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

Good morning and a very, very warm welcome to Volvo cars Strategy Update for 2026. For those of you in the room, thank you very much for making it to our Stockholm studio and thank you, everybody watching us online live right now. My name is Ron, and I have the privilege of facilitating the day today. As you can see from the video, it's been pretty intense some months for Volvo since the last time we all met. We, of course, launched the new EX 60 now on the roads. We also, earlier this week, launched the long-range plug-in hybrid versions of our best-selling XC60 and the XC90. So for those of you in the room, Hopefully, you've got a chance to familiarize yourself with the technology in the car, the XC60 is right behind you. If not, please take the opportunity after this event is finished. When we met in November about 10 months ago, we unveiled the new strategic direction for Volvo cars. What we will do today is to show the demonstrable steps that we are taking as a company to execute and deliver on that strategy. To do that, I'm joined this morning by most of our executive management team members sitting in the front row, led by our Chief Executive, Hakan Samuelsson. And I saw many of you who are interacting with them, but they will be available during the break and also during the lunch session for you to talk to them. So what have we planned for the day? Let's have a very quick look at the agenda that we have for you. Upfront, Hakan will come and he'll set the scene for the day with his introductory remarks and how we are responding to what is clearly a very challenging external environment. Hakan will be followed by Erik Severinson, Commercial Officer, and he will talk about how we are growing and intend to grow through a focus on electrification. Erik will be followed by our Chief Technology Officer, Alexander Petrofski, and as the world regionalizes how are we regionalizing our product to better tailor to customer needs. He'll share some of the details on the road map on how that will look. Alexander will be followed by Michael Fleiss and Francesca Gamboni to talk about how building a much stronger Volvo Cars through synergies, strategic synergies with Geely. What will that really look like they'll come to you with some details. We'll take a quick shot break, 15 minutes or so. But when we return, Erik comes back. It's not just about selling great premium cars. It's also about creating a great premium customer journey. What does that look like? What does that mean for Volvo? Erik will have some answers. Erik will be followed by our CFO, Fredrik, He'll talk about he'll tie all the presentations together with a clear outlook of what does that really mean financially and what we are capable of as a company. Thomas Ingenlath will be next and he will talk about -- he will give us a little bit of a peek as to what the new design could look like in an electrified era. That's not all. When those presentations are down, Hakan will bring them to close. And tie this day together in one flow. But we are not done after that because we will then break into a Q&A session. So I will request you all that to keep your questions ready, you will have a break, so take the opportunity to ask a couple of questions during then, but we'll have a quite time set aside where we'll take the questions more formally where I will be joined by the whole of EMT to answer your questions. Hope that sounds like a plan for the day. So without further ado, maybe I hand it to you, Hakan.

So thank you, Ron, and welcome all of you. Really glad to see so the big interest in our company. And that's Ron said was the purpose with this. A year ago, we met, I think, with a lot of you were here as well and outlined a bit the strategy forward in a very down-to-earth way. And today, we want to come back to you really and show you more in detail what is Volvo's answer to the situation we are into us. So we all know the industry is in a very challenging time. And I think now it's really -- if you don't have an answer how you will come through this challenging time you will have a big problem. And we believe and we have a very good answer, and we will show you today and how this challenging time is also a sort of opportunity for a flexible, fast-moving smaller company to be stronger and come out stronger through this. So that is the purpose of today. And our management team people are here. I think Ron already presented the people that will talk. Some faces are new, so maybe a special welcome. So Alexander Petrowsky, Head of R&D, new CTO. And then also Thomas is, as always, when there is -- I've seen in papers, the new old CEO of Volvos,maybe you are the new all the design head of Volvo. And then we are very glad that you are back because you gave Volvo identity last time when we made Volvo premium brand. And now you are going to help us give Volvo a face and identity as we are going to be the leading electric premium brand. So Francesca, well known, going to talk about sourcing and synergies, you were last time as well. And the Erik commercial head, Michael Fleiss also last time and last but not least, Fredrik. So I'm very glad to have the support of you telling this story to the people here. What has happened? This is almost now not needed anymore because there was a very nice video, you did this much better than me. But Anyhow, you saw on the product side, of course, we are very proud of the new EX60, not just the new car. It is the first car on an all-new platform, really a born electric new platform, new architecture with new technology, selling body, mega costing. So it's not just a car, a new EX60, it's a foundation for an all-electric future, is really important. And then Tuesday this week, we also launched how are we going to tackle the fact that some customers are not ready immediately go all electric. And then we have to come now with second-generation plug-in hybrid. So we upgraded our best seller PHEVs into the next-generation bigger emotors longer range. So that they will be perceived much more as an electric car. That's really what we mean with second generation, but they have a backup engine to take away all words about range. So that's also really important bridge solutions. And then as important as our 3 new architecture is an investment in an all new central compute architecture because in the future, if we don't go to a central approach, we will not have the speed that our customers require. It's really difficult to put in new customer features in 100 bought-in boxes from suppliers. It's obvious. So we need to take control of the software development and have a computing platform. And that is our system center compute, which now has become -- have gotten a name Hugin core. And that is the trademark of our central compute, which was quite a process quite some problematic times. Maybe you have heard about it. And there are only 2 type of car companies, the ones who have come through and are into the new world and the ones who still have to that in the future. And if I can choose, I would prefer to have taken the pain and be in the new world, and that's where we are. What did we? Yes. Also, Gemini assistant is quite good. As we are the lead customers for Google have been for many years. We are launching this first. So it's an AI-based conversational type of voice control. And then when you use it, you will understand why it is something totally new. So earlier, we heard a lot, I don't understand or with some stupid answers. Now you can talk to the car as normal person, maybe not as intelligent as a person, but very close. Performance we delivered cost savings because we said last time in very turbulent times, what do we do? We have to concentrate on what we control. So let's work with the cost always the right thing to do. So we took out SEK 8 billion in '25, and then we set the target to take out another SEK 5 million -- the figures are right from top of my head. And we said all during quarter 2 that we have done that already after 2 quarters quite good. And then we, of course, didn't relax. So we have set new targets. So we will come back to all of this when we talk about the quarter 3 here in October. But we are continuing