BMW Vz Aktie

Ladies and gentlemen, welcome back to our quarterly earnings call. Oliver Zipse and Walter Mertl are also back in the room with me. The line will be open shortly for your questions. The operator will give you some technical instructions now.

[Operator Instructions] Our first question is from Patrick Hummel from UBS.

Of course, since I'm the first questioner here, I'd like to thank Oliver and say, over the past 10 years, I think you and your team had plenty of potential opportunities to take wrong decisions in a very volatile and rapidly evolving environment with a lot of surprises, obviously. And probably that includes some potential distractions from the daily mood of financial markets, which can flip to the extremes very quickly, but you kept the ship on course. And I think the result today is BMW stands here as a very robust, as a very flexible company and I think that is your legacy. So thank you very much for all the great dialogue and the challenges in our discussions over the last 7 years and all the best.

Oliver, if I just may start with you. I think if I understood correctly and the translation was maybe not exactly clear, you said in the media call early on that you expect the U.S. to look at export credits, which, of course, could be quite beneficiary to BMW. So I'm wondering, is your optimism in this regard based on the discussions you have locally with Governor -- on Governor level, let's say, or are there any signs also from Washington that this is the way forward? Because I think that's a pretty bold statement. We're not hearing that from anybody else. So I'm keen to understand better. And also what it potentially means for your industrial footprint decisions thinking here and scenarios.

And my second question goes to Walter. Walter, you now chose a slightly more cautious wording on the China outlook. And frankly, to many in the financial community, that didn't really come as a surprise. We've always been a bit more cautious than you've been. I'm just wondering, you kept the guidance for the group, obviously unchanged. Is there any offset to the softer China view in your guide? Or are we just gravitating towards the lower end? And more specifically, you also alluded to positive momentum building in the coming quarters in the media call. Can you just remind us what the biggest EBT drivers that would sequentially get better will be? Is it Neue Klasse volumes? Is it further cost downs? Or what else is it?

Good. Thank you very much. Walter, we start with Oliver.

Patrick, thank you for your kind words. I always enjoyed discussing. And if there is a little time lag between recognizing what is right and what we do, that's okay with us. To your questions, export credits, we tried to explain on governmental level, but also on governance level in the United States, the industrial logic, why it's good for the United States. Because in our industry, the volumes per unit are too small to build every car in every country at the specific volumes. So this sharing of volumes and distributing it around the world helps the United States and it helps Europe. If you don't do that, volumes will shrink and not grow. And if you look at the United States, their main political movement is growth and the second political movement is jobs in the United States.

And this export credit program helps the United States and Europe to do both. And we explained that logic and they followed us. So it's not the question whether this is helpful for governments. It's more a matter how do I put it in, how do we execute it? So for me, it's only a matter of execution, and then it's a matter of timing. The most important ingredient is the first step in Brussels to implement the term battery deal, and then we can do that second step. And we are not the only company. There are other -- in other industry, other competitors who also importers and exporters at the same time. And I think to put export on the focus is the next logical step in the United States. And therefore, I think there's a very good chance to implement it.

Thank you very much, Oliver. Walter, please.

Patrick, yes, the wording was also explicitly chosen in March already, as we discussed. And so it is now in Q1. And I think we outperformed the market. We presented that one. Now with respect to EBT drivers in the Q2, Q3, Q4, well, there is, of course, a, space in corridors; b, we are still moving on with our cost measures as usual, with our programs. Don't forget that the R&D and the CapEx ratios are heading towards the strategic corridors, less than 5%. So we mentioned that already in March. I just want to underpin this topic. And of course, versus the actuals, our Neue Klasse is coming into place. Don't forget, in a lot of European countries, we have margin parity already apple with apple compared. And that, of course, contributes too. So I think there is still room for improvements.

Our next question is from Jose Asumendi from JPMorgan.

Jose from JPMorgan. Oliver, my very best wishes for the years ahead. Congratulations on the work done, setting the base for a very robust BMW. Thank you for all the collaboration in the past years.

Two questions, please. Oliver, you were at the Beijing show. You met many of your competitors. Can you maybe share your overall impressions of how BMW is set up to compete in China? And from your extensive discussions, was there anything that stood out for you in terms of partnership, collaboration, supplier competitiveness, et cetera, where you think this could be an opportunity for the firm for the coming years?

Question two. Walter, also great to see you as well. And just maybe can you help us map a little bit the headwinds and tailwinds in terms of fixed cost headwinds and maybe cost opportunities, which you mentioned in your speech and how that evolves between Q2 and Q4 of this year?

Thank you very much. We start again with Oliver.

Jose, when you walked over the Beijing Auto Show and compared what the BMW Group was representing and what the rest of the show was representing by and large, there was a very focused presentation of most of the players in that industry. The majority was electric. The majority was the same segment of cars, very few sedans, a lot of SAVs of larger size, focus on autonomous driving, it's all the same. It was almost a monoculture. And of course, markets worldwide, they are not monolithic. They are widespread. They are differentiated by drivetrains. They are differentiated by size. They're differentiated by price segments.

And then you looked at the BMW Group stand. There was a large portion of MINI with all drivetrains available. Then you look at the BMW stand, you saw individualization. You saw all drivetrains. You saw V8s. You saw, of course, the Neue Klasse, fully electric. You saw smaller cars. You saw the new 7 Series. You saw our focus on hydrogen. So the full breadth of a premium player, you saw that. And that differentiates BMW. The variety, which represents the variety of market segments. And you don't have to look on a global scale. You see that in China as well. The markets are much more wider than you would see on that fair. And that is a worrying thing. If the whole industry thinks they can concentrate only on one segment, larger cars, SAVs, electric, then something is wrong. On the other hand, this makes us more resilient, antifragile to offer the whole breadth.

Let's just look at the first 3 months. EV sales in China were plummeting, not only decreasing, they were plummeting. And what happened, our ICE sales went up at the same minute. So especially China shows what it means to be a full segmenter, to be technology open and at the end, also to be a global industry. That was proof that our strategy is right.

Thank you very much, Oliver. And now, Walter.

Jose, the headwinds we had in quarter 1 year-on-year, I think I mentioned, majority is about exchange rate and commodities headwind, which we mentioned already in Q3 last year and also in March. And the majority will be in the first half year of an impact of a high 3 million-digit number. And you saw already the first EUR 400 million, roughly EUR 400 million. And you will also see an impact in this direction in Q2 and then slowing down in Q3, Q4. That is clear based on the exchange rate development you saw last year already lasting now this year in the first half year.

With respect to the tariffs, now of course, Q1, there was not the extra U.S. tariff happening. So that was the hit now. Now if you remember rightly, Q2 to Q4, we had higher numbers on the tariff burden than now in Q1, which is 1.25%, it was 2% and 1.75% levels. So we are assuming, as you saw in our guidance of 1.25 percentage burden. That is less than full year burden of 1.5% last year. So that should be rather positive.

And not to forget, on the R&D side, I also mentioned, expenses have been down by 12%, whilst depreciation has been up as well as our capitalization ratio came down from 34% to 31%, which we also announced already in March. So that is, of course, also under IFRS a burden. And we compensated that in Q1. So we are still moving on, having, of course, more depreciation to come with every new start of production to come. Of course, that will be going forward, this discussion.

But with respect to tailwind, as we mentioned, 60% more order income on BEVs, especially with the iX3, which is high order income levels. That will be positive in the quarters to come whenever we deliver these cars. And these are not preorders. These have been orders booked and in some cases, this is already with some money on top of that. So that is positive. And with respect to this, as you know, we are not giving quarterly guidance. But with that in mind, we confirmed the guidance we have given in March. Thank you, Jose.

Our next question is from Tim Rokossa from Deutsche Bank.

Before I come to my questions, a lot of people on the call here asked me to say a few words to you, Oliver, other than just thank you. And I think obviously very, very happy to do that.

During the last earnings call, you said, 'Tim, I can't remember a single call without you. It almost feels like you're part of the BMW inventory by now.' Now obviously, I had to smile and I thought that I'm hopefully the good type of inventory, the Neue Klasse one and not something that sits for too long on your lot. But if we leave those jokes aside, I think that line captures pretty well something that's very real, like the consistency and the trust that we now built over so many years. And clearly, no one can say that you didn't pick a very interesting time to be the CEO of BMW. You've been on a very, very long journey with us together. We had COVID. We had the semi crisis. We had a big industry transformation. We have China, we have tariffs and now you leave with the Neue Klasse. And throughout all of this, we had big strategic debates. It's fair to say that we didn't always agree on everything. There were plenty of tough questions from all of us, but you were always very direct, was always very constructive and very respectful. And by the way, I can also only return this about always being present. It's absolutely not a given for a CEO to be on every single earnings call quarter after quarter, showing up, engaging, taking the questions heads on, and you did that very consistently, and that really sets an industry standard, Oliver.

And you generally always look very actively for this dialogue. At the very beginning of your time as CEO, you invited me to your headquarters. You showed me around. Back then, you were still with Nicolas. We already debated the very big themes. And I also remember this VDA automotive supplier conference 2 years ago where we were on stage back to back. And that captures something that's very consistent throughout your role as CEO. You always sought the dialogue with all sorts of stakeholders, not only when there was a concrete discussion on the table that had to be clarified, but also on the bigger questions, the strategic vision for the sector, the direction of this industry that is so enormously important for Germany and Europe. And what really set you apart in all of these discussions, Oliver, that's pretty clear is you never felt like you had to swim the mainstream. You focused always on what you believe was right, and you did have the conviction to stick with this.

And a very concrete example that I obviously remember from a capital market perspective is especially dedicated EV architecture. Many of us, including myself also for a while, argued that, that is inevitable. You were very clear that you saw that differently and the slogan flexibility is key, pretty much became associated with you among all of us. It was for you about protecting options, adapting customers, not really telling them what they are supposed to do, but giving them what they want to buy. And on behalf of the entire investor community, therefore, I would really like to thank you, Oliver, for this great discussion that we had over so many years, and we obviously wish you all the very best for whatever comes next.

And then I have two questions. The first one is...

Tim, can I respond shortly. You are one of the few, but there are some more who are still on the calls in the last 7 years, and you have been around for more than a decade, I think. So what you just said is very interesting because you are a follower of this industry, this complete developments, architecture, technologies, players, new players, old players. And that is very interesting that someone who has been observing the industry tries to summarize what's happening in this industry. And that's quite interesting because normally, you only look at a quarterly thing.

So I would like to thank you for following us and learning together. We had to sharpen our arguments to withstand your questions. So this was also very helpful for us, a good learning experience. And I would like to return the thank you. That was superbly interesting, not only in the calls, but also when you were visiting us, when we were discussing outside of the official events. So thank you for your support and your understanding. Now you can ask your questions. Tim?

Sorry, the host muted me again. I have two questions. Oliver, the first one is then for you. Now that you leave the seat, you hand it over, you accomplished a lot of things. Out of all the issues that this industry is still battling with, which one do you think from a capital market perspective, we should really focus on and really worry about and which one is perhaps really overdone and overplayed?

And then secondly, Walter to you, a bit in the direction that some of my fellow peers were already trying to get to. I know you don't guide on a quarter, but look, we have no Chinese New Year in Q2. You might book the IEEPA refund. We have more selling days in general. Is it fair to arrive at the conclusion that Q2 should generally be stronger than Q1, bar any major external events?

Thank you very much, Tim. We start with Oliver and then Walter. Oliver, please.

Thank you for your question. If you would look in the years or 5 years from now, in the year 2035, you would look back. I still think there's too much focus from the media, but also from the capital markets on individual players, individual technologies, singular events. In 5 years' time, the players who will still survive, they have the competence to system integrate, to bring all technologies into a car, who build cars who have a long-term quality, who are not falling apart after 1 or 2 years, who will still in service after 5 years. It's a completely different game which is happening there, and who are able to differentiate between a singular hype and an overall business model.

If you watch the industry today, actually, there are too much bets going on, too much bets on a singular technology that might happen, but this cannot be endured. So much money is lost in this industry on bets. So system integrators who are able to follow regulation and at the end, have still a business model on high-quality products, that's the key of everything. And in 5 years from now, to follow CO2 regulations specifically and remain a profitable business will be more or less the key to everything.

Thank you very much, Oliver. Walter, please.

Tim, yes, I'm not guiding quarters, but just for years. But of course, you have been absolutely right. There should be a potential once we finally clarified everything with the customs authorities that we book the IEEPA. Otherwise, of course, not. And the impact is, as we stated in March, not the biggest one. But tariffs was higher in Q2 last year. That's also a fact. But who knows what's going on, right? We have a clear understanding what we expect as we described in our guidance already. And don't forget the seasonality, of course. Usually, we have higher fixed costs after Q1. So that's the ordinary bit. So don't overstress this. But of course, we are working on, as you know us, we execute. Thank you, Tim.

Our next question is from Stephen Reitman from Bernstein.

And also, again, I want to add also just to wish all the best to Oliver. Again, I've got even longer perspective on BMW than even Tim. And BMW has always stand for integrity, which I think has been very much we've seen under Oliver Zipse -- under your stewardship. And I think in particular, one other element that was not discussed was during the whole crisis, the German auto industry faced in 2015 with Dieselgate and beyond, how well BMW actually fared in all of that with actually really avoiding that basically with -- they have actually had a technology that actually was completely compliant. And I think it shows something about the BMW and then what goes on in this company.

On to my questions, I think particularly as you leave the company and with Neue Klasse now really on its big rollout phase, just sort of what's your assessment or what is the assessment you're finding from your Chinese dealers and what you're hearing as well about how they feel about Neue Klasse in the China market? We've seen, obviously, the -- we know that BMW still stands for quality. It's a very aspirational brand. But until now, obviously, the problem for legacy carmakers has been not being able to keep pace with some of the technology changes that have come from the Chinese brands. How is the feeling now to which extent that Neue Klasse has bridged that gap and is a missing part of the puzzle?

Thank you very much. Walter, please .

Hello, Stephen. Well, we also had in China a brand summit and brand night together with the dealers, and that was received very, very well, especially that they see and feel that we are on eye level with the Chinese OEM locally, and that's the positive outlook. They have been also already very, very positively surprised by the 3 Series, which we also presented in China, and that makes everything positive. Not to forget that we help the dealer network in performing better. That is more or less finished. Our dealer rightsizing exercise, of course, this is moving on always. But all these things together, how you treat the dealer network, how we organize ourselves, plus the products to come is a positive spirit on their side, what we feel. So that makes it positive for us. Thank you.

Our next question is from Philippe Houchois from Jefferies. .

And of course, Oliver, thank you very much for your leadership and your availability over the years.

I've got two questions. The first one is, I think you've been, as a group, very steadfast in saying 8% to 10% margin long term. And those targets were given at the time when China was an excess profit market, there were no tariffs. And I guess I'm just trying to understand what new levers you've been able to identify to actually compensate for that and stick to that 8%, 10% margin corridor.

And specifically, I think at some point, there was a discussion that Neue Klasse production might lead to 10% to 15% production cost per unit. And I was just wondering if that's what you already observed already in Debrecen where you started producing the Neue Klasse.

And my second question is on this FCA provision that you've taken up on the U.K. I think at some point, Walter, you may have mentioned that you thought the basis of that investigation a bit flawed and that you would fight it. At the same time, today, you're giving in. Do you still think that there's a road map where this is a wrong investigation when we'll potentially see a reversal of that provision?

Thank you very much, Philippe. Walter?

Philippe, well, the 8% to 10% is not unreachable. Don't forget that it is 3 x 1 EBT point we have to achieve. One is on the performance side. We love our BMW ecosystem, and we can do even better. Not to forget Alpina to come, which is also positive for the contribution side. Not to forget that the Gen 6 Neue Klasse has a much better contribution margin than the Gen 5, as we all know for a while. So that's the performance 1 EBT point.

Second one is, of course, we are doing our homework, working on the material cost side, on the manufacturing cost side, on the warranty cost side. If you have a better quality, you have to provision less warranty costs, which is also contributable to the EBT margin, not to forget and of course, also logistic costs, et cetera, to be optimized with our global footprint. So that's the second EBT point.

The third EBT point is also homework, is our fixed cost levels, which we are also going -- coming down, as we mentioned already, step by step in '26 and '27 and also in '28. Not to forget one choker, I would call it, which we never forget to mention. This is the PPA, purchase price allocation depreciation, which is always accounted for 1.1, 1.2 EBT points. This is only lasting until mid- '28. So you will have already a half year effect in '28 and a full effect in '29. So with these elements to come, there is a chance to come back to 8% to 10%.

Of course, we are not naive. There is always something coming around the next corner, whether there are tariffs or other crisis points, and we mitigate as they come along. And we have plans already to do so. So I think that's for your first question. And the production cost comes along with it, right? So we use new technique and the latest procedures. And of course, that is also contributing, too.

Now your second question on the FCA provision, you hit a nerve on my side, honestly, because we and I personally had intense work together with this authority with FCA. We did a lot of really many, many amendment proposals we made between October, the draft version and our submission then in December. We contributed to, in my eyes, positively to come to a proper and proportionate solution for all parties. But I'm really disappointed that this was not reflected. Some bits and bobs have been reflected, but hardly anything. And that is really disappointing.

So I continue to regard the scheme as unfair and disproportionate. And was there legal grounds for challenge, I have to say, without the participation of a meaningful cohort of other U.K. lenders, especially all banks, and I have also an understanding about their situation, such an undertaking by the group of BMW would not be in the best interest of its shareholders, I think, particularly considering the level of ongoing uncertainty pursuing a legal challenge would create. And I think we have to consider that, and that's the reason why we're not challenging it because we can't do that without the banks and without more than just ourselves. That is my position on FCA.

Our next question is from Stuart Pearson from Oxcap Analytics.

So one detailed one and one just on China. Just maybe for, Walter, on the bridge, the other positive EUR 400 million. I just wonder if you can just shed a little bit more color what the moving parts were in there. In particular, I think you mentioned warranties being a tailwind there, but I can see, obviously, there's an outflow there, I guess, adjusting for that on the cash flow side. So just wonder what's going on warranties, whether that is -- I heard you mentioned it on the longer-term outlook as well, whether that's a source of potential tailwinds that can continue in the next couple of years. Generally, it's been a headwind for the industry. So I just wonder what's going on there.

And then the second question, I mean, going back to China, and Oliver, I want to hear what you're saying in terms of the breadth of product offer that BMW has in China. But in some ways, I guess, having to maintain that breadth of product range for the global market might be costing BMW and the European peers in China and that it's not been focused on the pure EV segment. And I just wonder, particularly, you mentioned those large SUVs that dominated in China, the Chinese moving to the premium segment. And I guess that is going to be a monumental challenge for a segment where it probably is a disproportionate part of your profitability in China. So how confident are you, I guess, of the X5 and above, that footprint in China in the next couple of years as we see the Chinese move into that. And of course, Mercedes localizes the GLE as well.

Okay. Thank you very much, Stuart. Walter, please.

Stuart, well, let's start with the first question to my bridge on other positions of this EUR 400 million. So my manufacturing cost side is a low 3-digit positive element. My warranty side is also a low 3-digit positive element. Don't forget, we didn't have to add any extra provisions for than previous years, maybe. But of course, the tariff burden is also in this other section. And we had last year only EU, China burden with our MINI electric cars, but nothing on the U.S. side, whilst now I'm having it. So now I'm experiencing 1.25% hit, whilst last year was lower. So this is a negative position on it.

But with respect to the Neue Klasse in China, coming to your next question, and the footprint, we are bringing this confidently into the market. As I mentioned beforehand, we had this brand summit and the brand night, the spirit of the dealers is very positive. They see our tech levels coming with the Neue Klasse on high level. So the product is on the point. And with respect to your question on the X5 footprint, if you have a look, even now in Q1, we sold more X5 with a better transaction price this year than in Q1 '25, not to forget. So we did a lot of product enhancements, but also could achieve a better transaction price level.

Now also a new X5 is coming in China in '27. And also that one, we have presented already to the dealers, the dealer network. And they also confirm this is on the point because it also has all techniques of the Neue Klasse, also the Momenta's tech. And not to forget, different than others, we also provide the X5 with all powertrains in China. So we have the offer, which is relevant. And all the other ones, I don't think that we just have to compare ourselves with. As you ask for GLE, it's about all Chinese OEMs. And I think we don't have to hide for. That's also what we got as a feedback from all dealers. And that makes me confidently looking into the future also for China.

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

It's Horst here. I have got a few left. The first one is related to your volume/price/mix line in Q1. So we have seen BEV sales, minus 20% in Q1. I could imagine that triggered positive mix while it seems that the price turned down quite a bit in Q1. Is that now a general trend that the pricing gets tougher in the premium market? And what happens if the BEV sales start to increase again with the ramp-up of the Neue Klasse? I know there are a lot of moving parts because, as you said, you also launched the Alpina and you launched the X5 and there are a lot of new models coming in H2, which compensate maybe higher BEV mix. But what should we think about this equation, price versus product mix going forward?

Then a follow-up to this midterm target question from Philippe, a question that I also always ask myself. I think a general problem in the premium market is that the volumes do not really grow anymore for the established players. You do well, you take even market share by having flat sales, but nevertheless, the top line is not growing. So therefore, my question is, if you want to achieve these midterm targets, this requires the assumption that the volume growth picks up again and that the price/mix impact gets less negative than it is right now. So that's question number two.

And then the last small question that I have is, when we look at the high oil price, in Europe, we see this BEV increase, which might be related to that. In the U.S., it seems we do not have any impact. But beyond BEVs, you see in the U.S. already that we have got a higher PHEV demand or that the people switch from large engines to small engines. So what's the role of fuel efficiency in the purchase decision?

Good. Thank you very much, Horst Schneider. The question will be answered by Oliver.

Yes. Thank you, Horst, for your question. I would like to have a twofold answer. The first one is very concrete. If you look a little bit deeper on our BEV global sales, then 2 things happen at the same time. They're going down in the United States and China quite rapidly, but they're almost fully compensated by higher ICE sales. Europe is exactly the other way. They're going up. They're above previous year level, and that is even before the ramp-up of the Neue Klasse. So you have to look a little bit deeper. It's all happening exactly at the same time.

In China, it's mainly caused by the reduction of the subsidies for BEV cars. And that puts also a different view on what is happening in China because only roughly 30% of the whole market is BEV. The rest is NEVs. It's not BEVs. So it's cars with plug-in hybrids, it's cars with range extenders and that will be a continuing trend. And what worries us that Europe thinks they can overhaul or accelerate on the BEV sales while China is putting the brakes on it. So that is a question mark where we think. But of course, our strategy to be flexible on the technology will help us there.

More on the strategic side, what is premium in the future? Premium of the future is product quality, specifically long-term product quality. It does not make sense to push cars in the market who lose their resale value after 2 or 3 years' time. This is not premium. So it's not feature count in a new car, it's what is the residual value after 1, 2, 3 or even 5 years. I'm not even talking about historic cars of 15 or 20 years. That is premium.

The second thing is premium system integration. It's not feature count. We discussed what we saw in Beijing, again, feature count over future count. That's not the point. How does that all play together? How does it fit? And is it for someone who drives the car, not while it's standing, but while it's driving, does it fulfill the function they are supposed to?

And the third one is safety. And I think that becomes one of the foremost criteria for premium of the future, safety, no casualties, no risks. Absolute promises to a brand who promises to be premium means no casualties, no risk in driving the car. And I think that will define premium of the future, and I think we are well underway to fulfill that promise. Thank you.

Our next question is from Christian Frenes from Goldman Sachs. .

And Oliver, I'd like to also extend my congratulations and best wishes for your tenure. I think the decision-making has been superb with hindsight and your focus on flexibility as well as profitability has been appreciated by everyone.

I have two questions. First of all, maybe zooming in on China, specifically the Neue Klasse ramp. My question would be, how are you thinking about pricing for the Neue Klasse in China? And to what extent can you comment on that? And also when do you anticipate setting that?

And my second question is just on the FinCo. Just I noticed that penetration rate jumped to 51.6% from 43%. So I'm just wondering, Walter, if you could give us some more color on maybe geographically, some of the dynamics we're seeing there that have caused that.

Thank you very much, Christian. Walter, please. .

Christian, well, on the Neue Klasse ramp-up, I think you know that we are going to start the iX3 in Q4. And then in '27, we are going to move on with the 3 Series, et cetera. As we mentioned also in February, the pricing will be always determined just before the start of sales, not when we present things. And I think that is most relevant as we all are aware of the market dynamics in China. So we will let you know. And believe me, we do know what we want to do.

On the FinCo side, the penetration ratio uplift, of course, we shouldn't forget about that in the first half year, China had hardly any penetration ratio because of these commissions paid by other banks. Now end of June, as we remember, the commission structure has changed as the party has reminded some banks. And hence, the commissions came down to the right level, which we also always fought for. And with that, our penetration ratio in the second half year of '25 elevated. And now we are just running on the same level again. And that, in combination, ends up with this 51% in Q1.

And the young used car is also included in our new cars, not to forget. You find a note also that we changed this definition because young used cars on our side is also classified as new. It is not an effect on the total business because it was always a total business, whether we have new, young used cars or used cars, BMW, MINIs, et cetera. So that is included always. It's just about the percentage ratio, and that is accounting for 2.5% to 3%, more or less that level.

Our final question is from Henning Cosman from Barclays.

So a couple of clarifications and maybe one first to Walter again on this other cost savings. Thanks for telling us already what was in there in Q1. I'm a little bit more interested in what that's going to look like going forward. I appreciate you don't want to guide on quarters, but if you could perhaps say if we're talking about EUR 1 billion or so in cost savings for the year as a whole. You obviously had an excess of EUR 2 billion last year, and it's quite a big swing factor. So would be great to understand what sort of ballpark you're managing towards for the full year.

To the clarifications, can I just clarify that -- Oliver, really interesting, your comments about the offset mechanism with respect to U.S. tariffs. But can I just clarify that, that's not included in your unchanged 125 basis points full year tariff assumption?

And then finally, Walter, I think all your statements sound really constructive. Could I perhaps get you to say that if I paraphrase and put this all together, you're kind of telling us you're going to be in the top half of the Automotive EBT margin guidance range for the full year. Oliver, all the best.

Thank you very much. So the question will be answered fully by Walter.

Henning, so with respect to other costs, I'm clearly not giving quarterly definitions, and we always have to have in mind the year-on-year position. We clearly stated already in March that we still move on, on the cost savings side on all the elements you can see. And you see that nominal in my reports, and you will also see that going forward. But I'm not giving you any indication about the amount.

With respect to your tariff question, offset mechanism is not included in my 1.25%. Clearly not. And with respect of your direction of my corridor, I think the corridor is still a corridor, and that is between 4% and 6%. And we concluded the quarter 1 with 5.0% and all the rest is to come. We confirmed our guidance of 4% to 6%. I think there is nothing more to say. Thank you, Henning.

Thank you very much for your last words. So ladies and gentlemen, thank you very much. Thank you for joining us. Bye-bye and [Foreign Language] from Munich.

Dear colleagues, ladies and gentlemen. Welcome back to the second part of our group quarterly call. We will now continue in German. So we took a short break. And now we are very happy to answer your questions. As always, we will give you some technical advice and then we start with the first question.

[Operator Instructions]

Here's our first question. It comes from Christina Amann from Thomson Reuters.

First of all, I would like to thank you for taking your time, and I wish you all the best for your time after BMW. Today, I'm interested in tariffs. Trump announced to have 25% for imports of cars. Are you optimistic that this will not be implemented. And if yes, why?

Second question, the Middle East, two things. You pointed out that it has an effect on sales. Can you put a figure to it? And then the second aspect. What does the war in Iran mean for spare parts deliveries. Is there a risk?

Okay. Thank you very much, Mr. Amann. First, Mr. Zipse and then Walter Mertl. Oliver, you have the floor.

Good morning, Mr. Amann. Thank you very much for being here today as also in the past years. Tariffs. You know how this has to be read. It's not yet an executive order. For now, it's just a threat. And it doesn't come unexpectedly because the [ turn very ] wheel from last summer. So it was agreed to say we reduce the import duties from 27.5% to 15%. And in return, the European Union will reduce the tariffs from 10% to 0%. Now the American side implemented this for the past 8 months, not the European Union. Now they pointed out that it might take some time because it's the process in parliament, but it takes quite some time. Now for us, this is not surprising. This threat is not surprising. But I would like to point out, it hasn't yet been implemented. I'd say the probability is high that the accelerated implementation and introduction of the original tariff is just a matter of days or weeks. This is not just our hope but I think anything else would damage both sides.

Now we are very optimistic. We still think it's just a threat in order to implement the deal.

Thank you, Oliver. Walter, you have the floor concerning Middle East.

Mr. Amann. Now your questions, impact on the volume. While, it's limited, as I said in my presentation. As for the rest, just as predicted in our forecast, we think it's temporary. And we will have a solution soon. It affects not just us, but the entire world economy. So we assume there will soon be a solution and you partly can see an effect in Q1.

Next question comes from Christoph [indiscernible] from the DPA.

Good morning, ladies and gentlemen. I would like to wish you all the best as well. My question is relatively simple. Now if I do the math, then 1.25 percentage points, this is EUR 300 million in Q1. Is that correct? Is my calculation correct? Or did I make a mistake?

Thank you very much for this mathematical question. I have to hand over to the CFO because he's perfect in mathematics. Walter Mertl?

Thank you very much. Well, your calculation is correct. We only give quarter points, not specific figures, but always in quarter points, it's around EUR 300 million. This is sales in the automotive industry, that's correct.

The next question comes from Felix Stippler from Handelsblatt.

Yes, Mr. Zipse also from me all the best for the future. I have a question concerning the business model. The margins with you and with other premium manufacturers are low, sales are more or less stable. For how long can this go on in the industry or how do you manage the turnaround?

Thank you very much, Mr. Stippler, Mr. Zipse, you have the floor.

Good morning, Mr. Stippler. Thank you for your question. I would like to make two comprehensive remarks. Our business model is not -- does not come overnight. We have to see it in its entirety. BMW has a specific setup. The demands of a worldwide stable individual mobile market is fulfilled. It's stable. It has even grown since the pandemic. It's now stable, but as such, it's very dynamic in changes. But all in all, it's very stable. It's one of the most stable industries worldwide. So if there is demand for vehicles, what can we do if the individual components are also very dynamic. Well, you know us, we have a very resilient -- we even call it anti-fragile strategy. We are open to technologies. All of the powertrains are implemented everywhere at any point in time. We don't know exactly what the sales will be in a year x in the future. And it's easy to understand because in order to do this, you have to have a lot of capabilities, and we are capable. We also benefit from it strongly.

Here are 4 examples where we see an acute effect. First, the Chinese market, as you know, is decreasing slightly. We think that it will stabilize again in the course of the year. But in Europe, it goes up. We have a global approach to counterbalance this. If you are not working globally, you always depend on regions. We don't.

Second example, since the tariffs were risen to 15% last summer in the United States, we had the x5 increase by 10,000 units, almost all of those ICEs. At the same time, the purchases in Europe increased. So we were able to react right away because we did have an increase in one powertrain, one vehicle, one market.

Third example. Now right now, the outcome is open concerning Iran, but we have an increase in gas prices and in Europe, more demand for e-vehicles, we have the NEUE KLASSE. We increased the production volume. We can react right away. So the reaction in the United States is different from the one in Europe. This, to us, is to be open to technology. And of course, the demand is due to the tariffs, but also the political situation because power is used for other things than for e-vehicles in the United States. So we have highly efficient ICEs, which is good. So it has an effect, a perfect effect. And in the short run, you cannot install something like this.

Then third, we are strong in all of the brands. Mr. Mertl talked about MINI. It has good growth. Rolls-Royce on the other side of the portfolio is also just as stable, so it is not down to the profitability of individual vehicles, but we work in all of the market segments. That's the third pillar of the strategy. MINI, Rolls-Royce and in between, we have more than 40 BMW models. This is why we can work in an anti-fragile manner.

What does the future hold? What is the future of this business model? That was your question. Well, I still think that the hyper optimistic perspective, which still persists, individual technologies does not -- is not future viable because the success depends on 3 pillars: it's long-term quality. Now it's of no use if the vehicle is of no value after 2 years because you use technologies which are no longer provided or which are just not robust than system integration. What does a car feel in its entirety. This is much more important then the very overheated fast and predominant implementation in vehicles. You see it everywhere in the world. This is not robust. How does it feel to drive the car, drive the NEUE KLASSE Symbiotic Drive. This is much more important than the individual technology and then ramp up capabilities. We didn't have to postpone any ramp-up, not even by one day. This is much more important than to say, "I have a show car, I have an announcement and then I have to delay it for 3, 4, 5 years." So the success stories are the system integration, ramp-up stability and the open technology, anti-fragile.

So we also have to see how innovative the vehicles are. So sometimes the media also focus on individual technologies, but this is not key to the success of the manufacturers, BMW, and this is totally independent of whether it's Mr. Zipse or Mr. Nedeljkovic who is the CEO. BMW is very well set up, we believe, in a strong future of BMW.

Now if we have higher profitability also due to fewer tariffs, then of course, we would welcome this.

The next question comes from Sebastien Ash from FT.

Good morning, ladies and gentlemen. Mr. Zipse, Mr. Mertl, thank you very much for taking your time this morning to talk to us. Mr. Mertl, my first question is, you talked about additionally providing the -- for the FCA risk scheme. What was the amount in the first quarter? And could you please tell us or remind us what the first provision was from this quarter?

And then second question, if I may, concerning the tariffs. This is to Mr. Zipse, I think. Now in the past months, you showed us a lot of optimism. You talked about positive expectations concerning the solution of this problem with the tariffs. Last summer, for example, I remember a possible deal with the administration. And you said that you are optimistic that this still will be implemented swiftly. Now why is this going to change? Or let me put it differently, how optimistic are you that this will find a solution in the next weeks or months?

Thank you very much, Sebastien. Let's start with Walter Mertl.

Good morning. FCA, you asked about FCA and what our provisions are. Well, we had a slight to medium 3-digit amount to the 31st of December 2025, we had to top it up, unfortunately, to a medium to a high 3-digit number in the millions. Now do you see it in the operating cost and in the financial services, the lost and profit accounts. Now as I said, we tried to find a better and more correct solution for the suggestion of October. In December, we filed it. Unfortunately, it was the effect that nothing of this was really assumed. Now usually, you can challenge this because in my eyes, it's disproportionate and still unfair. However, what is it all about without the participation of the banks and the main countries in the U.K., it doesn't really make sense to file an opposition. So at the end of the day, we had to top up the provisions.

Thank you very much, Walter. This brings us to the second part of the question, tariffs and BMW's optimism. Mr. Zipse, you have the floor.

Well Karl Popper said that optimism is an obligation for entrepreneurs. If you're not optimistic, if you're pessimistic, it's of no use to anyone. So we fulfill this obligation. Now that's just what the philosopher said. I remain optimistic because the pressure on the EU is mounting. The answer is not that easy. The answer cannot just be we're not doing anything because that would be a very bad answer for the EU. So I stay optimistic. There is increased pressure now and I'm sure that we will have a solution soon.

In the past weeks -- so in the past weeks, we continue talking to the administration in Washington. We said after the deal, we will continue. I'm sure that we will have an offset deal until the end of the year. We'll have an agreement and it will foresee that for importers, which are at the same time, exporters, there will be an offset. So for each exported vehicle, you're allowed to import one. We get a lot of support, but only if the first part of the deal is carried out. That's the European Union. So I reflect the discussion which we are having in parallel with the American administration, the export model, which is done by BMW is supported by them strongly.

Now our next question comes from Martin Hesse from Der Spiegel.

Good morning, Mr. Zipse. Now I would like to wish you all the best. I have one political question. You are leaving BMW after 7 years, and the government has been in power for one year. What is your opinion on the work of the German government, particularly concerning mobility and the automotive industry? It's still open what the European regulation for the automotive industry will look like in the future.

Thank you very much. Mr. Zipse, you have the floor.

Mr. Hesse, Politics is a difficult business. We see it's very hard to reach a consensus in a democratic environment. We always have an open [indiscernible] for all of the topics. But of course, the other parties should be open as well. Not all of our wishes are heard in particularly concerning the revision of the CO2 regulation, it shall be implemented during the course of the year. We cannot get be content with this just to say, we are open for technologies because we decreased the demand of 100% to 90%. And then in the small print, it is described what the 10% shall look like. And then they introduced a new vehicle category for small vehicles. Well, it goes into the right direction, okay, but it won't be enough in order to boost or to maintain even the economic power of the European automotive industry.

Now e-mobility, well, in Europe, to credibly say that we are faster than China in China itself. Well, you need to challenge this. You need to challenge whether we are still on the right track, whether we still do the right thing for the economy. We firmly believe, as you know, in a long-term business model, this is why we further promote e-mobility. Still, we believe when we look at 2030 to 2035, well the VAT code in Europe will be 15% that -- well, this is still exaggerated. But yes, we know that politics is a difficult business. We remain open for discussions, and we are happy to contribute whenever we can.

The next question comes from Frank Volk from Automobilwoche.

I have two questions concerning the NEUE KLASSE. You both underlined that you have a very high order bank and order volume. What about the production? How is the production going? Are you able to fulfill this increased demand? How is the production rollout? Did you increase production again or will you increase the production volume again? That's the first question.

And then second question on tariffs which was discussed before. Mr. Zipse, did I understand you correctly? Did you say that you understand that the U.S. government now has a stricter approach to the EU?

Thank you very much, Mr. Volk. Mr. Zipse, you have the floor.

