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

[Presentation]

Hello, everyone, and welcome. Today is a big day, but it's the small things that make the difference. The small but beautiful car right here will make a big difference. The Electric EX30, a big deal, a big deal for our customers and a big deal for Volvo cars. It's the smallest ever SUV, but it's no less of a Volvo. If anything, it's more. It's a distillation of everything that's good with Volvo, but in a smaller package. We like to say small, but mighty because it delivered on everything that you would expect from Volvo. We have been leaders in safety for a long time in the EX30 will be just as safe as you would expect from us. As designed to have the smallest CO2 footprint of any Volvo car to date, and it's available with powertrain options, Range, power and cost, depending on your needs. Is packed full of technology and features to create great experiences and make room for your things. If you want a bit more adventure from your car, well, we'll offer this in the Cross Country -- And of course, it embodies Scandinavian design throughout. Exterior, interior, lighting and material choices. So it's a true Volvo, an outstanding product designed around you and your needs. It just comes in a smaller package. And that's important. We have never offered this type of car before, but we know there are lots of people out there for whom this car fits perfectly. People who love our dedication to safety and sustainability and aren't willing to compromise because of a smaller package. People who want to drive an electric Volvo, but didn't want a car larger than their life needs. And people that want advanced technology and intelligence in their car, but they don't want to be overwhelmed by that technology. Simply put, there are so many reasons to go EX30. It's a car for the many. And perhaps one of the most important things is it enables even more people to become part of the Volvo family. And this is why the EX30 is also an important car for us as a business. 96 years ago, Volvo started as a small idea, scribbled on an napkin between 2 people with very strong values, values that resonate with us to this very day. Now we are much larger now than we were back then, but we are still a small yet mighty player in a huge global industry. And that means we're nimble, and we move fast. Well we bring everything along with us that we learn on that long journey, constantly trying to improve with age. And we have big ambitions. We are all in on our commitment to electrification we will be a fully electric car company by 2030, and we'll be halfway there by the mid decade just a few years from now. There's no ifs, there's no buts, there's no maybes. We do this because we want to be a more sustainable company. And it's an absolute necessity for the fate against climate change and towards our own goal of becoming climate neutral by 2040. And it will deliver what customers want, better cars and better experiences, more choice and with a lower CO2 footprint. The inflection point at which electric cars truly take off and become the dominant market force is coming ever closer. And that pace of change has never been faster than it is today, and we believe that EX30 takes both us and our industry several steps closer to that moment. Electric cars are simply the better choice. There's less noise. There's less vibration. There's less service and needs and cost for our customers and 0 tailpipe emissions. They're better for people and they're better for the environment. This is an important car that EX30 has been designed to drive around the city, so even more so. The Volvo EX30 plays a huge part and our ambitions for the future. It's a critical addition to our product portfolio and in a smaller size and a lower price point without compromising on profitability, on quality or on customer experience. In fact, with the size and the value it brings, the EX30 is priced at the equivalent of a similar internal combustion engine car. Like all Volvos, it's available the way you want it, outright purchase, lease or subscription. And we will build this car in high volume, and we will sell this across the globe. And it's here soon. In fact, you can order it today. You can buy it today with production starting in only a few months and deliveries to our customers before the end of this year. So let me say once again, the EX30 may be small, but today is a big day. It's a big day for our industry. It's a big day for our company, and it is a big day for our customers. Volvo for Life because it's the little things that mean a lot. And with that, let's get on with the rest of today show. Thank you. [Presentation]

Thank you, Jim, for that great introduction of the EX30. As you can see, we're really excited about the opportunities that the small but mighty car brings. So welcome. Welcome to Volvo Cars' Virtual Capital Markets Update. I'm Olivia, Chief Communications Officer at Volvo Cars. Today, we're broadcasting live from Milan, where yesterday, we held our global reveal of fully electric EX30. We now look forward to sharing more detailed information with you over the next few hours. During the course of our time together today, we'll go through all the details around the EX30. We'll then step into a deep dive into our commercial transformation and our journey towards mid-decade profitability. We'll conclude today's update with a Q&A session starting at around 3:30, 3:45 CET. For those of you that have asked questions and registered in advance, please use the link you have received in your to Inbox. Today's CMU is live streamed and will be available on demand on our website after the session today. So let's start today's program. And to kick us off, it's my absolute pleasure to introduce Akhil Krishnan, our Head of Small Car programs, who will give you more details around this fantastic SUV.

Thank you, Olivia. I'm Akhil and I lead the small cars programs at Volvo Cars, and today is a particularly special day for me as I have the pleasure of introducing you to our smallest ever SUV, the EX30. We started with the goal to offer a fully electric SUV in this segment at a competitive price, thereby bringing new customers to the Volvo brand by being a premium alternative for those who wish to downsize or stay in this segment, all while enabling the choice to drive electric without having to pay a significantly higher price premium to do so. The key factor to achieve this was to have a car that is cost competitive, while delivering fully on our product expectations. The EX30 is therefore a product of synergies between Volvo Cars and [ GD Auto ] . We leveraged the SEA vehicle platform with its scale advantages and established manufacturing operations. And to this, we bring key Volvo technologies, Volvo safety, our renewable and natural materials, Volvo design and our UX capabilities. The EX30 has a clear and simple product offering. There's 3 equipment levels, Core, Plus and Ultra that can be combined with our 3 propulsion offers. The single motor that's available on the Core and Plus levels, the extended range that's available across all 3 levels, or our twin motor performance starting with Plus and Ultra. Our customers can choose to have their EX30 in one of 5 exterior colors: Cloud Blue, Moss yellow, Vapour Grey, Onyx Black and Crystal White. We offer 4 exciting interior rooms that are inspired by Scandinavian nature: Mist, Indigo, Pine and Breeze. We've brought natural and recycled materials that have been turned into interior panels and upholstery in this car. The EX30 is focused on offering what is essential for our customers and minimizing all else. A great example of this is the single central screen that's running Volvo Cars' next-generation UX powered by Google. It positions driver information, high up within the field of view, and the rest of screen is used for navigation and applications. Another example of how we minimize is by removing electronics from the doors. The window switches are moved into the center tunnel and the speakers, which are usually in the doors are incorporated into a sleek sound bar, providing a premium sound experience and lowering the number of electronic units and cables overall. Coming back to the propulsion offer then. The EX30's single motor version has an LFP battery, so that's lithium and iron phosphate chemistry. The extended range and the Twin Motor performance have an NMC battery with lithium, nickel, manganese and cobalt in the chemistry. The LFP battery is cost-effective and less resource intensive to produce, enabling a lower entry price point to this vehicle, and the NMC is available for those who seek more. Range for the entry position is expected around 340 kilometers on the WLTP test cycle. And if you're after maximum range, our extended range offer can achieve up to 480 kilometers. And if your priority is performance, our twin motor performance version can accelerate from 0 to 100 kilometers per hour in 3.6 seconds, making it the fastest accelerating Volvo car ever. All of the EX30 cars are capable of DC charging at a high-power output, offering 10% to 80% charge in around 26 minutes. And the car is compatible with 8 or 11 or 22-kilowatt home charging units. To us at Volvo, safety and sustainability are integral to everything that we do. And the EX30 is a clear [ environment ] of that principle. A smaller card does not mean a compromise in our commitment to keeping people safe, both those who are inside a car and everyone else around it. We're drawing on years of pioneering research in both protective safety and our safe space technology. For example, we've introduced an airbag on the side of the driver seat to help prevent the driver and passenger from coming into contact during a collision. Our Safe Space technology enables the EX30 to be city safe. With the 3-way combination of cameras, ultrasonics and radar, this system is always there supporting the driver. Apart from emergency interventions, the sensors also assist the driver in other situations. Our parking support system can highlight free parking spots and can even help with braking, steering and maneuvering the car to secure perfect parking. And when you're on the road, our pilot assist system uses the same sensors to keep the car in lane. It can assist even by making lane changes. And in case you find yourself driving across one of these long trucks, it can offset the car in order to give our drivers a bit more breathing room to feel safe on the road. The safe space technology is also working when you've stopped. With the EX30, we introduced the door opening alert that's prepared to warn you if you're about to open your door into the path of an oncoming cyclist, a remedy to a big cause of cycling accidents around the world. We also have an interior sensing system, which watches for driver fatigue and distraction, two of the key barriers for us to overcome in our vision to achieve 0 collections. On the sustainability front then, our goal is to reduce CO2 emissions by 40% per car in 2025 as compared to our status in 2018. This is part of our longer-term target to be a climate-neutral company by 2040. While the EX30 will be a strong contributor in increasing the EV share of our total sales, it's also our next step on the materials and operations side. Compared to the closest vehicle in our portfolio, the fully electric XC40, the EX30 has 25% lower carbon footprint without being 25% smaller in size. So how did we do this? Let's look at steel and aluminum as examples to break this down. First, we recycled. Around 25% of all the aluminum in the car is recycled and so is 17% of the steel and plastics. Second, it's a smaller car. So we use less material overall. Third, we've streamlined the production process to minimize waste and manufacturing to a state-of-the-art level. And it's not just materials, it's also all the work that we do on the operations side. The factory that the EX30 will be produced will operate on climate-neutral electricity and 95% of our direct material suppliers are committed to climate neutral renewable energy in their production operations by 2025. We're also establishing traceability on 5 critical battery raw materials using blockchain technology. Overall, our smallest ever SUV is an exciting product that has a very important position in the Volvo Cars portfolio. I'll now hand over to Francesco Speciale, the commercial head for the EX30, to talk about what this car represents as a business opportunity. Thank you.

