Volvo Car AB (publ.) (VOLCARB) Earnings Call Transcript & Summary

Hello. I'm Sanela Ibrovic and I'm Head of Connected Experience at Volvo Cars. I'm engineer and in my daily work, I lead software development teams that are enabling this technology that Jim was talking about. But today, I will do something different. I will talk about the software, how it defines our cars, our products and our consumer experience. I will do this together with Elsa, who will join me eventually when we look more at the safety aspects and how software has enabled that dimension using the Volvo EX90 as example. When it comes to software in the automotive industry, we see some clear trends, hardware and software are becoming separated from each other. That gives the rise to the automotive software as a product in itself. There is a strong demand for standard [ scalable ] platforms and then centralized architecture that gives computing power that allows for the integration of the complex sensor sets paving the way towards the autonomous driving. We believe in the software-defined vehicles. More and more features are becoming software based. Instead of being recognized for the amount of the horsepower, the car will be defined by its brainpower and the software-based functionality and features. We also believe that there is a lot of value that will be and is unlocked through the software. Value for us and, of course, value for our consumers. Software is enabler for more sustainable and our commitment to the sustainability. It is a building block for the electrification of our cars. It is also enabler for safe vehicles that are prepared for the evolution towards the autonomous driving. It is super important building block for us to enable personalized experience for our consumers. And even better, that experience is enabled to become better over time through the continuous over-the-air software updates. For us as a company, it means that we will be able and are able to deliver features fastest, just leveraging on the nature of the software development features, which is faster compared to the hardware-based. When doing this, we are not only building our own software platform. We are creating an innovation platform, which we can utilize to quickly adapt to the changes and changes are happening that we know, but also for us to be able to quickly respond on the new business opportunities. My favorite part is the reuse. Historically, we have been forced to do -- redo the software with the hardware generation changes. It's not the case any longer. We will be able to use the same software with small adaptations, which in turn, creates the room for more innovation and more feature that would delight our customers. We see also that the software is creating a path towards the new revenue streams, such as subscriptions and software sales. We listened to Jim, and we heard that we are prepared, and we have the technology that is already built in the car just behind me. And let's just look what are the strategic building blocks, enablers that are creating and supporting the path towards our software-based vehicle. We have moved our -- and transformed our electrical architecture to be centralized, and I will tell more about it just in a few minutes. We have, of course, there and have decoupled hardware and software and have the fully connected vehicles and then also make sure that we have a flexible software platform. All of this is framed and enabled by our in-house development. The last one, I will come back to in the end of the presentation. But let's look at the more technological steps that we have taken. To support our vision of software-defined car, we are transforming the car electrical architecture. We are moving to the core compute architecture, which centralizes core software operations into one system. It's powered by 2 NVIDIA systems on the chip, or in [indiscernible], and is capable of more than 280 trillion operations per second. This core system have enough computing power to undertake the most complex tasks, everything from enabling the Volvo experience for the all occupancy in the car to powering the [ compact ] sensor set that, as we heard before, is starting the new era for safety. By decoupling software from hardware, we won't rely on the suppliers' compute deliveries. We will produce that behavior on our own, and we will have the greater control of the customer experience. This is also a huge enabler for the speed in development. Because when the hardware and software were tightly coupled, in many of the cases, the majority of the cases, development lead times have been steered by the long hardware development cycles. With fully connected cars, our core system and in-house software stack, we create full control of the integration flow from code to complete car. And our software stack is driven by principles of continuous development and continuous release. It's built for growth, and it's enabled our future [ stacks ] to keep expanding. This is also a strong enabler for our data-driven development. Having the control of the software stack and making our software platform flexible enables integration of the key tech ecosystem. I will come back more to that later on, but it's important because it makes us flexible again, to respond when the new opportunities comes up, but that makes us also as an interesting partner for the other tech company. And then let's move to the part that will give you more of the insight how -- what parts of the products that we have decided to do our own. Trying to get the control of the slides as well in the meanwhile. These are the 4 areas that I pick to just group us around our products and our car. And when we look at the body control, [ Robin ] was talking about [indiscernible]. This is a part of the product that we see it's important to us to control and see ourselves because it's a strong part of the approach and interaction with the car as such. There, we also have the development of the lock and unlock logic as well as the alarm. All of this is important, and I would just bring one example. Now when we introduced the digital key as a feature with Volvo EX90, the interaction with car starts much easier. It's convenient. You have your phone in the pocket, you seamlessly approach the car and start the driving. But if not doing that in the good way, that could also create [indiscernible] because I might just be passing by my car on the way to the trash can. Or even, I'm standing in the kitchen and talking to my kid while close to my car. In those use cases, you don't want the car to start lightening up and welcoming me. That requires smart algorithms and smart machine learnings that we are applying to really train and learn all these use cases in a good way. That is why it has been important for us to do it ourselves. Propulsion, it's a strategic area for us. It is enabled for our ambition to be a leader in the electrification. In this area, we are looking the vertical integration across the all parts, and that goes, of course, also for the software. It is about optimization, the range and the charging times, but it's also a new dimension that comes up, and that is the integration of the electrical vehicles into other energy ecosystems. Those integrations are happening in the car, but very much in the cloud environment, and that is why it has been natural for us to have the control and development in-house. And then we come to the core of our DNA, it's the safety. It's about vision and perception. And then we will also go more deeper into what does this mean in the area of the infotainment and connectivity. But since everything starts and ends at Volvo Cars with the safety, and we did a great reveal of the Volvo EX90 yesterday, I will welcome Elsa on stage that will tell us a bit more how software and safety are interacting and using the Volvo EX90 as a great example for that. Welcome, Elsa.

Thank you very much. Yes. So I'm Elsa, and I'm going to talk a little bit more about the safety we have in this fantastic vehicle. So the EX90 is designed to be the safest Volvo that ever hit the road. And as Sanela talked about, the core computer is a really important key element for us to enable it because it powers the exterior sensors and the interior sensors that can allow us to create a deeper understanding of both the world around it, but also the driver within. So we have coupled this amazing car with even more sensors. It has 5 external radars, 8 cameras and 16 ultrasonic sensors, but it also features a LiDAR. And it's a Luminar Iris 1550-nanometer LiDAR, capable of detecting objects up to 250 meters away in the glare of a bright sun or in complete darkness and in everything in between. Together with the other sensors in the car, the LiDAR can deliver its full safety potential. It has centimeter level accuracy and high resolution. And that means that it can accurately estimate the size and shape of speed bumps and potholes. It also estimate the [ map geometry ] of the road and size and shape of objects. So why do we add a LiDAR then to our sensor set? It's because the combination of sensors that we want to create. We want to create a shield of safety around the vehicle, the EX90, in every direction, and that's why we have combined these sensors. And we have combined them with a deliberate overlap in their understanding of the environment around them. So we had the radars in front, side and rear of the vehicle to determine an object, geometry and distance and proximity with high level of accuracy. And the cameras are added to determine an object's make up. What object is it, more or less? And the LiDAR can accurately estimate size, shape and geometry. And together, their impact on accident aversion can be massive. And our research shows that the addition to the LiDAR to our sensor set can help us prevent up to 1 in 10 crashes and even prevent serious outcome for up to 1 in 5. But let's look inward. We see also in our research that driver distraction and intoxication and sleep like drowsiness is really big portion of why accident happens. So we are adding now in the Volvo EX90 our driver understanding system and occupant sensing technology for the first time. We have a 2-camera system. Our driver understanding system is based with a 2-camera system that allows for a deeper understanding if the driver is distracted, sleepy or even impaired. And that means that we can adapt our level of support, so we can intervene or warn or break when needed and only when needed. And then we have then our occupant sensing technology, and that is when we are parked, we have a network of radars that can detect the tiniest movements like a baby's breath or a panting puppy and warn the driver that there's no one left behind. Should you really close the door and go away? So it's a really good step. But how do we do this then and/or why? We have our traffic accident team at Volvo, and we have that for more than 50 years, and we know what crashes happens and why and when, and we are taking them one by one. But previously, that takes quite a long time between our development and the crash happens and we get the learnings and understand what happens. But now we can do this much faster. So with this core computer in this platform that we have created now with EX90 and a really great exterior sensors, we can do this much faster. We can build, measure and learn really, really quick. And we do this to go to our journey with zero collisions. And right now, with EX90, we, together with Zenseact, controls the complete chain from pixel to torque. And with that, we mean vision perception as you talked about, sensor fusion that is when we take the radar and camera, fuse them together to get a deeper understanding of the environment or fusing radar and LiDAR now. And then decision and control. What should we do? Should we warn? Is it a threat? Is it not a threat? So now we complete the control chain and also how is the movement's going to be -- the vehicle motion, how will it be. So with this control of the complete chain, we can be much faster and help us in progress towards our journey of zero collisions. So we will -- and also to get more data, as we talked about, Sanela as well, we will, from the fleet learn and improve. We have now a fantastic platform to innovate on and further improving the safety area.

Thank you, Elsa. And talking about measuring, learning and adapting our solutions, we need connectivity. Connectivity is foundation for many of the things that build our future. Autonomous drive, connected safety, over-the-air updates, new business models such as subscriptions, Google-based infotainment services and access to car data and many more. Given the importance of the connectivity for our future, we invest to be able to manage that connectivity over time. That includes systems to monitor the quality of the service to efficiently manage the data cost for the traffic we use and also to continuously adapt to the new technologies. Today, we operate a global network of more than 3.5 million connected vehicles. It's a quite huge network to be compared with the [ tele ] operators that are running today. And that network is increasing for every new car we are selling, of course. What is important for us is to deliver seamless experience to our customers. We don't want them to bother which technology we use to connect the car, or we don't want them to care about how much the data will cost. That is something we care about. Instead, we focus on the service we provide for them. In the new Volvo EX90, we are introducing latest connectivity technology for the speed in the cellular technology with a 5G adaptation and also the adaptation to the latest WiFi 6 standard. Let's go back to customer experience that is enabled with the software. I will start with one of the proud moments in my professional history at Volvo Cars, and that is that we were a first car company to introduce a car with the infotainment system that was based on the Google's Android Automotive OS. Now we build on that open source platform and take our infotainment system to the next level. Our new Volvo EX90 comes with a vast new intelligent capabilities, again, software defined and powered by core computer. And from the beginning, one of major ambitions for the next generation for Volvo has been to remove obstacles for the electric car drivers. And we have done much already, but we are taking that even further, making the driving and living with this car a truly effortless and enjoyable experience. We have a clear purpose, we want to give our customers easy way of owning a car that feels personal for them. Behind me, you can see a lot of new capabilities and features that have been introduced with our Volvo EX90. It starts with interaction with the car from the living room with our Google Home or other relevant systems in other markets who don't have the Google support, where we can interact and steer the call from the convenience of the living room. I mentioned a digital key, seamless approach and seamless start of the car. Talking about [ bucket ]. We also have the new Volvo Cars app. We also talked about before, which will enable the smooth interaction with the car, but also before the car is already in the customers' hands following the order process. It will also be a strong enabler for our home energy system integration, truly leveraging on the smart charging principles. And then the all experience in the car that is based on our design principles of simplicity and safety, but still giving the full capability of personalizing the experience that we can relate to from our, for example, phones sets. Another part that we have been very careful about has been to make sure that we recognize that our consumers, we are loyal to our ecosystems. We are used to our phone models. We are used to our applications we use, and that depends on which ecosystem we have choose. That is why it has been important for us to create the software that is flexible that enables integration of these [ tech ] systems into our environment. That goes both for example, again, the phones and that technologies, but also when it comes to the business-to-business integration with all new opportunities we see with the fleet but also with the home energy system integration. And then where we started, the most important enabler for our software strategy is, of course, our software development capabilities and our teams. Today, we have more than 400 development teams in-house and almost 100 in our partners. They all together are building our new software platform that in a current fleet has been corresponding to 30-percent-ish of the in-house developed software. With the introduction of the Volvo EX90, we are doubling that figure. Those are the talents that we have been looking for and continue to do so across the globe, of course, strengthening our sites in Gothenburg, Lund, Stockholm, Shanghai as well as the tech hubs in India. And we are not doing this only on our own. We do take strategic decisions which part of the software is a differentiator for us and creates the value adding for our consumers. But in other parts, it makes us faster, it makes it better to collaborate. And from that, we have a quite significant scale of the tech companies that are relevant for us, but we are also very much relevant for them. Just to mention a few. We have strong collaboration with Zenseact in the area of the AD and ADAS and with the HaleyTek in the area of the infotainment system, but also with the ECARX and then very known names like the Qualcomm, NVIDIA, Luminar, iFLYTEK to mention a few. With this, we are approaching a summary of this block. And summary is that we are well prepared for our electric future. We have done that with a new technology with a core computer system that is prepared to be continuously updated with the over-the-air software updates. With this new architecture and our in-house development teams, we will, and we are gaining the speed in the development and the flexibility. Our software development teams are the key assets to build the future for us and to create the speed in the innovation. And to do this, we are not doing this alone. We are partnering with the best ones around us. Thank you very much.

Thank you.

Thank you very much, Sanela and Elsa. For this Q&A session that now starts, we also invite Jim to join on stage. And as I mentioned before, this is being recorded. So there are 2 microphones. We have [ Ann ] over there and [ Una ] over here. So just raise your hand, and we will allocate this and just take it one by one. Okay. Should we take [ Una ], please. Agnieszka, sorry.

Okay. Perfect. Agnieszka Vilela from Nordea. So I have a question about the potential for you to generate revenues from software, you mentioned that. In the aspect of safety, you're putting a lot of sensors in the car. But how do you think about the safety software? Will you be charging extra for Driver Assist or in future Autopilot? Or will it be included as a standard?

So first of all, when we talk about the different levels. So we hear a lot of conversation around the world about Level 2, Level 3, Level 4, Level 5. We think that's very, very confusing for the customers. In our opinion, those 2 levels, your hands on the steering wheel or your hands off the steering wheel. That's it. When you start to go into levels, people like, [ I meant ] to have one hand on or two hands on? When -- and so we are seeing right, when we get to autonomous driving, that's when your hands are off the steering wheel. And that will be regulated per country, per city and government regulation will probably be the bigger barrier to adoption than technology in that part. So just to kind of bring that off. And we will have our core safety systems. And then on top of that, you will be able to add on to that core safety system, which will be, let's call that a higher level of assisted driving. And eventually, that will go to pilot autonomous where and when that's allowable. So yes, we will have that option. Core safety systems, advanced ADAS, let's call that, and then fully AD when it's ready and the cities and the countries around the world that allow that to happen. Does that answer?

Question here from the left.

It's Daniel from Bernstein. Maybe first, you talked about the openness to other platforms. But can you kind of elaborate a little bit on how the Google platform or the Android Automotive platform influences that choice? So how does this work with the Huawei customer, with the Google customer, with an Apple customer? And are there any functionalities currently that are kind of limited to one of those? And then secondly, you just commented on the levels, hands off, hands on. But will you be prepared to take liability as Volvo in some cases when the customer takes off the hands from the steering wheel, how far away are you kind of from that capability? We've seen other OEMs going in that direction. Is that something you're thinking about?

Do you want to take the good one first?

I can take the first one. Of course, our today solution and the future will be -- the foundation is embedded automotive Android Automotive system that is Google based. But what we have done is not to lock our software stack to that system only. We have thought through how to have this standardized for APIs and abstraction layers in the software stack to make sure that we can introduce any other ecosystems. Of course, one simple example today is the Apple Car Play, but it doesn't mean we are limited to that. We can expand those ecosystems beyond, I'd say. So -- and looking at Google as such, it's one system, but we will be able to enable parallel ones on top of the embedded, which is Android based.

Yes. Just to come back on the -- when do we accept liability for -- you're speaking about full AD at this particular point in time. If you're driving an ADAS and [indiscernible] have your hands on the steering wheel -- you don't have your hands on the steering wheel, then you should have. And I don't think that we then take the liability for people who are driving the car at a responsible way.

And you can add to that, that we have in the EX90, our capacity steering wheel, so we can also make this judgment if the customer has the hands on the steering wheel even better and also with the driver understanding system so that we can help the driver remind for those cases needed.

