Mercedes-Benz Group (Daimler) Aktie

Welcome to the analyst conference call of Mercedes-Benz. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. [Operator Instructions] I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results documents.

Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties. If any of the assumptions underlying these statements prove to be incorrect, actual results might differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made.

With that, I would now like to hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you.

Good morning, ladies and gentlemen. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q1 results conference call.

I'm very pleased to have with me today Harald Wilhelm, our CFO. To allow more time for your questions, Harald will give a brief introduction and walk you through our financials. We will then move directly into the Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website. And with that, I will now hand over to Harald.

Thanks a lot, Christina, and welcome, everyone. So very happy to take you through the highlights of the first quarter, which was another eventful quarter geopolitically and for us as well.

Let me get started with the execution of our strategy before I move then to the financials and the outlook. Our product ramp-up is gaining momentum. As outlined, we're executing the most comprehensive renewal and expansion of our product portfolio. The new S-Class, you certainly didn't miss this one, remains a cornerstone of our top-end strategy. And we didn't stop there. We also unveiled the new Mercedes Maybach S-Class in China, particularly important and very successful in the Chinese market.

In 2025, every second S-Class sold in China was a Maybach. This was complemented by the new EQS, now offering an 800-volt system with fast charging capabilities, more than 900 kilometers of range and steered by-wire technology, which is really cool. We continued the S-Class story on the SUV side, presenting the new GLS in the U.S. alongside the GLE and the GLE Coupé.

Last week, the all-new electric C-Class premiered in Seoul following the GLC, which has seen very strong demand. It is the second vehicle on our MB.EA architecture and our first electric C-Class. And frankly, it looks pretty stunning.

On the van side, the all-new VLE had its world premiere. Built on our new highly flexible van architecture, it marks the beginning of a new era for the Vans division. And we will take this even further. Besides the upcoming VLS, we announced the Mercedes Maybach VLS offering true luxury and expanding our top-end portfolio further. And by the way, all of these vehicles come with MB.OS, our own operating system, featuring the latest entertainment stack, point-to-point assisted driving and much more.

By the way, talking about MB.OS, as previously emphasized, MB.OS enables us to partner globally with the leading tech companies. Level 2++ is already on the road in China and is coming to the U.S. later this year. And we also go beyond as we work with robotaxi companies on robotaxis with partners.

We are further strengthening also our local-for-local strategy. In China, the all-new GLC long wheel based with China-specific entertainment and Level 2++ was unveiled at Auto China. GLC is closing the BEV white spot in our portfolio. And in the U.S., alongside the presentation of the new key products for this market, we announced investments of more than $7 billion until 2030. The U.S. is a strategic growth market for us where we are further strengthening our footprint.

And with this, I would now turn to the financials on Page 4. Looking at the group KPIs. First, the group revenue developed broadly in line with the sales development at cars in the first quarter. The EBIT came in at a solid EUR 1.9 billion. EPS stands at EUR 1.49. Free cash flow, healthy at EUR 1.9 billion. That brings us to a strong net industrial liquidity of almost EUR 34 billion before obviously paying the EUR 3.3 billion divi, which we did earlier this month. Looking at the car sales, we ended the quarter with 419 units, in line with expectation. The sales development was impacted by China.

If you look ex China, total sales increased by 5%. And top end sales, particularly were resilient in China, maintaining a global sales share of 15% Core and Entry were lower due to China, while growing by 7% ex China. And the global BEV sales developed well, up 9%. In Europe alone, we recorded a growth of 34%. This is largely driven by the CLA and obviously, the remainder of the portfolio is currently ramping up with more yet to come.

Looking at the car financials, the sales I explained already. The ASP in the first quarter was lower, but slightly up compared to quarter 4. This also drives the revenue development. The EBIT adjusted is at EUR 900 million as expected, and the CFBIT adjusted stands at EUR 3.4 billion.

Now let's have a look at the EBIT evolution, the EBIT bridge on the Page 7 a bit more in detail. In the quarter 1, Cars delivered an EBIT adjusted of around EUR 900 million and a return on sales adjusted of 4.1%, well within our full year guidance range of 3% to 5%. What are the main puts and takes on the walk? The volume structure and the net pricing is actually slightly negative. However, the bucket is lower overall, mainly due to the tariffs, product enhancements, lower China contribution and a lower fixed cost capitalization. The FX, I think, is self-explanatory on the chart.

On the industrial performance side, the underlying industrial performance is positive, driven by continued efficiency improvements. That more than offset headwinds from raw mats and higher depreciation following our numerous product launches. However, on top, Q1 was impacted by several one-timers with negative items in the industrial performance on product-related measures and positive items largely in the other bucket.

Overall, one-timers, however, were a wash in Q1. Then on the SG&A and the R&D side, you see they were positive, reflecting our further efficiencies and having left the funding peak behind us.

Turning to the cash. Cars achieved a strong adjusted EBIT of EUR 3.4 billion. How did we get there from the EUR 800 million of the EBIT? We generated significant working capital tailwind that reflects our continued effort to improve the working capital, including a favorable inventory structure and improved payables mainly related to the production ramp-up. A part of this should unwind over the course of 2026. We further see proceeds from net financial investments. That's mainly due to the continued sale of our retail outlets in Germany. Depreciation exceeded investments as we have passed the investment peak. Total investments are lower, in line with our plan as flagged in February.

Overall, the level reflects our continued focus on investing in technology and competitive products on the R&D side while also demonstrating a highly disciplined total CapEx approach. These positive effects were partly offset by a negative other bucket with cash outs related to restructuring charges of around EUR 800 million, dealer provisions as well as the adjustment for the BBAC at equity result. As a result, we recorded a EBIT of EUR 2.6 billion. Adjusting for the special items, it's at EUR 3.4 billion.

Looking on the van side, Sales volume came in at 80,000 units. In China, we saw a softer consumer demand for midsized vans. Excluding China, vans were able to grow year-on-year despite a particularly competitive environment in the U.S. and Europe. e-vans sales increased by almost 30%, lifting the global EV share to 8%. Revenue development is broadly flat. And on the EBIT, we have a look on the next page before quickly on the cash flow.

The main driver of this were the planned investments into the new van architecture. Investments are expected to peak this year, strategically preparing vans for the future. This I think is a good moment to remind you that this represents the largest product investment program in the history of our Vans business. It underpins a highly attractive and scalable product pipeline, including the all-new VLE, VLS and VLS Maybach, alongside a broad range of private and commercial derivatives built on a highly flexible modular architecture.

At the same time, we are completely remodeling our global production footprint with investments in Victoria, Charleston and Jawor to enhance flexibility, efficiency and competitiveness. Working capital was a headwind driven by temporarily higher inventories as well as a higher value of stock from e-vans.

Now looking on the EBIT walk for Vans. Vans achieved an EBIT adjusted of EUR 450 million and once again delivered a benchmark double-digit return on sales of 10.1%. Let me guide you through the buckets, the volume structure pricing is lower, reflecting a lighter product and market mix, negative net pricing, partly offset by positive effects from an increased leasing portfolio. FX is a headwind, mainly driven by the Turkish lira, which was largely offset through pricing. Industrial performance is flattish, SG&A, R&D and others are a wash.

Looking on the Financial Services side, we have migrated to the new setup, which is working well and is enhancing our competitive offering in the market, which is also reflected in a higher penetration rate in the first quarter. At the same time, we continue to sharpen our focus on the core financial services business as evidenced by the signing of the Athlon agreement and the divestment from Blacklane, both expected to complete later this year.

New business volume declined by 4% to EUR 13.1 billion, reflecting sales development and adverse FX effects. The portfolio stood at EUR 130 billion at the end of Q1, broadly unchanged versus year-end 2025. Financial Services delivered a strong performance in Q1 with a return on equity of 13.3%. EBIT adjusted increased by 44%, supported by continued positive trend in portfolio margin, improved cost efficiency, while at the same time, the cost of credit risk remained elevated, reflecting a weaker global economic outlook.

Let's have a look at the group numbers. On the EBIT side, Carl Van Financial Services, I explained already. This results in a solid adjusted group EBIT of EUR 1.8 billion. We had some adjustments in the first quarter, additional restructuring charges of EUR 175 million for our NLPP personnel cost reduction program and M&A adjustments mainly related to Athlon following its reclassification as assets held for sale. With this, the group EBIT booked sits at EUR 1.9 billion.

On the cash flow, cars and vans, I covered already. Tax -- cash taxes are positive due to refund related to 2025. Interest paid is negative due to seasonality of coupon payments and higher interest environment. Interest income was positive with more than EUR 100 million. And on the free cash flow -- on the industrial side, altogether, this is at EUR 1.9 billion. The adjusted figure is significantly higher at EUR 2.8 billion, mainly due to the NLP cash out of almost EUR 1 billion in the first quarter.

On the NIL bridge, Page 14, by the end of first quarter, the nil increased to close to EUR 34 billion. That is a pretty comfortable level. Of this nail, we paid EUR 3.3 billion as a divi to our shareholders last week. What's the status on our share buyback program, our EUR 2 billion program. It's in full execution. In Q1, share buybacks totaled EUR 470 million. In total, as of today, as we speak, we have bought back shares worth more than EUR 1 billion since inception of the program following the AGM, the share buyback has accelerated significantly. And with regard to the DT stake, we continue to monitor market development and capitalize on opportunities as they emerge.

Now turning to the outlook and the guidance, getting started with the divisional guidance for 2025. Please consider the disclaimer regarding forward-looking statements at the end of this presentation in the relation to the outlook. Important to note, the war in the Middle East adds further uncertainty to an already high level of uncertainty in the global economic environment and automotive markets. The outlook assumes no prolonged conflict with respect to potential impacts on material, raw material and energy prices, inflation and sales trend. Assumptions are based on today's regulatory framework and on the U.S. EU tariff rate expected to be reduced to 0 now effective August 2026.

On the car side, the sales guidance for 2026, we retain an overall constructive view with targeted growth ex China. Global sales volume is expected to remain at prior year level. Product transitioning is impacting the sales volume as expected, with sales in Q1 being the lowest and building momentum in H2. xEV share is unchanged. And with quarter 1 well within the guidance range, we continue to see adjusted return on sales between 3% to 5% as guided. Equally, PPE, R&D and CCR remain unchanged.

On the van side, I can also make it pretty short. Sales guidance and the xEV share are unchanged. We continue to see adjusted return on sales as guided between 8% and 10%, no change to PPE, R&D and CCR. And also on the Financial Services side, short and sweet, given the current interest rate volatility, we continue to see the full year guidance unchanged in the range of 10% to 12%.

Looking at the group guidance, Page 16. It follows obviously the same premises as the segment guidance, in line with the unchanged divisional guidance. A group guidance remain unchanged. Equally on the free cash flow, industrial guidance, this remains unchanged before additional proceeds from major M&A activity.

And now turning a bit more to the outlook for the remainder of the year, what's ahead. Well, the 2026 ramp-up is in full motion. We see strong demand for all new electric models. In Europe, that order intake has more than doubled compared to prior year's quarter, up by 107%. New models resonate well with our customers. The order books for the new CLA, the GLB and the GLC are filled well into the second half of the year. CLA and GLC production are running at 3 shifts and additionally, an additional Saturday shifts for the GLC.

The S-Class is now available to order in Europe. First deliveries are starting in second quarter in U.S. and China. This will follow in quarter 3. So we also reskinned completely our large SUV portfolio with the GLS, the GLE, the GLE Coupé, including AMG versions and the order books on these ones will open soon. On the VLE, the order book is open in Germany. The rest of Europe will follow soon. And with this, we are confident that we can build on that momentum as our model ramp-up continues in quarter 2 with momentum being built in H2.

And last page, Page 18, well, one of my personal highlights, the all-new Mercedes AMG GT 4-door Coupé, which will be introduced in Los Angeles on May 19. You should really block this in your calendar. It will be our first model on AMG's electric high-performance architecture, AMG EA. This car will set new benchmarks and embody true AMG DNA. So very much looking forward to that one. Thank you for now.

And with this, I hand back to Christina christina.

Thank you very much, Harald. Ladies and gentlemen, we will now move on to the Q&A session. [Operator Instructions].

[Operator Instructions].

And the first question goes to Tim, Deutsche Bank.

Two questions, please. The first one, Harald, given there was quite a bit going on just for modeling and contextualizing your full year guidance, how should we think about one-timers going forward? Is there anything material that you already have in your agenda that we should already think about in our modeling in the coming quarters with respect to cash and earnings?

I'm also thinking about your restructuring program, lots of outflows in Q1. Obviously, some performance improvements impacts that you already see in Q1 as well on the P&L. Where do we stand on that side?

And then secondly, you already quickly touched on this, but it is a big topic, obviously. How should we think about raw material inflation in the second half of the year? Is there anything that you're planning already? You said you start to see it a bit, but it's a bit uncertain. How should we think about this?

Yes. Thanks a lot, Tim. So with regard to one-timer, as you mentioned them, number one, I would like to reemphasize that globally in the first quarter, I mean, they are a wash, as I outlined when going through the EBIT bridge, I mean, a bit before. When I look at the full year in terms of the outlook, obviously, as we guide also at the group level on an EBIT reported basis, everything which we have in mind, which we know is included in there. Y.

Ou could see a step-up in the restructuring provision for our personnel cost reduction program in the first quarter. I do not expect any further material addition in the restructuring provisioning on the EBIT side nor any other material restructuring elements. Otherwise, I mean, we would have included them, obviously, in the group guidance outlook.

On the cash side, I think put it clear in the outlook as well on the free cash flow reported for the group that this is before material M&A. So what is in our mind here. What is included in the guidance at this stage are minor M&A activities, smaller divestments in terms of our own retail divestments, larger ones to come to the extent they close in 2026, obviously, would further support cash generation.

What else comes to mind, Athlon closing is expected in 2026. However, that will not sit in free cash flow, but certainly will enhance the net cash position, and we would consider that, obviously, also in capital allocation. And your favorite ones on DT, no material divestment is assumed in the number. That's why this guidance is before material M&A cash flow.

So in other words, I mean, if you take that guidance on the free cash flow, as outlined before, in terms of total cash generation, I would say there are some distinct opportunities to enhance cash generation further, and you know the capital allocation framework, what we are supposed to do with it.

On the second question, on the raw mats, well, you can see in the first quarter bridge already in the industrial performance that we face some raw mats headwinds, and we do expect raw mats to step up further in the remainder of the year, higher than what we anticipated at the beginning of the year, also driven by the Middle East crisis and the global macro situation. That is included, however, I mean, in the outlook for the full year in line with the 3% to 5% guidance, which we confirm here today.

Thank you, Tim. We move on to the next question, and it goes to Mike Tyndall from HSBC.

It's Mike Tyndall from HSBC. I guess first question just around products, the new products specifically. And if I think about your -- the Capital Markets Day and the plan in terms of product cost savings, it feels like the big step is to come forward. And is that what we're going to see as these new products ramp? I'm just trying to think about very strong order intake. How does that translate in terms of EBIT?

And then I guess the second question, I guess, in some ways, it is self-explanatory, but Q1 is arguably the toughest quarter in terms of FX and tariffs, and you've hit the middle of the range. Is the reason we haven't seen an upgrade simply because it's a pretty uncertain world out there? Because it does feel like you're well set up for the rest of the year now.

Thanks, Mike. So number one, yes, on new products, we are very pleased to see the momentum. The order intake numbers going up. I mentioned the best numbers in terms of order intake in Europe, 107% up. Obviously, you don't see that in sales yet, but it's a good indicator for what is to come. That's what we have been working for so hard. That's what you have been waiting for so patiently. That's what we want to bring to fruition in the course of 2026 and obviously, beyond that.

At the same time, we do know that, I mean, the EV vehicles carry higher variable cost than the brothers and sisters on the ICE side. That's why we engage into significant cost savings. I mean, over time, and that should help to improve the margins on these EV vehicles, I mean, over time, '27, '28. And during the CMD, we outlined that we see the possibility to go to breakeven margin breakeven between ICE and EVs towards the end of the decade, all costs, including CO2 being included.

So we're exactly, I think, I mean, on that path. This is also a bit of an answer to your second question is, obviously, as we're ramping up, BEV in the second half of the year, the volume goes up, but there's a bit of a dilution coming along with it. Then no, quarter 1 is not the worst in terms of the tariffs.

Actually, quarter 1 on tariffs is slightly mitigated due to the IEEPA refund claim, which we included in the books and the records. So actually, in the quarter 1 tariff impact is around 100 bps, whereas we expect for the full year still 150 bps. So we'll have some headwind coming from the tariff side in the remainder of the year from higher raw mats, as I answered Tim's question before.

And the third, I would say, is the BEV dilution I just mentioned before. And then obviously, the depreciation, which kicks in with the new models coming off the production line. So that's why in terms of the remainder of the year, despite the momentum and some volume growth in H2, we see the guidance in the 3% to 5% corridor for now.

Thank you, Mike. We would move on to the next question, and it goes to José Asumendi from JPMorgan.

José, I'm sorry, we cannot hear you. We will try again. Then let's move on to the next one, and I will hand over to Stephen Reitman from Bernstein.

Two questions, please. First of all, on China, can you give us some idea of the timetable of the launch of the GLC Electric in terms of when you're going to be announcing the pricing on that vehicle? And obviously, it's very early days since the full unveil of the base version in China. But can you talk a little bit about the reaction you're seeing from your dealers and from any other relevant sources you can talk about?

And secondly, on BEV demand, are you noticing any impact? Are you seeing more feedback you're getting from the dealers about customer interest maybe moving more towards BEV because of high fuel prices?

Thanks, Stephen. Yes, on the timetable, the GLC long wheel-based is expected to hit China market in quarter 3 at the turn probably quarter 3, quarter 4, if my memory is correct. And we will set the pricing at the right moment of time, I would say, not too early, not too late.

And I think as you could see also, I mean, on other products, we'll have a view that this is competitive. However, obviously, protecting the brand and the product premium. The reaction, the feedback from dealers on the GLC, on the EV product line on what is to come this year, but also, I mean, as you know, from time to time, you show a bit the jeweleries, which are yet to come also beyond the 2026 is very encouraging.

The tech motion, which we kicked off with the CLA in terms of MB.OS, in terms of Level 2++ now, CLA on the road in China with Level 2++ I think, is gaining a good momentum in support of the entire product lineup, I mean, to come. And that's why we are hopeful that the GLC long wheel based, which was revealed last week during the auto show will pick up momentum once it's going to be launched in the China market.