with cost reductions. And also as we want to be the fastest transformer into electrification, we have the highest share in the business. So more than half of our cars are today electrified. And all of this, of course, would not be good if we could not do it also within reasonable frames. That's why I'm so happy that we are finally down on normal levels when it comes to CapEx and investments. Regionalization has also started. We have implemented a governance model, strengthening our leadership in the EMT Americas and also China is represented in relevant matters. We have also been granted authorization regarding the ICTS and what is that you asked. That is in the special requirements for connected vehicles that the Americans have introduced, which is then, of course, securing that there is no leakage of information, customer data to Chinese companies and the Chinese people. And there, we have introduced absolute firewall and then we are very glad to have from the commerce department in America gotten this approval. And last but not least, also Europe, countries. I believe we are going to be in the race with China and U.S., I think we need to forget our national nostalgic thoughts and understand we cannot have 28 countries. We, as a company, cannot have 28 CEOs, 28 CFOs, 28 Head of HR and so on. We need to go forward and towards a much more united Europe, and we are doing that with 5 subregions. So I was a bit longer than the video, but anyhow. Let's go into the challenging future already last time. This is not what especially coming towards Volvo. This is the whole industry. And if the industry does not have a good answer to this they will have a problem, and that's the purpose again of today. Climate. I mean, we need to reduce the usage of fossil fuel is good for the climate. And now lately, we will also remember -- okay, there are probably also other reasons for that. it's the wallet of the customers and it's also the supply of oil is definitely not secured or Hormuz strait what you knew what that was until 6 months ago. But we were reminded, maybe it's not a good idea to burn so much oil. Electrification is the answer, of course, for the transport sector. Globalization, building one car and try to sell it everywhere and build it in one factory, high scale, could in the textbook be a good idea. It worked some years ago. It's not going to work in the future. We need to be much come closer to our customers, listen to them, cars have to be more different. We're going to talk about that. And if we thought we had a tough competition in the car industry before, okay, just wait. It will be even tougher. And I talked to some guys from South America some days ago, and they are seeing now Chinese competition coming in, very low prices, and they have a high capacity of building cars in China. And when you cannot sell them domestically, what do you think they will do. They will, of course, export. The Americans have closed the door. So the rest of us have to take it. And South America has very low tariffs, so they are first on the list. Hypercompetition will come. And you can, of course, complain about that. The only correct answer is, of course, to do something about it, utilize our strengths and use what for others is a threat is for us a possibility that is our connection to, of course, China's second largest car company, Geely. So a big strength for us to use that to make Volvo stronger. So we have 4 unique areas, and that's really what we will talk about today, making Volvo stronger and also which are unique because I think if you listen to this today, you will realize not so easy to copy and maybe not what others are trying to do right now. The first one is we will have an absolutely regionalized program. We will need new cars to really have this. Then we need a lot of cars. And we will roll out 13 cars. I wouldn't say that, that in itself is not so impressing. Maybe you will just think, okay, can they afford that and do they really need that. But to have absolute optimal program for China, 6 new -- all new cars, 100% Volvo. 7 new cars, all new cars for the West, U.S. and also 100% Volvo, of course, and having the right mix of electrification, all electric, but also for the ones who are still reluctant to all electric second-generation hybrids. We will have absolutely, as we always have said, the all electric products ready by 2030. They are included in these 30 new cars. But we have added also some bridge solutions for those slow movers, which is not only people, it's also regions where there is no infrastructure. And then we will have the right car to grow with electrification because that's our formula for growth. It's not trying to be better in horsepowers and fuel consumption or discounting even worse. We will grow by being faster in electrification. All of this would not be possible if we could not develop the 13 cars, having the right electric cars if we didn't do it together with Geely. So there will be shared mechanical platforms. All cars in China will be based on that. A couple of the ones in Europe will also be based on a shared mechanical multi-fuel platform. But the electric cars will be SPA3 based developed in Sweden. And of course, material costs, Francesca will talk about also great advantages with the connection with Geely. And -- this is a lot about cars, technology and production, but also looking at what the customers are expecting from us. The whole business is really a wholesale business. It's wholesaling of hardware cars. And then the total product is created out in the distribution network. You add financing solutions, you add maintenance contract, you add winter tire solution and so on. We believe in the future to have economy of scale, we need a Volvo product for that. And we need to answer the 3 fundamental questions that the industry have problems answering today when customers are asking what's included in the price, not so easy to understand. it's as easy as understanding a telephone contract from an operator. Not very transparent. What is the price? -- also not very transparent, come in and let's talk more or less. Three, when can I get it? Also not so convincing answer from the industry. So we will come closer to the customer, offer the total product, and we will be answering what's included, what's the price, when can I get it? Erik will talk about that. So I think that's an area where really Volvo can lead the way. We can learn a lot from China on products and cost cutting, but coming closer to the customer building our brand, that is strength we have in Europe, which we should use building a stronger Volvo. And Thomas will also give you an idea how we can build a car that looks like a Volvo, not look like everybody else. So I hired Toyota once when I was in America, and then you know you have to go in and pay in advance. This was a petrol one -- and then the guy in the cashier asked, where is your car over there. Are you the one next to the Volvo Guy said, that's good. He did not say you have the Toyota, he said, you are the one next to the Volvo. And that, I think, is what we need to secure also for the future. Volvo should look like a Volvo and everybody should recognize it. Let's see what you think after listening to to Thomas. Okay. All of this, if we use this unique 4 success factors, we do it very disciplined and fast in the next 4, 5 years. We will come out not as when we did this last time. You remember, we started around 2014 and roll out Spa cars, the C40. It was 9 cars, I think. And with those 9 all new cars, we made Volvo a premium brand. We have that as ambition. I think we did that also. a lot of people realize that today. So this time, we roll out the new 13 cars, totally regionalized with the Volvo identity and sold to the customers in a new way. Our ambition is to be the leading premium car brand in the future. And that car brand is, of course, electric. So let's see if you can believe that when you have listened to the details from our presenter that now I put the hurdle very high for you to convince the people about that. But I will come back and try to summarize this afterwards. But let's now jump into our success factors and start with Erik who talk about electrification. So please, Erik.