Mr. Volk, we are very happy with the incoming orders for the iX3. And we also see it for the i3, which is not yet on the market. Still, we have orders coming in. And of course, we are able to fulfill the demand. The question is just when. So the waiting times are a bit too long still, but it's a positive sign. They are not infinitely long. But yes, we have new shifts and the same will happen in Munich once the i3 is in production. Every third full electric vehicle order in Europe is an iX3, and those are real preorders with advanced payments. It's not just increased interest. So the plant is doing well and it corresponds also to our expectations. With the iX3 we are very happy that we have a very high penetration rate. So it's not just owners who buys a new one, but we do conquer a lot of people from the competition. That's great. If you would like to order an iX3, you will get one, of course, Mr. Volk.

Second question, do I have understanding for this call up? I'm not calling it a threat, but this call up to really implement the great deal. Yes, I understood that they issued the remainder of the call up, and I'm sure it will lead to a result.

Next question comes from Stephen Wilmot from the Wall Street Journal.

First one, the Chinese market is obviously changing rapidly, as we all know. Can you just summarize what changes you're seeing and the nature of the premium car buyer in China and how those are affecting BMW?

And secondly, just a couple of clarifications of things that you've previously said. You implied that you'd seen an increase in EV demand as a result of the rising oil price. Can you just confirm us what you're saying? There have been some issue with the translation or something. I just wanted to make sure I understood that correctly.

And secondly, I wasn't totally sure when you talk about this system of import in terms of the U.S. tariffs here, the -- you've been arguing for credits for your exports from Spartanburg. Are you saying that the U.S. administration is open to that model and they're just waiting for the EU to fulfill its side of the deal? Is that what I understood correctly? Just if you could just clarify what's actually happening there and what you expect to happen.

Thank you very much, Stephen. So let's start with the Chinese market and the offset logic with the U.S. administration. This is Mr. Zipse and then Walter Mertl on the effect of what's happening in Iran.

Good morning, Stephen. So if you're in New York, I'd say good night and not good morning. Let me answer questions one to three, and then I hand over to my colleague. Of course, in the Chinese market, a lot is changing, a high impact has that the subsidies for pure e-mobility is withdrawn. This comes from the administration. It's not just driven by the market. It had huge effect on the Chinese manufacturers, particularly in the first quarter, you need to understand this when you look at the market, then BMW, China is still our biggest market and it's a central technology driver. We showed this also at the trade show. We don't have to go into detail. Now we showed that we have a very close cooperation and we have the empowerment of the production sites. And of course, in 2026, we had 625,000 vehicles. It's the largest individual market. And in Q1, we -- so you always have to look at it in relative terms. I think that's highly important. We have the NEUE KLASSE. It's similar to Europe. And it's very popular the NEUE KLASSE, and we think that it will be welcomed there as well with open arms.

Of course, the market normalizes because in a normal market, which is so big, Chinese manufacturers, both on the delivery side and also on the market side are dominant. It's just like in Europe and the United States, they adjust and they become the dominant players. So it's not that surprising what we see in China. They are highly innovative. I think that's clear but we still firmly believe that China will remain our biggest market also in the future.

Now I can just confirm what I said before. I think that for the United States, a good business model is to have export-oriented companies to focus on them to promote their activities and not just local for local. So where we have the business model, we are heard. So in order to answer your questions, yes, I do believe that in the past weeks and months, this will be heard and will also be implemented.

Thank you very much, Oliver. Now concerning Iran, and BEV demand. Walter, you have the floor.

Thank you very much. The BEV demand depends on the region. And in Europe, we said that we have more than 60% increase than Q1 2025, whether this is due to Iran or because of our fantastic iX3, we can discuss this, of course. Both will have an effect probably. In other regions, in China, in the United States, we just mentioned it before in the United States because there is this withdrawal of subsidies. The demand is no longer that strong in the entire market and in China. And also here, as Mr. Zipse said, as before, look at the price segments where we feel the withdrawal of subsidies with vehicles up to $120,000. And if you look at the overall decrease of volume in the Chinese market, then you see 2/3 from the price spend up to $20,000 and the rest from the price spend up to $40,000. So you see that we have a different impact at BMW than with others.

Next question comes from Leonard [indiscernible] from POLITICO EU.

Staying with the Chinese market, I have two questions. One of them sort of doubling down on what Stephen asked. I understand that you expect the Chinese market to stabilize in the rest of the year. And I also understand that you aim to remain a significant player in the market. But I would be interested in how exactly you're planning on doing that. So I'm wondering, will this be a pricing strategy? Will you work on technologies that will convince the Chinese market? So I'm looking to better understand the avenue to which you become or remain a dominant player in China.

And then secondly, regarding the status quo, I understand the market is down in China right now overall and you're less affected by that than some other players. Although I would be also interested to get a better understanding of what is your sense of why that is the case right now? Again, is this a pricing problem? Or is it possibly also a technology gap specifically? Could this be automated driving technologies where perhaps other players are more advanced and which becomes an increasingly important technology for Chinese customers?

Good. Thank you, and I hand over to Walter Mertl.

Good morning, Mr. [ Rus ]. You know that the Q1 overall market was decreased by 17.5% and the CPCA has an annual forecast, which was corrected minus 7.6% is the forecast now. And of this week or next week, it might even be down to 8%. Now there's one factor why we are still important, namely our openness to technology, our vehicles. We are known as Baoma. So the purchase force, we shouldn't forget this stands for a value in itself. We have very good cars. Otherwise, we would see a massive decline in the volume as well. This is not given. You know that we've done a lot of things for 1.5 years. We did [ white sites ], the dealers. We closed dealers. We also opened up dealer in other sites, then we boosted the dealer performance by training. This is one large element. We also carried out product measures in the past months. So as a result, we also declined list prices. We lowered them. And those dealers are independent, the transaction prices done by the dealers is not on our list prices.

Now in combination with the product measures, the result was that the list prices were lower. The transaction prices increased slightly in the first quarter. This is positive. The vehicles are still appealing. Now concerning the forecast in China, well, with the NEUE KLASSE and the Momenta stack. So we will be on eye level with the Chinese offering parties, many clients, and we showed it in China at the trade fair, we also showed the positive demand of the i7, the iX3, i3, everyone wants to have this car, and we can expect in Q4 to offer the cars. So pricing is okay.

Well, the next question comes from Stefan [ Radomski ] from [indiscernible].

Mr. Zipse as a farewell, I have a fundamental question for you. Now we heard in the past several times, there are rumors really that Chinese manufacturers might enter the factories in Europe or Germany with their Chinese cars and then produce their cars here. Now it's very hard to comment on what others are doing, but it's just a fundamental question. Is that a risk? Do you think might this open up a door which you'll be unable to shut? Or do you think that's positive because the plants can be maintained because if the Chinese don't come in, then they would have to be reduced in size?

Thank you, Oliver Zipse, you have the floor.

Mr. [ Radomski ], good morning. Thank you very much for your question. It's not that easy to understand what happens in the industry. 2025, BMW sold -- or built more than 1 million cars in Germany as much as never before. And 25% of the entire car production comes from BMW. So not the large manufacturers produce most, but BMW, it's actually a small manufacturer, but BMW is there at the forefront. Now in the eyes of BMW, we don't have to reduce capacity at all. Look at Regensburg 2025. It's the strongest plant and we have full capacity utilization. Leipzig is the only plant in Germany where BMW and MINI are run on one belt. And then in Munich, we have the preparations for BMW i3. We invested into that. So a plant in Munich will be like the one in Debrecen.

So we will have several shifts there as well. And this will start off in August. Dingolfing will have the rollout of the new 7 and from NEUE KLASSE, it will produce the ICE model. Maybe you heard that the NEUE KLASSE is not just an e-car, but there is an ICE on its own platform. This will then be produced in Dingolfing. Spartanburg has an all-time high of 430,000 units. Debrecen will produce for the high demand of the iX3. So this question is not relevant for us. The production doesn't just mean that cars are assembled by some people. Now it's about system integration of highly complex products. It's much more than just an assembly plant. And of course, this is indispensable for the success of our company.

Thank you very much. This brings us to the last three questions. First question, please?

Yes, the next question comes from Timothy Lowe from Bloomberg News.

I just wanted to ask real quick, given the full landscape of things with the tariffs and with China and the disruption in the Middle East, in March, we had the impression that maybe you thought that the first half of this year is going to be a trough, maybe even first quarter and that things would maybe accelerate later in the year. I'm just curious, do you still believe that now, given what you've alluded to in the report as like the auto industry is -- generally has been sort of like expectations are actually down. Do you still believe that early in the year is the trough, and it will get better for BMW later in the year?

Good. Thank you. Walter Mertl, you have the floor.

Thank you. Yes, we think that. We work on it every day. In Q1, we showed good performance, just as announced, in March and in Q3, we said that we have a high burden from the tariffs and also because of the currencies, we reported it as such. In the second quarter, the currencies will still be an extra burden as we saw in Q1. We already announced this, and the discussion of the tariffs was already explained. And for the second half, the good momentum is that we roll out the NEUE KLASSE more and more. This is why we are optimistic.

Next question comes from Joachim Herr from Boersen Zeitung.

Good morning. I have a follow-up question concerning the Middle East, probably to Mr. Mertl. Now how much of your overall sales can be found in that region, comes from that region? And you are highly optimistic that the conflict will be solved soon. But I guess -- or that's the question. Can you picture a scenario if this won't happen that you then have to take corresponding measures?

Second question, it seems that because of the high gas prices, the demand for e-vehicles increases, particularly in Europe, do you think that this trend is going to continue, even if the prices are lowered even if the conflict is resolved? Do you think this will continue?

Thank you very much, Joachim. Walter Mertl, you have the floor.

Mr. Herr, good morning. The volume share of the Middle East is less than 1.5%. You are asking about scenarios. You know that BMW is always prepared for mitigations. And of course, we're doing this now as well. And the BEV demand within the EU, as I said, whether this is due to gas prices, whether this is due to something else or because of the wonderful product i3 and iX3, we can discuss this, of course, as we already told your colleague. Of course, all of the factors will play a role. I focus on our very good product and I'm sure this is why the demand increased by more than 60% for BEV in the past year.

Okay. Last question?

Yes. Last question comes from Regina Ehm-Klier from Passauer Neue Presse.

Good morning. Thank you for handing me the floor. Mr. Zipse, first of all, all the best for you. I have one question concerning the costs, which Mr. Mertl mentioned. Cost in Munich, 10%, how can this be implemented? Does that mean that this will only be solved through HR costs or costs for staff?

Thank You very much. Mr. Mertl, you have the floor.

Ms. Ehm-Klier. It's about the overall setup. We have a new product, and we have more efficiency and more productivity in the plants as with every new product. So we install the new technologies in our plant. And this is why we have better technologies, better working processes, and this allows us to reduce the costs. We are just more efficient.

Thank you very much. Mr. Mertl. This brings us to the end of the call. I have some personal remarks, Oliver. We all know that this was your last call after 35 years at BMW and more than 10 years at the Board of Management. You assumed the responsibility in a very dynamic, volatile time, which -- and it was very hard to make plans with the NEUE KLASSE you initiated, one of the most important projects in the company history. And technology neutrality you showed us is the right path. On the 30th of May, you will be there for the shareholders at the annual conference and in name of the analysts, journalists and shareholders, we say thank you for 20 quarterly calls and 7 annual conferences and annual assemblies. Thank you very much. Thank you for everything.

So thank you very much from Munich. We will speak soon.

[Statements in English on this transcript were spoken by an interpreter present on the live call].

Colleagues, ladies and gentlemen, good morning, and welcome to the telephone conference of the BMW Group for the first quarter. Today, we have here Oliver Zipse, Chairman of the Board of Management; and our CFO, Walter Mertl. First, Walter will take you through our financial results. Oliver will then give you a general business update for the BMW Group. After a short break, we will then have time for our Q&A session. Walter, please go ahead.

Ladies and gentlemen, good morning. The year 2026 started off with sound financial results for the BMW Group, in line with our expectations. In the first quarter, group revenues totaled EUR 31 billion. Group earnings before tax amounted to EUR 2.35 billion, approximately 25% lower than in Q1 2025. With this result, we generated a group EBT margin of 7.6% on the level of the 2025 as well as 2024 full year. The operating profit in the Automotive segment was EUR 1.345 billion. The EBIT margin in the Automotive segment stood at 5% in the middle of our full year guidance corridor of 4% to 6%. As you know, we consistently focus on our reported figures. Accordingly, the 5% represents our reported EBIT margin without any adjustments.

The Q1 extra tariff burden of 1.25 percentage points is accounted for in this margin. In addition, the EBIT margin includes the depreciation from the BBA purchase price allocation of 1.2 percentage points.

Let me now provide more details on the Automotive segment's performance across key metrics. In the first quarter, the BMW Group delivered around 566,000 BMW, MINI and Rolls-Royce vehicles to customers. This represents a slight decrease of 3.5% compared to the same period last year, driven by the sales decline of all electric vehicles in the U.S. and China. The BMW brand saw a decline of 4.6% year-on-year. This was driven by shifts in regional and powertrain sales. The MINI brand continued its growth following the successful renewal of its model portfolio, achieving a solid sales increase of 6%.

Let's take a closer look at our sales performance across regions. Starting this year, we have slightly adjusted our regional sales reporting to reflect our sales organization structure rather than geographical continents. In our largest sales region, Europe, deliveries increased slightly by 3%. We saw growth across all powertrains, combustion engine vehicles, all electric vehicles and plug-in hybrids. The BMW brand's order intake in Europe showed strong growth across the entire product portfolio in Q1 with an order bank reaching well into the second half of the year.

In our sales region Asia Pacific, Eastern Europe, Middle East and Africa, deliveries declined by around 6,700 units or 8.3% year-on-year. This development was influenced by multiple factors, predominantly the macroeconomic environment and the diverse competitive landscape throughout the region, while the conflict in the Middle East had a limited regional sales impact in Q1.

In the Americas region, retail sales decreased by 4% year-on-year, primarily due to the U.S. Here, sales of all electric vehicles dropped significantly following the discontinuation of IRA support in the fourth quarter of last year. Our product portfolio enabled us to largely offset this decline and fulfill customer demand with our attractive combustion engine vehicles. When comparing U.S. sales to previous year, we must also remember that Q1 2025, meaning last year, was positively influenced by strong customer demand, driven by expectations of custom duty increases starting in April 2025. Overall, we performed better than the total U.S. market, which declined by 6.6% in the first quarter.

In China, the overall market declined sharply by over 17% in Q1, driven by reductions of government subsidies and changes of regulations. By comparison, BMW Group sales decreased by 10% and therefore, outperformed the overall market in Q1.

Switching gears to BEV retail sales. In the first 3 months, the BMW Group delivered over 87,000 all-electric vehicles to customers worldwide. Sales of electrified vehicles, including both BEVs and plug-in hybrids amounted to approximately 133,000 vehicles. This represents a BEV share of total sales of 15.5% and an electrified vehicle share of 23.4%.

In Europe, BEV sales continued to grow and order intake increased by more than 60% year-on-year, especially due to strong demand for our all-new iX3 and the iX1. In China and the U.S., the removal of incentives and the reduction of subsidies for electrified vehicles had a noticeable impact on BEV sales year-on-year, reflecting the country-specific market dynamics. Automotive segment revenues declined moderately by 7% to EUR 27.2 billion in the first quarter. Adjusted for currency translation, mainly from the U.S. dollar and the Chinese renminbi, the decrease was 2.9%. It was driven by lower sales volumes and intense global competition.

Let's now take a closer look at the year-on-year changes in the operational results on the following slide. In the first 3 months, changes in currency and raw material positions accounted for a negative impact of around EUR 400 million. As anticipated, the adverse FX development from the second half of 2025 continued into the first quarter of 2026. The net effect of volume, model mix and pricing resulted in a negative impact of around EUR 700 million compared to Q1 2025. In addition to the impact from lower sales volumes, this decline was driven by intense competitive pressure across all major markets.

Ladies and gentlemen, we are continuing cost reductions across the company to tackle the overall headwinds. In the first quarter of 2026, we have further reduced both R&D and capital expenditure, thanks to early investments in the Neue Klasse. As of March, group R&D expenditure totaled around EUR 1.8 billion, a significant decrease of around 12% compared to the previous year.

The R&D ratio according to the German Commercial Code came in at 5.7%. Despite this significant reduction, research and development expenses in the P&L under IFRS increased by EUR 100 million due to 2 factors included: an increase of EUR 200 million in depreciation resulting from capitalized development costs in prior years and a lower R&D capitalization ratio compared to Q1 2025, which decreased by 4.3 percentage points to 31.4%.

Our ongoing commitment to reducing operating costs is further visible by the development of selling and administrative expenses, which decreased by around EUR 100 million year-on-year. Other cost changes provided a tailwind of around EUR 400 million compared to the first quarter of 2025. This includes various factors, most notably manufacturing costs and warranty expenses as well as a year-on-year tariff burden.

Overall, automotive EBIT amounted to EUR 1.3 billion in the first quarter, a decline of approximately EUR 700 million compared to Q1 2025 was driven by headwinds from FX, tariffs and depreciation. Coming to free cash flow in the Automotive segment, which amounted to around EUR 800 million in the first quarter of 2026. The net change in working capital reduced free cash flow by around EUR 500 million as expected.

This mainly reflects the typical Q1 inventory buildup with production exceeding sales volume. The impact of higher inventories was partly compensated by an increase in trade payables, which rose in line with production levels. The net effect of capital expenditure and depreciation contributed about EUR 600 million to free cash flow. Depreciation exceeded capital expenditure in the first quarter, positively impacting free cash flow.

We expected this position to flip versus previous years as we continue to reduce CapEx and see depreciation from earlier investments take effect. This trend will continue throughout 2026. The CapEx ratio for Q1 was 2.0%, reflecting the typically low level seen in the first quarter of the year. The change in provisions reduced free cash flow in the first quarter by EUR 300 million, primarily due to the consumption of warranty provisions.

A change in the position other reduced free cash flow by EUR 300 million, mainly due to regular tax payments. For the full year, the BMW Group is targeting a free cash flow in the Automotive segment above EUR 4.5 billion.

Ladies and gentlemen, the BMW Group remains firmly committed to its shareholder return strategy, which includes both dividend payments and share buybacks. The second tranche of our third share buyback program with a volume of EUR 625 million is currently underway and is scheduled for completion by the end of August at the latest. The third tranche is planned to follow thereafter.

Let's now turn to our Financial Services segment. In the first quarter, the number of new contracts concluded with retail customers increased slightly by 4.3% year-on-year, reaching 420,000 contracts. The penetration rate for lease and loan offerings increased to 51.6% in the first quarter. This development was supported by changes in the competitive environment in China. Mid-2025, local banks significantly reduced commissions related to brokering financing and insurance products for end customers.

Adjusted for FX effects, new business volume grew by 4.1% to about EUR 16 billion. Segment earnings for the first quarter amounted to EUR 381 million, a decrease of EUR 269 million compared to Q1 2025. This decline results from an addition to an already existing risk provision in the U.K. At the end of March, the Financial Conduct Authority, FCA, issued its final cross-sector compensation program for customers who were sold automotive financing products under certain commission models since 2007.

Unfortunately, the published program reflects only a few of the many amendment proposals made to the initial draft by both the U.K. Finance and Leasing Association and the BMW Group. As a result, the compensation payment volume will likely exceed previous estimations. Additionally, income from the resale of end-of-lease vehicles was lower year-on-year as expected. The credit loss ratio across the entire credit portfolio remained low at 0.27%.

In the Motorcycle segment, first quarter deliveries declined slightly by 4.2% year-on-year. The segment EBIT for the first 3 months rose to EUR 89 million with an EBIT margin of 11.4%. Finally, one remark on the other entities result, which increased by around EUR 300 million. This was driven by positive valuation effects from interest rate derivatives resulting from the sharp rise in long-term interest rates in March.

Ladies and gentlemen, let me now turn to our outlook for 2026 and briefly outline some of our current assumptions. The situation in the Middle East currently remains highly uncertain. Our outlook assumes that the ongoing conflict is temporary. The expected tariff impact on our 2026 results can still only be estimated based on our existing assumptions. We expect import duties from the EU to the U.S. to remain at their current levels.

Following the recent positive vote in the European Parliament, we anticipate that tariffs on imports from the U.S. to the EU will drop to 0% effective in the second half of the year. Similarly, tariff reductions for imports into the U.S. from Mexico and Canada are also expected to take effect in the second half of the year.

We continue to anticipate a full year negative impact of around 1.25 percentage points on the auto EBIT margin from the increased tariffs instead of 1.5 percentage points in 2025. In China, we are making good progress with our set of measures to support market performance. The overall vehicle market in China declined more sharply than anticipated throughout the first quarter, already prompting several revisions of official market forecast for the year by the CPCA.

In light of this trend, our focus will remain on achieving the right balance between sales volume, transaction prices and dealer profitability. Based on our assumptions, our full year guidance parameters remain unchanged. Group earnings before tax are expected to be moderately lower than in 2025. In the Automotive segment, we forecast global deliveries to be at last year's level. The automotive EBIT margin is expected to be within a corridor between 4% and 6%. The EBIT margin in the Motorcycle segment should also come in at between 4% and 6%. In the Financial Services segment, we are targeting a return on equity in the range of 13% to 16% for the full year.

Ladies and gentlemen, the year 2026 started off with sound financials for the BMW Group with an auto EBIT margin in the middle of our full year guidance corridor. Within our global business model, we continue to leverage flexibility across powertrains and regions as we ramp up our Neue Klasse. This flexibility enables us to effectively mitigate risks as they arise.

The prudent management of R&D, CapEx and operating costs is clearly reflected in our Q1 results, underscoring our strong commitment to financial discipline. With that, the BMW Group remains on track to meet its operational targets as we advance our strategic plan. And as we roll out the Neue Klasse technologies across the entire portfolio, we at BMW Group and all of our stakeholders have plenty to look forward to. Many thanks.

Thank you very much, Walter. Now over to Oliver Zipse. Oliver, please go ahead.

Good morning, ladies and gentlemen. Before I'm talking about the quarter figures, I would like to address a tragic loss that has deeply touched many BMW fans around the world. On May 1, race driver, long-time BMW works driver and company ambassador, Alessandro Zanardi passed away unexpectedly. Alex, as everyone called him, was an impressive personality, an unwavering optimist and an inspiration to many people worldwide. He demonstrated what is possible in light with dedication, will power and ambition. The BMW Group has lost a fascinating humanitarian representative and BMW M Motorsport has lost an ambitious and successful works driver.

Ladies and gentlemen, Walter Mertl has taken you through the results after the first 3 months of 2026. As we outlined in March at our annual conference, we knew that there would be several headwinds we would face throughout this year. For us, it is about minimizing their impact while consistently leveraging opportunities that arise. At the same time, we remain firmly on course with our long-term strategy, a strategy that has provided clear direction and enabled us to navigate an increasingly unpredictable global business environment over recent years.

Three characteristics in particular, define the BMW way. First, our strategy of technological neutrality; second, the BMW Group's global footprint; and third, inspiring brands and fascinating products. Since 2021, the BMW Group's long-term product and technology orientation has focused on the Neue Klasse. Building on an exceptionally strong foundation of products and successful technologies delivered to customers over many years through to today, we are now making a huge leap forward in nearly every area of technology with the Neue Klasse.

This will pay off as we roll these technologies out rapidly across the whole product portfolio. Remember, last year in September, here in Munich at the IAA Mobility, we represented the BMW iX3, the first vehicle of the Neue Klasse. With this all-new vehicle generation, BMW is now entering into a new era.

The launch of the iX3 has been extremely successful. Just a few weeks ago, in March, we handed over the first BMW iX3 vehicles to customers across Europe. Over the past weeks, the model has also reached showrooms throughout the region. Preorders in Europe now exceeds 50,000 units, underscoring the strong interest in this vehicle. The iX3 also continues to win notable major international awards.

Most recently, it won 2 awards at the renowned World Car Awards. An international jury of 98 automotive journalists presented the BMW iX3 two prestigious titles, the 2026 World Car of the Year, being out competitors across all powertrain categories as well as 2026 World Electric Vehicle of the Year accolade. With the first Neue Klasse model, BMW has delivered a clear step forward in technology and design, one that is resonating strongly with experts, journalists and customers alike.

Now given the very high market demand, we already pulled forward the second shift of BMW iX3 production at our Debrecen plant in February and further rollout across the U.S. and Asian markets is planned for the coming months. And the iX3 was just the beginning. A lot has happened since our annual conference. The Neue Klasse is gradually making its mark across the entire BMW portfolio.

In March, we unveiled the next step with the world premiere of the new BMW i3 at BMW Park here in Munich. Since 1975, the 3 series has inspired dreams. At the core of the brand, each of the eight generations embodies progress and innovation. And with the BMW i3, we are building our future on this rich legacy.

This event provided a unique opportunity to celebrate this milestone not only with media and other key stakeholders, but especially and perhaps most importantly, with our associates. More than 30,000 employees joined the celebrations over days, underscoring the strong bond our team feels with the brand and their pride in this incredible moment, both for the company and for their achievements in bringing this vehicle to life.

As the second model of the Neue Klasse, the BMW i3 perfectly symbolizes the journey BMW has taken over the last years. It is, of course, a completely new vehicle with a reimagined design and seamless integration of advanced technologies. And at the same time, the BMW i3 represents the progress of the BMW Group itself from the systematic modernization of our production facilities through new ways of working that enable efficiency, scalability and our long-term competitiveness.

The i3 will be produced at our main plant in Munich with an investment of around EUR 650 million. The facility has been completely remodeled following the principles of BMW iFactory - lean, green and digital. Production of up to 1,000 vehicles a day continued uninterrupted during the shop floor adaptations over many months.

And now beginning in 2027, the plant will exclusively produce electric vehicles. The plant also continues to make great progress in realizing cost efficiencies. When the i3 rolls off the line for customers, we will have reduced overall production costs at the Munich plant by an additional 10%. These improvements are driven by optimized production processes, targeted automation and digitalization as well as the vehicle design improvements enabled by Neue Klasse technologies.

Series production of the BMW i3 begins in August, followed by the market launch in Europe a few weeks later. Several additional Neue Klasse models will soon be manufactured in Munich, including the all-new BMW i3 Touring. The BMW i3 leverages all the technologies developed for the Neue Klasse from driving dynamics to powertrain, from battery technology to operate concept and, of course, the digital user experience. And you can choose between different drive variants because, as you know, we remain technology open.

Each element is perfectly attuned to the characteristics of the 3 Series, creating a whole new dimension of sheer driving pleasure. This is also confirmed by initial reviews and feedback from customers and journalists, which have been exclusively very positive. This was also evident just 2 weeks ago at Auto China in Beijing, the world's largest automotive trade fair. We presented not 1, not 2, but 3 new models, the BMW iX3 and the BMW i3 Long Wheelbase for the Chinese market as well as the world premier of the BMW 7 Series model update with Neue Klasse technologies and design elements.

The China-specific Neue Klasse vehicles have been developed in close collaboration with our local R&D teams and local partners in China think global, but act local. This enables us to leverage the know-how of leading Chinese tech players and integrate local digital ecosystems and technologies to meet the specific needs of our Chinese customer needs.

For example, in voice assistant features and automated driving solutions. This momentum generated by the Neue Klasse in China will provide a powerful impact for our portfolio and marks the beginning of the next chapter in BMW's tailored innovation and technology leadership in this key market. In 2027 (sic) [ 2026 ] the seven millionth BMW vehicle will roll off designs at our Shenyang production base.

This remarkable milestone underscores our long-term commitment to China, and we are constantly strengthening our local footprint to underpin this momentum. Through deeper localization across the value chain and expanded China-based decision-making, we are faster, more robust and even more synchronized with local customer expectations and market dynamics. The new BMW 7 Series we unveiled in Beijing will kick off the rollout of Neue Klasse technologies across all powertrains and into other product lines and segments.

Coming in the middle of its life cycle, it is the most extensive model revision in BMW's history and will take the 7 Series to a whole new level. The technology-open driver -- drive offer -- sorry, technology-open drive offer covers all customer needs. The updated BMW i7 with new round battery cells features up to over 700 kilometers of range according to the WLTP cycle, meaning an Increase of 100 kilometers from the current version. Start of production will begin in our plant at Dingolfing in July.

The new 7 Series exemplifies BMW's ability to industrialize the latest technologies at speed, integrating them into serious vehicles and making them available directly to our customers. This summer, we will also unveil the next generation of our BMW X5. It will be the first BMW model to be offered with 5 different drivetrain variants, highly efficient conventional powertrains, plug-in hybrids, battery electric and from 2028 on, also hydrogen. In this way, we are laying the foundation to successfully meet the diverse needs of our customers around the world, both today and in the future.

Ladies and gentlemen, our products continue to enjoy strong demand globally. We are well positioned to meet the needs of customers across different regions and markets. In the first quarter, we leveraged the strength of our current portfolio in a shifting environment, supported by a brand offering across brands, segments, drivetrain technologies and geographies. And consistent with our balanced global approach to sales, the performance in Europe helped to partially offset weaker dynamics in other markets. Sales were particularly robust in Germany, where group registrations increased by more than 10% year-on-year.

In China and the United States, the BMW Group performed better than the overall declining markets. BEV orders in Europe were up by around 62% with European sales of fully electric vehicles exceeding the previous year's very high level. And for the fifth consecutive quarter, the MINI brand delivered global growth with sales increasing by 6%.

As we roll out the Neue Klasse, we can look ahead with confidence. Its technologies and design language will provide fresh momentum into our already strong BMW products, offering individual mobility solutions tailored to the needs of customers across markets worldwide. And at the same time, the company is prepared to weather different dynamics in the global markets and to seize opportunities at the same time. That combination is what sets the BMW Group apart. We have stayed on course, consistently implementing our long-term strategy and are now ideally positioned to reap the rewards.

This is very much part of our DNA. Time and again, the BMW Group has proven resilient from the pandemic through supply chain interruptions and semiconductor shortages and the energy crisis. Throughout, we have remained true to our technology open approach, which has proven its strength as global automotive markets continue to transition and deliver stronger results in new technologies.

As this will be my final quarter call as CEO of the BMW Group, I want to extend my sincere thanks to the media and capital market communities who have accompanied me throughout my tenure since 2019. I have always valued our dialogue at times challenging, but consistently constructive, and I am grateful for the professionalism and engagement you have brought to these exchanges.

I hope you will extend the same openness and a warm welcome to my successor, Milan Nedeljkovic. I wish you all the best and look forward to answering your questions one last time. Thank you.

Thank you very much, Oliver. Ladies and gentlemen, we now have a short break before we move on to the Q&A session. See you in 5 minutes.

Good morning, ladies and gentlemen. Welcome to the 2026 BMW Group Annual Conference Analyst and Investor Call. My name is Stefan Richmann. I'm the Head of Treasury and Investor Relations at the BMW Group. It is my pleasure to host today's investor and analyst Q&A with Oliver and Walter.

As Oliver mentioned earlier, we continue to leverage our global business model and the advantages of our technology neutral strategy, meeting demand for both combustion engine vehicles and electrified vehicles. With the successful rollout of the NEUE KLASSE iX3, we have kicked off a major product offensive that will provide the BMW brand with crucial momentum for the future.

Walter has shared with you how we have navigated 2025 and delivered on major KPIs in our operational business despite the tariff impacts, developments on currency markets and the intense market situation in China. Disciplined and consistent cost reduction underpinned our performance. We have also provided comprehensive and reliable guidance for 2026, factoring in all known and decided aspects against an uncertain geopolitical backdrop and tariffs.

With that, I will turn the floor over to you, and we are happy to take your questions.

Our first caller will be Patrick Hummel from UBS. Patrick, I can see you on the screen. Welcome this morning. And please, the stage is yours.

So Oliver, first of all, your tenure is coming to an end soon. And you've not been shy to be anti-consensual on many of the key topics that we have discussed with you over the years. But your way of doing things or the BMW way of doing things has worked out pretty well compared to competition. So I'm curious when you soon hand over to Milan, what's actually your high-level advice to him? And what have been your key learnings over your tenure that you think are going to be most valuable for your successor and the entire company in the future?

And the second one for Walter. I have to dive a little bit deeper into the 2026 guidance, if you don't mind. You take certain assumptions for tariffs that some people this morning call quite optimistic, such as the EU lowering the tariff to 0 later in the year, also some sort of USMCA agreement that would improve the current situation. So to better understand and quantify what you've baked in versus the status quo, can you just give us the 105 basis points of tariff impact alternatively? What would be the right number in a no-deal scenario? Would it be 175 basis points, 150, whatever, that would be helpful.

And if you don't mind elaborating a little bit on the other key building blocks in the EBIT bridge for 2026, the usual volume/price mix, costs, G&A, all of these.

Thank you very much, Patrick, for your questions and also for being so kind to directly allocating them to Oliver and Walter that, of course, makes my job easier. So first, the question to Oliver from your side with regards to his tenure as it comes to an end after more than 3 decades with the BMW Group and regarding high-level advice for Milan, over to you, Oliver.

Patrick, I regard being anti-consensual as a compliment. We are living in a competitive environment. And to be consensual is probably the first mistake you're about to do if you want to compete in a pretty high-level competition in our industry. You know what drives us, if I give one word to what we -- it's not me, it's we, including Milan, of course, what we have been doing for the past years is to become anti-fragile, if I might use that word. And anti-fragile means you are profiting from a highly volatile world. And there are 3 components to it, and we built on that competitive strength for the past 10 years.

To be a global company helps you. Like you have seen, we have been shrinking in China, but we have overcompensated with growth in Europe and rest of the world and the United States. To be technology neutral or technology open, however you want to phrase that, helps you to quickly respond to market needs and requirements and you have very fast growing electrifying countries and you have countries who hit the brakes. And to assume that would never be the case is the first mistake you do. This is a highly fluctuating world. And under the assumption, which every year holds true, the number of cars being sold in the world as new cars is increasing, not decreasing. So the world market is there.

And the third component is, of course, that you are -- that you offer cars in all segments with all drivetrains. So it starts with a MINI, then goes over to the lower segments at BMW, all the way up to 7 Series and now very soon, ALPINA plus Rolls-Royce, of course. So all these 3 elements built an anti-fragile environment. And then all you have to do, you have to train your muscle to react quickly. And that is what we have done through all supply chain crisis we might have had. Corona crisis, energy, whatever you call crisis, it helps you to train that muscle of maximum flexibility.

In Milan, you won't even -- probably you won't even feel that there is a change in top leadership because he has been with us all along. There's good reason that he becomes my successor. So individual people do not make a big difference in our strategy because our strategy is built up of a close negotiation and devising a strategy with top leadership and top leadership at BMW is 65 Vice Presidents and 7 Board members. It's not -- and it's not -- therefore, not a top-down issue. So there will be some very, very stable elements in our strategy.

Thank you very much, Oliver. And now turning to your second question, Patrick. It was about the 2026 guidance and providing some additional detail, specifically on tariff assumptions and you were asking about individual building blocks within the EBIT bridge. And for that, of course, I would like to hand over to you, Walter.

Patrick. So first, I thank you with respect to the tariffs assumption. Why is that? Because everyone is raising this question, of course. So eventually, we start with 2025, first of all, to have a base. In 2025, we had a lot of ups and downs. You remember, in Q1, we had more or less 3/4 of an EBIT margin hit because of China cars coming into Europe, and we started with the U.S. then in Q2, and we had 2.0% in Q2, and 1.75 percentage EBIT hits in Q3 as well as in Q4. And you do know, I'm not specifying it, whether it is 1.4%, and I would still speak about 1.5% or whether it's 1.6%. I would also classify this 1.5%. So there is a variance in already.

Now going forward, we assume and we wrote about it on Page 263, for everyone in this call, it's Page 263 on the tariffs. It's about -- in the second half year, we assume that we are -- we will see changes to the better. We assume EU and the U.S. will come to the final agreement and we still assume it is nil from the second half year onwards, meaning July, whatever July really means then. And ultimately, we also assume that there will be a better negotiation between the U.S., with Mexico and Canada and some other countries.

And with that, we assume that we are not having a 1.75% burden in the first half year, but lower. And overall in the year '26, we shall see 1 and 1 quarter, 1.25 EBIT points earned in the EBIT margin. It's not on top. It is instead of the 1.5% EBIT burden in 2025. So instead, not on top. I think that's the key element, number one.

And then you asked for some further details, which we wrote on Page 264, for everyone. I'm happy to highlight these once again. So we are working on all cost elements. Whether we speak about CapEx, we will reduce CapEx. We will reduce also R&D further on the German commercial law side. And we will reduce also the fixed costs. That means sales and general costs, SG&A., so on all elements. But we shouldn't forget about the depreciation, which we see based on the start of the NEUE KLASSE. You saw some already in Q4, but just a bit. And with the restart of production, we see, of course, the depreciation starting across the year. And with that, there is a burden.

And on top of that, with the start of the NEUE KLASSE, you remember that our activation on development costs is finished 6 months after start of production. And we focused heavily on all elements of the NEUE KLASSE. All our tech clusters are getting activated and 6 months after start, not anymore. Hence, our activation ratio is going down in the second half year latest, but you shall see already some elements in the first half year.

Ending, before the next question is coming, that we assume an activation ratio -- a capitalization ratio of R&D costs of around 30%. You saw that in '25, we had 41% capitalization ratio of R&D, and we assume it is around 30%. That gives you also a burden on top of that. And of course, we also wrote about the product measures we described and discussed even in China. On the other side, I have to say, currently, in the first 2 months, we see transaction price stabilization even to the better. So that works out. All these product measures we did starting in November and now 1 month after the other, we are shifting something behind. And also the dealer network is stabilizing themselves. So that should help a bit at least.

Now if you take all these elements together, still the headwind is bigger than the tailwind, which we're working on. And that ended up in the assumption that we'd rather guide for the segment automobile 4% to 6% instead of 5% to 7% last year. And with that burden, we come also to the conclusion for the group that we have a moderate decline. A moderate decline is between 10% and 15% minus the previous years, which I think I would like to underpin last year was a very good group profit of the year as guided, and we are better than EUR 10 billion profit. So that is a very high position to start with in this current environment, especially if I look around some others. Hope that helps, Patrick.