We do that right now. So you'll see a few -- if you do try that and ADS, I will tell you, please put your hands back on the steering wheel. When you get to full AD, which I think was really the question. When you get to full AD, then of course, in the legislation in the countries where that's a [indiscernible] to happen, and we have deemed our car to be safe enough to drive in those conditions in that specific space, and provided you are in that specific lane, country, region, then of course, I think we take that responsibility.

We start over there and then we go to Erik, sorry.

George Galliers from Goldman Sachs. Maybe just following up a little bit on this. So just in terms of the revenue opportunity, is it fair to say that the core is provided as a standard and then the advanced and the full would be subscription services or something you pay incrementally for from Day 1? Then secondly, with respect to the LiDAR. Is the LiDAR hardware going to be on every EX90? And how do you think about this on future Volvo models given the cost of the LiDAR and the packaging constraints? Can this safety system be replicated on your future vehicles? And then the third piece is just the readiness of the full AD. Obviously, in Germany, there is now parameters to have full AD. I believe in France, there has also recently been a change in the regulation when will Volvo be in a position to offer this on the EX90?

On the full AD, we don't have a precise time line of when that will be fully available. So we look at that -- because we need to decide where we feel comfortable and what the markets are that we feel comfortable to launch. And so even if it's available in certain markets, theoretically, we will make the decision as Volvo where we want to launch full AD and learn from that experience before we expand that further around the world. In terms of LiDAR, so LiDAR capability and LiDAR technology will continue to improve and reduce end cost. We're going to start to see LiDAR technology now in many, many more vehicles and many other applications around the world. We've seen that adoption with technology that comes into the mainstream. And very quickly, large-scale adoption drives down cost and drives up performance. Second part of that question is that one is the hardware, but the other is the software. So if you're buying a LiDAR stack and you're buying the full stack and you don't build the software -- the perception software and the sense of fusion software that connects the LiDAR from the silicon layer all the way up into the application layer, then you're paying for that software. We are developing that software in-house. So that makes the overall cost of the LiDAR, and of course, our software development team and the cost of that is spread across our entire company. And we're now paying a markup to those companies that want to sell you a full LiDAR stack including software. The other really important part to this is because we write the software to the application layer, if we choose to do so, we can change suppliers of sensors, of cameras, of LiDARs, and that gives us the control that when more availability of LiDAR comes into the market or more availability of sensors, a cheaper price or higher performance, we can then write to that API. So long answer, I guess, to your short question, but basically, because we do the software that takes a huge amount of the total cost that you would pay if you were bringing that LiDAR as a fully plug-and-play system. Hopefully, that answers the question. Sorry, I forgot the first part of that question. I can usually only do 2 things...

[indiscernible] how the payment model will look like...

Yes. So that will be the option. So the option will be you'll have a core, very core system, and this will be standard will come LiDAR. And then eventually, we will have the option to trade into Advanced Driver Assist and then full AD when AD is available. And that will be something you can either take and pay. Right now, the payment models of that will be either you buy that one-off lump sum and then you get the continuous over-the-air updates, or you buy that as a subscription basis. I actually think what will happen in the industry will be, will start to use the application layer, sort of the connection [ there upon ] iPhones and your smartphone that you will be able to toggle in and toggle out of that subscription. So for example, you say, hey, I'm going to -- I'd like to try the Advanced Driver Assist on this. I don't want to pay the full lump sum, but I'd like to try it. So I'm going to toggle in through the app and try that for a while. While you're toggled in on that, you're going to be charged a monthly subscription. If you don't like it, you don't use it, you toggle out and the subscription stops. That's how I think we'll end up bringing that product to the market. Does that answer the question?

All right. We go to Erik and then Hampus at the top...

Erik Golrang from SEB. You've touched upon it now, but you talked about the successful decoupling of hardware and software, which I guess also ties into the ambition of taking out as many control units as possible and moving it into the core compute platform. With the EX90 now, how big is that step if you compare it to [ a XC90 ] or a C40 or something? How many control units are taking out and put into the centralized setup to get a feel for how much you're able to improve the complexity in the system here?

I can take that, if you'd like. So basically, let's say, this gets us halfway where we want to be, okay? So this is the first step in our journey towards electrification was to take a platform that was basically a hybrid platform, so the XC40 and the C40, we don't want that. That was the first foray, if you will, into electrification. This platform here takes a huge step forward and eliminates, let's say, half of those [ MCUs, ] ECUs and centralize this core compute. The next step will take us much more towards that distributed architecture that we're looking for. And so it will be an evolution. It's not a different platform. We don't talk about different platforms. We're just talking about the evolution of our electrification journey, unless you want to add to that.

No, I think it's...

Taking out like 50, 75 previous [indiscernible].

I don't think we can put a number on it because I don't know that accurately right now. But let's just say directionally, we're taking out half and we're moving halfway towards where the next development will be, and that next development will be, of course, hopefully, maybe not the next vehicle that we've produce but the one after that. That's when we get to full -- let's call that full core compute architecture, yes. I mean I think the big thing here is that -- because you're trying -- this is a really complex subject, and you try and boil it down into -- because it's a great question. And you try and boil it down into a really small [ sound bite ]. And the real big thing is in the automotive industry, people have outsourced that. And so doing -- and outsourcing all the [ EMUs ] or the ECUs across the car, they actually outsource the silicon and the choice of silicon and the relationship to the silicon and fab providers. And then, of course, that became part of the problem in terms of supply. So I'm happy to take this into a really small [ sound bite ]. The real thing that's going to change and differentiate global mobility in the future as companies who understand 2 things: software and silicon. And of course, there's a whole plethora of conversation in between that, but that's really the nugget that makes this change fundamental. We understand silicon. We don't need to build silicon because we see people like NVIDIA who are very well capable of doing that. They already have those huge investments, so we don't feel the need to have our own silicon fabs, but we do feel the need to understand silicon. And then, of course, the application layer, we don't need to build. We don't need to build cameras. We don't need to make sensors, but we need to understand how they work, and we need to understand the software that connects from the silicon to the application layer. And that's really the journey.

We take the last question for this section from Hampus here at the top there.

Hampus Engellau from Handelsbanken. Two questions then. I know you don't want to talk about level of autonomy, but it would be interesting to hear of the capabilities, given the, like number of sensors you're putting on this vehicle and what type of level it will be capable of? Are we talking about an [indiscernible] or L3 plus? That's my first question. Second question is more related to the software. How much of the decision-making software is Volvo developed and how much is from the Snapdragon Ride platform that you're using?

Can I take the first? You can talk about Snapdragon. I would open that question up to the floor and see how many people understand what Level 3 plus software is in terms of autonomy. Anybody here tell me exactly because I'm being asked that question, what is Level 3 plus autonomy or ADAS in the car. Anybody here know what Level 3 plus is. Does that mean at one hand on the steering wheel, 2 hands on the steering wheel, eyes in the road, eyes in the dash. I'm sorry, I can't be driven on that. I can't be -- you either have your hands on the steering wheel or you don't. And I [indiscernible] conversation of Level 3, Level 3.5, Level 3.2. And then you get to this [indiscernible] conversation, which is, well, your Lane Change Assist, is that Level 3, but your Blind Spot Assist is Level 2. So I know I'm not trying to be smart, but I think it's a really important conversation that we say, ADAS, as we [ have our hands on ] the steering wheel, of course, we have advanced the ADAS systems in terms of its capability of lane change. We can now travel at faster speeds and still follow the lanes on the road. We can travel at faster speeds and follow the car behind. We can travel at faster speeds and decelerate and accelerate and so on. But the actual levels, I'm going to be really pretty precise and say it's LiDAR, I don't on or off.

But it is capable for unsupervised if that was the question with the hardware-wise, but [indiscernible] comes later. Yes. With regards to the Decision and Control, it's not the Snapdragon for the Decision and Control. That is in the NVIDIA AI platforms. And together with Zenseact, we do some parts of it. They do some parts of the development on the Decision and Control because there is, for example, the ADAS condition avoidance things. There is mainly Zenseact. We have the driver understanding features that we do and also the parking functions. So it's a lot of levels, but we do bits and pieces together. So together, we control the complete chain.

All right. Thank you very much for a very interesting presentation, Elsa, Sanela and Jim.

So now, we will talk about electrification, which is super exciting. We will talk about what we have been doing so far. We are talking about where we are today with this beautiful vehicle. And we will be talking about what we do in future. My name is Kerstin Enochsson, I'm heading Procurement and Supply Chain at Volvo Cars, and it is fantastic to be here with my colleague.

And I'm Erik Severinson. I'm Head of New Products and Strategy.

Great. So let's kick it off. Talking about our electrification strategy and the different elements of it. Obviously, we need to start with demand. And looking at our demand today, we see we are well positioned in the fastest-growing segment to achieve above-market growth.

But it's also, of course, for us, important in our strategy that we leverage the strong track record we have from plug-in sales and recently also for BEV sales when we're building our portfolio towards fully electric at the end of the decade. The products is only one thing, though. The other thing we need to master in this transition to electrification is the value chain and how we can integrate and learn both from development and from manufacturing for all the key components in the electric propulsion system. The control of the value chain will also provide us with sustainable technology and secure our supply in the future. And we think there is a great potential when we look at our strategy to combine these 2, right?

Yes, absolutely. And we will talk much more about supply chain going forward, which I'm excited about. You take the last part, and then we jump further.

Yes. As I said, the integration of the development and the manufacturing part will be a key thing in this transition. And the technology is moving rapidly. So we are seeing now the generations of propulsion systems iterating very fast. And it's also important for us to build a structure around development and manufacturing that can capture the value and the opportunity that, that kind of fast transformation gives.

Good. So let's start with the demand and we all love numbers here in the room, and now we start seeing some numbers. As we speak today, year-to-date, in 2022, our recharge volume in sales is around 33%. It's comprised of 2 different elements. One is the BEV sales of around 8% and then 25% PH, plug-in hybrid sales. That is October. You see the BEV sale is double this year, year-to-date compared to last year. If we are looking into the recent month, we see that we are extremely strong in BEV sales. In September only, we had BEV sales of 13% of total sales and in October, even 15%. Until the end of the year, we see that we are going very strongly [ to with ] double digit. So the expectation is to come very close to that number end of this year. Then you have already heard about our ambitions many times until mid-decade, we want to come to 50% pure electric car sales. And in order to do so, we need to have fantastic products. And Erik, you will now speak about the range that will lead us there.

Absolutely. And we are on a journey. As we talked about for a few years, we have had our first fully electric cars on the market, the XC40 and the C40. And [ standing ] next to me here, of course, is our new EX90. And the EX90 is the first Volvo we built on all-new, all-electric and software first foundation. But it's also a step towards the journey. We will going forward now launch one fully electric vehicle every year in the coming years. At the end of the decade, we will be a fully electric company with a fully electric product line up. And the products, again, is one thing. The other thing we need to master is the technology behind. So with the EX90, we take the first step of building a car which is born electric. And that gives us a lot of opportunities when it comes to how you design the floor, fully flat, how you integrate the cells into the modules and how you integrate the modules to the car. We can reduce materials versus the previous generation. We can lower cost, and we can improve performance by doing this. So if you look at our different generations of e-propulsion systems, this is what it looks. The current car, which is built basically from a converted architecture, from ICE cars, and applied with electric batteries at e-motors, is what we have at the market today. In the next generation, which the EX90 represents, we can improve energy density, we can improve charging speed, and we can dramatically improve the CO2 footprint of it. But this is also a step. Since the transition is so quick, our technology road map is crucial for us that is constantly evolving into the next level of technology. And the third generation, which will be around mid-decade takes the next step towards improved energy density, charging speed and CO2. And it's in this generation, we are working a lot on the battery cells, but also much on the integration of the battery into the car. Concepts like cell-to-body, for example, trying to figure out a way to lower the cost, lower the weight and improve the performance. And it's not only about battery cells, it's as much about the integration of the different components. How you steer the electric engine, for example, is -- how you combine your battery management system with the climate unit, all of these things, how you build this ecosystem in the car around electric propulsion, those will be the key enablers to achieve these fantastic, improved numbers.

Before we're getting too technical, why don't you outline again what is the key benefit for the customer because he or she needs to get engaged and excited about the car to buy it. So you're talking about charging here?

Yes. I think that is one of the important aspects, of course, charging time. That will be a key customer feature. And also, I think cost and I think range. And if you look at the range between the different generation, it's not only about the top range. It's also about the bandwidth of range positions you can offer to the customers. If you take the current generation of cars, we have ranges around 400, 500 kilometers and that moves up with the EX90 up to 600 kilometers. The next generation, we add further to that, closing up on to almost 800 kilometers, but that's not the thing. The thing is also in the same architecture, being able to scale and create the bandwidth. So you can have for example, in our Generation 3 from 400 kilometers up to 800 kilometers, allowing the customer to choose if they want to use the car for long trips or if it's more of a car for short trips and everything in between.

So then let's look into how we do all this and a bit of the logic behind. And Erik, you already mentioned vertical integration before, and I want to jump a bit more into that and the logic we see behind it. So why is vertical integration important for us? So it's an outcome we are expecting, it's speed of innovation, it's taking control of the value chain, and this is, of course, harvesting on cost efficiencies. So why is it so important to take this control? The electric propulsion system is complex. You will be able to see later on around lunch time in the studio, the electric propulsion system only in the raw setup. And you will agree with me that it is very complex, and we will also have a look later on in a few minutes on the entire system we are having in front of us. We need to, in this complex system, be in the driver seat, and we need to orchestrate the changes we want to make. Orchestrating changes doesn't mean we will do everything ourselves. We will do it ourselves partly both design, assembly, but we will work and continue to work with our suppliers and partners, of course. And now we will have one interesting example on how we work with our partners on vertical integration.

Yes. And it's the -- our collaboration with Northvolt and our 2 JV companies, which we are building up together with them. And as you might know, we have communicated about it before, we have 2 different collaborations. The one is sports development, focusing on developing not only the next generation of cells, but also exploring how we can combine the knowledge of a cell manufacturer with the car manufacturer when it comes to integrating battery cells into the vehicle. We think that is a great potential of the collaboration. The other part is, of course, the Gigafactory that we are now planning and preparing for in Gothenburg, which would go into production in 2026. And normally, when I talk about our Gigafactory and our plans in Gothenburg, we talk about the numbers, such as the gigawatt hours, up to 50 gigawatt hours per year. The site is prepared for that. The first step is [ 30 gigawatt hour ]. We talk about the amount of jobs we might create is or will create. It's up to 3,000 jobs or the size of the investments, which we have communicated around SEK 30 billion. But since we are the last act before lunch, I thought I could talk about frogs instead. And there is a point to the story. So in the preparation project right now, we have actually moved 4,000 frogs. We have found a new home for them in a frog hotel, separate in the plot next to our plant. And why do I talk about frogs when we are here to talk about electrification? Well, with proactive ideas and proactive actions like this to actually go out and find what are the key bottlenecks for getting this project according to time plan in place. When you take this, we can build much more confidence in our permitting process. So by giving 4,000 frogs, a fantastic experience in a top of the world, Frog Hotel, we are actually able to be ahead of our permitting plan to get this plant in place in 2026. Construction start and deforesting will start first quarter next year.

Good. One great example, let's look into the entire map of our electric propulsion system and just run you through some of the highlights and the things we are actually doing to further improve. The electric drive consisting of 3 core elements. It's the inverters, it's motors and transmissions. In the car here, we have in front of us the Generation 2 CAR DX90.We are deeply integrated in the areas of motors and transmissions and the motor is going to be assembled in-house. Then in the next-generation cars, around mid decade, we are taking a further step. And then the inverter is not only bolted on as it is in the generation 2, but it will be fully integrated, meaning that also the housing part is then in one block, and it will be one component. So it will be a much more deeper integration. We will have in-house design going forward and also in-house assembly. The other major block in the electric propulsion are power components. We have 3 main components, and that is the 12-volt battery. It's the DCDC and the onboard charger. In generation 3, we will integrate the DCDC and the onboard charger and the so-called power box. So we have one component less, and we will actually also be able to get rid of the 12-volt battery. So we will simplify, put things together and make it then also easier and faster to drive further technical development.