Good. Erik Severinson, I'm Chief Commercial Officer. Hakan talked about and we've talked for a long time about growth by -- through electrification. And I want to stop there and say, is that then the right strategy? Are we now on the right path as an industry and as a company to focus on this. So let's look at some numbers. If you look at the recent development in the automotive industry around electrification, the trend has gotten quite clear in just the last 6 months. What this graph shows, first of all, what sticks out is China. China has between 2017 and first half of 2026, become the most electrified or the highest total volume of electric cars in the world. And then remember that China is 34 million cars. The size of the Chinese car market is as big as the European and American car market together. And if I include cars with plug-in hybrids, cars with the cord. The total share of cars with the cord in China is above 67%. And China is going electric as a speed that we did not see come happening. And it happens even at an amplified speed in the last 6 months. Then I called out Germany in this graph because in what was in December Hakan I was in Germany and everyone talked about electro drama, which means that we're saying that electrification is not happening. That's where you see the the down trend there on the German graph. And then fuel prices at the pump has gone up in Germany now to almost EUR 2.7, EUR 2.8 per liter. And now they don't talk about Electro drama, they talk about paying at the pump, and electrification has gone up to over fully electric, 25%. Actually, in the last weeks, we're seeing almost 50% of all new cars sold in Germany are fully electric. So Germany is going electric. And Germany is massively important for the European car market. But if electrification was such a difficult thing, more customers would have already shifted back. And that's not happening. So yes, electrification is the path to growth. The only thing growing is cars with the cord. And then you ask, how good is Volvo? Are we then managing to capitalize on and this graph shows the blue bar is our current market share in Europe, around 2.3%. To the right, you have our top 3 premium German brands in Europe, I guess who they are. They're around 5% market share. And in the middle there, you have our current Volvo Bev market share in the BEV segment. Already today, we're around -- almost twice as high market share on electrics in Europe than we ever is on the total share. And that is before the XC60. If I extrapolate the XC60 with the retail orders, we're well above 5%. On the BEV market in Europe right now with what we're selling, including XC60 Volvo has roughly the same market share as the premium German, which we never ever have been close to in the past. So we are managing to capitalize on this trend right now. And as Europe electrifies, this is an engine to growth. But it's all about product. And Alex and Michael will talk more about that later, and Thomas will show the design. And when you get the product right, that's where you really, really can find the growth. And that's why we're so happy to see the commercial success of the EX60 because basically 3 problems that you need to solve for an electric car buyer. I need to come roughly as far as I come with my car I have today. I need to charge roughly as fast as my average stop is today on the long-distance drive, and I cannot pay much more than I'm paying for the car today. With the EX60, we managed to tackle all those 3. And we were blown away, I would almost say, about the response from the customers. We are doing this in the largest BEV segment. And actually, since we saw these 3 questions, we're now selling the EX60 at a higher profitability than the XE60. So it's not only about growth, it's also about profitable growth. And if I look at the retail order intake over the last 6 months, this is the most successful launch for Volvo Cars, in the modern times at least. So product is super important. The EX60 is the proof point of that. And it's not only us, I think we already showed this in the Finn, but we have also received fantastic quotes, of course, on the car, putting it right up there where it should be together with the other German premium competition on fully electric. But then what about U.S. and what about areas where electrification goes slower. We, on Tuesday, communicated the upgraded hybrid models, which we Håkan talked about a bit. It's not only about giving them a bigger battery. It's also about giving them a stronger engine. It's giving them a new autopilot or improved autopilot, a new phase in terms of the XE60. And these are products that we know our customers really appreciate. So by doing this, we can also address those markets where electrification goes fast slower. And if I take the example now of the cars launched on Tuesday, we take an XC60 there to the top, had previously a range of around 80 kilometers. Now it's over 200 kilometers, which means it performs like an electric car. To the bottom there, we try to make an example, you can basically do your normal commute on one charge, charge once per week. If you want to go on a long trip over the weekend, you do that without worrying around charging infrastructure. And then during the week, you have a full electric car when you're driving the city driving as well. And we're also seeing that customers are appreciating the way an electric car performs. If you -- they're not -- what do you like about electric car? You like your acceleration. You like the fact that it's silent. You like the fact that I have a very responsive drive in many markets. So I think the combination of a really long electric range where you don't have to charge as much and a strong electric motor in a hybrid package is very appealing to those geographies where electrification goes slower, for example, U.S. So we think this is an example on how we have a more pragmatic approach. It's not only us. We got one quote I like it's only 2 days in, but maybe -- the best thing about the PHEV or plug-in hybrid is that it makes the step to a fully electric Volvo feel smaller. If you see what I mean, the fact that actually I learned to charge, for example, that I learned to appreciate that electric is -- is a better way to drive a car, that is a very important part of the PE. So we are also seeing that it's a great conversion engine to get people into full electrics. So let me summarize a bit on our strategy. Yes, the world is electrifying. That's clear. It's the only thing growing in the world's automotive industry are cars with a cord. BEVs are increasing our market share. We see that proof point already now in the Europe example. You will continue to see that as we launch these new cars. EX60 validates our growth strategy, but also shows the fact that you can make money on BEVs. And we have to have a pragmatic approach where the world is going a little bit slower into full electrification. So I think that underpins our strategy and proves that we're on the right track. And with that, Alexander, I think it's good for you to come and talk about products.