Thank you, Walter, and all the best. Oliver.

Thank you very much, Walter, for this detailed explanation. We have the next caller up. And I hope we will see him on screen in just a second. That will be right here, we've seen José Asumendi from JPMorgan. The stage is all yours for your questions. Thank you.

Two questions, please. Oliver, I would love to hear your thoughts, please, when you look at the Chinese market over the next, let's say, 3 years, what do you think are the biggest challenges BMW will have to confront in the region? And then looking back then at the work you've done in the last 3, 5 years, how are you leaving the group in terms of the manufacturing and the product offensive to be able to compete and obviously take further market share?

And then Walter, I'd love to also get some thoughts, please. What drives the lower end and the upper end of the margin range? You provided already very detailed reply to this, but a bit more thoughts as to the lower end and the upper end of the margin range for the Automotive division and whether we should expect some -- potentially some pricing relief in 2026 in China as hopefully, you will have to support less the dealers in China in '26 in comparison to '25?

Thank you very much for your 3 questions, José. And the first 2, I will then hand on to Oliver. The third one obviously, to Walter. First question being from your side, what is our expectation on the Chinese market over the next 3 years, whether we see any big challenges and what are those? Oliver, please go ahead.

When you look at the Chinese market, then the first thing you must recognize this is by far the largest car market in the world. And all along, it was clear, the largest car market in the world will be highly competitive, highly innovative and, of course, dominated by the largest local players. So what happened and is still happening in this market is not a surprise. It's normalizing. So when you say normalizing, that means there is competition in a saturated market, like we have in Europe and in the United States. To survive in such an environment of saturated market, of course, you have to safeguard your profitability. And you cannot expect that you have higher profitability as somewhere else in the world, which is not a big disaster and not a surprise.

Now with the NEUE KLASSE coming up, and we already received very high resonance from the NEUE KLASSE, the iX3, which will also be available very soon in the Chinese market in the long version. The feedbacks we get are as positive as we have them here in Europe. There is no difference, underlining that we are highly competitive. Why are we highly competitive? The car in China is very much made in China for China. We are collaborating, of course, with local supply chains. We are collaborating with leading China tech players like Alibaba, Huawei, Momenta. We have a local production at the Shenyang blend and we will present the car at the Beijing Auto Show next month. So this car is underlining exactly what the next 3 years -- and that is your question, what is important in China? High local content, super innovative and highly competitive. And all 3 elements is inside the iX3 for the Chinese market.

So there is a very positive outlook. And as we said before, this is not a car. This is a technology platform with technology clusters. And all cars, which are being launched after that, for example, the local X5 will bear all these technologies. So we have a positive outlook into that market, especially with the launch of the car. And the main fundament, if you want to compete in the Chinese market in the future, the Chinese content will be ever higher, and that's exactly what we do.

Thank you, Oliver, for this look into the future regarding the Chinese market and following up with José's second question, what have we done in the last 3 to 5 years, specifically with regards to manufacturing and our product offensive?

I mean what you see in our production and product, that always comes together kind of -- production comes from product. And what we see with all these technology clusters, which you will see in more than 40 cars until end of 2027, you will see exactly the same thing in the production areas. And you will see that in productivity, the throughput with AI applications are as high in the manufacturing area as it's in the product area and which help will increase productivity as well as the quality and the output of the cars.

So new technologies are at the forefront of BMW, and this process of optimization will never end. There's never an end. We -- every year, we have pretty tough targets for productivity improvement. So every year, this production system becomes more expensive. And there's a good reason why Milan becomes my successor because he has done that very, very successfully in the manufacturing area. And of course, you will see that at the end, you will see bottom line.

And the production is well on track worldwide. The Munich's -- plant here in Munich will start very soon with the i3. It has been completely rebuilt in Spartanburg, the new X5 starts very soon and next year, the new X7. In Leipzig and Regensburg, they're both working 3 shifts because of the high demand for the cars in these factories, and the new plant in Debrecen also works well. So our plants are full speed ahead for the product offensive we are undertaking now.

Thank you very much, Oliver. And now moving to José's third question, I would like to pass that on to Walter. And I think it goes pretty well hand-in-hand with Patrick's question on guidance 2026. So José is asking how the lower and the upper end of the margin corridor in the auto segment could be driven. Walter, over to you.

Yes. Well, the corridor is a corridor, right? So that's the reason why it's 4% to 6%. And of course, as we are in the beginning of this year, anything could happen. As we remember in '25, 12 months ago, over the course of following 8 to 9 months, also a lot of things have changed on the cost side, on the pricing side, across the geopolitics and the regions. So luckily, we are a global player. And hence, in '25, we have been able to shift margins also between China with the success, especially in Europe and the U.S. And you can only do that as a global player, and we are happy to do that.

Other than that, of course, it's about pricing, it's about cost targets, how we achieve them. And I think in '25, we saw that we executed very good in my eyes. And of course, it's about the tariffs that our assumptions are right or not. On the other side, there is always risk and there's always a chance. And we try to organize them from a portfolio aspect. And we manage that one in the same year this year as we did it last year. And usually, you see that driving cost down is always a good thing because that is in our own hand. All the rest, we have to organize flexibly with the markets on the pricing side. But so far, I think 4% to 6% is a very good prediction and guidance.

Thank you very much, Walter, for this answer. And we will now move on to the next caller. We should be seeing Tim Rokossa from Deutsche Bank, and we see him right here already on screen. Good morning, Tim. The stage is yours. Please go ahead with your questions. Tim, we are not hearing you, and I'm wondering whether there's technically on our side or whether it is on yours.

Yes, sorry, I was not unmuted by the host yet.

I can't believe how happy I am that it was unmuted on your side.

So thank you, Stefan, Oliver and Walter. I have 2.5 questions, please. The first one goes to you, Oliver. When we think about the support from the EU, it feels like the regulator has finally understood how important this industry is and wants to help. But whatever they come out with seems oddly complex and difficult and probably beyond the point. I wrote Oliver Blume yesterday. And obviously, there was also a lot of investor questions about what he thinks the industry -- the EU should do for the industry, some very specific points about EU-made BEVs, for example, getting support for them. Do you feel like the EU has finally understood that they need to help this industry and want to help them? And what would be your view of what they should do to do that?

And then secondly, Stefan, I'm allocating the questions here as well. But obviously, please feel free to reallocate them. When we think about China, maybe Walter here, what do you say to people that just feel like they have a bit of a deja vu moment at this point in time compared to last year, where you also were very optimistic on the Chinese development. You also guided for some improvements from what we see right now. I understand the transaction prices have stabilized, but it still really feels like something that might be a bit awakening in the summer.

And the final point, probably also to you, Walter, why do you decide to bake in the tariff easing in the rest of the year? When we look at someone like Daimler Truck this morning, for example, they don't. I think there's reasons to believe that you should rather show what is the reality today, rather than taking a view on when this would be signed.

Thank you very much for your questions, Tim. First one will be going to Oliver, the other 2, then obviously to Walter. And the first one with regards to the EU, support from the EU has the regulator really understood. Oliver, over to you. And since the question already came up this morning in media, maybe the concise brief version are on that question.

I'll try to make it brief. Tim, it's great that you're participating. You seem to be part of the inventory of this meeting. I cannot remember the last year that you have not been here. So good morning to you specifically. I will try to make it very short. Very clearly, the EU is making things not complicated. Complicated is not the problem. We can control complexity. That's not the problem. But they're working against the industry. In the news proposal, which came out in December, they tried to put even more topics in where markets are restrained from developing themselves. One portion is, yes, they go from 100% to 90% CO2. But how to achieve that in the small print, it actually works against technology openness.

The second element, and that was not in the legislation before they tried to put European content in such a way that export models and the German car industry is very much export orientated is neglected. So all the European content, which comes out of export is simply not taken into account, which is a very dangerous thing, I think, because this creates a lot of job and a lot of value. And to only favor smaller cars, which are 4 meters, 20 and longer, you can do that. We don't mind giving incentives. But how it's written, it creates 2 classes of cars. And that, of course, reduces the competitiveness of the whole industry. So the small print behind it is still very much technology unopen, too much focus on electric only and not enough focus on real CO2 reduction.

And I'll end with a question, what happens to a regulation where the markets will -- in the electric arena, also with our products grows to 50% market share, and then it stalls. If that regulation is implemented and that is happening in the market, you will shrink this industry. And I think this is a dangerous path to go to. And with that, I stop. I was supposed to be short.

Thank you very much, Oliver, but I think the message came across. Second question, over to you, Walter, was with regards to the guidance 2026. Our provision on the Chinese market, its development, whether it might be too optimistic. Please, over to you.

Too optimistic. We rather like risks to incorporate them as Chairmans, don't we? No, we do not. We have to see chances and risks. And with respect to China, if you really compare the last 6 months and you see month after month or you eventually rather quarter-by-quarter, you will see that the dealer network and all these measures we have taken in place are starting to get more grasp and starting to be more effective and stabilizing the dealer network. That's the first of all, because in the Chinese environment on all dealers, not just BMW, the whole industry, there is still a lot of irritation, let's say, with all these new rules also come in place, right? The price has to be finally over costs, which I really appreciate from SAMR, the new rules, which they also double check. So I'm really highly appreciating those. So that's already a positive sign with respect to the transaction price. And we see that in December, in January, in February, and they are stabilizing and even raising. So they are becoming better -- positive for us.

Second, we also did a lot of product measures. In November, we started the first tranche in February, the second one and the next one will come. So we are enhancing product attractivity and increasing transaction prices for those products and it works. And the third one, which is, well, take it optimistic or realistic whatever, if you see the run rate of our sales in China, if it moves on like that, we can achieve previous year. Of course, if everything is crushing, then we have a different scenario, but our run rate is stable.

And don't mix up the Chinese New Year, there's always a difference between January and February that has always to be a year-to-date February number. Otherwise, you would fail yourself. So taking all this into consideration, we see the chance and we wrote in our guideline -- guidance that we can achieve previous year. We didn't say that we want to achieve the previous year. Of course, we also aim for profitable growth and stabilization, always the thing. But given all the facts and given what we did in the network, we can achieve previous year, even if you compare the numbers year-to-date February, once you saw them already from CAAM. You see that we are still on a very good track compared with all other competitors, whether they are Chinese or traditional ones. From that perspective, I still think what we wrote is absolutely spot on and correct.

And with respect to the tariffs why I am baking them in already. Well, I think we have to mention that one, what our assumption is plus 1/4 of an EBIT margin, yes, that is also a lot of money. But we will also find some assumptions and some measures in order to compensate should we fail in our assumption. And you saw that last year. 12 months ago, we've been the only ones mentioning that we bake in 1% extra costs for tariffs and ultimately, they have become 1.5%. And we found measures to try to compensate this 0.5% point. So now we speak about a difference of 0.25%, and we still have 1.5 months to go. On the other side, we really hope that tariffs will be lowered across the world because free trade would be best for everyone. So that is also a communication from us to everyone. Hope that helps.

Great. Thank you very much, Walter, for your answers. Thank you, Tim. We now have next up in line Horst Schneider from Bank of America, and there he is. Horst, good morning to you, and please, the stage is yours.

Very good morning also to Munich and to the Board. I have got 2, 3 questions, please. The first one is regarding cost versus volumes. What I have got to say is what is really outstanding. Oliver also what you have achieved over your tenure is basically this level of cost cutting without announcing big major programs and layoffs. Also for 2026, my impression is that a large part of the stability you aim for come from lower cost. That, of course, then raises for me the question, what comes after 2026. And here, I refer more to the midterm guidance.

Is now the cost-cutting potential -- basically exploited after 2026 and needs the margin growth from 2027 onwards to come more from volume growth? And with that, the question would be do you expect the premium market to grow again? Or you expect to gain market share? You said today in the media call, Oliver, that you expect not to lose market share to the Chinese OEMs in Europe. I share that view. But you aim to take market share from Chinese OEMs in China or you take more market share from legacy OEMs from your traditional peers as of '27. So what is the trade-off between volume and cost regarding the midterm guidance?

The second question that I have is regarding EVs, I was surprised about this great contribution and reconciliation in Q4. So Walter, may be a question for you since now, I think BEV leases in U.S. is structurally lower in '26. We're going to see this tailwind throughout '26 that this is a major part, basically for the group earnings. And maybe you can remind us how you treat EV residual values in your portfolio. You constantly write-down or you write down basically at the end of the contract period. What is now the share of EVs in your leasing portfolio?

Thank you very much for your questions, Horst. And of course, it needs to be pointed out. I didn't notice that as first that you're wearing the right apparel for this call. That's very much appreciated. Thank you for that. And first question then obviously goes to Oliver. You asked about the trade-off between cost and volumes. First of all, the price, how we've handled that in the recent past, but also a midterm guidance and how do we expect the premium market to grow and whether we intend to gain market share also in the Chinese marketplace, specifically in Europe from Chinese competitors. Oliver, over to you, please.

On the fixed cost side, not on the market, we made substantial progress last year. And we are of the opinion, this is a continuous management task. And you see that -- if you look at our figures, you can see that. We are against programs. We are against publicly announced programs because that kind of reduces the responsibility of management to take that task very seriously. So we don't talk about it. We try to really do it whenever it's necessary. And of course, these things come in waves. There are years where it's easier, where years, but we every year become more efficient all the way -- also started last year already with the help of AI.

On the market side, the question is wrongly asked, cost versus volume. I know that people love to have that orientation to say, which way should they go. But it's the wrong question because good contribution margin is the sum of both. And flexibility is the most important thing if an opportunity arises to create positives or a super positive contribution margin, you quickly have to react. So flexibility to quickly, that it's 10x more important than to say we push volume or we only concentrate on the upper segment, it's the completely wrong question, because that is a result and not a target.

So I will never let people ask you what do we want to say, we want good contribution margins. And then, of course, these opportunities with quickly changing markets. The core question is, how quickly can we get into all these little niches where opportunity rises. And the good thing is the opportunities change currently very much. That means it's not important that you have a strategy to be in that market that you have the flexibility to react very quickly. And that is what we call anti-fragile, that we have in all segments, all drivetrains, we can always very swiftly react and we are after contribution margin and not after cost or after volume in the first place. Thank you.

Thank you, Oliver. Horst, your second question was on EVs, specifically BEV leasing situation in the U.S. and whether it constitutes a tailwind for 2026, then also the handling of leasing contracts with regards to depreciation and the share of EVs in our leasing portfolio overall and all of these topics at once, I would like to hand over to you, Walter.

All in one. Well, let me start with that. In different markets, we have different penetration ratios. And the U.S. has one of the highest leasing penetration ratios, not to forget the loan, there is also a loan business there.

With respect to BEV leasing, because of IRA and the subsidies more or less coming from the government, leasing was the one and only for BEVs because on loan, you wouldn't have received anything. And BEV was a very high share. Now with the stop of IRA subsidies from October 1 onwards, that had an impact in the U.S., of course, on BEV sales. And on top of that, into our leasing portfolio. So in Q4, leasing penetration came down in the U.S. And with that, you have, of course, effects on the elimination part, which I guess you also raised coincidentally the question. Hence, there was a different impact in our segment consolidation because that is always the contra of the auto business. You do know elimination is mainly for financial services business. So auto sold the car and in the group, nothing happened. So I have to take it out, means minus. If there's less financial services business, there is less minus, and it could appear as positive amount, right? That happened in Q4 dedicatedly.

Now you also raised the question with respect to how we treat residual values. Well, we always treated length at the start of the contract, thinking about where is the residual value in 36 months if it is a 36-month contract. Of course, also 48, 30, you name it. But always, once the customer is signing it, we see every quarter, of course, we are doing our total portfolio revaluation. And we do know which prices we have been capable to achieve for the off-lease cars. So that's our prediction model. It's not that easy explained. It's a bit more complex, a lot of math. But that means if you depreciate a car already higher or lower, during the course of the contract is already the first topic, right, how big is the depreciation during the contract time.

Second, on top of that, with the revaluation, we double check whether we have to adjust across the portfolio. That's what we also do. And that is a permanent approach. Every quarter, we are doing that. And this is ending up in our balance sheet. If you have a look for our residual value provisions, that's the second part. The first part, you can't see because it's our leased-out products. You just depreciate, you don't know whether we depreciate it on a straight high level or on a low level. Sorry, I'm not sharing this information.

But you see this on top provision. And that is how we deal with that. And that is how we organized with shrinking used car prices since we had the top prices in '22 and '23. That's why we speak about lower residual value profits than we had previous years because we see that it comes down gradually step by step. But it's still positive, but less positive than previous year. And even this effect, you see in 3 segments, you see it in auto, you see it in financial services and you see as a contra in consolidation. That's how we deal with the financial services lease business, especially. Hope that helps.

Reconciliation is going to be a positive contribution in 2026, significant positive contribution, right?

Whatever you classify as significant, but we can assume if we have less BEV leases in the U.S., you will have less negative consolidations that way around. But of course, don't forget, we are not just dealing with leases in the U.S. We have it across the world. U.K. is getting the iX3, for example, now in Europe already. Leases are going there. So there might be contras, might be different. But yes, you're right.

Thank you very much, Walter. Maybe just a quick statement on how we are proceeding so far. We have obviously quite some interest in our figures in the guidance 2026. For the next callers coming up, and we still have several in line, I kindly ask you to limit yourselves to one question each. We have already answered quite a significant amount of topics, and we surely have covered a lot of issues already. So therefore, please limit yourself to one question.

Next one up, and we should see him on screen rather soon. There he is, Mike Tyndall from HSBC. Mike, the stage is yours. Mike, please do me the favor and check whether it works on your side.

I'm hoping you can hear me now.

Now we can hear you. Yes. Thank you.

Fantastic. I will stick to one question then. Just one for Walter, please. If I look at the profits from BBAC, we were at around EUR 270 million in '25, down from about EUR 1.4 billion in the prior year. When you talk about China achieving the same sort of number for this year, can you just unpick the difference there? How much of that was one-off? And therefore, how much of a recovery is likely in that profitability of BBAC in 2026?

Good. Question goes to you, Walter, regarding profit from BBA in 2025 and an outlook for 2026 with regards to potential one-off effects in 2025 that may have an effect in 2026. Over to you.

Right. Mike, so I hope you have a look for the right disclosure in our 432 pager. You see 2 elements where you can see BBA numbers. One is the group consolidated one. There you end, obviously, with EUR 227 million, but that is after BBA after OCIs. So that is a rather consolidated view. In the disclosure where we present all the shares we have on every legal entities, you see the legal entity view. And there you see more than just EUR 227 million, rather EUR 1.2 billion. So I hope you see it the right disclosure.

Now with respect to '25 versus '26, all measures in place, we did already a lot of fixed cost cuts in '25 to stabilize the situation. And we have given also a lot of cost targets on the manufacturing cost side, on fixed cost side, which they are driving forward positively. So we assume that we are running more or less stable year-on-year '25, '26 with our assumption that they hit the cost targets and they've organized also the price targets they have. And I'm so far positive at least the 2 first months I saw.

Good. Thank you very much, Walter. And we have the next one in line, and we will probably not see him, but only hear him if I understand that correctly. So via not there we see you, Stephen, very good. So Stephen Reitman from Bernstein. Stephen, please go ahead with your question.

First of all, again, congratulations, Oliver. I mean it's been obviously an incredible environment you've had to deal with since 2019, and which you've done gracefully, and I think it's a great effect for BMW. My question actually is for Walter, and it's about the cash flow. At the Q3 stage, part of the reason for the reduction in the cash flow guidance last year was this timing -- the timing mismatch that the refund you were expecting were not going to occur on tariffs in 2025, so it's going to come in '26. So my question really is about the guidance on the cash flow for 2026. How much of that includes the expected refunds you're getting from the U.S. Treasury for the tariffs -- for the refunds on tariffs? And can you just generally talk about where you see sort of the refunds from tariffs going forward really?

Thank you very much, Stephen, for your question concerning cash flow and focusing on cash flow only. Question being, coming out of the Q3 statement that we made, we had a clear statement there that a reduction of our cash flow expectation for 2025 came out of the postponed tariff refund and whether that now and to what extent it has an impact on the 2026 guidance. And with that, I hand it over to you, Walter. Please go ahead.

Stephen, well, we had to reassess our receivables expected in November as, for example, Europe didn't come in place, and I can't put receivables against the EU at the current stage based on which contracts. So I had to reduce that one first of all. And hence, I would rather speak about receivables of a mid-3-digit million number rather than this high level. And secondly, also with respect to the U.S. authorities, we have to say that we see in terms of our volumes, in terms of process complexities and also sometimes also effects as a result of shutdowns, numbers came up and down. But ultimately, we are running on.

I can say that with respect to the 3.75% discount, we handed into the authorities our claim for April '25 to March '26,already. That is not finally confirmed yet by the authorities, but we handed the claims in already. With respect to this procedure, we assume that we are not getting cash back, but we rather can run more or less our tariffs to be paid as a discount of that one. That's more or less the assumption so that we just pay net rather than getting a gross number to us and the other one is paid by us. That is our current assumption and understanding with the U.S. authorities with respect to going forward. Hope that helps.

Thank you very much, Walter. And also thank you to you, Stephen, to sticking to one question only. We have run over the official time already, but we will continue with just one question each. I believe we still have 3 callers in line. First one already on the screen right now, Christian, Christian Frenes from Goldman Sachs. Christian, the stage is yours for your question. Thank you.

And also from my part, Oliver, thank you and congratulations on your stewardship of the BMW through what has been a really volatile environment from 2019 to 2026. I think the execution has been really impressive and underlines your flexibility strategy. My question is really on T&R, the new retail strategy. And my question for you, Oliver, would be what are your thoughts on the strategic importance of shifting to T&R? Why is it so important? And perhaps as part of the same question, just the financial impact of shifting the BMW brand in 2026 to T&R, should there be any financial impact that we should expect? Maybe the last one is a little bit for Walter.

Thank you very much, Christian, for your question concerning T&R. I will just briefly say the abbreviation stands for the new retail, which is in Europe, our sales model change to direct sales. And you were asking with regards to its strategic importance for the BMW Group and also financial impact. I would indeed give the question on strategic importance and relevance to you, Oliver. And then an expectation with regards to when BMW will be shifting to T&R and the potential financial impact. Walter, I will be handing that to you. So Oliver, please start.

T&R, the new retail is based on 3 assumptions. First of all, we are in the business of individual mobility. That means each car we sell is owned by an individual with very specific needs. That's the first assumption. And I think you would not -- you would agree that this is a valid assumption.

The second assumption is the future of understanding our customers is largely based on AI competence, to know what he has owned in the past, what his lifestyle is, what his expectations are. To make him very individual offers for other products is a central function.

And the third one is, we already have down the road because we installed T&R in our European operation of MINI and our learning experiences are quite positive. We're not in a rush to implement that. But we are almost 80% through with the preparation of the IT systems. So it doesn't come at one single point. I think there is no way back. We believe we will introduce that step-by-step because individual mobility will be closely linked to understanding the customer individually. And that is something you can only do as a retailer and not as a wholesaler. Does that mean that we don't need partners? No, it's exactly the other way around.

We need dealers, partners, entrepreneurs just as we before, but we need central intelligence of understanding the customer. So strategically, we are unwavering. Are we in a rush? No. We do it step by step, just like we have done it with MINI. We introduced it in the first countries in 2022. We're now in 2026. So we will take our time, but there is no way back.

Thank you, Oliver, and Walter, over to you with regards to financial implication.

Well, with respect to the financial implication, it's a positive aspect because we create price stability online and offline. There is no haggling around the pricing from dealer A to dealer B to dealer C and the customer is just playing this game. So there is stability for everyone. And not to forget, people are starting to change their habits, not running on Google Search machines anymore and on our homepages. They run ChatGPTs and Cloud, whatever. And that will search for pricing. Currently, under MSRP under our wholesale system, we can advise MSRPs. But ultimately, we deal with independent dealers and the independent dealer is setting their price.

Now we have a mixture of offers by different OEMs. Some are already on direct sales. So they have the transaction price on the list, and others like us on BMW side, we are running in wholesale, meaning on our homepage is the MSRP and not the transaction price. Now if ChatGPT or Cloud or whatever machine is searching for the best price and best offer, surely, the one who is organizing and presenting the real transaction price is better off than the other. So that is why Oliver Zipse also mentioned we will run into this direction automatically because that will be the advantage and to get the same price in the country rather than different ones.

And from our point of view, we also have done a better chance for upsell procedures online and offline because we can present the products rather than having the discussion at the dealer side about the pure price. It's about the products and all features in it.

And finally, the last positive topic on financial impact is stock management because we can do it centrally, like Oliver mentioned, rather than having a dealer individual stock management. And usually, in total, you will have always too much stock in the pipeline and that creates price pressure again. So once we do it on a central stock management, we do know in which areas and regions we run which cars and sell which cars, we can optimize that one as well and that saves, again, further costs. That is our position. So we are looking forward to implement that also for BMW in Europe.

Thank you, Walter, and thank you, Christian, for this very important question. We're now coming to the second to last in line and we have him on screen already. Stuart Pearson, Oxcap Analytics. Stuart, please your question.

Just quickly, Walter, just to clarify, did I hear correctly, apologies if I missed it, but based on what you're seeing year-to-date in China, do you think profitability there could be flat this year? I wasn't sure if that's what you were trying to say or if you just meant more on volume terms. But my main question was just on mix because you're coming out of a period, I guess, it's been relatively strong in that respect. Obviously, you have the X5 changeover this year, which in previous incarnations would have created some volatility. I think it was down 20% volume-wise in 2018. But it sounds like -- I think you said you're running 3 shifts there already. It sounds like maybe this time there will be minimal disruption from there. So I wonder what you expect from mix for the full year, but also in Q1? And is it right to assume that with some mix disruption, I think you mentioned FX would be tougher in Q1 and tariffs as well that Q1 would be one of the weaker quarters of the year.

Thank you, Stuart. And if you don't mind, I would briefly comment on the first question since we do not guide individually per region. I will leave that up to Walter, whether he wants to start guiding on regions now, but that would be my answer, at least. And the second one then was regarding to mix, especially with X5 changeover, Walter, I hand that over to you.

Stuart, so absolutely right. We are not doing country-specific guidance. But the discussion you're referring to was with respect to the legal entity BBA, where I helped Mike to find the right number in our disclosure. So that was the number. And further on, I elaborated that they also have the fixed cost targets and material cost targets and price targets and that was the story.

Now with respect to the effects expectations on full year Q1, the expectation on full year is that we are ending up with 4% to 6% in this corridor with segment Automobile, of course. And yes, we also mentioned already in Q3 that we are facing an FX headwind in the first half year and especially in Q1. And why is that? Exchange rates deteriorated, especially end of Q2 '25. That's why we had this big exchange rate effect in the second half year of '25. If everything stays stable, that will move over into the first half year of '26 with an exchange rate burden. And I said, rather in Q1, why is that? Because in Q2, the deterioration started already.

Now coming to your strong X5 changeover. We have a good mix. Don't forget that the NEUE KLASSE starts to kick in, in the second half year. And X5 is still on a very good sale mode and it's not stopping in whenever during this year. So that's quite positive.

Thank you, Walter. And we're just about to end, but we still have Henning Cosman from Barclays joining us, so he should be coming up on stage on screen in just a second. It is via audio only, sorry about that Henning. But then please go ahead and ask your question. We can hear you indeed.

Okay. Perfect. I'll try and be brief. So I'll save my congratulations to Oliver for the Q1 call. My question is on total shareholder return. I'm surprised it hasn't come up yet. It's probably to Walter. So as a combination of dividend and share buyback, of course, would you say it's fair to assume that the moderate decline to your group EBT guidance as a proxy to net profit and ultimately, dividend payment as well and draw conclusions to the dividend component of TSR.

And then on the share buyback, I suppose if you were to conclude the remainder of the existing envelope that could be up to EUR 1.3 billion or so. But between the two, would imply below EUR 4 billion. And separately, I think unlike last year, you also haven't said explicitly at least that the shareholder return could exceed the Automotive free cash flow. So I was just wondering if you could help us a little bit with the potential magnitude of TSR? Could it exceed the Automotive free cash flow this year? Again, are you prepared to comment on that at this stage? Any more color would be great, I think.

Thank you for your question, Henning. Concerning total shareholder return, some assumptions on your side, whether our current guidance gives an indication with regards to net profit and potentially dividend payments for the year 2026. And also, as we already stated for the year 2025, whether we would be willing to exceed the available Automotive cash flow in order to follow-up with shareholder return payments. And I would hand that question, of course, over to you, Walter, with regards to 2026.

Henning, so in principle, our framework hasn't changed, right? Our framework is 30% to 40% and share buyback. And usually, we also limit that with free cash flow. And as an exception, last year in '25, we said exclusive to free cash flow situation. And that's what we did. So ultimately, in '25, you shall see with our proposed dividend, which has to run through the Annual General Meeting, of course, plus share buyback, we would have achieved EUR 4 billion cash out and we have achieved an auto free cash flow of EUR 3.2 billion. So we can do statements that we are overrunning the Automotive free cash flow. Usually, I would see that as an exception. But between 30% and 40%, there's a lot of room for maneuver.

The suggestion we do to the Annual General Meeting is 36.6% payout. So there is still room for 40%, whatever we discuss. And I think that is a discussion for in 11 months rather than now. We just can highlight that we're sticking to our rules and the share buyback. We are running currently. The second tranche is going to be ending by August. And we also mentioned that we earmarked already the third tranche. So share buybacks are moving on. I think that is all I can say to this topic currently.

Thank you very much, Walter. Ladies and gentlemen, this brings us to the end of our Q&A for the 2026 BMW Group Annual Conference Analyst and Investor Call. Thank you all for making the time to join us here today, and we wish you a great rest of your day. Thank you.

Good morning, ladies and gentlemen. Welcome to the 2026 BMW Group Annual Conference Analyst and Investor Call. My name is Stefan Richmann. I'm the Head of Treasury and Investor Relations at the BMW Group. It is my pleasure to host today's Investor and Analyst Q&A with Oliver and Walter.

As Oliver mentioned earlier, we continue to leverage our global business model and the advantages of our technology-neutral strategy, meeting demand for both combustion engine vehicles and electrified vehicles. With the successful rollout of the Neue Klasse iX3, we have kicked off a major product offensive that will provide the BMW brand with crucial momentum for the future.

Walter has shared with you how we have navigated 2025 and delivered on major KPIs in our operational business despite the tariff impacts, developments on currency markets and the intense market situation in China. Disciplined and consistent cost reduction underpinned our performance. We have also provided comprehensive and reliable guidance for 2026, factoring in all known and decided aspects against an uncertain geopolitical backdrop and tariffs.

With that, I will turn the floor over to you, and we are happy to take your questions.

Our first caller will be Patrick Hummel from UBS. Patrick, I can see you on the screen. Welcome this morning, and please, the stage is yours.

So Oliver, first of all, your tenure is coming to an end soon. And you've not been shy to be anti-consensual on many of the key topics that we have discussed with you over the years. But your way of doing things or the BMW way of doing things has worked out pretty well compared to competition. So I'm curious when you soon hand over to Milan, what's actually your high-level advice to him? And what have been your key learnings over your tenure that you think are going to be most valuable for your successor and the entire company in the future?

And the second one for Walter. I have to dive a little bit deeper into the 2026 guidance, if you don't mind. You take certain assumptions for tariffs that some people this morning called quite optimistic, such as the EU lowering the tariff to 0 later in the year, also some sort of USMCA agreement that would improve the current situation. So to better understand and quantify what you've baked in versus the status quo, can you just give us the 105 basis points of tariff impact alternatively, what would be the right number in a no-deal scenario? Would it be 175 basis points, 150, whatever, that would be helpful. And if you don't mind elaborating a little bit on the other key building blocks in the EBIT bridge for 2026, the usual volume, price mix, costs, D&A, all of these?

Thank you very much, Patrick, for your questions and also for being so kind to directly allocating them to Oliver and Walter. That, of course, makes my job easier. So first, the question to Oliver from your side with regards to his tenure as it comes to an end after more than 3 decades with the BMW Group and regarding high-level advice for Milan. Over to you, Oliver.

Patrick, I regard being anti-consensual as a complement. We are living in a competitive environment and to be consensual is probably the first mistake you're about to do if you want to compete in a pretty high-level competition in our industry. What drives us, if I give one word to what we -- it's not me, it's we, including Milan, of course, what we have been doing for the past years is to become anti-fragile, if I might use that word. And anti-fragile means we are profiting from a highly volatile world. And there are 3 components to it, and we built on that competitive strength for the past 10 years.

To be a global company helps you. Like you have seen, we have been shrinking in China, but we have overcompensated with growth in Europe and rest of the world and the United States. To be technology neutral or technology open, however you want to phrase that, helps you to quickly respond to market needs and requirements. And you have very fast-growing electrifying countries and you have countries who hit the brakes. And to assume that would never be the case is the first mistake you do. This is a highly fluctuating world. And under the assumption, which every year holds true, the number of cars being sold in the world as new cars is increasing, not decreasing. So the world market is there.

And the third component is, of course, that you are -- that you offer cars in all segments with all drivetrains. So it starts with the MINI, then goes over to the lower segments at BMW all the way up to 7 Series and now very soon ALPINA plus Rolls-Royce, of course.

So all these 3 elements built an entire fragile environment. And then all you have to do, you have to train your muscle to react quickly. And that is what we have done through all supply chain crisis. We might have had corona crisis, energy, whatever you call crisis, it helps you to train that muscle of maximum flexibility.

In Milan, you won't even -- probably you won't even feel that there is a change in top leadership because he has been with us all along, and there's good reason that he becomes my successor. So individual people do not make a big difference in our strategy because our strategy is built up of a close negotiation and devising a strategy with top leadership and top leadership at BMW is 65 vice presidents and 7 Board members. It's not -- and it's not -- therefore, not a top-down issue. So there will be some very, very stable elements in our strategy.

Thank you very much, Oliver. And now turning to your second question, Patrick. It was about the 2026 guidance and providing some additional detail, specifically on tariff assumptions, and you were asking about individual building blocks within the EBIT bridge. And for that, of course, I would like to hand over to you, Walter.

Patrick. So first, I thank you with respect to the tariffs assumption. Why is that? Because everyone is raising this question, of course. So eventually, we start with 2025, first of all, to have a base. In 2025, we had a lot of ups and downs. You remember, in Q1, we had more or less 3/4 of an EBIT margin hit because of China cars coming into Europe, and we started with the U.S. then in Q2, then we had 2.0% in Q2 and 1.75 percentage EBIT hit in Q3 as well as in Q4. And you do know, I'm not specifying it, whether it is 1.4%, and I will still speak about 1.5% or whether it's 1.6%, I would also classify it as 1.5%. So there is a variance in already.

Now going forward, we assume and we wrote about it on Page 263 for everyone in this call, it's Page 263 on the tariffs. It's about in the second half year, we assume that we are -- we will see changes to the better. We assume EU and the U.S. will come to the final agreement, and we still assume it is nil from the second half year onwards, meaning July, whatever July really means then. And ultimately, we also assume that there will be a better negotiation between the U.S. with Mexico and Canada and some other countries. And with that, we assume that we are not having a 1 [indiscernible] quarter burden in the first half year, but lower. And overall, in the year '26, we shall see [ 1 in 1 ] quarter, 1.25 EBIT points burden in the EBIT margin. It's not on top. It is instead of the 1.5% EBIT burden in 2025. So instead, not on top. I think that's the key element number one.

And then you asked for some further details, which we wrote on Page 264 for everyone. I'm happy to highlight these once again. So we are working on all cost elements. Whether we speak about CapEx, we will reduce CapEx. We will reduce also R&D further on the German commercial law side. And we will reduce also the fixed cost, that means sales and general cost, SG&A. So on all elements. But we shouldn't forget about the depreciation, which we see based on the start of the Neue Klasse. You saw some already in Q4, but just a bit. And with the restart of production, we see, of course, the depreciation starting across the year. And with that, there's a burden.

And on top of that, with the start of the Neue Klasse, you remember that our activation on development costs is finished 6 months after start of production. And we focused heavily on all elements of the Neue Klasse, all our tech clusters are getting activated and 6 months after start, not anymore. Hence, our activation ratio is going down in the second half year latest, but you shall see already some elements in the first half year.

Ending before the next question is coming, that we assume an activation ratio, a capitalization ratio of R&D costs of around 30%. You saw that in '25, we had 41% capitalization ratio of R&D, and we assume it is around 30%. That gives you also a burden on top of that. And of course, we also wrote about the product measures we described and discussed even in China. On the other side, I have to say, currently, in the first 2 months, we see transaction price stabilization even to the better. So that works out all these product measures we did starting in November and now one month after the other, we are shifting something behind. And also the dealer network is stabilizing themselves. So that should help a bit at least.

Now if you take all these elements together, still the headwind is bigger than the tailwind, which we're working on. And that ended up in the assumption that we'd rather guide for the segment Automobile 4% to 6% instead of 5% to 7% last year. And with that burden, we come also to the conclusion for the group that we have a moderate decline. A moderate decline is between 10% and 15% minus the previous years, which I think I would like to underpin last year was a very good group profit of the year as guided, and we are better than EUR 10 billion profit. So that is a very high position to start with in this current environment, especially if I look around some others. Hope that helps, Patrick.

Thank you very much, Walter, for this detailed explanation. We have the next caller up, and I hope we will see him on screen in just a second. That will be right here we see, Jose Asumendi from JPMorgan.

Two questions, please. Oliver, I would love to hear your thoughts, please. When you look at the Chinese market over the next, let's say, 3 years, what do you think are the biggest challenges BMW will have to confront in the region? And then looking back then at the work you've done in the last 3, 5 years, how are you leaving the group in terms of the manufacturing and the product offensive to be able to compete and obviously take further market share?