Exactly. And the other, of course, component, which we have touched before are the batteries. And battery in the current technology is a bit of a box-in-a-box problem. You take the coated films of cathode anode material, put them in a can for the cell. You take the cells and put them in a module. You take the module and put them in the battery box and you put the battery box in a car. So it's a box in a box in a box. What you want to achieve with the volume you have available, you want to have as much as possible of that volume in a battery to carry energy. So you don't want to have a lot of aluminum cans. You don't want to have cables, connectors, et cetera. You want to use the volume for material that can hold energy, meaning basically battery chemistry materials. And to do that, you can see the evolution between our Generation 1 and 2 already, reducing the battery modules from 2007 to '17, also allowing us to go in for bigger cell with cells with a higher energy density. The next step on that journey is to take away the module altogether and go for a direct integration of the cell into the car. A lot of the development in the battery and electric field or on electric cars when it comes to energy and density has been focusing on the battery cell, especially on the cathode side. In the future, I think we'll be much more focused around vehicle integration and anode development, leading to even further improvements. And the same principle of integrating and taking away parts, you can also apply for common technology in the car industry, such as stamped body in white. If I take the future cars, for example, they will come with a mega costed real floor. And that means we can take away a lot of different parts, which are stamped and welded together and replacing them with one big part that is costed and optimized for that vehicle. And that reduced weight, reduced costs, it increases flexibility for product updates and overall, also allows us to utilize technology between the different cars in a much smarter way.

Good. So where does all these lead us? And obviously, we want to talk about cost, something we are doing in procurement all day long. So we have now learned that all major electric propulsion components will be reengineered to achieve cost efficiency and, of course, also the technical performance. We foresee that with Generation 3, the total battery pack is expected to cost less than USD 100 per kilowatt hour. And we assume that this will happen around mid-decade, and we are also assuming raw material prices of the level of 2021. So now we have talked about product, technology. We have talked about cost. Also interesting to know if we are getting supplies. So we want to now show you what we are doing in order to secure the capacities we need to make our ambitions come true. A little bit of animation here. So we have, of course, long-term contracts, long-term contracts with our Tier 1 suppliers that is already set up today. We are having electric cars out on the road. Contracts are signed for next cars to come. And those contracts are very long. We talk about often around 7 years or so. So very long contracts with Tier 1 suppliers. On top of those contracts, we are having supply volume commitments, and that is over a 3-year period. So now we have signed it in 2022 for '23 to '25. And while we are going on, this will roll forward. So we have supply commitments from our Tier 1, and that is also then including the raw materials we will need. Having global supply is good, but we all understand that regionalization is absolutely key. So for this car, the EX90 that is going to be produced in the U.S., we are fully localizing our supply into the production region and then also into production regions further on. And we're having long-term volume commitments signed with Northvolt and NOVO. One step further, as it was outlined here before, we will have in-house production from quarter 1 in 2026 with NOVO. And then there are 2 things in the pipeline, which is, number one, raw material sourcings to feed into our supply chain. That is also regionalized. And looking into raw materials, we are focusing on 3 the core cutted materials. It's lithium, nickel and cobalt. We have the opportunity to feed this material into existing supply chains, which we are going to do. So this is in close alignment with our Tier 1s, and this is simply to further ensure that we are not getting short of supply. You will hear more about it. So stay tuned for now. It's in progress. And then the last part, as mentioned before, the supply volume commitments, which we have set up previously for '23 to '25, will roll forward. So there is, of course, more in progress as we speak. So that's then the summary, and Erik?

Yes, perfect. Before we go to the summary, maybe I can just take you back a little bit to the cost discussion because I came up with something I wanted to say. So it's -- the cost parity to ICE is, of course, very important when you develop this. And we have to -- we will get there. That will be a focus. But it's also important in the cost discussion and electrified vehicles to think about the cost of ownership and the cost of usage because Jim touched on it in the beginning and also yesterday in the reveal, you require much less service, it's less moving parts. The electric machine is 4x more efficient than a combustion machine. So you actually use less energy in electric car as such. So when you talk about cost parity and we talk about the future of demand and where the consumers are having, we also have to consider and compare the total cost of ownership of electric cars to combustion and cars. To move into the summary, we believe we can transform fast. We think that we have a strong demand. We know we have an attractive product portfolio coming. We have it lined up. We know what we want to do. We know how they will look, we know when they will come. We see the technology evolution, and we understand how to get there, how do we collaborate, what is strategical, what is not strategical. We also see that we have a robust plan to deliver on our cost and our supply. We are, as Kerstin said, securing all angles to meet the current production, the midterm production and the long-term production when it comes to supply. Thank you.

Thank you very much. All right. Now we open up for questions again, and I'm sorry if I missed somebody in the previous session, but let's start to...

It's Jose from JPMorgan. Three questions, please. I'd love to understand a little bit better the locations where the vehicle is going to be built. And if you're going to plan to produce the car in Chengdu and whether the investments are behind us in terms of the ramp-up of the car. Second, in terms of the components within the electric motor, how far do you want to develop this expertise? And can you talk also about your partners that you have to assemble the electric motor? And three, can you talk about battery and what is the big difference between your purchasing contracts you have on battery and the 50 gigawatt hour plan you have -- ramp-up plan you have in terms of battery technology. What's the difference between the purchasing contracts and the in-house production?

Three very good questions. I don't remember all of them, so you have to repeat them. But let's see if we can try to answer them together. And I'll start from the back, easiest to remember it that way. When it comes to the collaboration with Northvolt and the JV, the difference versus sourcing at the Tier 1 supplier is obviously that we are a 50% owner of that production entity. It also enables us to build a very optimized process to how we are bringing the cells into the plant. That production plant will be next door to our car plant in Torslanda. So you will basically see how we can find new opportunities. And also, this is an area in battery cell production, which has not been, I think, totally developed yet, how do you optimize the handover between a battery cell and a battery car plant. So that is one thing. And now you have to repeat the other 2 because I already lost that.

The other 2 . Within electric motor or the key components, who are your partners or, let's say, 2, 3 years on the road, how far do you want to develop your expertise in the inverters, motors, et cetera?

It's a good one. First one is for you.

The electric motors, already in this car, we are assembling ourselves. And then in going components, we are purchasing from a range of different suppliers to that. And then when we are moving into Gen 3, there will be a larger part of the components we take more control of. So we work, say, upstreams in the supply chain.

From a technology perspective, I would like to add that the trend is, in general, as in many other technologies and less costs that you integrate parts. So if you look at an electric motor inverter going forward, they are more and more moving into an integrated unit. And then, of course, it becomes also more important to understand how do you design such a unit, so it optimizes the performance for the vehicle.

And the first one was you're building the car in the U.S. I understand you want to build a car also in China. So are the investments behind us in terms of the ramp-up of the investments needed to assemble the car? So those 2 locations are correct, and the investments have been already been [indiscernible].

So in regards to location, correct, this car will run off the line in our U.S. plant in Charleston. And of course, we are -- I mean, we are fully investing. We are fully in the ramp-up phase both at our own facilities, but also in the facilities of hundreds of suppliers, and we are preparing to ramp-up. Then the launch in China will be after that and a similar procedure is happening there, of course. It's a very big job and hundreds of people are very engaged in getting there and making it real.

On the right, Erik.

Erik Golrang, SEB. I have 2 questions. I appreciate the slide on the -- how you source sort of the delivery security of raw materials. But if I could ask you a specific question just to understand how much of better supply and so on you have actually secured today. If you achieve your targets, 600,000 fully electric vehicles by 2025 and a bit less than 200 hybrids. Are you fully covered on battery supply for that figure?

So we have contracts in place that are supporting it, say, base contracts, both with, say, partners. Now you meant towards 2030 -- that is done with the suppliers and also then with NOVO and Northvolt. So it's a combination of different players. We have contracts in place to reach these numbers in 2030. And on top for the first few years, we have these supply volume commitments that are absolutely securing that we are getting the supply.

Okay. And then the second question on how you think about the sort of how future-proof the EX90 and the sort of the drivetrain technology is there? I mean I assume you plan to be making this core for quite a few years, also beyond 2024 when it goes into volume. And then you talked about the sort of third-generation technologies with the fully integrated drivetrains and cells in the chassis and so on. Arguably, there are a few competitors who have some of that already in production or soon to go into production? And as we move up to Gen 2 and so on, I mean, how competitive do you think the EV tech in this one is in 2025, '26, when I assume quite high volume hopes for it also for those years?

I think it's a very good question. And the first question is a little bit how do you future-proof when you're in this massive technology transformation. And I don't think you can ever stand and say that we make a car now, which will be future-proof for the 7 years that we live. The thing how to tackle that question is to build a structure, which is not so based on platforms as we have been in the past in the automotive industry but you can build an architecture where you can backwards compatibilize new innovations into this car. So if I take the EX90, for example, and we look at the software stack. That is actually very much updatable from whatever we will comfort the future also backwards. That can also be applied partly into the electric propulsion system. Of course, it is difficult to change the battery concept in a vehicle, but we believe that the battery concept we have from this one will very well be competitive, very long down the line, even in the third and fourth generation comes online as well.

Okay. That's interesting. And just a follow-up to see how far you can take that. Would it be possible to shift the 400-volt architecture into an 800-volt in this one? Or is that too much of a change to do on an existing platform?

It's possible.

[indiscernible].

Mattias Holmberg from DNB. I assume there will be some geographical limitations in the Gigafactory in Gothenburg in terms of reach. So I'm curious to hear how you think about, say, the U.S. and China long term in terms of own battery capacity? Will you be happy to be fully dependent on suppliers for batteries in these regions? Or would you at any point consider getting your own capacity in these regions as well?

If I put it this way. I mean our industrial strategy is quite simple. It's build where you sell and stores where you build. I don't think battery cells are a very good commodity to ship because they're big. They are heavy, they are dangerous. If they are not in a battery pack, you have to treat them in a certain way. So yes, it makes a lot of sense to regionalize and localize battery cell production. Our strategic initiative with Northvolt, the JV together starts with the plant in Gothenburg. But obviously, we are having a growth plan for Volvo, and that growth plan would require more cells. And the JV is definitely a part of that planning, but we have nothing concrete we can communicate.

Can we go to Dan here in the front?

Daniel for Bernstein. I'll follow up on that and ask whether the regulatory changes in the U.S., specifically the IRA has changed or accelerated your thinking? And if you could be a little bit more specific than just saying we're going to get more suppliers in the U.S., right? If you think about the different value chains from raw mats up to the cell, has anything changed in your thinking?

Can I start and then you jump in? I was kind of expecting that question after the previous one. So obviously, it has -- I wouldn't say it has changed, but it has accelerated. It makes it more urgent to take the steps to go there. And I think also, in general, for the better industry or the electric vehicle ecosystem in the Americas has a collective task to make that happen. So we are having our plans, which we are having, but we're accelerating those. That will be my answer to that one. And then you can talk about the supplier ecosystem.

Yes. I can -- of course, I can only agree that the urgency is increasing with this kind of legislation. There are a lot of unknowns as we speak, around this legislation, we don't know exactly what -- how definitions need to be understood, and we are expecting more and more input during the next month. So -- but already today, we are with all suppliers discussing how can we regionalize upstream as much as possible because that we foresee is the name of the game going forward.

We have one in the back here. Hampus?

Hampus Engellau, Handelsbanken. Could you maybe talk a little bit about the guarantee on the battery life cycle, battery swap and how you -- so we could compare a bit with some competition?

Yes. Oh, that's a big question. Everything from guarantee to battery swap, how long time do we have? I think let's start from the technical side, with the battery swap. There is 2 technology tracks when it comes to battery and vehicle integration. Either you go for kind of a cell to body track trying, as I talked about, maximize the amount of material in the battery volume that can carry energy. Then since this is the floor of the car, you cannot swap it, you would have to take out the seats and that doesn't work, right? The other one is to go to battery swapping. So on our track, in our technology solutions, we are not doing battery swapping as some other competition is doing. Obviously, there is a -- if there is a failed battery cell or if there's a failed module, there is a possibility to fix that, to remove the module, to remove the cell and handle that. We are designing the car for having a highest possible quality on battery cells. And we're also planning the software that fears the better in a way. So we're utilizing it as smart as possible so we limit the risk. This will be a challenge. We think that if you do it right, we don't see any reason to why the life length of the battery should be less than the life length of the car. And that I think is the best way to protect for future insurance questions and problems.

So no percentage on battery capacity after a couple of years?

No. You're the guy with the numbers, right? It was the same with...

At the front.

It's Dorothee Cresswell from Exane. I think I understood you correctly, that you're obviously very confident on the self-supply being locked down. But you're also looking further up the values for chains. So does that mean you're going to invest yourself in metals, mining and refining? We'll see that in your CapEx? Or do you do that by a joint ventures? Any comments on that would be helpful. And then I just wondered what your latest thinking is on LFP battery technology. I'm sure it's not relevant for this product, but there are more compact, more affordable products coming later. And I wondered whether that's something that could be relevant.

You start with LFP and I continue with the battery.

Good. No, very good questions, both of them. And when it comes to battery chemistries, just as you say, for this car, we will not have an LFP battery, it's too big, and it doesn't make sense to have that technology. But for lower vehicles, further down the line with smaller battery packs, more focused on costs, definitely, LFP is a chemistry, which we are looking into and which we are having in our plans as well. We are not today any cars with an LFP battery and as I said, this one will not have it either. I also think there are opportunities on the battery chemistry side, where you go for high manganese cells, which can actually achieve similar cost levels, but without some of the drawbacks of LFP around recycling and cold climate. So we will not be -- we will be -- battery cell chemistry will not be the deciding factor for us. We will be able to handle all kinds of different chemistries in this application.

And in regards to battery raw materials, we are looking into everything from pure offtake agreements to investments -- equity investments. So there is a very broad range. A lot of discussions with many players are ongoing right now. And as I said, we will come back once we can talk about something.

George?

Yes. Just actually on Dorothee's question on LFP and also what you've been talking about in terms of cell to chassis, so is it fair to assume that you see the opportunity for cell to chassis with nickel-based chemistries? And then secondly, when we think about cell to chassis, what are the implications in terms of recycling, does it complicate recycling or not, especially from your perspective?

I don't think the chemistry, the LFP discussion or whatever chemistry that doesn't make a big difference. We have to have a -- we want to have one vehicle integration concept regardless of cell chemistry. It's more the form factor of the battery cells, which is the deciding factor how you structure that. I think the -- in the future, when it comes to technologies like LFP, we are seeing that you can use them in different places, in different ways, different markets, having different requirements, et cetera. And that also goes for recycling. I don't think the vehicle integration concept. If it's sells to body or not, is the most difficult factor to solve when it comes to recycling, I think it's rather the different chemistries. It's very difficult to mix an LFP and NMC battery cell in the same recycling process, it's not possible. And it's also very difficult to manage both. But I think the vehicle integration concept is not the deciding factor in that territory.

All right. Harald?

It's Harald from Morgan Stanley. Can I ask a slightly more commercial question. We've talked for the last 5 or 6 years about BV versus ICE comparatibility on the cost that hasn't been achieved your third quarter, I think that, that became quite clear. Can you talk about 2 sides, really. One, can you just talk about the big buckets that makes you so confident that you can achieve that price comparability? And if you don't achieve that, aren't we all going to have to pay higher prices for cars? And do you think that it's realistic that we will continue to do so, right? The first few of these cars that we're buying -- we're buying it at very high prices relative to the cars that we bought before. But that's not necessarily true for 100% of the population, right? Not everybody has enough money to do that. So can you talk about how do you approach that angle? And then internally, considering the gross margin difference between the cars today and considering the fact that you've got a very ambitious target for BVs, how does that conversation go right? Because at the same time, you want to maximize profitability, but you want to also get to 50% BV. How does that conversation go, right? Are the targets still going to be the same, whatever happens to the relative profitability? I'd love to understand.

I mean, and they're connected, right? So your first question around ICE parity of course, is very connected to the margin of the car, obviously. How will we achieve it? And I will let you come in from the commercial perspective on the suppliers. But if you look at it technically, again you have to play is to figure out the triangle between charging speed, size of battery and expectation of range basically. Those 3, it's super easy to achieve ICE parity between [indiscernible] shrink the battery. If you are okay to drive 200 kilometers, you can have it today, but that will not be the right. You have to balance that. And I think in that discussion for our consumers, you cannot only talk about the upfront price. You have to look at the total cost of ownership because there are so many other aspects which will help the consumers in the financial calculations about this one. And I think when we start balancing our vehicles on total cost of ownerships, back to your last question, then we can get to a totally different discussion in the company when we talk about should we build a web or a non-web.