Your second question in terms of the EV demand, I would say, for Europe, definitely, we see that very recently with the Middle East crisis, the fuel price spike, the dependencies, I mean, on fuel, there is definitely a favorable momentum picking up.

Well, I mean, I cannot tell you how sustainable that is going to be in case the contract settles. But clearly, the product in itself, I think, are considered as very attractive through Mercedes. And that is supported, I would say, by the current macro and geopolitical circumstances.

Okay. I'll try one more time with Jose. Jose, are you online? Not the case, then let's move on to Christian Frenes from Goldman Sachs.

One moment. Sorry. Here's the operator speaking, Jose, we can hear you, but not really well. Unfortunately, we can understand you. So maybe you could try dialing in one more time, and then we will -- unfortunately, we cannot understand you. We are very sorry. Something seems wrong with your line. We cannot understand you at all. We are very sorry. Please try dialing in again.

Yes. Let's move on to Christian.

Okay. Can you hear me now?

Yes.

Okay. Great. I don't know what happened there. But it's Christian Frenes, Goldman Sachs. Two quick questions, please. Harald, you mentioned the tariff had a 100 basis point headwind in Q1. And I think you mentioned 150 basis points headwind for the full year. So just the cadence of this, I suppose, should Q2 be the peak tariff headwind then and then with the reduction in the second half, could you just clarify, please?

And then the second question in your cars profit bridge, you -- there seems to be -- the other was obviously a benefit. You called that out. You said it was a wash. It looks like your other operating income and expense talks about a EUR 350 million gain from a settlement from claims against suppliers. Could you just elaborate what that's about, please?

Yes. Thanks, Christian. So I would say probably the quarters to come should run at around 150 bps dilution from the tariffs. Well, I mean, obviously, it depends a bit on the sales from the imports into the U.S. But globally, I would say, take it as a kind of 150 bps per quarter to come, I would say. And that gives you not exactly maybe 150 bps for the full year, but in the vicinity of -- to your second question, I mean, in the bridge, as I explained, I mean, in the other bucket, we have some support in the industrial performance.

We have some negatives. So all in all, I mean, they are a wash. So what is in the other bucket? Yes, we have included in the quarter 1 profit, the claim towards suppliers, which we have been discussing and settling, but you will understand that I will not outline any particular supplier relationships. So please understand.

Thank you, Christian. We will then move on to Patrick Hummel from UBS.

I'd like to first ask about China. I mean your sales performance, obviously, in Q1 wasn't great, but listening to you, it sounds like it was more in line with your plans because you were not pushing too hard. Is it fair to say that Q1, according to your playbook at least, is going to be the weakest quarter for China, and we should see not just sales picking up.

And bearing in mind, we're talking about also EV sales picking up in the second half. Is it still fair to assume that also the profitability should improve despite the dilutive impact of EVs versus ICE cars, just to get a better handle on what you expect from China for the remainder of this year? And my second question you booked this book gain on Athlon, about EUR 300 million. That asset in itself is worth more than EUR 1 billion, I think, then you marked EUR 2 billion worth of DTG shares as held for sale. That gets me to EUR 3 billion M&A or potentially even more.

And in the plan you presented with the full year, you talked about EUR 2 billion. I just wonder whether if you execute all the transactions, if that has any impact on cash returns or you would stick to basically the framework you presented and any further proceeds would just give you some buffer maybe for 2027 or so?

Yes. Thanks, Patrick. First question on China and China sales, I would say, yes, China sales first quarter evolution, I mean, was roughly in line with what we did expect. We said at the beginning of the year in the full year outlook, as you remember, that we do expect China sales to be lower in '26 versus '25. What was, in the year-on-year as well, I mean elements. Remember that the banking commissions have come down significantly. That has a particular impact, I mean also on our side.

You could also see that, I mean, we adjusted in terms of go-to-market strategy. We did adjustment on MSRP. We did negotiate and discuss and settle with dealers in the first quarter. So that I mean had some temporary impact in the first quarter, but consciously, as we were trying to protect as well profitability at our end as well as profitability I mean on the dealer side. And that time, I mean, at the expense of volume, but consciously this is, I think, the important point.

Now as you say, exactly, I mean, as we're building the momentum for H2 with all of the products, I mean, to come, once I mean, I emphasize, I mean, the S-Class, S-Class Maybach, GLS, the GLE localized. So really cool product, the GLC, GLC I mean, electric, the C-Class to come. I think there is a fair expectation this to create volume momentum. Therefore, from today's point of view, I would say quarter 1, I mean, should be at the lowest in terms of the sales.

Well, I mean, we're not outlining, I would say, the profit by region. But globally, I would say that should also have a supportive effect in terms of margin generation in the second half of the year on China. However, as you can see also in the first quarter in terms of China contribution applies to China, BBC result. It's a tough competitive market environment. And that's why next to the product momentum, we're taking a lot of actions in terms of localization, in terms of sourcing, in terms of cost effort to mitigate the market situation. The second question in terms of M&A.

Well, I mean, on the Athlon side, you referred to the EBIT side of things, I would say. I mean, the gain included at the group level of EUR 300 million. That is basically as we moved Athlon as an asset held for sale. The intercompany margin, which has been stored at the group level during the period we hold Athlon gets now released as the asset gets divested. So that's a bit more, I would say, a mechanical side of things, accounting side of things, I mean, on the EBIT.

I think your question refers more to the cash side. Well, I mean, is there a potential to do more of EUR 2 billion of cash generation from M&A? I would say, yes. I think you could count Athlon in for maybe up to EUR 1 billion or so. However, it will not hit free cash flow on the industrial side as it sits on financial services. But clearly, it adds to the net cash position.

And I said it before, I confirm and we would consider, obviously, this amount also in the capital allocation framework, i.e., consider as cash generated next to the other assets, in the own retail as well as any potential move on DT stake. So yes, next to the underlying industrial free cash flow, which we confirmed as per the guidance today, I think there is a decent cash upside from M&A.

Thank you, Patrick. We will try one more time to connect Jose. Jose, can you hear us. Okay. It doesn't work, unfortunately. Okay. Then we move on to Horst Schneider, Bank of America.

The first question that I have relates to EBIT bridge in cars for 2026. I really liked the details you provided when you released the full year '25 results and to what extent the various drivers will impact results in '26. I want to come back on that. Could you maybe repeat again what drives now EBIT in cars in '26?

I have here in my notes minus 0.5% from structured pricing, minus 1% FX, minus 0.5% raw material effect, plus 2% efficiency gains. I think you said already that the raw material is going to have a more negative effect. Maybe you can update us on these drivers for 2026. That's number one.

Number two, I was surprised in Q1 that you had such a positive impact from the trade payables, while inventories were also moving down. So I wonder why that was? And should we expect going forward some reversal of this trade payable effect? And I'm also not aware if you have provided the guidance for working capital for the full year because I'm thinking, as you rightly say, you're going to increase sales in H2, should lead to an increase of inventories, but also trade payables. I'm not sure about the trade-off. To what extent working capital will be a positive driver in 2026 or not?

Now it's on. So thanks also to remind us the EBIT walk '25, '26, as outlined during the ARC and the I think you picked up on most of the elements, but for the benefit of everybody, I mean, if you depart from 2025, we said at the point in time, tariffs and FX is a minus 1. structure and pricing is a minus 0.5%. raw mats is a minus 0.5%. Efficiency is at 2% and the depreciation is 0.7%. Well, that's pretty precise now.

Looking at it from a Q1 perspective, i.e., based on the quarter 1 performance, I mean, I will not make an update of each and every item, I would say. But globally, I mean, I would say tariffs maybe is a bit better. I mean, as we included the IEEPA refund in the quarter 1, as commented a bit earlier. Structure and pricing I would roughly see in the same vicinity. Raw mats, maybe a bit more headwind, I mean, to come. Efficiencies, I think, I mean, we are on track. We're also on track in the first quarter. I hope the explanation I gave you in terms of reading material for the bridge helped. What sits inside is in sync with the 2% for the full year.

And the depreciation is also, I think, in the same order of magnitude as outlined during the ARC. So which means all in all, let's say, probably, a bit more raw mats headwind, a bit less of a headwind on the tariffs and then some puts and takes. But that's why all in all, we confirm the 3% to 5%.

Point number two, on the trade payables, I mean, in the first quarter, I mean, on working capital, what is in there. In the first quarter, we increased inventory from the end of the year 2025, which is usually the low point in terms of inventory. You get ready, obviously, to support the product ramp-up, the new products coming. So that's why, I mean, inventory went up in the first quarter. However, the inventories on the structure on the mix lighter is improved.

Also, I mean, the cost efficiencies have an impact on the inventory. That's why you don't see in the cash flow chart, I mean, such a burden on the inventory side. So it's rather in light or a wash, whereas on the trade payables, you see, I mean, a more important amount. I mean that is a function of the production ramp-up, which is favorable on the payable side. But obviously, then, I mean, if you move throughout the year, you then will deliver these vehicles as per the sales expectation and then come back down again in terms of the inventory towards the year-end towards our inventory targets.

We did not set out any specific guidance on working capital. That's all included in the free cash flow guidances and the CCRs of the division and the cash flow of the group. But clearly, I mean, we have, I mean, very tight and stringent working capital targets for all of the 3 elements. I mean, the DIO, the DSO and the DPO. But next to it, I mean, we are also working on further improvements on all of the elements. In particular, here, you see a benefit kicking in the first quarter on the payables side, which should also last and be, therefore, permanent. So in a nutshell, a part of the payables will be temporary, a part will be permanent. So I hope that helps.

No, that helps a lot. Just a small follow-up on raw materials. Is the increase in raw materials not impacting also your suppliers so that it will be more difficult to cut the material costs as much as you want? I think it's an industry phenomenon. It's not just affects you, but your view on that would be interesting.

Well, we have different contractual arrangements, some are fixed prices, obviously. And on some, I mean you have more floating. That's all in all, I mean, we included risk assessment in terms of raw material evolution for 2026. And that is included in the outlook, as I pointed out before.

Thank you, Horst. We will now move on to Henning Cosman from Barclays.

I wanted to come back on the operating free cash flow. I know we talked about the working capital, but I think we're bouncing around a little bit that there could be upside to the operating free cash flow guidance. I understand there's upside from the M&A piece. If we think of the above EUR 4 billion and some of the payable effect in Q1 being sustainable now and the momentum that you hope to generate in the second half, would you be prepared to maybe statement if there's a bit of upside above EUR 4 billion. So obviously all landed anyway, but any sort of additional color if you could would be great.

And a related sort of question also ultimately, free cash flow, I suppose you called out quite prominently the investment in the U.S. in the press release at least, perhaps not so much in your prepared remarks now. But I'm just wondering if there's anything incremental there? Anything at all to do with continued hope for more favorable tariff treatment eventually, if there's still anything ongoing in terms of lateral conversations with the U.S. administration. But separately from that, even is there anything incremental in terms of the CapEx or investment plan that you're calling out for the U.S. today?

Thanks, Henning. I had some difficulties, frankly, to understand some elements of your question. But from voice over. But first one, if I get it right, was on the free cash flow side of things, the operational free cash flow side, the M&A side of things I commented already before, I would say. I think on the operational free cash flow has a good start of the year, as outlined before, supported by working capital payables, yes, some element will reverse, I mean, in the course of the year. O.

N the other side, well, I mean, you have EUR 1 billion of NLP cash out sitting in the first quarter, which should not repeat in the remainder of the year. So was a large chunk of cash out on the restructuring program, I mean, that is behind us. So obviously, that will help the cash generation in the remainder of the year. And then, I mean, we'll focus on all of the other levers, I mean, in terms of efficiencies anyhow, but also then on the attempt to manage the inventory to target, which is always a bit more towards the year-end. So I mean in quarter 2, quarter 3, we are in the ramp-up mode, I mean, for the new products.

So you will see some seasonality, obviously, here in the cash generation, as you can see also in previous years, but probably more emphasized, more supported, I mean, given the high number of product launches, I mean, we're doing. But yes, I mean, I would say, based on the quarter 1 cash flow, therefore, with the elements I outlined on working capital, on NLPP, I think that we feel good with the guidance of slightly below and you know what the corridor is of slightly below compared to the EUR 5.4 billion, which we printed in 2025.

Your second question in terms of further investments in the U.S. and impact -- I mean, favorable impact on tariffs or deals. Well, I mean, we think we had an important event with the GLS and the GLE reveal in the U.S. in Tuscaloosa, Alabama in March. We celebrated at that moment in time, the 50 million vehicle coming off the line. in the U.S. I think we could witness, I mean, with a lot of stakeholders being present during that event that we are considered as a very good corporate citizen, I mean, over there.

We continue to entertain, I think, therefore, constructive dialogue, but I would not speculate about, I mean, any link between the investment and the tariffs at this juncture. We are committed to continue to invest in the U.S. as outlined with the EUR 7 billion investment.

For 2026, I don't think -- I mean there is any particular thing, I mean, to mention. That is a more mid- to long-term strategic statement. I mean we've been doing. And very clearly, I mean, we see the potential for further localization in the U.S., in particular, in the SUV core segment. But that is not -- I think for 2026, that is a bit more in the midterm. I hope that answered the questions to the extent I got them.

No, that's great. And just to confirm, no more NLP payout this year in the cash, but probably around another EUR 1 billion or so in 2027?

I mean we did already in 2025 from memory, a couple of hundred million, EUR 300 million or so, I think, in 2025 cash outs and then now EUR 1 billion in 2026 first quarter. We will still have some cash out I mean, in 2026, the remainder, but obviously much lower than the EUR 1 billion in the first quarter. And then from today's point of view, we should be done with that.

And obviously, the benefit kicking in, in terms of -- I mean, the people have come off the payroll to a large extent. by the end of the year, I mean throughout quarter 1. And obviously, that will create, run rate benefit moving forward. I mean that's why we did invest into it.

Thank you very much, Henning. We'll move on to Stuart Pearson from Oxcap Analytics.

Yes. Stuart Pearson from Oxcap Analytics. So just following up just very quickly to check my understanding was right on the IEEPA refund. Just from what you said, I guess it sounds like you're suggesting that was around 50 basis point support in cars in the quarter. So just to check that that's correct and where that would sit in the bridge, I guess, in structure, but maybe just clarify on that.

And then the second one, just slightly bigger picture. I guess coming back to the U.S. but more on the demand side. I know coming into this year, as a market you talked about growth, and I think the target to grow there to 400,000 retails by the end of the decade, but I think retail is a bit tough on that in Q1. So just wondering what you're thinking on the U.S. opportunity. I guess you'll have a bit more supply from both GLE and maybe that core SUV a little bit later on. So is that still a significant growth market that you're excited about? What are you seeing in April there? That would be interesting.

And then the third one, just on Financial Services. Obviously, a very strong quarter. I noticed credit losses came down there a little bit. Is there also a bit of help from residual values improving a little bit in the U.S. just coming out of the end of that normalization process? So just any color on that strong financial services performance would be great.

Yes. Thanks, Stuart. So yes, I mean, in the first quarter, I mean, that refund following the Supreme Court ruling and has been included in the first quarter results and that mitigated the tariff impact that sits in cars, but it sits also in vans that makes basically, as I commented, the cars dilution limited to 100 basis points, I mean, in the first quarter. I think we don't spell out the detailed amounts please understand. In terms of the U.S. market, very clearly, we see that as a very important market. We see that also as a market with good growth opportunities.

And when I say that, I mean I'm not assuming the entire U.S. auto market to grow massively. But clearly, we have an attack plan to grab share in areas where we're in particular strong, such as, I mean, the top end. U.S. market, we enjoy a top end vehicle share of 30%, 30. And if you look at the product pipeline, I mean, to come with the new S-Class, with the GLS now, the new GLS and the GLE, which we revealed and many more products, AMG I guess, why we're doing the AMG event in Los Angeles in May. I think we can really create, I mean, a good buzz, and that's what we want to do despite the tariff challenge. So this is a distinct decision that I mean, we're not holding back. We are in a tech mode, I mean, for the U.S. market, but based on great products, which are in the pipeline.

And the third point on financial services, yes, I think a good quarter. But I would say it should also be decent quarters ahead. What's driving the improvement towards the 13% in the fourth quarter, definitely, it is the interest margin improvement. We talked about the acquisition margin improvement in the last numerous quarters and said, I mean, it will come through. So you need to be a bit patient. I mean, here you go. So that is definitely the biggest lever in the profitability improvement.

Number two, the efficiencies, which we continue to drive. The new structure also has significant cost savings and efficiencies, which we are able to pull off. Third, on cost of credit risk, we stepped up given the macro challenges. So it's a headwind, but that has been nicely digested in the quarter 1 as we update, obviously, that model based on the macro parameter each and every closing. And your point on the residual values, that sits on the industrial side, so that doesn't impact the financial services.

Thank you very much, Stuart. Looking at the time, I think we are at the end of our call. Thank you all very much for your questions and for being with us today. And thank you very much, of course, to Harald for answering all of the questions.

Now Investor Relations remains at your disposal to answer any further questions you may have. And to all of you, have a great morning, a great afternoon and a great evening. Thank you, and goodbye.

Welcome to the Q&A session. At our customers' request, this conference will be recorded. The replay of the conference will also be available as an on-demand video webcast in the Investor Relations section of the Mercedes-Benz website. [Operator Instructions] I would like to remind you that this conference is governed by the safe harbor wording that you will find in our published results documents.

Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

May I now hand over to Christina Schenck, Head of Investor Relations, Digital and Communications at Mercedes-Benz; and Willem Spelten, Head of Corporate Communications at Mercedes-Benz. Thank you very much.

Welcome back here in the room, and welcome back online for our more interactive part now, the Q&A session. I have with me Harald, Ola, Oliver and Mathias for our Q&A. And we have roughly 1 hour time, which we will dedicate the first 30 minutes to the analysts and the investor questions and the last 30 minutes to journalists.

And once we've wrapped up the questions from the analysts, we will change to the media Q&A. So we start with analysts, go then to the media. The media part will be held in German. We're starting in English. Second part will be in German. If you're bilingual, we kindly ask you to post your question in whatever language you prefer, English or German, and we will answer in the same language you chose.

Simultaneous interpretation is available for all participants. German is on channel 1, English is on channel 2 and Chinese is on channel 3.

So let's now begin with the analyst and the investor questions. As usual, please bear with me for some instructions. I see your hands already. For the participants online, the operator will explain the procedure for registering your questions on the phone line again shortly.

For participants here in the room, please raise your hand, and we'll call you up. [Operator Instructions] Our conference call will end around 11:45. Please take your questions and ask them slowly and clearly so that the translators can do their job well. Thank you.