And then Walter, I'd love to also get some thoughts, please. What drives the lower end and the upper end of the margin range? You provided already a very detailed reply to this, but a bit more thoughts as to the lower end and the upper end of the margin range for the Automotive division and whether we should expect some -- potentially some pricing relief in 2026 in China as, hopefully, you will have to support less the dealers in China in '26 in comparison to 2025.

Thank you very much for your three questions, Jose. And the first two, I will then hand on to Oliver. The third one, obviously, to Walter. First question being from your side, what is our expectation on the Chinese market over the next 3 years, whether we see any big challenges and what are those? Oliver, please go ahead.

When you look at the Chinese market, then the first thing you must recognize, this is by far the largest car market in the world. And all along, it was clear the largest car market in the world will be highly competitive, highly innovative and of course, dominated by the largest local players. So what happened and is still happening in this market is not a surprise. It's normalizing. So when you say normalizing, that means there is competition in a saturated market like we have in Europe and the United States.

To survive in such an environment of saturated market, of course, you have to safeguard your profitability. And you cannot expect that you have higher profitability as somewhere else in the world, which is not a big disaster and not a surprise. Now with the Neue Klasse coming up, and we already received very high resonance from the Neue Klasse, the iX3, which will also be available very soon in the Chinese market in the long version. The feedbacks we get are as positive as we have them here in Europe. There is no difference, underlining that we are highly competitive.

Why are we highly competitive? The car in China is very much made in China for China. We are collaborating, of course, with local supply chains. We are collaborating with leading China tech players like Alibaba, Huawei, Momenta. We have a local production at the Shenyang plant, and we will present the car at the Beijing Auto Show next month.

So this car is underlining exactly what the next 3 years, and that is your question, what is important in China? High local content, super innovative and highly competitive. And all 3 elements is inside the iX3 for the Chinese market. So there is a very positive outlook. And as we said before, this is not a car, this is a technology platform with technology clusters. And all cars which are being launched after that, for example, the local X5 will bear all these technologies. So we have a positive outlook into that market, especially with the launch of the car. And the main fundament, if you want to compete in the Chinese market in the future, the Chinese content will be ever higher, and that's exactly what we do.

Thank you, Oliver, for this look into the future regarding the Chinese market. And following up with Jose's second question, what have we done in the last 3 to 5 years, specifically with regards to manufacturing and our product offensive?

I mean what you see in our production and product, that always comes together kind of -- production comes from product. And what we see with all these technology clusters, which you will see in more than 40 cars until end of 2027, you will see exactly the same thing in the production areas. And you will see that in productivity, the throughput with AI applications, as high in the manufacturing area as it's in the product area and which help -- will increase productivity as well as the quality and the output of the cars.

So new technologies are at the forefront of BMW. And this process of optimization will never end. There's never an end. Every year, we have pretty tough targets for productivity improvement. So every year, this production system becomes more expensive. And there's a good reason why Milan becomes my successor because he has done that very, very successfully in the manufacturing area. And of course, you will see that at the end, you will see it bottom line. And production is well on track worldwide. The Munich plant here in Munich will start very soon with the i3. It has been completely rebuilt.

In Spartanburg, the new X5 starts very soon and next year, the new X7. In Leipzig and Regensburg, they're both working 3 shifts because of the high demand for the cars in these factories. And the new plant in Debrecen also works well. So all plants are full speed ahead for the product offensive we are undertaking now.

Thank you very much, Oliver. And now moving to Jose's third question. I would like to pass that on to Walter. And I think it goes pretty well hand-in-hand with Patrick's question on guidance 2026. So Jose is asking how the lower and the upper end of the margin corridor in the Auto segment could be driven. Walter, over to you.

Yes. Well, a corridor is a corridor, right? So that's the reason why it's 4% to 6%. And of course, as we are in the beginning of this year, everything could happen. As we remember in '25, 12 months ago, over the course of following 8 to 9 months, also a lot of things have changed on the cost side, on the pricing side, across the geopolitics and the regions. So luckily, we are a global player. And hence, in '25, we have been able to shift margins also between China with the success, especially in Europe and the U.S. And you can only do that as a global player, and we're happy to do that.

Other than that, of course, it's about pricing, it's about cost targets, how we achieve them. And I think in '25, we saw that we executed very good in my eyes. And of course, it's about the tariffs, whether our assumptions are right or not. On the other side, there's always risk and there's always a chance. And we try to organize them from a portfolio aspect and we managed that one in the same year this year as we did it last year.

And usually, you see that driving cost down is always a good thing because that is in our own hand. All the rest, we have to organize flexibly with the markets on the pricing side. But so far, I think 4% to 6% is a very good prediction and guidance.

Thank you very much, Walter, for this answer. And we will now move on to the next caller. We should be seeing Tim Rokossa from Deutsche Bank, and we see him right here already on screen. Tim, the stage is yours. Please go ahead with your questions. Tim, we are not hearing you, and I'm wondering whether there's technically on our side or whether it is on yours.

Sorry, I was not unmuted by the host yet.

I can't believe how happy I am that it was on your side.

I have 2.5 questions, please. The first one goes to you, Oliver. When we think about the support from the EU, it feels like the regulator has finally understood how important this industry is and wants to help, but whatever they come out with seems oddly complex and difficult and probably beyond the point. I wrote for Oliver Blume yesterday, and obviously, there was also a lot of investor questions about what he thinks the industry or the EU should do for the industry, some very specific points about EU made BEVs, for example, getting support for them. Do you feel like the EU has finally understood that they need to help this industry and want to help them? And what would be your view of what they should do to do that?

And then secondly, Stefan, I'm allocating the questions here as well, but obviously, please feel free to reallocate them. When we think about China, maybe Walter here, what do you say to people that just feel like they have a bit of a deja vu moment at this point in time compared to last year, where you also were very optimistic on the Chinese development. You also guided for some improvements from what we see right now. I understand that transaction prices have stabilized, but it still really feels like something that might be a bit awakening in the summer.

And the final point probably also to you, Walter, why do you decide to bake in the tariff easing in the rest of the year? When we look at someone like Daimler Truck this morning, for example, they don't. I think there's reasons to believe that you should rather show what is the reality today rather than taking a view on when this would be signed.

Thank you very much for your questions, Tim. The first one will be going to Oliver, the other two then obviously, to Walter. And the first one with regards to the EU, support from the EU, has the regulator really understood. Oliver, over to you. And since the question already came up this morning in media, maybe the concise brief version on that question.

I try to make it brief. Tim, it's great that you're participating. You seem to be part of the inventory of this meeting. I cannot remember the last year that you have not been here. So good morning to you specifically. I will try to make it very short. Very clearly, the EU is making things not complicated. Complicated is not the problem. We can control complexity. That's not the problem. But they're working against the industry. In the news proposal, which came out in December, they tried to put even more topics in where markets are restrained from developing themselves.

One portion is, yes, they go from 100% to 90% CO2. But how to achieve that? In the small print, it actually works against technology openness. The second element, and that was not in the legislation before, they try to put European content in such a way that export models and the German car industry is very much export orientated is neglected. So all the European content, which comes out of export is simply not taken into account, which is a very dangerous thing, I think, because this creates a lot of job and a lot of value. And to only favor smaller cars, which are [ 4.20 meters ] longer, you can do that. We don't mind giving incentives. But how it's written, it creates 2 classes of cars. And that, of course, reduces the competitiveness of the whole industry.

So the small print behind it is still very much technology unopen, too much focus on electric-only and not enough focus on real CO2 reduction. And I end with the question, what happens to a regulation where the markets will -- in the electric arena also with our products grows to 50% market share and then it stalls. If that regulation is implemented and that is happening in the market, you will shrink this industry. And I think this is a dangerous path to go to. And with that, I stop. I was supposed to be short. Thank you.

Thank you very much, Oliver, but I think the message came across. A second question over to you, Walter, was with regards to the guidance 2026, our provision on the Chinese market, its development, whether it might be too optimistic. Please, over to you.

Too optimistic. We rather like risks to incorporate them as Chairman, don't we? No, we do not. We have to see chances and risks. And with respect to China, if you really compare the last 6 months and you see month after month or you eventually rather quarter-by-quarter, you will see that the dealer network and all these measures we have taken in place are starting to get more grasp and starting to be more effective and stabilizing the dealer network. That's the first of all, because in the Chinese environment on all dealers, not just BMW, the whole industry, there's still a lot of irritation, let's say, with all these new rules also come in place, right? That price has to be finally over cost, which I really appreciate from SAMR, the new rules, which they also double check. So I'm really highly appreciating those.

So that's already a positive sign with respect to the transaction price. And we see that in December, in January, in February, and they are stabilizing and even rising. So they are becoming better, positive for us. Second, we also did a lot of product measures. In November, we started the first tranche. In February, the second one and the next one will come. So we are enhancing product attractivity and increasing transaction prices for those products, and it works.

And the third one, which is, well, take it optimistic or realistic, whatever, if you see the run rate of our sales in China, if it moves on like that, we can achieve previous year. Of course, if everything is crashing, then we have a different scenario, but our run rate is stable. And don't mix up the Chinese New Year. There's always a difference between January and February that has always to be a year-to-date February number. Otherwise, you would fail yourself.

So taking all this into consideration, we see the chance and we wrote in our guideline -- guidance that we can achieve previous year. We didn't say that we want to achieve the previous year. Of course, we also aim for profitable growth and stabilization, always the thing. But given all the facts and given what we did in the network, we can achieve previous year. Even if you compare the numbers year-to-date February, once you saw them already from CAAM, you see that we are still on a very good track compared with all other competitors, whether they are Chinese or traditional ones.

From that perspective, I still think what we wrote is absolutely spot on and correct. And with respect to the tariffs, why I am baking them in already. Well, I think we have to mention that, one, what our assumption is, plus 1/4 of an EBIT margin, yes, that is also a lot of money, but we will also find some assumptions and some measures in order to compensate should we fail in our assumption. And you saw that last year. 12 months ago, we've been the only ones mentioning that we bake in 1% extra cost for tariffs. And ultimately, they have become 1.5%. And we found measures to try to compensate this 0.5% point. So now we speak about a difference of 0.25%, and we still have 9.5 months to go. On the other side, we really hope that tariffs will be lowered across the world because free trade would be best for everyone. So that is also a communication from us to everyone. I hope that helps.

Great. Thank you very much, Walter, for your answers. Thank you, Tim. We now have next up in line Horst Schneider from Bank of America.

I have got 2, 3 questions, please. The first one is regarding cost versus volumes. What I have got to say is what is really outstanding, Oliver also, what you have achieved over your tenure is basically the level of cost cutting without announcing big major programs and layoffs. Also for 2026, my impression is that a large part of the stability you aim for come from lower costs. That, of course, then raises for me the question, what comes after 2026? And here, I refer more to the midterm guidance. Is now the cost-cutting potential basically exploited after 2026 and needs the margin growth from 2027 onwards to come more from volume growth. And with that, the question would be, do you expect the premium market to grow again? Or do you expect to gain market share?

You said today in the media call, Oliver, that you expect not to lose market share to the Chinese OEMs in Europe, I share with you, but you aim to take market share from Chinese OEMs in China or you take more market share from legacy OEMs from your traditional peers as of '27. So what is the trade-off between volume and cost regarding the midterm guidance?

The second question that I have is regarding EVs. I was surprised about this great contribution and reconciliation in Q4. So Walter, maybe a question for you since now I think BEV leasing in the U.S. is structurally lower in '26. We're going to see this tailwind throughout '26 that this is a major part basically for the group earnings. And maybe you can remind us how you treat EV residual values in your portfolio? You constantly write down or you write down basically at the end of the contract period, what is now the share of EVs in your leasing portfolio?

Thank you very much for your questions, Horst. And of course, it needs to be pointed out. I didn't notice that as first that you're wearing the right apparel for this call. That's very much appreciated. Thank you for that. And first question then obviously goes to Oliver. You asked about the trade-off between cost and volumes. First of all, the price, how we've handled that in the recent past, but also a midterm guidance and how do we expect the premium market to grow and whether we intend to gain market share also in the Chinese market, but specifically in Europe from Chinese competitors? Oliver, over to you, please.

On the fixed cost side, not on the market, we made substantial progress last year. And we are of the opinion, this is a continuous management task. And you see that -- if you look at our figures, you can see that. We are against programs. We are against publicly announced programs because that kind of reduces the responsibility of management to take that task very seriously. So we don't talk about it. We try to really do it whenever it's necessary. And of course, these things come in waves. There are years where it's easier, where yes, but we every year become more efficient all the way also started last year already with the help of AI.

On the market side, the question is wrongly asked, cost versus volume. I know that people love to have that orientation to say, which way should they go. But it's the wrong question because good contribution margin is the sum of both. And flexibility is the most important thing. If an opportunity arises to create positive or super positive contribution margin, you quickly have to react. So flexibility to quickly add is 10x more important than to say we push volume or we only concentrate on the upper segment. It's the completely wrong question because that is a result and not a target.

So I will never let people ask you what do we want that, we want good contribution margins. And then, of course, these opportunities with quickly changing markets. The core question is how quickly can we get into all these little niches where opportunity arises. And the good thing is the opportunities change currently very much. That means it's not important that you have a strategy to be in that market that you have the flexibility to react very quickly, and that is what we call anti-fragile that we have in all segments, all drivetrains, we can always very swiftly react, and we are after contribution margin and not after cost or after volume in the first place. Thank you.

Thank you, Oliver. Horst, your second question was on EVs, specifically BEV leasing situation in the U.S. and whether it constitutes a tailwind for 2026 and also the handling of leasing contracts with regards to depreciation and the share of EVs in our leasing portfolio overall and all of these topics at once, I would like to hand over to you, Walter.

All in one. Well, let me start with [ BEV ]. In different markets, we have different penetration ratios. And the U.S. has one of the highest leasing penetration ratios, not to forget alone, there is also a loan business there. With respect to BEV leasing, because of IRA and the subsidies more or less coming from the government, leasing was the one and only for BEVs because on loan, you wouldn't have received anything. And that was a very high share. Now with the stop of IRA subsidies from October 1 onwards, that had an impact in the U.S., of course, on BEV sales and on top of that, into our leasing portfolio. So in Q4, leasing penetration came down in the U.S. And with that, you have, of course, effects on the elimination part, which I guess you also raised coincidentally the question. Hence, there was a different impact in our segment consolidation because that is always the contra of the auto business.

You do know elimination is mainly for financial services business. So auto sold the car and in the group, nothing happened. So I have to take it out, means minus. If there is less financial services business, there is less minus, and it could appear as positive amount, right? That happened in Q4 dedicatedly. Now you also raised the question with respect to how we treat residual values. Well, we always treat it linked at the start of the contract, thinking about where is the residual value in 36 months if it is a 36-month contract, of course, also 48, 30, you name it. But always once the customer is signing it, we see every quarter, of course, we are doing our total portfolio revaluation, and we do know which prices we have been capable to achieve for the off-lease cars.

So that's our prediction model. It's not that easy explained. It's a bit more complex, a lot of math. But that means if you depreciate a car already higher or lower during the course of the contract is already the first topic, right? How big is the depreciation during the contract time. Second, on top of that, with the revaluation, we double check whether we have to adjust across the portfolio. That's what we also do. And that is a permanent approach. Every quarter, we are doing that. And this is ending up in our balance sheet. If you have a look for our residual value provisions, that's the second part.

The first part, you can't see because that's our leased out products, you just depreciate. You don't know whether we depreciate it on a straight high level or on a low level. Sorry, I'm not sharing this information. But you see this on top provision. And that is how we deal with that. And that is how we organized with shrinking used car prices since we had this top prices in '22 and '23. That's why we speak about lower residual value profits than we had previous years because we see that it comes down gradually step by step. But it's still positive, but less positive than previous year. And even this effect, you see in 3 segments, you see it in Auto, you see it in Financial Services and you see as a contra in consolidation. That's how we deal with the Financial Services lease business, especially.

I hope that helps.

Reconciliation is going to be a positive contribution in 2026, significant positive contribution, right?

Whatever you classify as significant, but we can assume if we have less leases in the U.S., you will have less negative consolidations that way around. But of course, don't forget, we are not just dealing with leases in the U.S., we have it across the world. U.K. is getting the iX3, for example, now in Europe already. Leases are going there. So there might be contrast might be different. But yes, you're right.

Thank you very much, Walter. Maybe just a quick statement on how we are proceeding so far. We have obviously quite some interest in our figures and the guidance 2026. For the next callers coming up, and we still have several in line, I kindly ask you to limit yourselves to one question each. We have already answered quite a significant amount of topics, and we surely have covered a lot of issues already. So therefore, please limit yourself to one question.

Next one up, and we should see him on screen rather soon. There he is Mike Tyndall from HSBC.

I'll stick to one question then. Just one for Walter, please. If I look at the profits from BBAC, we were at around EUR 270 million in '25, down from about EUR 1.4 billion in the prior year. When you talk about China achieving the same sort of number for this year, can you just unpick the difference there? How much of that was one-off? And therefore, how much of a recovery is likely in that profitability of BBAC in 2026?

Question goes to you, Walter, regarding profit from BBA in 2025 and an outlook for 2026 with regards to potential one-off effect in 2025 that may have an effect in 2026. Over to you.

Right. Mike. So I hope you have a look for the right disclosure in our 432 page. You see 2 elements where you can see BBA numbers. One is the group consolidated one. There you end up with EUR 227 million, but that is after BBA, after OCIs. So that is a rather consolidated view. In the disclosure where we present all the shares we have on every legal entity, you see the legal entity view. And there, you see more than just EUR 227 million, rather EUR 1.2 billion. So I hope you see the right disclosure.

Now with respect to '25 versus '26, all measures in place. We did already a lot of fixed cost cuts in '25 to stabilize the situation. And we have given also a lot of cost targets on the manufacturing cost side, on fixed cost side, which they are driving forward positively. So we assume that we are running more or less stable year-on-year '25, '26 with our assumption that they hit the cost targets and they've organized also the price targets they have. And I'm so far positive, at least with the 2 first months I saw.

Good. Thank you very much, Walter. And we have the next one in line, and we will probably not see him, but only hear him if I understand that correctly. So there we see you, Stephen, very good. So Stephen Reitman from Bernstein.

First of all, again, congratulations, Oliver. I mean, it's been obviously an incredible environment you had to deal with since 2019 and which you've done gracefully, and I think to great effect for BMW. My question actually is for Walter and it's about the cash flow. At the Q3 stage, part of the reason for the reduction in the cash flow guidance last year was the timing mismatch that the refund you were expecting were not going to occur on tariffs in 2025, so it's going to come in '26. So my question really is about the guidance on the cash flow for 2026. How much of that includes the expected refunds you're getting from the U.S. Treasury for the tariff -- for the refunds on tariffs? And can you just generally talk about where you see sort of the refunds from tariffs going forward really?

Thank you very much, Stephen, for your question. Concerning cash flow and focusing on cash flow only. Question being, coming out of the Q3 statement that we made, we had a clear statement there that a reduction of our cash flow expectation for 2025 came out of a postponed tariff refund and whether that now and to what extent it has an impact on the 2026 guidance. And with that, I hand it over to you, Walter. Please go ahead.

Stephen, well, we had to reassess our receivables expected in November as, for example, Europe didn't come in place, and I can't put receivables against the EU at the current stage based on which contracts. So I had to reduce that one, first of all. And hence, I would rather speak about receivables of a mid-3-digit million number rather than this high level. And secondly, also with respect to the U.S. authorities, we have to say that we see in terms of our volumes, in terms of process complexities and also sometimes also effects as a result of shutdowns, numbers came up and down. But ultimately, we are running on.

I can say that with respect to the 3.75% discount, we handed into the authorities our claim for April '25 to March '26 already. That is not finally confirmed yet by the authorities, but we handed the claims in already. With respect to this procedure, we assume that we are not getting cash back, but we rather can run more or less our tariffs to be paid as a discount of that one. That's more or less the assumption so that we just pay net rather than getting a gross number to us and the other ones paid by us. That is our current assumption and understanding with the U.S. authorities with respect to going forward. I hope that helps.

Thank you very much, Walter. We have run over the official time already, but we will continue with just one question each. I believe we still have 3 callers in line. First one already on the screen right now, Christian, Christian Frenes from Goldman Sachs.

Also for my part, Oliver, thank you and congratulations on your stewardship of the BMW through what has been a really volatile environment from 2019 to 2026. I think the execution has been really impressive and underlines your flexibility strategy. My question is really on TNR, The New Retail strategy. And my question for you, Oliver, would be, what are your thoughts on the strategic importance of shifting to TNR? Why is it so important? And perhaps as part of the same question, just the financial impact of shifting the BMW brand in 2026 to TNR, should there be any financial impact that we should expect? Maybe the last one is a little bit for Walter, but...

Thank you very much, Christian, for your question. Concerning TNR. I will just briefly say the abbreviation stands for The New Retail, which is in Europe, our sales model change to direct sales. And you were asking with regards to its strategic importance for the BMW Group and also financial impact, I would indeed give the question on strategic importance and relevance to you, Oliver, and then an expectation with regards to when BMW will be shifting to TNR and the potential financial impact, Walter will be handing that to you. So Oliver, please start.

TNR, The New Retail, is based on 3 assumptions. First of all, we are in the business of individual mobility. That means each car we sell is owned by an individual with very specific needs. That's the first assumption. And I think you would not -- you would agree that this is a valid assumption. The second assumption is the future of understanding our customers is largely based on AI competence. To know what he has owned in the past, what his lifestyle is, what his expectations are, to make him very individual offers for other products is a central function. And the third one is we are already half down the road because we installed TNR in our European operation of MINI and our learning experiences are quite positive.

We're not in a rush to implement that, but we are almost 80% through with the preparation of the IT systems. So it doesn't come at one single point. I think there is no way back. We will introduce that step by step because individual mobility will be closely linked to understanding the customer individually. And that is something you can only do as a retailer and not as a wholesaler. Does that mean that we don't need partners? No, it's exactly the other way around. We need dealers, partners, entrepreneurs just as before, but we need central intelligence of understanding the customer. So strategically, we are unwavering. Are we in a rush? No, we do it step by step just like we have done it with MINI. We introduced it in the first countries in 2022. We're now in 2026. So we will take our time, but there is no way back.

Thank you, Oliver. And Walter, over to you with regards to financial implication.

Well, with respect to the financial implication, it's a positive aspect because we create price stability online and offline. There is no haggling around the pricing from dealer A to dealer B to dealer C and the customer is just playing the game. So there is stability for everyone. And not to forget, people are starting to change their habits, not running on Google search machines anymore and on our homepages. They run ChatGPTs and cloud, whatever. And that will search for pricing.

Currently, under MSRP under wholesale system, we [ cannot ] advise MSRPs. But ultimately, we deal with independent dealers and the independent dealer is setting their price. Now we have a mixture of offers by different OEMs. Some are already on direct sales. So they have the transaction price on the list. And others like us on BMW side, we are running in wholesale, meaning on our homepage is the MSRP and not the transaction price.

Now if ChatGPT or cloud or whatever machine is searching for the best price and best offer, surely, the one who is organizing and presenting the real transaction price is better off than the other. So that is why Oliver Zipse also mentioned, we will run into this direction automatically because that will be the advantage and to get the same price in the country rather than different ones. And from our point of view, we also have done a better chance for upsell procedures online and offline because we can present the products rather than having the discussion at the dealer side about the pure price. It's about the products and all features in it.

And finally, the last positive topic on financial impact is stock management because we can do it centrally, like Oliver mentioned, rather than having a dealer individual stock management. And usually, in total, you will have always too much stock in the pipeline, and that creates price pressure again. So once we do it on a central stock management, we do know in which areas and regions we run which cars and sell which cars, we can optimize that one as well, and that saves again further costs. That is our position. So we are looking forward to implement that also for BMW in Europe.

Thank you, Walter, and thank you, Christian, for this very important question. We're now coming to the second to last in line, and we have him on screen already. Stuart Pearson, Oxcap Analytics.

Just quickly, Walter, just to clarify, did I hear correctly, apologies if I missed it, but based on what you're seeing year-to-date in China, you think profitability there could be flat this year. I wasn't sure if that's what you were trying to say or if you just meant more on volume terms. But my main question was just on mix because you're coming out of a period, I guess, that's been relatively strong in that respect. Obviously, you have the X5 changeover this year, which in previous incarnations would have created some volatility.

I think it was down 20% volume-wise in 2018. But it sounds like -- I think you said you're running 3 shifts there already. It sounds like maybe this time there will be minimal disruption from there. So I wonder what you expect from mix for the full year, but also in Q1? And is it right to assume that with some mix disruption, I think you mentioned FX would be tougher in Q1 and tariffs as well that Q1 would be one of the weaker quarters of the year.

Thank you, Stuart. And if you don't mind, I would briefly comment on the first question since we do not guide individually per region. I will leave that up to Walter whether he wants to start guiding on regions now, but that would be my answer at least. And the second one then with regarding to mix, especially with the X5 changeover, Walter, I hand that over to you.

Yes. Stuart, so absolutely right. We are not doing country-specific guidance. But the discussion you're referring to was with respect to the legal entity BBA, where I helped Mike to find the right number in our disclosure. So that was the number. And further on, I elaborated that they also have their fixed cost targets and material cost targets and price targets, and that was the [ story long ].

Now with respect to the effects expectations on full year Q1, the expectation on full year is that we are ending up with 4% to 6% in this corridor with segment Automobile, of course. And yes, we also mentioned already in Q3 that we are facing an FX headwind in the first half year and especially in Q1. And why is that? Exchange rates deteriorated, especially end of Q2 '25. That's why we had this big exchange rate effect in the second half year of '25. If everything stays stable, that will move over into the first half year of '26 with an exchange rate burden. And I said rather in Q1. Why is that? Because in Q2, the deterioration started already.

Now coming to your strong X5 changeover. We have a good mix. Don't forget that the Neue Klasse starts to kick in, in the second half year, and X5 is still on a very good sale mode and it's not stopping in whenever during this year. So that's quite positive.

Thank you, Walter. And we're just about to end, but we still have Henning Cosman from Barclays joining us.

I'll try and be brief. So I'll save my congratulations to Oliver for the Q1 call. My question is on total shareholder return. I'm surprised it hasn't come up yet. So it's probably to Walter. So as a combination of dividend and share buyback, of course, would you say it's fair to assume the moderate decline to your group EBT guidance as a proxy to net profit and ultimately dividend payment as well and draw conclusions to the dividend component of TSR. And then on the share buyback, I suppose if you were to conclude the remainder of the existing envelope, that could be up to EUR 1.3 billion or so. But between the two would imply below EUR 4 billion.

And separately, I think unlike last year, you also haven't said explicitly at least that the shareholder return could exceed the Automotive free cash flow. So I was just wondering if you could help us a little bit with the potential magnitude of TSR. Could it exceed the Automotive free cash flow this year? Again, are you prepared to comment on that at this stage? Any more color would be great, I think.

Thank you for your question, Henning. Concerning total shareholder return, some assumptions on your side, whether our current guidance gives an indication with regards to net profit and potentially dividend payments for the year 2026. And also as we already stated for the year 2025, whether we would be willing to exceed the available Automotive cash flow in order to follow up with shareholder return payments. And I would hand that question, of course, over to you, Walter, with regards to 2026.

Henning, so in principle, our framework hasn't changed, right? Our framework is 30% to 40% and share buyback. And usually, we also limit that with free cash flow. And as an exception, last year in '25, we said exclusive to free cash flow situation. And that's what we did. So ultimately, in '25, you shall see with our proposed dividend, which has to run through the Annual General Meeting, of course, plus share buyback, we would have achieved EUR 4 billion cash out, and we have achieved an out of free cash flow of EUR 3.2 billion. So we can do statements that we are overrunning the Automotive free cash flow.

Usually, I would see that as an exception. But between 30% and 40%, there's a lot of room for maneuver. The suggestion we do to the Annual General Meeting is 36.6% payout. So there is still room for 40% whatever we discuss. And I think that is a discussion for in 11 months rather than now. We just can highlight that we're sticking to our rules and the share buyback we are running currently. The second tranche is going to be ending by August. And we also mentioned that we earmarked already the third tranche. So share buybacks are moving on. I think that is all I can say to this topic currently.

Thank you very much, Walter. Ladies and gentlemen, this brings us to the end of our Q&A for the 2026 BMW Group Annual Conference, Analyst and Investor Call. Thank you all for making the time to join us here today, and we wish you a great rest of your day. Thank you.

Good morning, ladies and gentlemen. 2025 was, in many ways, a remarkable year for the BMW Group and above all, one that set our course for the future. First, we achieved a solid financial result with group earnings of more than EUR 10 billion. Walter Mertl will provide more detail in just a moment.

Second, we grew in 2025, selling more vehicles than the previous year and expanding our leadership of the global premium segment. And third, our technology open strategy continued to demonstrate its strength. Demand for cars with combustion engines remained stable, while sales of our all-electric and electrified vehicles continue to grow.

And fourth, once again, through our own efforts, we significantly outperformed the EU's CO2 fleet targets for 2025. And finally, we successfully began the rollout of our NEUE KLASSE with the BMW iX3, giving the BMW brand and the entire company crucial momentum for the future. And all of this shows we deliver consistently and continuously. We have set the right course in recent years and do not need to change our strategic direction. In this way, we can keep the company on track for long-term success.

Standing here beside me is the new BMW iX3. This vehicle marks a pivotal moment in the BMW Group's recent history, the serious launch of our NEUE KLASSE. Production of the iX3 has successfully ramped up at our new plant in Debrecen in Hungary.

First customers have already received the vehicles. And since last week, the iX3 has been in European showrooms. Demand for the iX3 is significantly exceeding our expectations with strong orders from both private and fleet customers. And we are also attracting many new customers who have never driven a BMW before.

Our order books for the iX3 are full and reach well into this year. We are exploiting the flexibility of our production and supplier network and increasing capacity in line with demand. The NEUE KLASSE represents a huge investment. Only a company that enjoys long-term economic success like the BMW Group can invest in its future on such a massive scale. This success is built on 3 important parameters. I'd like to call this the BMW Group's strategic triangle.

First, our balanced global positioning in sales and production; second, our attractive product lineup across all brands serving the entire premium segment; and third, our consistent strategic focus on technology openness. I will talk about the last 2 points in the second part of my remarks after Walter Mertl has spoken.

In 2025, we delivered around 2.46 million vehicles to customers worldwide, representing sales growth of 0.5% compared to the previous year. And this shows that our business model is robust and resilient. In Europe, we increased our sales by more than 7%, delivering more than 1 million vehicles to customers in Europe for the first time since before COVID.

We also made significant gains in the United States of America with growth of 5% even in a saturated market. In our markets outside the main sales regions of Europe, the United States and China, we also posted growth despite the overall downward trend with an increase of 3.4% over the previous year.

China remains our largest single market. However, due to the intense competitive market environment, our sales development fell short of our expectations for the year. And thanks to the strong overall performance in 3 of our 4 sales regions, we nevertheless achieved growth worldwide. And this confirms the strength of our global footprint.

Our worldwide presence is a decisive competitive advantage. And all BMW Group brands contributed to this result. Electrified models across all brands as well as the models from BMW M were the main growth drivers. The BMW brand once again maintained its position as the global #1 in its segment.

Demand was particularly strong for core models like the X1, the X3 and the X5 as well as our 3 Series and 5 Series models. BMW M continued its success story in impressive style in 2025, increasing its sales for the 14th consecutive year with more than 213,000 vehicles delivered to customers M reached a historic all-time high.

The BMW M5 and M5 Touring and the X3 M50 were the main drivers of this success. This provides compelling proof of the enduring appeal and growing demand for top-level performance in the premium segment. MINI achieved significant growth, thanks to its new model family. Sales increased by nearly 18% compared to the previous year.

The main growth driver was the most versatile model in the line of the MINI Countryman, accounting for over 32% of the brand's total volume. MINI and electromobility are a perfect fit, and our customers clearly agree. This is underscored by an impressive achievement in 2025. For the first time, the brand delivered more than 100,000 all-electric models to customers in a single year.

That is more than 1 in every 3 MINI delivered. And in this way, MINI is making a major contribution to the electrification of the BMW Group. At our ultra-luxury Rolls-Royce brand, the number of handbuilt motorcars delivered to clients remained on the high level of the previous year. The value and number of requests for highly individualized Bespoke continued to increase. And the home of Rolls-Royce at Goodwood is currently being modernized and expanded to provide more space for both Bespoke and the marque's pinnacle Coachbuild products.

BMW Motorrad confirmed its strong market position in the premium segment in the financial year of 2025. Despite a global decline in the total market for motorcycles above 500 cc, the brand delivered more than 200,000 vehicles for the fourth year in a row. And most notably, the R 1300 GS and F 900 GS played a key role in BMW's Motorrad's market success in 2025.

Ladies and gentlemen, all of this shows that our multi-brand premium approach enables stability and growth. Another major strength of our business model is our ability to meet diverse customer preferences, different regional requirements and technological developments in parallel. Our electrified vehicles provide the clearest proof of this. In 2025, we delivered more than 640,000 electrified vehicles to customers worldwide. And that means they accounted for about 26% of our total sales with all electric vehicles making up around 18%.

Europe stands out, in particular, with electrified vehicles representing over 40% of sales. Plug-in hybrids were also in strong demand in 2025. And all of these factors make the BMW Group one of the leading providers of electromobility in the premium segment.

Thanks to our balanced mix of efficient drive technologies and growth in electrified vehicles, we once again outperformed the legal CO2 requirements in the European Union. Based on our preliminary internal calculations, we achieved fleet emissions of 90 grams of CO2 per kilometer in Europe in 2025.

That once again places us well below the legal target entirely through our own efforts. We do not need to rely on pooling with other manufacturers or even averaging over several years. This provides clear evidence that technology openness and effective climate protection are not mutually exclusive, but go hand in hand. The BMW Group remains fully committed to the goals of the Paris Climate Agreement while setting our own ambitious targets.

For example, by 2035, we aim to reduce our CO2 emissions by at least 60 million tonnes compared to 2019 levels, and we intend to hold ourselves accountable to this target. We're charting our own course, something that is more important now than ever before. On the one hand, we see that regulatory frameworks in individual markets can be extremely volatile.

And on the other, we are convinced that the European Union experiment of mandating electrification will not deliver the desired results to the contrary. For this reason, we continue to pursue a long-term holistic decarbonization strategy. We are committed to providing solutions not only for new vehicles, but also for the existing fleet on the roads based on technology openness across the entire life cycle of our vehicles.

And for this reason, we also integrate fuels such as HVO100 and [ advocate ] for 100% credit in CO2 calculations. And in addition, recognizing and crediting green steel would strengthen the European steel industry and safeguard jobs in Europe. Using more recycled materials in new cars reduces our climate footprint as demonstrated by our NEUE KLASSE.

A holistic approach strengthens European value chains and keeps the industry competitive. And at the same time, it enables effective climate protection and real CO2 reductions. Companies should be free to provide solutions geared towards customer needs while also investing in appropriate new technologies to meet the European Union's climate goals.

As a global player, we stand for free trade and global collaboration. We do not believe in protectionism, but rather in the power of innovation to compete on the global stage.

However, with the Industrial Accelerator Act, the EU Commission is continuing its protectionist course while not addressing homemade challenges like high energy prices. And one thing is clear. Without international value chains, the ramp-up of electromobility and the development of powerful battery technologies are not feasible.

Labels such as Made in the European Union or Union origin disadvantage European companies with global value chains if they do not recognize that each euro spent in Europe counts the same for prosperity and jobs. No matter if the car stays in Europe or is exported.

Instead, the development of expertise and production for battery cell technologies in the EU should be promoted and effectively incentivized as fast as possible. This year, together with policymakers, we must find realistic solutions that allow us to achieve our climate goals and to strengthen our economy and competitiveness.

Ladies and gentlemen, 2025 was shaped by very different development, strong growth in Europe and the United States, a much more challenging situation in China, rising competitive pressure and additional headwinds from tariffs. But nevertheless, the BMW Group continues to deliver a stable performance because we acted early. We adjusted our internal cost structures and maintained our strategic direction.

This combination of strong operating performance today and a clear long-term perspective is a crucial success factor for our company. And that brings me back to the vehicle standing next to me. The iX3 and the technology of the NEUE KLASSE testify to our innovation and performance.

And it underlines that we are already ahead. Walter Mertl will explain in more detail how our strong operating performance is reflected in our financial figures. We will then take a look at 2026 with more new products on the way.

[Presentation]

Good morning, ladies and gentlemen. For the BMW Group, 2025 was marked by fully leveraging our operating model to deliver solid results in the face of the challenging environment. The year was heavily impacted by tariffs, developments on currency markets, especially in the second half of the year as well as the intense market situation in China.

In the face of these headwinds, we executed consistently on our strategy and took advantage of our flexible global structures. We balanced sales across our regions and our brands. We reduced R&D and CapEx, thanks to early investments in NEUE KLASSE, and we drove further cost reductions across the entire company.

With this, we were able to deliver on major KPIs in our operational business, a Stable Group EBT margin of 7.7%, the same as 2024 with Group earnings of more than EUR 10 billion. Volume growth to 2.46 million Group vehicles. The continuation of our electrification story with an increase in BEV share to almost 18% and xEV share to over 26% of total sales.

A electrified share in Europe of over 40%, a CO2 fleet emissions figure in the European Union of 90 gram per kilometer, 2.9 gram below the relevant target. An Automotive EBIT margin within our guided corridor, over EUR 3 billion free cash flow and solid capital returns.

As I promised at the annual conference 1 year ago, we have addressed all aspects of costs, R&D, SG&A, manufacturing and material costs to secure a consistent year-over-year reduction in every quarter. This amounted to an overall Auto EBIT tailwind of approximately EUR 2.5 billion for the year.