Yes, not much more to add. I think it was clear. I think in regards to your question around internal discussions, I think we can take them in the end when we are all together. Okay?

Right. More questions? Okay, sorry.

It's an exciting topic. We are on many questions.

[indiscernible] from Danske Bank. Yes, you're talking a lot about securing the supply volumes long term. And we're moving from, I mean, no inflation environment or a high inflation environment. So how many suppliers are eager to sign up to long contract, so how are you changing those contracts? Are we seeing much more rapid updates on pricing for your supplies? Or are there mechanisms built into the new contracts, et cetera?

So there are definitely mechanisms built into. It's very common to index materials in contracts, so that we are doing for battery materials, for steel, aluminum and others as well. So there is a mechanism built into. And in general, we are having price discussions with our suppliers. It's all absolutely transparency based. So we see exactly how much of the total parts price is, for example, energy related, and then we can have relevant discussions. So all fact-based negotiations we are having, and this is how we are proceeding in my view so far well.

And those discussions will be more frequent now, I guess, as well had like a few decades of no inflation?

Of course, if there is an enormous cost pressure in the market and problems to pay electricity bills, then these dialogue can be more frequent. But just keep in mind, out of the entire parts price electricity is 2%. So it's not a major part of the cost.

Henrik Christiansson, Carnegie. Just a question on this bidirectional charging, very interesting technology. If you use that as your local power bank at your house, but that obviously increases the usage of the battery as well. And how do you, as an OEM guarantee range and the guarantee topics really when you start to use that as you run, how will you manage that?

I think, I mean actually, it doesn't increase the deterioration of the battery so much because it depends on how you do it. The critical thing for battery when you go from no charge to full charge up and down all the time. If you -- through software can be charging within, say, 50% and 70% of the time and using that window for bidirectional charging in our analysis, we see it doesn't make a material difference on the life length of the battery. So we believe that there is an opportunity here that if you do it smart and you steer that functionality in the right way, you can achieve this without having a major deterioration of the battery actually. And that will be our approach to it.

We have time for one more question now before lunch, if there's any? All right. Thank you very much, [indiscernible].

Thank you.

Hi. My name is Henrik Green. I'm Head of Advanced Technology and Sustainability here at Volvo Cars. And with me...

My name is Anders Kärrberg, I'm Head of Sustainability at Volvo Cars.

And consequently, we will talk to you about sustainability. That is obviously, a very dear subject to Volvo Cars. You all know we were founded nearly 100 years ago with people in mind. That has always given us our core value safety. It's very natural to us to bring that core value further into planetary safety. People safety as much as planetary safety or sustainability expanding into society and people at large. But we also see that it's not only for ourselves and our history that we are dear to this subject. We can see that consumer demand is already out there and it's growing the sentiment, especially for the demographic around interest in our brand is growingly asking for mobility that doesn't require unnecessary footprint on the planet. Also, we hope and we think that all the investors looking to invest in Volvo Cars also pays attention to sustainability. So for us, this is a key success factor going forward. And we build the sustainability strategy, and I will be rather brief and then later, Anders will go into more detail. But we build the sustainability strategy on mainly 3 pillars: climate action, circular economy and responsible business. So starting with climate action, which is imminent in many ways and the most urgent for us to raise towards our strong commitment that we still stand firm behind to be fully climate neutral as early as 2040. And our way there, we have also committed to take a large step already by mid-decade, this decade to reduce the carbon footprint of every vehicle with 40%. Circular business. Circular business is, on one hand, as important to reach the climate action as it is also important to go beyond the climate action and carbon footprint because it takes into account all Earth's resources. And for us to grow business to continue to provide mobility to our consumers and customers without necessarily growing the need for virgin resources in doing that. We have already committed to SEK 1 billion in cost savings by circular economy mid-decade and 2.5 million tons of CO2, which would actually account to 8% of our CO2 footprint by mid-decade this year. But it's the biggest thing for the second half of this race towards climate neutrality. Responsible business. As I said in the beginning, people has always been a center in Volvo Cars. We have heard it throughout every presentation today from the start, and you will hear it, I believe, until we finish 4:00. It's at our heart. People inside the company, our employees, of course, our customers are users, but also people around us, people around our cars and people in societies where we operate our society at large. But with that, let's dig into this in more particular and start to compare how does the amazing EX90 perform against these hard targets. Anders?

So our long-term ambition is to be a climate-neutral company by 2040. But more importantly, we are focusing on the short term to reduce CO2 by 40% per car between 2018 and 2025. And this target is, in turn, broken down into 3 sub targets, which you find on the screen: tail pipe, supply chain and operations. In tail pipe, you find the emissions from driving -- driving through the life cycle of the car assumed to be 200,000 kilometers. And here, we use CO2 emissions data from certification that counts a battery electric vehicle as a 0 emission vehicle. In supply chain, you find all the emissions from mining, extracting, processing raw material for our components, but also the energy that goes into machining and manufacturing assembly of all the components. So basically, from the mine to the Tier 1 supplier, that's those emissions. And then finally, operations. It's about our own manufacturing operations, supply chain, retailers, logistics, business travel and so on. Now these 3 buckets of CO2, they are not equal in size. When we started to develop this car in 2018, roughly 2/3 of the emissions from an average Volvo Car was in the tail pipe bucket. 1/4 in supply chain and the rest in operations. Now today, when we have started to electrify, you find 55% of the average car emission in tail pipe, 35% in supply chain and about 10% in operations. as we electrify the proportions between these 3 buckets will change. And now what about the EX90?

Well, thank you, Anders, and you have already given a hint. But let me try to walk you through this, I apologize for a rather complex slide, but this is important. And I think this tells actually the story behind the whole electrification journey at Volvo Cars and as we see it throughout the industry. Well, first of all, the tail pipe emissions, obviously, this car does not have tail pipes. The tail pipe emissions are 0. It's energy required to -- its CO2 required to produce energy, but out of the car, the tailpipe emission is 0. That was the largest bucket and that becomes a 100% reduction, of course, going from our previous EX90 to our new EX90 fully electric. But that also shows that we bring on a burden in terms of sustainability here that also needs to be addressed and which is a key part of our strategy to address and have already been partly addressed but we add 500 kilos of batteries. And although that Kerstin and Erik showed you before that this second generation of e-propulsion has 40% better efficiency when it comes to CO2 footprint per kilowatt hour, we still amount 111-kilowatt hours of energy inside this car and that accounts for a larger footprint than a traditional car. And we should be honest about that fact, and we need to address that with actions continue, as was also shown in the previous presentation, third generation where we will see a further reduction of CO2 per kilowatt hour. So right now, this car, as it stands, actually has a higher supply chain emission than our previous car. That is also partly to be mentioned from the higher levels of aluminum. Aluminum per kilogram has a higher CO2 footprint in steel going to a more lightweight and advanced body structure, holding that battery in the floor, it adds CO2 to the total life cycle. Finally, Anders talked about our own operations, our manufacturing facilities, our retailers, our R&D operations, test labs, et cetera, where we are continuously improving by using more and more fossil-free energy and taking that down. And we can see here that, that is down by 19%. So if we proportionally add these 3 buckets, the minus 100% in tile pipe, approximately 2/3, the 68% plus, almost of 1/3 and the smallest bucket of minus 19%. We see a total reduction of this amazing car versus its nonelectric predecessor with 50%.

When it comes to circle economy, our long-term ambition is to be a circular business by 2040. For us, this means to decouple business growth from the consumption of resources, resources being material, water, energy. And how do you achieve that? Well, first of all, of course, very simple, you reduce the consumption of resources. You engage in recycling of all materials, but without degrading the material, so it loses value. You eliminate waste, you eliminate pollution and you grow revenue beyond vehicle sales. Short term, we've set some targets, and we focused on the 3 targets you see on the screen, plastics, aluminum and steel. But we do more, of course. We focus on remanufacturing of parts, waste elimination and to better use the material, raw material that we buy. All in all, we believe that this actually can provide major savings for the company, about SEK 1 billion by 2025 and at the same time, reduce our CO2 footprint. Recycled content has been important when developing this car as well, and Henrik will tell you more about this.

Well, as we have already talked about, adding aluminum and batteries to the car adds a burden in terms of CO2 during the supply chain and manufacturing process. And addressing that, we knew from start that it's very important and urgent to increase the level of recycled material into this vehicle. So that was one of the prerequisites really early. And it's also one of the continuously growing challenges going forward, both to our mid-decade ambitions and to the fully climate neutral target of 2040. But looking at this car, we're quite proud to stand here today and say that we achieved 50% recycled plastics, 15% recycled steel and 25% recycled aluminum. As an example, that accounts for, I believe, 48 kilos of recycled plastics in the car right now. And this needs to grow. If you remember what Anders said, that has to go up to [ 25% ], the same for steel and aluminum up to [ 40% ]. Aluminum is the most CO2 intensive out of these 3 buckets.

So the third pillar of our strategy is that we aim to be a recognized leader in ethical responsible business going forward. And here, we focus on 4 areas: First, it is about how we treat our employees. And we want to be an industry road model. So we work hard with diversity, inclusion, gender quality and the safety of our coworkers. The second area is about procurement. Here, we now put procurement on par on the same level as cost and quality. It's a basic hygiene factor. As a tool, we've introduced an internal price on CO2 of SEK 1,000 per ton. And this guides us to weed out [ high-meating ] suppliers early in the process. Of course, there's more to sustainability and procurement. It's about screening for human rights, applying our code of conduct and doing audits based on a risk analysis globally. The third area is about finance. We have already issued 2 Green Bonds. We have established a sustainability linked loan, and I just learned over launch that it was the first in the automotive industry. And we also use CO2 as an important screening factor when making decisions, which option are providing the lowest CO2 footprint. That's a decisive factor in investments. And then finally, of course, anticorruption, ethical behavior is a part of our corporate culture, and that's something that we reinforce all the time. Also, this area has then been important when developing this beautiful car. Henrik?

Absolutely, Anders. And although many of those activities actually goes across our car line and deep into everything we do, there is a couple of highlights that we still would like to connect, of course, to this vehicle. And starting with traceability, which is the first step to a fully responsible supply chain and business. We are now increasing our traceability of raw materials from one previous metal cobalt to also now include nickel and lithium. So that traceability is our first step to a larger set of traceable parts and materials going into the car. But very proudly so far, 3 of them. We have also, of course, shown you the amazingly beautifully designed wool blend upholstery, which, of course, comes from a wool industry that is certified for the animal health. We also use wood interior as we could see yesterday, illuminated wood that is FSC-certified, of course, where it is growing and industrialized. And as Anders said, we can also probably now conclude that the second Green Bond that was issued provided money and funding to this particular car in the end of the production and development phase that we are in right now. So EX90 partly funded by the second Green Bond.

To conclude, we would like to summarize some progress we made in sustainability comparing to the situation we were in 2018. Then starting with climate action. As you can see on the screen, we are progressing with our target of minus 40% per car to 2025. We are right now at about 12%. This will, of course, improve as we sell more [indiscernible] as you heard before, we are at 8%. And in the October -- month of October, it was doubled, so that looks progressive. Finally, we are also have a target on getting fully climate neutrality when it comes to energy in our manufacturing operations. We are at 66%. It is a very good performance when you compare to industry. And last year, we had our plant in Torslanda, going climate neutral. And we also achieved 100% renewable electricity for our Chengdu plant in China. So it is progressing well. The other area about -- if you click one more, circle economy. By 2025, we want our new cars to have a recycled content about 25%. Currently, our cars on the market average is about 10%. So there's a way to go. But here, we are taking a step in the right direction. Waste and water are also very important. And here, we talk about our own manufacturing operations. To manufacture a Volvo, generates 450 kilos of waste. 96% of that is recycled. Here, of course, we can do better, do more. We are against our target now at 5%. Water to manufacture a Volvo in our system consumes about 2 cubic meters of water. We are overachieving the target as you can see. One major reason being the drought in China where we simply had to put in a lot of strong measures, which we have, and we hope, of course, to have this level sustained. But when talking about water and waste, you should be aware of that the problem is not within our operations. It is in with the supply chain. And here, we simply do not have the data today to quantify the waste and the water and the energy consumption. And we are working on it. Now hopefully, another day, we will come back with better figures. Next slide then summarizes a few things on the ethical responsible business area. We want women in leading positions in the company. It provides a good culture, and it attracts talent to the company. We are currently at 29%. And it's been flat for 4 years. It's not something we're proud of. We are putting strong actions in to get more women into leading positions. It's 29%, a bad figure. If you compare to automotive industry, it's actually fairly good. If you compare to industry in general, it's a poor figure. Then we introduced a family bond, which is a global offer, general neutral on parental leave for our employees. You can see the terms there, 24 weeks, 80% pay. It's been very popular. And we note that the ones that take this on is actually 70% fathers. So it's more men that is attracted to this benefit than women. Employee engagement, I think all companies measure, we are at an index of 77, which is against the global benchmark, which is 76, pretty good. We have increased over the years. And finally, there is a measure on the safety in our manufacturing operations. LTCR. I'm not sure you -- all of you know what it is, lost time case rate. It's an international measurement method where you measure accidents and incidents in manufacturing. 0.06 is a very, very good figure when you compare to competition. It's really world leading, so not only do we make the world's safest cars. Volvo is also probably one of the most safest places to work. Thank you.

Thank you.

All right, okay. Thank you very much. And now it's time for Q&A. And just to repeat: You need to wave your hand, get a microphone because this is being recorded. Agnieszka?

Agnieszka, Nordea. I have a question on batteries. And if you have any concept for more kind of circular strategy there, what is that?

Well, speaking of the batteries, I think it's, first, to fairly acknowledge the fact that, that is one of the most important parts in the future, to become circular. Steel, aluminum and batteries is definitely 3 most important buckets in terms of CO2, so one of the challenges is, of course, that growing in volume, you need that volume to come back before you can harvest batteries and put them back into production. I think there is a couple of things that are very important for us to become both circular and climate neutral here, and that is to use recycled material in production of new batteries. And when Erik and Kerstin and the team chose to collaborate with Northvolt on building the NoVo structure, that was one of the main criteria for choosing them as partner, the capability to bring in black mass from old batteries into new production. So the challenge here is the lead time. We want all our cars to live as long as possible. And actually you can say, the longer a car lives, the better it is for the environment, the more mileage you get out of that car, so we want the batteries to live long, but at the same times, we need those batteries back to build new cars. And well, to answer your question: Well, it's an imperative part of the strategy to use recycled batteries. And right now we are -- the main hurdle is access to old batteries in the volumes that we are growing to.

You may also know that, in Europe, the EU Commission is going to require recycled content in the batteries. So starting 2030, about 4% of the critical materials must be recycled, going to about 10% in 2035.

All right, we have a question over here.

You mentioned that you're applying new criteria to suppliers when you're working with them. When you compare the electric version of the vehicle versus combustion engine, have you reduced the number of suppliers you're working with? Or have you changed the supplier base based on the new criteria you're applying when you're working with them? And the second, you mentioned some data points that you want to come back to us. I believe it was waste, water management, et cetera. What are you doing to obtain this data from the organization so you -- so investors can see that in the future?

Yes. If I start with the battery question or the supplier question. Well, already when we sourced the batteries in these vehicles, which were actually quite a few years ago, we brought to the table that the sustainability requirements is, as Anders said, as important as quality and costs in our process. So to be on the map as a future supplier -- as a supplier today and, of course, a future supplier, you need to meet our sustainability requirements. And you want to be part of our sustainability journey going forward, so yes, that changes who supplies to us, but I wouldn't say that I know that we have reduced the number of suppliers in total.