Thank you Akhil. Yes, the EX30 is Volvo Cars' smallest SUV to date. And yet it represents one of the biggest business opportunity in the coming years. Why? As Akhil mentioned earlier, with the EX30, we are entering a new segment, the small fully electric premium SUV. And we're launching a new lower entry price point to the Volvo product portfolio and in particular, to Volvo electric cars. In turn, this will help our brand to grow by attracting new consumer groups. Lastly, with this ambitious sales target, it will strongly contribute to our growth and profitability objectives, allowing us to reach 8%-10% EBIT margin by mid-decade. And needless to say, it's also critical to our ambition to be a fully electric carmaker by 2030. EX30 bring a strong value proposition. It's paired with an attractive price that creates an opportunity to democratize electrification across our markets. We know that price is often one of the biggest barriers when considering whether to switch to an electric car. The EX30 will come with a price tag starting at EUR 35,900 in this very own country, Italy, for example, where we launched it yesterday. This means that you can get a fully electric car for the same price as an internal combustion engine car in the same segment. But a car is not only both, it's owned, used, serviced and maintained. The total cost of ownership is a model for estimating the total cost of a car over the ownership cycle. And residual value is a major contributor, bringing the overall cost down. External residual value sectors have deeply evaluated the EX30 offer and specifications, concluding that the EX30 comes with a segment-leading residual value, enabling them a lower cost of ownership for our consumers. Not only the EX30 comes with a new lower entry price point to our Volvo portfolio, but also with a strong profitability expectations. In fact, it will contribute to the profitability growth of our company with estimated margin between 15% and 20%. Thanks to this package, a smart city SUV with a very attractive price, we are convinced that we will be able to attract a wider group of consumers. Consumers looking to buy for -- to buy a new small electric SUV and also new consumers to the brand. The EX30 well resonates with the objectives of our commercial transformation to direct consumer relationship, aimed at attracting new audience to brand. We see this in our statistics of the subscription products we offer today, where over 70% of customers are first-time Volvo buyers. All in all, we see the EX30 as a car with huge conquest potential, attracting the new consumers for the long run. We expect the EX30 to play a significant role in the growth of the new -- of the fully electric small premium SUV segment across markets. The segment today is growing rapidly, replicating a similar trend that we experienced in the larger CSUV segment. We strongly believe that this car will replicate the strong success its sibling [ EX40 ] . A large portion of the EX30 global sales will be in European market where key markets are like Germany, U.K., Netherlands, Sweden, France, Norway, where you already from yesterday, could have purchased your car, your EX30. Based also on the product specification and dimension, we also see a great potential for this product in Latin America and Asia Pacific markets. Brazil and Japan, to name a few, are 2 examples of key markets where the EX30 will boost our electric sales ambitions. In Japan, additionally, we are going to offer the EX30 exclusively online, in line with our commercial transformation vision. This car will also be a relevant contributor to the U.S. electric sales growth, where we see the soupcompact segment to rapidly develop, especially for more environmentally conscious customers. There, we see the EX30 to capture this market opportunity. Hence, with the price range starting from EUR 35,900 up to EUR 50,900 in this country, as I said, with different variances between markets across Europe, the EX30 is available as of yesterday in most of the European markets. In U.S., with a down payment of $500, it is also possible to reserve the EX30 with a starting price of $34,950. During 2023, we will gradually start sales across remaining markets. We plan to add 70 markets during 2023 and a couple of more in 2024. First cars expected to be delivered by the end of this year. That was all for me. And now I hand over back to Olivia for the next section.

Great. Thank you, Akhil, and thank you, Fransesco. So let's move on to our next session, where we will talk about the commercial activities that we're undertaking our strategy and how we intend to change the relationships that we have with our valuable customers, starting with the U.K. With that, I would like to welcome to stage our Chief Commercial Officer and Deputy CEO, Bjorn Annwall, who is joined with Jovana Jovic. Head of Commercial Transformation programs; and Kristian Elvefors, Managing Director of Volvo Cars U.K.

Thank you, Olivia. And as you know, we feel really excited about where we're going as a company, and we feel really excited about being in heavy execution mode right now. I think by looking at this car, you understand that on the product side, we're really executing -- and on the performance side, having a 0 to 100 at 3.6 second, of course, that's quite impressive. What we're going to talk about now is something that I think is similarly impressive. In the U.K. now, you can buy a Volvo car from the second you write down volvocars.com until you at legally bought the car in 36 seconds. That is also an important statistics, an important type of execution that we're focusing on right now. I'll start a bit with talking about our commercial strategy, recapping a bit what we shared with you during the EX90 launch and the Capital Market Day in Stockholm. And then Jovana and Kristian will talk more specifically on how this is now being executed in the U.K. So a bit of repetition then of our commercial strategy. So our strategy is to grow. It's to grow much faster than the market. Our ambition is to be at 1.2 million cars by mid-decade. But volume alone is not the important thing. We need to grow profitably and to do so, we need to have the right pricing and the right mix of cars in the market. And we also need to grow our brand. We need to grow the coverage of the brand, meeting new customers, and we need to increase the depth of our connections to customers -- connecting even more emotionally with the customers. With that as a base, we can really grow. And we're going to grow by leveraging the 2 key inflection points in the commercial arena. First one being electrification. And as you know, that's the fastest-growing part of the automotive sector, and we're going all in and all focus is on full electrification. We will be 50% fully electric by mid-decade. fully there at the latest 2030. No ifs, no buts, no maybe, full focus. The other thing we are focusing on is to leverage the power of online and digitization. And our strategy there is not really online. The strategy is not agent, our strategy is to drive a better consumer experience divided by the total cost it takes to deliver that experience. And the total cost today is roughly SEK 60,000 per car. Say, 60% of that is with the retailer and 40% rest of it is with us. So the total cost that ultimately the Volvo customer has to pay. We need to drive efficiencies and optimize that set of resources. And the way we believe we can do that is by focusing on omnichannel experience with volvocars.com as the base. We will also focus on having a transparent online price. No haggling, no worries that your neighbor pays a lower price than yourself. You know what the car cost. It's a fair, straight price, and you can find it on volvocars.com. We will have a very clear and simple offer that you can actually ask the consumer, understand by yourself. And I think what Akhil and Francesco just went through in terms of having 5 colors, 4 interior rooms, 3 powertrain packages. All of those choices are very intuitive and easy for consumers to navigate. And they can make their choices, but not more than they need to do. We will also continue to work with our retail network. Physical network is very important. You cannot stream a car out in the market. You need physical showrooms. You need to deliver the car physically. You need to service it physically. And we are very proud to have a strong Volvo retailer network. But we're now evolving that into taking a somewhat different run. And we need to also continue to rightsize that network to continue to drive efficiency and sustainability in the business model for both us and our retail partners. One thing we need to do in order to do that is to share more things together with our retailers. The digital systems and the consumer data. If we share that, we take away a lot of administration for us and the customers. We can drive more effective marketing. We can a much more efficiency throughout the purchasing journey for the consumer. On top of that, we are also driving the inventory model in a smarter way. When you have 2,500 retailers throughout the world, today, that implies you have 2,500 inventory points. The risk for having the wrong car in the wrong place at the wrong time is very high. by taking control over that inventory ourselves, we can reduce the total amount of inure and increase the number of times where we have the right car at the right place at the right time, and that means happier customers and lower discounts. That is our strategy, and that strategy is a global strategy that we're implementing throughout the world. That actually means of how we implement that, however, is slightly different in different regions. In Europe, in order to deliver against those objectives, we need to change the legal construct and we change from a wholly model into an agent structure. In the U.S. and China, we're not flipping into agent structures, but we will be reaching those objectives by other means through our collaboration with our retail partners. So now we're going to focus on Europe and to share some more on what exactly we're doing in Europe, Jovana, who leads our European commercial transformation program will share some highlights. Jovana, welcome.