And now I hand back to the operator.

[Operator Instructions] I will now hand back to Christina Schenck.

So let's start with the questions in the room. I go for Horst Schneider. Horst, over to you.

Yes. No, you can hear me. When I -- I mean, first of all, it's great detail that you provided in these midterm targets and how they can be achieved. I got it that you target now 7% revenue growth and you target we said also positive price mix. Positive price mix, especially mix does not mean that also this positive mix arrives at the bottom line.

So maybe can you outline the details when you expect this price/mix line to improve, which is still on price, minus 0.5% in 2026. So you assume that to continue this level of negative price or this pricing on earnings then also flips positive or neutral. Some details on that would be appreciated.

The second question that I have is on China. because I looked recently at the sales figures of the CLA, which is very attractively priced in China. I think it's a great car. But I was disappointed how low the unit sales are. You target also for the upcoming EVs and unit sales growth in China. My impression on the back of that, it's not the product. It's basically that the Chinese customer has got prejudices against foreign EVs.

So my impression is that the price needs to be lower than the Chinese car before the Chinese buy then. So therefore, what is your confidence that you take that you can really succeed with the EVs in China?

Yes. Maybe I'll kick it off with the first question, Horst, in terms of the margin profile? I mean, I would suggest, I mean, let's depart from the outlook, the guidance to 2026, so the 3% to 5%. I mean for the sake of the argument, if you want to take in the midpoint as a departure point from there.

When I said before, it's a minus 1% on FX and hedging on tariffs. It's 1.5% plus on volume, price, mix, BEV and it is a 4% on the efficiency. So basically, obviously, 1.5% going from around 1.8% to 2-ish with a stronger top end sounds rather like a lower number. But clearly, I mean, you can see in that plan, therefore, I mean, we are not over ambitious when it comes to the margin from the growth, but more ambitious when it comes to the margin from the cost. I think that's number one, what you can read in there.

Number two, at the beginning of the ramp-up of the EVs, obviously, you still have an EV margin, which is lower than ICE and therefore, I mean, an EV dilution sitting in there. So that is, I mean, a net number of all of the levers, volume favorable, pricing, mix and EV. How should you think about the profiling maybe of that without giving each and every detail now in terms of fiscal year or even quarter in 2027. But clearly, I mean, you heard it, 2026 is a ramp-up year in H2.

So I think that suggests that in 2027, we should see some meaningful contribution from the top line, so from that volume and mix in 2027 already. I hope that helps.

Then coming back to CLA, first of all, I agree to your assessment. It's a great product. And that's why we also -- our customers feedback these activation rates, usage rates on the technology given. If you look closely at that segment, you see the CLA is a touch more niche in China than it is here because cars and everything have gotten so much bigger in China. So we deliberately position it a touch more niche. Secondly, you have seen the vast pricing pressure, especially in Q4 on BEVs in light of the incentives and the fadeout of incentives, there was extreme measures in the market.

We did not participate in those measures because we believe that the substance of the product will require a certain amount of time for -- by customers to be fully understood and fully appreciated. If we now deliberately very fast go into this more aggressive positioning. I believe the attractive positioning is the right one. The overly aggressive entails further risks.

And you have also seen apart from the list price, if you look at the financial offerings, which many of the peer group offer, you see quite a deterioration in the net pricing. Year over, some of the subsidies were dialed back. And I believe this will, in the foreseeable future, also help that there's going to be a slight rebound in pricing and then the relative attractiveness of the CLA will increase.

And since the plan for China is stabilized profitability or increase profitability again?

Yes. And you will see with the next coming launches, especially the electric GLC, it is coming as a significantly larger vehicle, a bit more sweet spot, a bit less of this niche, like the CLA sedans is something where the whole market has shifted a bit.

So we will always have it. But for us, the CLA is the anchor car for this tech stack to show its capability. That's why we opted for a fixed pricing approach. And also together with Momenta, we can offer roughly 10 cities right now, and we constantly roll it out. So the next cars coming will enjoy the fully deployed tech stack.

On that journey, just to add to that, I agree with everything Oli said, look at the profile of our portfolio and also the average transaction price of our portfolio, you mentioned it, where we sit above the relevant peer group. the most important action for us on NEV starts with the electric DLC. And needless to say, then E-Class next year and so on are going to be very important.

Okay. Thanks very much. Raise of hands. Tim, over here.

Yes. Oliver, if I can maybe follow up on that in China. What's the mid- to long term here? Should we expect you guys to have the same market share with BEV as you used to have on the ICE side? Or will we have to get used to simply a smaller market with perhaps to Horst's question, a stabilized profitability?

I believe some segments in the Chinese market have shifted and going to remain shifted. If you jump into the pre-COVID era, the 2019, then the whole entry segment looked completely different to what it looks today. If you just scale back in time and look when did we deploy a long wheelbase A-Class in 2019, what kind of vehicles are now in those segments?

Secondly, in China, the half of the market, half of the car market is now NEV. If you look at and dissect the market by price segments, especially below RMB 300,000, below RMB 200,000, that share even increases. So I would say, in that segment, we will offer a few cars, but no longer this full lineup as we have seen 2019 or if you scale back further.

So I do foresee, like deployed and I explained, the growth perspective, but it is to a lesser extent on the entry vehicles. But as of today, we cannot offer in midsized SUVs and electric alternative, right? So we are happily enjoying great sales for our combustion GLC. It leads the pack. However, for the 50% seeking NEVs, it will be by mid of this year that we come with a long wheel GLC.

Okay. And don't forget that Oli mentioned in his presentation, a segment where we have enjoyed a very nice business for many years has been the CBU imports of the GLE, one of our core vehicles in our portfolio worldwide. That turns local this year. with a specific China version of that vehicle. So those segments become even more important. And in light of the tariff situation that Harald described, well, there was a slight shift in tariffs between the United States and China in 2025, which is not supporting export business in the same way that it did before. So it's crucially important to now localize such a core vehicle in our portfolio, and we think that will build momentum in that segment.

And 2 more follow-up questions, please, to what was said. Maybe with you, Ola or Harald, because you also very much stand for this. I don't think I've heard the word growth as often from you guys as today over the last 4 years ever since Monaco, certainly scared a few people, judging from my inbox on the investor side. is value over volume over with this announcement?

Do you now say 2 million units is what we need to achieve. We need the fixed cost coverage? Or do you still very much prioritize margins? And if we then think about margins, Harald, 2 to 4 percentage points, sounds very ambitious with all the front-loading you do on ADAS, as we discussed about yesterday, Ola, the cost going up on DRAM, all the other inflation. What makes you confident that we don't stand here next year and you're telling me, yes, we achieved 4%, but actually, the costs went up. So the net number is more like 2% or 3%. How should we think about that?

So on the first one, if we go all the way back to that original presentation, Pillar 2 is called profitable growth. It's not called profit or growth, it's profitable growth. And listening carefully to what Mathias said in his presentation, it is still profitable growth, but it's not profit without growth.

And we do think that it matters that if you invest into such a comprehensive innovation, technology and product portfolio, you must have the ambition that you have success in the market with those products. When you go into a few segments where you literally have a white spot at the moment, electric GLC or electric C-Class, and we know that, that is the bulk of the premium electric volume in Europe and you have no offering today, you must have an ambition to grow. So profitable growth, and I believe that is the word we used, profitable growth remains the mantra.

And maybe a bit of switch of gears, as you can see with the back or the support of the efficiency measures now and also moving forward. we believe we can generate and create ourselves, more headroom in terms of stepping up competitiveness without forgiving value, but stepping up the competitiveness also on the commercial side of things.

To your other question in terms of what makes us confident that the net number, I mean, shouldn't look different than the one I'm telling you today here. I make one caveat on the slide, please pay attention to it. It was on the raw mats and all of the bridges I think I gave, I mean, consciously separated the raw mat effect from the efficiency effect.

Obviously, we are exposed to risk, but also to opportunities in this respect. I think, I mean, other measures, I mean, a chiefly behind us. as we think about, I mean, regulatory stuff. I mean you mentioned the EU 7 engines. Obviously, that's quite a lot of content coming to the vehicles, but I think we know what it is. And I mean that is included and calibrated in the entire envelope I gave earlier today.

So moving on. Christian, over to you.

Yes. So first of all, could you detail the product mix dynamics within the top-end vehicle space in 2026, but also 2027. So the impact of AMG versus the refreshed S-Class. That's my first question. I can ask -- and then I have 2 more, which is -- second question would be the net tariff headwinds.

You detailed it for 2026, but please, if you could elaborate on post-production localization measures, what is the net impact? And also, how should we think about the net tariff impact as we head into 2027? And then lastly, just something specific to your China dealer restructuring efforts. What is the impact in 2026 on those for the P&L and for cash?

Yes, I'll start with the first one to break it down more detail for you on AMG. So if you look at the current portfolio, the entry point to the AMG brand are the entry vehicles on the current MFA2 architecture. So like an A35. And then you have the full performance version with A45. As we go into MMA and electrification, we're going all in on electric performance, which means that, that entry sliver of the AMG sales sun downs in this year. That is why that affects the headline number to start with. But I want to emphasize that, that is the lowest level of the AMG portfolio.

What happens now on AMG is a very comprehensive product offensive in the next couple of years. On the combustion side, led by the brand-new 6 cylinder, further developed 6 cylinder, you could see that they came out with a statement now that it starts in the middle of this year with the GLC 53, which is one of the most important segments. The brand-new V8 that has gone into this car There's, of course, an AMG version of that, and that will find itself into product next year and stay tuned for how far that can go in terms of performance. There is some very exciting developments in the pipeline there.

On the electric side, we're now going to reinvent performance electric vehicles. Some of you have had the chances to get some initial sneak previews, but it will be mind-boggling performance where we try to pair it with the emotion for the ones that still have petrol in their veins. And the signature flagship product in that offensive is, of course, the AMG GT that we will show in May as a world premiere, and it comes in the second half of this year. But that technology that superior performance and that emotion is then rolled out into the whole portfolio.

So you will have MMA versions of that. You will have MBE versions of that, et cetera, et cetera. So this run out and then run-up for AMG in particular, 2026 is a runout and then to prepare for a run-up. So I think we're going to then see a runout and then into 2027, very, very good momentum on AMG. That's what's going on.

And on the other 2 questions, Christian.

Just on the S-Class, you didn't mention the S-Class, the new...

Yes, S-Class -- well, S-Class, the production starts in a couple of months from now. Here it is. You saw the Maybach version of it yesterday. And then with the lead times, I don't know, we hit China in September-ish, United States in the summer. We will then be in Europe in roughly May-ish time frame. So of course, you first go down and then you start going up. Full firepower of the S-Class is 2027 and forward.

So when we think about the mix of the top-end vehicle space, is there a significant shift with the S-Class and the AMG?

'27 growth, changeover year '26.

So your second question, I think, was on the tariff impact and any localization. So we'll have, I mean, the run rate impact of the tariffs in 2026, as I outlined earlier, stepping up from 110 basis points in '25 to, call it, 150 is obviously in '25 in the first quarter, there weren't, I mean, any incremental tariffs. So I think that explains the 2026 number.

Then in that number, you already have the localization of the GLE in the U.S. -- in China, sorry. But I mean the vast majority of the incremental tariff headwind is anyhow the U.S. tariffs, which impact the imports into the U.S. So as we have a target to grow in the U.S. towards the 400, as Mathias pointed out, that has, I mean, a tariff impact going along with it. That's why in the midterm, I said that could go up from 150 to 200 basis points.

Yes, in the longer midterm or I mean, towards the end of the decade, I think I mentioned it in the localization section, there is clearly an opportunity with next-generation GLC to come. That could be a significant mitigant to that tariff, but I think that is probably a bit outside the midterm territory we were using in the financial guidance outlook. Then on the dealer section, Oli, I mean, you want to take it or...

Maybe I can take it. So first of all, the dealers in China, they are more than just part of the process. There is a very close and intensive partnership. So we work the whole strategy for China hand-in-hand with our dealer partners. That is important because we deploy new formats to acquire customers. We're going to bring something for the top-end vehicles, which I think is attractive in the customer journey.

We complement it with the uplifted digital journey. Now this is hand-in-hand because also this kind of recalibration of the density of the network is at the benefit of our dealer partners because it is on the aftersales revenue and general on the profitability for the network an uplift.

So I would say we are well on track with the figures Harald presented to proceed.

I take one more question in the room, and then I'll give people online the chance to also ask a question. Henning, over to you.

Yes. To Harald, please. thanks for being so forthcoming with your bridges. I just have a clarification, please, because I think when you spoke about '26 to the midterm, I think you mentioned the 1 percentage point headwind from tariff and FX again. And I just wanted to make sure you actually meant that. Or is it from the starting point of 4%? Is it just the efficiency and 1.5% volume structure price?

Yes. To clarify, so the starting point, 26 so the 3% to 5%, again, take the midpoint as a reference, minus 1% from tariffs and FX, incremental tariffs and FX. And then the 1.5%, I mean we talked in terms of top line volume mix, pricing and BEV and around 4% on the efficiencies.

Okay. So another 1% from -- for the period from...

Another 1%. Tariffs and FX.

Yes. And -- sorry, and that's mainly related to hedges rolling off, yes, the delayed effect of the FX coming through.

In '26, I think we're still well covered also at pretty good rates when it comes to the U.S. dollar and also on the renminbi. So I mean, if current spot and more kind of, call it, towards 120 kicks in. And the other currencies, interesting enough, I mean, only the euro is strong and continue where they are, obviously, that creates some further headwind for the years post '26.

And the second question is on China, please, and the profitability there. I think at the CMD, we talked about trying to protect a double-digit margin. I think you were coming from still 15% or so in 2024. I don't think you probably deliberately didn't give a pinpoint update today. But if we could just talk conceptually, is that going lower before it's starting to go higher? And if you could give any color for profitability between imports and local, if that's a good way to just explore it a little bit further.

We made a slide, which we called we deliver on the targets we promised here. And in 2025, we still delivered a double-digit margin in the joint venture. 2026, as characterized by all the ramp-ups, it is going to be down year-over-year. Then we will have pretty much second half of 2026 and then transitioning into '27, the benefit of like a vehicle like the GLE long wheel base providing additional profitability.

At the same time, we see the facelift cycle for GLCC class, which also get their combustion side. What is definitely a topic of intensive work is the profitability in China for the electric vehicles. So this will slightly weigh on the profitability in the BBAC. But that is why we embark on this mission of a deep localization there, taking out cost, which is increasing the resilience on the combustion side as well as improving the resilience on the electric vehicles. So yes, year-over-year, first, delivered on target for '25. Second, '26, slightly down. '27, we will do our best to return to where we were.

So let's move on to the telephone line. We have questions there, and I will start with Patrick Hummel.

It's Patrick from UBS. My first one would be a clarification about cash returns and DTG specifically. Hard, thanks for all the color on that specific slide. You highlighted EUR 2 billion of M&A inflows. I was just wondering, Athlon, there were some media articles suggesting that could be worth about EUR 1 billion.

Some additional German distribution outlets, I guess that's also a few hundred million. So that would leave a relatively small amount for DTG if the total M&A bucket is about EUR 2 billion. Should we read it that way? Or could it just well be if you execute all of these transactions, DTG, Athlon and the distribution networks that the M&A-related inflows would exceed EUR 2 billion?

And would that also directly translate into additional cash return to shareholders? Or would you say it's the EUR 6 billion that we've talked about, EUR 5.1 billion is the dividend and the EUR 1.7 billion remaining from the existing buyback. So whatever happens on the disposal front, the cash return this year won't exceed EUR 6 billion. Am I misreading that?

I have a second question then.

Thanks, Patrick. Well spotted. I think the numbers, I mean, you reminded us, I think, are correct in terms of Athlon, in terms of the own retail divestment potential. And I think the EUR 2 billion you put on the chart, I mean, should not be seen as a cap in terms of cash generation from M&A, maybe a bit of a prudent approximization await the financial statements coming out early March.

As I said earlier, you will see assets held for sale. I think that rather gives an indication in terms of the size of the order of magnitude we have in mind on DT. So does it mean, therefore, M&A cash proceeds could be above EUR 2 billion? That could be a distinct possibility. Let's talk about it when we're getting there. I think the message here is a solid underlying cash flow of more than EUR 4 billion on the industrial side, including a significant cash out from the restructuring program.

So in terms of underlying cash generation, I think that's a pretty reasonable number. And then this potential of cash generation on top of it. So I think, the message here in terms of potential for shareholder return and our commitment on shareholder return, I think that should be attractive for investors. And I think that should also be a bridge to look through somehow 2026 while we expand the margin in '27 forward.

My second question, I guess, is for Mathias or Ola. The next-generation A-Class or whatever it's going to be called. When we think back at the Monaco CMD, you basically painted a picture that suggested that the very low end of your entry segment is not very attractive, neither from a margin standpoint, maybe also not from a CO2 compliance standpoint.

So I'm just wondering what changed your mind? Why do you think you need this model? And what can you do to avoid margin dilution? Is it maybe just that the cost structures in Rastatt are what they are and you have to have a certain capacity utilization there?

Or I mean, I get the point about young buyers getting sort of attracted to the brand, but the financial impact, at least in the history of that model range has been rather dilutive? And if you can just share a bit more beyond your thought process why you bring this model back or bring a successor.

Patrick, good to hear from you. I'll do the financial mechanics and let Mathias do the market. Now we have the MMA architecture fully industrialized and all the technologies available. And when we looked at this equation, again, weighing in what it means for the overall market presence in Europe, and it's really about Europe for a very reasonable investment amount, very reasonable.

And with the variable cost projection that Harald was alluding to, the sum of those financial mechanics said this can meet our lower end threshold, I would say, Harald. But it does play a role in the market, and I want to let Mathias reflect upon that.

Absolutely. I mean, Europe, as I pointed out in my presentation as well, is extremely important for us. It's a market where this segment is being well served. And the A-Class as it is today, is a vehicle where the average age of our customers is 7 years younger than for all other Mercedes-Benz products on average. So that means we have the early opportunity getting younger customers into our vehicles, plus, and I mentioned the topic of our new unit.

We have very attractive downstream business combined with it. So we believe that it absolutely makes sense in Europe to have this product available, including the downstream effect, it will definitely be a profitable case and very important for us to get customers acquainted with our brand at the very early beginning.

And the designers did present us something in 2025 when I saw it, I just thought to myself, it's hot as hell. I want that. That's the irrational part of the equation.

Your new company content.

Okay. We do want -- Sorry, Patrick. We do one last question in the room. I'll take a look for hands up, Stephen?