When working with the suppliers and sustainability, today, we put requirements on them, 100% climate-neutral energy by 2025, a waste reduction of 4% annually and reduction in water. However, this is very difficult to follow up with a supply chain that is global and there's about 2,000 direct material suppliers. And sometimes, the suppliers do not know their own footprint on CO2, on water, on waste and energy, so it's -- those are the reasons why we currently cannot look into this. However, your question is very relevant because for a company like Volvo and in the automotive industry that's where the issue is. It does not sit with our own operations. However, of course, it's a concern for us and we must work on it.

A question...

It's Philippe Houchois at Jefferies. I have a question, though, between reusing and recycling. When you look at a battery coming at the end of its life, does it have to be completely dismantled? Are materials reused? What is the rate of loss of materials in that case? Or are you looking at batteries where they come back at the end of the life of a vehicle but they can be reconditioned? And that would make a significant difference in terms of the energy, for example, required to reuse, so is there a cutoff? Or is there a level of reusage or recycling that needs to be done to be able to reuse a battery into new a vehicle?

Yes. I mean I would -- it's a good question that we spend a lot of time thinking about. I would like to answer it in 3 pieces. One part is, yes, we can remanufacture and reuse batteries in our own fleet, but then you have to understand that means that you have a battery that has no car and a car that has no battery. And that means that a car either crashed, leaving a healthy battery to take. And the car that is still healthy needs a battery. So the best way in both those cases is, of course, to avoid crashes and to avoid batteries to break before the end of life of the car, so yes, remanufacturing of batteries back into our own use in the vehicle fleet is good. And we are doing that today and we will continue to do that, but remember it's much better to avoid having to do that at all. And have the same battery in the car until end of life is always best. Secondly, yes, I think there is a market for end-of-life batteries. And that should be used. It's better to have a battery end of life in a residential storage solution than to have it as landfill 100 days of the week, but I also think that we will compete around those batteries because, when we are going to build 600,000 electric vehicle, we need 600,000 batteries to put into production that are recycled. So I think there -- in the beginning and the growth of the electrification era, there will be a scarcity of old batteries that will compete to go either into new production of batteries and cars or second life in residentials. From an environmental perspective, both are better than the alternative, but it will be a competition.

[ But if I may expand on this and said it's taking ] a lot of materials. If you take apart a battery at the end of its life, recondition or reuse materials, they don't really lose physical properties. I mean copper doesn't. A number of other materials don't lose any property. I'm just trying to understand. Is -- at a normal end of life of a 10-year-old vehicle, how much can you recondition a battery and consider it as new for a new vehicle? Or does it have to be taken apart and recycled [ to put in? Is ] reconditioning an option...

Yes. So an average car today lives around 17 years. In Sweden actually, I believe, our cars live around 22 years. After 22 years, we don't really know today exactly what will happen with our batteries because that is yet to be seen, but the estimation today is that a 22-year-old battery needs to go back into production through black mass recycling.

Yes, George, in the front here.

Yes. Obviously a huge focus quite rightly on CO2 and -- but what we've seen obviously with diesel is there are other externalities in addition to CO2 to bear in mind. With battery electric vehicles, given their mass, presumably there are other external considerations, such as particulates from tires, damage to infrastructure, which should be considered when we think about that overall sustainability. What are the top priorities for Volvo when we think about externalities above and beyond CO2? And how are you addressing those?

Well, yes. Let's share the question, Anders. I think you have things to bring to that good question as well. I -- let me start with the most important things. Maybe this isn't exactly what you asked. For us, priorities here is steel, aluminum and batteries. And that is both from a perspective that, that contributes the -- largely to the CO2 footprint, but it's also because that draws Earth's resources. So beyond looking at climate and CO2 and carbon footprint, we, of course, need to look at usage of raw material. How much ton of metals do we bring up from earth to build a car? And is there other pollutions that you mentioned that also needs to be addressed? So right now I would see, between today and 2030, this is addressing the giant part of that puzzle. The giants are steel, aluminum and batteries. From 2030 to 2040, it will be a long tail of thousands of things. There we will talk about electronics. We will be talking about tires. We will be talking about a lot of things to get to a fully climate-neutral situation in 2040.

Climate is obviously the first thing to look at and to reduce your impact on nature. Circular economy, recycling used materials is the second. The next one coming in for all industries is biodiversity. And we are still in our early phases to assess really what are the externalities and what we need to focus on; land use, for example, and then material use and so on. Your question on materials: I just want to comment. It's very -- a very important question because a car weights 2 tons, but upstream when you look at the -- all the raw material needed to produce those metals, minerals and the plastics, that tail is really, really big. To produce 1 ton of steel, you need 5 tons of materials, gravel, ore coming out from the mine, 5 tons to 1. If you go to copper, you are at 330 tons of material to produce 1 ton of copper. You go to neodymium, which you find in our magnets. We don't use a lot. You are to 950 tons to 1 ton. You go to cobalt which we use in our batteries. You go from 1,500 tons to 1 ton. So the material you use, the focus on recycling here is going to be fundamental, I mean, not only for Volvo obviously but for the whole automotive industry.

All right, I think time is running up. Very interesting. And for sure, we can get back to this in the general Q&A, but thank you very much, Anders and Henrik.

Thank you.

All right, now it's time for Bjorn to talk about what we do, quite significant changes in how we go to the market, right? Yes. Thank you very much.

Thank you, John. And nice to meet all of you again. I'm going to start over here by this car, close to the eye of the car, that you were all drooling over during the lunch. You were looking at the car. I don't know if some of you looked at the eyes of the other people. Do you know what I saw? I saw a lot of people saying, "I want to buy that car." And how can you do that then? 3 options: volvocars.com. You go to any of our retailers. Or for those of you here in Stockholm, I'll be here after the show. I'll take it down, okay? Now [ Jim ] always say that selling cars is a very core part of our business plan, and it is. How do we do that then? Our commercial strategy. It's very clear. Those of you who spent a lot of time with us in the IPO process, you will be a bit bored because it hasn't changed. A strategy shouldn't change every year. A strategy is something you need to execute on with more sophistication over time. And that's really what I'm going to share with you in some more detail but the same direction. So the strategy has 3 components. We aim to grow. We aim to grow faster than the market, and we do that by leveraging the 2 transformative forces of selling cars in the automotive industry right now. One is what you sell, electrified offers. And the other one is how you sell when we power the potential of online and digitization in order to drive a more efficient go-to-market model. That's our strategy. In terms of growth, I get this question a lot. Yes, our mid-term objective, mid-decade objective, is to get to 1.2 million cars. Yes, with 1 or 2 years of supply constraints, it's going to be tougher to get there than we thought [ 2 ] years ago, but that's still our target. We see the demand. We get -- know what cars we get. We know what supply we have. That's our target. And then some people want to be extremely technical. What is mid-decade? Mid-decade is mid-decade, and we are aiming to go to 1.2 million by mid-decade. Then the key question is, will we do that come hell or high water? What's important is to grow in a sustainable and profitable way, so this is not a target that has a value in itself. It's important to show how fast you're going to grow, but we're going to preserve our margins. And we're going to focus a lot on earnings quality and pricing in those cars that we sell. That's what we said before and that's what we continue to say. And in order to do that, of course, we also need to grow the strength of our brand. And that's part of our strategy as well because that gives us a higher willingness to pay, from the customers, a higher degree of loyalty. Electrification. We've talked about it so much. I don't think we need to hammer this home even further, but we will be at more than 50% fully electric car by mid-decade. And that will be slightly different across the world. We're going to be far beyond 50% in EMEA. We're going to be roughly around 50% in Americas and a little bit lower in APAC by mid-decade. That's our plan. And then when it comes to online, what we have said has been 50% online. And I get a lot of questions around what does that really mean. And that's a very good question because, if we mean searching for a car online, then all car companies of the world is already there. So that's not really what we mean. Does it mean that you have a buy button online, but everything else is handled manually back? No, not really. What we are really after, it's not technology for technology's sake. It's not online for online's sake. We are after delivering a better consumer experience divided by the total cost of the system to deliver that consumer experience. And that total cost is all the costs that we have and all the costs that [ are -- their ] retail partner has. That's the cost we need to optimize. We are a few thousand cars within -- a few thousand people within Volvo Cars working with selling and servicing and marketing cars. If you take all the retail partners that we have and take all the employees that work day and night [ by nothing than ] serving Volvos and some of our agencies that have employees that do nothing but serving Volvos, we run 65,000 people. It's that collective force of those 65,000 peoples that we need to optimize to get the best consumer experience divided by cost. That's what we're going for. And in order to do that, we believe in a seamless omnichannel experience where volvocars.com is the base. Then we have a network of retail partners that support the physical part of that omnichannel experience. We are also securing that we share the consumer data between us and a retail partner given -- because then we can market more efficiently. We can administrate a lot of things more efficiently. And the customer care becomes much more tailored and efficient and cost efficient. We're also going with a fixed price. We are not -- we know that the Volvo customers don't value price haggling with retailers. And that's not a very value-adding type of activity, so if you want to optimize consumer experience divided by costs, you stop price negotiating and you take away people that price negotiate. That's an improvement. Also we know that, in terms of the offering of the car, we're drastically taking down the complexity offering. We know that, our consumers, they get more angst for making the wrong choice from 58 different choices than the pleasure of making those choices. People want to choose the color. They want to choose the interior room. They want to choose the wheel, and then maybe some the equipment level [ at kind of broad bands ]. That's what we're going to offer, so it's going to be 4 or 5 choices to make for a consumer and going to make it much simpler and straightforward. The other thing that we're doing is -- if you take Europe, for instance. We have 1,500 retailers. That means today we have 1,500 physical inventory points and we have 1,500 inventory flows. That's not a capital-efficient way of running it. That is something that we're going to optimize so you have shared inventory for those, shared inventory points. The likelihood that you have the right car in the right place at the right time is much higher with that approach, so that's what we're going for. That will create a better consumer experience divided by the total cost. Doing this requires different approaches in different regions. In Europe, in order to actually set the price and to share the consumer data and to take the full responsibility of the inventory flow, we legally need to flip into different legal [ custom ]. We go from a wholesale model into a direct-to-consumer model. In China, we actually already today share the consumer data, and you have a very different digital ecosystem where you that -- where that is enabled. And we have different legal ramification and constructs, so there we actually have the ability to set the price to a much higher degree. And in the U.S., we have the franchise laws. So by law, our retail partner has to be the transacting part of the -- of selling the car, so of course, we work within the legal frameworks of that and work with our retail partners to optimize the consumer experience divided by the total cost, but we need to do it in a slightly different way. But what we're going for is this recipe [ endgame ]. If we then say, and focusing on Europe for a while, "What will this mean?" What does it mean for the customer? What does it mean for the retailer? And what does it mean for us? Starting with the customer, it's very simple. He or she will get the better consumer experience, so much clearer what you buy, very clear offer of the car. You know what it costs, and your neighbor doesn't get the same car at a lower price. And you know the delivery time. This is in the long run. Right now delivery times are very far out in time and a bit volatile, but structurally this enabled us to be much clearer on delivery times and a much more seamless journey. That's good for the consumer. For our retail partners, in essence, what that gives them is long-term sound economics. You cannot take today's model and just put it online. And then you add a lot of those online platforms which then incentivize retailers to discount cars and send them into somebody else's region. That's not a good consumer experience, and it's not a role any retailer wants to have either, so by doing it this way, we get a structure that works for the retail partners and for us. The retailers can focus on really value-adding activities, explaining the car, explaining why the Volvo is the right for you, but they don't need to spend time price negotiating. They don't need to spend time calling other dealers and swap cars. They don't need to work with administration in different ordering systems and financial service systems. We take away a lot of inefficiency in that whole end-to-end process. So that's really what's happening to the retailer; and they're very, very clear. And we had all the European retailers in Gothenburg a month ago when we had this discussion that there is no way we can be successful unless our retailers have sound economics. We can't have a partner that don't have sound economics, but this will require -- just as we need to change a lot, they also need to change. Their role is changing. And in some countries, we are optimizing the network because we might not need as many sites in some of the key countries. And then for us, what happens to us? We get basically a very good, efficient go-to-market setup. And importantly, with a direct consumer contact, we have a platform for further growth. So yes, more efficiencies that I already talked about, but I think it's also important that we take over the responsibility for building the digital infrastructure. We take over the responsibility for a lot of the direct consumer contacts and for setting the price. And all the inventory is actually with us. So the total inventory in the system will go down, but the inventory that remains, all of that will be on our books. And which is also important, we get the direct contacts. If you want to do what Jim was talking about, toggling a software and add something on subscription, you have the potential for cross-selling and upselling and selling other things to the consumers, which is an important potential. Not so much mid-decade, but in the times after that, we have big hopes in the economic consequences of that. How are we rolling this out? And this page, you should look at, but you shouldn't really look at it because the honest answer is we don't know exactly how fast this is going to go. You need to slice the elephant. And the way we've sliced the elephant is we've started with one specific channel, direct to consumer; one specific contract, Care by Volvo subscription. And we started in 5 countries, Germany, Holland, Norway, Sweden and the U.K., to get into this direct model together with our retail partners. It was shown quickly that consumer loved it. It worked well. Then we added additional cars, BEVs, into that. We added also additional contract types online, and that's fine. When you have kind of 10% of sales, you can have this as an business on the side, but then when you start to add more contract types, then all of a sudden you get to half of the business. And then it becomes quite inefficient to work in 2 different business models at the same time. It's very hard. It's not a very easy stance to work like that, so what we realized is that we need to take country by country and flip them completely into the new model. And our first country to flip is U.K., which we aim to flip by mid next year. After that comes Sweden. And then we're going to learn all the things it takes to flop -- flip all the different channels, all the contract types; and understanding the automation of all the back-end system and how we optimize our role and the retail partner roles. After that, we will then go to the other countries. And we will adjust this time frame based on the learnings in U.K. and Sweden. It's important to remember that the go-to-market model in the automotive industry is extremely decentralized. You have the retail partners. That's really where the action is happening. And then you have the national sales companies. Now as you need to digitize the whole system, you get an extreme centralization forced into a decentralized system. That's what's make this quite complex to optimize. And our intention is not to build up -- this up country by country. You're going to draw much more synergies by actually sharing some things across countries, some of the price setting, some of the offer steering, some of the inventory flow management. That's not going to happen country by country. That's going to happen at a cluster level of countries so you draw efficiencies. In order to make that happen, we have reorganized within Volvo now. So we have a direct-to-market P&L area. Right now that Sweden and U.K. is in that area. And any country that's due to flip within 12 months will be moved into that area so that we really build a new structure for the future and not get stuck in the old way of thinking as we transform our company. So that's how it [ pays ], the transformation. We've got, get a lot of question on Care by Volvo. What is Care by Volvo really? And there are 2 types of Care by Volvo. It's the 36 months fixed contract which is principally like a leasing setup, but we take more responsibility in house, handling a lot of the processes with the consumers. And actually, up until now, we have done the financing of the car on our balance sheet. Care by Volvo flex is a much more flexible offering where you have basically a 3 months notice period for the consumer, which makes the barrier to entry into Volvo much lower. It's a fantastic tool for driving conquest, and we see that with the consumers that are coming in through the Care by Volvo flex. A lot of them were not with Volvo before. So we get more consumers into the Volvo brand. And while they can leave after 3 months, they are actually electing to stay much longer, which is of course the whole idea with a contract setup, but -- allowing them the flexibility to leave if their life circumstances are changing. Where are we in the U.K. then in terms of delivering this flip? So the retailer contract for the full business, not just the Care by Volvo part, that will be in place by the end of this year. We have built and are building the different digital solutions to have the different contract types and the different channels. So we launched B2B for small, medium enterprises in the spring. We launched B2B for large companies [ through lease costs ] just recently. And we have a few other big digital deliverables during the spring. When all those solutions are ready, we will flip fully into the direct-to-consumer model. That will be midyear next year. And at the same time, we will also get up and running a new fund-based solution that handle the financing of the cars together with [ Optio ], a partner of ours. It's a Luxembourg-based fund who works with innovative, consumer-based financing solutions across different industries. And now we're working together to really reinvent consumer financing in the direct-to-consumer model, automotive industry. And what will that give us? First, I'll give you a bit of context to where we will use it. We will use this fund-based solution for our leasing products, operational leasing products, and for the Care by Volvo flex, which is roughly 1/3 of the volume in the U.K. For cash, you don't need financing. For loans and financial lease, we're continuing to work with our financial service partners that we have traditionally had. And this picture, by the way, give you a bit of the complexity that, for every channel and every contract type, the online optimization you need to drive is a bit different. That's why it takes some time to build an efficient, fully online business model, but if we go back to the fund-based solution, that, we will do for the operational lease and for the subscription. And why do we need that? First, we want to make sure there is one consumer journey, not one consumer journey to order the car and another consumer journey to finance the car. No consumer wants that. Secondly, we want to have full control of the pricing. Yes, interest rates are changing. How do we optimize setting the price for the financing versus the car? The consumer doesn't care. They pay one thing in the end. We want to be able to kind of optimize how we actually price it to the consumer. The third point here is really important and a bit hard to understand sometimes. When Jim says he want to toggle in or toggle off a subscription: You bought this car and then you want to upgrade to self-driving capability for 3 months, and you want to pay for that. Today's financial service structure is not built on that premise. Today, all the leasing companies and the banks, they have been built on one premise. You have one asset. For that asset, you create one contract, and that one contract has one duration. That's kind of the atoms of which all the systems are built. And then if you say that, "I want the timing to be flexible. I want the asset to be flexible. I want to add this subscription on top now for the self-driving technology," it can't be done. It's -- and you look at me and I'll say, "Of course, it can be done." Yes, of course, it can be done, but if you built a system for 30 years with a paradigm that one asset is one contract, is onetime, it's very hard then to come in and say, "No, no. I want the time to be flexible. I want the asset to be flexible," so you need to rethink how you build up the digital system to serve these consumers in the right way. And that's what we are enabled to do together with [ Optio ]. And then, of course, by taking a more active role in this value chain, we get a bigger capturing of the value creation. Here Volvo -- you need to remember that leasing grew a lot over the last 30 years. And the -- except for the last 10 years, we were extremely poor as Volvo, so we couldn't participate as much in this. We came by with different local solution with financial service providers country by country. Now we have an opportunity to capture a broader part of this value creation. And interestingly enough, not only is the whole business flexible, as I talked about here. The logic is typically set up country by country, which has been fine because we have run our business country by country, but as we now go into the digital online future, we're not going to run the business country by country. We then need financial solutions that cut across several countries. And the current structure is not built to provide for that. So the structure, very schematically, that we're setting up. So we as Volvo, of course, we will take care of the key interface with the consumer. That's going to be our job. Then you have debt investors who are going to provide financing. They want return for their money. And what better to invest in, and if you want safe assets, than investing them into very safe cars, Volvo cars, being driven by the most safety-minded people on Earth? That's the asset class. And then [ Optio ] will be managing basically the fund, all-around setting up -- setting that fund up. And then we get to structure with [ SPVs ] because that needs to be country by country that are then actually holding the cars, but with this structure, we get around the inflexibility that -- the whole car financing industry as we built around it for the last 20 years. This will not be up and running overnight, but this will be up and running for the U.K., for 1/3 of the business, by midyear. And we believe this has great promises for making sure we can serve the consumers in a more flexible way going forward. Then I'll wrap up with some quick logic for numbers and then we go to the Q&A. So yes, in the IPO, we were very clear. We had, prior to COVID, around 6% structural EBIT margin. We need to get to 8% to 10% by mid-decade, so 3% structural improvement. One big piece of that is going to be the commercial transformation. What is it that actually gives us a structurally better margin? By doing what I talked about here. So first of all, it's around revenue growth and pricing. It's around productivity. It's around capital productivity. And last but not least, it's about taking a better part of the full value chain and being -- capturing a larger part of the value chain. So on revenue, it's pretty simple. Having a great consumer experience enable you to price and mix your cars in a richer way. That's very important. Also, by going into this direct model, you steer the pricing, so you take away some of the unnecessary intra-brand competition that you have in some locations throughout Europe. And also in this whole model you have a much higher focus on making sure the cars stay in your system. And by that, you have better pricing on the used cars and you control residual values in a stronger way. That's one key aspect. Productivity, we've talked about it. Big one here is taking away a lot of administration both for us and for our retail partners. You also -- quite importantly, in some of the countries, we have 2 big networks. That would have been true in a wholesale model. And it's also true, even more true, if you go into a more digitally enabled model as we do. So we need to optimize the number of retailers in some specific markets because a lot of the fixed cost sits in the retail network, yet we need to make sure that the retail network get a decent return. For -- that remains. And last but not least, having a higher degree of these Care by Volvo subscription enables us to drive a much stronger loyalty. And loyalty is key because it's much more cost effective to keep a happy customer than to lose a customer and acquire a new one. On capital efficiency, I think I've talked about that already, but it's actually a massive improvement when you think about 1 inventory system rather than 1,500 inventory systems. So that, we will materialize. And then we will take a better part of the value around the car. Financial services is one. Insurance is another one that I think we're going to talk much more about once this car is on the road because this is the safest Volvo ever. I don't think it was mentioned well enough in the earlier presentation that, with this LiDAR and the software we put into this car, our estimate is that, compared with the next best Volvo, you're going to avoid 9% of the accidents that are happening -- and a 20% reduction of accidents with severe or fatal outcome. That's massive. And then on top of that, you have the best safe-minded drivers on Earth in Volvos, so of course, the premiums for Volvo cars should be much lower than they are today. And that's something that we're going to work on as well. I think I actually stop there and go over to the Q&A, John?