Good morning, everybody. Good to see you. I'm Alexander Petrofski. I'm the new CTO of Volvo Cars. I'm a few weeks in the job, and I stand here and talk about technology. But I carry with me 25 years' worth of automotive experience, whereof more than 20 in Volvo Cars, spent working with our products, working with technology and a number of other things in various leadership positions. So the world, we touched upon that earlier. The world is decoupling fast, and we intend to adapt much faster than competition. And what I will take you through is our new product road map. which you will see is enabled by the regionalization strategy, which is the foundation of what we are talking about today. So we plan to offer a fully regionalized portfolio by 2030 and all of this within affordable frames, and that's important. Hakan touched upon it earlier. And also, we will be delivering this at times when competitors are perhaps scaling down. Now would be the time for us to make that product push. So let's talk a little bit about the details of that. We believe that we are uniquely positioned to turn regionalization, which is happening very fast into a competitive advantage versus our peers. And we aim to do that with 13 completely new Volvos. In the Western markets, U.S. and Europe and beyond, we aim to develop and launch 7 new cars, completing our current BEV offer with more battery electric vehicles and also a third generation of hybrids. All of this will be underpinned by our Western tech stack and our industry-leading software-defined vehicle architecture, the HuginCore. In China, we will be developing and launching 6 all-new Volvos. And we will be able to do that by leveraging Geely synergies with unique access to industry-leading technology. All of these cars, we will deliver with true China speed. And later, Francesca and Michael will talk about the efficiencies we gain in terms of scale and in terms of cost through this collaboration. So Volvo is not a startup. Volvo is a 100-year-old company, a brand recognized for safety innovations and for Scandinavian design. And now we intend to leverage 2 discrete tech stacks, an Eastern and a Western, local production and all of this to drive growth. As I'm a product guy, more than half of my career, I worked with our products, I counter assist to talk a little bit about what kept us busy during 2026. And it's -- we touched upon some of it already quite a lot. Erik already went through the -- our long-range hybrids. -- on the XE60 as well as on the XC90. We also made a refresh to our 2 most sold models currently, XC60 as well as XC40/EX40. All those updates are very noticeable. Either you can feel them when you drive or you see them, so you can basically touch them. What is less noticeable is all of the value and all of the upgrades we made on the software side. This software, we have delivered to these new or refreshed products, but also to an existing fleet of cars, all cars that are out there. And we delivered this via over-the-air updates. And you're all aware of probably how over-the-air updates works and maybe you experienced in your existing car. It's common practice in the automotive industry. But we have been doing over-the-air updates, full car downloads since 2020 for our full fleet. So Volvo was essentially pioneering this amongst the incumbents. Two examples, our new Volvo Car UX delivered to 2.5 million customers earlier this year in 85 countries. I don't know. I hope many of you drive Volvo. So you may have received it via over-the-air updates. I hope you like it. It's a refreshed graphics, of course, but it's also a snapppier system, and it's also a better interaction model through that new UX. My other favorite mentioned by Hakan as well, Gemini, Google Gemini, an AI assistant allowing for natural conversations in your car. So you can talk about your car and ask queries, how does this feature work, for instance, what happened to my car or you can also talk about virtually anything else. And I'm a commuter, so I spend 2 hours every day in my car. And Google Gemini has not only improved the value of all that time in my car, but also to give a personal example, it also helps my daughters riding along with me to practice for exams and practice for homework. So really, really useful. All of these values we can deliver to cars with existing conventional distributed electrical architectures. But the real game changer is what we launched with the EX60. This is technology that allows us to deliver value far beyond infotainment and connectivity. One example is in the EX60 as this is our first car, where we improved charging speed. We reduced charging speed by more than 10% before even having delivered a single car to a customer. So taking charging from impressive 18 minutes to 16 minutes. And you can expect to see much more of that type of customer value coming from Volvo stretching, as I mentioned then, beyond infotainment content. Let's talk a little bit about software-defined vehicles and how that changes the industry. And as Hakan said, we firmly believe that there are 2 kinds of OEMs. It is the ones that master this technology and have developed the software-defined architecture. And it is the OEMs that either are in process and we can have -- we can testify about that it is a process or will have to do it at one point in time. We have completed the biggest technology transformation in our 100-year old history. And I would like to be a little bit technical about it, so bear with me. And I will start with safety. For safety, we will use multimodal sensing, all of the sensing in the interior of the car, together with all of the sensing on the exterior of the car and improve real-world safety in ways we were not possible -- we couldn't possibly do before. Massive amounts of data that needs to be processed by our high-performance compute, our high-performance onboard compute through our partnership with NVIDIA using our Orin core computers, designed to manage these massive amounts of data, such as camera feed, as you would imagine, quite resource intensive. We also use connectivity to feed -- to continuously feed data from the car to our data centers. And we do this to train our AI models to further improve our cars and draw learnings from all of the vehicles that are out there. HuginCore is also a zonal electrical architecture. And what that means is that we essentially divide the car into a number of zones. Each zone is controlled via a zone controller. And the zone controller which is essentially a computer, which provides edge computing to the mechatronic systems that are present in that particular zone. And what that means is you may have a brake system, for instance, located somewhere in the car or you may have a door that needs a certain control. That computing is provided by the zone controller. And those zone controllers also allows us to take out electronic control units at large in the car, which