Thank you, Bjorn. Good day, everyone. My name is Jovana Jovic, and I'm Head of Commercial Transformation Programs at Volvo Cars. So today, as Bjorn mentioned, I will be focusing on the European transformation and what we do when we say we are flipping markets. So flipping a market means fully closing the wholesale channel in that market, and operating it direct-to-consumer in an omnichannel setup. That is a major step. With that, Volvo Cars takes on the end-to-end responsibility for consumer journey and customer experience. In today's setup, as an OEM, Volvo cars is commercially foremost responsible for brand building activities. On the other hand, sales and transactional activities are outsourced to our partners. Going direct and omnichannel, these are connected. So the full flow is connected between the brand building and sales and transactional activities. While this seems as a very simple thing to do in connecting the lines in the presentation. In real life, this is a major undertaking. We are transforming almost all the aspects of our commercial operations. To give you some examples. We're transforming what we sell. So foremost, we want to simplify for the customers. So we are providing fewer car product variants and simplified financial product lineup. Then of course, we're increasing the transparency and we are changing how these prices. So prices are online set by Volvo cars. In the funding transformation, we are optimizing the holding structure to enable capital cost to operational efficiencies by setting up a new off-balance solution for all products. Consequently, how we are selling changes as well. It's a digital transaction between the end customer and Volvo Cars, foremost on .com Contractually as well, it's a relationship between the end consumer and Volvo Cars. How we operate needs to change to be able to support everything else. So we are taking on the responsibility of a larger part of the order to delivery process. but also usage phases in consumer journey by in-sourcing operations. And lastly, but definitely not least, We are transforming retailer network into agents, with remuneration model in accordinance. Now all of this is enabled by digital systems. Digital systems enable us to connect the end-to-end flows to connect the lines fully. It's built on digitalization, but also on automation. As an example, order placement from .com is fully connected to the back-end system. So there are no manual interventions. And connecting the systems fully enable us and our partners to support consumer journey through the omnichannel setup. Of course, in addition, a lot of teams are impacted, and we have a new operating model put in place to enable and support the efficient direct-to-consumer operations. Now as amazing as this is, it does require effort. And this is and has been a truly cross-functional collaboration with very dedicated teams to deliver on our transformation with a supportive leadership team to take decisions when necessary and also reallocate the resources when necessary. Now we do all of that because we see Three key implications of doing the fleet approach in Europe. We see better customer experience with the customers, long-term sound economics for the retailers, and for us, it's a competitive and future-proof platform. To showcase what customers will see. So as mentioned, the impact to customers is a better CX, better customer experience. Now the film this screen is showing is part of the purchasing journey of an XC40 recharge. And I can very proudly say that now, for the first time, all choices are available at customers' fingertips. All your cars offers and prices are visible and available online. With a simple journey, you start by choosing your car, then you choose your features as mileage as an example, you can choose your options or so he add-ons, and also all financial options are available. You can read more about them while browsing. When you choose your add-ons, you can subscribe to a service package and also choose a potential down payment, if you would like to put that one. Lastly, you proceed to check out and putting personal information to place your order. Now Bjorn already mentioned it, but I will repeat it. If EX30 goes 0 to 100 in 3.6 seconds, a customer can place an order in 36 seconds online. That's our personal best. Now on the other hand, what this firm now shows is the retail side of the coin. If a customer chooses to start a purchasing journey at a physical store, retailer has the systems in our omnichannel setup that support identifying the customer. And then they can log the opportunity and start purchasing journey with car configuration. Then they also can continue by proceeding to check out and also placing the orders going the full way. Now if the customer would choose to finish the order placement or the journey off-line, the retailer is able to send a link with the customer, so he or she can do it at home later on. With this, the wholesome, we are enabling the retailers to spend time poor customer value-adding activities. So as a mean more sales. With this, of course, the cost structure is optimized, but there are other aspects of the retailer impact such as no stock risk, which means that capital efficiency is improved. And then in the end, the impact to us as mentioned, we are building a competitive commercial operation system with future-proof growth-to-market setup. All parties are better off. We are not born into the system. We are almost 100 years old OEM that has taken major transformation steps already mentioned by microleagues. In a lot of markets around the globe and now with flipping or closing the wholesale channel and everything that, that entails, we will be able to operate an efficient direct-to-consumer business model. That means that we have scalable and consistent consumer experience across the markets. where we can optimize marketing sales activities but also the inventory and capital costs across the full system to us and retailers. Of course, with responsibility of the digital infrastructure, we also create direct consumer relationship and we have the ability of price setting. Now those consumer relationship will give us the opportunity to build up loyalty, but also a potential for cross and upselling. And now when U.K. is our first market to very shortly -- or fully closed the wholesale channel, I will hand over to Kristian to tell you more about the U.K. specific.