Stephen Reitman from Bernstein in London. A question on China again. Obviously, you talk about the potential of filling the white spaces with the new BEV platforms that you're coming out with new models like GLC, electric and such like.

Could you just comment on the research you're doing on the Chinese customers? To what extent the customers have gone away? How much do you expect them to come back? What is the dealers' confidence in the product portfolio, which obviously you've shown to them during your journey?

Most certainly. Let's talk about the Chinese customer and obviously, maybe one of the most demanding customers in the world. So on average, for Mercedes, 37%, S-Class 39%. I think Maybach just sits directly on 40%. If you do a poll on what does Mercedes-Benz still mean for customer groups, it is still for 65%, an icon of success, and they aspire to own such a car.

What is today one of the biggest detractor, if you will, and that is, I guess, where your question is aiming to. The detractor could be intelligence. Can Mercedes offer the same level of ADAS infotainment updatability as they have seen by other competitors. And that is what we have shown today that with the tech stack we have developed, we close that, so to say, gap where you have it. Specific vehicles in our portfolio like the E-Class they massively contribute to the highest average TAP in the market.

They outsell any competitor because they already have a Level 2+ system. They don't have the point-to-point navigation. That is why we cascade this tech stack now into each and every segment, returning back to those customers. We have more than 7 million and still growing customer base. And we have also, due to the combination with financial service, now the opportunity to strive with a new offering, which were maybe on the fence waiting, can you take away this detractor reason?

So overall, the ambition to own a Mercedes-Benz is not fading. The attractivity to buy one is elevated and is going to be elevated with each and every model we are offering. So therefore, we are pretty confident on it, but still realistically also showing where have we lost customer, what were the reasons and how to get them back. That was on my slide, 100% China fit.

We have to offer more comfort. We have to offer more space, especially on the SUV side, you have seen this additional raise of space and larger vehicles at lower price points. So that is something where all our product decisions for the next 24 months kick in to cater for that.

So basically, you're saying the Chinese customers haven't been spoiled by these very cheap offerings of -- with a lot of high tech at very low price points.

Especially on the lower segments, especially on the lower segments. And if they are in an all-out price war against each other, that is when we chose to be a little bit more cautious, as Oli mentioned before.

And how do you convince them also -- I mean -- or is it very clear to them the key characteristics of the Mercedes and the legacy brands about the long-term value of the vehicle, the residual value, which clearly among the cheapest Chinese cars doesn't seem to be consideration. People think these almost like throwaway products after 4, 5 years.

Exactly, sir. And that is what kind of a product are you willing to throw away? The more pricey the vehicle gets, the more you are willing to also look after your residual value. A lot of the equation is also uncertain to that extent, I personally visited the used car market south of Beijing to take a look how are actually some of the other cars returning after 2 years, 3 years? What's about their longevity?

What's about their substance quality over time? I think there is something what is sometimes questioned that is safety. It is only questioned until something happens. And those are the moments when I would say, our continuation in these core values, our communication to the strength and to the attributes of the brand, they then yield results. Obviously, we cannot put this at the absolute forefront at every point in time, but it is seen, perceived and then obviously convincing when others might have cut a corner here or there.

So yes, for -- and it alludes to the entry segment question and probably an A class has to be completely differently assessed in China. Therefore, it is a European and not a China. That's due to size, expectations of vehicle formats. But our more comfort, more space, more intelligence should take away those detractor reasons, which might be existing right now.

So thank you very much for your interest and all of your questions. I would be handing over to Willem now to leave some time for questions from media.

Yes. So we are now switching to German. There's, of course, translation available for everybody who's not fluent in German.

[Interpreted] Okay. Let us now start with the journalist part. We still have half an hour for questions. We also start here with questions from the room, and we'll also check for questions that online participants might have. Who would like to start with the first question?

[Interpreted] I'd be interested in what -- how you define medium term? Does it mean 2027, '28, '29? Or does it mean, let's just wait and see, but we're not really sure. What is midterm?

[Interpreted] Well, thank you very much for the question. Well, this is something that is just -- was left undefined. Well, it's not '27. Otherwise, we would have said it's '27. However, why is this important? Why do we call this midterm? Well, we live in a time where we are faced with volatilities in securities and the like.

So even though we are confident in the plan, as such, we are not in a position to say which quarter this will materialize in basically. But it's not 2027, but it's also not the end of the decade. This doesn't leave so much room of maneuver for speculation as to which year this might refer to. So I would not just lead this substray, so after '27, but before the end of the decade.

Next question, please.

[Interpreted] Okay. So let's just ask another question. I have an additional question on the U.S. tariffs and the impact on your profit. You told me this in margins and points. Can you tell me this in absolute numbers. So what was the impact of U.S. tariffs in '25? And what do you expect the impact to be in '26 in absolute numbers?

And then also a question on China. I heard a little bit about -- well, Mr. Blume of Volkswagen saying that in China, he's looking at an 80% decline in the luxury business, and he's not -- he doesn't believe that it's going to recover anytime soon. So I'd be interested in finding out what your stand on that is. How do you think the luxury segment is going to develop in China in '26?

[Interpreted] Well, the first question is, if you just take the passenger car revenue in 2025 and with the outlook look that we gave for '26.

So the passenger car revenue figures should remain the same, around EUR 100 billion. That's the ballpark we're talking about. And then times 1.1% for '25. So EUR 1 billion was the impact that we saw in the tariff impact in '25, and it's going to go up in '26 because we'll have a full year impact. So it's going to be a significant number. So thank you very much for asking the question because very often, you look at the percentage points and you're like, well, it sounds so little, but it's actually a lot of money.

[Interpreted] About China, I don't think it's a secret that consumption, especially in the upper price bandwidth is a bit subdued. So the consumer mood is a bit gloomy -- and this also includes things like coffee that people buy at a discount of, for example, there is a certain degree of price attrition. And it is definitely a problem that we still have the real estate issue, and there is certainly a correlation to be seen when it comes to being willing to spend on luxury goods.

[Interpreted] The problems mentioned by our colleagues from other car manufacturers, I don't see for us. We have lost 19% in our segment. The total market went down by 15%, which means for 2026. However, products, as Ola said, like the S-Class, GLS, S-Class and have gone past the first half of their life cycle. So they are going to be refreshed, including the intelligence that we build into these vehicles. And I think this will give us a chance to see a stimulation in sales of these vehicles.

[Interpreted] Okay. Mr. [indiscernible], please. Two questions. First of all, Kecskem�t will be the biggest plant in Europe in the future. Why do you invest so much into the -- I mean, you mentioned the cost of energy of labor.

Are these the only reasons or the framework conditions, regulatory conditions, also a reason is everything easier there. And the other thing is exports from China, not to the U.S., not to the EU. But do you expect exports from China or could push out exports from Europe and other regions of the world? Or do you want to tap into new consumer groups? Or do you see a pushout effect already? Or do you expect such an effect? And if so, how big would it be?

[Interpreted] On your first question, if we had just some sort of industrial plan, well, like the automotive industry, all dimensions in Eastern Europe are more attractive if you want to invest. And this applies to us as well. It's more attractive to invest in Eastern Europe, but we have a long-standing tradition in Kecskem�t. It's a fantastic team there, just like in Germany.

And I would like to thank all the employees and workers who are listening right now. We have a very modular strategy. So Kecskem�t really suggests itself for using this. And then we have greenfield sites, and we have a new brownfield site. So we really have the chance to perfection all the processes in addition and on top of what you can do in an existing plant. And on top of that, we can remain CO2 neutral right from the start. So we are really at the spearhead when it comes to decarbonizing our production in Kecskem�t.

As regards the streams of goods around the globe. Well, the glass is not always in everywhere half empty, even though 2025 was really a challenging year for global trade. But adopting a middle or long-term view, there are some signals, free trade agreement, I'm thinking of Mercer.

And I assume that at the end of the day, the European Parliament will finally reach a conclusion. And I think they want to have some kind of preliminary approval and then the formal approval. But also the signal that comes from the free trade agreement with India. When it comes to global trade, there are also certain impulses that induce us to believe that the situation might improve.

And I don't know if it was you or Mathias who said when Thailand does a deal with China and suddenly, there are no tariffs imposed. I mean, it's obvious that they use the production structures that you have in China. So we also have such tactical changes to bear in mind. Thank you.

[Interpreted] My first question is about the decline in sales in China. Can you give us a figure for 2026? And do you plan to adjust prices because of that? And another question regarding the push ahead in Europe. What do you think of local content measures? Do you think these make sense?

[Interpreted] Maybe first Oli, and then Ola.

[Interpreted] Well, we said that in '26, sales will remain below '25. This is our expectation. I believe that we showed that our product campaign that will really have a bigger effect in the second half of '26, we will be able to improve our situation. But in some total, sales will remain below '25. But you also said that on the prior year level as regards to the total sales expectation, we, of course, want to make sure that we can compensate elsewhere in the world to make up for that.

Number two, price adjustments or price adaptations. You referred to that in the market, there is a gap between the list price and the transaction price. So we have done a few strategic price adaptations already earlier that year, but they don't have any effect on the transaction price of the vehicle on the market. Rather, there are one component in a plethora of components of what we do in order to optimize our cash flow and our dealers are involved, too.

We want to sell at attractive but not overly attractive prices. European content and everyone is waiting for a positioning of the European Commission in this field, which is expected to come at the end of the month. I'll try to give you a balanced answer. In addition to my job as CEO of Mercedes, I am also the President of ACA. And we are intensely discussing this issue among the manufacturers, but also with our suppliers.

Let me tell you this. We all agree on CO2. And we can see some movements here, but the small print still requires a lot of improvement. And the industry more or less has closed banks, both manufacturers and suppliers, the many thousands of suppliers. When we talk about European content, the situation is more complex because the profile of the companies is very, very different.

German manufacturers are global entrepreneurs, especially premium manufacturers. Their business model has been built over the last 70-plus years, and they sell goods in all directions. So we are also big exporters also from other regions, the U.S. being the best example. in this case, like another premium manufacturer, we are the biggest exporters from the U.S. If you have such a profile.

Of course, it is quite obvious and logical that you're in favor of open trade and open markets and against protectionism. If you're a manufacturer that has a regional footprint and you strike it lucky in one of the big economic regions of the world, it may be tempting to think.

[Interpreted] Well, whatever other economies do out there, this is not my level playing field. Let us raise the bars a bit or the obstacles. I can follow that. I can relate to that, and I can understand this. So there is no one single exact position across the industry regarding this question. But I think everyone agrees that the supply networks. They are not supply chains, they are supply networks that have been built over decades that have been perfection.

They are the invisible hand of the market and the high-tech vehicles, for example, this S-Class really features components from all 5 continents. I think that protectionism and its unintended consequences, fast, we shouldn't change this drastically, and we all have this common denominator across the industry. If you do that and as a market player, I'm in favor of a level playing field.

So whenever you do regulate, you should really use a very, very fine saw, not the chain saw and make sure that no unintended consequences will ensue, especially after concluding a free trade agreement with EUR 1.4 billion there and several hundred million people there. Well, I expect, in this case, the most intense debate in the course of the year '26.

[Interpreted] One more question from the room, and then we go online. Mr. [indiscernible] from DPA.

[Interpreted] One question with regard to the plant in Kecskem�t. Did I get it right that this year, you will increase the units from 200,000 units to 400,000 units or double the units. This is the first question. Second question, if Hungary is the biggest production plant of Mercedes in Europe, I ask myself, is that only the beginning maybe for cost reasons? Of course, it would be quite natural to transfer even more capacities to that site. why shouldn't you do that?

[Interpreted] This was the capacity potential that Harald showed in the slide. So it won't happen overnight all of a sudden. This is the capacity potential. Having said that, this is a clear message also to the colleagues here in Germany. We, of course, stand behind Germany. We have seen robust 2-digit billion amounts being invested in factories, tools, machines.

The accounting, Harald, of course, is not done on a nation level, but I think it's fair to say that more than 50% of this investment is spent for Germany. So we do a lot of upgrading here in the plants here in Sindelfingen, for instance, we did a lot in Rad to prepare for the launch of the MMA. So we did that last year. This is also very important.

So considering that, our worldwide sales in Germany compared to the rest of the world is 12%, 13%, 14%, but investment is more than 50% and more than 60% of the employees work here. So I mean, this is a clear commitment to Germany. If this is no commitment, I don't know what kind of commitment I can give you, and you will hardly find any other company with such a commitment.

Having said that, Germany must increase competitiveness. We have had many years where we compensated higher costs with intelligence. But if everything happens at a time, higher energy prices because of the horrible war in Ukraine, because of the higher labor costs compared to other economic regions, then the slowliness, then the control level, et cetera, et cetera.

Then you reach a point where competitiveness as such, is put into question. This trend has to be turned around because capital chooses the risk-oriented return. There's no preferred nation of capital. This is the reason why we, in this union together with many other industry sectors, we ask Brussels and Germany, please, let's increase the competitiveness, the competitiveness of Europe. That's the best protection for economic growth, labor, innovation, et cetera.

[Interpreted] Now let's take an online question from AFP and [indiscernible].

[Interpreted] Just first of all, on Maiden Europe, the Saudi are warned this week that such a strategy could invite countermeasures, protectionist measures from other markets. To what extent do you share those fears? And why?

And my second question would be the cars return on sales next year, you guide to -- this year, in fact, 2026, you guide 3% to 5%, I think. Could you please elaborate a little bit what kind of factors might drag you down close to 3%? What might push you up towards 5%?

[Interpreted] So I'm not 100% sure if you heard my German answer to almost the same question before. I'm not going to repeat most of that. But I can say this, if you as an economic actor act against another economic region with protectionistic measures, it would be naive to believe that, that other economic actor just sits back and says, whatever. It's more likely that, that other economic actor would devise a countermeasure.

And the most prominent recent example of this is the EU anti-subsidy study on BEV vehicles, which I understand the reasoning behind it. And it was about level playing field, which I understand and I have understanding for. But the Chinese side, not obviously with the same measure, has already acted and it affects businesses, European businesses in that market.

That is why I say handle with care from the headline that might sound good in a campaign, go European, and I'm as European loving citizen as you can find, we live in a global economic network. And certainly, the auto industry is one of the most global ones. So when you devise policy on that, do it with precision. and not with rough measures.

[Interpreted] On your second question, I think I explained the walk from '25 to '26. So I'm not going to repeat that. But I mean, if I think about your question in terms of what could either bring us closer to the 3% or the 5% within the guidance corridor, and I would probably say some potential on commodities and maybe on FX, be it on the raw mat side, it could take us to a higher level.

What could take us to a lower level. I mean China is always, I think, unforeseeable in terms of the intensity of the competitive environment that could be an element, which could bring us further down. Right now, I would rather say it's a calibrated approach, which we take for 2026, thinking about the 3% to 5%.

[Interpreted] So back to the room here.

Again, in English, it's Stephen [indiscernible] from The Wall Street Journal. On the U.S. growth ambition, when do you expect to get to that 600 -- sorry, 400,000 target? Is that again middle midterm ambition? It wasn't totally clear whether that was the same time frame. And what's the path towards that?

Is it selling -- is it the localization of the GLC, which will make a big difference? Is it selling all of the local vehicles? Or are you -- it sounds like from your tariff guidance, you're also counting on more imported sedan -- sorry, selling more imported vehicles to. It would just good to get some color on that growth ambition.

So on the 4000, we stay consistent to midterm. That's true. We finished last year roughly 300,000 units, and we believe we can grow that midterm to 400,000 units. If we look at our original past market shares in the market, having a comparable product portfolio to our competitors, I think it's a reasonable assumption to believe that we can grow and win back market share with the brand we have, with the brand-new products we have, with the technology we have presented today with a further increase in localization and with the partnering up with global partners like Microsoft, Google, NVIDIA, et cetera, to get closer to the customer demands in the United States.

So these 5 elements I just pointed out, we believe make us very confident that that's an ambition, and it's a tough ambition, but that's an ambition, not unrealistic.

[Interpreted] So this brings us to the end. Mr. [indiscernible], you showed a hand.

[Interpreted] Yes, I have one more question with regard to the top end area. You've mentioned the medium-term targets, 14% to 15% or an increase to 15%. So this is really modest. You used to have very ambitious targets. You also had a share of 16%. I mean, can you explain why in this segment, it will be so challenging in the years to come?

[Interpreted] I already gave you part of the answer on that in that we take the entry AMG offer, that's a 35% offer. So we'll discontinue that. So it's a great volume element, but not a great earnings element. And if you take that out and if you look at the other products that are coming, you will be looking at quite a substantial growth, so greater than 15% in the midterm and then a share in the overall sales of 15% or greater.

Now if you look at what Mathias said, then some of the growth will happen in the core, in particular, with the electric core product. So this element also will grow. It might seem superfluse because you're saying, okay, well, you're coming from 10%, 11%, you're already present in that segment. Yes, we build up a great position. Yes, we're leading worldwide in that segment. But it is still a more balanced and ambitious journey in the next 2 to 3 years. In particular, with the entry AMG, that is not mathematically part of that.

Last question, Mr. Well, do you believe that you'll be able to compensate for the tariff effect in the U.S. by price increases? Or is that something that's hopeless? We're not making this assumption.

[Interpreted] Last question, Mr. [indiscernible].

[Interpreted] Well, do you believe that you'll be able to compensate for the tariff effect in the U.S. by price increases? Or is that something that's hopeless? We're not making this assumption.

[Interpreted] No.

[Interpreted] Okay. That was a short question and a short answer. So let us come to the end of this media Q&A, and I'm going to be switching to English.

Today, both here in person and online via the live streams. We truly appreciate all your questions today and your attendance. This concludes the event. It was wonderful to have all of you with us you next year in an even brighter future. Take care. Bye-bye.

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

Good morning, ladies and gentlemen, and welcome to the Annual Results Conference 2025 of Mercedes-Benz. We welcome our guests here on site with us in indigen and those of you joining us via the live stream. My name is Cristina Schenk, and I'm responsible for Investor Relations, digital and communications.

Good morning, everybody, also from my side. My name is Willem Spelten, I'm heading Corporate Communications at Mercedes-Benz. Thank you very much for joining us today for this event to reflect on the past year as well as to take an outlook on the years to come here on site [indiscernible] as well as on the live stream. We have a 4-hour program ahead of us, divided into 3 parts: the annual results conference at capital market update and of course, a Q&A. [Operator Instructions]

And we will now start with the first part, the actual annual results conference and our CEO, Ola Kallenius.