essentially leads to a cheaper architecture. As Volvo, of course, our architecture provides redundant power supply. And why is that important? Because no matter what the car is exposed to, be it a crash event or something else, the car needs to be powered so that you can call for emergency rescue service or simply that you're able to open the doors of the vehicle. All of these technologies is typically what is described as a software-defined vehicle architecture present in the car. But what is more important and what has taken us time and what will take everybody time is what we refer to as the software factory. The software factory is all of the people, 3,000 software engineers. It's processes, it's systems, it's data centers, it's automated testing, automated testing, all conducted in our industry-leading software test center that allows us to, from one single software master, deploy software and new functionality to all cars out there. And the complexity and the individuality of each car is managed almost solely through configurations. And that's a big, big difference versus conventional. So from a Volvo perspective, we will now harvest the benefits of more than half a decade worth of development. Earlier this year, we were recognized by Standard & Poor's for being the only Western and the only incumbent OEM reaching the highest classification, L5. And we're very proud of this, but it probably says nothing to you, fully understandable. But what we are equally proud of is the customer value we can deliver with this architecture. So the customer will get a safer car, a more intelligent car and a car that continuously updates and improves. So the car will be fantastic when delivered from the plant, but it will improve over time, and it will peak sometime during its life cycle. We also believe that we can provide new customer value. And obviously, we will also continuously upgrade and improve the quality of the vehicle. And this will strengthen residual values of EVs. And those are conversations we're currently having with our RV setters, and we're getting really, really good response on that. And that's also a valuable factor. For you as investors, it is obviously perhaps even more important what this type of technology will deliver for our business. What would be the values for Volvo Cars. And through this high degree of software commonality, we can improve scalability and manage the complexity of the vehicle through software. It will allow us to develop cars faster, and it will lower our investment per car. Last week, I'm new to the company. I'm now leading engineering. So I ask a lot of questions. That's part of my onboarding process, I guess. So I looked into what is the commonality in code base. So I asked my team to compare the commonality in code base between the EX60, which is our first SPA 3-based vehicle and the next vehicle, which is currently in pipeline. And the number is quite astonishing. More than 95% of the code is identical across those vehicles. And as I said, the differences is managed almost solely through configurations. We will also be able to improve loyalty and improve the relationships with our customers that are in our ecosystem and that uses the software-defined vehicles from Volvo. And this will lead to improved top line and with reduced costs, we see an increased profitability, as shared by Erik for the EX60. So now that we have demonstrated the strong technology underpinning our cars, I would like to talk us through our regional plans. And starting with the U.S., we looked at a graph indicating that electrification has slowed down somewhat in the U.S., heavily impacted by tariffs and regulations and obviously also through customer sentiment. However, there is an established quite sizable BEV D SUV segment. And for us, that's an opportunity because, as Erik spoke about earlier, customers that drive electric typically do not turn back to driving ICE cars. So that's an opportunity for us. Other markets, there will be -- sorry, other states where, for instance, electrification is slow or nonexistent, we believe there will be a continued opportunity for selling hybrids. As we all know, preference for large cars remain in the U.S. And all our cars in the U.S. will be underpinned by our Western tech stack, powered by HuginCore, and we will be providing multi-propulsion option on this new tech stack. So you can expect to see a third-generation hybrid in the U.S. Francesca will also talk us through more about that more cars will be produced locally in the U.S., which will also allow us to increase our addressable market. Europe, more mature from an electrification perspective, 20% of the market is BEV, driven by Northern Europe, Central Europe, slower in Southern Europe as well as in Eastern Europe. Same technology stack, our Western stack, multiple propulsion options, meaning that an individual car will be offered with a BEV propulsion, a PHEV propulsion and a HEV propulsion, all powered by HuginCore. And there, simply put because there will still be an opportunity to continue selling hybrids. And of course, we want to reach scale with our technology. In addition to that, we will be obviously broadening our BEV portfolio. So we will be launching new cars, and that's part of the product push of 7 new models. China. There we are. China, world's largest car market and the world's largest BEV market, around 40% of all new car sales is BEV. Obviously, an opportunity for us. But the opportunity, which is unique to Volvo Cars is that we will be able to leverage Geely. And those of you who visited China, you know that the speed of tech adoption is very, very high, but the technology needs to be right. It will -- it cannot be any technology. And this is where we have unique access. So through Geely synergies, we will be able to provide the markets with advanced data systems and digital cockpits that are highly competitive in China. We will also be launching multiple propulsion options. You're probably already aware that we are offering an XC70 in China as a hybrid. We will continue to launch hybrids side-by-side with battery electric vehicles. And all of this, as I mentioned before, will be delivered with true China speed. In China, we target less than 2 years' worth of development time from program start until the vehicle hits the market. So to try to sum up, we are in the process of our largest ever product push, and all of these products will be tailored for our regions. We are uniquely positioned by capitalizing on investments already completed and our leadership in software-defined vehicles. In addition to that, we have unique access to synergies within the group and an eastern tech stack. And all of this will allow us to broaden our portfolio, launch new fantastic technology and grow our market share, 13 new Volvos. And now I would like to hand over to Michael, who will talk us through Geely synergies and how that will help us.