Thank you, Jovana. And hello everyone. My name is Kristian Elvefors. So I'm actually going to do this. So a 96-year-old company with 96 hours to go until we close the wholesale channel, and we become direct for real. And it's not only about going 100% from start, we actually already trade on 50%. And then you might ask, how do we do that? So we started 18 months ago to negotiate to the retailers and to set up a minimal viable product for flipping the market. Meaning a minimal viable product, you need to engage the retail network also to understand the future and where we are heading. That mean that you need to continue to consolidate the network to build bigger, fewer, better retailers that can take care of the volume that we are going to get out of this shift into a new direct volume model. One thing of doing it is also to enhance and test new business models. It's not only about building new full service sites. It's also about test new hub and spoke systems where retailers have for less cost that can build delivery centers, they can do service and sell used cars, but they don't have new car sales showrooms. That means a regional footprint where a retailer might have 4 to 6 sites where the today have 6 new car sales site. And tomorrow, if the customer is changing the behavior still operates in a big regional area, but might have 3 to 4 new car full sites, 6 service points, that takes cost out of the equation and gets us more efficiently. U.K. today already has the highest output of all retailers in Europe. And to be able to cope with the growth that I'm going to talk about soon, we are also setting up 2 new prep and deliveries, service centers at our ports in Grimsby and Bristol, that will help us and the retailers to get even more volumes out. So that has been a part of an ongoing discussion for 18 months, and we are continuing to do that now as we see the effects of what the transformation and the change will bring to the market. As we discussed early both Bjorn and Jovana, when you see you can transact in 36 seconds. You have a huge efficiency impact compared to how you deal with an order today. Even if it's a 2 or 3 minutes on average, it's so much more efficiency you build into that system. And actually, a sales consultant today needs to have a big computer to do the full sales process. Tomorrow, the sales consultant can you do it over the phone or even the customer's phone to be able to transact quickly. That also means that you are not fenced in your showroom, you can actually transact and do the deals wherever you are as a sales consultant. And also the customer itself can help and process and transact and finish the order or the prospect wherever they are and wherever they like. So the efficiencies of the network will continue for a while, and we don't know exactly the finish state of it. But in close collaboration with retailers, we are continuing to working on it. And that is also part of a guarantee to keep the profitability in the retail network still, but taking out and being more efficient as we go into the future. Then you can ask yourself, why the U.K.? Why did we want to do the U.K.? The third biggest market for Volvo. It is a big risk, but it's also a big mature market who are very used to heal online and e-commerce. Who are quite textile when it comes to buying online, by almost 31% of the customers are doing all the retail, all the grocers are shopping online already today. We could see for COVID what happened. Not only [indiscernible] since we're launching new offers and started to deliver the cars directly we could also say that retailer partners digitalize the systems to be able to deliver used cars or even new cars direct to the end customer. used car direct deliverables is a big, big thing in the U.K. that actually builds confidence in the customers that they can even buy new cars in that same way. So I think the U.K. is a smart move for us. because we are taking off in a really good market with a good market transaction and a good marketplace as such. Then, will we grow? Yes, of course, we will grow. You have seen the EX30 and I'm hugely impressed. And I know my retailers as well and the customers and the reviews we have seen so far. It's a fantastic product. It's a fantastic product, not only for all the markets we are launching the cars in, but specifically for the U.K. We have been waiting for this car for a long time. And I'm sure that this car will be a #1 car in this segment in a couple of years' time when we have full delivery of the car. As the EX40 is today, and it has been for 3 years, the #1 best-selling car in this segment. And also followed by the XC60 top 5 since launch, and the EX90 top 3 since launch. We know what we are doing. And we are sure that we will help this to grow our market position with a 20% year-over-year, up to our midterm ambitions. And that's bigger than the market as such, which we calculate to do another 9%. And to caveat it [ a nasal ] strengthen out, in May, isolated with 3.7%. That's a long time since we did 3.7% market share. And that is the path and the first wave of doing this growth now. Then also you need to grow in a profitable channel because you need to take care of residual values, you need to protect the residual values of a car, and you need to have a sustainable life cycle of a car and to do that you need to trade in retail. You need to be strong in retail. You need to have a strong retail offer in place, then you on money on the offers on the car as such, but also on the high residual values and a big customer base. That's a big difference of trading all the current fleet where you have a different equation. So the strongest part need to be in retail. We are strong in retail today, and we will become even stronger with this is EX30, and that guarantees profitability for us, market share and a long lifetime success for the car. And as an example to finish off before I hand over to Bjorn, we have been trading, as I said, 50% already direct today. We know what we are doing. And we have been trading with Care by Volvo for a couple of years now. And as you can see from the figures, it's a huge success for us. 90% conquest, the highest number in all markets. We are taking loads of customers in the U.K. from other premium manufacturers and also other brands out there that want to become a part of the Volvo family. That is so good. And then you can see from an average. So we trade on an average from 48 years today, which is also a fantastic result, taking the average age of our drivers and owners down 11 years which is really, really tough to achieve. And then we haven't even launched EX30 yet. And as you can see, 43% of our customers are already today trading full end-to-end without any retail assisted sales in there. That means that they might visit the retailer for a test drive, they might have visited the retailer for to have a look and feel at the car, but they have done the full transaction themselves. And I need to mention one thing that we are doing in the U.K. as well as the other markets where we are launching. We are building capabilities internally to take care of the full customer end-to-end journey. It's not only about building an agent framework and building an agent set up out there. It's also building our own capabilities to do the end-to-end solution for the customer. So stay tuned and wish us good luck because we are going to do it in the U.K. So now over to Bjorn.

Thank you, Kristian. And I would really recommend you to go to volvocars.com in the U.K. and sense the experience yourself and see if you can do it in 36 seconds. So we are clear on where we want to go. If I were you, I would ask then, okay, what will that give us financially? And this is something that will play out over time. I mean, the baseline cost, as I said, is around SEK 60,000 per car for us and our retailers -- on average throughout the world. It's a little bit lower in the U.K., a little bit higher than some other markets. So of course, the cost base to work on there. But I think as importantly, the consumer experience can be done so much better. And that's when we're going to drive our brand and that's going to drive loyalty. There's lots of potential. And we are moving to implement this throughout the world. you can slice the pie in a different way. You can do it by geographical market. You could do it by type of offers, subscription versus cash. You can also do it by type of car, ICE versus BEV. And we have tried a different -- a set of different angles in different countries, which means that we now have an online direct type offer in many markets throughout the world. No market has it for the full market like U.K. will have next week, but a lot of markets have started this journey. Now it's key to do this right. So we're scaling up the capabilities, the digital system, they operate thing changes we and our retail needs to do, and we will roll this out throughout Europe. But first, we make real strong learnings in the U.K., then we go to Sweden and then we move on. Online is a difficult term. What do we mean with online. And for us, we have a very clear definition. When we say online, we mean from a customer point of view, there is a buy button. There is a clear online transparent price and there is a direct transaction with us. That's kind of the basic assumption on what is online direct sales. But for that to be important for us, it also needs to be part of a structural road map to drive a better consumer experience divided by cost. We can very easily put it by button on many of our volvocars.com and then have a lot of people and posted notes and people doing things between different systems, we can do that, but that will not give a better structural cost. So the online sales that we are counting is only online sales where the consumer views it in the right way and we take steps to get structurally better. And right now, that last quarter, that was 5% of our total sales. And that will now grow during this year, particularly towards the end of the year. The case we're selling now in the U.K. in wholesale still needs to get deferred. So you're going to see that effect towards the end of this year and beginning next year. And you're going to see how this continues to grow towards 50% by mid-decade. So with that, I think we have covered enough for commercial for today, and I hand it back to Olivia. Thank you very much.

Great. Thank you, Bjorn. And thank you, Jovana, and thank you, Kristian. So we have heard all about the EX30 and our commercial strategy and our ambitions. So now we will shift to the road to higher profitability. And with that, I would like to welcome to the stage our CFO, Johan Ekdahl; and Fredrik Andreasson , Deputy CFO and Head of Global Controlling, who will walk us through the profitability road map that we have ahead of us. Thank you.

Thank you, Olivia, and good afternoon. So financials and mid-decade ambitions. Just as a short recap, these are our mid-decade ambitions. We aim for EBIT margin of 8% to 10%. 50% fully electric sales by mid-decade, which will then take us to our journey towards our fully electric 100% by the end of the decade. On sales volumes, we aim for 1.2 million cars on a run rate as of mid-decade, where, of course, the EX30 will be one important contributor to that. 40% reduction of our CO2 footprint by mid-decade and then also 50% direct online sales, as alluded to here previously. So those are the mid-term ambitions. Where are we now? Well, this is then 2022 compared to where we were in Q1 on a rolling 12 basis. And what we can see that we are on a growth -- And even more so if we look at 2023 isolated. We had a 14% volume growth in sales as of May. So we are really taking off now when the easing of the supply constraints, production constraints and semiconductors, et cetera, having an healthy growth each month this year. And even more revenue, we are growing top line revenue more than we grow sales volumes also showing that we still see healthy pricing on the back of the demand. On EBIT, we see that we are more or less in line for the Volvo core part with last year due to the fact that we, during the second half of 2022. So elevated raw material prices, et cetera. However, also there in Q1 this year we saw that we were increasing our operational profitability. And on cash flow, although we have had some structural investments during this year, investments in plants in affiliated companies, et cetera. We are on track to our plan, and we still have a very healthy liquidity situation. So that's sort of the situation as of here and now. And also, I think what's important as part of this journey is that if you compare to 2019, where we had 705,000 cars and then with 2022, we had 615,000 cars, it's a drop of 90,000 cars driven by COVID and then also the semiconductor constraints, et cetera. But despite that, we have maintained the same profitability, both due to the fact that even with elevated raw material prices, higher cost for semiconductors, freight costs, et cetera. We have also been able to increase our variable cost efficiency and also seen a healthy growth in pricing and good car line mixes during this period actually being able to absorb these volume drops over this period of turbulence in the last couple of years. And looking forward, I think that we see that we will, of course, see a normalized supply and demand situation and a somewhat normalized mix of cars, but we also see that we will have lower raw material prices. We also see that with the issues with semiconductors, et cetera, easing up, which we also see now on the growth this year which means that those effects very much will balance out going forward towards the mid-decade. So if we then look a little bit more into the building blocks, how to take us to the 8% to 10% EBIT margin? As I said, the pricing and cost normalization will -- we see it balance out. We will near term have a cost for electrification, but we will also have those positive building blocks, which then is more cost efficiencies and synergies. It is, of course, on the back of the growth that we will see up until the mid-decade and also from the commercial transformation, as shown here earlier, where we also will have a more efficient commercial system. On top of that, we also will have a contribution from our affiliated companies, although I think it's important to emphasize that we will have or aim for the 8% to 10% range on the Volvo core operations and the contribution from the affiliates will be on top of that. So with that, I will leave over to Fredrik, who will take us through these different building blocks somewhat more in detail. Fredrik?