Good morning, everybody, and welcome to this 2026 annual results conference. We're looking forward to sharing with you today our numbers and what happened at Mercedes-Benz in 2025. But right after this first presentation, more importantly, what's our game plan? What are we doing? And how do we see the next year for Mercedes-Benz develop?

But if we start by reflecting a bit on 2025, yes, it is true that the auto industry and our company, we're in a once in 100 years transformation going towards zero emission, going towards fully digitalized intelligent products like this S-Class that is standing right next to me here. But it's happening in an environment that is dynamic, more dynamic than we have experienced in many, many years, maybe the main topic that the debate centered around in 2025 was tariffs and trade relationships, but it's not the only thing that is going on in the environment, which means flexibility and agility is key to master this transformation in the current circumstances.

So what did we focus on in 2025? First and foremost, innovation, technology and preparing the biggest product launch offensive in the history of the company where we launched the first of 40 models that are coming in the space of 3 years. Why was this so important for Mercedes-Benz in 2025? We have been working for 4 or 5 years to build technology platforms. And we're going to dig deeper into this in the strategy update that follows right after this annual results conference. And it is about a comprehensive next-generation powertrain portfolio, needless to say, on the electrical side, but also on the electrified high-tech combustion side.

But maybe the bigger revolution on technology is to replace the brain and the central nervous system of the vehicle with what we call the Mercedes-Benz operating system. And within a very short period of time, we're going to proliferate this technology throughout our whole portfolio.

And we started launching with the CLA that one car of the year was safest car tested by Euro NCAP in 2025. Of the established manufacturers, either we were the first or at least one of the first to launch a software-defined vehicle. While all of that is going on, of course, in the market conditions that we're operating in, we're managing the go-to-market thoughtfully and keep an eye on the ball when it comes to cost efficiencies and capital return to our shareholders. Harald will get into that in more detail.

But if you look at the numbers, what is the effect, within adjusted EBIT of EUR 8.2 billion for the group, as you can see, these market conditions are reflected in our results. We also took the opportunity in 2025 to make the organization leaner and more streamlined and also not just rejuvenate our management with next-gen talent but also make the management team smaller, leaner, flatter and more impactful, which is what is mainly reflected in the difference between the adjusted number and the reported number.

I want to highlight two numbers on this chart. On the one hand, the EUR 5.4 billion free cash flow. For many years in a row, we have been a very solid producer of free cash flow, and we have returned free cash flow to our shareholders in those years at an amount, which is unprecedented in the history of this company.

And even if you look around the industry, in this eventful 2025, that EUR 5.4 billion stands out as one of the most solid numbers on cash flow production of any car company. And in spite of handing the cash back to the shareholders, after we have done everything else, funded our incredible product launch and technology and innovation plan; our net industrial liquidity remains above $30 billion. So we have a rock solid balance sheet, a rock-solid balance sheet to take on the next phase of transformation, which will be intense in the next few years. But we can do that from a position of strength.

If you look on the sales side, the reduction in sales is mainly down to managing the fierce competition in China. So that is where you will find the major part of that reduction. Where we don't go for market share at all costs. And our Head of China, Oliver Thone, will talk more about that in the capital markets update after this presentation.

And yes, because these are wholesale figures, we made some, I would call it, tactical management of our wholesale numbers in the United States in 2025. I don't think it's surprising with a tariff level that was a different numbers throughout the year. If you would put on the retail numbers here, of course, it will be a little bit better picture. But I think we managed that in the smartest possible way.

On the top-end vehicle side, a very solid 15% share of overall sales, banner year for the G record with a very solid sales across the world. And also the electric G, if you look at an electric vehicle in that price class, the most sold electric vehicle by a wide margin in that price class around the world. So for the fans that have taken the step into the next gen, they're blown away by what that vehicle can do.

Solid Maybach year. AMG is readying an enormous production of -- product defensive that is coming in the next years, mainly unfolding in '27 and forward, we'll get to that later. And yes, S-Class and GLS, they are now at the end of this stage of the life cycle. This car that we presented only a couple of years ago at our 104th year anniversary is like a whole new S-class. Technically speaking, it is a refresh during the life cycle. But if you update more than half of the cars of the car, 2,700 parts, it is a new car. And the same happens to the GLS this year as well. So we have a run-out scenario and then a run-up scenario of those very important vehicle in the top end portfolio.

With regard to electrified vehicles, even though every single combustion vehicle in our portfolio is also electrified with a potent 48-volt system, mild hybrid, we stayed at roughly the 20% xEV. Not surprisingly, we have ambitious growth plans for this coming with the main focus being on BEV.

More about that later. But now I would like to hand over to Harald to give us a deeper dive into the numbers. Harald, please.

Yes. Thank you, Ola, and hello, everybody. Very happy to take you. So yes, quite a lot of numbers, but I think very important to understand what's happening, I mean, behind that. Well, Ola talked already through the sales numbers for cars. So if we look on the revenue side of things, obviously, that follows the sales evolution.

If you look a bit on the ASP evolution, you can see obviously that 2025 was a market environment, a very competitive market environment, but also an environment with adverse FX effects. That's what you can see reflected in the revenue evolution.

If you look on the profit side, EUR 4.8 billion adjusted EBIT on cars and EUR 5.5 million on cash flow. Let's dig into that a bit more in depth what is behind it.

So looking on this chart, well, what can you see in summary, I would say, quite a lot of macro and market headwinds in 2025, but significantly mitigated by efficiency work. Let's go a bit more in detail into the bridge, but I try to simplify it a bit. If you look at what is behind that evolution of 8% from 2024 to 5% in 2025, 2.5% RoS dilution coming from tariffs and FX, volume structure, pricing and product-related measures had an impact of minus 4%. Raw mats favorable by 0.5%, efficiencies more than 3% -- 3.3% efficiencies in 1 year for material operations, SG&A and all other cost elements, and the BBAC headwind of 0.3%.

What does it mean altogether? If you look at the sum of cost measures and improvements, they fully compensate the market evolution, and it leaves us with the FX and the tariffs basically with a 2.5% down. So that's what happened in 2025.

A word that maybe on the Q4, some of you already reverse calculate and look at the fourth quarter and might wonder [indiscernible] what happened over there? Yes, you see a 2.6% return on sales adjusted for cars. The fourth quarter came in, in line with the expectations, slightly higher deliveries, sales, cost phasing, ramping up towards the end of the year, a bit traditional, but also some supplier one-time included fixed cost capitalization as we reduced the stock level.

But then on top, in the fourth quarter, we had to accrue for warranty-related measure which is a 3-digit million number sitting in that 2.6%, which probably you cannot take as a run rate moving forward. So please, important to note in this respect.

Now let's have a look at the cash flow for cars in 2025. And we had a favorable support from working capital mean here lower inventories but also lower receivables due to a lower sales volume. But then let me emphasize the investment side of things, which you see here, clearly, 2025 marks the peak of investments for cars. And that's why the net investments exceed the depreciation, as you can see here on the chart. All in all, the investments, if you take the PPE and the R&D, are at EUR 12.7 billion in 2025 compared to EUR 12.1 billion in 2024. So yes, we went up, but probably a bit less than what we said at the beginning of the year. But clearly, this is the peak. And from now on, that will decline more on that a bit later.

Then on the other line, I think you have the stuff you know, the BBAC and equity dividend reversal and the non-cash effects related to the NLPs, the personnel cost reduction measures, dealer provision and the like.

So now let's have a look at the van side of things. Before I go into the numbers, maybe some of the business highlights. It started -- we started the year in vans by the divestment of the vans operations in Argentina, adjusting the industrial footprint, I mean over there. Well, very happy. Some of you could see a very intense year to prepare for the van. The new van architecture coming up, the van VLE and the van VLS. And I think I was super excited to reveal that in a not-too-distant future, so this ushers into a new era on the van side, and that was a very important year to progress in that direction.

Looking on the business evolution on the van side, 359,000 units in a competitive market environment in Europe, especially, I mean, in the fleet business and also in the U.S. The electric vans increased by 46% to an 8% xEV share with improved availability of vehicles on the EV van side.

Revenues are in line with the sales on the EBIT and the cash flow side. Let's have a look into that. I mean, as I think these are quite respectable numbers in -- given these market circumstances. In other words, $1.8 billion of EBIT adjusted on the van side, which is a 10.2 percent return on sales, I mean, adjusted, which is to my understanding and knowledge is a benchmark number for that type of business in that type of market circumstances.

How did we get there? Volume structure, pricing net was a 4% minus in 2025, with sales and pricing negative but the mix being favorable. Then we had FX headwinds as well on the van side, but basically we compensated by industrial performance.

Let's have a look at the cash flow side in the vans. Here, clearly, what I said before, the emphasis, the investment into the new Van platform marks, I think, the highlight of that chart. So a significant level of invest into that platform on the EV side, but also on the combustion side.

And it means nothing else as at the same time, we're ready the industrial side of things with a ramp-up in Vitoria, but then also in Eastern Europe in our [ Yabaplan ] that with nothing else than preparing the van business for the next decade to come with that type of investment.

So on the cash flow side -- or back on the cash flow side here, a bit of working capital support as well as in the other bucket, a bit similar like the provisioning I mentioned on the car side.

Then let's turn to Financial Services. So in 2025, we reshaped Mercedes-Benz mobility. And basically, we took the customer front end of Mercedes-Benz mobility and merged and combined it with the cars sales organization into one customer unit. [indiscernible] is going to talk about that a bit more in depth later. And that became effective Jan 1, 2026.

With that, we create an even more seamless customer journey and/or at the same time, also create efficiencies and synergies. Important, I think, for the financial community, the capital structure and the segment reporting does not change as a function of that structural change.

At the same time, in 2025, we focused on the core business in financial services. If you remember, the divestment from our ride-hailing FreeNow at the beginning of the year and at the end of the year, the announcement that we're going to divest from Athlon.

Now looking on the business evolution side, we had a higher penetration rate in mobility in 2025. However, when it comes to the business volume, the portfolio, that follows the evolution on the sales side on cars and vans. Furthermore, the portfolio is impacted also by FX effects.

With this, the -- however, the EBIT is up by 12%. Let's have a look how we got to that one. So it means a 1.3 billion EBIT adjusted on the mobility or the financial services side with a return on equity of 9.7% adjusted.

How did we get there? Well, in the portfolio, we now see the margin improvement, the interest margin improvement coming through, which we did follow already since a while and successfully been locked in on the acquisition side and that is now going into the portfolio margin. That is point number one.

But also on the efficiency side, mobility, our financial services delivered, I think, a pretty remarkable job with of 10% OpEx saving in 1 year to help the profitability recovery that has been slightly offset or reduced by a higher cost of credit risk. And with this, I think, a pretty solid year in 2025 with a positive development trajectory throughout the year.

Now let's turn to the group. I explained the division side of things. So what's left is obviously the recon here, I mean you can see the -- at equity contribution from our Daimler Truck stake. All in all, that means the EBIT adjusted at the group level is at EUR 8.2 billion.

Then on the adjustments, the most important one refers to our NLP personnel cost reduction program, where all in all, we accrued EUR 1.6 billion in 2025. Many of the colleagues, I mean, will come off the payroll end '25, beginning '26, and therefore, you will see a rather faster payback of that EUR 1.6 billion charge moving forward.

The other one charge in the adjustments refers to the legal proceedings in the U.K. related to discretionary commission models in the past, unchanged compared to the third quarter. And the third element is on the van side, the adjustments in the context of the divestment in Argentina. I mentioned before.

With that, I mean we are the EBIT -- at the group level, on the book side, EBIT booked at EUR 5.8 billion.

Now over to the cash flow. We talked already about cars and vans in terms of their contribution at the group level, I mean lower taxes, significantly lower taxes in 2025 compared to previous year, a favorable contribution from the interest result at the EUR 500 million, the truck divi is sitting inside here, and that means all in all, I think, a healthy EUR 5.4 billion cash generation.

On the fourth quarter, I mean, the cash flow was slightly negative. I'm sure you observed that, but that is a function of a bit of working capital volatility in the last quarter, which is, I think, not uncommon. If you look on the adjustment side on the cash flow, you will find the cash outs -- the first cash outs, but a minor one on the NLPP program I referred to before legal proceedings and a bit on the M&A side. This one is related to the divestment of our own retail in Germany.

On the net cash side, well, I explained the cash flow evolution in 2025 already. So from the beginning of the year, what else we paid the divi of EUR 4.1 billion in the course of 2025. We launched a new share buyback program in fall. Actually, we got started, I mean, with it on November 1. So EUR 2 billion program over 12 months. In the remaining months of the year 2025, we already did around EUR 300 million, which leaves us with EUR 1.7 billion to go in 2026. And with that, I think you can observe a very, very comfortable and healthy net cash position at the end of 2025 of EUR 32 billion.

Now let's close the chapter on 2025 and that look forward on 2026. So what is ahead, I mean, here? Whenever we talk about the forward-looking statements, for sure, it's important to look at the details, the footnote, so please have a careful look at that. At the disclaimer section in the document here, one point I'd like to emphasize is, obviously, all of that deck is based on today's assumptions, also referring to the regulatory framework.

If you think about the tariffs, obviously, and what we also assume in these numbers with regard to tariffs, is that the U.S.-EU tariff agreement will come into effect, i.e., it will be -- will come down to zero effective April 2026. That is the assumption, which is built into here.

Now let's have a look into the division guidance. So obviously, we'll start with cars. First, on the sales side. Overall, we have a constructive view for 2025 when it comes into sales. And clearly, we target growth in all of the markets ex-China for 2026.

So what does it mean? In Europe, I mean, we see on the back of the very strong product launches to come, growth momentum, growth possibility in Europe, same in the U.S. with the product momentum with a very strong position in the top end segment with a 30% share of top end in the U.S. I think, with the products to come, it's a legitimate, I mean, to go for it as well as in the overseas and in the other markets.

With regard to China, we also believe that in the second half of the year, the products coming will generate main favorable momentum. But overall, I mean, in that very dynamic environment in China, we retain a more cautious view. And that means that for China, for 2026, we expect sales to be lower than 2025 in China. Globally, however, we believe that, therefore, we can keep the sales level, I mean, at about the level of 2025.

Important to note in that is we have a year of product ramp-ups that the first quarter probably will be rather, I mean, lower in terms of or the lowest in terms of the sales numbers and then building the momentum throughout the year in H2.

With regard to the mix on the top end side, we do expect a mix of 14% to 15%. You might wonder after 15% in 2025, where should it come down if all of these products are coming in? There's a more technical reason for that, if you -- when I have a deeper look into it and that refers to the AMG side and the entry positions where the AMG entry models mean transition from the current ones, I mean, into the new ones. And that has an impact in 2026 on the entire -- on the total top end share.

On the xEV side of things, we target 21% to 23% in terms of the xEV share, clearly driven by higher BEV volumes in 2026 with the products to come into market. Whereas, I mean, on the entry side, from the predecessor of the MMA, we migrate probably from the plug-ins into the BEV. So that has an impact on the plug-in. All in all, that means the 21% to 23% xEV share for 2026.

Now obviously, the stuff you're may be most interested in this part of the section before we turn a bit to the longer-term perspective, meaning the section to come and thereafter; the profit guidance for cars for 2026. So if we depart from the 5% in 2025, what are the key building blocks 2026? And I think that's important to understand.

So in 2026, we faced a headwind from the full-year run rate, I mean, on the tariffs and the full year run rate on the adverse FX side, and that is a 1% down compared to 2025.

Then, with the structure and the competitive pricing environment, we see a slight headwind of 0.5% in 2026. Raw mats, probably reversing, if I look at current trends, also probably 0.5% a headwind. But the efficiencies kicking in again, maybe not at the full force of the 3% in 2025, but call it, I mean, roughly, I mean, 2% of efficiencies net in 2026 again.

And then the depreciation associated to all of the new products, I mean, coming into the market where technically the depreciation of what has been capitalized starts at the start of production, has a headwind of 0.7 negative.

All in all, that leads to a 3% to 5% return on sales, I mean, adjusted. But a bit similar, if you allow me to compare with the bridge between '24, '25, where I told you basically all the market elements have been mitigated by efficiency measures. If you look on the bridge now '25, '26, it means that the market evolution is completely absorbed by further efficiency measures, and it actually leaves you, you want to really make it simple with a headwind from the tariffs and the FX '25 to 2026.

Then on the investment side, I emphasized before that 2025, we did see the peak of the investments with the 12.7% in terms of PPE and R&D. So clearly, now for 2026, we therefore see the PPE to come slightly down and the R&D to come significantly down compared to 2025. And well, obviously, I mean, if that investment comes down, the depreciation accelerates. That is favorable in terms of cash conversion. So hence, you see a cash conversion rate at 1 to 1.2 on cars.

Let's have a look on the van side of things. First, in terms of the sales side, we do expect some slight sales growth despite headwinds expected, I mean, in China and the U.S. on the back of the product strengths. We see the xEV share between 8% to 10%, so expanding even further with the full availability end of the products. And then in particular, with the VLE ramp-up to come later in the course of the year.

What does it mean in terms of the profit evolution on Vans? Here, we maintain the guidance of 8% to 10% as we had it in 2025. So coming from the 10% in 2025, what are the building blocks in the Van bridge. The FX is also negative here, but a bit less so with an 0.4%, the volume and the mix should be positive, a bit less than 2%. The pricing is expected to remain stable. And then obviously, we have to prepare for the VLE ramp-up in the sites and the products that comes along with some cost, which is probably in the vicinity also over 2%. That's how we're getting to, I think, a pretty clean 8% to 10% on the vans for 2026.

Looking on the investment side and the cash flow for vans, I talked about cars, the investment peak being 2025 for the vans, the investment peak is 2026. Well, obviously, with the VLE and then later on, the VLS coming to market. It means on the R&D side, we will be slightly above previous-year level.

On the PPE side, as the emphasis now goes on the industrial side of things, it's going to be significantly above. And that is pretty clear that this weighed on the cash conversion ratio. Therefore, that sits at a rather low number of 0.1 to 0.3 in 2026, But I would say that if 2025 was investment peak for cars, 2026 is the investment peak for vans, and then it starts to decline also on the van side.

Looking on financial services for 2026, we do expect a pretty solid return on sale -- on equity adjusted of 10% to 12%. For 2026, what are the building blocks here? Favorable effect from the portfolio margin, expanding further. We continue on the cost savings, and we do expect some flattish cost of credit risk.

With that, I mean, I would suggest we have a look at the group guidance. Obviously, that follows the same assumptions as on the segment, on the division guidances. The -- all of the comments, I mean, I made, I mean, before, obviously, apply also here. And it means, first, on the revenue side, we expect that at prior-year level, so roughly in the EUR 130 billion territory. On the EBIT side, we see that significantly above prior-year level. That is a reported EBIT. Remember, we had in 2025, the restructuring charge for the NLPP, which we don't expect to repeat in 2026.