With our diligent management of the business, we have been able to offset a large share of the challenges we faced. Without the full year tariff burden of approximately 1.5 percentage points of EBIT margin, both our Group earnings as well as our Auto EBIT would have been above the previous year.

Let me now take you through our financial figures in detail. For the full year, group revenues totaled EUR 133 billion. Earnings before tax at Group level amounted to over EUR 10 billion as anticipated at Q3. This represents a single-digit percentage decline of 6.7%. The resulting Group EBT margin remained stable at 7.7% for the year, and earnings per share even rose slightly year-on-year.

If we look at the breakdown of the group performance by segment, the Automotive Segment delivered EUR 6.3 billion in earnings with an EBIT margin of 5.3%. Motorrad EBIT reached EUR 178 million with a margin of 5.7%. Financial Services generated EUR 2.4 billion in earnings before tax and a return on equity of 14.3%.

All 3 operational segments were, therefore, within their respective guidance corridors. Other entities improved to just over EUR 1 billion in EBT. The positive trend after 9 months continued into Q4. And finally, eliminations amounted to an EBT of EUR 629 million. This reflects the positive development in Q4 as anticipated.

Let's look at how the Automotive Segment performed across key metrics. Over the course of 2025, the BMW Group sold over 2.46 million BMW MINI and Rolls-Royce vehicles to customers worldwide, an increase of 0.5% over 2024. Looking at the regions, we see our global model at play as we steer effectively across geographies. As Oliver Zipse highlighted before, sales in Europe and the United States outperformed the market, delivering an increased market share and overcompensating the development in China.

We delivered a stable monthly run rate for the BMW brand of around 50,000 vehicles throughout the entire year in China despite the intense market environment. During the course of the year, we have taken actions to consolidate dealer structures and address pricing, which will underpin the stability in the market.

Excluding this Chinese market, global group sales in 2025 grew by 5.9%. Electrified vehicles are both a foundational pillar in our strategy and also a key growth driver, thanks to our expanding portfolio of attractive products. Oliver Zipse has already taken you through the figures in detail, but the highlights were a total of 642,000 electrified vehicles delivered in 2025, representing solid growth of 8.2% and an overall xEV share of over 26% and deliveries of all electric vehicles of 442,000 units for a share of almost 18%.

Revenues in the Automotive Segment came in at nearly EUR 118 billion, 5.9% below 2024. Approximately half of this decrease is due to negative currency effects. The remainder results mainly from global pricing pressure. Let's look at the year-on-year automotive EBIT result in detail coming from our previous year's earnings.

The net balance of currency and raw material positions resulted in a headwind of EUR 600 million. Negative trends in FX outweighed the slight positive effects from raw materials, particularly in the second half of the year. This adverse FX development is expected to carry into the first half of the current year, mainly in Q1.

Compared to 2024, the Net Effect of volume, model mix and pricing weighed on Automotive EBIT by a total of EUR 1.8 billion.

The overall mix effect was positive, driven notably by a strong share from the mid-class, including 5 Series growth as well as a record M performance. For the full year, pricing was a significant headwind of EUR 2 billion. In line with our planning, we continued to decrease operating costs in 2025.

As planned, we reduced R&D expenses following the peak in 2024 with a nearly EUR 800 million reduction year-on-year. SG&A savings represented EUR 900 million, continuing the trend from the first 9 months. Other cost changes amounted to a headwind of EUR 800 million. This development resulted from a few areas.

On the one hand, tariffs had a negative impact of approximately 1.5 percentage points on the auto EBIT margin. In addition, a softening market on residual values weighed on earnings. They remain positive but lower than the previous year.

On the other hand, warranty expenses were significantly lower year-on-year, as outlined at Q3. An additional positive effect came from a high 3-digit million saving in manufacturing costs and material costs. Overall, we reduced costs by EUR 2.5 billion for the full year through our active steering of R&D, SG&A and manufacturing costs and material costs.

Through this, we were able to offset all headwinds, except a portion of the approximately 1.5 percentage point tariff burden, resulting in a net year-on-year decrease of 1 percentage point in EBIT. In total, segment earnings in 2025 reached EUR 6.3 billion.

The automotive EBIT margin came in at 5.3%. Excluding the EUR 1.3 billion depreciation resulting from the PPA of BMW Brilliance Automotive, the EBIT margin reached 6.4% for the year. And that still includes the headwind of approximately 1.5 percentage points from tariffs. As you know, our focus is consistently on our reported figures.

Due to different approaches in the industry, however, consideration of PPA and tariff burden ensures better comparability of operational performance. Looking at R&D and capital expenditure in detail. We made early investments to implement our strategy, which we see as we look at R&D and CapEx development in 2025.

Group expenditure for research and development according to German Commercial Code for the year amounted to EUR 8.3 billion. This is a decrease of nearly EUR 800 million or 8% below the peak of EUR 9.1 billion in 2024. This translates to an R&D ratio of 6.2%.

Given the lower revenue, the ratio only declined slightly year-on-year. Group capital expenditure totaled EUR 7.2 billion, a year-on-year decrease of over EUR 1.8 billion from the peak of EUR 9.1 billion in 2024 or a 20% reduction. This resulted in a ratio of 5.4%.

The CapEx ratio, excluding right-of-use assets, came in at 4.9%. As promised, R&D and capital expenditure have already significantly decreased from the peak in financial year 2024. Despite the rollout of models of the NEUE KLASSE, we will maintain this trend going forward. This means in both absolute and relative terms, we are heading back towards our strategic corridors, which are 4% to 5% for R&D and less than 5% for CapEx by 2027. Moving to free cash flow. Total segment earnings before tax amounted to EUR 5.9 billion for the year.

Working capital contributed positively with EUR 900 million, mainly due to strict management of inventories. The net effect from capital expenditure and depreciation reduced free cash flow by EUR 2.3 billion. Changes to provisions had a negative impact of EUR 1.3 billion, mainly due to the utilization of warranty provisions.

Following the EUR 2.7 billion figure communicated at Q3, free cash flow developed positively in Q4 and reached EUR 3.2 billion at year-end. This was in line with our expectations of above EUR 2.5 billion for the year. Our financial strength is further underscored by our automotive net financial assets. At year-end, this came in at over EUR 44 billion.

Let's now turn to our Financial Services segment. As a key component of our BMW ecosystem, the segment consistently contributes to group profitability. In 2025, new business developed positively throughout the year with nearly 1.73 million new financing and leasing contracts concluded. This represents growth of almost 2% year-on-year.

The increase is due in particular to the positive business development in Europe as well as the changed competitive environment in China in the second half of the year. Since the end of June, the market situation has been influenced by the significant reduction in commissions from the local Chinese banks in connection with the brokering of financial and insurance products for end customers.

Penetration rates for lease and loan offerings increased by 4 percentage points to 46.6%. Overall, new business volume at Financial Services reached an all-time high, growing by 2% to EUR 65.8 billion despite negative currency effects.

Segment earnings before tax reached EUR 2.4 billion. The moderate decrease compared to 2024 is due to lower income from the resale of end-of-lease vehicles as well as tax payments related to changed assessments of operating taxes from previous years. Residual value remained positive but lower than the previous year. The credit loss ratio of 0.28% was within our expectation.

Return on equity for the full year reached 14.3% and therefore, within the guided target corridor of 13% to 16%. Ladies and gentlemen, in 2025, the BMW Group achieved Group earnings before tax of EUR 10.24 billion, thanks to a stable year-on-year profit attributable to shareholders of BMW AG amounting to EUR 7.29 billion, the Board of Management and the Supervisory Board will propose to the Annual General Meeting a total dividend payment of EUR 2.6 billion.

The proposed dividend represents a payout ratio of 36.6%, which is consistent year-over-year and in the upper half of our strategic target range of 30% to 40%. This amounts to a dividend of EUR 4.40 per share of ordinary stock and EUR 4.42 per share of preferred stock.

Additionally, we completed the second share buyback program in early 2025 before starting the third program after the AGM in May. The total from both programs amounted to a payout of EUR 1.25 billion in 2025. Our third share buyback program will run until April 2027. We are currently running the second tranche of this program with a volume of EUR 625 million for ordinary shares. That will be completed by August 31st, 2026, at the latest.

The third tranche is earmarked for after that. For the financial year 2025, the total shareholder return of close to EUR 4 billion, comprising the proposed dividend and share buybacks exceeds free cash flow in the Automotive segment. This further underscores our commitment to capital returns. That brings me to our outlook for the current financial year.

What are our expectations for 2026? In Europe and the U.S.A., we see some growth potential. In China, we have responded to the market environment by taking a number of steps to stabilize transaction prices. Average sales figures over the past few months indicate that sales in China could reach last year's level. Consequently, we forecast global deliveries of BMW, MINI and Rolls-Royce vehicles to be at previous year's level. Due to model cycle effects as well as shifting regulatory and market dynamics, we also expect the share of fully electric vehicles to be at the same level as the previous year.

Turning to Auto EV development. We continue to work diligently on reducing costs and we will see tailwinds from reduced investments, lower manufacturing and material costs, declining R&D expenditure as well as reduced SG&A in the 2026 financial year.

We anticipate a negative impact of approximately 1.25 percentage points from tariffs on the auto EBIT margin compared to the 1.5% in 2025. Given the significant investments made into NEUE KLASSE in preceding years, we will see a material increase in depreciation and amortization from both CapEx and capitalized R&D.

While we will continue to make significant reduction in R&D expenditure, the additional depreciation and a lower capitalization ratio, which is expected in the 30% area, will result in a significant P&L burden. Other headwinds in 2026 include FX and raw materials, the measures taken in China to stabilize transaction prices and finally, lower income from used car remarketing.

The reductions we will achieve on the cost side will not fully offset these headwinds. We, therefore, expect an auto EBIT margin in the corridor of 4% to 6% in 2026. The corresponding ROCE in the Automotive Segment is forecast to be between 6% and 10%.

In the Financial Services segment, we again anticipate a return on equity of 13% to 16%. Putting this all together, we expect group earnings before tax to be moderately lower than the strong result in 2025. The full 2026 outlook for all key performance indicators is available in the BMW Group report.

In addition, we expect the free cash flow in the Automotive segment at the year-end over EUR 4.5 billion. Ladies and gentlemen, for 2026, we will continue to systematically implement our strategic course, particularly with the launch of NEUE KLASSE product offensive, and the rollout of its technologies across the portfolio. We will leverage flexibility in our global business model to tackle the challenging and dynamic operating environment.

At the same time, we will manage our operational business with continued focus on cost discipline. This will enable us to deliver financial results in line with our guidance and generate strong return to shareholders. Ladies and gentlemen, let me pick up on Oliver Zipse's comments regarding sustainability and CO2 emissions before I hand back over to him.

For the BMW Group, we view sustainability holistically and as a competitive advantage. That is why we, in our annual reporting, disclose our sustainability performance fully to our investors and customers. In line with our strategy and our commitment to the Paris Climate Agreement, the BMW Group considers the CO2 emissions of vehicles, both for the new and existing fleet over the entire life cycle from raw material extraction and parts production to the manufacture of vehicles and across the use phase to the vehicles end of life. We address all stages of the value chain with ambitious targets.

However, European CO2 fleet emissions regulations focus only on the use phase and do not recognize the full reduction potential along the entire value chain. When it comes to reporting, emissions shown in sustainability statements do not always correlate to the actual generation of emissions of all vehicles on roads.

For the 2025 financial year, the BMW Group reporting includes all vehicles sold in the year across the life cycle, including the CO2 emissions from the supply chain for vehicles produced in the reporting year from BMW Group production, from the assumed use phase of 200,000 kilometers for vehicles delivered in the reporting year based on the consumption mix of the reporting year and from end-of-life disposal for vehicles produced in the reporting year.

However, the use phase emissions reported in line with European frameworks in 2025 do not consider all existing BMW Group vehicles still in use, but rather only those vehicles sold in the reported year. This means that the European reporting frameworks neglect the reduction potential of the existing vehicle fleet.

Here, there is significant leverage to quickly contribute to CO2 reductions through use of e-fuels and carbon-neutral fuels such as HVO100. Immediate credit should be given starting, for example, in 2027 for the CO2 reductions achieved using sustainable fuels, which should not be subject to limitations, such as caps on specific gram per kilometer values.

The European regulatory framework should reflect this holistic approach towards reducing overall emissions in the here and now in both the new and existing vehicle fleet because ultimately, every gram of CO2 saved counts. That is what we at the BMW Group believe and what makes a true societal impact.

I'll now hand back over to Oliver Zipse to provide additional strategic insights for 2026 and beyond.

[Presentation]

Ladies and gentlemen, looking ahead to this year and beyond, 3 key factors will be decisive. First, for our 2026 targets, the product lineup is currently available, which we have built up gradually over the past few years. And second, for this year and the years to come, the rollout of additional NEUE KLASSE models and integration of its technologies across the entire product range.

And third, the tech clusters of the NEUE KLASSE, which enable rapid advances and collaboration with leading tech players worldwide. Let's start with the first item. The company's current product portfolio across our BMW, MINI, Rolls-Royce and BMW Motorrad brands offers a range of premium options in all key segments from MINI in the urban compact car segment to Rolls-Royce in the ultra-luxury class.

At the beginning of this year, we added another highly exclusive dimension to our brand portfolio, BMW ALPINA. The long-established BMW ALPINA brand embodies a maximum performance and exceptional driving comfort combined with unique options for individualization. This makes it an ideal addition to our existing product range in the segment for individual, highly customized vehicles.

In this way, we are tapping into a highly profitable segment with great growth potential positioned above the BMW brand's top models and below our Rolls-Royce luxury brand. Overall, the BMW Group offers one of the industry most comprehensive and diverse premium portfolios.

A core strength of this lineup is our consistent focus on technology openness. We committed early to a market-driven mix of different drive technologies. With this approach, the BMW Group continues to chart its own course, enabling us to systematically respond to the diverse requirements of markets and customers well into the future. Because we choose this path early, making the necessary investments at the right time, we can now fully realize the market potential of our products. Today, we offer battery electric vehicles in all relevant segments. And by the end of the year, we will have a total of 20 BEVs across all brands.

This will further strengthen our competitive position. And at the same time, plug-in hybrids also remain important. And this is not just a bridging technology. For many people in all regions of the world, they are the only way to integrate electric locally emission-free mobility into their everyday lives.

Together with our range of highly efficient combustion engine, this approach provides maximum flexibility, ensuring that regional market opportunities can be consistently exploited. And this strong lineup lays the core foundation for the company's business success in 2026 and beyond.

At the same time, and that brings me to my second point. We are systematically building on our current advantage with the NEUE KLASSE. With the release of the BMW iX3, the market launch of the NEUE KLASSE has just begun. And this is only the start. Additional all-electric models with the new design and the innovations of the NEUE KLASSE will follow.

Another notable highlight will be unveiled next week when we present the BMW i3, the first variant of the next generation of the BMW 3 Series. The new i3 brings our NEUE KLASSE right into the heart of the BMW brand, prepared to be amazed by what the technologies of the NEUE KLASSE can do in a vehicle like the 3 Series.

I think it is fair to say that they take sheer driving pleasure to a whole new level. And here's a sneak preview of what we will be unveiling next week.

[Presentation]

Ladies and gentlemen, I am looking forward to presenting this incredible car to our BMW fans worldwide next week. And after that, we will meet again at Auto China in Beijing to introduce the Chinese version of the iX3 as the next NEUE KLASSE model.

We developed this vehicle exclusively for China together with our local R&D team in the market, ensuring that the product meets the specific wishes and needs of our Chinese customers. The result, the most Chinese car we've ever built.

Initial feedback from the local media has been overwhelmingly positive with Braze in particular, for its driving characteristics. The China-specific digital features have also been very well received. And then in 2027, BMW M will usher in a new era in the high-performance segment with the first all-electric M vehicle with racetrack capabilities based on the NEUE KLASSE.

Alongside development of the NEUE KLASSE, we've also created the essential conditions for rapid ramp-up with our supplier and production network. Production of the iX3 has successfully begun at our new plant in Debrecen. We will start production of the new BMW i3 at our main plant here in Munich in the second half of the year. To do so, we have completely modernized the plant during ongoing operations. And from late 2027, we will build only electric vehicles in Munich.

Production of high-voltage batteries will also begin at our new plant in Irlbach Strasskirchen in the second half of the year. And this facility will supply our plants in Germany with the sixth-generation high-voltage batteries.

Our plant cluster in Shenyang in China is also ready to build the NEUE KLASSE in China for China. And at our largest plant in Spartanburg in the United States, we are systematically modernizing the production system for the technologies of the NEUE KLASSE.

This also includes the new high-voltage battery assembly facility in nearby Woodruff. And across all plants in our production network, we are creating the necessary conditions to implement the technologies of the NEUE KLASSE as quickly as possible in all BMW models. Between now and 2027 alone, we will bring more than 40 new or updated models to the market. Each of them will benefit from the technologies of the NEUE KLASSE, always tailored to concept requirements and independent of the drive technology.

The best example of this is the next generation of our BMW X5. This summer, we will officially unveil the successor to our current model and the X5 will be the first BMW model to be offered with 5 different drivetrain variants with highly efficient conventional drives as a plug-in hybrid, battery electric and from 2028 onwards, also powered by hydrogen.

In this way, we are laying the foundation to successfully meet the diverse requirements and customer needs around the world, both today and in the future. And shortly before that, at the Beijing Show, we will be showcasing the first model update to feature technologies from the NEUE KLASSE the BMW 7 Series.

The result is an almost completely new vehicle. We're taking full advantage of the new possibilities from NEUE KLASSE technologies and raising our luxury sedan to a whole new level in terms of both appearance and technology. And this brings me to my third point, the technology clusters of the NEUE KLASSE and their potential.

With the technology clusters developed specifically for the NEUE KLASSE and our modular approach to technology, we can integrate market-specific functionalities and content into our vehicles. At the same time, we are strengthening our R&D capabilities to enable us to respond more quickly and flexibly to local customer needs and provide appropriate solutions.

In our key sales regions, we have already implemented numerous features in collaboration with leading local partners. For example, in the Chinese market, we are working with Alibaba, Banma to establish the next generation of intuitive in-car voice control.

In China, the BMW Intelligent Personal Assistant is also being expanded to include deep sea functionality. In most markets, including Europe, we will be integrating Alexa+ as the centerpiece of our BMW Intelligent Personal Assistant. Thanks to the advanced large language model technology of Amazon Alexa+, our customers now benefit from an even smarter, more connected and highly personalized voice assistant.

With our driver assistance systems, we continue delivering the best possible customer experience in each region tailored to local requirements. And to achieve this, we work closely with selected partners. And our guiding principle remains the same. We always strive for smart, symbiotic and safe solutions.

Last summer, we launched a new cooperation in China with Momenta, a leading local provider of ADAS technology. And outside China, we are collaborating with the American company, Qualcomm. Both collaborations focus on the co-development and integration of software that adapts to different road conditions, traffic scenarios and user needs, relying on state-of-the-art AI algorithms and data-driven methods. These examples highlight the extraordinary flexibility and scalability of our tech clusters. With a software-defined NEUE KLASSE, we maintain control over all systems and can deploy them simultaneously worldwide. And we are also able to rapidly integrate local technology stacks, giving our customers access to their preferred innovations and features.

Continuous over-the-air updates ensure that our vehicle software is always up to date. All functionalities are improved on an ongoing basis to permanently enhance the customer experience. Ladies and gentlemen, as you can see, the BMW Group remains successful and highly innovative. Our current product range is one of the broadest and most attractive lineups in the premium segment worldwide.

With the NEUE KLASSE and its technologies, we have secured a significant competitive advantage, and we will leverage these strengths to drive our economic success. However, it is also clear that our world remains unstable and numerous risks will persist in the current financial year.

We meet these challenges with strategic consistency and with market and opportunity-driven vision. Our global footprint in sales, research and development and production provides us with a foundation to mitigate uncertainties and respond flexibly to unforeseen events. And we will continue to build on these strengths in 2026 and of course, in the years to come.

Thank you very much.

So ladies and gentlemen, welcome back to our quarterly earnings call. Oliver Zipse and Walter Mertl are also back in the room with me. The line will be open shortly for your questions. The operator will first give you some technical instructions.

[Operator Instructions] Our first question is from José Asumendi from JPMorgan.

Oliver and Walter, I wanted to ask just a few questions, please, and they mainly revolve around China. And obviously, too early to give '26 guidance. But I was wondering with the upcoming product launches that you have and particularly Neue Klasse, do you think you can stabilize the business model and deliveries in China sequentially or even deliver higher sales growth in '26 versus '25?

Second, can you give us an update, please, where you stand on dealer restructuring in China? How far in the process are you in terms of, yes, reducing the number of dealerships and consolidating the dealer network?

Thank you, José. We start about China with Oliver and then Walter. Oliver?

José, this is Oliver speaking. Regarding China, I think what we see in China is a continued intense competition, and that has been influencing our sales volume also in 2025. But now we -- I think since September, we're kind of stabilizing on the current volume. It's about 50,000 units per month that is stabilizing. Also prices are stabilizing. But we see continued intense competition, of course, there. I think Walter will talk in a minute about the dealer restructuring.

But overall, I think the Neue Klasse will stabilize the business there. It will not come to the market early the year. It will be rather at the end of the year. So we will see next year about the volume of 2025. But looking at the product portfolio we have there from MINI over all segments of BMW and then Rolls-Royce, I think that will give us some form of resilience. And of course, the Neue Klasse, we will have a car there, which is adapted to Chinese needs. It's a longer version.

There's a lot of Chinese for China content in there. So I think we are ready to give good responses to a continued dynamic market. And -- but we will not see rapid growth in China next year, no, not in 2026; and 2027, we will have to see there. What is important that we are entering into targeted collaboration with Chinese partners. And I mentioned a couple of them. It's Alibaba, it's DeepSeek integration. It's Huawei, it's Tencent, it's Momenta. So what we see there that you will see specifically on the digital side, a lot more cooperation with our Chinese partners in China.

Thank you, Oliver. And Walter?

José, yes, as we mentioned, we stabilize on this roughly 50,000 units a month in China and the dealer restructuring network is part of it because we have to stabilize that one first, and we are well on track. We are more than halfway through. We will finish this restructuring by mid next year. And with every dealer restructured, we come in a more stable phase on the dealer profitability side, which is supporting and straight away our sales performance in the market. We have even established new locations with the dealers. We closed some of those.

We switched some from sales and service to service-only in order to maintain even our service setup and footprint. So I think we are doing everything in order to stabilize China. And like Oliver mentioned, we wouldn't expect growth next year and then the rest is coming then with the Neue Klasse from '27 onwards, and we shall see that one about the market dynamics.

Our next question is from Patrick Hummel from UBS.

I hope you can hear me. It's Patrick from UBS. A couple of questions. First of all, Oliver, I think you ended up with your prepared remarks saying you're looking into the future with optimism. And I'd like to pick up on that in terms of what that means for next year. We currently have a run rate in the auto EBIT margin in the second half of, let's say, around 5%, I guess, Q4, maybe even a little bit below.

If you think qualitatively about the key puts and takes going into next year, I appreciate today is not guidance day, but can you just elaborate a little bit where that optimism comes from and whether that's also optimism as far as the EBIT margin expansion year-over-year is concerned? Because I think we do have some headwinds year-over-year. Obviously, China had weakened during this year. We have some further tariff headwinds, I would assume we have some FX headwinds.

So just to better understand where that optimism comes from. And the second question is more capital allocation-related one. Your free cash flow guide for the year is now more than EUR 2.5 billion because of that almost EUR 1 billion of delayed refund of the overpaid tariff. I'm just wondering how that affects your thinking about future share buyback activity?

Are you just going to smoothen and sort of allocate the EUR 1 billion that's missing this year to this year so that you can still continue your share buyback with EUR 1 billion plus next year? How do you think about that timing difference we have because of the overpaid tariff this year in the context of share buyback in the future?

Good. Yes, we understand. Thank you, Patrick. We start with Oliver.

Patrick, I would like to start philosophically a little bit. Karl Popper once said, optimism is an entrepreneurial duty. Just imagine you are not optimistic about the future of your company. What would that mean? I leave that -- the answer of that question to you. But for BMW now, that optimism is not naive optimism. It's the result of a year-long strategy process, which gives us a lot of resilience. First of all, there's, of course, the Neue Klasse where we have all technology clusters on benchmark level. And the investment for that is mainly already behind us.

So that is what we have already done. And now we talk about the rollout of many new cars based on these technology clusters. If we wouldn't be optimistic after these high investments, which are already behind us, we would have done something completely wrong. Then, of course, on the cost side, we are continuously improving. We are below the 2024 levels already now substantially.

So we take advantage of application of AI in all processes, becoming more efficient at the same time, having efficiency as a core element of our entrepreneurial duty on top of technological competence. So that gives us all optimism. And don't forget, let's look at 2025. Europe was growing by more than 8%, United States by more than 9%, the Rest of the World by more than 10%. And if you only look at crisis or more difficult markets like China or supply chain issues, then this is not the whole story.

The whole story is -- we have a global footprint. We have a technology-neutral approach. We have a premium multi-brand strategy across all relevant customer segments. And we play the global market, which is growing, by the way, also all forecasts for the next 5 years, and you can read whatever source you want, there is a growing worldwide market on individual mobility. And that is where we think we are resilient for the future. And that gives us, of course, also some realistic optimism into the future.

Yes, Patrick, I can understand your arguments. And of course, China second half year was different than in the first half year, but we are still running and doing efficiencies against it. There will be a first half year impact and straight away, of course, I can understand this one. The same is with FX. It's also the impact in the second half year. Translation is different in the second half year than in the first half year. You know that all across the companies.

On the other side, tariff will be different as well in the first half year compared with the first half year of last year. And efficiencies, we just elaborated today that we also did a good work on that on all cost categories, having positive impacts between '25 and '24. So year-to-date, I even mentioned today around EUR 2 billion cost efficiencies across all cost elements, not just some fixed costs, but across everything, material costs, logistic costs, fixed costs in any kind. So these ones are also running positively on the other side.

And with respect to your free cash flow, of course, I can understand the discussions and your points with respect to CapEx and depreciation, this will be, of course, directionally positive. As we just stated, our CapEx is down. Depreciation will grow next year with the start of the production of our Neue Klasse, of course, depreciation is kicking in. On the other side, don't forget the efficiencies. But that will be also then, of course, positively for the free cash flow, not to forget, you mentioned refund of tariffs next year.

But this is a time gap between EBIT and cash. And of course, there is sometimes an effect positively as you just have provisions for, but at one stage, as we see on the warranty side on us, there is a cash out. So in principle, that is okay. On the other side, with regards to capital allocation, of course, we can't mention anything with respect to the capital allocation at this stage. So we will provide you, of course, with the annual conference and update.

But more importantly, I think, we stress that we have a strong balance sheet, and this gives us the ability to honor our capital allocation commitments in this dynamic year '25. And I think we underpinned that we said for this year '25, free cash flow automobile is not a cap, but we took this cap away, and we stressed in the ad hoc as well as in the speech today that we still stick to the 30% to 40% dividend rule we have. Even we are not having a policy, but we stick to our own rules. Thank you, Patrick.

Our next question is from Tim Rokossa from Deutsche Bank.

Max, Oliver and Walter. I'd like to follow up very quickly to that, Walter. So if I take the EUR 2.7 billion or so starting point this year, you have the U.S. tariff repayments, you have less IBS cash out, you have CapEx down. We are in the vicinity of something like EUR 4 billion to EUR 5 billion for next year, just knowing the building blocks that we know today. Maybe there's something you want to say on that.

And then to my 2 questions, please. On China, I think what was most surprising with the latest profit warning is actually how profitable you are still in China. So, so much about that validated optimism, Oliver. I fully agree with that. You have to be optimistic on that market. Some would say that your assumption about a flat '26 market is now again too optimistic. How can you give us some reassurance that we don't stand here and post the summer break '26 and have the same revelation that we had over the last 2 years, i.e., you still being too optimistic, assuming a flat market when in reality, it was probably trending down.

Is there anything you changed with respect to your quarterly assessments, monthly assessments, anything else, adjusting capacity and so on and so forth? And thirdly, probably to you, Oliver, as well or maybe Walter, we all talk about the German OEMs all the time. Every newspaper seems to sell better saying BMW has a problem. Mercedes has a problem, BMW is terrible and so on and so forth. When in reality, you guys have very globally diversified business models, you make money from all sorts of things.

And the real issue is on the supplier side in Europe and Germany, arguably. That also means more support from you guys for these suppliers. Is that something that we should preemptively put in our models every year now? Is there something that you see, Oliver, in your discussions with politicians is actually understood? How urgent the situation there is? Or is this just being totally ignored and everyone just focuses on the OEMs?

Thank you very much, Tim, for your question. I think we start with the first and the second one with Walter and then about the German OEMs, the answer will come from Oliver. Walter, please.

Tim, yes, I can see all the points, which I tried to elaborate with Patrick's answers on the free cash flow statement, yes. But of course, I can't give you any numbers. That is not the time to do so. But the topics, of course, I think I elaborated already answering Patrick's question. With respect to China and profitability thing and optimism, well, we do our homework. We differentiate our tasks and measures on the production side, but also on the sales side.

And I think we stressed it already today. We mentioned on the production side that we are utilizing our capacity flexibility -- flexible in all aspects. I can just underpin that the cost metric is a total different one in China than outside China. I mentioned that also permanent. And on the sales side, we are just in the middle of the consolidation, the restructuring and resizing these things. As I mentioned, we closed some locations. We opened even new locations. We downgraded some fully fledged dealerships to service-only in order to cover the customer support fields.

So we are doing all that stuff. And we are more than halfway through already now, and we will finish it by midyear '26. And with every dealership set up freshly and restructured, we will contribute to the profitability of dealers and hence, also to make it more attractive to sell fantastic BMW Group cars. So with that respect, I think we are still on a good track. You do know that we have been performing well in the first half year. And at the Capital Market Day, we had the discussion about groups, which impact is it all about with this commission statement changed.

But we shall see that even we have to consider some subsidies, which are differently now since October than in previous quarters coming from provinces and cities, and that will also come into effect one way or the other. So we're observing the whole market, and we cope with the dynamics with all instruments we have. And I think that should underpin our optimism. Thank you.

Thank you, Walter. Oliver?

Tim, I think, the industry -- and I don't like, as you know, the word crisis, but we are on the crossroads of something. And the crossroads means that the rules for competitiveness for OEMs as for suppliers alike are very similar. First rule is you have to have a global approach to be able to profit from technological advance from global supply chains and also from global markets. I'm adamant that this is one of the secrets of the future of suppliers and OEMs. The second is that you have to have some form of technology-neutral capability.

That means you have to be able to manage complexity to stay efficient despite the complexities, efficient in all your processes. And that means you have to be very close to your markets, which are super diverse. There is no one size fits all in market demand. So technology-neutral means you have to embrace complexity and at the same time, stay efficiently. And the third one is -- and that is very much linked to the global approach, you have to be on the verge of technological and innovation development.

And a lot of technology, they are not born inside Germany or inside Europe, they're born in a global context. Look at batteries, look at AI applications, look at digital capabilities like assistant or autonomous driving. And if you don't have a global approach to have connectivity into these technologies, you might run into competitive problems. And that -- to see that and discover that resilience means that you have to stay globally connected despite the fact that you might have disruptions in your global supply chain. And you have to read it correctly. If you think you become resilient to cut your global supply chains, I think, you're on the wrong path.

Our next question is for Stephen Reitman from Bernstein.

Yes. My question is also about China. You mentioned that, obviously, the cost base you have in China is very, very different from what you have in Europe, and I guess, even in your German plants and even in Hungary, I guess. What I was thinking what that means implications for pricing in China of your new products. We've seen your German neighbor Mercedes price their CLA based on their new electric platform at a very aggressive level at RMB 259,000, so very much like-for-like with the Tesla Model 3 Long Range.

Obviously, it's not a vehicle that directly correlates to the iX3 or the i3, but it maybe is a signal that there is a realization that one has to price at these kind of levels, which are quite different from where we've seen historically in the German autos price their cars. Do you have any kind of observations on that without necessarily revealing what your pricing strategy is in absolute detail is going to be?

Thank you very much, Stephen. Walter?

Stephen, well, we always have to differentiate the price and the volume, not just per se, but also which price we are talking about. We have MSRPs and we have transaction prices of the market. And the transaction prices are usually with the dealers because they're independent. And we have our net sales revenue, ultimately, how we are selling our cars and products to the dealers. And with respect to the transaction price deterioration since '23, especially since '24, Q2, we have given here and there more support to them in order to adjust the profitability. That's crystal clear.

And the whole transaction prices collapsed, in fact, in '24 for the whole industry, everyone across all segments, whether we have high pay or low pay cars. But still, the dominant growth in the market comes from cars up to RMB 150,000, that is the dominant growth year-on-year. Now with respect to our competitors' pricing, of course, we are having a look on which transaction price levels our cars are priced transactional price-wise currently. And we have our understanding how we utilize this one for us, how we set our MSRP or recommended price.

And you can see that also if you compare the predecessor of the current X3 in China and the successor, the current X3. So you see transaction prices slightly elevated, but not much. And I think based on that one, we consider all the dynamics, even our competitors trying to utilize whatever best. We learn from all of that, once we set the prices properly. And parallel, of course, with respect to our profitability, we are working very hard on all the cost levers with respect to material costs, but also with respect to production costs.

And don't forget, we fully consolidate our joint venture, BBA, whilst other competitors don't have this fully consolidated effects like we do. So we have a different revenue base. We have different costs in our balance sheet and P&L. So we can't compare straight away the P&L effects between us consolidating fully our joint venture partner in China and others just having them like they have shares in other companies and getting that as financial result. That is, of course, also to be considered. Thank you, Stephen.

Our next question is from Philippe Houchois from Jefferies.

I've got 2 questions, if possible. And I'll take your point, Oliver, about optimism and looking into 2026. I look at all the changes we've seen on tariff. And more recently, we've had no new proclamation from Trump on the 3.75. We're going to get tariff from the U.S. into the EU to 0. The CO2 pullback in the U.S. is a mix opportunity for you, I assume. And I'm just wondering, is there a reason why if we look at Western world, U.S., Europe, if there should be any incremental negative in 2026 versus '25 or if those changes kind of balance out into a more optimistic outlook?

And then my second question, then I'll be a pessimist. And it seems like the 10th of December is when we're going to hear from the EU about adapting their strategy. I look at this industry and everybody has a different view, a different agenda on CO2, on local content, et cetera, and -- rather than a unified approach that might give the industry a bit more weight in discussing with Brussels. So I'm just wondering, do you think that on the 10, we get a changed auto policy and then everyone will have to adapt or there will be a little bit of everything for everyone? So do we have a piecemeal approach, you'll be happy and -- or do we have a view that will favor you or the French or the Germans, the usual dividing in the industry?

Thank you very much, Philippe. Oliver?

Philippe, thank you for your question. On the tariff side, I would like to underline what we have said before. If you have a global business model, that is kind of a natural hedge you have. Take the example of BMW. Just for the sake of the argument, just assume that we're importing and exporting into the United States and into Europe about the same amount of cars. So from Germany into United States and from Spartanburg into Europe. Just for the sake of the argument, if that would be -- and that is about the case, it's the equal value of cars.

Then of course, before we paid the sum of 12.5%, 10% into Europe and 2.5% into the United States. Now after the conclusion of the deal with the United States, with 15%. So it's an increase of 12.5% to 15%. This does not destroy any business model. And this effect that it almost doesn't change despite the fact that locally, we have different taxes means that a global business model kind of protects you against these changes. And that is even more true when both markets grow.

As I said before, Europe grows by more than 8% in the first 9 months and the United States grew by more than 9% in the first 9 months. So it's kind of even a stabilizing element. But I think what is even more important that a global business model and international corporation is at the core of everything industry must do. And they must do everything to get also political support for global trade and to tell what the guiding principles of this trade is. And we have to reduce trade barriers instead of increasing them.

And if you look, for example, at what we see in the semiconductor industry, at the core of it is not an industrial problem. It's the inability to talk to each other on an eye-hide level. And that is why we said we have to reduce trade barriers, not increase them. I come to your second question. What we really fight for is a new regime in the CO2 regime for 2030 and 2035, away from tailpipe only all the way to life cycle assessment that we take all CO2 effects we see in our industry into account. And that we are confident that we also achieve currently the 2025.

And I can also tell you '26 and '27 will not be different that we will achieve our targets despite the fact that they are more strict now in 2025. And I think technological neutrality is very crucial. And I think a piecemeal approach is exactly the wrong way. As long as you stay tailpipe only, it doesn't help you if you allow some e-fuels in it and also allow plug-in hybrids. That is not enough.

That is not enough to give an industrial valid proposal for CO2 reduction, which keeps the industry in its size, which doesn't shrink markets. I think it's very important. And all we achieved so far gives us credibility in our position. And we think we have to get away from tail-pipe only measurements. This is the most important request we have from policymakers. Thank you.

Thank you very much, Philippe. Now we know Oliver is responsible for optimism. So thank you.

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

Yes. And I hope you can hear me. On this optimism, just I remember to one of the BMW meetings that was, I think it was 10 years ago. There was a joke made. What does a German who sees light at the end of the tunnel, he extends the tunnel. But that is not my question. And I think you have got clearly a different stance, Oliver. My questions are more related to Europe, a region where you performed strong, which is a good region for you at the moment. Maybe you can talk a little bit about the order trends and price trends that you are seeing.

The background of my question, as I said, we see at the moment that one of your peers is running this significant model launch of [indiscernible] and, of course, tries to take market share. That's also what the company targets suggest of this peer. So I want to know if there's any impact that you see in the market from that, which could hurt you.