Thank you, Johan. So let me talk you through this, starting with the cost of electrification. And as you know and as you've seen in our Q1 numbers, our BEV profitability is currently hampering our margins. We're at 7% profitability in Q1. And that is really with our Generation 1 electric vehicles. And what we're trying to illustrate on this graph is the cost per kilowatt through different generations of battery technology and electric vehicles. So Generation 1 is really BEV-ICE combined. It's the XC40, it's the C40, the car is current today. Generation 2, we move into born electric. So EX90, we've already launched late last year. EX30, we launched today. These are Generation 2 vehicles. So born electric. But it's only with generation 3, we take a massive step. And that is when we reach BEV-ICE cost parity. I'm going to go through a bit of the specific things we're doing to take that step in a minute. But worth mentioning is also that there's a common factor across all these generations. And that is that they are using raw materials and they're using lithium in specific. As we've seen in the past 12, 18 months, lithium prices have done a bit of a roller coaster. They've gone up drastically, which has naturally further hampered our margins. In the recent months, it started to come down quite drastically. And we foresee it to continue to come down, but that development, of course, impacts how this develops. But let's talk about Generation 3. And here, we thought it made sense to bring 3 very concrete examples of what we are doing to push down cost. So let me start with the first on the left-hand side. That is or battery packs or our cell-to-body technology. So we've introduced this to you in the last Capital Markets Day, and it is an in-house concept where we basically rethink how you build an electric car. So instead of having a battery cell in a box, which sits in a box, which sits in a battery pack, which is on a floor, which sits in a car, which is the biggest box, we basically make the battery a structural component of the car. It becomes the floor of the car. That has, as you can see, a 30% cost reduction versus today. So huge cost savings benefit, but it also adds other values. It reduces weight by 70 kilos . Meaning lower sustainability footprint or CO2 footprint. It also means a lower energy consumption as the car is actually lighter, and it creates better opportunities to create good interior spaces also for low body cars. So hugely exciting. Second is e-drives. And here, we're going to talk a bit about Generation 3, but let me mention Generation 2, which was just launched with model year '24, XC40 and C40. And with that, which is now currently in the market, we've taken the e-motor production in-house. And as we did that, we also took a big step in improving efficiency. So those are 8% more efficient than the previous generation, which you also see if you look at the range numbers of our current XC40 and C40. With that generation too, we took one big step in cost as well. And that was to take the inverter and the motor and create that in one module. With Generation 3, we're further pushing costs down 40% versus the reference today by taking the last step, if you will. We're taking the inverter, the motor and also the transmission and building that into one combined housing. Last example is really vertical integration and mega costing. And here, specific example is the rear floor, but there are more applications. The rear floor is for Volvo and for most OEMs, a hugely complex structure with hundreds of weld points and a lot of small pieces fitting together in a complex supply chain. What we're doing in Generation 3 is really mega costing that. So there one big aluminum cost to replace that complex structure. That gives us design flexibility. It's more sustainable to do so, and it drastically reduces the supply chain complexity and also complexity in our plants, which are further benefits beyond the pure cost savings of the material parts. So that was about high voltage and cost reductions in that area, critical area. But beyond that, we are deploying additional measures to achieve operational leverage and enable a continuous transformation. And we talk about it as our culture, competence and cost. So starting with culture. It's really to continue the culture journey we're on, which is embracing transformation, and it's also about focusing on enabling flexibility by having a cost-conscious mindset. And here, we have clear proof points that we're doing today. And a lot of the things said earlier today and the products we show are proof points that our strategy is embracing transformation. We are embracing transformation as we execute. And we believe this is going to be critical also going forward as the industry morphs. Secondly, maybe the most obvious is competence. It's really making sure that we make room for the critical talents that are for the future. We have done so. We will continue to do so. And as technology develops, we will make sure to attract that right competence and have that critical competence with us. Costs maybe mostly linked to the financial topic of today. But we are taking further steps into optimizing our variable cost, and we are also taking steps in improving our indirect cost, where we're very publicly announced a reduction or a redundancy program in Sweden a couple of weeks ago. And that is really a building block to build an even more efficient and sustainable structure to stand on as we move forward. Last point on cost efficiency and synergies is really maybe the smallest car, but the biggest synergy of all. It's the car we launched. It's the car we just looked at. This is -- as Akhil mentioned, leveraging the SCA vehicle architecture, but then we've added Volvo technology, Volvo Design, Volvo UX to make it a real Volvo. But it's also standing on economies of scale of a bigger footprint. And that means that we have huge profit opportunities and huge profit ambitions for this car. Francesco mentioned it before, we are aiming and seeing a 15% to 20% gross margin on this car. We're mentioning this. And for competitive reasons, we're not going to disclosed the gross margin of every upcoming car. But we figured as you're trying to understand our journey to 8% to 10% profitability. Us launching a small car, which is typically for the automotive industry, a profit-wise challenging segment, we figured that we give you that negative information to better understand the journey we're on. So that was cost. So let's talk about growth. So our ambition is to reach 1.2 million cars by the mid-decade, and there's really 2 things driving that. The first is I would call it normalization. We're currently still supply constraints. We're seeing improvements, but the clouds are not fully gone from the horizon. And if we just look at the times before the semiconductor crisis hit harshly, and before the full impact of the lockdowns in China came into place by the mid-2021 or running 12 months deliveries was almost 800,000 cars. And we ended up 2022 at 615,000 as Johan just showed. So there is an opportunity just from the normalization. But beyond that and maybe more excitingly is that we are drastically expanding our addressable market. Today, we offer large cars, medium cars, [indiscernible] and hybrids. And then we have a limited BEV offer in the medium segment with XC40 and C40. We're expanding that offer and thereby expanding the market. We talked about and introduced the first large car the EX90 late last year. Today or yesterday, we added EX30 as a small BEV both expanding the addressable market in terms of car size and use case, but also introducing a new BEV in a very unexplored premium segment, which we believe gives us a huge opportunity. Beyond that, we are continuing to launching at least one new BEV per year until the mid-decade. So our BEV portfolio will drastically expand. And that means we'll be able to capture a much bigger share of the electric market, which is, as you all know, growing like But it doesn't stop there. If we look at mid decade, the PHEVs and hybrids are also developing. We will maintain our current product portfolio, but we will refresh it. We will have updated infotainment systems. We will have added smartification. We will do some exterior updates meaning that these cars will be relevant for consumers also in the years to come. And that means that our combined portfolio is really expanding what we can grow into. Then moving to the last point of our past to 8% to 10% profitability or the building blocks, if you will. And that's really coming back to what Bjorn and Jovana and Kristian talked about, our commercial transformation. So this has some key benefits. We are offering a scalable and consistent consumer experience and that is really, in other words, enabling growth. We need to have a seamless omnichannel experience, starting in the customer funnel, all the way through the transaction to make sure that customers want to buy a Volvo car. From a financial point of view, the second point raised here is maybe the most interesting. When we do a full flip and go into an agent model, that gives us the opportunity to optimize the entire system. We're able to optimize marketing. We're able to optimize sales, the inventory we have and the distribution costs and how we distribute across the entire system. Third point, also important. We're taking on the responsibility for the digital infrastructure. And all consumers will eventually buy a car online or through an omnichannel experience. As we're taking on the responsibility on behalf of our dealers in some of these markets, that means that there is no need for them to reinvent the wheel. If the consumer wants it, it needs to be provided. And we are able to leverage our national scale, our regional scale and even our global scale to build great solutions that we can apply, rather than our dealers building the same type of solutions trying to reinvent the wind. And that means ultimately less cost in the combined Volvo dealer system, which ultimately means more profit in that system. And as we are the orchestrators of that system, we can make sure that there's a fair allocation of that profit. The last point, which I just mentioned, and it's actually not part of my next slide where I'm going into some of the financials of it, but that is really the fact that we are establishing a very tight direct customer relationships. This means potential for upselling. It means potential for cross-selling. It means potential for us to go into adjacent businesses with 0 marketing or transaction costs to reach that customer with an offer. But let's go into some of the financials of it. So this is showing the EBIT impact of flip U.K. in specific. So we really have 2 things which is contributing to EBIT. So one is that we move to national pricing. So transparent, unified pricing optimized by us. Second and most importantly, is we're replacing the current dealer margin with a fixed dealer numeration. And that dealer remuneration is lower than today. It is lower, but we're also taking away risk and activities from the dealers and optimizing that centrally. And that's really what's weighing us down here in the third bucket. We're really in-sourcing part of what the dealer is doing. When it comes to tactical marketing, when it comes to call center services, when it comes to a lot of the administration, we're taking that on and doing it more efficiently. Another thing we are taking on is stock, and that's the fourth bucket. We will actually grow our inventory. Today, the majority of inventory sits with dealers and some sit with us. When we flip the market, we take on that entire inventory, and that might sound scary. But ultimately, that gives us the opportunity and freedom to optimize that inventory across the market. We're able to allocate it where it needs to be. It will give a shorter time to delivery to a customer, and it will ultimately reduce the need for overall inventory in the market. And as we talked about before, if we're taking out cost from the system, that will benefit all participants in the system, and we're the orchestrators. So we see 1, 2 years in, this is the type of economics you will see in the market. That said, we're flipping markets. Yes, U.K. is flipped in 96 hours, as Kristian said. But this is not something which is a big bang. We're doing this gradually in many places of the world already today. Bjorn talked about it a bit. But with different offers, with different products. If you take the APAC and China countries, we go direct agent with our BEVs. We're setting up new interfaces and ways to market with downtown stores to meet the customers where they are. And this is happening as we speak. So to summarize a bit, we talked about cost of electrification and how we will generation by generation, take that cost down, reaching BEV/ICE parity. We talked about efficiencies and synergies with the EX30. We talked about growth how normalizing the supply situation and how we're expanding our addressable market to be able to aim towards our 1.2 million ambition. And we talked about the commercial transformation as 1 of the 3 main building blocks to reach our 8% to 10% EBIT margin. So with that, let me say thank you and hand back to Olivia.