And then on the cash flow side, we do expect that the cash flow for 2026 to be slightly below prior year. Please remember that, that will include a significant cash out for the NLPP program. So the underlying cash flow, I think, with that, I mean, looks to be rather solid and strong. If you think about the bandwidth of that guidance range, slightly lower compared to 2025. You should rather think about the lower-end side of that band. That's important maybe to note as well. As well, I think important to note that, that cash flow guidance does not include any further cash ins from M&A or divestments.

And with this, I think, I mean, we covered 2025 and the guidance for 2026. And now I'm handing over back to Willem.

Yes. Thank you very much. Harald. Thank you very much, Ola, for looking back at 2025 on our results. After a short break, we will focus on the future of Mercedes-Benz, Little teaser, it's a bright future. We will be back on stage in 15 minutes at 9:00 AM sharp. So until then we will pause the live stream, but please make sure to redial in or to reactivate at 9:00 AM.

[Break]

Thank you, Ola. Thank you, Harald, for providing us with a review on 2025 results. We're now shifting from 2025 to the future of our company. Ola Kallenius, Mathias Geisen, Oliver Thone and Harald Wilhelm will provide us with an update on where we stand in terms of implementing our strategy, the progress achieved, the momentum behind the initiatives and the next steps on our path forward.

Please welcome back on stage, Ola.

Thank you, Christina, and welcome back to this strategy update for Mercedes-Benz, and we will focus in this strategy update on Mercedes-Benz cars. For those of you who are Formula One fans, you know that the 2026 season is the start of a new regulation. Actually, a fundamental rule change, both on the powertrain side, more electrification to negotiate the lab, but also a reworked car a little bit smaller, a little bit lighter. I would consider it one of the biggest rule changes in the history of Formula One. And we're now testing in Bahrain as we speak with George Russell and Kimi Antonelli.

Why do I say this? Because this feels a little bit like what's going on in the auto industry as well. The rules are changing. And as the rules are changing, market environments are changing, even the macro environment is changing. The technology is a transformation once in 100 years. You have to also, as a company, be able to be agile and flexible and make the adjustments that are necessary to take on these new rules.

And that is what we want to show you in this presentation today, what is Mercedes game plan going forward here in the next years? I'm just going to start with some headline numbers to give you a feeling for the destination.

We want to grow. Absolutely clear priority in the midterm is to grow and come back to at least roughly a 2 million number for the car side. Mathias Geisen will talk more about that in his go-to-market presentation right after me.

Of the historic product launch offensive at Mercedes-Benz, we're putting a lot of emphasis on models in what we call the top end vehicle segment. So in this same time frame, we want to grow our top end vehicle sales quite significantly. And as we're in transformation on a journey towards zero emission, we want to double our xEVs in the same period with a very strong emphasis on BEVs in some cases. Harald mentioned it in the results conference just a few minutes ago that, for instance, on MMA, the new entry architecture for Mercedes-Benz, we have gracefully retired the plug-in hybrid and are focusing on BEV and the regular mild hybrid powertrains.

But if that is the destination and that destination should also lead to solid profitability and return to our shareholders, Harald will talk about that mainly in his section, what is more important is what is the journey? How are we going to get there? What have we done in the last years to prepare ourselves for this? And what are the strengths that we can play to?

And that can be summarized with these five chapters. And it starts with technology and product, of course, the go-to-market strategy that Matthias will cover. China is on everybody's mind, the most competitively intense but also the largest car market in the world. Oliver Thone is joining us here this morning, our Head of China, to give you a drill down on what our game plan specifically for China looks like.

But next, this whole revolution that is going on technologically and on the market side, we are fundamentally reinventing the company, the people, the organization, the tools, leveraging artificial intelligence, but also introducing robotics into our manufacturing environment.

And last but not least, for all of you who are investors in this company, large or small, we always have you on our mind and we want to continue our very solid track record of returns to our shareholders.

Now I'll go a little bit deeper and see what this means. Over the last 4 years, we have, starting with the electrical side, changed everything. The new generation of electric vehicles that are entering into the market for Mercedes-Benz, starting with the CLA that we launched last year and CLA Shooting Brake, GLB, GLC electric and all those vehicles that are now in the pipeline; they come with a fundamentally, from the ground up, newly developed electric powertrain platform that we can scale in every single segment of Mercedes, completely flexibly in production from range toppers using the most sophisticated NMC technology to also models more in the entry offering per model with LFP inside the same energy box fully flexibly across plants and across models.

If you look carefully at the details of the numbers of, for instance, the CLA or the GLC electric, when you look at the size of those vehicles, what they contain and what they actually consume in terms of kilowatt hours per hundred kilometers, it's almost like you get to an impossible equation. They are fully loaded, fully Mercedes, technology or bells and whistles that you can dream of, but at the same time, class-leading inefficiency -- class-leading inefficiency that didn't -- that wasn't possible in the old paradigm on combustion cars. It's like bigger cars, more fuel consumption.

Here, we beat even entry offerings of some of the volume competitors in terms of efficiency. How is that even possible? Technology. Technology and innovation, scalable across the whole portfolio. And to make a splash and also make a statement, that is why we built this AMG GT XX concept car and drove "around the world in less than 8 days," smashed 25 records for any electric vehicle in the world with this orange beauty down here.

Was that a PR exercise? No, it was not. Technically speaking, it was a test drive. And in only a few months' time, we will have the world premiere of the production car of this and it will go into the market in the second half of this year.

So here, we also demonstrate the absolute frontier of what electric drivetrain can do. And maybe on powertrain, I could end my presentation right there and said, "Yes, let's go." But as I mentioned, we live in a heterogeneous world. Adoption towards electrification in the 150-plus markets that we serve around the world is not the same everywhere. And it is clear to us that for the foreseeable future, minimum the next 10 years, probably a little bit longer; it will be in all of the above scenario. It will be an all-of-the-above scenario. So a little more than 2 years ago, that is how we have adapted to the rules coming back to the Formula One car analogy.

And we have in this calendar year 2026 ready to go, 4 cylinder petrol and diesel, 6 cylinder petrol and diesel, brand new V8 and the high-performance AMG versions of these powertrains. EU 7 ready. For those of you who are combustion -- hobby combustion engineers, if you study the EU 7 rules closely, you have to run Lambda 1 and you cannot run rich at the top end of your revving curve, which you need for peak performance. Maybe you don't use it every day in traffic. I understand that, maybe on the Autobahn.

To solve that equation without sacrificing performance is very difficult. But just to demonstrate how comprehensive the update of the electrified high-tech powertrain portfolio is, for this S Class and here is where it starts. I think it's the first car in the world with that generation powertrain with that level of technology ready to go, more performance, most stringent emissions rules.

So for every meaningful product portfolio position and certainly, also in the Performance segment for AMG, we're ready to go, and we will roll out this across the portfolio in the next couple of years.

That in itself as a technology platform, is a big deal, and it sets us up to go for it. An even bigger deal is the work that we have done on the Mercedes-Benz operating system in the last 4 to 5 years. When we launched the CLA in the summer of last year, I believe we were the first, shall I call it, established manufacturer, not new entrant, established manufacturer that launched a fully software-defined vehicle with top-of-the-line compute, top-of-the-line sensing and a fully comprehensive holistic software stack based upon both the traditional AI and end-to-end Gen AI.

Others are working on that, too, some of which work on it for their electric cars and do something else on the combustion car. In the case of Mercedes-Benz, MB.OS is now coming to the complete lineup, all electric cars, all combustion cars.

Here is the S Class. I mentioned it in the presentation before. We have changed more than half the car 2,700 parts. The most significant change is actually what's beneath the sheet metal. It is a complete replacement of the brain and the central nervous system of the car. So every single Mercedes will be on this platform.

It is also a flexible platform. We can launch a top-notch feature with a tech partner in the West. And at the same time, on the same foundation, do they except same thing in China with a completely different tech partner and add whatever we like, whenever we like. The car digitally doesn't grow old. It stays fresh and will stay at the forefront of what's technologically possible from now on and forever. It's like a river that flows, and it never stops because this also fundamentally change how you produce cars. You fill up the software now in the final assembly as opposed to get it from a supplier inside some kind of an ECU, the old paradigm.

In your aftersales organization, anything, any analysis that you want to do on consumer behavior mind you with anonymized data, of course, data protection or any other issue that the customer has, you can now go in with full OTA capability in 100% of the car. We have had OTA capability for years, but now it's the whole vehicle that is reachable.

It is incredibly powerful and I think the biggest technological change that we have experienced in this company in decades. And we are one of the leading, if not the leading, established OEM that have made this happen.

What's the feature that we talk a lot about? Assisted driving, automated driving. Every single Mercedes now comes with an NVIDIA supercomputer in it. 27 sensors around the car in this vehicle here, I'm thinking to myself, where are they? Yes, kudos to the design colleagues that they can mask that quite beautifully. And a combination between a rule-based AI stack and an end-to-end Gen AI stack that we launched together with NVIDIA at the CES at the beginning of the year.

So Level 2++ literally is built into every car everywhere. Yes, we have launched it first in China because it's allowed. We're launching it now in the United States because it's also allowed. In Europe, you can have a debate, but we're going to have a positive discussion with regulators in Europe to demonstrate how sophisticated this technology is and hope that we can also bring it to our customers in Europe soon.

Next-gen L3, much higher speeds, much less restrictions based upon, of course, that foundation. In development, is coming. And we have made the S-Class and here, we deliberately chose our flagship L4-ready with all the redundancies that you need for L4, redundant steering, redundant braking, redundant power supply, redundant compute, et cetera.

And we are launching this year the first pilots together with our partners, Uber, NVIDIA and Momenta. And it will not just stay at one location, it will go to several locations here over the next couple of years. So the new S Class is L4-ready as well.

We have talked about this product offensive. Yes, it's very large. I looked at this chart and I was thinking to myself, I actually have a pretty good memory, Christina and asked I feel that it looked different than the slide that I showed last year.

Sometimes, Mercedes is more sophisticated than it should be. And I'm sure we have a PhD-level department that does nothing about count nomenclature and models. So I can say this, if you pull out the chart from last year, it's actually the same chart, but they didn't show all the AMG models here, and then they added the long wheel base. Whatever, it is the same product offensive that we talked about last year. Some have now been uncovered. The biggest launch here is the one that we have now, and it's going to be really, really big. And it happens both on the electrical side and on the high-tech combustion side. So stay tuned for a very busy 2026.

In these next 3 months alone, the new VLE, which is the successor of what we call the V class today, the Maybach S-Class, the new GLE, the new GLE Coupe, the new GLS, the new electric C-Class, the new AMG GT. Inside 3 months, 7 world premieres, I've never experienced anything like that. So for those of you who are in product media, and I see a few here in the room today, just stay with us for the next 3 months, we will keep you busy.

Yes, I mentioned, and I think Matthias will talk more about it, there's a lot of emphasis on the top end to make sure that in our traditional stronghold, where we are the largest manufacturer in the world that we build upon that position, defend where necessary and increase where there are opportunities. And we will do that, both from Maybach, particularly for AMG and also in the G.

G is one of those things. It's a scarcest product. Everybody wants to have it. Many people dream about it. When we announced last year that we were going to do a G convertible that we will launch in the second half of next year, I didn't know that I have that many friends. Suddenly, I got WhatsApp messages from people I haven't spoken to in a long, long time. So we will, of course, make sure that it stays precious, but we have growth potential here, as I mentioned in the beginning.

In terms of the markets, Matthias, I don't want to steal your thunder, and we are looking at growth already in this year in the United States, in Europe and in overseas. And some people with a specific focus on Europe and a specific focus on Germany, they come to me and say, "What is it now? What is your portfolio strategy? And what is your go-to-market strategy?" Build, protect our home turf of top-end vehicles. It's where we have the origins of the Mercedes-Benz brand, and it's also the main part of our profitability.

Grow with core. And especially now that we're entering the electric vehicles on core, we have a chance to really make a dent there, and we will do that, but also stay in entry and manage the entry volume, that is the position where I don't know, the 28-year-old version of yourself, where you get to know the Mercedes brand first and when you step in.

And for those of you who were particularly nervous about the entry offering in Europe, yes, we did make a decision last year that we will have a very exciting, hot as hell successor to what is currently the A-Class. And no, we're not going to show it to you today because the current generation A-Class is running for this year until the end of next year. But rest assured, for the European market, we will have an adequate, very attractive entry point into the Mercedes-Benz brand. Stay tuned.

You can spend 2 hours talking about China. I'm going to spend 2 seconds because I'm going to hand that whole chapter over to Oliver Thone, who will explain in all dimensions, what is our plan to tackle this most fiercely competitive environment in the automotive industry today. And that leads me to the transformation of the company. We're a product company. We're a technology company. The [ orients ] of this company is all about innovation and so on. And I admit it. We talk from morning till evening about cars and technology. That is what we do. But you should not waste this opportunity of a once in 100 years transformation to not at the same time, look at your enterprise.

So kind of a quiet revolution in the background that is going on at Mercedes-Benz in many dimensions, I'm only looking at 4 here, is that we are reinventing the enterprise as well at the same time. It starts with people. And the people that carry the most responsibility in the company is, of course, the management. We have significantly changed the management structure. We have significantly elevated next-generation talent into prominent positions in the company, not only on the Board. If you look at the Level 1 below the Board, it's almost like half of the team is new.

And the people that carry the torch for a long, long time that are now going into retirement, and that deserve maybe a little bit time for themselves as well, there is a hungry, young generation of management on the top level, but on all levels, ready to take over and also in a much slimmer, flatter optimized structure.

And this winning attitude, we want to carry into the whole team at Mercedes-Benz and we're working on that across the whole company, across all levels, kind of that Formula One spirit, you go for it. It's all about shaving some lap time off of the sectors and ultimately win the race.

This is also powered by technology. The revolution is not only happening on the product side. We have dozens, if not hundreds of AI-driven projects going on in the company that is going to change how we work. It's going to fundamentally change how we work happen in every industry.

And what's going on in advanced pilots with robotics, it feels a little bit like, I don't know, the Hollywood movie iRobot many years ago that felt like science fiction. It's not science fiction anymore, we are close, we're doing pilots now. We are invested in one of the leading companies in the United States that is in the process of creating a next-generation humanoid-style robots and also other applications of it called Apptronik. I saw another car company, the market cap went up a lot, maybe, Harald, we undersold that bit.

But nevertheless, we're going to use robotics to also in the next years, not decades, years also revolutionized productivity and how we make things.

Last but not least, but I'll leave it to you, Harald. For every shareholder that is listening, we know who we're working for, we're working for you, and we are very, very, very focused that everything that I just mentioned also leads to a healthy return to you.

And with that, the first 140 years, they were exciting, we're looking forward to the next 140 years. Thank you very much.

[Presentation]

Good morning, ladies and gentlemen. What you've seen in this film is our recipe for success. It's about engineering, excellence and superior customer experience. So that's what we call Welcome Home, and also to you, welcome home to Mercedes-Benz.

Ladies and gentlemen, the last time I was in front of this audience was roughly 3 years ago when I was still responsible for our van unit. Times have changed meanwhile. And today, I'm happy to share with you our go-to-market strategy and how we want to reach the 2 million, Ola mentioned earlier on.

We want to reach those 2 million in a profitable and sustainable way. This is why we will further grow our top-end vehicle share and we will massively grow the share of our xEVs in addition to that as well. Because we have to strategically focus on electric mobility as well. How do we want to achieve it? With a great brand, great products and great customer experience. Is it easy to achieve? Definitely not easy, but we are well positioned to get it done. So let me tell you how.

But first thing first, 140 years and 2 weeks Carl Benz invented the automobile. And we had a big celebration. And still today, we are a highly respected and leading automotive brand. That's the reason why we didn't only celebrate with partners. If you look at this slide, we received congratulations from lots of our competitors around the world and that shows what strong brand Mercedes-Benz still is.

But what's the reason for it? Well, we are still #1, the most valuable luxury automotive brand in the world. But what I believe is even more impressive, if you look at all the brands in the world across industry, and I would say there are plenty, we are amongst the top 10. So that shows the strength of our brand. We performed with 3 very important sub-brands like T-Class, Maybach, and AMG, and we have high customer satisfaction. So we are in good shape with a very strong brand, which is definitely a competitive advantage in disruptive times with a technological transformation going on as well as major geopolitical challenges around the world.

But if you have such a strong brand, it's not good enough only to invest in your products, you also have to invest in your brands. When we talk to our customers around the globe, they all like being in contact with us digitally, but what they want is more physical touch points to our brands. This is why we decided end of last year to increase our sponsoring activities. We are the new premium sponsor of the WTA Female Tennis Tour to get close contact to our customers on-site to fans and to potential customers.

Second topic, we don't want to wait for the customers to come to our showrooms because if you do that, you normally already intend to buy a vehicle. We want to get closer to where the customers are. So we build brand studios around the world, launching 10 of them this year in metropolitan areas. And we even go beyond automotive with branded real estate. That's a license system here, and we work with luxury real estate developers and will build 14,000 apartments around the globe, where customers get direct access to the Mercedes-Benz design and our overall market setup. So that's why we believe, from a brand perspective, we are well set up for another 140 years.

But now let's look at the products. And let me say one thing upfront. Before I did run the van unit, I was Head of Corporate Strategy. And 5 years ago, we definitely, totally overestimated the speed with which customers would be willing to switch over to electric mobility. And we also overestimated their desire for having a completely differentiated design for their electric vehicle. So what were the guiding principles for our new launch campaign of the more than 40 models Ola mentioned? The duality of the drivetrains available as combustion and as electric, all share the same iconic design independent from the drive trend we apply and partnering up with companies, technological players in parts of the world to make sure we can cater the needs and especially the regional needs of customers better.

The front on as you see here, CLA, GLC, GLB. The CLA was the first one, and it shows the potential of our launch campaign, having been awarded car of the year 2026, having been awarded across segments, the safest tested vehicle by Euro NCAP last year. That really shows the DNA we have for our new products to come. Order intake is extremely strong, beat for the CLA or for the GLC, which has not even seen the showrooms yet. So we are in very good shape, but there is much more to come.