And then the second question also related to that is you said that iX3 got off to a very good start in terms of orders. Do you see some cannibalization that people switch, let's say, from the iX1 to the iX3. In general, do you see that competitors also react to your very competitive pricing that you have said, the pricing that you can afford because of the Neue Klasse concept. But do you feel also in that context that maybe in 2026, there's very strong competition in the European EV market just because every peer tries to sell the model at the same time?

Thank you very much, Horst. Oliver?

Horst, it's not new in the last 10 years that there's competition and everyone tries to fetch market share from the other competitors. This is -- I mean, this is the essence of this industry for many, many years. And as I said, in Europe, we grow in Europe together with BMW and many faster than the market. So we are one of the peers who are taking market share. And by the way, I don't have any problem if the iX3 cannibalizes the iX1, it's okay. It's completely okay. I mean, it's a more expensive product. And if that is happening, it's fine.

And the iX1 is currently completely sold out. It's produced in our Regensburg plant. The Regensburg plant operates absolute on its limits on a 6-day week, 3 shifts per day. It's completely sold out. So I wouldn't have any problem with that kind of cannibalization when a higher-value product cannibalize the lower value product. That's okay with me. And of course, there's a very strong competition in the EU market, EV market. We know exactly the point where we stay in the market and when we leave the competition. We know exactly the point where we do that.

And of course, you can adjust your prices, but you must know in what kind of business model we are working on. And if you look at our results, especially on the group side, I think we do that in that competitive market quite well. And at the end of the day, we still have a very, very solid business model. And I think with our full lineup of combustion engines, plug-in hybrids, BEVs and diesels, we are perfectly set up for the European market also for 2026.

And that means that you expect an increase of sales, especially on EVs clearly in 2026 also in Europe. You made the statement on China, but for Europe, clearly, you should aim for an increase and higher than the market growth, right?

You hear me silent because we are not at the time of the year to make any prognosis.

Yes, that's fair.

But I remain optimistic, yes. Yes. Yes. Overall, yes, I do remain optimistic.

So optimism is the word of the day. Yes.

Our next question is Anthony Dick from ODDO BHF.

Yes. My question was around the costs. So firstly, regarding the comment you made about costs being lower in Q4. I was just wondering if that should affect the usual seasonality we usually see with Q4 being a weaker quarter from a margin perspective. And then -- so we've seen some important labor force reduction programs at your peers, especially in Germany. So I know this is not really usually the BMW way, but I was just wondering if you were also considering such measures in light of the circumstances. And just more generally, also, could you elaborate a little bit in terms of what you're doing on the cost side of things and how that will carry through 2026?

Good. Thank you very much, Anthony. We start with Walter about the costs in Q4.

Anthony, it's about the costs. I didn't mention anything about Q4. So of course, not. But I elaborated on in the quarter and year-to-date and optimistically, as this is the time for, we cut our costs in the quarter year-on-year by more or less EUR 1 billion. And year-to-date, I mentioned more or less EUR 2 billion. So year-on-year, Q4 will be also lower. That is a lower aspect year-on-year.

But in the quarter 4, there is usually seasonality that the highest fixed cost we have in the quarter 4, but not year-on-year, that is still the lower aspect. I hope that makes it more clear. So seasonality is still there. The labor force reduction, I thought we explicitly mentioned that. So we have this impact that we reduce it in total, but I have to stress again, we utilize the flexibility also in China where we have fixed-term contracts in our joint venture.

And once they expired, they haven't been renewed. And that brought it down to a slightly below previous year. If we have a look outside China, we would still guide this previous year's level. But we are just utilizing the flexibility all over the place. And as we had to adjust with our prediction, the Chinese numbers, that's automatically the consequence.

And with respect to costs, I'm happy to repeat myself thousand times. We just utilize our costs and organize that they are coming down, whether we speak about material costs, CapEx or any of these fixed costs, but we have no program. We have no cost program like other ones mentioning. At one stage, I mentioned even should you need a program, eventually, you need external help. And we are not utilizing external help because we just do our homework on all cost elements. Thank you.

Our next question is from Stuart Pearson, Oxcap Analytics.

Just a couple left. I mean just noticing your, I guess, silence or reluctance to answer Horst on the xEV mix in Europe next year. I just wonder, given your -- I mean, you're not just on track to meet your CO2 targets this year, you actually might beat them a little bit. Do you really need to increase xEV mix in the next couple of years? You're already around 40% year-to-date in Europe, market is around 30%.

So I wonder, is that really a goal to keep pushing that mix higher? Or could we see you rather take the benefit of fresh EV product pricing and margin? And conversely, if you were to increase your xEV mix and hence improve your CO2 significantly in the next couple of years, could we even see you think about selling your services in a pool to another carmaker and monetizing it that way? So just a question on xEV in Europe.

And the second one is also xEV, but over in the U.S., where xEVs were around 25% of your Q3 sales. I wonder if you can share what proportion of those were benefiting from the subsidy via the leasing loophole that's now being removed and how you see the U.S. market post that? And Mercedes was talking about U.S. still being a growth market. Obviously, it was tough in October on the overhang -- but so -- hangover, but I just wonder how you expect to see that in the coming months and into next year.

Okay. Thank you very much, Stuart. We start about the xEV in Europe with Oliver and then the U.S. with Walter. Oliver?

Stuart, we have this very strange regulation in Europe that you only have a stepping function every 5 years. So between 2025 and 2029, the targets remain the same. So our mix in 2025, where we increased the BEV sales by more than 10%, almost automatically gives us the leeway to reach the CO2 targets. And now with the new product lineup, also the Neue Klasse, the ramp-up of MINI and so we will almost automatically reach our targets in 2026 because the target stays the same as in 2025.

And by the way, that's also part of our proposal to the European Union to do a continuous improvement process that the CO2 targets are [ adapted ] every year and not only every 5 years. So we are kind of quite relaxed about the 2026 targets on the BEV side. Will it increase? The market will show, Stuart. I don't make any prognosis on the BEV market in 2026. We follow the markets. We look for market share. And if that is with EVs, we follow it. It's very simple.

Thank you, Oliver. Walter?

Stuart, with respect to the -- yes, we have a lower EV share than we utilized in Europe, and we all understand why. But we're still running on roughly 14%, 1-4. So the other way around in Europe xEV. With respect to the benefit of the support up to end of September, we utilized the IRA aspect in all relevant numbers.

And with this respect, we see also if you have a look for auto data, for example, that even incentives came down. Don't forget Auto-Data includes the IRA impact like tactically support despite the fact the government paid for in the past up to end of September. And our share was always higher than traditional competitors of us.

So it automatically, you see incentives coming down even month-on-month or quarter-on-quarter. You can see that in Auto-Data. And with respect to the coming months, well, we saw that in the month of October, the whole BEV market was a bit lower than previous months, especially September, where the run on off was more or less coming in.

And then we shall see. I guess it's too early to speak about trends or whatever, that will be seen in November and December, but we are still selling good EVs in the U.S. Thank you.

So we come to our last question.

Our last question is from Michael Tyndall from HSBC.

Mike from HSBC. Just a couple, if I can. Walter, can you help me with a little bit of math here? So if I look at your EBIT walk, the other bucket was EUR 1.2 billion. I think you said that tariff was in there, so that's roughly EUR 500 million. So we've got other at EUR 1.7 billion. If I'm not wrong, IBS cost about EUR 800 million last year. So we've got the reversal of that. And there were some other issues in 2023, again, if I'm not wrong, on airbags and such. How much was warranty of that EUR 1.7 billion? Because I'm trying to understand when I think about Q4, how much of that continues on into Q4?

And then the second question for Oliver. You've very kindly done a lot of work explaining Neue Klasse to all of us. And I just wonder how does that translate to consumer awareness? Very strong orders for the iX3. Are customers aware of what a big change this is? Or are they buying it because they like the way it looks, the way it drives? I guess the answer is all of those things. But I'm curious to know how you can actually raise consumer awareness about this big change that you're making?

Good. Thank you very much. Walter?

Michael. Well, I hoped that my speech was quite clear. But again, happy to speak about. It was not about '23, it was about '24, first of all. And in '24, in the quarter 3, we had a high 3-digit million provision for the warranty cases, a high 3-digit million. Then with respect to this 1 and 3 quarter EBIT hit year-on-year based on additional tariffs, that is a mid-digit level.

So that altogether, that's what I mentioned on the one hand and on the other side, that is still positive. But the majority of our improvements were then running on material costs and manufacturing costs and direct costs like logistics, for example. So altogether in the quarter that all came in. That was this EUR 1.2 billion bucket.

Michael, concerning the Neue Klasse, I think during the IAA here in Munich, we created a huge media awareness of the car, what it is, how it looks, how it's used, what the innovative features are in it. And on top of that, in the coming days, journalists and other key opinion leaders will experience and test the series vehicle. And I think the core of the car is how it drives.

And we -- whoever drove the car said, well, I've never experienced anything like how it drives, how synergetic the assistant functions of the car, interact with the driver and the physical properties of the car. I think that is new. And of course, we're going to pinpoint it. And at the end of the day, people buy on design. And we think with the new design language we created for BMW, we hit it right on spot that people love what they see. It's a new, sleek, very modern language we have here, and that will attract more customers.

Thank you, Oliver. Ladies and gentlemen, now we have reached the end of the telephone conference. Thank you for your optimism to us and for your questions. All the best to you. Bye-bye and [Foreign Language] from Munich.

[Interpreted] Colleagues, we shall now turn to the second part of our quarterly conference, and we'll continue this in German with interpretation. As always, you get some technical information before we take the first question.

[Interpreted] Ladies and gentlemen, we're now beginning the Q&A session. [Operator Instructions] The first question comes from Christina Amann, Thomson Reuters.

[Interpreted] I have a couple of questions. I'd like to start with Nexperia. I bet that's the question most will ask. What's the supply situation with semiconductors? What are the perspectives for production? What are the perspectives in the short, mid- and long term? What is BMW doing in order to solve that situation?

Second question. Regarding investments, Mr. Mertl, you said that investments will be reduced according to plan, both for development and for production facilities and similar. So could you explain that a little more?

Since in that context, now I look into the U.S., tariffs are an issue for BMW. Is repayments outstanding a reason for your lower forecast? What are the steps BMW had taken in order to improve the situation? Are you planning to relocate more production into the U.S.? And now a first glance into the year 2026, what are the prospects for that year?

[Interpreted] Thank you, Ms. Amann. I guess that covered pretty much everything that we need to answer today. Let's start with Nexperia, Mr. Zipse.

[Interpreted] The question is not entirely unexpected. But let me answer strategically. In global -- being at home in global supply chains, I mean, that's something we've practiced twice, once during corona and then during the semiconductor crisis 2.5 years ago. So it doesn't really hit us as a surprise.

To get back to this particular case, all I can say is that we are in close contact with our direct and indirect suppliers, the ones further down in the supply chain. And we continue to assess the situation.

So we do this several times a day in order to identify potential supply risks early and if necessary, to then take required or appropriate measures. Currently, production in the market is going well. But it is a volatile situation, and this is why we are making use of all possible measures to keep up our production as good as possible.

What is important, Nexperia is not a direct business partner of the BMW Group, but it supplies our direct suppliers and we support them in validating and activating alternative supply opportunities. Thank you for the question.

[Interpreted] Then part two, investment. Walter, please.

[Interpreted] Our long-term plan had been planned early. So from -- we were able to talk about that investing in 2020. And a peak is a peak and it's not our level. So it's always been clear that in 2025 and '26 and '27, we would gradually reduce that back to our strategic corridor. And that's reflected in our actual figures. We've done our homework. We've had to invest in CapEx and R&D, and we carried that out.

Now regarding the tariffs, the requests or the applications for refunds have already been filed. Otherwise, we continue to optimize the way that we had announced in the last 2 quarters as well, and we're doing everything we can in order to reduce costs for 2026. Well, we'll talk about that next year, March, at the balance sheet press conference. Thank you.

[Interpreted] Okay. Let's take the next question.

[Interpreted] Next question, [ Christoph Meyer ] from dpa.

[Interpreted] I can take it from there, the refunds. The applications you filed, what are the quantities we're talking about? How much will you be refunded? Then another question relating to figures. The support for dealerships in China, can you give us a dimension here, an idea? How much did that cost you?

[Interpreted] Thank you, Mr. Meyer. Walter Mertl, please.

[Interpreted] Well, the application for tariff refund, we filed it. We do it once a quarter. We file that retrospectively for August and September. Since end of September, the most recent tariff applies 50% in the U.S. and the other refunds for production support at 3.75%, we can also file an application for a refund of that. And as you know from our ad hoc guidance, we're assuming it's a high 3-digit million amount, if you add up all of them, be it refunds or payback of over-payments.

And then you asked about support for dealerships. That's a low 3-digit million amount to clarify this and profitability and liquidity as well as operations can this way be maintained in China.

[Interpreted] Thank you. Next question, please.

[Interpreted] Next question, Stephen Wilmot from The Wall Street Journal.

Firstly, just a quick yes or no one on the Nexperia situation. Are you seeing an easing of a situation now or not? And then secondly, just wondering if you can give a bit more guidance on the outlook for tariffs going forward. So 175 basis points in the quarter, 150 for the full year. Do you -- I mean, is the 175 the new normal? Or do you expect the impact to come down as you head into 2026? So yes, those were the two questions.

[Interpreted] Well, Stephen, as we already said earlier, we're in close contact with our suppliers. And we are really continuously assessing the situation in order to early identify potential supply risks and then to take suitable measures. So this is something that's happening on a basis of several times a day.

But what's also important to us, and this is what we already talked about earlier. And to add to this, we are welcoming the positive signals coming from politics. So we're explicitly welcoming those. I think it is very important that all stakeholders in the economy and politics are aware of the fact that these are global supply chains.

And they will remain global even if you take hedging measures, you will, especially in the semiconductor industry or the battery industry, no matter how you position yourselves, if you've got several suppliers, I mean, there will always be some remaining dependency and this is why we welcome it very much if politics recognize that, especially here in Germany, we do have these global dependencies and they also have a lot of benefits.

[Interpreted] Thank you. Maybe Walter, the outlook regarding the tariffs.

[Interpreted] Well, as I've said in my presentation, we're assuming 1.75 percentage points impact for the entire year. And of course, we're expecting that everything has been translated into laws that's been announced. So we're assuming also in terms of from the EU, we're expecting that the 0% import tariffs from the U.S. into the EU will then be ratified and confirmed by the parliament. That's what we're assuming is going to happen.

[Interpreted] Thank you. next question, please.

[Interpreted] Next question is from Joachim Herr from Boersen Zeitung.

[Interpreted] I have two questions. Mr. Zipse, again, on Nexperia, you said in earlier cases, you were able to practice in Corona and also during the semiconductor crisis or where we have these bottlenecks. Can you briefly explain what you've learned from that? Or how you are able to better handle the situation this time?

And the second question on China. Sales in China, minus 11% in the first 9 months. So that's below your expectations. How do you react to that? Are you going to lower the capacities? Are you reducing headcount as well? So how do you deal with that in terms of production?

[Interpreted] Thank you. Let's begin with Nexperia, Oliver Zipse and Walter Mertl.

[Interpreted] Well, what I mean by that when I say we have been able to practice all supply chains with BMW begin with a commodity or with a mine and then there's processing stages happening somewhere in the world. And then we've got the first levels of aggregation, the first refinements. And then until the very end, this reaches our first-tier suppliers. And we have a high degree of transparency now regarding all components of the vehicle.

So depending on the type, there's between 12,000 and 18,000 individual components involved and we now have a pretty good overview of the value chain. And this is why we know very early when there could be a bottleneck. And before that even begins, we can either increase our inventory already or we can try and be more flexible.

Do we always succeed? Obviously, not because there's just too many competitors involved. But in a case like Nexperia, I think we are fast enough. It's also about speed, about acting quickly because when we can act quickly, then we can minimize the effects. Well, of course, we cannot entirely escape the situation. But as I said earlier, at the current point in time, our plans are all full up and running and everything else remains to be seen.

[Interpreted] Then sales in China, Walter?

[Interpreted] Well, if you look at the development of the quarter compared to the previous year in China, then you will see that in Q1, there was a decrease by 70%. Second quarter was about 15%. And now third quarter, 9 months, we're at 11%. So gradually, we're doing less values, to put it that way.

So what are we doing? Well, we're just about to rightsize our dealership network so we're consolidating it and we're restructuring. It doesn't mean that we're closing certain shops, but we're also -- we've got some user service locations. We've also opened up new ones.

And we'll be done with all of that by the middle of next year, so much on the sales side. And that obviously helps to increase or support dealer profitability. And that way, we'll be able to sell more. And with Neue Klasse, I'm sure they'll do a great job.

And now in terms of vehicle production, of course, we've got a tight grip on costs. And in terms of headcount, we've got fixed term contracts in the joint venture and depending on capacity, these contracts will either expire or they will be renewed. So we can handle everything quite flexibly both in sales and production.

[Interpreted] Next question, please.

[Interpreted] Next question. Felix Stippler, Handelsblatt.

[Interpreted] I've got two questions on Neue Klasse. Mr. Zipse, in your statement, you said demand is already exceeding expectations. Now I'd like to know what were your expectations and by how far were they exceeded? And then Mr. Mertl, you just mentioned China and Neue Klasse. Well, what do you expect? How much less bad would it be because of Neue Klasse?

And then I've got two general questions regarding the state of the automobile industry. Volkswagen and Mercedes, they've got pretty bad figures. You're appearing a little more stable. Are you still worried about the state of the German automotive industry? And if you look at the geopolitical situation and sales in China, do you think that European carmakers will have to bet more strongly on Europe where you also grow strongly?

[Interpreted] Thank you, Mr. Stippler. I think I'll pass it to Oliver Zipse.

[Interpreted] Well, with Neue Klasse, our plan was with the iX3 to set a new benchmark and the feedback and customer interest is really huge. It's very positive. This concerns the entire concept, but also individual performance data, the design, the user contact and this is also reflected in orders in Europe. They are well above our expectations.

For example, 1 out of 3 orders received September in Europe was an iX3. I mean, you get the idea. We've got 15 all-electric vehicles in our portfolio right now. And in the next few days, the first [ multipliers series ] will be tested.

And there will be comprehensive reporting, which will give us additional tailwind, but that is not supposed to be the end because in 2026, we'll also be celebrating the BMW i3, not the iX3, but the i3. So that will be the next premier, and we're just electrifying the heart of BMW or we're continuing on that journey.

That is -- do we need to be worried about China? Well, let me combine that with the question about China. You see, Neue Klasse, because it's a global product, sure, Neue Klasse will also be available in China. It will there be enriched by digital solutions that are made in China and for China with the partners we have there.

So it will be pretty much of a Chinese product, it will be a long wheel-based version. So we're not really that much worried that there won't be any demand for that product. Now on the contrary, what you're seeing in Europe now, we're expecting the same to also happen in China.

Do we need to worry about the German automotive industry? Well, well, it's not our job to be worried. It's our job to look for attractive products and cater for the markets. And I gave you the figures before. And in Europe, we're growing by almost a 2-digit growth rates, and we're gaining market shares.

So that general concern for everything in the automotive industry, I don't think you need to be generally worried, but obviously being competitive in that environment, speed, momentum in adjustments, that's what's now more important than it was a couple of years ago. So you just have to switch up the gears.

And do European OEMs have to bet more on Europe? Well, it's always going to be strong in your home market. You can see our growth here is the strongest apart from the U.S. and the rest of the world.

The home market always has a very special meaning, but that should not lead to a picture where we should actually withdraw from other regions. I mean, the overall picture shows if you want to be resilient, you have to be strong in all regions. And for BMW, that has always applied and it will also apply in the future.

[Interpreted] Thank you, Oliver. Thank you, Mr. Stippler. Can I ask for the next question, please?

[Interpreted] Next question comes from Frank Volk from Automobilwoche.

[Interpreted] In connection with Nexperia and the dependencies battery technology, rare earth, I have a question on global supply chains. In connection with localization, I mean that's been a success factor for BMW. Question is, has that system now reached its limits where you're becoming vulnerable in terms of industrial policy.

As you've said, there's always been supply bottlenecks and we can handle those. But doesn't it now have new quality how that is used as an instrument in global politics? How can you better prepare yourself for that? I think you also mentioned this in your statement that you want to increase your flexibility in the supplier network. Can you give us some insights in which direction this might be going?

And then a question on the EU block. Do you have any hope that your voice will be heard in that context, that the EU will actually postpone that final date? What is the status of the negotiations there?

[Interpreted] Thank you, Mr. Volk. We've understood all of your questions. I'll pass both questions to our CEO, Oliver Zipse.

[Interpreted] Now Mr. Volk, the dependencies, maybe you need to ask that question slightly differently. How do you best get by having these dependencies? We depend on all sorts of things. We depend on politicians, on supply chains, global value flows. But ultimately, we also depend on our customers. So the question about the dependencies, for me, that I always -- I tend to think why do you even ask that question.

We depend on all sort of things. And the core is who is best in managing these dependencies in such a way that it turns into a profitable business model. The question is not how do I reduce dependencies, but the question is how do I make use of them, so in the end, I have a profitable business model, some -- a business model that's resilient and future oriented.

It essentially means you need to manage your dependencies. You will never be able to get rid of them. That's not possible. In the supplier side, if you run into situations where there's a monopoly, then you have to make sure that you turn the monopoly into an oligopoly. So instead of one, you need two or three partners.

And the political dependencies, you need to talk to people and let me combine that with your second question, CO2 regulation, which only looks at the tailpipe and they're hoping to bring this down to 0%. And this does not reflect -- it doesn't reflect the reality. It will actually lead to the opposite. I don't think this will achieve any substantial CO2 reductions because the customer -- and the customer, that's the greatest dependency we have.

The customer always has the possibility to just continue driving their old car. But I think with the life cycle approach, we've actually chosen a very good approach, and we can be much faster if we manage this type of dependency in a better way, Mr. Volk, and then the dependencies, especially when it comes to semiconductors, when it comes to cloud-based digital services, when it comes to batteries, all that matters is to make these more resilient.

Reducing these dependencies would directly lead to a situation in which we can no longer innovate and in which we would no longer be competitive. And if you don't recognize this, then you probably have a greater problem in taking your successful business model into the future.

But what's also important for me is that you recognize these dependencies, and this brings me to the Brussels regulations. Then I will not take that technology as the only admissible technology where I have the greatest dependency. I'm talking about dependency in terms of batteries because most of that is outside of Europe. So presumably, that's the largest step you can take. Don't just bet on one horse, and this also applies to politics.

[Interpreted] Thank you, Oliver. Thank you, Mr. Volk. The next question, please.

[Interpreted] Next question is by Sebastien Ash from Financial Times.

Thank you for the information you've provided with to us so far. Mr. Zipse, you fairly strongly criticized the idea of stronger regulation of corporate fleet emissions in the European Union. And there seems to be almost being prepared as an exchange for a weakening of the 2035 target for consumers more generally.

I mean, could you just give me your thoughts on how you would see or how you would look at a situation in which on the one hand, 2035 was weakened, but on the other hand, the corporate goals were strengthened once again.

[Interpreted] Thank you. Oliver, please.

[Interpreted] Thank you for the question. Now to clarify this, we're not asking for the targets to be weakened. We're asking for a different regime as to how these targets can be achieved. The way we put it, these targets can be achieved much more easily if they don't just focus on tailpipe emissions, and this applies to the fleet as well as to private cars.

Because currently, all that's done is they're measuring tailpipe, but that's wrong because it leaves out of account all other possibilities of reducing CO2 within that regulation. For example, it doesn't matter if today, an OEM buys green steel, that's not part of today's fleet regulation. It's irrelevant. And we believe it is important.

I mean, the greening of supply chains, where does the green power come from? That should be part of that regulation to provides incentives. What we are asking for is a new regulation that is more effective and greening the fleet. I mean, which is pretty strong -- it's pretty strong in Europe.

In almost all major European countries, there's very large vehicle fleets. And to prescribe in that field which technology has to be applied regardless of the framework conditions is at least as wrong as the tailpipe regulation. The better thing to do would be to prescribe that CO2 regulation such that you need to have improvements every day. And then the reporting CSRD that should be combined with the fleet regulation.

BMW Group today already reports its Scope 1, 2 and 3 CO2 reductions and the success we have. We're continuously going down. All forecasts show that we are dramatically reducing our CO2 footprint Scope 2, 3 in upstream. But usually, that is irrelevant, although we're reporting this. So that is, in a way, a little absurd.

You're reporting something, but it has no effect. And we just want to combine those two in this way to arrive at a much better solution instead of having single solutions and the current regulation on the corporate fleet actually achieves the opposite because it prescribes something. In that case, it tells companies what they have to do, regardless of whether the CO2 reduction is actually happening or not.

[Interpreted] Thank you, Oliver. We've now got three questions left. So next question, please.

[Interpreted] Next question, that's Regina Ehm-Klier from Passauer Neue Presse.

[Interpreted] I have a question that relates to becoming climate neutral. Debrecen is the first fossil-free plant. Will further sites follow? Have you got something in the pipeline here?

And next question is about less costly models. There's -- people say that German cars are too expensive. Is BMW working on a more low-cost alternative?

And then, next question, that's about the dealer network. BMW wants to switch to an agency model. Is that still what you're planning to do? Or are you going to postpone that?

[Interpreted] Let's begin. Thank you, Ms. Ehm-Klier. Debrecen and more inexpensive models, and then the agency model that will be Walter Mertl. Oliver, please.

[Interpreted] Well, Ms. Ehm-Klier, I explicitly like to thank you for your question. Debrecen is the first fossil-free plant with clearly reduced CO2 emissions and targets also. And these targets, well, we've got those for every existing site. And I like that question because the reduction that we're doing there, by the way, we're doing that in our own free operation because we are really convinced climate protectors.

But this has no effect on the fleet regulation. You understand whether we do this or not, except for the fact that we're reporting it, it has no effect whatsoever, and this is why we are asking for a new regulation so that something like Debrecen or something what we do here in Munich where we're switching entirely to electrified vehicles that this actually has a value and something that's reflected.

So if somebody makes more efforts, you should have a higher chance to avoid a possible penalty payment. So thank you so much for your question. And as you know, we're right on track for fulfilling all of the targets, Scope 1, 2 and 3, including CO2 fleet targets. So we're really doing extremely well.

Now less costly models. Well, they already exist today. The all-electric ones and the hybrid ones and also the ICEs, that's the MINI brand. The MINI brand is highly attractive. And the only thing that makes these cars expensive at the moment is a penalty custom tariff of more than 30% for the parts of the cars that are manufactured in China.

The European Union artificially make these cars more expensive. And that is obviously to the detriment of the consumers. That's why we think that this regulation is highly detrimental to our customers, namely to be able to offer low cost or more inexpensive cars to our customers.

[Interpreted] Then the status of the agency model. Yes, happy to answer that. Because with MINI direct sales in Europe, we started that quite successfully in January 2024. And the last European markets to go -- went live this year, in the summer of 2025. And this is quite successful. All is going according to plan.

In the first 6 months '24 some fine-tuning was still necessary. This is why it was a staggered go live, and this is a successful concept that we will also roll out for BMW. It will take a bit of time. We need to upscale it, and we need to prepare the contracts, finalize them for BMW. We will also introduce that in Europe.

[Interpreted] Next question, please.

[Interpreted] Next question is [indiscernible] from [indiscernible].

[Interpreted] I hope you can hear me.

[Interpreted] Yes, we do. We hear you.

[Interpreted] Actually, it's two questions. Is there already a price for Neue Klasse in China? And if not, could you just give us an idea of what the price will be? And then on steel, tomorrow, we'll have the Steel Summit in Berlin. What are your expectations?

[Interpreted] Okay. We'll begin with the Steel Summit.

[Interpreted] Well, the Steel Summit is something we welcome, of course. We welcome that politics has now recognized that supply chain resilience, competitiveness, that all of these are so important for central industries such as steel, but also chemistry or the automotive industry is highly relevant. So that's why we welcome this discussion.

Of course, you need to protect yourself from competition, but that doesn't mean you shouldn't do everything you can in order to stay competitive. And I think we need to continue to work on that. The industry, as such, it applies to us also. But we need to have -- despite difficult framework conditions, we have to remain competitive. That's something that's got to be said, in addition to all of these protective mechanisms that people also like to discuss.

And then the prices for Neue Klasse in China, it's a very attractive product offering or will be, but we haven't actually fixed the prices yet. But of course, it will be quite competitive.

[Interpreted] Thank you. Let's turn to the last request for the floor.

[Interpreted] Last question comes from Christoph Meyer, dpa.

[Interpreted] It's me again. Maybe a good question to finish off with because it's quite global. When I look at your figures and what the outcome will be for the year, if I compare that to '22, it looks much worse. If I compare to the time before that, is actually looking quite normal. '22, '23, that was a very special situation, obviously.

Now if I were to ask you now, crisis, is this now a time of crisis for BMW because in the industry when we talk about a crisis, but now if you could answer that for BMW, are you in a state of crisis? Or is this normal?

[Interpreted] Oliver, please.

[Interpreted] You've never heard us speak of a crisis before. A crisis is if you don't know what to do anymore, that's a crisis. I think Corona was when we had a standstill in all plants. That was a crisis because we didn't know how that was going to end. We didn't know when we could reopen the plants. But in the last quarter, yes, you've never heard us speak out the word crisis, and business results, they are as they are.

I mean, we work for them hard every year. And in 2022, '23, there were always special effects in '22. We had a special effect of EUR 7 billion. That was when the 75% majority in BBA. So we had special effects, so that perhaps can't be compared. And in '23, there was the semiconductor situation, which reminds me of Nexperia. So every year is a little different. I don't really think you can compare the years directly.

We're satisfied with what we're doing here in Munich. Could it be better? Yes, of course, it could. But the entrepreneurial job is to just -- in the environment you find, it's neutral. You just have to work with it, never just talk about a crisis all the time. As you can see in Europe, individual mobility still has a very large demand in the market. And globally, it's even associated with growth, so we would not want to speak of a crisis in a situation today.

[Interpreted] Thank you for the last question. I think that kind of rounds off our telephone conference today pretty well. So thank you, colleagues, for your questions. All the best to you, and I'm sure we'll see each other soon. [Foreign Language] and goodbye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Gentlemen, good morning, and welcome to the telephone conference of the BMW Group for the third quarter. Today, we have here, as always, Oliver Zipse, Chairman of the Board of Management and our CFO, Walter Mertl. First, Walter will take you through our financial results. Oliver will then give you a general business update for the BMW Group.

After a short break, we will then have time for our Q&A session.

And now, Walter, please go ahead.

Thank you, Max. Good morning, ladies and gentlemen. In the third quarter of 2025, the BMW Group continued its strategic course and maintained its global market position. But before we dive into the details of the quarter, I would like to directly address our communication from October 7th. You all know the BMW Group as an ambitious company. We have always focused on identifying opportunities and realizing market potential and our success demonstrates that this is the right approach. In 2025, despite all known challenges, we're very confident in the fundamental potential of the Chinese market.

Our planning scenario was fully confirmed during the first 6 months with the performance on the level of the second half of 2024. For the second half of this year, we assume we would see growth momentum. However, at the beginning of the fourth quarter, we observed that this momentum has not materialized to date. So for the remainder of 2025, volume stabilization rather than volume growth now appears likely. Accordingly, we have adjusted our planning and now anticipate a consistent monthly run rate in China, in line with the first half of 2025.

In addition, we have introduced measures to support the profitability and liquidity of our dealers in China. The measures will also have an impact on our Q4 profitability. The consolidation of our dealer network in China is progressing to plan.

Ladies and gentlemen, with respect to tariffs, the BMW Group has been fully transparent throughout the year concerning the impact on our 2025 financial results. Our original guidance given in March as well as our updated assessments in the Q1 and Q2 reporting were based on certain assumptions. As mentioned in our ad hoc announcement, these assumptions were not fully realized as expected to date. In our anticipated tariff-related headwind of 1.5 percentage points on the auto EBIT margin for the full year.

I will share further details on our full year outlook later on. But now let me walk you through our Q3 figures. Group earnings before tax totaled over EUR 2.3 billion in the third quarter and exceeded EUR 8 billion year-to-date through September. Compared to the first 9 months of 2024, this represents only a slight decrease of 9.1%, a notable achievement in light of the current developments in the automotive industry.

And for the full year, we also expect a decrease in the single-digit range only. This represents a full year group profit before tax of approximately EUR 10 billion despite the significant burden of higher tariffs. Excluding the impact of tariffs, pretax profit even exceeds the 2024 figures. Within the BMW Group ecosystem, every segment contributes to our overall success. The reported group EBT margin stood at 7.2% in the third quarter and 8.1% year-to-date through September. The reported Auto EBIT margin fell within our full year target corridor for both Q3 at 5.2% and year-to-date through September at 5.9%.

Ladies and gentlemen, as you know, the BMW Group is always transparent in its reporting and we consistently focus on communicating our published figures. For better comparability within the industry, allow me, nevertheless, to provide a few additional details regarding our operational performance in the Automotive segment.

First, Auto EBIT includes the depreciation resulting from the purchase price allocation of BVA. Excluding this depreciation, which amounts to approximately 1.1 percentage points, a quarterly margin would be 6.3% and the 9 months margin will be 7.0%. Second, Auto EBIT also includes the burden of extra tariffs, which amounts to around 1.75 percentage points in the third quarter and 1.5 percentage points through September. So this impact should also be added for a fair comparison of our EBIT margin.

Q3 deliveries to customers at group level increased solidly by 8.7% year-on-year. After 9 months, the share of all electric vehicles reached 18% of total sales. And with a share of 26.2%, more than one in 4 vehicles sold globally was electrified, meaning either a BEV or a plug-in hybrid.

Let's now take a look at how the Automotive segment performed across key metrics. Deliveries of BMW, MINI and Rolls-Royce vehicles to customers reached 588,000 units in the third quarter, and Europe sales grew by 9.3% and in the U.S. by 24.9%. In China, retail sales did not meet our expectations, with deliveries at previous year's level. After 9 months, global retail sales approached 1.8 million units, representing a slight increase of 2.4%. This clearly demonstrates the strength of our global business model, the sales performance in Europe and the U.S., more than compensating the challenges in China.

Sales of all electric vehicles exceeded 100,000 units for the sixth consecutive quarter. Q3 revenues in the Automotive segment amounted to EUR 28.5 billion, reflecting a slight increase of 2.4% year-on-year. Adjusted for currency translation effects, the increase was 6.4%. Segment EBIT amounted to approximately EUR 1.5 billion in Q3, an EUR 5.1 billion from January to September. The reported EBIT margin, including the negative impact of BBA, PPA and tariffs, as mentioned, came in at 5.2% for the quarter and 5.9% as of September.

That brings me to my next slide, taking a detailed look at our operating results of the third quarter year-on-year. Automotive EBIT increased by around EUR 900 million compared to Q3 2024. As anticipated at midyear, changes in currencies negatively impacted EBIT by EUR 500 million while raw material positions remain neutral. The net effect of volume, model mix and pricing resulted in a negative impact of EUR 300 million in the third quarter compared to the previous year.

Both volume and model mix provided a tailwind while pricing was a headwind. This is particularly evident in China, where we see price pressure across all segments. Furthermore, since the end of June, Chinese banks have significantly reduced dealer commissions. While this led to a certain increase in transaction prices, as expected, it could not offset the negative impact of the lower commission revenues for dealerships. Consequently, we implemented dealer support measures in August to strengthen dealer profitability and liquidity.

Ladies and gentlemen, in line with our planning, we will continue to decrease our operating costs in 2025 and beyond. This trend is once again reflected in our figures for the third quarter. Research and development expenses decreased by about EUR 300 million compared to the prior year quarter. Group R&D expenditure totaled EUR 5.9 billion as of September. This remained significantly below last year's level despite extensive product initiatives and intensive preparations for the first model of the NEUE KLASSE. The R&D ratio according to the German Commercial Code stood at 5.9% after 9 months. Selling and administrative expenses decreased by around EUR 200 million compared to the previous year. These nominal cost savings of EUR 500 million more than offset the negative impact from volume, model mix and pricing. Product cost changes provided a tailwind of around EUR 1.2 billion compared to the third quarter of 2024.

This development results mainly from 3 areas. On the one hand, warranty expenses were significantly lower year-on-year. In Q3 2024, we fully recognized the necessary warranty provisions for the integrated braking system. On the other hand, tariffs had a negative impact of around 1.75 percentage points on the Auto EBIT margin in Q3. The majority of the improvement and other cost changes in Q3 results from the positive development of manufacturing costs and material costs.

So overall, we reduced costs by over EUR 1 billion in the third quarter by approximately EUR 2 billion year-to-date through September. In addition to EBIT, tariffs also affect free cash flow. While refunds are recognized in EBIT, cash flow rather be recognized in 2026 and in 2025. This negatively affect free cash flow through September and the timing effect alone will impact free cash flow for the full year by a high 3-digit million euro amount. Free cash flow in the Automotive segment totaled EUR 343 million in the third quarter.

We start with earnings before tax, which amounted to EUR 1.4 billion. The net change in working capital contributed positively to the free cash flow by around EUR 300 million. The negative net effect of capital expenditure and depreciation impacted the third quarter by EUR 300 million. The CapEx ratio was 5.2% in the third quarter and 4.4% for the first 9 months.

Following the peak in 2024, CapEx will decrease for the full year 2025. The CapEx ratio is projected to remain below 6%. Changes to provisions negatively impacted free cash flow in the third quarter by approximately EUR 500 million. This was primarily due to the consumption of warranty provisions. The change in the position, other, amounting to around EUR 600 million reflects the development of a set of various topics, including income taxes paid. After 9 months, free cash flow in the Automotive segment stands at almost EUR 2.7 billion.