Thank you, Alex. Good morning and also very much welcome from my side to you, and thanks for joining this event. I'm Michael, and I'm responsible for product and strategy. That's strange, I thought Alex's product, but I'm defining the product and Alex is executing them. So very welcome into the team, Alex. We will have a great work together. I talk today about our progress in building a strong above cars with rely synergies. So I'll give you an update on what I talked about last time. First of all, we have 2 areas where we look for synergies, commercial and technology. On the commercial side, we are looking into revenue and reach growth. And on the technical side, we are working on improving our cost base by either reducing our investments or reducing our cost base. Earlier this month, we have launched our new relationship with Lincoln Co. Volvo Cars will be the exclusive importer for Lincoln cars in Europe. This is a really good synergy and I explained to you why 3 areas. First, we will unlock revenue growth in a new segment, lower price bond, new market segment we will increase our opportunity to sell these cars to our fleet customers and to our lease customers. Secondly, we increased our volume in the ecosystem. So more efficiency for our sales channels, more efficiency in our logistics by shipping cars and products. And third, but last but not least, -- we have an additional business opportunity for our dealer network. So more traffic, showroom traffic and more sales opportunity. So a really good opportunity for us to participate on this brand and our showroom. But on the other side, for Lincoln Co, a fantastic opportunity to use our dealer network. And this also makes our dealer network more resilient. So more showroom traffic, more sales, but also bigger fleet of cars to maintain. So it stabilizes our dealer network in Europe. But talking about technology then. So last year, I talked about our regionalization and our strive to find synergies. Here, a little explanation of how it looks like. We have our 3 regions: U.S., Europe and China. And on the top, you see 1 thing, which is, for sure, not discussable and not changing, the 4 pillars of Volvo Cars success, the brand, the design, the quality and the safety. And these are common around the globe every customer driving a Volvo around the globe will field these things. Below that, you have the technology, and we have a Western technology and the China technology. And this is separate because there's legal requirements. There's different ADAS solutions in different markets. There's a different in-car app landscape, so we need to tailor for that. That's why we separate that. But then we have the big black part underneath, and this is a global parts and technology. And this is the area where we will find our synergies. For all regions, it applies the same. We strive for local supply chain, and we produce where we sell. With this strategy, we have the cars fit for U.S. right for Europe and tailored for China. Now a little bit of education. What is our architecture about, what is the platform? So we have 4 areas in our architecture. First 1 is a mechanical platform. This is a mechanical frame underpinning the car, the aluminum and steel parts. Here, we are striving for maximum commonality, either in the platform world or by parts. Then we have the big part of mechatronic modules, mechanical systems, which are guided by simple software. This is, for example, an e-powertrain a battery, a climate system or brake system. All of these products are called mechatronic modules. Here, we are striving for commonality around the globe. Huge opportunity to improve our cost levels and share investments. These mechatronic modules will be brain agnostic because the next thing is electronic architecture. We call it the brain of the car, the HuginCore, which Alex talked about. And we have in China, our Geely electric architecture. So the mechatronic modules are independent from this architecture, and we can just build it on top. By that, we can build Western cars and China cars with the same mechatronic modules, but with the brains, which are needed for the region. And then last but not least, our beautiful top heads. This is really where we define the Volvo, the interior and the exterior of the cars. And here, we find synergies by looking into common parts in between the car lines. So for all of these areas, we are working with procurement collaborations and contract manufacturing. This is a new word and Francesco will talk more about that. But all of that creates great opportunities. Okay. The automotive industry is in danger. Financial crisis, certain new cars for Volvo. How does that go together? Our competition is slowing down. We are speeding up, and we can do that. because of this, and I will explain. So you see here in dark blue, this is technology we are already having based on the SPAs redevelopment, the big investment we are behind. And the light blue is where we look for synergies with our colleagues in the Geely Group. White is the new investment. And it's probably the proportion of these bars where you can see how much investment it is for our 13 new cars. So on the Western world, we use HuginCore. For the mechatronic modules and mechanical platforms, we use SPA3, but also if we look into further cost optimization for SPA3 by using common parts. And for the hybrids, we are looking into the same thing, but also sharing platforms. In China, we are relying on the mechanical platforms of Geely Group using the Geely brain, but all of them have unique top ads. The customer will not feel, which platform is in the car. The customer feels through the top head, what the car is, and it's a Volvo, no matter where you have it. And this helps us then to create these 13 new cars in China, 7 in the Western world. And just to let you know, the 2 cars, the 2 plug and hybrid cars Erik talked about. I'm not part of that, that was investment. Now we talk about unit cost. And here, I gave you an example of how the average cost structure of our cars looks like. Starting with the mechanical architecture, 15% of the cost is in that technology. And we are looking for up to 80% of synergies. Mechatronic modules, the most expensive part of our cars. 50% of the cost base, 60% open synergies. Electric architecture, 10% of the cost base of the car and only 10% synergies as this is regional and also stopped by legislation. And on the top head, what makes the car Volvo 25%. And here, we see 30% of commonality. And then to the right, you see what that equates to. We already have currently 10% of our parts are common, and we go up to over 30% in 2030. You can imagine what kind of leverage we have here to reduce our cost base and to improve our investment. So in a nutshell, 4 areas. First, we have executed the first commercial synergy with Lincoln Co a win-win situation for Volvo and for Lincoln Co. For China-specific cars, we can create all of these new cars in a very, very affordable way because we use the power of the second biggest automotive manufacturer in China, producing our cars still look like a Volvo. In the Western world, we rely heavily on our great SPA3 technology, and we are using synergy platforms where needed. And last but not least, we have a fantastic opportunity to find synergies by using common parts. And up to 2030, we will have over 30% of common parts. With that, I hand over to my colleague, Francesca, and he will talk more about how we do that.