Great. Thank you very much. [indiscernible]. [ Thank you ].

[ Yes. Thank you ].

Yes. I'm sure there will be a few questions on this section as well. So please, Hampus, over there, [ Ann ].

Yes, you can buy a car.

Thanks. Thank you. I'll take one as we speak -- no. And talking about Care by Volvo and the future. Could you maybe talk a little bit about the used car business, how to play that in; and update us on how to think about that? Because historically that has been a very profitable business.

Right. And that will continue to be a profitable business. Not all consumer can afford to buy a new Volvo. And a lot of people value a 3-year-old Volvo. And that's true today and it's going to be true tomorrow. We are very clear that we want to keep those car within the Volvo ecosystem, so they should be sold by us or our retail partners and not ending up in an uncontrolled way in auctions via leasing companies. That's really what we are focusing on. And I think a lot of the system we are building up to sell new cars in an effective way can also be leveraged for selling used car in an effective way.

Could there be a possibility to maybe have a "care by used Volvos?"

Yes, no, no, of course. And we have a select program which is in essence a way to make sure that, the Volvo you're buying, we have reviewed it. It's a Volvo in good order. And you can add simple financing solution to that, but of course, "care by Volvo used" is for something we're going to use. Some -- here in Sweden, for instance, when you get a car back from Care by Volvo, some of those cars, we put into Volvo On Demand. So a bit more fluidity using the cars across different channels and contract types that you can also do much, much better in the future.

And also is it fair to assume that you might be able to keep the battery electric vehicle maybe longer in that system? Or how should we think about that?

Yes, I think this comes back to one thing we didn't fully discuss during the circularity discussion, but in the end, there is a big, big recycle value in that battery. And then I think we need to come to a point where that recycle value actually get the value upfront. We're not there yet, but I think that's where the business model is slowly going, where we can actually, already from the beginning, make a contract with who takes care of that battery when the car has end of life. And you can actually take some of that value upfront.

Erik, here in the front.

3 questions. The first one, on you've been quite keen to talk about the sort of establishing direct consumer relations because previously there's been a filter between you and the consumer and there's sort of data that go lost. And there's a lot of things you can't really see in terms of preferences and consumer behavior. We're some way into this journey now at least, far way to go, but could you give some snippets on sort of what have you learned, so far? Have you seen the benefits of getting a bit more sort of [ hands ] access to all that consumer data?

Yes. There are a number of different ones. One is, in more targeted marketing, you get much more efficient. I think one that is more clear for the consumer is, as you call into our care center, we know your Volvo ID. We know what cars you have. We know that -- when that was serviced the last time. And we get the full log of all the questions. We can, in a much faster way, serve you and solve your problems. And those are 2 very, very clear examples.

Okay. And then the second question, on pricing and you being more in control of pricing. And we've seen, I guess, some more opportunistic pricing and quicker price changes with some players in the market recently. Is that something you will go to as well? As an example, you said you've kept the fully flexible Care by Volvo at 10% of the total volume. Will you sort of use -- as that fills up, will you increase the price of that one, or will you be more stable? How opportunistic will you be with pricing?

No, we're not going to be opportunistic. We're going to be strategic and structural. The only reason we're [ capping ] that at 10% is that -- if you -- the positive mind and the more negative mind. If you have the negative mind is that, okay, people come in. They try a Volvo and they send it back after 6 months. If that's all that happens and everybody send them back at the same time, it's not a very valuable proposition, but on the other hand, if -- what seems to be the case, people, a, keep them longer; and b, stay with Volvo. So the next car is another Volvo. Then this is a fantastic acquisition tool. And then I'd rather -- then I can sell 20% subscription flexible, but first I want to have a clear proof point over time that -- if this is -- actually is the acquisition tool that I believe it is. Then I can do more of it.

Okay. And then the final question on this, the new financing solution to enable a lot of this. Is that -- is all that infrastructure and everything in place now? Or is that something that's still quite some time -- out in time? Or is all of that in place?

It will be in place by midyear next year for the U.K.. And of course, there is a lot of legal structure that needs to be in place. That is in a very, very good place. Then there is the digital tools in order to make this happen in an efficient way. That's part of the journey that we're building now and getting it ready for midyear next year.

Okay, Bjorn, we have some here to the left.

Yes.

José.

Bjorn, can you speak about the improving the digital backbone? What does this mean for you in terms of transforming the company? You mentioned changing the digital sales platform from a country level into a larger level, so what does this mean for you in terms of investments and managing that part of the business? And second, you mentioned inventories will be kept also now on a group level, so can you quantify a little bit the impact on the balance sheet as you move the business? As you flip the U.K. next year, what could be the impact on the balance sheet?

Yes. On the latter one, I will not go into the spreadsheets, but I would recommend you to sit down with John and Carl Fredrik. But in essence, yes, the total system goes down, but we used to have maybe 60% of it. And then so I mean it's not material, but it changes. Carl Fredrik and John can help you with that. And the first question, on...

The digital backbone, investments...

Yes, digital backbone. What does it mean? So if I get a bit philosophical, first, and I need to do that: It actually changes everything because, if you think about it, the way to build great digital products if you're an Amazon or a clone or anybody starting from scratch, you do that quite centralized. And you put the best businesspeople you have as product managers leading the digital product team but fully understand the consumer, though the tactical decisions should have build that feature -- or that feature [ should integrate in ] that way or that way first. And this -- so you have the general managers. They sit in the middle of digital product teams quite centrally. Our businesspeople, they sit very decentralized in the countries. So changing the whole operating model how we get the business acumen and full understanding of the business, the car business, into our digital team; and at the same time, building the digital acumen with our businesspeople locally and understand that they have to give up the control of some things because it could be better done at a central level, that's an enormous change journey, but I think we're doing it quite well. In terms of investments, this is what we have been investing in over the last few years and what we will continue to invest in; and that's part of the business plan. It's just making sure that, rather than investing digitally in 50 countries, you can now do this more in a common way.

Daniel, here in the front.

And maybe I will add one thing. I think in the decentralized model we are also extremely dependent on buying digital solutions and systems from somebody else. Here now we're investing in really building it ourselves. Clearly we shouldn't build everything. There are components and stuff we build, but we need to be the system architects that understand how this works because this is how we interact with our consumers. That can't be outsourced.

Daniel from Bernstein. Bjron, could you comment on what is it that you can learn from your sister company here? So what are they already doing that's beyond what you've told us today? I'm thinking about kind of regional sales organization, city center showrooms. So in the Polestar sales approach, what are items where you say, well, that's maybe something we'll consider in the future too?

I don't think I should comment in detail on what Polestar is doing, but I think just the fact that we have had Polestar have enabled us to think, "Okay, if we start with clean sheet, how would we do this?" And one thing you'll conclude is that having 2,500 entrepreneurial and sales partners throughout the world is a fantastic asset. So it's all about how you use that in a smart way and how you leverage that physical asset together with the digital product. That's something that I think Polestar and many start-ups are very, very envy of. And we are helping Polestar to get access and value out of that as well.

Then we're going to try it a different way. So if your premium competitors are basically telling us, "Well, we'll move kind of the traditional dealer shop to the fringe of the city. And it's going to be a service center," and the main customer engagement will happen kind of on the high street, is that something you agree with?

I think people have said that for last 10 years. I do believe that you're going to have less physical flow to the retail sites. That's why you probably need fewer. You're going to have more kind of downtown locations that's relevant for test driving. And you have -- one of ours is over here, right? So of course, that's something that we continue to build out, sometimes by ourselves, sometimes with our retail partners. We need to be where the consumers are and make it simple for them.

[ One over here ].

Philippe Houchois, Jefferies. We talk a lot about affordability, the recycling value of the car with the battery, et cetera. And today, when you sell a vehicle like this with the battery, how much are already kind of improving the residual value of that car when you price the car? Because we only talk about price parity, TCO, et cetera. The biggest part of [ TCO ] is basically reducing the depreciation share of your lease costs, so are you pricing those cars, [ i.e., of ] the same way? Or are you telling me it would be a 3-point difference, a 5-point difference, 10-point difference?

This is one of the topics where you should be going country by country and comparing, depending on what you compare with, but we see that the residual values of BEV cars -- and if you just go back the last 5 years: Everybody said that they will be really, really bad; and has been proving wrong every second year, right? So we get good residual values on these cars. We're having the discussions right now with a lot of the residual value centers and fleet companies and so forth, but we're confident that we're going to get a good residual value for this car.

So the debate on affordability is a false debate. You could actually address that much more aggressively. Or is it -- or the issue -- I mean, if cars live 17, 22 years, your actual realized value of the recycling is much long dated, but could you not actually do much more in terms of affordability of EVs already?

Yes. We can do more and that's our agenda. And that's what I think Erik and Kerstin talked about. And I think -- having a more clearly defined exactly what happens to the battery at the end of life, if it's a second-life usage or if it's recycling; and already now setting the financial contract for that and getting that value into -- now, I think that's a very interesting proposition. It's not been fully done yet.

All right, we are ready for a leg stretcher, some fresh air. And let's meet here and start at 3:00 p.m. Thank you very much, Bjorn.