For the full year, we now target a free cash flow of over EUR 2.5 billion compared to the original forecast of over EUR 5 billion. This is driven by 2 factors: lower-than-expected earnings for the full year and tariff refunds that we now expect to receive in 2026 instead of 2025. We remain committed to shareholder returns using both dividends and share buyback. Despite the lower free cash flow outlook, we will maintain our dividend payout ratio of 30% to 40%, and we will continue our share buyback program, as announced. As a result, the anticipated shareholder return for the financial year 2025 will exceed free cash flow in the Automotive segment.

Let's now turn to our Financial Services segment. Financial services is a key component of our customer journey and an important part of our integrated value chain. As a vital element of our financial operating model, the segment contributes consistently to our group profit. New business grew significantly during the third quarter, primarily driven by the changed competitive environment in China. This contributed to a slight year-on-year increase of 1.9% in new leasing and financing contracts concluded with retail customers over the 9 months period.

New business volume increased by 4.2% to EUR 48.5 billion. The penetration rate for lease and loan offerings rose by 4.1 percentage points to 46.4%. Segment earnings amounted to more than EUR 1.8 billion, a year-on-year decrease of 14.4%. Decline is primarily attributable to the lower income from the resale of end-of-lease vehicles as well as the tax payment in the second quarter, resulting from a revised operational tax assessment for prior years. Retail income remains positive on a portfolio basis. The credit loss ratio across the entire loan portfolio remained low at 0.26%.

In the Motorcycles segment, deliveries increased solidly by 5.7% in the third quarter year-on-year. EBIT for the third quarter totaled EUR 60 million, resulting in an EBIT margin of 7.9%.

Let's now turn to our outlook for the 2025 financial year. 4 weeks ago, we confirmed that the outer EBIT margin will remain in the guided corridor of 5% to 7%. More specifically in the range of 5% to 6%. We also confirmed that deliveries in the Automotive segment are expected to increase slightly. At the same time, the BMW Group adjusted its guidance for the following 2 key performance indicators.

First, group profit before tax, which we now anticipate to decrease slightly compared to 2024. And second, return on capital employed in the Automotive segment which is now expected in the corridor between 8% and 10%. In the Motorcycles segment, deliveries are now expected to decrease slightly, whilst the EBIT margin range is confirmed between 5.5% and 7.5%. In the Financial Services segment, we confirm a return on equity in the range of 13% to 16%.

Ladies and gentlemen, we have invested early and significantly in the future of our company, in line with our long-term strategy. Our technology classes are ready, paving the way for the broad deployment of innovations across our complete product portfolio. Our Gen6 battery technology will sharply hit the market and support profitability with cost savings of 40% to 50% for the battery pack.

After reaching their peak levels in 2024, we are reducing both CapEx and R&D as planned. We are also maintaining our consistent management of operational costs. This is reflected in our figures for the third quarter and through September, and it will continue to be visible going forward. With our highly attractive products and the NEUE KLASSE, we have the right levers in place to continuously strengthen our global market position today and in the future.

We believe that our 2025 profitability stands out in the current business environment with a pretax profit decline only in the single-digit percentage range year-on-year. And with our strong balance sheet as a solid foundation we will deliver consistent returns for our stakeholders.

Thank you very much, Walter. Now over to our CEO, Oliver Zipse. Please go ahead.

Ladies and gentlemen, good morning. For the BMW Group, several key strengths have long formed the foundation of our strategic course. Our global footprint, our technology neutral approach, our premium multi-brand strategy and broad portfolio across all relevant customer segments and our ability to identify the potential of new technologies and bring them to the road in each major region. This strength gives us flexibility and make us resilient and we are benefiting from them now. As a global company with global brands, we are used to dealing with varied conditions and unpredictability on the ground in each market.

We recognize the current dynamics in the automotive industry, major transitions in innovation, operating with the global supply chain, a shifting geopolitical framework with trade impacts such as tariffs as well as a rapidly evolving market in China, to name but a few. We remain focused on our long-term trajectory while using our flexibility to adapt to the changing dynamics and are tackling them head on. This is what has always set the BMW Group apart. Our business remains on track and healthy. As Walter just shared, this is underscored by our group EBT result over the first 9 months, demonstrating the performance of the entire business, including our sales development.

Despite the challenging market dynamics in China, our overall global sales posted year-on-year growth of 8.7% in the third quarter, excluding China, it was 12.2%. Through September, sales in Europe were very up 8.6% compared to 2024, while sales in the United States grew by 9.5%. These strong results helped compensate for the development in China. Electrified vehicles and M vehicles both drove global growth. With our technology open approach and multiple premium brands, customers find products that fit their wide range of needs and tastes.

In the coming months, we will take this to the next level with the introduction of the NEUE KLASSE. Just 2 months ago, at the IAA mobility here in Munich, we unveiled the BMW iX3, the first vehicle of our NEUE KLASSE. The response was tremendous, from visitors and fans from across the globe, media, analysts and political stakeholders. A few weeks later, we celebrated the official opening of our new plant in Debrecen, where production of the iX3 is now underway. We have started taking customer orders for the car, which have exceeded our expectations.

Just looking at Europe, we see orders already extend several months into 2026 already. This confirms an exceptionally positive start of the vehicle. The NEUE KLASSE is BMW at its best. And starting with the iX3, it will set new benchmarks from the performance data and revolutionary digital interface to its sustainability approach. The BMW iX3 offers a range of more than 800 kilometers in the WLTP cycle.

And thanks to the ultra-fast charging capability, the peak charging power is up to 400 kilowatts. And that means in just 10 minutes, the iX3 can charge enough to drive more than 370 kilometers. The fully emersive digital experience will bring UI/UX to a whole new level. But the BMW Panoramic iDrive, drivers can intuitively keep their eyes on the road, while all necessary information is perfectly in view.

With the BMW iX3, we will also introduce a new generation of driver assistance systems. The BMW Group is the first car manufacturer in Germany to receive approval for assistance systems in accordance with the United Nations Regulation for Driver Control Assistance Systems, DCAS. This approval enables the BMW Group to offer the Motorway Assistant with Level 2 hands-off function in numerous other models and countries in the future. This also covers an extended range of functions. More innovative assistance functions for urban driving will follow.

In terms of sustainability, the iX3 is explicitly focused on conserving resources and production and reducing the model's environmental footprint throughout the supply chain, production, use phase and recycling. In line with the principles of design for circularity, the iX3 is made up made up of 1/3 secondary raw materials. Moreover, Plant Debrecen is the first BMW Group car factory that operates and produces vehicles without using fossil fuels, such as oil and gas, under normal operating conditions.

Overall, the iX3 is a perfect example of our strategy of reducing CO2 wherever we have leverage. This will help us reach our near-term target to reduce our carbon footprint by at least 40 million tonnes CO2 by 2030. Since 2020, we have been fully committed to the Paris Climate Agreement, with the target of achieving net 0 by 2050. The next NEUE KLASSE model, which we teased at the IAA, is prepared for its launch, the new BMW i3.

With the eighth generation of the 3 Series, we will bring the NEUE KLASSE and its technology clusters into the core of the BMW brand. Production of the i3 will get underway at our main plant in Munich, the second half of next year. Other locations in our international production network will follow with production of 3 Series variants.

Throughout 2026, we will show how the NEUE KLASSE technologies will be integrated into further models just as the 7 Series and the X5. And by 2027, we will put 40 new models and model updates with NEUE KLASSE technology and design language on the road worldwide. This all-new BMW generation will provide an enormous boost to our already broad and popular portfolio, with technology solutions tailored to customers in their markets.

And this applies especially to China. The NEUE KLASSE products, we will launch in China, are developed together with our local engineering teams and Chinese partners in the market for the market. Our NEUE KLASSE architecture allows to integrate local tech stacks from leading Chinese tech players into our own ecosystem. This gives consumers access to innovations and features they are used to, including solutions from Alibaba Banma, DeepSeek, and Momenta. With the NEUE KLASSE, we are again demonstrating our strength in mastering system complexity, integration and efficiency.

We know what our customers want, and identified trends in individual markets early. The result are products that perfectly integrate the best technologies, both in-house and with partners across regions to offer the best product substance to our customers. What makes the NEUE KLASSE so unique is that we are rolling out the technology clusters across the entire portfolio regardless of the drivetrain. Our technology-neutral approach continues to show its success and allows broad market access as consumer preferences shift.

At the same time, we are making progress in decarbonization in the here and now. After 9 months into 2025, Group sales of all-electric vehicles are up by 10%, resulting in a BEV share of 18%. PHEVs grew nearly 28% year-on-year delivering an overall electrified share through September of 26.2% globally. Europe showed particularly strong growth, with BEVs reaching over a quarter of total sales, while BEV and PHEV sales combined for an impressive 41% share. Europe will also be the primary driver of our BMW iX3 sales in 2026.

Thanks to this solid result, we are well on course to reach our CO2 fleet target for the year, just as we have consistently done for the past several years. For us, it has long been clear that we would meet the targets for 2025 and importantly, without penalties, cooling or averaging. The success with our technology neutral strategy also gives our voice weight in the ongoing discussions regarding the EU's targets. We have reached our climate targets by following market demand and customer needs. And by continually optimizing all drivetrain variants.

It remains critical for Europe to revisit the targets for 2030 as well as for 2035. Setting an end date to a specific successful technology will lead to a massive shrinking of the industry as a whole. It will harm European industry and also create dependencies that are unwise in the current geopolitical dynamic. To achieve climate goals and create effective CO2 regulations, we must take a comprehensive view, one that accounts by using a life cycle assessment approach for the full carbon footprint of the vehicle and its value chain. And that also values climate neutral fuels, such as HVO100. That's a holistic framework which reflects various market needs and uneven infrastructure development, while safeguarding Europe's value chains, jobs and industrial strength. And above all, it delivers genuine climate protection and real reductions in CO2.

Companies should be free to deliver the solutions, taking customer demands and needs into account, while adequately investing in new paths and technologies to achieve the EU's climate goals. In this context, the BMW group is very skeptical about the EUs planning, greening the fleets regulation as it does not consider current market realities. Commercial fleets rely on high vehicle availability with high mileages. The currently inadequate charging and hydrogen refueling infrastructure will not be guaranteed in all member states by 2030 either.

Further fleet mandates and additional regulations that exclude individual technologies are not necessary to achieve the CO2 targets. Moreover, they hinder technological development and introduce harmful market distortions contrary to customer preferences. Here also, we advocate for a holistic and technology neutral approach.

Ladies and gentlemen, we are tackling the challenges in global markets head on, leveraging our strengths and implementing our long-term strategy. We have made significant investments and have created the right operating framework to deliver. Our flexible global network, our tech-open strategy, our focus on innovation and our ability to master technological complexity sets us apart. Over the coming months, we will deliver as promised.

Starting with the iX3, we will rapidly deploy our ambitious strategy one vehicle at a time around the globe. We will continue to lead with product substance and solutions that meet our customers' needs. We, therefore, remain optimistic as we close out 2025 and move forward to 2026. Thank you very much.

Thank you very much, Oliver. Ladies and gentlemen, we now have a short break before we move on to the Q&A sessions. See you in 5 minutes. Thank you very much.

Welcome back to our quarterly earnings call. Oliver Zipse and Walter Mertl are also back in the room with me. The line will be open shortly for your questions. The operator will first give you some technical instructions, please?

[Operator Instructions] Our first question comes from Patrick Hummel at UBS.

Two questions for Walter, please, and Oliver, no offense, but we just met in Munich for the strategic question. So I'll focus on 2 financial ones, if you don't mind. First, regarding the tariff impact, thanks for the quantification. I think the 200 basis points in the second quarter impact, that's clear. If I apply simple math, 150 basis points in the first half and 125 for the full year, that suggests about 100 basis points for the second half.

So I'm just wondering if you would say this 100 basis points run rate for the second half for tariffs should be also a good indication for how things would look like going into 2026? Even maybe as a more, let's say, cautious scenario because you might be able to mitigate more of the tariff impact via pricing and optimization of your industrial footprint. So that's the first question, is 100 basis points a conservative run rate for the future?

And my second question, I think you're still holding on to your China guide, volume-wise, flattish, which means better than minus 5 or at least minus 5. Are you still comfortable with that? And if not, if maybe the number would be a bit more closer to minus 10, would you still feel comfortable with the group guide in terms of slight volume growth and the 5% to 7% margin range, just to get an idea about stress testing your assumptions here for China.

Thank you very much, Patrick. Walter?

Patrick, so with respect to your math on tariffs, I can just reiterate that for the full year impact, we have 1.25%, so 1.25, and it's around 1.25. You also do know that not every deal is closed yet. And I also mentioned already that we don't take our credit scheme we proposed and tried to get into the U.S. deal. We took that one out of this year's expectations, but we are still fighting for because we are still convinced that has to be included to honor the production in the country, not just in the U.S., but also even in Europe, right? So we always talked about that one also in Europe. But with respect to our guidance in this 1.25 percent point, that is not included anymore, but that doesn't mean that we are not fighting for.

With respect to your question on 2026, I will elaborate about this one in March at the press conference, and why is that? If you just have a look for the last 6 months, a lot of things happened, impacting tariffs. So the next 6 months, I guess, there could be also some changes, and that's the reason why we rather speak about when it's due and time to discuss about it.

Your question about China, I just want to reiterate, we are not doing guidance by region. The guidance is set on the world and not on the region. Of course, we see all these topics in China affected by a strong monitoring of the authorities with respect to the commissions paid from external banks to the dealers and the impact, especially on the first week of July. Of course, we are seeing that. You're also aware that we are restructuring our dealer size. But of course, whilst our ambition on flattish is up to minus 5% versus last year, we clearly approach that one from the level below. And of course, all depends on the recent developments in the market. We see some improvements week by week, but it all depends. So I think that is still comfortable.

And finally, to end up with our volume guidance, if we just have a look on Q2, in the quarter 2, you just saw, despite the fact we lost 13.7% year-on-year in the quarter 2, the full world was still positive by 0.4%. So we compensated some losses in China year-on-year with European and America performance. So that is still a clear statement. The world guidance is intact, independent of the situation there in China.

Our next question comes from Tim Rokossa at Deutsche Bank.

I have 2 questions. The first one to you, Walter, probably. I think one of the most appealing aspects of your equity story is that you can actually plausibly claim that the investment peak is behind you because you invested in all the necessary flexibility capacity. Now can we talk a little bit about the phasing and seasonality here when we think about quarters? We have seen another step in the right direction during Q2. Is this something that you think will continue over the next few quarters? Is it volatile? And perhaps you can contextualize this with what we should expect in terms of seasonality for margin and cash flow in Q3 and Q4 this year?

And then secondly, not sure but probably, Oliver, to you. I agree with your comment on the press call. It's all about building attractive products and that it outweighs things like even tariffs. Now in Europe, we actually noticed that a couple of OEMs talk about good momentum now, even those with all the portfolios like Mercedes, for example. Where do you think that the emergence of the European consumer, at least on the premium side but also upper mass market side, comes from? And how do you feel how sustainable that is?

Okay. We start with Oliver and then Walter. Oliver, please?

Tim, nice to talk to you. Let's have a look at Europe, and that is where your question is directed. Europe has an ever-aging age of the product, the car fleet. And I think now also comes the time to replace that fleet. And customers, of course, know that. That's the first thing. So it's quite obvious that there is a replacement momentum in Europe.

The second is that especially BMW, we have a very attractive product portfolio over all segments. Starting on the very top with Rolls-Royce, then 7 Series, the 8 Series is still in the market, and all the way down to the 1 Series and MINI. And you can have in every segment, you have combustion engines, you have the electric fleet. And on top, as I said in the media conference call, we never sold as many' M products as we've done before. So the whole breadth of product offerings leads to, of course, growing market share.

And is that sustainable? I think it is because the 27 countries in Europe are much more predictable than what we see, especially in China. So -- and also, of course, we have political stability inside of Europe. So we see for the remainder of the year and also going into '26, a robust, predictable market demand, which is able to compensate some of the more difficult markets like in China, for example.

Thank you, Oliver. Walter, please?

And just reiterate the strength of Europe, just to speak about the second price level of our sold side is less than 20%. So we have a strong first price level, which is even more stronger then.

With respect to your right directions you asked after Q2. So the free cash flow is on par with previous year's level, but we shouldn't underestimate the second half year is also different to previous year. Why is that? Because CapEx peak, for example, was last year in Q4, and that is not going to happen this year. So we will have less CapEx in Q4. We have the seasonality of our working capital procedures. And not to forget, we are also aiming to organize profit in Q3 and Q4. Otherwise, we couldn't confirm our full year guidance. All these elements together end up that we are still confirming our EUR 5 billion free cash flow.

And if you just think about last year, when we had the big IBS impact, we also organized the right free cash flow ultimately, and we are not going to have that.

Not to forget on the consistent approach, which you saw on the cost side, R&D as well as the operational costs. We came down in Q1 year-on-year. We came down in Q2 year-on-year, and we are planning to go down in Q3 as well as in Q4 year-on-year. All that is proving our consistent approach, first of all; and secondly, is underpinning a stronger free cash flow in the second half year. I think that's the main relevant things for you.

Our next question comes from Stephen Reitman at Bernstein.

You mentioned in the speeches that you've had already a journalist testing of the iX3 in kind of in a preform in Miramas in June. Could you comment on the reactions you received, particularly from Chinese journalists and other people who know that market very well?

That is your question? Yes. Okay. Then Oliver, please.

I think what we have done, of course, on purpose because the iX3 is not only the front runner of the Neue Klasse, it also encloses a complete product and corporate strategy directed towards 4 different technology clusters. And you can only experience that when you drive the car, not by looking only at the battery size and so on.

And what you find out, if you combine that driving experience around these 4 technology clusters, wherever we go, whether it's European journalists, whether it's American journalists, whether it's -- especially Chinese journalists, they say, well, wow, this is a masterpiece of engineering. How it fits together, how it feels when you drive the car, especially if you drive it against current competition.

Just for example, if we -- we have the objective, everything that has to do with assistant systems, meaning autonomous driving, it has to be smart, it has to be symbiotic and it has to be safe. And symbiotic means that the car is your companion and it's not just a function which you buy and put in it to a technology stack and put it in the car.

And I think when the journalists drove the car, they said, I've never driven a better BEV in my life. And this is not only directed about the electrical drivetrain. This is how it feels. And therefore, we're extremely optimistic when we unveil the car in early September and then launch the car in early November, that there will be a substantial market demand because that car is going to be at that point in time, the benchmark of the industry. And that is what whoever we talk to, whatever is written about the car, which is reflected by media and journalists.

So you already hear from what I'm saying. We are very optimistic about the market success of the iX3, but also the subsequent cars, the iX3 and the other cars which are coming closely after.

Our next question comes from Sam Perry at BNP Paribas.

Sam, are you with us? Hello? We don't hear you.

We will move on to the next question, which is from José Asumendi at JPMorgan.

Two questions Oliver, please. Oliver, in the light of the rapid developments we're seeing from Tesla and Waymo, when it comes to deployment of Level 4 autonomous driving. I would love to get your thoughts, please, on how you strategically think about autonomy within BMW? And how do you tackle Level 3, Level 4 autonomous driving within the house? Who are your key partners? And ultimately, whether you think this is a technology you need to be involved at the forefront in order to be able to protect pricing power in the premium segment.

And the second question was, Oliver, for you as well. When it comes to tariffs, I would like to understand, beyond the framework we have seen between Europe and U.S. when it comes to tariffs, what are the maybe outstanding bolt-on negotiations that B&W strategically is looking to pursue in order to maybe round up the agreement?

Okay. Thank you very much, José. The answer will come from Oliver.

The first question, if you talk about individual mobility, is you have to answer the question, what business are you in? And of course, we ask ourselves, what business are we in? I can tell you what business we are not in. We don't build trucks. We don't build pickup trucks. We are not in mobility services. We are not in driverless cars. And that's the first question, what you have to do.

The second thing, we are not testing out business models. When we launch a car, it must be profitable from the first car on. This is what we are in. And in line with that, and you will see that in the Neue Klasse, that assisting system, autonomous systems have to be in line with that business we are in. That means individual mobility in the premium segment.

I cannot talk about other business models. But you have to answer the question, are you profitable? Do you have a chance to be profitable? Do you have a chance to be profitable if the regulator has not admitted specific things, and only to have a testing ground in some areas of the world does not mean that this is scalable. So I cannot tell you the logic of other market participants should think that this will be profitable. I cannot answer that question. But we are in the business of having profitable high-tech, premium individual mobility, and completely, autonomous cars are not part of that business model.

The second question, I think we have answered that before. I think the most important thing that we come to an agreement, what has been done by a handshake agreement between the EU and the United States. And we must now quickly finalize and implement the agreed measures. That's the first priority.

And whether we pursue individual agreement, that has to be seen, but that's not the most important thing. I think the most important thing, to now come to a conclusion, to a reliable conclusion that we have a 15% 0% agreement on United States and the EU tariffs. That's the most important thing. And I think it's a good agreement for both sides because it ends a never-ending dispute, which you can do forever. And I think that's the best thing for both sides that has been -- that could be achieved at this point in time, and as we said before, it's not a complete disaster for our business model because BMW has a global business model. We import and export into the United States and the EU at the same time. So there is some offset included in that deal because we have that business model.

And the most important thing is that Europe recognizes that this is a business model that works, which is not confined and restricted to the European Union, but this is a global business model. That is the most important thing that has to be recognized. And this is not a disadvantage. This is a great advantage for European companies.

Our next question comes from Michael Punzet at DZ Bank. [Operator Instructions]

Hello, Michael?

Michael Punzet. Can you hear me?

Yes. Yes. Yes, we hear you. Please give us your question.

Okay. I have one question regarding the Q2 targets in Europe. You mentioned several times that you will meet that target already in 2025. Do you see the risk that become disadvantaged in competition in the years '20, '27, assuming that other car makers can push BEV sales by lower prices or higher incentives?

Thank you very much, Michael. Oliver Zipse, please.

Mike, thank you for that question. I have 2-parted answer to your question. We're not concerned about -- and I can only speak for BMW. We're not concerned about '25, '26 or '27. We will reach the targets even if there is some market pressure. We have enough leeway to fulfill the requirements. We have prepared for many, many years for that. And we will never push something into the market just to reach a specific CO2 requirement from the legislator.

At the same time, while saying that, I think we nevertheless need a different framework for CO2 regulation. To look only at the tail pipe will lead, over time, to serious market distortions, which less effectiveness of CO2 reduction, with less profitability for market participants and therefore, less investment capabilities into climate change. And therefore, we advocate for a different regime, which is oriented towards a life cycle assessment, which includes supply chains during the creation phase of the car, which looks at a technology-neutral approach, which includes e-fuels or alternative fuels, which includes the type of power you use for driving the car, all the way down to what happens to recycling the car. This is the much more effective and much more competitive approach to CO2 regulation.

Are we there yet? No, we are not there yet, but we made a proposal to advocate for, and I can tell you that we get more and more institutions, market participants who we convinced that this is a better approach. Is that happening overnight? No, of course, not. This will happen during the next 12, 24, 36 months until we are there that we get into a new regime.

But if we don't start to argue what is the better regime, every week, you run into a much more difficult competitive situation and market situation in the market, as you can already see in Europe. People report diminishing profits, and that has nothing to do with the tariffs of the trade relation with the United States. This is purely self-inflicted, and that will -- has only started now. So yes, especially with the Neue Klasse, we will reach the targets, but at the same time, we advocate for a new regime.

Our next question comes from Adrian Yanoshik, Rothschild & Co, Redburn.

I had a question more at the top of the mix, even above GKL, and I'm talking about Rolls-Royce. So do you have any updates or KPIs that you might be able to share, whether it's ASP or personalization rates? And I think tied to that, maybe any updates on the Goodwood expansion and what it could contribute to the business going forward.

And I think maybe a second part of the question on the same theme, any next steps that you're able to share on the development of the ALPINA sub-brand starting next year? We had some early comments a couple of weeks ago. Sounds like it's still a very low volume, high performance orientation, but I would love to get an update, if it's possible.

So we start with the Rolls-Royce question with Walter and then Oliver. Yes. Walter?

Adrian, well, as you do know, we don't say explicitly to our brand-dedicated numbers, as you do know. But with respect to Rolls-Royce, you do know that we have over EUR 500,000 revenue, that one we shared already last year, and that is still the case. So it's more than EUR 500,000 revenue a car. And bespoke is more than 50% on a share. So that is a really good business, but I'm not talking more about it. Other than, yes, we have an expansion on the Goodwood side because the business is really good. And we are not overdoing it because this is a special client deal, and that's the reason why we are not talking so much about it. Many thanks.

Oliver?

Adrian, you apparently watch us closely, and that is a very good thing. If you look at our brands, especially in the upper segment, Rolls-Royce, but also BMW, what you see is that individualization plays an ever-increasing role. At BMW, we launched 2 cars, the Skytop and the Speedtop, for example, very low volume -- ultra-low volume in the upper price range in a never until then, achieved price range. Those 2 cars were immediately sold out, immediately.

You mentioned ALPINA. There is more to come, but that is a similar approach, low volume, high profitability, high individualization apart from normal products. So you have their Skytop, you have Speedtop, you have ALPINA on the BMW side.

And the same thing you see at Rolls-Royce, an ever higher individualization rate. And in that context, we also invest into Goodwood. We even expand that individualization. It's never about volume. It's about increasing the contribution margin per car, and that is working quite well. Because independent of market sentiment, there is a very, very stable marketplace for ultra-high net worth individuals. And we are exactly targeting these new customer bases.

And Rolls-Royce, you see all kind of difference individualization. You see the normal bespoke business, which is ever increasing. You see custom build cars and you have even one-offs, which we've done in the past 3 years, 3 times. Rolls-Royce had one-off cars, which only exists one time. And so that business models, to individualize in all kinds of segments and all kinds of price ranges, you will see that at BMW, and you will see that also at Rolls-Royce. And that, of course, stabilizes both brands. Thank you.

Our next question comes from Sam Perry at BNP Paribas.

Can you hear me now?

Yes, we hear you.

Yes. Apologies, I was having some issues. Just a couple of questions on China, please. First one was about discussions currently ongoing regarding sort of minimum price guarantees replacing tariffs in Europe for Chinese-produced vehicles. Can you talk a bit about the puts and takes for that for BMW, both from a perspective of your many exports from China to Europe and also, I guess, the European business more broadly.

Second question also on China. At the CMD a few weeks ago, you mentioned the only area of the Chinese market growing was below RMB 150,000, and you didn't want to compete there, which was a large reason for why your volumes have been under pressure. However, the data I'm looking at, and maybe I'm looking at wrong data, but it shows that the market is growing up to around the RMB 300,000 mark, which is where about you have about 50% of your product offering. My question, I guess is, is the reason the volumes are under pressure because you don't compete at that price point or because you're continuing to lose some market share?

Yes. Thank you very much. Walter?

Well, on the EU-China tariffs, you do know our statement. We have been persisting serious criticism of this legally implementing regulation. And on which these countervailing duties are based, the BMW Group has filed an action for annulment of this regulation with the general court. And this is still ongoing. We haven't any conclusion yet, but we are coping with it.

And with respect to the competing on the side, yes, you're right. On the June side, up to RMB 300,000 above growth, up to RMB 150,000. There was a growth of 18% year-on-year, and between RMB 150,000 and RMB 300,000, there was a growth of 4% year-on-year. And -- but we shouldn't forget what I mentioned previously, we are restructuring our dealer network. The performance of the healthy dealers is still a good one. But whilst restructuring these ones, and we are having a good progress by doing that one since November '24 and we will finish that by end of this year, we lose out here some performance, and that is to really kick in and the issue we are facing on the volume side.

Our next question comes from Michael Tyndall at HSBC.

I'm going to stick with China. And Walter, I wonder if you could help me out here a little bit. The dealer rationalization, what does that mean in terms of your P&L? Are those dealers a drag on volumes? Are they competing aggressively on price? Or are you in fact supporting them through this transition? Is there compensation going out, such that when those dealers are no longer in business, you'll actually see a meaningful impact. So I'm kind of -- if you could give us a bit more detail as to what exactly will change once those dealers are no longer in operation.

And then the second question for Oliver. Oliver, when we spoke last year, you very rightly described the Chinese market that was in this unsustainable state in terms of the number of operators. And I'm noting that you've said things have started to change in June, but I'm also noting that some consolidation efforts haven't really played out. From your perspective, are we on the cusp of seeing the Chinese market start to consolidate, such that it's a more rational sustainable market going forward?

So we start with Walter, and then Oliver. Yes, Walter, please.

Michael, so on the dealer side, yes, we mentioned that one already, that we are in the middle of this restructuring side. We are closing down some outlets, and we are selling some outlets from one dealer group to other ones. And I want to reiterate that existing dealer groups are buying those outlets. So that is positive.

And with respect to end of this year, we are assuming that by then, compared with end of '24, we will have roughly 10% less dealer points and roughly 20% less on the owner structure. So this is going on. There has not been changed in our story. It's just getting executed. I think that is the big thing.

With respect to compensation, you mentioned, as I always said last time, no dealer compensation has been neither announced nor paid hence, and of course, while transaction pricing in the last 3 weeks has seen slight sequential recovery, of course, it doesn't entirely compensate all these losses of the bank commissions they previously received or up to end of June they received we see. We are, of course, closely monitoring that one. And as good partners, we are, of course, also in good discussions with our dealer partners. That's the thing for -- to your first question, I think.

I would like to answer the question about the Chinese market situation. Of course, the Chinese market will remain very dynamic in the coming weeks and months and even years. Two things are very important to recognize. First of all, the market share of Chinese manufacturers in the home market is still below the value of European manufacturers in Europe. So the current share of Chinese car manufacturers in China is 59% compared to over 65% of European players in Europe. So there is even more development.

And what is the final end game? Is this 70%? It's probably going to be above the 66%. So we must expect that in the next months and years, the market share of Chinese manufacturers will grow up to 65% or 70%. That's the first thing. Everything else would be, I would say, unrealistic, first thing.

But that means for the rest of them, for non-Chinese players, there's still a market share of 1/3, which is substantially due to the size of the market. Now with these remaining Chinese manufacturers, you currently have more than 100 brands. Can you expect that these 100 brands with the remaining market share in China will remain? That's also very unlikely. If you ask the question, who are the dominant players? I cannot answer that question. But there will be some flourishing brands. There will be some brands who struggle.

What you see that the profitability level in the Chinese market is very low, also for the Chinese players. So that will lead to more market dynamics. But brand will become even more important. That's the good thing. Whoever has a strong brand, who has some heritage, who has a track record of reliability, of high-quality product has an advantage, even if the current market conditions are very fierce, that will be the remaining element who is able to stabilize market share or even to grow market share, and BMW will be one of these brands.

So our last question comes from Horst Schneider.

I hope you can hear me. The last question I have is -- the last question, maybe something for Walter. Walter, maybe you can help me to understand the drivers in terms of earnings for H2 now, also more from a sequential perspective, if I reconcile that, you expect rising volumes, China pricing is improving, in contrast -- or also tariffs are declining, then material costs are going up.

You ramp up Neue Klasse, you ramp up Debrecen plant. So it's a kind of trade-off. But when I look at your free cash flow guidance, it -- so you say the free cash flow is higher in H2 than H1. It implies to me that also earnings should be in H2 higher than H1. Is that conclusion right? And is -- does that mean that basically you stay within the 5% to 7% margin guidance also in H2 or also in Q3 and Q4 even. So in other words, Q2 was the trough in terms of margin. Is that conclusion correct?

Walter?

Hello, Horst, nice try. So the full year guidance is still intact, as I mentioned. So the full year guidance is still intact. And I think we have a good starting basis because if you have a look from my half year numbers, auto EBIT is on EUR 3.6 billion and my total group profit is starting with EUR 5.7 billion, all half year numbers. So even if you would just double it up, it is already in reach in my guidance. And we have, of course, a lot of ups and downs in the second half year with respect to profit and everything could happen, of course, but there are chances and not just risks. So I think we have a good starting basis first of all, eventually better than a lot of other ones, first of all.

And secondly, I can just reiterate what I mentioned to Patrick and Tim before and on the free cash flow. We presented that our fixed cost, our operational fixed costs are declining every quarter. We presented and proved that one in Q1, and we have done so in Q2. And we also promised already in March that we are going to do that all along, meaning also in Q3 as well as in Q4. Plus not to forget, our seasonality on working capital in Q4. We know how our structure is running in Q4. That's always beneficial for free cash flow, which we also presented last year.

And last but not least, our CapEx development over the quarters. If you have a look for '24, you saw there was a huge CapEx impact as a burden on free cash flow in Q4, and we also mentioned that we have a very good slowdown of CapEx because we did our homework already, right? Other ones have eventually a different strategy and have to have more CapEx in Q4, whilst we, not, especially not versus last year where we had our final peak. And if you put all these jigsaws together, you end up in our free cash flow prediction, and you end up with our guidance on profitability on group as well as on auto EBIT. Many thanks for us.

Many thanks to Walter. Yes, Horst?

Yes. Just a follow-up maybe to Walter on that. So in other words, so CapEx is up H2 versus H1, and working capital in H2 is a tailwind or a headwind?

Horst, let's try again. So again, on my full year number, CapEx is lower on full year this year than last year. And you saw already a decline in the first half year. You will also see a decline in the second half. If you just compare year-on-year, the first half versus first half year '24 or the same on '25. That is just easy.

And we have reached the end of the telephone conference. Bye-bye and servus from Munich.

Colleagues, welcome back to the second part of our half year report. We'll now continue in German. After the short break just now, we're now looking forward to taking your questions. As always, you will be provided with some technical instructions before we then begin with the first question.

[Operator Instructions] First question comes from Christina Amann from Reuters.

I have a question relating to the tariffs. Perhaps you can quantify how much of the tariffs cost you in the past quarter? I mean these are the 2 topics aren't they? U.S. tariffs and the Chinese tariffs. Second question, also on tariffs. The agreement of the EU and the U.S. means 15% import tariffs into the U.S., 2.5% and later 0% for goods coming from the U.S. going into Europe. Perhaps you can provide some clarity as to what that means for you and how you will proceed. Will the positive or the negative effects prevail? Or is -- are they more or less balanced? Then in your forecast, you made reference to mitigating measures. Perhaps you could explain what is meant by that? Does it mean price increases? Or what's the strategy that BMW is pursuing here?

Thank you, Ms. Amann. We've understood all of your questions. Mr. Zipse will begin later then Mr. Mertl.

Good morning, Ms. Amann. Let me just say something more general on the tariff discussion. Free trade and International Corporation are extremely important for all industries globally. There's not a single technology that would be able to survive without global trade. Obviously, that's something that's often neglected when we talk about tariffs. These global links that network, that is just there. That's something you always have to bear in mind when you talk about tariffs and talk about how you can be more resilient, how you can protect yourself.

I mean any type of tariff no matter in which direction leads to higher costs and disadvantages for all consumers that must be emphasized. Therefore, the fewer trade obstacles, the better it is, especially for companies doing global business. This is why we're always much in favor of reducing trade barriers and tariffs.

Now returning to the current ongoing discussion. Of course, we welcome the general agreement between the European Union and the U.S. to reduce tariffs on both sides of the Atlantic. So that's a good thing to begin with. It's good what's been achieved. You don't need to talk bad about it. And now next step is to finalize the measures agreed on and to implement them.

We are supporting the European Union explicitly in this respect. Especially the EU Commission with a clear reduction of imports down to 0% would reflect the fact that more than 80% of cars from the U.S. is actually made by German companies. So it's in the interest of European companies to really bring the EU tariff to 0 without any restrictions by further technical parameters. This is why we will also support this being made possible.

So we would like to appeal to both sides to continue to work on opening the markets and also on working on the convergence of technology rules. But Mertl will now briefly say words on the financial repercussions.

Hello, Ms. Amann. In the second quarter, the effect is reflected in about 2 EBIT percentage points. So that's the impact we have here. And on 7th of May, we said this is the major impact in the second quarter because this is where the largest tariffs applied. What we had expected was that in the third quarter, tariffs would be reduced due to trade agreements between the U.S. and the remaining states, and this is actually what happened.

And U.K., reached an agreement, There's an agreement with the EU as well. Some might be a little irritated by. But if you look to the homepages of the White House or the EU and you see the conclusions, we're seeing quite clear and strong words from 1st of August saying that for vehicles and for vehicle components, import into the U.S. will be exposed to 50% tariff, and there'll be 0% for goods going into the EU.

And 1st of August is from when on this will apply. Now mitigating effects. This is something we've already been using. This relates to the footprint of our plants and supply chain. It's not the same for all manufacturers. You know what ours is. And of course, let's also not forget that a free trade area in the U.S. is still intact. We're selling from the Spartanburg plant, more than 50% out of the U.S. We're exporting. And because it's a free trade area, no tariffs applied to those. So that's 0 tariffs and that applies to us as well.

Others might export other percentages and there's other effects, but the 3.75% according to the executive order also applied to us for cars produced in Spartanburg. And obviously, that also applies to us, and that's also a mitigating measure.

Next question please.

Next question is by Markus Fasse from Handelsblatt.

I'd like to stay with the topic of tariffs as well. Mr. Zipse, like the rest of the German industry, your hope is that more can be achieved in those agreements, the offsetting model so that imports and exports from the U.S. could sort of be balanced or offset against each other so that we're much better off in the end compared to what has been achieved now. Question, do you still see any chances that this offset model, imports and exports to offset one another that, that could still be realized? And what would that mean for you then? That's my first question.

And the second question, what does it mean for the relationship between the U.S. and Europe? Has the European -- has the economic area of the 2 being strengthened? Do you expect there will be more investment from your industry in the U.S.? And what can the possible answer of the EU be? Do we have to reconsider how we can improve the attractiveness of the location. What does the EU now have to do? Because this deal, all in all, is at a disadvantage for the European industry, at least that's how it is perceived by many parties.

Thank you, Mr. Fasse. I'll pass it on to Mr. Zipse.