Great. Thank you so much, Fredrik, Johan and all my very talented colleagues today for your valuable contributions and also for your insights. So let's now start to move into the Q&A session. But as a recap, so far, we've heard about the EX30 becoming one of our most significant opportunities in the coming years and a building block for our strategic transformation. It's important for our customers, for the industry and for Volvo Cars. We also stepped into our commercial transformation and the importance of creating end-to-end online experiences that are relevant and meaningful for our customers. Importantly, we looked into our mid-decade ambitions, our electrification journey and improved profitability. Now let's move to the practicalities for the Q&A.

For those of you who registered to ask questions, please send them in now using the chat function on your screen. For those of you that dialed in and would like to share your question via audio, then please follow the instructions from the operator and we'll bring you right into the session live. Now with that, I'm glad to welcome all of our speakers back on to the stage. One final point, we'd just like to make sure that everyone has the opportunity to ask their questions today. So as you're thinking about your question, please make sure that you try to keep it tight, so we have time to make sure that everybody has an opportunity. Now with that, I'll kick off with one topic area that we've had some questions on in advance, and that's related to our EX90. Now we recently announced that we will adjust production going from the end of 2023 to the first half of 2024, and that's to allow additional time to ensure that customers have a great first experience of the car and the software inside it. So I'd like to throw this question to you, Jim. How confident do you feel that with this adjusted time line that we will have everything that we need to be able to meet the deadline that we've set ourselves now for the first half of 2024?

Yes, obviously, the current -- that we'll have those deadlines. I mean we made the decision very, very consciously. Because this is the first call that will come out in a brand-new platform. It's tactful technology, as you know, and part of that technology is a very complex software stack, a software stack that predominantly we're building ourselves. We want to make sure that it is wrinkle-free and that the customers, as you see, Olivia, have a fantastic experience. So we pushed it deliberately. And we've pushed it roughly about 5 months or so. That gives us, we think, ample time to make sure that when we get this car launched, it's going to be a fantastic experience for our customers. And at the same time, we go on with everything else that we've got on, obviously, launching the EX30 which we're talking about today as well. But conscious choice. It's a small push forward for us, but the benefits of that is that we'll end up with a car, which is fit for purpose and where our customers get a great experience.

Okay. Great. Thank you so much. Now I'm going to go to the audio. We're going to hear from our first question. Our first guest today will be Hampus from Handelsbanken.

Three questions from me. What risk do you see in EX30? And the cannibalization risk with XC40 Recharge? And second question is linked to that. Will there be an updated phases of the CX40 recharge to called EX40? And then the last question is how much capacity and do you have for the EX30, just to get a sense.

Okay, great. So I'm going to break those up. I'm going to let Bjorn take the first 1 regarding cannibalization, and then maybe you can repeat your second question as you after Bjorn.

No, interesting. We get the question sometimes. When we launched XC40 here in Milan in 2017, we got exactly the same question, shouldn't the XC40 cannibalize the XC60, and what happens is the other way around. You get a stronger portfolio, you attract more consumers to Volvo. Yes, there might be a consumer who thought they're going to buy an XC40 and up next or vice versa. But we firmly believe the strengthening the Volvo portfolio and the EX30 is a size class smaller than the X4, the serve different purposes, and that is different to our overall portfolio. And I can answer the next question as well. We're not going to talk about any upgrades to the XC40 BEVs today. You will not get any news on that. And in terms of production capacity what we can say is that the EX30 really has the opportunity to become our best-selling car and be competing with the XC60 and the XC40.

Good. Thank you. Does that answer all your questions, Hampus? Okay. Second question is coming from Pushkar from HSBC.

So I have 3 questions. The first one would be around your volume targets if you are willing to share something in terms of what kind of volumes or growth that you would expect for the EX30. The second one is around and China. We haven't really heard you referred to a few regions when you talked about EX30, but China was not mentioned. So I'm just wondering, and because that's a region where you have a pretty low EV penetration. So how are you going to address that? And then the third one is on the profitability of EX30, the 15% to 20% margin. The slide that you show with the generations, I don't think that applies to the EX30 because this is made on a [indiscernible] platform. So just wanted to understand how do you get to that 15% to 20% margin from, let's say, 5% to 7% today with what you have for your BEVs?

Okay. Thank you. I'm going to let Francesco start up.