Thank you. [Break]

[ All right ], let's talk about the financials then for some time, Starting off with the Q3 financials that we released a couple of weeks ago. And as you know, there is a somewhat unstable environment. I still think we have a pretty sound performance. So if we look into the Q3 numbers -- and this is not the quarter. This is Q3 last 12 months compared to 2021. So we have had a decrease in retail sales volumes due to the fact that we have had constraints on production and supply for quite some time both driven by component supply, semiconductors, et cetera; but also, especially in China, lockdowns due to COVID; and also during the summer, due to electricity cuts and the heat waves in one of our plants, which means that we have had a 15% decrease in retail sales volumes. However, we do see an improvement now gradually. We have had an increase in retail volumes for the last 2 months, September and October, and we have also seen a gradual improvement in the production situation whereby October actually was the best month so far this year. However, there are still uncertainties and some volatility in the system. If we look at revenue, however, despite the volume decrease, we have seen an increase in revenue, 8% for this period, which is then mainly driven by a number of things. It's good mixes of cars. We have seen a very good pricing development on the back of the high demand that we have -- are still seeing, driven by supply, but also in general, good demand. And we have had a tailwind on currency on revenue as well, driven mainly by the U.S. dollar. And also, to some extent, we have increased revenue also due to the fact that we now contract manufactured cars for Polestar. If we look at EBIT, we do see a deterioration of the EBIT margin. If we look at the Volvo, let's say, core business, excluding our JVs and associates, and especially now during '22, in Q2 and Q3, we have seen increased costs for raw material. And we have also seen due to the constraints we have had in production, effects from -- we are buying semiconductors on the spot market, et cetera, so we have seen an increased cost level. And also on the electrified cars, of course, the lithium prices are still very high. And if we look also on the currency effects, the positive effects that we see from the U.S. dollar on the revenue side is, to a large extent, currently being offset by also that the euro is on a very high level compared to the SEK. So all in all, but -- somewhat operating margins right now on the back of the raw materials. However, I think that, as we have seen, the more traditional raw material prices have been coming down gradually. And that will, over time, have an effect in our P&L, although that there is a certain time phasing, which means that it takes a number of months before we really see the effects in our books. And on electrified cars, we still see high prices for lithium, et cetera. So the high raw materials will continue during the fourth quarter and probably somewhat into '23. Including JVs and associates, we see an increased margin, but that is then, of course, mainly driven by the positive one-time effects we had from the listing of Polestar during the second quarter this year. Cash flow, operating and investing cash flow. We see a negative cash flow of SEK 3 billion this year and SEK 5 billion last year. However, to be noted on that is that, that has been quite largely affected by those that we call pre-IPO transactions or structural investments that we announced already in connection with the IPO last year, which has actually affected these numbers with around SEK 10 billion or even more than SEK 10 billion in 2021, and an additional SEK 8 billion in 2022, mainly consisting of our purchase of the Taizhou plant in China from Geely, some investments in Polestar on preference shares, et cetera, and also our investments into our ICE JV with Geely Aurobay. So excluding those structural investments, cash flow is positive in 2021 and even more so in 2022. And as you saw the other day, we also have now announced that we are, as a part of our strategy and the electrification strategy, we are now stepping out as owners of Aurobay and selling our part to Geely Holding, which will be likely finalized this year, which will then also have a positive cash flow effect both in terms of the shares that we sell and also the shareholder loan that will be gradually repaid during 2023. And if we look at ROIC, we see a slight deterioration -- or that's mainly driven by higher investments during this period. So that's then the financial situation as of now, in short, based on Q3. If we then look a little bit ahead on the mid-decade ambitions which we are firmly standing by. As we have said, on the 1.2 million cars sold in mid-decade, the 40% reduction of CO2 per car and an EBIT margin of 8% to 10% in mid-decade. And how will we then get there? Well, we will need, of course, to grow quite significantly during the coming years. But what's important also, I think, to bear in mind there is that if we look back in mid-2021 at the time of the IPO, we had, on a last 12 months basis, volumes of almost 800,000 cars. Now we are lower, but that is completely driven by the constraints we had in production and supply, and not by demand. So there is a much stronger demand than 2022 volumes sort of represent. And we would have sold considerably more cars each quarter this year, having had a normalized production situation. So I think that's a good starting point also to understand that the increase, if you will, from that perspective is not as big as it seems. Further, we are working on securing supply to be able to reach these ambitions. As Erik and Kerstin and others talked about previously here, we are working on securing battery capacity, for instance, both through our JV with Northvolt, NOVO, and also other supply contracts in order to ensure that we will have battery capacity to reach our volume ambitions. We are also working on taking steps in regionalizing supply chains in order to reduce sensitivity for disturbances that we have seen during this year and during COVID. And we are also working on securing more presence in battery materials, which we will come back to more later when there are more firm things to announce. And also beyond the 1.2 million cars, we are working on securing capacity. We have acquired the plant in Taizhou in China from Geely. We have announced the construction of a new plant, a third plant in Europe, in Kosice in Slovakia, so we will have capacity also off the mid-decade to go even beyond the 1.2 million cars. And if we talk about demand, we do see a record order book currently in Europe, virtually twice as high as some normalized level, and we still see a robust demand across the regions. There are, of course, uncertainties due to macroeconomic factors that we see, inflation, interest rates, energy prices, et cetera. But -- and we need to be prepared, if you will, for different scenarios. But currently, we can say what we see and we still see a healthy demand globally for our products. And we will also, during this period up until mid-decade, have a very good product portfolio. We will -- starting with the beautiful EX90 today, we will release one new electric car each year. We will release a smaller SUV next year that we have said, and then continuously each year. And also, considering the current portfolio with both our BEV cars and our PHEVs, et cetera, we believe that we have a product offer that will support growth during these years. Profitability. Bjorn was talking also somewhat about this recently, I will go into these different buckets a little bit more in detail. We are currently, in the last years, at an average EBIT of around 6%. We will reach 8% to 10% in mid-decade, and how will we do that? I will go into this. We have -- we will see an effect that we have initially some cost for the electrification up until we have reached cost parity mid-decade. But we will also see that we will reach cost efficiencies and synergies, both -- with cooperations with the Geely ecosystem and others. We will do the commercial transformation that will increase our profitability, as Bjorn just showed. We will, of course, have an effect from the growth on our profitability. And we also will, in out years, have a contribution from our affiliates. So if we look into these a little bit more in detail. Cost of electrification. Yes, we firmly believe in our electrification strategy. But currently, the margins for BEVs are slightly lower than other cars. But gradually, with each new generation of technology and architecture, we will see -- and due to the technical development, and over time, we believe lower raw material prices, we will reach cost parity in mid-decade. Cost efficiencies. We talked about earlier in these different areas through vertical integration in selected key areas, core components developed in-house, et cetera. We will reach a much more efficient cost structure. We will also have efficiencies across the Geely ecosystem, examples being the new smaller SUV, which is developed in cooperation with Geely. We also see with Polestar, for instance, that we have a lot of cost sharing on product development platforms and other common technology between, for example, the EX90 and the Polestar 3. And that can also be like synergies in terms of sourcing components, et cetera. Further, the commercial transformation that will drive increased profitability. I will not go into that in that much detail due to the fact that Bjorn just went through this in more detail. But as we said, it's more -- it's both about growth, better pricing opportunities and capital efficiency, et cetera. And over time, capturing a larger part of the total value chain. Growth. Of course, when we grow, we will have a leverage, both in terms of coverage for indirect cost but also, and over time, increased gross margin because there is always an element of variable cost also in gross margin. So we will have an effect just by the growth that we will have in the coming years. And on top of that, we aim to reach between 8% to 10% Volvo Cars stand-alone. But we will also, on top of that, have a contribution from our affiliates, especially then on Polestar and Lynk & Co in the outer years of -- into the mid-decade. So that was profitability. If we look at the CO2 target of reduction of 40%, we are well on track. If we look at what we have done and what we have in secured and decided actions, and also then, of course, as a large contributor, the increased volumes of BEV sales in the coming years, we will be well on track and even more so on the 40% CO2 reduction at mid-decade. But yes, the transformation and our growth journey and all new cars that we will launch will also require quite a large amount of investments. We are -- during this period up until mid-decade, we will have investments in fixed assets and in capital engineering, including digital investments of above SEK 100 billion in order to secure that we will deliver on our transformation and on our mid-decade ambitions. However, I think it's important to point out that these investments will be fully self-funded by our operations during this period. And finally, liquidity. We have a strong, healthy liquidity position as of now, and we also have a prudent and healthy maturity profile of our different financing. And we also have a good mix of green bonds, other bonds and loans. And going forward, virtually all new financing will be green financing under our green financing framework. But you also see that there is -- the maturity profile is very balanced over time in the coming years. So with that said, that was what I was planning to share. So John?

Thank you very much, Johan. Thank you.

All right. Now, it's the time for the last part of the day, and that is the open Q&A. And for that, I invite Jim here to join on the stage. And we have a little bit change in plans. We thought of bringing all the presenters up, but it would be very crowded here. So we will direct the questions from our end. So please, the chance of asking questions before we -- George?

Yes, thank you. I had 2 questions, really, with respect to the financial targets. I think the first one was just in terms of mid-decade. I think in Bjorn's presentation, he slightly alluded to, we shouldn't be too dogmatic about mid-decade being necessarily 2025. Does that also apply to the financial targets? The second question I had really was on pricing. Obviously, you've shown a fantastic vehicle to us today. And when I look at the pricing, it looks very ambitious. It certainly looks to be slightly higher than the pricing for comparable vehicles from BMW and Mercedes. Is that what we should think about for Volvo's pricing ambition going forward that actually, you may be able to price above your premium German competitors? Or is that specific to this one vehicle?

I'll let Bjorn speak on both of the points, one on the mid-term ambitions in terms of volume and how we don't become fixated in volume, it's more about adding value. On -- and then obviously, on the pricing piece in more detail. But actually, if you look spec for spec against the competitors that you mentioned, then that's actually not the case. If you measure the 2 specs up, we are actually lower than both of those companies that you mentioned, so -- on a like-for-like basis. But let me hand over to Bjorn and take those other 2 questions.

I think -- does this work? Yes. No, I think you actually answered it quite well. We are not planning to position ourselves above the more traditional German competitors, but we are planning to position ourselves on par. Premium product, premium price. And given the spec you have in this car, that's how we position it. In terms of the mid-decade, what is really mid-decade. On the volume side, yes, it's a range. And given that we now have had 2 years of supply, yes, mid-decade might be more around '26 than '25 on the margins. I don't think we're giving that guidance right now. Mid-decade is mid-decade.

But it's fair to say that we will not prioritize volume or sacrifice our margins.

Yes. Margins are more important than volumes. But on the other hand, delivering on our electrification journey is more important than accepting the margins, because it was more important we should break some of the electrification journey. But that will strategically put us in a much worse situation in the long run. We have a golden opportunity to grow, and we're going to take that within reasonable margins.

Data points -- just to come back on that. The data points that we have right now is we see that internal combustion demand is coming down. Whereas BEV and [ NEV ] -- let's put together everything, PHEV, long-range PHEV and let's call that [ NEV ], and pure BEV, are rising rapidly in every single region. And that's what Bjorn -- so see the big issue with transitions and technology is it looks like it's going to be linear. And you see this everywhere. You saw this when you went from a desktop computer to a laptop computer. Well, laptop's more expensive to start with and people says, you'll never get that to the price point that will sell en masse, and guess what happened? The same with cellphones when you had feature phones, and feature phones got much less expensive. And then, of course, you go the smartphones. And it looks like it's going to be a linear transition, and that curve is going to stay the same. And then, boom. You have an inflection point, and when you hit that inflection point, that flips into hypergrowth. And the people who have had the fortitude and the foresight and the ambition and the courage to put in the capacity, knowing that, that inflection point is going to happen, and then they're ready to take the market, those are the companies that win when the technology changes. And that's exactly what's happening right now, and -- but is that a little bit more expensive? Yes. Will that price come down? Yes. Will you have the inflection point, and you'll see it flip? Absolutely. And if that's when you make the decision, you're too late. You've missed the market. And that's our entire purpose here is that we're going to get ahead of the market, and we're going to be brave and we're going to be bold and we're going to be courageous, and we're going to see it as it flips. And you see that when those friction factors are taken away, when you take away the friction factors of range anxiety, of charging speed, of cost, then you have -- and the pricing part of batteries versus BEV, when all that disappears, you see it flip. And you've seen that happen in a couple of countries around the world. You've seen that happen in Norway. You actually just [ most ] -- Norway, right? And you will see that happen in a lot more countries. And that's really the ambition.

And I think there is another friction point that is worth mentioning for all management companies or automotive companies is that they all sit on big factories producing petrol and diesel engines. So as you make that decision, you also need to take the social responsibility. What happens with all of that into consideration, which is a friction factor in driving the change. It's very important to handle that in a social responsible way. Now, we're very happy that that's not the job of us. Our job is to deliver a fully electric company. All our ICE asset is now in Aurobay, and per the announcement we made this week, we will fully exercise and sell off the remaining 33% by the end of this year. We have no ICE development. We have no ICE factories. So we don't even need to have that as a mental friction factor as we go into the future, and that is a big deal.

And although -- sorry, I know. We'll take another question. Sorry.

Agnieszka. And then we have Hampus up there. Let's start with Agnieszka, please.

Perfect. Thank you. So Jim, yesterday, you showed us a small teaser for the small SUV, electric SUV, and I just wonder if you could share any color for that. Will it be launched next year? And also how crucial will this car be for reaching your 1.2 million volumes target? Thanks.

I am so glad you asked that question. Yes, because I think that's the part that people are missing. So yes, we will launch that product next year. We've already alluded to that. We haven't given details. We have -- despite what you read in the press this morning, we haven't named that car. We haven't put volumes in that car. But there's 2 things to that. Yes, that takes us into a price point and to a demographic that we've never really played in before. Gen Z is coming into the market. Gen Z, 18, 19 year olds, they're becoming first-time buyers. That is a fantastic car for that generation. And when we offer that on subscription and you're signing up to 3 months, that's all you're going to sign up to and a much more competitively priced product. That becomes a really compelling offer for that younger demographic, first-time buyer to come into the Volvo brand. They won't -- in many cases, they won't even go anywhere near a dealership. They'll look at that 3 months, that's a pretty good monthly subscription. I can take it with insurance and roadside assistance and all that kind of stuff, boom, done, and then, we find this day. And if we do our job properly, we will keep that customer all the way through. They need a bigger car as they have a family and a dog and another car and all that stuff. We will then hopefully trade them up through that.

Yes. And if you want to put some color on it, yes, it will come in gray.

Hampus and then we take [ George ] and José.

Sorry, just as a point to that. The other really important part to that is that's a volume vehicle in terms of that. So back to your other question, which was asked, that does that then help get us to the 1.2 million ambition? Of course, because one, it's a brand-new demographic. And two, it's additive. It's non-cannibalistic to our existing product lineup.

And does it help us get to the 8% to 10%? Yes.

Hampus?

Thank you. I have a more of a strategic question. Introducing this top-of-the-line EX90 model is very interesting, and I can -- it's a fantastic car. But from a strategic point of view, when you look at your volumes and you look at the existing segments, the volume segment, family car, et cetera, what was the strategic reason why you choose to go EX90 when -- coming with that next year and battery electric model than not doing an EX60 model? Thanks.

It's a really understandable question. So we have the XC40 and the C40, so we're in that segment, and we're calling that -- let's call that our mid-range segment. So we already had an electrification play in that, and we wanted to be big and take the flagship and move to that. It's a really important car for us. Obviously, it's a really profitable car for us as well, and so that helped. And we knew we were also going to be topping and tailing the range when we bring up the smaller one within a very short period of time. And then, of course, that allows us to circle back and then fill in the gaps. And we said we'll be releasing a brand-new electric car every year for the next 4 or 5 years, so we need to start somewhere. We started with the C40, so the XC40, the C40, the 90, the smaller one, and then we start to fill in the gaps in between.

And one additional answer is also what they went through, generation 1, 2 and 3 of the electrical architecture. Clearly, non-battery generation 3 will be even more cost competitive, and that cost competitiveness is even more important for the EX60 and the EX90.

Can I do a follow-up? Is it fair to assume that the next launches you do in battery electric models, will the duration will be shorter between introducing and being able to take a delivery of the car?

Shorter than 16 months.

I'm trying to square this mid -- even if we go in 2026, okay?

Yes.

Thanks.

So your question really is when we release a smaller SUV, when we release that between release and receive, will it be shorter than this?

Yes.

Yes.

Thanks for taking the question. You sound very confident when you talk about battery costs coming down. But if I look at what the price of lithium is doing, and at the same time, everyone is ramping up their BEV mix aspirations, what makes you stay comfortable that that's really going to evolve in that way?

So we're talking directly to the people who run the mines, and we see the new capacity that's coming on. If you look at lithium over the last 5 years -- I don't know, maybe Johan, you have the exact numbers on lithium. But if you look at the last 4 or 5 years, lithium had been pretty flat. And then, of course, a whole bunch of different events caused lithium to spike supply and demand. And then at the same time, we start to see new sources coming in on lithium. And we're speaking directly to the peoples in the -- that are in the mining industries. And so we're confident that, that direction of travel will be downwards in the next quarters, certainly in the next year. So I don't know if you want to add to that?

I think the excitement is to say that the [indiscernible] that we do have and the discussions that we do have indicates that the prices will come down short term. Of course, currently, the prices are high, which of course affects the profitability on BEV cars. But I also think that we will not be shortsighted in that perspective. We are very, very confident in our electrification strategy, and we believe that that's where the growth and the future profitability will come from. So we will execute on that strategy even if now in an isolated quarter or so, that will have an effect on very short-term profitability.

All right. We have José and then [ Harold ], please.

Question here. Can you talk a little bit around what you consider strength of the balance sheet and capital allocation priorities in the next 2 years? There's a lot going on. There is CapEx, digital CapEx, there is loans to Polestar, dividend payments, et cetera. So when you think about the balance sheet and the use of the proceeds and the free cash flow, what are the priorities for you strategically as a group?