And when Ola talked about the 40 -- or more than 40 vehicles, it is important to mention, it's not about the sheer amount of products. It's about their strategic relevance. I said that we want to profitably grow to 2 million. 15% of our sales today are top-end, but 30% of the products we will be launching take place in the top-end segment. That shows that strategically, this is a vital business for us. But it's also true to say in markets like Europe where entry and core are predominantly important. We also have to make sure that we address those customers. And that's what we will do with the model we will launch below the CLA as an entry model into our brand to make sure we cover both bookends of the overall rollout.

So now I've talked about the brand, I've talked about the products. But I said earlier on, it's about customer experience because this combination is what really drives loyalty. So let's start with the retail network. We have a new retail concept, offering modern in-store experience. We have rolled it out already to more than 50% of the dealerships around the world and we will grow this number in the next 3 years to roughly 85%.

Second topic, customer service. The numbers still look great. We have a car park of 28 million. We have a service retention of 90% for the younger products, but that's no reason to lean back. So we still have to invest in innovative service concepts. That's why we are in the middle of rolling out mobile service to make sure that we come to the customer if he wants his vehicle to be serviced at home.

And we also increased our activities when it comes to customer events. We launched last year our so-called Silver Arrows Program for top-end customers, where we really offer money-can-buy experiences to get closer contact and more fascination for the brand as well. So having talked about the brand, having talked about the product and customer experience, the question is now, how do we orchestrate all of that? 1 year ago, we decided to merge all activities in marketing, sales and financial services into one area of responsibility to make sure that all the customer-facing offers are managed out of one hand. So we can manage the complete life cycle as one integrated profit pool.

That's pretty unique to the industry, that's also pretty new to us. We've started first of January with this concept that we believe that we can increase retention even further, especially given that we already have 70% of our customers having a service, a finance or a leasing contract. We believe we can increase this number even further and drive retention to make it overall a profitable overall result. So that's new.

Now I talked a lot about the global approach. Now let's look into the regions. Let's start with Europe. Europe has a slightly above average top-end share, 50% entry and behind China with 40%, the biggest region when it comes to battery electric and plug-in hybrid vehicles. For us, it is the biggest -- was the biggest sales region last year. So what do we want to do? First, we will close the white spots. Right now, there is no electric C-class. There is no electric TLC.

Second, we will continue offering EU-specific products like the CLA Shooting Brake or, as I just mentioned, the entry model below the CLA. We will also apply an optimized channel mix to make sure that we best balance volume and profitability. And we will further roll out the agency model, already covering 50% of our European sales. This number will go up for the years to come because we are in the midst of rolling it out to other markets as well.

If we look into the U.S. market, that's a different market, extremely high top-end share, 30%. 75% of the customers decide to go for an SUV or an SUC, and they have a combustion engine share of 85%. So what do we do here? Of course, we fully leverage the U.S. tailored SUVs we already built in the United States. We will offer high-performance and highly efficient combustion engines, including a brand-new V8. But we will also work on the other hand and not only launch our battery electric vehicles, but especially also focusing on the introduction of high-performance battery electric vehicles like AMG.EA, Ola referred to it earlier on.

We will also benefit from our corporations. We have onsite with Microsoft, Google and NVIDIA. And of course, we clearly intend to increase our localization activities. As you know, right now, in the United States, we built the EQ SUVs, but as well and with the majority the GLE and the GLS. In addition to that, we intend to also produce the GLC in United States in the next years. So that's our approach for the United States. But if you want to increase the resilience of the business system only looking at the United States and at Europe, it's not good enough. You also have to look at all the other regions. And they are very heterogeneous. We've grown nicely last year in those regions, they are very heterogeneous, and there is not the one-size-fits-all approach for all of them. So we apply flexible strategies tailored for each market.

If I say they are so heterogeneous, what do I mean? Let me give you an example when it comes to the products. There are markets in Asia where customers formally having driven luxurious sedans, now tend towards grand limousines, MPVs, et cetera. That's a segment we can definitely attack with our VLE and VLS. We can also perfectly leverage our production network with CKD, SKD and CBU, but also for the countries where we have free trade agreements with export from China.

And we will fully utilize the free trade agreements now in place, for example, for India. In India, we are already the #1 player of the premium brands, and we'll definitely build on that and increase our activities here going forward. So let me sum it up. We have a great brand backed by measurable customer satisfaction. We are ahead of the biggest launch and technology campaign we ever had and we have regionally specific strategies to tackle profitable growth around the globe. Will it be easy to reach 2 million? Definitely not, but we have the right ingredients to get that done.

Before I hand over to Oliver Thone to give you insights on how that looks in China, I would like to finish with a kind of sneak preview. It's our new commercial for GLC. And from our perspective, it perfectly embodies what the future holds. It's about performance, emotion and customer excitement.

Ladies and gentlemen, thanks for your attention.

China, you have heard it probably 50 times, and it's on the top of all automotive thoughts right now. My name is Oliver Thone. I'm living in China since 1 year. I'm leading the China business of Mercedes-Benz since 1 year, and it's my privilege to give you an update of what is the situation and most importantly, what is the outlook.

When we talk about the market in China, it's unmistakenly the most dynamic market in the world. We see pricing pressure, we see new competitors and entrants in nearly every segment and thus, heavy shifts in what used to be the structure of the market.

Yes, Mercedes-Benz sales in China were down, but I invite you to look behind the figures. The overall segment for premium vehicles was down 15%, if you make a cut above RMB 400,000. In that segment, Mercedes-Benz retained it's #1 position. We are also leading in luxury sedans and our customers enjoy among the highest residual values. And compared to our peers, we realize the highest transaction prices. How is that possible?

We have a still growing customer base in China, more than 7 million, and they are as digital savvy as you hear it. It's a very specific way of living and our customers, everybody spends up to 6 hours per day on their devices. The device has a special role. You can do anything online. Obviously, food and buying clothes is no surprise. But in China, you buy everything online, including cars.

To cater for that demand, Mercedes-Benz has created a very specific app with a local flavor. We have 2.4 million active users every month and interact in a direct-to-customer channel. Again, we also achieved customer satisfaction #1 for a second consecutive year.

Looking at '25, '25 was no year of growth, but it was a year where we calibrated our operations, we invested into the future, and we shape the company for future success. 575,000 units were the result of deliberate sales steering to assure the highest possible net revenue quality.

We do that by upgrading vast parts of our portfolio and thus providing good reasons for customers in investing in Mercedes-Benz. Also, intelligence is updated with the update functionality Ola described, and I'll dig deeper into it in a moment. Our customers in China are among the youngest in the world. In fact, 37 is the average age. And when acquiring an S-Class, it's 39.

That customer base is of huge importance. And to grow and access the younger customer base, we signed the world's best table tennis player Wang Chuqin last year to become brand ambassador. But behind the scenes, we have always been investing into the future because we believe in the future of China. Now we were amongst the first to invest into Momenta. That Momenta, which has partnered now with many OEMs, we were the first in 2017 to invest into it.

We have deepened our partnership with ByteDance. You will see results in a moment. But we also ventured out to invest into a new company, Afari. Afari is an AI start-up, which is heading out to change AI in the cabin. Now in such a year, it's utmost important to work on cost. One year ago, you have been promised cost targets, and the team is working day and night to deliver on these, and we are well on track.

Now you are most interested in what is the future looking like. Now China will remain the single most important market for Mercedes-Benz. It is also fair to say competition won't go away. Pricing pressure in the foreseeable future won't go away. That is why we defined a clear strategy around technology and products, a deeper localization, customer centricity and everything underpinned by operational excellence.

And we follow through with a focused implementation. We talked about the values, which make a Mercedes or a Mercedes-Benz, and you know them. It is safety, design, comfort, quality and intelligence. But this intelligence in China, it requires to have a local flavor, like the user interface I spoke on the app. You have to cater for the specifics of that market. Ola described how Level 2++ point-to-point navigation is actually something which is becoming ever more standard in China and the rest of the world is now catching up.

This journey, you have to be part of this industry. And to do that, we teamed up with the best. That is the advantage of MB.OS. It is partnership agnostic. We are able to deliver a tailor-make UI, a deep integration with local software and other technology players. This might sound a bit abstract. Let me dissect it into 2 elements: one, intelligent cabin; second, advanced driving.

And to not just talk about it, let's have a look what is possible. We do this. We integrate the Doubao intelligence and speech recognition systems with local software partners to have the best performance. Why is that complex? The system, and you know, has -- there's not one Chinese spoken. There's Mandarin, there's Cantonese, and there are very many specific local variants. And my Western tongue is adding another addition to Mandarin. But the system needs to understand that, and that is possible with the power of AI. So we took the CLA together with an engineer on a ride from Beijing to Shanghai, and let's take you on that ride.

[Presentation]

What you have seen the system understands my weak Chinese, it understands his, the local dialect, you can throw in a second command while I have just thrown in my command to have a massage. That is possible with the compute and the power of AI. Now it is cool to show it here. But what is more important to us, 97% of our customers activated this feature just this January.

They love it. They post about it, and that is the first part. Now let's look at the second part, ADAS. For ADAS, it is a very specific situation in each and every city in China. And we teamed therefore up with Momenta to bring Mercedes-Benz safety-proven intelligence in developing these systems, but team it up with an expert on the specifics for the market. Now allow me to narrate a video, which we have filmed. It is our Chief Software Engineer in China, [ Wang Xin ] and the CEO of Momenta, Xudong , who sit in this car.

Let's have another look.

You see here, they drive through the city. You have the hands off and just -- the possibility of this car to identify complex traffic situations. You have the smooth human-like role to the car in front of you. You kind of do not interrupt the driving attractivity by harshness, and you can manage these systems and situations by the car automatically.

You identify traffic lights and the car comes to a standstill and it will accelerate. You see the cutting of a vehicle and passenger crossing. This is automotive safety Level D implemented by us together with Momenta. And what is unique about it, we call it cooperative steering. The machine and the driver interact. They don't fight each other. No one else in the industry can offer that level. Why is that crucial?

Today, to have that level of intelligence, you were forced to buy a new energy vehicle. That is why Mercedes-Benz is going to launch a lot of new energy vehicles. But this unconditional intelligence we will bring into the whole combustion lineup, we will be the first one to offer uncompromised intelligence and no question of drivetrain choice. How will this journey start? We will launch the electric GLC extended wheelbase, locally adapted vehicle with a lot of local supply chain ingredients.

It will extend today's imported GLE will be by the mid of the year a fully localized extended GLE, including all the intelligence I have described. And of course, in the fourth quarter of this year, we will also have the S-Class. Now you saw the software stack in the CLA in action. This software stack is constantly evolving. So the GLC and the S-Class will have even updated iterations in the market.

By that, and by 7 China exclusive models, we are setting and laying the foundation for growth in China. All of our cars will offer more space, more comfort and more intelligence. How is that possible? We have the so-called dual engine. We have 2,000 engineers working, one part in Beijing directly at the TCC next to our BBAC manufacturing and in Shanghai. That is absolutely crucial to live and breathe the pace of the Chinese automotive industry.

We deeply integrate with the local supply chain, and we can iterate plus leverage the cost base, which is advantageous. At the same time, the Shanghai engine will continue to deliver software. And still this month, our customers will get the first OTA even for the MBOS in the market, just launched late last year. Sometimes, these results transfer to the world and the rear seat entertainment in the S-Class was, in fact, done in China for the world.

The second part is production. And I know right now, there's no factory picture without a robot, but you're well invited to visit our factory in China, you will actually see a robot, including a humanoid if you wait until March. More than 6 million vehicles have been produced and 20 localized models. We are constantly improving material cost position. And at the same time, the BBAC is the first zero carbon plant certified in China. That is a testament to our green manufacturing promise.

This market requires absolute resilience in all parts of the operation. Therefore, we have strategic pricing competitive but not utterly aggressive. We work with our dealer partners, which are of strategic importance. They are the direct interface to our end customers, and we enhance that by building up the aforementioned digital channels.

So we have a seamless digital and physical interface to our customers; new retail formats, which were announced by Matthias; we will also have those rolling out in the second half of 2026 to more than 3 cities. As said before, delivering on cost targets is more than just a promise. We are well on track to not only achieve but to exceed the targets defined here 1 year ago, and we will continue to do though, including adjustments wherever necessary in our operations.

Now the big question is when will this growth kick in? 2026 is going to be a year of ramp-ups. We will have in the first half a lot of changeover in the factory. And later on, we will have in the second half ever more launches kicking in. The environment we foresee to remain competitive, but we are absolutely committed to turn every opportunity into growth.

7 dedicated models for the Chinese market and each of them 100% China fit. This will assure the highest net revenue quality and at the same time capitalize on local cost. Now talking about net revenue quality, talking about cost, I think, Harald, that is a good bridge to our CFO. Thank you very much.

Yes. Thanks, Ollie. No pressure on -- Wonderful. Well, in that section, obviously, I mean, we're going to wrap up what you heard before. I want to give you an update on our cost efficiency measures where we are compared to what we said a year ago here. And then, yes, maybe have a glimpse on what it means in terms of margin, cash generation moving forward and return for our investors.

So before doing that, just one slide, I mean, to outline what are the assumptions on which we make these forward-looking statements, I will not try to entertain you or educate you on the macro and the market assumptions in detail, you know them much better than I do. But all in all, I mean, you see what is the assumptions we take on the macro side of the things and then what we derive from there is our market expectations.

This is not sales expectations, it is market expectations. So in essence, what you see, we see constructive, good momentum for the U.S., we see in terms of macro and hence, also in terms of market evolution, a more moderate or stable development in Europe. I think we are realistic about the dynamic, very competitive market environment in China. Hence, we take a cautious view on China in terms of the market, and we see good grounds for the overseas to build momentum.

On top of that, we all know lots of volatilities, lots of challenges and risks. You see some on the slide, but maybe also the other of the opportunities, which you also see on the slide. But let's not dig deeper, I would say, on this one. Let's now really go to the real stuff. So real stuff, I mean, you heard it loud and clear in terms of the plan of attack.

So in 2025, starting from the 1.8 million, we explained, I mean, why 2026 is a ramp-up year more -- I mean with a low start, I mean, in the Q1, and building momentum in the H2. But clearly, with that unprecedented product firework kicking in, we will build momentum post 2026 into 2027. And very, very clearly, we have that target of back to 2 million units in mind. Where does it mean we want to do it? Definitely in the U.S., in Europe, also in the overseas on the back of the products with a very strong position in the top end in the core.

And clearly, I think there's a message, Matthias, we want to attack and gain back market share. What does it mean for China? Well, you heard before that for 2026 we take a bit of a cautious view, which was in the guidance section where I said, I mean, it's slightly down compared to 2025. But clearly, here again, with the products coming, we want to hold the line in China and call that 500,000 to 600,000 units in China.

Is that realistic? Is it unrealistic? We think this is realistic. Why so? We have many products coming to the market. If you think about the GLC electric, if you think about the electric C-Class, if you think about, I mean, the C-Class, I said, electric e-cars, obviously, to come, these are products covering EV white spot, I mean, we're having today. So I think it's perfectly legitimate to go for that level of ambition in China.

So that's, I mean, how we want to come up with the 2 million units on a worldwide basis. Looking at the mix, well, on the top end, we clearly have a target of more than 15% top end share in the midterm. You might say 2025, you had, I mean, 15% already. Now you're telling me something about 2026 is 14% to 15%. That doesn't sound, I mean, super ambitious. Well, I would suggest you keep in mind that at the same time, we grow the core pretty substantially.

So if you look in absolute numbers, I mean, that more than 15% in the midterm means nothing less than more than 300,000 units in the top end, which I think is in terms of ambition, but also in terms of absolute size, clearly, a leading position today, but also in the future and that is a growth of around 15% of unit sales in the top-end segment, obviously supported by beautiful products, I mean, like the S-Class, the GLS, I mean, to come, a super strong AMG product lineup in ICE, in EVs, in particular, in the midsized segment and obviously, on the top of the crown with the AMG.EA to come.

On the xEV side '26, 21% to 23%. I think I explained it before in terms of the BEV share growing, maybe the plug-in in the entry segment migrating into the EV segment. That's why in 2026, you don't see that step up in the absolute number in terms of xEV share yet. But clearly, moving forward, we have a 40% xEV share in mind.

And again, here, what does that mean? That means around 800,000 units in terms of xEV vehicles, and that means nothing else than doubling it compared to today. If we talk about pricing environment, let me say very clearly, we command a price premium, thanks to the very strong brand and the products today, and we will continue to do so also in the future.

However, as part of our tech and as part of our game plan, we clearly defined that we want to step up and we did already so the competitiveness in terms of the pricing. So we adjusted to market realities. We are ready to do so wherever needed. And with the efficiency work we concluded and we continue to do, we create the flexibility, the headroom to do so.

But again, we are protecting and we are optimizing value, but we are opening opportunities for volume. And that is the key recipe why we also, next to the products, believe we can come back to the 2 million units in the midterm. Over the midterm, that should then also stabilize pricing, and it should also enable ASP to grow over the midterm. If then you think about the revenue side of things, 2026, I commented before, I mean, should be probably rather flattish.

If you look beyond that, clearly, the product firework, the sales will generate also revenue momentum. If you then think about the top end evolution I mentioned just before the mix evolution, but also the very strong growth potential in the core segment, you can expect in the revenue side on top of the sales volume effect also a favorable mix effect. I mean with this, we target a CAGR starting from 2026 of approximately 7% on revenues.

Now let's switch gears a bit in terms of -- from the market, what does it mean in terms of the industrial base and how do we adjust the industrial base. First, last year, we mentioned already, we're coming from 2.8 million units some time ago. In 2024, we brought it down to 2.5 million units, max production capacity. So what is the target? I mean in conjunction, I mean, with the sales target, I just talking about before, obviously, you keep some flexibility. That's why we set basically target for 2.2 million by 2028.

What did we accomplish in 2025? Well, we did adjust capacity in Europe and Germany by roughly 100,000 units. We did adjust the capacity in China by around 120 units. What are additional activities we are doing moving forward in 2026, 2027. The GLB will end the production in Mexico and then we'll move to Kecskem�t. So that is approximately 100,000 units. We'll shift and gear up the Kecskem�t facility and thereby it will become the largest production site in Europe after the full ramp-up.

On top, we still have optionality in remote location, and we also have flexibility depending on market evolution to adjust further in China in case need be. At the same time, that is a very flexible production network, which can accommodate the entire product portfolio and changes on the demand side. And as you know, we also can run the EVs and the ICE from the same production lines and that's a fundamental principle we're having today, which we retain also in the future.

Well, overall, let's have a look on the localization where we are and where we're heading to. Globally, we target to ramp it up further from the 60% to 70%. As Ola pointed out, it's always a good principle, I mean, to serve the markets from local. Even more so, however, I mean, under the geopolitical framework we are facing in these days. What does it mean by the key regions?