Well, your first question, the offset logic. Well, the politics is always about what's feasible. I think what's important now is to take the first step, which is now in sight and to agree on it, namely reducing tariffs on both sides. That would be a first important step. Now whether or not in the second step, we will conclude yet another offset agreement, that's something you can also do on a bilateral level. It doesn't have to be part of a major package. You can also do it directly between 2 countries.

This executive order on Section 232, that's actually something that's been passed unilaterally. So perhaps we could renegotiate it bilaterally. But I would actually not include that into the big deal we are currently negotiating. I think it's unrealistic. But that's not a problem because these bilateral reductions of tariffs are much more important.

Now as far as the U.S. is concerned, the investments that are to be made and we already made those many, many years ago, we're actually 15 years ahead of everyone. In the past 30 years, we already sold more than 7 million -- or made more than 7 million vehicles in Spartanburg, and we already invested USD 15 billion there. So we more or less anticipated everything that was happening now, not that we knew it was going to happen. But this local-for-local approach that's always the right thing to do. We did it in the U.S. We did it in China, and we're also doing it in Europe.

And just to give you the picture, at the same time, we're investing more than $2 billion as we speak in the U.S. and at the same time, we're investing in an even higher amount in Germany. Think of [indiscernible], think of the refurbishment of the plant in Munich or the entirely new plant in Hungary, the high F&E investment here in Europe. Now where we really need to be careful is that we do not actually favor one nation over the other.

No, Europe is the region that has the best network, and that's the business model we need to strengthen. It would be entirely wrong to believe that we can do more in the EU to strengthen that location, so I'm able to export more. That would be the wrong path because all of this is happening at the same time. And on the level of technology, the world is entirely interconnected anyway. And that's something you always need to distinguish.

Now trade with finished products follows its own laws. And obviously, and that's something we've been preparing for, for many years, this will be increasingly localized. Now on the level of technology, the opposite is happening. Because of fast technological progress, the interlinking becomes stronger all the time. Look at the semiconductor industry, look at battery technology. Globally, this will be stronger and stronger interlinked. So this is actually the opposite of what you would assume.

And you just have to be clear about it, and we're trying to communicate this and tell politicians about this, that this is actually a large advantage that Europe is cooperating with the world and establishing links. We're not preventing investments abroad, but German companies are true global players. This is an advantage and not a disadvantage. And it's these mechanisms you have to be aware of in order to strengthen Europe.

Next question please.

That's [indiscernible] from DPA.

A lot of my questions have already been asked. But there's 2 things. Number one, tariffs. Well, in the U.S., these have so far not been passed on to customers. Will you change that now? And if I've understood what Mr. Mertl said earlier and I just did a bit of math on my pocket calculator, in Q2, there would be roughly EUR 600 million extra burden by tariffs. Can you tell us how that is subdivided? How much of that is China and how much of that is U.S.?

The question goes to Mr. Mertl.

Now if we start with pricing, that's decoupled from the cost. Pricing is multidimensional. It's not the same in China as it is in China, in the U.S., in Canada or whatever. It's just the market. So that's the first thing we need to take into account. And then otherwise, all of the projects, the things we're planning and how and where we're acting, obviously, we do not talk about commercials publicly. Our competitors are also thinking about what they want to do, and we're thinking about this. And this is not so much related to tariff effects. This is something we do every day, every month when we launch new products. And in every market, we consider things well. We've got our own methods and we define our prices.

Now regarding the split of the tariffs, of course, different tariffs act in different countries. But I'm not going to talk about that in detail now. So please understand.

Next question please.

Next question comes from Stephen Wilmot from the Wall Street Journal.

I'm sorry to hark on about the business of tariffs. But just a bit of -- just a couple of clarifications, if I may. The -- I'm struggling to reconcile the guidance for the full year, which you said 1.25 percentage points or based on the current analyst consensus, that would be about 1.5 -- a little over EUR 1.5 billion. It's quite a big difference from the EUR 1 billion that you gave in your outlook in March. I appreciate a lot has changed, but also for the -- you've been helped as well as hindered by some of the changes.

So can you just help us square what that EUR 1.5 billion number presumably is about right? And what's changed, I guess, since you last gave your tariff update in the context of you saying that everything has been fully anticipated and nothing has changed in your guidance. I'm just trying to understand how that difference has come about.

And then secondly, does your guidance -- current guidance include 0 tariffs on the shipments of your vehicles from Spartanburg to EU, there's a bit of ambiguity in the kind of news reports around this. So I just wanted to know what you're factoring in.

And thirdly, does that question of the EU tariff on U.S. exports or imports from the U.S., I should say, does that answer your question about export credits? You've talked a lot about getting some kind of offset arrangement with the U.S. But is that essentially -- is that question of offsets basically answered by the question of what the EU tariff on shipments from the U.S. is? Or are you thinking about that separately now?

That's for the Mertl.

Now regarding the guidance that we've given so far for the expected tariff impact, this was always only in respect of EBIT margin. And both in March and in May, I spoke about 1 percentage point impact on the EBIT margin. The number in euros that you referred to, that didn't come from me. We're still talking about 1 percentage point in terms of EBIT margin. So much on the first question.

Question 2, regarding 0% tariffs on EU imports. Yes, we're factoring that in, in accordance with what I said before, starting 1st of August. However, in our P&L, let's not forget that the goods that we're importing on 1st of August will not be sold right away and will not be posted in the P&L. I still have goods left and it will take some time, and there will be corresponding effects, but that's fully taken into account in our guidance.

And now regarding the offset logic, we strongly advocated this and Oliver Zipse mentioned it earlier that we set up a credit scheme, both in the U.S. as well as in Europe that gives us credits for units produced, and we can then use those credits. Unfortunately, that hasn't been adopted yet. That's one point in our list, something that we were hoping to be able to take into account. But that's out now because with the 1.25% impact, credit schemes for this year are not factored in.

But regardless of that, we continue to work on this because we think it's the right thing to have a credit scheme, both in the U.S. and in Europe. We would really like to implement such a scheme, and we'll continue to talk about it. Just to be quite clear about it. The offset is not factored into the current guidance for 2025.

Next question please.

Next question comes from [indiscernible] from Financial Times.

I'd like to ask a bit of a broader question. Until now, companies have obviously pointed to the evolving nature of the Trump administration's tariffs. But now that we do have a basic deal between the EU and the U.S., it does seem like these 15% tariffs are going to stay. So I just wanted to see your take on the fact that this will likely stay, obviously through next year as well. And how this new reality is basically going to fundamentally change the car industry as a whole? That's -- sorry, a big question for the first one.

And then on the second one, I'm sorry to go back to this tariff. You've just been walking through the various mitigation steps that you're going to be taking. And I take the fact that you obviously have the benefit of exporting. But even then, most of the rivals have said that there's also the steel and aluminum costs that are not directly imposed on carmakers, but are obviously burdening the car industry through the suppliers. And that -- and therefore, many are expecting the tariff impact actually increase towards the later -- towards the end of the year, even despite the EU-U.S. trade deal.

So I just wanted to clarify, is the differentiating factor for you is the exports that allows you to buck basically the industry trend where everyone is warning that the impact will be bigger later this year?

Oliver Zipse, please.

Now if you understand BMW as a global group of companies, then before we had an import/export balance into the U.S. and from the U.S. more or less. Just for the sake of argument, let's assume that was fairly balanced. So we're importing the same as we're exporting. Then before the trade negotiations, we had a tariff, let's say, of 10% plus 2.5%, 10% going into the EU and 2.5% going into the U.S.

Now the total is 15%, 15% plus 0. So from a global perspective, it's almost identical. Sure the relationship changes, but in total, it's almost the same. What I want to say is I think this tariff discussion is way exaggerated and also its effects on the industry. What's much more important is the question, are the products attractive? Are the products made in such a way that they create a contribution margin? And are they attractive enough so that customers will pay a good price for them. This is much more important than tariffs. So allow me to make that remark.

Well, yes, we've got a new tariff system in place, which applies for now, but the effect on the BMW Group won't be that large because in total, the tariff is not much higher than it was before. What's important to understand for Europe is, please don't go into -- don't make that mistake of believing that by limiting the trade relationships from other countries, you can be more resilient. I think that is a fallacy.

Actually, you need to have global business models. You have to trade in all directions and be locally strongly integrated. These are the business models that will always survive, and this is exactly the strategy of BMW.

Walter Mertl, please.

One thing I can add here is regarding the statement that you made that others have declared that in Q3, there will be higher impact, and we are not saying that. Well, we have to take into account in the U.S. that the OEMs also have quite large inventories. Ours is -- the reach is less than 30 days. Now in the industry, on average, it's a huge spread, but the industry average is roughly 60 days. So many other OEMs have a lot more inventory or had more inventory in U.S.

And that's different to us. And they also imported cars into the U.S. in different manners. And for that reason, their P&L still includes like legacy cars that are still being sold now without the tariffs. And so in Q3, we will now have the cars sold on which those tariffs apply.

So that may well be that they actually say other things based on their particular business model, their inventory and also their P&L effects than we at BMW because we have fewer cars in the yard locally, it does make a difference. And consistently, that's why the statements that made by OEMs are just different.

Yes, that was a very important clarification. Next question, please.

[indiscernible]

I wanted to ask, could you comment on the current situation in China? And are you planning on changing your strategy or adjusting it?

Okay. I'll pass that question to Walter Mertl.

Well, in China, it's quite exciting. End of June, as I said in my speech earlier, there were a few impulses by the government. They wanted to take greater care of how commissions are taken into account that we at BMW have been criticizing over the past 2 years that external banks paid far more than 5% commission to dealerships. We're not talking about net sales, but with an effect on net sales of the dealerships.

And this is something we made them aware of in June at the end of -- and as a result, a couple of things happened beginning of July. We at BMW have always been positive about this month, by month, we had slightly increasing volumes. But of course, this had effects on the entire market. At the same time, the government also underlined that supplier payment schemes have to be taken into account. BMW Group pays within between 30 and 60 days as per agreement and other OEMs in China do this differently.

So here, there might also be a slight irritation while we don't have that. And all of that taken together may lead to some irritation in 1st of July. The second week of July and the third was better already. Ultimately, for us, for the BMW Group and its vehicles, we're seeing a slight increase in transaction prices in the first weeks of July.

In the first weeks of July -- well, but we'll see how that goes once we've got the closing figures for July. Now what may be different at BMW than with other OEMs is the following. As you know, we are restructuring our dealer network. And currently, the impact is mainly with the dealers that we had to support since November with respect to their criticality and the dealership network will sort of be rearranged.

And we have made quite good progress yet. And by the end of the year, the process will have been completed. So we've got truly motivated dealers in place, which will be able to sell their units. We're now in a phase of transition work that makes it a little more difficult. This is why in the first 6 months, we saw a stronger impact in the year-on-year comparison.

And since we're making good progress and because existing groups of dealers are going to take over other groups of dealers and outlets, we're quite confident because they all believe in BMW, and they know that they're well invested and they know that they'll have a future with BMW. They'll be able to grow and they'll be able to make money, and we are very happy about that.

We've got 3 questions left. Next question, please.

Next question comes from [indiscernible]

Zipse, you mentioned the flexibility of production networks. Now, if there's no import tariffs importing into -- are you already considering relocating further models into the Spartanburg plant, for example? Then I have a question relating to the end-of-lease vehicles and the slower revenues obtained. What's the reason for that? And then a question relating to China and the sales strategy. How are you currently acting there? There is a price competition going on. There is a fight. Are you going along with that? Or would you tend to say, no, we can't make any more money on that? So what does it look like?

Mr. Zipse will begin regarding flexibility and production network and then the other 2 questions will be answered by Mr. Mertl.

No, there won't be any relocations. Now, the ranges of these tariffs are simply not large enough. And as I said, the Spartanburg plant is working at full capacity. There is no room for further volumes. So permit me to say so. And from the current perspective, all of that remains stable, also the plant utilization. And both markets, Europe and the U.S., each on their own are highly attractive markets for BMW. The numbers actually speak for themselves. We've got high growth rates in both markets, and this is independent of the plant location. Walter, please?

Let's start with the end-of-lease vehicles and the money we get for them. Every quarter, we reevaluate our entire portfolio in the entire world. We have residual value expectations towards the end of the contract, and we are relating that to the beginning of the contract, and we're including all of the information into this calculation that we have, not just a general list assuming current today's prices, but we're factoring lists that we're predicting for the next 36 months, for example.

What can be stated is that for the past 2 years, used car prices gradually normalized because we've had the best prices when there were hardly any new cars available because there wasn't enough material. This was in the years '21 and '22, and this is why used car prices increased strongly in that time. In 2023, third quarter, slowly decreased because we again have full availability.

But regardless of that, regardless of the fact that prices are slowly decreasing again, we can establish that they're still higher than they were, for example, in 2018 or 2019. And accordingly, because we are reassessing every quarter, we can say that we still have and we still make income in the sale of end-of-lease vehicles not as much as last year, but it's still a positive contribution. And this is exactly what that point is about.

Now China, you're asking whether we're entering the full price fight. Well, in China, last year, we had a major discussion second and third quarter when a lot of things happened. Also these commissions that I referred to earlier. They increased to more than 10% effect, which we have criticized. Now this has now led to a turnaround. Of course, the market is quite dynamic, but I'd like to point to our forecast.

In March, we said that we'll be on the level of the second half year of 2024. And I can tell you our net revenues, if I compare those with the forecasted second half of the year 2024, we're actually slightly in the positive compared to where we were second half of the year 2024. So our plan is working and the future will show the rest.

Next question please.

[indiscernible]

I've got 3 very brief questions. I wanted to know, can you say anything on the dividend yet? The forecast is that -- or analysts forecast that the dividend will be lower to EUR 4 compared to the EUR 4.30 from the previous year. Hence, my question. Do you have a target? Do you want to keep the dividend stable? Or how do you see this?

Second question, in China, the limit for luxury tax was lowered. What's the impact for BMW? Could you tell us how many vehicles roughly could be affected by this? And then third question, I'd like to ask the 0% tariffs in the European Union, does that take off some burden? And could you quantify that in base percentage points?

All 3 questions will be answered by Walter Mertl.

Now the amount of the dividend, we will tell you once we know that will be in March 2026 at the balance sheet press conference, and that's where you'll get the information. Regarding China and the luxury tax that was lowered. I wanted to correct you, the luxury tax is there, but the base level as of which it applies, that base level was lowered to RMB 900,000. Now the impact for us is less than 1% of the volume.

Regarding relieving a burden because of 0% tariffs for EU imports. I mentioned this earlier when I was asked whether I could break down all of the tariff effects individually. That's something I wasn't going to do, so I want do that now. So just know there's still 5 years left for EU imports, and they don't have a P&L effect of 5 months, but less. But of course, there will be an effect, and we're happy and that people followed us in that respect.

Now something from -- the last question, looks Meyer. We had Andrea Meyer first, and now we have Luke Meyer. The last question, please. Luke Meyer from Capital.

Sorry, it's just a comment I had to make and I apologize. Well, you have the floor. There could be more people by that name. Anyway, well, you have the floor.

Now for something completely different, no tariffs. From your perspective, you had some positive news on BEV sales, and I would like some more details. First of all, are you this year compliant with the EU regulation and how about the next years to come? Are you keeping an eye on what the regulation is doing here? And what's the demand on the market?

Now in the EU, could you say that -- I mean, last year, customers were quite reserved. Is that over now? Is demand now increasing? And if it is, is it also increasing outside of Europe? Is the margin increasing outside of Europe? If you're now selling more BEVs, does that dilute your margin? Or is the opposite the case?

And the third question also on BEVs, but now in respect to China, there is a concern that in China, luxury and BEV doesn't really go together and will not work in the long run. So what's your take on this? What's your experience?

Thank you, Mr. Meyer for those 3 questions, that will be answered by Mr. Zipse.

I'd like to answer your question step by step. First of all, do we reach our targets? Yes. We're sufficiently confident about this. Last year, we reached them anyway. This year, next year, I think we'll also reach our goals in terms of the current regulation in the EU. That's all been known for many years.

Even if for 2025, the goals are stricter. We are growing with our BEVs. So we're quite confident that we can reach those goals. But we still believe there could be a better regime, a better method going forward to 2030 and 2035 to do this most efficiently, but then also to improve the effectiveness of CO2 regulation. You know what we're saying, we need a life cycle assessment, not just look at what happens in the car, but also consider where does the power come from, what happens in the value chain, what happens with the suppliers and what happens when the cars are recycled.

Well, sometimes it's a little difficult to understand that we're saying. Yes, yes, we're staying within all of the limits. But looking into the future, we're actually in favor of a more intelligent approach to us. That's no contradiction, by the way, that we're doing that because everything we do cannot be measured in quarters, but in years or even decades.

So what happened in the first 6 months, BEV sales could be increased globally to more than 220,000 units. We've never had that many before, and that should actually answer your question. Is there a market for this? Of course, there is. Otherwise, we wouldn't be selling so many cars. And they're highly attractive. And now with Neue Klasse, we're still going one level up with an increased performance in almost all sizes.

So we do believe in 2026, '27, '28, we'll be on a very good track. And you will see with the Neue Klasse, the attractiveness of our product portfolio is so high that we will see a substantial increase in our values, which brings me to your question about China.

Now whether in a specific market, something works better or worse. Well, it's precisely for that reason that our approach is neutral in respect of technology. In Europe, there's different approaches as well. By the way, there's a huge difference between Denmark, Belgium, Norway as compared to Spain and Italy.

With our approach, we're just responding to that. We just changed the product mix in such a way that it works there. And this is in Europe, the same as it is in China. And the observation you made, well, that's quite right. But it's not a problem really because we're able to react to this. And what I said earlier about Neue Klasse, of course, we'll also launch it in China. It's a global product offering.

And we will create trust in our customers that all electric offering can be very attractive because of the electric drivetrain, but not only because of that. These are all in all very modern vehicles, digital capabilities, completely new design. You will experience -- well, we're not relaxed, but we are confident that we are able to respond well to any market development.

How about the margin? Do more BEVs dilute your margin?

Walter Mertl?

Well, I could take that question. Do you know that not just because of design and attractiveness of the product of Neue Klasse, that's not the only reason we're looking forward to this, but I'm also looking forward to its profitability with Gen 6 in the battery alone. Depending on which battery use, we'll have savings of 40% to 50% in manufacturing costs compared to our current Gen 5 battery. So I'm really looking forward to that. So I'm also looking forward to that also in terms of the BEV.

All right. Thank you, Meyer for the question. Thanks to the colleagues. Thanks for your questions. We are now ending our telephone conference. Thanks for participating. Goodbye and Servus from Munich.

[Statements in English on this transcript were Spoken by an interpreter present on the live call.]

Colleagues, ladies and gentlemen, good morning, and welcome to the telephone conference of the BMW Group for the second quarter. Today, we have here, as always, Oliver Zipse, Chairman of the Board of Management; and our CFO, Walter Mertl. First, Walter will take you through our financial results. Oliver will then give you a general business update for the BMW Group. After a short break, we will then have time for our Q&A session. Walter, please go ahead.

Good morning, ladies and gentlemen. After the first 6 months of the year, the BMW Group remains on track to meet its full year targets for 2025. As expected, tariffs weighed significantly on financials in the second quarter. Nevertheless, the BMW Group achieved group earnings before tax of over EUR 5.7 billion and a group EBT margin of 8.5% in the first 6 months. In the second quarter, deliveries to customers at group level increased by 0.4% year-on-year. As of June, BMW Group global sales remained on par with last year. All electric vehicles made an important contribution with a share of total sales of 18.3%. The share of electrified vehicles, meaning full electric vehicles or plug-in hybrid vehicles amounted to 26.4%. Group earnings before tax totaled over EUR 2.6 billion in the second quarter and over EUR 5.7 billion after 6 months. This resulted in a group EBT margin of 7.7% in Q2 and 8.5% in the first half year.

The operating profit in the Automotive segment reached EUR 1.6 billion in Q2 and over EUR 3.6 billion after 6 months. This led to an automotive EBIT margin of 5.4% for the second quarter and 6.2% for the year to the end of June, both within our full year guidance of 5% to 7%. Excluding the depreciation resulting from the purchase price allocation of BBA, the margin came in at 6.5% for the second quarter and 7.3% through 6 months. Let's take a look at how the Automotive segment performed across key metrics. Between April and June, deliveries of BMW, MINI and Rolls-Royce vehicles to customers were on previous year's level with over 621,000 units. We saw sales growth in all regions, except China. The BMW brand declined slightly by 2.6% compared to the second quarter of 2024. Outside of China, the brand grew by 4.7%. MINI benefited from the full availability of the entire model range and reported a significant year-on-year growth of 33.2% in the second quarter across all regions.

Retail sales in Q2 were especially strong in Europe with double-digit growth of 10.2% year-on-year. The European order intake for BMW remains strong with an order bank reaching well into the fourth quarter. The U.S. reported a growth of 1.4% in Q2. In China, retail sales levels in the first 6 months of 2025 were down 15.5% compared to the previous year. However, during the second quarter, we saw a slight sequential improvement month by month. Sales of our all-electric vehicles continued to grow. In the second quarter, we delivered more than 111,000 all-electric vehicles to customers. Automotive segment revenues decreased moderately by 8.4% to EUR 29.4 billion in the second quarter. Adjusted for currency translation effects, the decrease was 5.3%, mainly due to lower sales volume in China. Segment EBIT for the period from April to June totaled EUR 1.6 billion. The EBIT margin came in at 5.4% for the quarter and 6.2% for the half year.

These margins include the negative effects from extra tariffs, which amounted to around 2 percentage points in the second quarter and around 1.5 percentage points in the first 6 months. And we mustn't forget the effect from the BBA purchase price allocation I just mentioned. That brings me to my next slide to take a detailed look at the year-on-year changes in the operational result. Automotive EBIT declined by around EUR 1.1 billion compared to the second quarter of 2024. More than half of this difference is due to the impact of tariffs, which is included in the position other. Changes in currency and raw material positions were neutral in Q2. But in the second half year, we expect a headwind year-on-year, especially because of renminbi. The net balance of volume, model mix and pricing effects negatively impacted EBIT by EUR 300 million in the second quarter compared to the previous year. Volume and model mix combined were neutral.

Pricing continues to be a headwind year-on-year, however, to a much lesser extent than in the first quarter. Competitive pressure remains strong, especially in the Chinese market. Here, price levels of the second half of 2024 continued into the first half year of 2025 as expected. Research and development expenses decreased by about EUR 200 million compared to the prior year quarter. Group R&D expenditure as of June totaled EUR 4 billion, slightly below previous year. The R&D ratio according to the German Commercial Code came in at 6% after 6 months. For the full year, R&D expenditure will be below last year's level, and it will steadily decrease over the next years. Selling and administrative expenses also decreased by around EUR 100 million compared to the previous year.

The year-on-year headwind of EUR 1.1 billion from other cost changes can mainly be attributed to 2 factors: first, the higher tariffs in the U.S. and anti-subsidy tariffs imposed by the EU Commission on electrified vehicles from China; and second, the sales of end-of-lease vehicles. Here, resale income was lower than in the second quarter of 2024, yet remains positive on a portfolio basis. Free cash flow in the Automotive segment totaled about EUR 1.9 billion in the second quarter. Segment earnings before tax amounted to EUR 1.6 billion, which is EUR 1 billion lower than in the previous year's quarter. The net change in working capital reduced free cash flow by around EUR 300 million. The net effect from capital expenditure and depreciation had an impact of EUR 200 million in the second quarter. Capital expenditure for the first half year amounted to around EUR 2.7 billion, a significant year-on-year reduction of around EUR 700 million. The CapEx ratio was 4.5% for the second quarter and 4% for the first 6 months.

After the peak in 2024, CapEx will decrease for the full year 2025, and we expect a CapEx ratio below 6% for 2025. Changes to provisions negatively impacted free cash flow in the second quarter by around EUR 200 million. This was mainly due to the consumption of warranty provisions. The change in the position other of around EUR 1 billion reflects the development of a set of various topics, including accrued expenses, interest and advanced payments received, income taxes and liabilities for tariff expenses not yet paid. After the first 6 months, Automotive segment free cash flow is on previous year's level with just over EUR 2.3 billion. For the full year, we are targeting a free cash flow of over EUR 5 billion. Our strong free cash flow generation enables us to further execute our consistent shareholder return strategy. In May of this year, the Annual General Meeting authorized the Board of Management to buy back up to 10% of BMW AG's share capital over the next 5 years.

Based on this authorization, a third share repurchase program with a volume of up to EUR 2 billion was approved. It should be completed by April 30, 2027, at the latest. The first tranche of EUR 750 million began in May, and it will be completed no later than December 8 of this year. Let's move on to the Financial Services segment. The number of new contracts concluded with retail customers in the first half year reached almost 825,000 contracts, a slight decrease of 3% year-on-year. This is due to the challenging situation on the Chinese market, which led to a moderate decrease in new credit financing business. The new leasing business continued its dynamic growth in the first 6 months of the year. The penetration rate for lease and loan offerings increased by 2.5 percentage points to 43.7%. Driven by a higher average financing amount per contract, new business volume was on previous year's level despite the slight decrease in new contracts. Segment earnings amounted to just under EUR 1.2 billion, a year-on-year decrease of 19.5%.

This results mainly from 2 topics: in addition to provisions following the receipt of a revised operational tax assessment for prior years and the resale income of end-of-lease vehicles, which was lower than in the second quarter of 2024, yet remains positive on a portfolio basis. The credit loss ratio across the entire loan portfolio remained at a low rate of 0.27%. In the Motorcycles segment, deliveries decreased moderately by 8% year-on-year. Segment revenues decreased by 2.8%. Adjusted for currency translation effects, they were on par with the second quarter of 2024. Segment EBIT in the second quarter totaled EUR 136 million with an EBIT margin of 14.2%. Ladies and gentlemen, our outlook for the full year is based on assumptions, which are described in detail in our half year report. But let me briefly mention some key factors for our business development in 2025.

In China, we have been observing increased monitoring of the automotive market by local regulatory authorities since the last 2 weeks of June. This also affects commissions payments from local banks to dealerships in connection with brokering retail financial and insurance products, payment terms to the supplier base as well as increased scrutiny of price competition. Dealer commissions were significantly reduced by local banks in June. And we are closely following these developments and the potential impact on the Chinese automotive market. Ladies and gentlemen, as you recall, our guidance given in March included all tariffs in force as of March 12. In our quarterly statement for Q1, we had assessed and included all tariff increases announced as of May 7 and confirmed our original guidance based on certain assumptions. And in today's half year report, we maintain our consistent approach and have also incorporated the effects of all latest announcements. According to the announcement on July 27, an agreement between the U.S. and the EU regarding the tariff situation is emerging.

Based on published information by the respective authorities, we expect partial reductions of the currently applicable tariffs between the U.S. and the EU from August 1. Additionally, tariff negotiations across the globe are ongoing and may result in further changes. Therefore, the expected impact from tariffs on our full year results can still only be estimated based on our certain assumptions. For the full year 2025, we currently expect a burden from tariffs of around 1.25 percentage points on the EBIT margin in the Automotive segment, including mitigations. Based on our assumptions, the full year outlook remains unchanged. That means on a group level, we are targeting earnings before tax at previous year's level. In the Automotive segment, we expect a slight increase in deliveries and an EBIT margin in a corridor of between 5% and 7%. The EBIT margin in the Motorcycles segment should come in at between 5.5% and 7.5%. In the Financial Services segment, we expect a return on equity in the range of 13% to 16%.

Ladies and gentlemen, the BMW Group is a truly differentiated global player. This strong strategic positioning enables us to mitigate the impact of tariffs and allows us to adapt swiftly to changing market conditions. The BMW Group has a focused strategy and a clear plan on how to effectively navigate our operating business. As a result, we were able to provide a comprehensive guidance for the year 2025 in March, including the impact of tariffs. And we delivered an EBIT margin within the full year target corridor of 5% to 7%, both in the second quarter and for half year. At the BMW Group, we are steering our business carefully and in a consistent manner.

During the last years, we significantly invested in the future of our company in line with our long-term planning. In 2024, both CapEx and R&D reached peak levels. Starting in 2025, we are reducing CapEx and R&D spending as planned. Our operating costs are also decreasing compared to prior year. Just as in Q1, this is again evident in our Q2 figures. Based on the results of the first 6 months, we once again confirm our full year targets for 2025. And we remain committed to our long-term goals of premium profitability and capital return to create value for all of our stakeholders. Thank you.

Thank you very much, Walter. Now over to our CEO, Oliver Zipse, please.

Ladies and gentlemen, good morning. Thanks to the strength and foresight of our strategy, our attractive product portfolio and our global team and operations, the BMW Group is built to weather various conditions. And it underscores that there is not one automotive industry, there are players with different strategic approaches. Through the first half year, our sales performance demonstrates the appeal of our global brands and the ongoing success of our broad technological approach. After confirming our original guidance from our annual conference after the first quarter results, we remain on track with our financial targets for the year despite ongoing tariff uncertainty and fluctuations in the Chinese market. Unpredictability is a long-standing feature of the auto industry and is the norm in today's business environment. What is decisive is how you deal with it because global success is rather predicated on your ability to anticipate developments and to respond rationally and efficiently. That is fundamental to the BMW Group.

The overall global automotive market is growing. We are always ready to profitably gain market share wherever individual market conditions allow. As dynamics in the industry shift, we know exactly where we are placed with our premium brands and where we can pursue opportunities, maintaining a healthy balance of value creation and market share. Over many decades, we have built up a comprehensive and balanced network of sales, production and supply chain operations spanning the major regions. This makes us one of the few truly global players in the industry and our deep roots in global markets offer us many advantages. First, they allow us to tap into leading-edge developments in the individual markets and understand specific customer needs. Our ties to research universities, our R&D network and IT hubs and our network of local tech partners enable us to leverage key competencies from individual markets for our global products and strategy.

Second, through our extensive footprint in key markets, we remain resilient in the face of geopolitical instability and ever-increasing regulation. And finally, our strong ties also allow us to engage in direct discussions with key political decision-makers who value our perspective. Here, it is not just about our individual interest, but rather finding solutions for customers worldwide and driving shared economic prosperity. The BMW Group welcomes fundamental agreement between the European Union and the United States to reduce tariffs on both sides of the Atlantic, and it's now important to quickly finalize and implement the agreed measures. We will continue to advocate for trade between the EU and the U.S. not to be hindered by import tariffs. The currently agreed U.S. tariffs also burden European exports, affecting consumers and globally operating companies. Therefore, we urge both sides to continue working towards market openness and the convergence of technological regulations.

Through our global production network and supply chains, we maintain high flexibility to respond to fluctuations. Our production plans are attuned to market demand, allowing us to achieve capacity utilization above the industry standards. At our largest single plant in Spartanburg in the United States, for example, we produce over 420,000 vehicles annually, over half of which serve the local market and half of which we export. Across the United States, we have created extensive value chains as well as a competency hub for our Global X family of vehicles in Spartanburg, which remain in high demand across the entire globe. BMW made in America and sold to the world. This combination of leveraging the competitive advantage of the U.S. market and SUVs with brands -- BMW's brand strength allows us to develop products which speak to customer needs in markets worldwide. For the current financial year, our sales results continued into Q2 in line with our expectations as conditions continue to vary from market to market.

In Q2, we saw a sequential improvement from Q1. Outside of China, all 3 of our major sales regions posted growth. Group sales in these markets combined to grow by 6.3% through the first 6 months of the year. Group sales in Europe grew overall by 10.2% in the second quarter and in Germany alone by over 10%, with growth in most markets outpacing the passenger vehicle market. Overall, the BMW brand increased its market share in Europe. Among the most successful BMW models were those in the business class segment. In the first half of the year, the BMW 5 Series saw growth of more than 40% worldwide compared to 2024. Other notable models saw success, including the BMW X2 models, which more than doubled sales through June. With the full availability of the new MINI family, the brand grew in all regions worldwide, including in China. In the first half of the year, more than 1 in 3 MINI sold was a fully electric vehicle. Rolls-Royce increased deliveries by nearly 10% in the second quarter, driving by strong sales from the Cullinan Series 2.

Drivetrains and model variants across the portfolio continued to see success in Q2. BMW M sold nearly 106,000 vehicles through June, the best ever first half year of the brand. Sales of plug-in hybrid models from the BMW brand grew by almost 30% in the first 6 months. Our BEV models continue to be a fundamental pillar of our strategy. In the second quarter, we achieved an important milestone with the delivery of our 1.5 million all-electric vehicle. And across the portfolio, now we offer more than 15 all-electric models. In Europe, the group's BEV share reached 25% with the PHEVs included, the electrified share reached nearly 40%. And across all brands, BMW is the third best-selling BEV brand in Europe. While we are proud of our position as a leading BEV player, we know that the world is multidimensional. To meet consumer needs, especially in a product as complex and personal as a car, there is no single answer. Our Q2 results show that we can serve multiple preferences simultaneously. BEVs, PHEVs and our M models all achieved growth.

The most effective strategic approach is to use all technology to reduce CO2 emissions overall. We remain committed to the goals of the Paris Climate Agreement while advocating for a review of the 2030 and 2035 targets in the European Union. To achieve these goals and create effective CO2 regulations, we must take a comprehensive view across the entire value chain. This would consider all emissions across the entire life cycle and not just tail pub emissions from the supply chain to the raw materials used in the car, the production process, the vehicle drive, energy used to power the vehicle and finally, all the way up to recycling. And dependency on a single technology can be damaging to an industry. Putting all your eggs in one basket is just poor asset allocation. Hydrogen, for example, offers European opportunity to use our expertise and take the lead on an emerging technology that will contribute to our climate goals and unlike BEVs without the need for large amounts of raw materials or battery technology, which are not localizable at large scale in Europe.

Beyond drivetrains, there is great potential with alternative fuels. There are more than 250 million vehicles in the EU, which could now immediately contribute to climate protection. But this requires a clear regulatory pathway and targeted investments in the ramp-up of all renewable fuels. The HVO100 as an example, while it is already available in markets across Europe, tax schemes and the CO2-free targets need to recognize this renewable fueling option to incentivize customer adoption. This would also help in scaling an alternative fuel that has a 90% CO2 saving compared to normal fuels and can already be accessed today. For OEMs and customers, this is also a cost-effective way to reduce emissions in the use phase. For Europe to maintain competitiveness and finance its future, we need to invest not only in new technologies, but also leverage our existing technologies, which can meet customer preferences and still contribute to climate targets.

For the BMW Group, we're now just 5 weeks away from the next major innovation step, which our entire company has been fully focused on for many years now, the launch of the Neue Klasse. On September 5, we will celebrate the world premiere of the all-new BMW iX3 at the IAA Mobility here in Munich. In June, we hosted media representatives at the pre-drive event in Miramas in Southern France. The initial feedback has been tremendous, and we remain right on time with the launch, including at our new plant in Debrecen. Construction also continues at our battery assembly facility in Irlbach-Straßkirchen. With the Neue Klasse, we are making great strides in all relevant technology fields, whether in electrification, digital user experience, driving dynamics or sustainability. The new BMW iX3 will be a benchmark in our industry.

The all-electric sixth-generation powertrain will set standards in performance and efficiency, powered by our battery cells developed in-house with 20% more energy density, an electric range of up to 800 kilometers according to WLTP, with 400-kilowatt maximum charging, customers will be able to add over 350 kilometers to their vehicle range in just 10 minutes according to WLTP and with an energy consumption of 50 kilowatt hours per 100 kilometers. In addition, our revolutionary new iDrive will change the way the driver interacts with the car. With the BMW iDrive, we set an industry standard more than 20 years ago. After the reveal of the all-new Panoramic iDrive at CES in January, we are already seeing the industry follow our lead. With the technology clusters we have developed for the Neue Klasse, we will scale our advanced technologies across the portfolio. We will start in the core segment to build momentum quickly. This is simply smart economics. By 2027, we will bring 40 new models and model updates with the Neue Klasse technology and design language on the road worldwide.

Our technology cluster approach allows us to integrate market-specific features and content. In our major sales regions, we have a variety of local solutions with leading partners. This allows us, for example, to further enhance the digital user experience as well as automated driving functions in our upcoming Neue Klasse models. In China, for example, we are collaborating with Alibaba Banma to develop the next level of intuitive and conversational in-car voice interaction. We will also enhance our BMW Intelligent Personal Assistance with functionality from DeepSeek in our vehicles in China. In most other countries, the next-gen BMW Intelligent Personal Assistant will be powered by large language model technology from Amazon Alexa. For driving assistance systems that meet local needs and regulations, we've also sought out partners in different geographies, always following our philosophy in this area, smart, symbiotic and safe. Just 2 weeks ago, we announced a new partnership with Momenta, a leading Chinese ADAS technology provider.

The partnership will focus on software development and integration for Chinese road networks, traffic conditions and user expectations, utilizing advanced AI algorithms and data-driven development methods. We will launch the systems in China, starting with our Neue Klasse. In other markets, we continue to build on our already very successful partnership with Qualcomm. These examples show how adaptive the Neue Klasse architecture is. With a software-defined vehicle, we maintain competency over all systems of the car and can roll them out to markets at the same time across the world. But we also are able to quickly integrate local tech stacks into our own ecosystems to give consumers access to innovations and features they are used to.

And through backward integration of software solutions available for all aspects of the vehicle over the air, we will continuously enhance the customer experience. This overall is a huge advantage for us. Ladies and gentlemen, our consistent strategic approach and continued success is not a coincidence, but the result of resolute long-term planning and orientation. It is a multiyear process in every area of the company. That is what our stakeholders expect from us. The BMW brand is a promise, and we deliver on our promises. We continue to build upon the strong position we are in today. And with the rollout of Neue Klasse technologies and products over the next 2 years, we will bring the company to a whole new level. Thank you.

Thank you very much, Oliver. Ladies and gentlemen, we now have a short break before we move on to the Q&A session. See you in 5 minutes.