So good morning. I'm Francesca Gamboni, responsible for procurement and supply chain. So Michael has talked about how we can create value by deeper collaboration, and I will explain you how we translate this in cost competitiveness with our unique differentiator in the industry, which is the Geely synergies. But let's go through. So again, the logic is very simple. So as you know, and as variable cost, we have 3 components, so of variable costs, mainly. So you have manufacturing costs, you have logistic cost and you have material cost. So when you share platforms, you can -- you obviously get industrial scale. If you -- when you share platforms and you share parts. And obviously, industrial scale, what does it mean? It means that you can share industrial capacity. And if you can share industrial capacity, obviously, you can have lower manufacturing cost because you are sharing, you're utilizing better your plans. If you're sharing your plans, you also share your logistic means because, of course, you put the parts in the same trucks in the same trains in the same ships. So of course, you get lower logistic costs. If you share common parts, obviously, you get more buying power. You get more buying power, and we'll talk about this when you share the same suppliers. But of course, if you're also buying the same parts, you get even more buying power. And again, this impacts the material cost. And this is exactly what I'm going to talk about. And what I'm going to talk about is how we are embedding this in the way we work. And this is going to be structural and not at call, so we're going to have a cost competitiveness. Again, a unique differentiator within the industry. Cost competitiveness at birth of our cars and not at call. So it's not going to be something that we say, oh, let's see if we have some opportunities every time. So let's start with our industrial. Let me drive you through our industrial strategy. Our industrial strategy is built around 3 main principles. So the first principle is 1 platform per plant. What does it mean? Why do we want 1 platform per plant? When we talk about 1 platform per plant, it means reducing complexity. And as you know, complexity entitles when you have complexity, you have time, you have waste and you have, at the end, higher manufacturing cost. So 1 platform per plant will bring a reduction in complexity, as you see from 50% to 30% in our plants. So a significant a significant complexity reduction. The second pillar of -- our second principle of our industrial strategy is regional optimization. Why does this impact our cost? So of course, regional optimization means, first of all, customer proximity. So we are going to build where we sell, which -- what does it bring to the customer? It brings that we're going to be more agile, flexible reduced lead time, that's great from a customer proximity perspective. But why also does it reduce cost? -- it reduces cost because obviously, you're not transporting big animals like cars all around the globe. And obviously, you reduce your logistic costs. And if you think about logistic cost, often logistic cost is higher than the manufacturing cost in the industry, which people normally forget this, but this is an important component. So again, regionalization also not only create customer proximity, but also reduces cost. And then again, last but not least, when we share a platform -- and that's the point that Michael was mentioning also, when we share platforms, we can also share industrial capacity by contract manufacturing. So again, we can utilize our plans, and we can fill our plants with contract manufacturing and again, reduce the manufacturing cost. So again, the rule of the game is we want to have 1 platform, which basically is focused factories. And when we talk about focused factories, it means also build in the plants, what the consumer wants in that specific region. So 1 platform per plant regional optimization and contract manufacturing. As you see on the right, you see that, for example, in the U.S. we will build large car mainly because this is what the consumer wants. In Europe, it's more about small and medium cars, -- and again, in China, it's about large and medium cars. So that's basically what we mean with focus factories. And when you have focus factories, as you know, you have a lower cost base. If we go a specific -- if we talk about contract manufacturing, I would just like to double-click on Gent. Because, Gent, it's going to be Gent and Chengdu are going to be our 2 plants where we are aiming at sharing platforms and which -- where we are aiming at having contract manufacturing. The other 5 plants will be plants where we have Volvo specific platforms. But these 2 plants are going to be shared the platform plans. A deep dive and a double-click on the Gent plant. As you might have read probably in the news this first 6 months, we had big task force that we have built with the Belgian government to make Gent competitive. Why? Because if you want to have contract manufacturing and attract let's say, players to come in your plants, you must be competitive from a cost perspective because the world knows that Europe is loaded with empty plants. So we're not the only ones needing or wanting to utilize our plans. So of course, the first prerequisite was to become competitive. In order to become competitive, so the Gent plant had a couple of important competitive factors, which is the location because it's in the center of Europe it's near to the sea. So it has a big part. So that were good factors. But it had also some disadvantages in terms of labor and in terms of other costs that was affecting the total cost. As you can see, on the graph on the right, you see the Gent as it was in 2025. So not competitive compared to the lowest benchmark in Europe. So what we have benchmarked and of course, not even compared to China. So then what did we do at the beginning of the year? We went -- we teamed up with the Belgian government, and we said, okay, what do we need to do to bring the cost of gent to what we call the future gent, but now it's the actual gent to bring the cost of Gent at the same level of the best plant in Europe. So in a nutshell, so we worked through the first 6 months of the year. And in June, we finally had our road map and our list of actions, which we have agreed together and which we are now implementing. The actions are basically on 3 areas. So one area is obviously labor and energy, how do you reduce labor and energy cost by automation and so that is basically by automation and also by making it more flexible, energy and labor. The second and reducing, obviously, the need -- the second one is obviously vertical integration. So what