I can take the first 2, and then be Fredrik can jump as well on the profitability. When it comes to volumes, we cannot disclose exact targets, but of course, we aim to attract new consumers to the brand. This is a new lower entry price point. So obviously, we expose our portfolio to a wider range of consumers. We have high volume ambitions with this car, and we aim to, as Bjorn mentioned before, to be one of the best seller. The second question was China, yes, it would be part of markets coming in 2024.

And then maybe linked to profitability. So first, the graph showed was an illustrative chart. So don't read it with millimeter paper. How we achieve profitability is really by having economies of scale. And it is and you also have a good offer range. We have an LFP battery, for instance, which is cost efficient as a base. So It's really about finding those opportunities as we build a small car on the pure BEV platform, which the XC40 is not.

Yes. Let me just pivot on that a little bit. So when you build a brand-new car from the gig on a full BEV platform, you take massive economies of scale. And as we said in the EX30, we took a lot of time and attention to how we're going to design this kind of the stuff that we're going to remove. I mean the cheapest part you can buy is the part that you move completely, if that makes sense. So we stripped out a lot of the stuff out. We see a lot of this from the doors. Normally, you have the switches and so on and the doors all gone put into the center console. We'll build on the base up. We're using LFP technology as a battery platform gives us a really nice low entry point. And we looked at every single part of the bill of materials on this. We're fine tooth comb, and we ended up building because a large part of the car obviously comes from the bill of material. And that's what. And then in addition to that, of course, we use the SEA platform, which allows us to spread that cost and much more effectively. And basically, you add that up, and that's how you get to those price points.

Bjorn?

And I would say also, interestingly enough, I mean, from the get go, it was a big sustainability focus on this car, and it turns out what good sustainability is typically good for cost. It's about taking out waste, reducing material, taking out complexity. And another silly example would be the sound bars. You have one sound bar instead of 4 or 6 loud speakers. Less cost, less complexity, a great consumer experience. So there's a lot of small things. We've done much better in this car.

Exactly. Very good. Does that answer all of your questions, Pushkar? Did you have a third?

Yes. Yes. Just if I may ask a follow-up, though. And just to Jim, based on the pricing of the vehicle, EUR 36,000. How does that aggressive pricing fit in with Volvo's image of a premium carmaker, just how do you reconcile the two?

Yes, I don't think there's any conflict there whatsoever. I mean you can have -- in my opinion, you can definitely have a premium experience. You can have a premium product and you also have a premium product, which is very -- which is very price competitive. I mean that's really where the outcoming happens. I think with this car, that's exactly what you start to see. You start to see a real premium package in a very affordable price. And as we said -- as Francesco said earlier, with the aim here is that we democratize electrification. And I think we're frontrunners in that, and we're going to keep pushing.

Good Okay. Next, we will move to George from Goldman Sachs.

And thank you very much for the very informative presentations. First one, I just wanted to mention if you gave good detail on some of the cost saving approaches you're taking going forward, including sell-to-buy giga casting and the third generation of e-Drive. Can you just give us some insight into the timing of the introduction of those initiatives? When do we expect them to come? Will they be on products that form part of the mid-decade objectives? . The second question I had was around cash flow. Obviously, you reiterated the margin targets. Historically, I don't believe you had cash flow targets, but would you expect to be free cash flow positive each year between now and achieving the mid-decade targets? And then finally, mid-decade, obviously, is quite vague given we're only 18 months away from 2025, and financial markets are time sensitive. Your U.K. market CAGR would seem to suggest 2026 might be mid-decade unless the U.K. market is going to achieve record sales that it has never achieved in the past. So is 2026, a fair assumption for what you're classifying as mid-decade internally today?

Okay. Thank you, George. I'm going to suggest that we start, Fredrik, with you, taking the 3 generations and then pivot to you Johan to take the second 2 on cash flow and mid-decade.

And the examples we showed there are really generation 3 BEV examples, and we will have generation 3 BEVs within the mid-decade.

And on the cash flow, we don't specifically guide on cash flow targets. We will on the back of the growth have a healthy cash flow. We will also have a lot of investments we need to do in the next coming years, but we will be able to fund those through our own growth and profitability. And the third question was -- mid-decade. Yes. I mean mid-decade is -- we said it's not a specific point in time, but it's, of course, during the period of '25 to '27 somewhere. And those different ambitions might come at slightly different points in time, but of course, it's in that range of time.

We wanted to -- the reason we said my decade was in order to give us some of those bookends. And it's very difficult to pinpoint a specific month or even a specific year when the industry has gone through this transition. But at -- we wanted to give some guidance, and I think my decade gives -- provides that guidance for us. And remember, when we talk about the 1.2 million doing that up is when we talked about the 1.2 million run rate, 1.2 million. That's a 1.2 million run rate. Effectively, you do the math on that, you get to 100,000 cars per month. That's what we expect to hit within that mid-decade ambition. EX30, there'll be a big part of taking us in that direction.

Makes sense. Bjorn?

I think you can also add that in this mid-decade is a bit kind of a range of time. My sense is that the more sustainability part of it getting to 40% reduction in CO2 per car, getting to the 50% electric comes early in that range, whereas maybe the full volumes and cancel a little bit later, but all what I will still consider mid-decade.

Okay. Makes sense. Does that answer your questions, George?

And remember, just to pivot on that last point. Remember, we are going into an industry transformation and industry transformation that's probably going to last for the next 10 to 15 years. That's how profound this changes. We are early to that. We're moving into that. And so the mid-decade piece, to Bjorn's point, that's a small period of time when you relate that to the large transition that's going to happen that we're going to have to live with for the next decades or so.

Okay. Very good and clear. And Do we have any more questions online? Yes, we do. Here we are. Okay. So Erik, let's hear from you, Erik, SEB.

I have 2 questions. First one is a follow-up on the gross margin indication there of 15% to 20% on the EX30. The low versus the high end of that range. Is that sort of specification mix dependent or more factor of the sort of the lithium component you indicated? And then the second question is about sort of speed to market in sort of new products, bringing new products to the market, given the slight delay of the EX90. If I look internally towards siblings in the [ Gelo ] sphere, there are some companies who've been able to bring quite a few vehicles to market within a period where you really haven't brought any new BEVs into production at least. So how do you think about sort of the speed that you're running at in terms of bringing out new products and putting them into production if we look ahead?

Okay. Thank you, Erik. So I propose we start with you, Johan, on the margin question for EX30, and then Jim, we go to you on the...

Yes. Yes. On the margin, the 15% to 20%. Of course, there will be variations between specifications and also between jurisdictions, but -- and it's also based on what we see currently on lithium prices, which is, of course, a factor that could change over time. But -- so it should be seen as indicative range on the current circumstances.

Quickly following up there, should we think about a level slightly above that for the EX90?

We've not given any guidance in -- that was one of the points that Johan made early. We don't want to get into the situation we're starting to get margins on every single model. But we felt -- I think it was maybe a [ Fred ] we felt it was important at this particular point in time because we know that you're looking to say, okay, what does this mean for the current BEV margins. I think we're still probably one of the few companies that split out BEV margins versus total margins at ICE margins. . We wanted to give a bit more granularity on this car. It's our first fully designed duly electric car. As Fredrik said, sometimes that's perceived as a smaller car, we'll have smaller margins. So we wanted to be clear on that to say that will be margin beneficial to our BEV structure, but we're not going to get into the situation where we'll start to give margin guidance on every single model that we bring out. I'm sure you understand that. In terms of the pace of change. So the pace of change, the new EX90 platform is a complex platform. Of course, it takes us much, much closer to a core compute platform. As I said earlier, it's got lots of new technologies. There's 5 radars. There's 8 cameras, the 16 ultrasonic sensors and there's a LiDAR system, which is a brand-new technology for us. We are building the software stack from the silicon all the way up to the LiDAR earlier, which means we're building the perception software. We're building everything to do with the sensor fusion software. All of that's getting done in-house. That's a lot more complicated than maybe some of the other platforms that you mentioned. And it's really a software delay. Most of this is related to software, and that's the reason why we will push this out. But I don't think it's a fair comparison to say the platform has come out earlier and the new platform for the EX30 is later. I think there's a good rationale and good reason as to why the complexity as well as the benefits that, that new platform will bring.