As you say, I mean, we have a very strong liquidity situation and a strong balance sheet as of now. We will need to do investments in our commercial transformation, in our car program, in our digital infrastructure. But we will, over this period for some years up until the mid-decade, will also have a growth and an increased profitability that we will be able to fully fund the investments that we will do. Polestar, as you commented, we -- as we announced the other week, we have decided to, together with the other main owner of Polestar, provide funding support to Polestar for them to being able to deliver on their plans up until and beyond 2023, which is something that we definitely can, without having any effect on our own strategic plans, can afford to do. So that doesn't -- that's not sort of a prioritization in that respect. That doesn't affect our ability to deliver on our transformation.

I'll just add a couple of comments to that. So we've been very, very choiceful and very strategic on where we spend our engineering dollars and where we spend our investment dollars. Back to the comment earlier, what we buy versus what we build. We build a core technology that adds differentiation, and then we buy in really good technology that we think enhances the car but we don't need to own that. So Android Auto, Apple CarPlay. There's 7 billion people in the world who have either got an iPhone or an Android. I don't think we need to build that interface. And I think people are used to saying, "Hey, Google" or "Hey, Siri." I don't really think they care whether they say, "Hey, Volvo," I just think they want a really good experience. And the engineering dollars that you need to put into that kind of investment if you're going to have your own infotainment stack is huge, and you need to keep updating it. So that's going to be the gift that keeps on giving if you make the wrong investments in that. You make the right investments in that you partner up with these big companies that are going to continue to invest, and of course, Android and Apple spread that over the entire base. So balance sheet-wise and then investment-wise. Silicon is the other thing. We don't make our own silicon. NVIDIA are pretty good at that. Qualcomm are pretty good at that. TI are pretty good at that. And this huge investment on fabs in silicon development is massive. And we saw since NVIDIA got into silicon on the car on the drive system, the first one, Xavier, was run at 40 TOPS. The next one, Orin NX, is around 180 TOPS. And the next one, which they've conveniently named Thor, is run at well over 1,000 TOPS. That, for us, is a -- we just need to know how we harness that computational power that we need to extract the best from the car. And you harness that computational power by writing the software between the silicon and the application layer. So we're really choiceful about where we spend our investment dollars in that sense.

Maybe to add shortly, the fund solution that Bjorn was discussing, of course, is also one part of this where we will be able to have a profitable growth on these leasing products without having them on our own balance sheet, which means that we can also really -- to have more balance sheet headroom, if you will, to do other investments. Of course, there is -- yes, that's also different -- or other important part of that.

Good. [indiscernible]?

Thank you for taking my question. Just a little bit what we talked about earlier. In my earlier question, we talked about IRA. You've kept all your targets. But in the last 18 months, right, I've never been so busy, right? Every day, the world has changed. Every day, right? The interest rate environment is different. The consumer is in a completely different place. You yourselves are in a different place from where you thought you would be. Strategically, you've got IRA, who knows what the European Union will regulate. You've got the geopolitics of a China. You've got the localization of supply chains, which is something we're going to talk a lot about. The relative profitability of EV versus ICE, right? So comparing this to what we talked about 12, 18 months ago, which part of the plan -- what part of the strategy are you thinking about that you think you might have to adapt? Things are changing, right? The companies are going to have to adapt to those changes to some degree or other. Where do you feel that the changes might have to come?

Do I start on the sales front? Because I think the big thing that was -- that doesn't change for us is that we've had this in place for a long time in terms of how we're going to top and tail our existing electrification journey with the C40 and XC40. We knew that 90 was coming out. We knew we had a new platform. And of course, we knew that the smaller SUV was coming out. That positions us in a pretty good space. Does the profitability remain? The difference between ICE and BEV remain in place for -- and of course, the changes to that recently caused a speed bump that we're going to have to cope with? Absolutely, right? But everybody is coping with that, right? And quite frankly, as investors, as you sit here as investors and you said, hey, we want to invest in the auto industry. What are you going to invest in, ICE? I mean even a consumer 2 years, 3 years from now, you're thinking about buying a $50,000, $60,000, $70,000 car. Are you going to put your money into ICE technology, knowing where the depreciation on that's going to go? So yes, it's the moment in time whereby you're hitting some speed bumps because, as you say, there's a huge amount of change between the war in the Ukraine, the pandemic closing things down in China, rising inflation cost, rising energy cost, rising cost and logistics. Everybody's playing in that. I go back to my earlier comment, right, technology wins the day and you need to wrestle it and you need to be focused. And when you're trying to play, I'll use your stance of 2 -- you're trying to ride 2 horses at one time, I'll keep a foot on ICE because that's giving me profit right now, and I'm going to wring out those assets. And I've got all these people and I've got all these unionized plants, and I'm frightened about all that stuff. And I'm also going to try and play here and be successful here. Versus this is where we're going. Everybody, the 42,000 people in our company are fully lined up on exactly where we're taking the company. Same as our dealership network. There's a clarity of purpose there that I think drives you through those speed bumps in a much more controlled way than if you're trying to -- so would I prefer we didn't have all that going on at the moment? No. That is what it is.

Thank you, and that's a very good answer. And I wasn't really referring specifically to the product range, which looks great. The brand is very fresh. The way that you're making decisions is very different from your competition. But what about -- I don't know, even supply chain or your manufacturing footprint and all of those things, you're not thinking about any of those things at this stage?

We are -- and that's what Erik talked about. Our strategy is very, very clear. And that's the strategy that I think accentuates that. You need to produce where you sell, and you need to source what you produce. And are we there? No, we're not. Do we need to speed up to get there? Yes, and that's what we're working on. That's not a change of strategy, that's a further acceleration of what was the strategic direction.

That's an interesting question. And when you look at it in terms of bifurcation, it's actually trifurcation right now that's happening in the world. So you get -- bifurcation started with China kind of decoupling a little bit from the rest of the world. Now, you've got trifurcation because obviously, you mentioned the IRA, which I'm happy is now called the IRL, considering it's [indiscernible] -- that Inflation Reduction Law, again, is beneficial because it's driving adoption and it's putting in infrastructure investment into the U.S.A., and we're all going to benefit from that anyway. As we bring out a smaller SUV, we're going to benefit from that as well because that's when we need price points. And quite frankly, the people who buy that product in the U.S. are going to be the people that qualify from a household -- total household income point of view.

When we talk about things that have changed since 1 year, 1.5 years ago, we talk about all these disturbances. There are a few structural things that are happening. That's exactly what we were saying. You see the inflection point of BEVs in the world now. I mean you always get this discussion. You only have 2 BEVs, the XC40 BEV and the C40, yes, that's just a version of it. You have 1 BEV. Yet, I mean, more than 20% of our order intake is on BEVs, much more on those 2 cars. So consumers are fully worked there. EU has legislators you can't -- with a ban for ICE in '35. So the changes that are happening now are exactly the changes that we said we bet on will happen. So we feel quite confident we have the right strategy. Yes, it's bad weather right now, but we go in the right direction.

And the other thing because somebody is going to ask the question, so I'm just going to preempt it. Somebody is going to say, well, what about the subsidies that you get from the different governments? And this government is doing this. And this -- I know very topical given the changes recently, but let me just address that head on. No industry should have to rely on government subsidy to be successful. That was going to have to go away anyway. You need to get to parity between ICE and BEV as quickly as possible. We think we'll be there by 2025 or so, right? Maybe even before that if the price of lithium comes down even quicker than we think it will. But that's how you got to be playing this game to say, I'm not going to rely on my business model on the fund of some government giving subsidies or not giving -- I'm going to win this under our own steam and under our own strategy, and we're going to figure that part out to get there as quickly as possible.

Okay. We -- time is running, but we have time for a couple of more questions. We take Henrik and then finally, Daniel as the last one.

Yes. Henrik from Carnegie. Question on the commercial transformation, which was the biggest error there in your EBIT bridge to reach 8% to 10%. During the IPO process, you talked about the importance to build central inventory to facilitate that transformation. Starting point today, low inventory levels, you have strong demand, you talk about long order books. This beauty is not delivered until 2024. So the question is, how important is that build a central inventory as a piece of the puzzle to actually achieve those commercial synergies -- commercial transformation synergies given where we start today? And it's not very -- mid-decade is not far away.

We will come to a point. Now demand has been here, supply has been here. Demand will come up with macroeconomics and supply will come back. So we will be in a situation again where the industry has inventory. Then, it's important that we don't build that up in thousands of places, we build that up in a streamlined way so you don't get the wrong car in the wrong place in the wrong -- at the wrong point in time. That's our strategy. It's a meaningful part of the whole benefit that we're going to get after the commercial transformation. You're not seeing it right now because you're seeing record high margins with this demand and supply imbalance that we have. But by mid-decade, I'm fairly sure we're not going to have a supply constrained industry again.

On the centralization of the inventory, the hidden part of that which you often don't see is not so much the inventory holding cost of [ whole ] inventory. [ Whole ] -- what the deposits inventory in 1,000 places around the country around Europe is suboptimized, because you never have the right car at the right time when the customer comes in. Centralized architecture allows you to do that. But the biggest thing, the biggest benefit you get is you don't get discounting. Because when you're sitting there and you're a small entrepreneurial dealership and you're trying to run cash flow, then you tank then to try and offload those cars that the customers might not want, but I'll take it if you discount it for me. And that won't happen anywhere near as much. And so you really get the benefit in terms of the brand value and keeping the brand value up, but you also get the benefit of non-discount.

Okay. We have one mic to Daniel here.

Perfect. Thanks. Daniel from Bernstein. Jim, could you talk a little bit about your relationship with Geely and where you see kind of the biggest opportunities there for the next decade? And then maybe for Johan, kind of the flip side of that, right, where do you have the scope as Volvo to demonstrate your independence from Geely to the market? Could you maybe talk a little bit related party transactions, the debt issuance, free float, any hope? So kind of the opportunities for Jim and the headache for Johan.

Yes. He would say that's always the case. Of course, you know that, right? So first of all, let me start with independents because then he can pivot in on that. But we're an independent company. We floated as you know, and we registered in the Stockholm Exchange. And therefore, we are guided and governed by all the rules and regulations of being a Swedish company. We have ownership from Geely for sure, and that gives us a couple of benefits. One, because we can aggregate the spend power and the leverage in terms of supply chain spend and supply chain architecture, we're allowed to tap into that as Volvo. So we get the benefits of being part of a bigger group without having the drawbacks of losing control or losing independents. So that's the positive. The second point to that is that allows us access to an infrastructure within the Chinese supply chain that we probably wouldn't have had access to in quite so meaningful way in the past. And so you combine both of those things together, that brings us the leverage that we wouldn't get if we were just Volvo. Also brings Polestar those same benefits because, of course, they leverage off the benefits that we get. But we run our company completely independently. There's no team orders, as they say in F1. And so -- and we go after a certain demographic, we go after a certain market and they play in a different swim lane from we do.

Yes, if I remember what the question was now. But as you say, I mean, there are a lot of benefits. Of course, we -- I mean that can be product development, cost sharing. That could be sourcing. That could be -- I mean we already have the CMA platform on the current BEV cars. It's being developed together with Geely. We have a lot of projects together with Polestar where we share product development and have commonalities between the cars, et cetera. Of course, I mean, all those are related party transactions, if that was the question. And of course, we have a thorough process to ensure that they are always on arm's length, et cetera. So it doesn't have anything to do with that. It's on market terms, but it's more that we get synergies due to scale rather than anything else.

All right. But that concludes the Q&A. So I'll leave the word now to Jim for some end remarks, and thank you, Bjorn and Johan. Yes, thank you.

So just -- I'll be real quick on the closing remarks, and then I'll hand over -- maybe you can just then bring the day or the -- yes, almost the whole day out to a close. I'm going to start where we ended up partway through that conversation with the Q&A, which is my firm belief is that at the end of the day, technology wins. It usually always does. And sometimes, you got some speed bumps that you need to get through. Sometimes you have a little bit of delay in the adoption of that technology. There's a good reason why everybody here probably has at least one smartphone and you're not running out looking at a pager, and that's because technology won the day on that specific topic. The same thing has absolutely happened in the automotive industry or next-generation mobility, which would be a more accurate term. And it's nothing to do really with electrification. This is the nomenclature that we've used in order to describe what's actually happening in the industry at this point in time. But the nomenclature of electrification only covers the tip of the iceberg. The big, big profound change is obviously the move towards core compute technology, understanding the silicon and the silicon layer, which is the computational layer of the product itself and of the infrastructure itself and of the whole economic environment that, that new product is going to operate within. And if you don't understand silicon and you don't understand software, then you are not going to be at one up when this thing shakes out. And that's why it's not really just about us saying we're going to -- we stay in electrification. By forcing ourselves to stay in electrification, we force ourselves to stay in those conversations with those suppliers around silicon, around software, around connectivity, around cloud, around data, data analytics, computer science and all the things that have been pulled into this at the same time. There's no way you can deal with all of that and be focused on all of that and have one foot still being an internal combustion supplier. Doesn't matter how big you are. Doesn't matter how rich you are. Doesn't matter how deep your pockets are. I just don't think there's any way you can be successful. You guys are investors, right? So you've got to figure out what you're going do, where you going to take people's pensions monies and invest it in and say, we've got investors for the long term because this is going to be the next generation of mobility. This is a moment in time. It's a pivotal change. It will take 2, maximum 3 years to play out, and the theory of the oligopoly will absolutely be in play within 3 years. You have the winners, and you have the losers. You'll have a mushy pool in the middle that are neither winners or losers that are slowly going to claw their way to try and stay in the game. They're going to be competing on price. They're going to be competing on nonspecific products. They don't have the technology because they never invested in it early enough. And then you're going to have clear winners. That's how we think this whole thing is going to play out, and that's the technology side. On the customer transformation side, as you know, I don't come from the automotive industry. I come from the tech sector and consumer electronics. And it was very strange for me in this industry that you sell somebody a $40,000, $50,000, $60,000, $70,000 product, and you never speak to that customer. You don't speak to that customer presale, you don't speak to that customer postsale. Yet, it's probably the single biggest purchase that they ever make in their life beyond their house. Because everything went through the dealership network. And quite often, that dealership network was selling more than just your product. It was selling your competitor products. So then you're in a landscape where you've got to try and make sure that your marketing is strong enough and powerful enough that when that would-be customer walks into that dealership, they say, I just want Volvo. Don't talk to me about anything else. I just want a Volvo. Now, we've got a really good deal on this car. We've got a really good deal on this. No, I just want a Volvo. That's really tough to get marketing that's that strong to do that. So unless you have a direct relationship with a customer at point-of-sale and then presale and postsale, you can keep that relationship going, I think it's going to be very difficult to be relevant in the new world. And if that wasn't enough, the new demographic, the digital natives, the Gen Z who are going to come into this market and be the most powerful consumers of the -- in the world ever, they shop online and they expect to have 2 things: one, a direct relationship with the end supplier, the OEM, let's call it. But they also expect that direct relationship to be with a meaningful company that does genuinely care about safety, sustainability and human-centric technology. And I think we tick maybe not all of those boxes, but we certainly tick a lot of those boxes. And that's why I think our strategy is where need to be sharpened up. Back to that point, the strategy shouldn't change every month and every year. It needs to be sharpened, but you got to be really clear. This is where we're taking the company, and you got to get everybody faced in that direction. And I think we've done that at Volvo. I think ourselves, our customers, our suppliers and our dealership network understand exactly where we're taking the company, and that gives us some clarity of purpose, and it gets us some surefootedness of where we're headed. And with that, I shall hand back to John, who will bring us to an elegant close. Thank you.

Thank you. Now I just want to thank all the presenters for a fantastic day and the Volvo team for making this possible. And of course, all you visiting here, your interest, your questions and interest in Volvo cars as I said. We have all this recorded. So online, you will find a video, you will find them there being downloadable, et cetera. And as always, if there are any questions that have not been answered, just reach out to the Investor Relations team and we'll be happy to help you. Now it will be some time also afterwards to stroll around the car and hopefully we have a couple of designers there to answer your questions as well. But from my side, just thank you very much for coming here and look forward to seeing you again. Thank you.