are the suppliers that we can bring, let's say, vertically integrate the technologies, so to reduce the overall cost. And the third one is ecosystem. So what are the technologies that we can bring closer in the area, which you can imagine for the Belgian government is also very important because they're attracting innovation and technology. So of course, for them, it's extremely important. And for us, it affects the cost. So good news, we have a plan, we have a road map, and we are in line with implementation of this plan. And as we have a cost that now is competitive, obviously, we have a queue of brands who want to put their volumes in our plant because it's -- simply because it's competitive. So that was just a deep dive on contract manufacturing. If we talk about procurement, so 1 year ago, I spoke to you about about sharing suppliers. So I was here talking about our plan of sharing suppliers. Now the procurement, obviously, the procurement goes in 3 steps. So the synergies, how we harvest the synergy goes in 3 steps. So of course, the first step is, as I said 1 year ago, is to share suppliers. And I can say good news, we have 80% of the suppliers, which are common suppliers together with Geely, and we are heading to 90%. So tick the box, we have done that. Now the second step, once you share suppliers and you go together hand-in-hand to the suppliers, it will be even nicer to buy the same stuff. So obviously, the second step is, and now we buy the same stuff. So we go -- we share parts. We have common parts. And this is what Michael explained. Our target is to get 30% commonality, and we are today at 10% commonality. When we do -- obviously, when we define the commonality, we also work on our variants, and we try to optimize our variants. As an example, for example, it's just an example on the to see the opportunity, how big the opportunity it is. So on the compressor side, for example, we have 23 variants, and we have seen that we can cut in these variants, and this would give us a reduction of 40% in terms of cost of that specific commodity. So that, again, is an example of the potential that there is behind the different commodities. Of course, not all of them have 40% or this opportunity is just an example in the coming years. And of course, again, 3 steps, common suppliers, so allows us to have procurement leverage. We go to the common suppliers with common parts. And then the last step, it will also be a good idea that we have one phase so that we go only one and represents. And this gives even a higher strength. And that's the third step of how we are going to approach the synergies. This is -- this gives the greater commercial leverage. This is something we are working on, aligning the organizations in China is already a reality. So we have common organizations and going -- working. In Europe, we are looking into aligning the organization in order to have one face to the supplier. Again, the 3 steps, one phase to buy the same stuff. And that's the maximum of synergies that you can have. And this is a unique in the industry because nobody else has this within the industry. What does it give? Well, what will it give? As you see on the left is what I said, so nothing new, the common parts, the 30% that we are going in 2030 and the shared suppliers that we are going at 90%. What is it going to give? It's going to give 5% cost reduction. So our material cost will cost 5% additional -- 5% less in the coming years. You say, why 5%? Because it's linked to the 30% reduction because the reduction, basically, the potential when we have a common part is more around the 20%. And of course, on a 30%, let's say, common parts, this is basically what we harvest. But again, it's not only this because what we spoke before, we also have manufacturing cost reduction, as I explained before with the contract manufacturing and our strategy, the one platform regionalization, manufacturing and logistics. We have less investments, again, in our plants, if you share the platform, by definition, you share also the cost of the investment. And finally, everything I said we are doing, I spoke about the direct material, but obviously, we're doing it also in the indirect spend, which means the marketing, the digital, I mean, meaning computers or whatever else you buy, transport, you can also buy it together. So not only use it together the transport, but also buying it together. So that's an additional savings. So just to summarize, so what I said and just what are the advantages that we are having, unique advantages. Again, shared platforms create industrial scale. Industrial scale creates a competitive footprint. If we have a competitive footprint, it means we have lower investment per car, and we have lower manufacturing cost per car. I think there's no doubt about that and lower logistic costs, obviously, there's no doubt about that. If we look at the common part, so common part creates procurement scale. Procurement scale creates greater commercial leverage. And if we have greater commercial leverage, we have lower BOM cost and lower indirect cost. Again, I think I have -- I hope I have explained this clearly. But of course, there is another advantage, which I haven't spoken about, which is a byproduct, which is also great for us, especially in these turbulent times as we are and as we foresee being is that when you have scale in procurement, you also can increase resilience. What does it mean? It mean that fundamentally, I can, for example, afford now to do double sourcing and protect myself instead of only one source because you can't afford to do double sourcing when your volumes are too small because, again, you can't afford to have double tooling. You can't afford to have 2 players and the volumes are too small now with big scale. A second thing, which is not to neglect is the access to innovation. When we share suppliers, it means that we have access to the supplier panel of a Chinese player, which means that we have access to all an ecosystem to choose from of technology and innovation that we can choose from and we can obviously access. And that's a very big technology, let's say, advantage that we have as opposed to others. So again, putting together the panel, it means also choosing -- and also, obviously, Geely has access to all our panel, which is mainly European panel, which obviously is an advantage for both. And then we choose the best. We choose the best and we work and we go forward with the best. This is an advantage, again, that we have, others don't have, and it's not to neglect. So -- and with this, I hope I have convinced you on how we're going to tackle the cost, the variable cost. And I think we need a break. So I will leave it to Ron.