So maybe not fully comparable then. Okay. Next, I'd like to go to Mattias from DNB.

You mentioned the EX30 and the small car segment as a new market opportunity. But In fact, you've already had a 30 Series car, and I'm thinking in particular about the C30, which never really became the success that you seem to believe that EX30 have the opportunity to become. So I would be interested to hear what learnings you made with the C30? And what you're doing differently than around in order to penetrate the small car market?

Akhil?

I can take that one I work with the small cars program. So when we did the C30, that was pretty much of an experimental shot into this particular segment. It wasn't built up from the scratch as an EV. And it was also rather early in terms of the industry sort of evolution and the infrastructure and things like that going up. With the EX30, like Jim mentioned and Francesco said, too, we're democratizing electrification. So we're giving customers the choice to drive electric in a segment that's predominantly combustion engine driven. So that's why we believe that EX30 will be a very strong volume contributor.

You learn from things in the past, as you mentioned. I mean if you take it to the other industry, if you look at the success of the [indiscernible] it was second product. First product was called Lisa and it never worked. They learned a lot from that. They came in and they home run Max. So I think there's a lot of learnings when you try these things. We're an innovative experimental company, and we've learned a lot from the SEA, and now we're going to apply a lot of those learnings to the EX30.

Perfect. Johan?

I also think the industry has evolved. It used to be a little bit dogmatic big cars a premium car, a small car is not the premium car. I think the consumers have evolved, and I understand you can buy premium in different sizes. I also think the consumers are much more receptive for a premium car in a smaller size.

And particularly when it's electric. Fantastic. Any more questions from you Mattias? Thank you. Next, I'd like to go to Doris from Exane BNP.

I have three, if I may. The first is around the EX30. Could you talk a little bit about Who you regard as the key competitor products for that vehicle? Maybe one of the key brands that you see yourself competing with? And then with regards to the EX90 and the launch delays, that suffered, And I wondered whether that means that then that is the only car or new BEV that come in 2024 because you obviously said one BEV per year. In other words, are there knock-on effects for other products on that platform? And then lastly, with regards to your waterfall chart in terms of how you get from the current profitability to the 8% to 10% target range. I noticed that the price mix headwind was relatively minor. And given the macro pressures that are already on consumers and obviously sort of pretty aggressive competitive environment now. Can you just elaborate a little bit on your thinking behind that slightly small headwind, if I may say?

Okay. So I'm going to start with Francesco then Jim, then Johan.

I can start With competitors with the EX30, we have a huge market opportunity. We are going to be in most of the markets, the first car in the segment. There is not a true small premium SUV segment, fully electric segment. Across many markets, we will be the first one to eat the segment and to capture the market opportunity. So competitors varies , as Akhil mentioned before, between combustion engine phase-out products, most of the time and also new non-premium electric cars. So we are going to be the first one. It's a huge opportunity for us.

For me, I think, Francesco says it all. This white space that we're going to part upon drive into will allow customers to get a premium experience. They're allowed to get 3 different choices in terms of powertrains. You get 2 different battery chemistries, 2 different sizes, 2 different options in your powertrain, 5 different choices of color, 4 different interior choices. All of that is going to be combined in a price point of around $36,000. It's pretty compelling, and we think we'll actually expand that part of the market. Second point was really, I don't sought of I forget.

It was not going to effect on EX90 on any other...

Yes. So no, we will stay true to our promises on that . So the EX90 we already launched, so we count that as a launch. We launched that last year. We'll be launching another car in that same space, the same year next year. So -- yes, you can expect one brand new launch, as we had said previously, every year for the next 4, 5 years.

So no change to that plan?

Not change of plan.

Yes. And on the question on the margins. I think it's important to remember, we are coming out now quite turbulent We now see improved situation when it comes to supply chain, semiconductors, et cetera, we see raw material prices coming down. And then, of course, we will also see, over time, a more balanced situation when it comes to supply and demand and mixes of cars. And the illustration that you referred to more show that we see that those effects will balance out over time, which means that we might see -- yes, so that's pretty much the answer to why that is not a bigger effect in the graph. .

Okay. Great. Thank you. Then we'd like to move to the next question, which is from Agnieszka from Nordea.

I have just one question, and it's about your strategy for China. Looking at your BEV volumes in China, we can see that you're a bit underpenetrated in that segment. So could you please tell us what hopes do you have for the EX30 when it comes to the Chinese market? And maybe also referred to your ambitions for EX90?

Bjorn?

Yes. No, it's a very good question. I think the whole evolution of the electrified market in China, the dynamics is quite different towards the Western world. First one, the consumer perception in the Western world -- an old car is a combustion car, a contemporary car is a fully electric car. That's the demarcation line between traditional and contemporary. In China, the demarcation line is not if you fully electric, if it is -- if you're fully smart-ified meaning good infotainment, voice steering, ADAS sanctions, those type of features are extremely important for the Chinese consumers for many different reasons. And you have, over the last few years, seen an onslaught of a lot of new players that are Tesla by Chinese in different forms of fashion, either funded by Internet guys with good equity funding or all the big OEMs have launched one or 2 more separate brands to go after this opportunity. So right now, you have a lot of quite good cars, very smart-ified cars they are all fighting to get volumes because without volume, they will not be sustainable. So the pricing is quite tough. You have -- the BEVs are selling at a discount were comparable ICE cars in that market right now as tha0t goes on. So we, as Volvo, we have a long-term play to be fully electric, to be premium. So what we're doing now, we're not going as aggressively on volumes as quickly as we are in Europe and the U.S. But we are, of course, using EX90 to position as a smart-ified premium electric brand. And I think it's more important to position us right as contemporary premium then to go after volumes aggressively. That will hurt margins, and it's not the right path forward. But I think this China discussion is something we will come back to, but we have a good plan for how we win in China, but it's slightly longer time frame.

And China is a big market. So there's certainly enough customers for us that really care about the Volvo brand. They have been maybe with Volvo customers. They care about Scandinavian design, which differentiates us in that market. They care about our true authentic towards sustainability, which, again, I think, to some extent, differentiates us in that market. So it's a buildup towards...

Safety as well.

No, it's really important to say, actually, because we don't need to change our brand in China. We just need to make sure it comes across in China. A lot of those new start-ups are actually trying to come close to some of the values that Volvo really is. So nothing wrong with our brands.

Just more Volvo. Okay did that answer your question? Or did you have a follow-up? . But then -- with that being said, I think it's a good time now for us to wrap up. No more questions online that I can see. Thank you so much to everybody for joining us today. Your participation means a lot to us. Thank you also to my colleagues and speakers. Thank you so much for your insights. I'd now like to hand over to Jim to share with us some closing final remarks.

So first of all, thank you. Thanks to everyone for taking the time to join us here today and for the people who have been on stage to help bring alive untill this story that is the small but mighty EX30. I'd also like to thank our partners with whom this car simply would not have been possible. And I would like to thank our employees. Not only the employees who worked tirelessly in this car to bring it alive over the last few years, but I would like to take this opportunity publicly to thank everybody within Volvo Cars, all of our employees. All of share in this collective success today in this achievement. . I'm proud to be part of such a fantastic team at Volvo Cars, and I'm inspired by what we're doing for the future and where we're taking our company together. The EX30 is a big deal. It's a big deal for industry. It is a big deal for our company, and it's a big deal for our customers. A small SUV thing doing big Volvo stuff. Connected directly with our core values of safety, of sustainability and of human-centric technology. This allows us to continue our collective efforts to be a pioneer and the protection of people and planet. And with that, I'll hand back to Olivia to close us out.

Thank you. Fantastic. So thank you so much for participating again today. If you have any further questions at all, please don't hesitate to contact our Investor Relations team or alternatively visit our website for more details or access for today's presentations online. Thank you so much, and have a great day.