If you see the U.S. on the left-hand side of the chart here, clearly, we have a target to serve more than 50% of the demand in the U.S. by local production. And yes, clearly, I mean, there is the potential to extend the production capacity further and what other product could be better suited to do so than next-generation GLC to do so, which means U.S. is and will be the home of mid- and large-sized SUVs serving the local markets, but then also serving Europe and the overseas markets in terms of the SUVs.

We think about, I mean, Europe, I mean, majority of the European demand is being served already today, I mean, from local production. So Europe, I would say, remains the home of the top end of the sedans. This is where the craftsmanship is at home. This serves the demand in Europe, the GLB shift I mentioned already, which is coming from Mexico to Europe. But clearly, it is the home of the top ends and the sedans, which get exported from Europe on a global scale.

And then looking at China, so clearly, more than 80% in terms of local supply from the local production. This year, by the mid of 2026, we will localize the GLE long wheelbase in China, next to the market presence. It offers strong cost advantages. And it means that the imports are basically limited to the top-end products coming to China. And at this stage, we do not foresee to export from China to Europe or the U.S.

Switching gears more to the cost side. Production cost being first chapter in here. So what did we accomplish? Well, in the last years between 2022, 2024, we did achieve already 10% production cost down. We didn't stop there. Last year, we said we want to go for another 10% between 2024 and 2027 in terms of production costs measured as cost per unit. And I'm happy to report here that in 2025, 4% out of this 10% have been accomplished already, obviously, sitting in the numbers we were looking at before in the first section. So what are remaining levers for '26 and beyond to get to this 10%? Well, it is the adjustment of capacities is to work on the efficiencies on the HPVs in the factories, but also in the logistics, just to work on the labor cost. So all levers are being pulled across the entire production network, to step up the efficiency level.

The other key one, obviously, is the switching gears, the moving east and the Kecskem�t facility offers significant factor cost advantages in the vicinity of 70%. So we are leveraging these and by stepping up the production capacity over there, it means the low-cost share in Europe will double from 15% to 30% by 2027.

Very, very important [ chapter ], obviously, given the size of the bill of material is the material cost and the material cost reduction. What did we say last year we want to reduce material cost by 8% between '24 and 2027. Well, I think good news. In 2025, we did already 2%. And we all know that supply chain is in a tough situation, obviously, as well. So being able to pull off, 2% here, I think, was a very good achievement. So we clearly have this 8% in mind for 2027.

But we now -- what we added given the competitive environment and also to create ourselves even more headroom in this competitive market environment is to step up that effort beyond 2027 and to go from the 8% to an even higher number, i.e., 10% post 2027. So this is, I mean, what we embedded now into our plans, how do we attack that? Well, leverage even more the global footprint, extend the best cost country sourcing.

Clearly, China opens up sourcing opportunities for China, but also for the rest of the world. And now we have a clear game plan how to pull off these potentials. We add new participants into the supply base, adding new partners with fresh ideas and fresh mindset. But not only obviously working on the supply chain side also we're working internally, and that means also to challenge the design and the specification we are doing, pull forward more standardization and design to cost initiatives internally, but also jointly with the suppliers.

The other chapter, I think you're very interested is how about this famous BEV margin and this question of BEV and ICE margin parity. Maybe I think some update in this respect and news to share here. We now look into the products entering into the markets such as the CLA, but now I mean let me pick the GLC as an example. So we now know the bill of material of that vehicle coming to market.

We made substantial progress on the battery cost, on the drivetrain cost. We know what it is at the start of the production. And I think good news to report that on the battery side, we are 30% down compared to predecessor products with a lot of efficiencies, economies of scale, LFP at work, so the entire tool set.

But also the entire vehicle as such comes with a lower variable cost bill of material compared to predecessor products. But we don't stop there at start of production. And I think that is the new element, if you bear in mind what I just said before on the material cost. So we'll continue the journey in terms of fundamental cost saving as we go through the life cycle of the product. And if I factor that into account and I factor also all costs, including the CO2 benefit, created by the EV vehicles, which I think is a legitimate thing to do. By the way, others are doing it as well, I would say.

Clearly, we do see a path now to get to margin parity. If I take a GLC electric and compare it with the GLC combustion, if I take a C-Class electric and I compare it with the C-Class combustion, if I take the electric E-Class coming with the current E-Class combustion, we see a path to margin parity towards the end of the decade between BEV and ICE.

Investments. Well, I think I talked already earlier today about cars achieving investment peak in 2025. You see it here on the chart, EUR 12.7 billion. I think with a very disciplined investment approach, I mean, in particular on the PPE side, really enabling this tech stack on the R&D side. So EUR 12.7 billion is clearly the peak. You see the profiling down '26 and '27. And what I think is a very important message here, we readied that tech stack.

And we now can bring it, we can now proliferate it into the entire product portfolio. It's not only about the CLA or it is not only about the GLA. No, it also goes into the S-Class, I mean into the GLE, into the GLS to come. So entire product portfolio will benefit from that leading tech stack moving forward. So that's message number one. Message number two, you can also see here on the chart that looking at the vehicle architectures, the peak also on the architecture side in terms of ICE and EVs is behind us in terms of the investment peak.

So that gives us a lot of comfort that we can command that investment coming down at the same time retaining a focus and the top end emphasis in terms of investment and the core, which you see on the bottom of the chart here clearly, which illustrates we're investing in top end and core, obviously, where the higher level of margin sits.

And then fixed cost, well, 2019 to 2024, you know 19% accomplished already. We didn't rest there. We set ourselves another 10% between 2024 and 2027. Good news, I would say, 2025, we achieved already 7%. Well, we could say, well, that's not that much to go anymore. But obviously, the last mile is always getting more difficult. But we have a clear plan. I mean how to do that? A very, very strict use of attrition, so not replacing people leaving as a function of attrition. Then the NLPP personnel cost reduction program we talked earlier today, will kick in with the benefits in '26 and then 2027.

We address also structural issues when you think about the management positions in terms of spend and layers and dual roles. We have a pretty massive outsourcing ongoing to best cost countries or even hand over the activities to external service providers. Another example is the divestment of the own retail in Germany. We talked about the integration of the financial services customer front end with the sales and customer organization unit.

And obviously, each and every area is working hard on standardization, digitalization and extensive use of AI across the entire business. So what does it mean in terms of margin perspective and trajectory? Clearly, a year ago, I think when we're standing here, we said we target in 2027 following a double-digit margin. Did that ambition change? No. Why?

As when we said that last year, we were pretty explicit that this is pre-tariffs. And we all know where we ended up, I mean, on the tariff side of things. Since then, I think a significant evolution in terms of the furthering of the competitive nature in the market. And so we are here confirming an 8% to 10% margin target in the midterm, including 150 to 200 basis points dilution from tariffs and the adverse FX effects we were talking about earlier today.

So how can we come from a 3% to 5% in 2026, where I think in the break, I already got quite a lot of questions, what it means and the like. So let me take you -- as I took you from the '24 to the '25 and the '25 to the '26, let me take you from that '26 guidance 3% to 5% to how is it possible to get to 8% to 10% in the midterm. Well, let's start first with some headwinds again.

The more -- I mean we grow, we also grow the ambition in the U.S. It means the tariff impact will go up a bit further, 150 basis points, '26, so going more towards the 200 over time. The FX, from the assumptions that I shared with you a bit earlier, we don't see it going away. So all in all, FX and tariffs, basically, constitute another headwind of around 1%. The entire volume structure, pricing, EV ramp-up is a super important lever, obviously.

So going back to the 2 million units. But you might be surprised that maybe in this entire equation, it is probably something around 1.5%. So where is the rest coming from? It is the efficiencies at work. This is the efficiencies of roughly 4% which will not only bring us up to that level, but also will make the company even more resilient and waterproof.

So what does it mean? Clearly, we believe in the products and the plan to attack the markets, I mean, to go to the 2 million units. But in terms of -- I mean, what's underpinning that margin expansion, it is clearly the efficiencies at work, proven so far. And I think on the back of that, we are confident that we can deliver on that moving forward. If you look on the margin side in terms of this profile, clearly ramping up. What does it mean on the cash generation?

Well, you could see the chart on the investment side, the investment coming down, depreciation going up. It means cash conversion turns favorable moving forward and not only at cars, but over time also at -- on the van side. So let's have a look what that means. Well, maybe another short recap before doing so in terms of cash generation track record, if you go back to 2019 until 2025, it's more than EUR 50 billion of cash generated, free cash flow generated. We returned more than EUR 30 billion to you via divi and share buyback. On top, you've got the Daimler Truck shares from the spin-off.

That basically yields a total shareholder return of more than 130%. And if you look at 2025 that is a TSR of around 20%. I use this example, I stressed last year, so if you invested in 2019, EUR 100 into Daimler shares at the point in time. And if you count everything, the divi, the share buyback, the Daimler Truck shares and all of the cash streams coming to you, that is equivalent of EUR 230 today.

So I think it's a reasonable IRR. And if you think at the same time that the net industrial liquidity stepped up from EUR 11 billion to more than EUR 30 billion, EUR 32 billion, I think you might read from the chart that cash generation matters to us. Now what to do, I mean, with cash generation and cash returns? Clearly, we have the capital allocation framework in place. We are committed to that framework. We are committed to the shareholder returns.

But this capital allocation framework and the application of it, I'm going to take you through that in a minute, is not a demonstration of the commitment to that framework only. It is also, I mean, a signal in terms of our confidence into the business, into the operational, into the financial profile we're talking about in this chapter before. So very clearly, the cash generated, I mean the free cash flow generated and the cash proceeds generated will serve the divi, will serve the share buybacks.

And in the cash generation, obviously, also M&A starts to matter. Before I talk about that, I mean, let me share a word on the divi as we didn't do that before. You could see, I think, from the press release that we propose to the AGM a dividend of EUR 3.50 for 2025. How do we think about that? How do we come up with this proposal? Clearly, on the one side, the divi should express the business profile and the business evolution, which we analyzed in the section earlier today. That's why the divi for 2025 needs to sit below the one of 2024, which was EUR 4.30.

But at the same time, we do understand and we do know that the sustainability of dividend also matters to you as a shareholder a lot. And there is a third dimension, as we talk about '26 as a ramp-up year as we lay out a very clear plan how we move forward, in terms of top line expansion, come back to 2 million units, come back to margin expansion, come back to higher cash flow generation moving forward. That is also a message in terms of the divi of EUR 3.50.

Please read this footnote in conjunction with the divi proposal of EUR 3.50. Now a bit more in detail for 2026 in terms of cash generation and cash return. What can you expect? Well, if you read my lips, a bit careful from the guidance section, you can see an industrial free cash flow for 2026 in excess of EUR 4 billion.

Very clearly, we have the potentials on the M&A side. I talked about Athlon. We have the own retail in Germany, where we are ramping up the wave of the divestments in 2026. And then we clearly have another little asset, which is called Daimler Truck [ stake ]. And happy to report here at this stage that a share of that has been reclassified in the financial statements to come out latest when you see them early March in assets held for sale. That means nothing else, our firm determination to be in market in 2026. So if you size these opportunities, I would say, give it at EUR 2 billion. So cash generation altogether, I mean, could be around EUR 6 billion. What to do with it? Divi of EUR 3.50 translates into cash out of EUR 3.4 billion.

I explained to you earlier that the share buyback launched in 2025, we did already EUR 300 million in 2025. So that leaves us with EUR 1.7 billion to go in 2026. And on the back of the cash generation strength, I think that fuels the perspective to launch a successor to the 2025 SPB program also in 2026. Just for the sake of the argument, assume same order of magnitude, then obviously, it will come after the first one after the EUR 1.7 billion. So give that on the chart, you see a EUR 1 billion to EUR 2 billion. That means basically around EUR 6 billion of cash generated from the industrial business and M&A. And approximately the potential of EUR 6 billion return to shareholders in 2026. At current share price and market cap, I think that would constitute a double-digit return at the same time, retaining a very, very healthy balance sheet of EUR 32 billion.

So I think it's time to wrap it up. I think you got the details of the attack plan on which we are moving full speed ahead. We are confident about that plan. Why are we confident? It's the leading tech stack, which now gets proliferated into the entire product portfolio. We have these incredible vehicles coming to market with an unprecedented launch campaign, '26, '27, creating momentum.

You heard loud and clear how we pull all levers to leverage the brand and the products in the market to conquer the markets with a target, a clear target back to 2 million. You heard a comprehensive game plan how to add Tech China in terms of what the customers expect from us, in terms of the tech stack, in terms of the products, in terms of the cost base and also how we leverage the local capabilities, intelligence in terms of the R&D.

You heard as well a fully engaged and motivated team from the shop floor to the boardroom with a determination to win. You heard about discipline when it comes to cost and investment supporting higher level margin and cash generation, which should come back as cash returns to you. That is the reason why we are confident, and we welcome you to join us in that confidence. Thank you very much.

Yes. Thank you very much, everybody. This was the presentation part of the day. Thank you for joining us here in person in Sindelfingen and all of you on the screens for joining us digitally. Thank you, Ola, Harald, Matthias, Olli for your presentations. We will see all 4 Board members back on stage for a Q&A session in roughly 12 minutes at 10:45 sharp. This is still a public Q&A, so it will be broadcasted. However, only registered analysts, investors and journalists will be able to ask questions. So see you back in 30 minutes.

Welcome to the global conference call of Mercedes-Benz. At our customers' request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be directly followed by a Q&A session. [Operator Instructions]

I would like to remind you that this telephone conference is governed by the safe harbor wording that you find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

May I now hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Good morning, ladies and gentlemen. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and the Internet to our Q3 results conference call. I'm very happy to have with me today Ola Kallenius, our CEO; and Harald Wilhelm, our CFO. To give you more time for your questions, Ola will provide a brief introduction, followed by Harald, who will detail our financials as usual. After that, we will move directly into the Q&A session. The respective presentation can be found on the Mercedes-Benz IR website.

Before Ola kicks off his presentation, let's relive our IAA highlights 1 more time.

[Presentation]

Welcome, everybody. This morning, we published our third quarter results. And I guess you've already skimmed through the numbers. So we'll be happy to give you a little context now. We're managing, as you know, a highly dynamic business environment from tariffs and political disruptions to intense competition in China and to heterogeneous BEV adoption around the world. And as you can see in our results, we're navigating through it with prudence and a plan.

From the beginning of the year, we took a realistic view about the challenges and opportunities ahead, and we will maintain this approach. So our first message is this, Q3 is in line with our 2025 guidance. All Q3 key performance indicators match full year expectations. Yes, the current challenges need a lot of management attention. And while we're a 100% focused preparing for the future, we will most definitely take our long-term goals into account. And the best answer in any market environment is customer orientation and product substance. And recently, we made a lot of progress.

With the CLA, we kicked off our biggest ever product launch program. The CLA is elevating its segment. It's our first software-defined car and the first Mercedes to run on MBOS and its efficiency is unparalleled. That's not just what I'm saying. Maybe you saw it a couple of days ago, one of Germany's most renowned car magazines basically wrote, it's the best car we have ever tested. And I mean, they've been evaluating cars for almost 80 years, and the CLA has just raised the bar.

We now see this great feedback translating into customer orders. The CLA is gaining traction in the European market, and we're just at the beginning of a global rollout.

We have also launched the new CLA Shooting Brake. It offers the same product substance as the CLA and adds even more room and its very popular model amongst fleet customers, important for Europe. Both these cars also now in the next weeks start production of the hybridized ICE version.

We met many of you guys in Munich in September. You saw the new electric GLC with your own eyes. It supports the new face of the Mercedes-Benz brand combining iconic Mercedes elements with the latest technology, and that car can be ordered as of today. I'm sure the new GLC is about to continue the success story of our best seller in the electric era. With the new VLE and VLS models, we're expanding and elevating our range of grand limousines. We began pre-series production of the VLE in the third quarter. The next steps will follow soon. I recently drove 1 of those prototypes, watch this space.

In that context, let me say a few things about our product strategy at this point. As announced, all added up, we plan to launch more than 40 new models by the end of 2027. And we want to spark desire wherever we choose to play. This includes a significant expansion in the top end segment over the next 2 years. That's where Mercedes comes from. That's what we do best. And that's also what fuels our financial firepower. So the focus on the top end segment remains a cornerstone of our strategy. In addition, the core segment is where most of our volume is. It's the backbone of our business. Here, we'll complete our offering across all powertrains BEV, plug-in hybrid and ICE. The electric GLC marks the start and the C class and more will follow. In the entry segment, you will witness a complete reskinning of our offering. Soon, the new CLA and CLA Shooting Brake will be followed by 2 SUVs. As you can see, we make sure to keep providing an accessible entry point into the world of Mercedes-Benz. This is particularly important for the European market. So we have this in mind.

All these new products will carry the next generation of exceptional Mercedes technologies. So we're keeping up the pace. In electric drives, we showcased a new dimension of performance with the concept AMG GT XX. The car has shattered a whole series of records. It traveled around the world in less than 8 days, covering over 40,000 kilometers. Some might say that was a nice PR stunt. But in reality, it was the most demanding test drive of all time because the very technology that made this possible is going into series production already next year. This includes axial flux motors and directly cooled batteries. Regarding software, we have entered the era of software-defined cars with MBOS. We'll roll out MBOS across our entire portfolio, BEV and ICE and see constant evolution, thanks to over-the-air updates. Our advancements in ADAS are elevating customer experience and increasing safety, will launch our point-to-point assisted driving system for urban traffic next week in China, so I'll call it Level 2++.

I'll be happy to talk a little bit more about our way forward in a minute. But first, Harald will guide you through the numbers and give you our financial outlook. Harald, please?

Thank you, Ola, and hello, everybody. Let's continue with the group financials on the Page 6. Revenues are at EUR 32 billion due to lower sales volume. However, partially offset by a better structure. The EBIT adjusted sits at EUR 2.1 billion. Obviously, we'll dive into that a bit more in detail. If you look at the EBIT book, that's significantly lower due to 2 effects: the restructuring program, the NLP, as we call it, and the legal proceedings at [ NBM ], also more on that a bit later. EPS is at EUR 1.22. Also, we will give a bit more color on that in the section a bit later.

In the third quarter, you might have noticed that we had a healthy cash generation with EUR 1.4 billion in the quarter, yielding a total year-to-date of EUR 5.6 billion free cash flow and that brings us to a comfortable net industrial liquidity of EUR 32 billion by the end of the Q3.

Looking on the car sales, Page 7, in July, we expected H2 sales in the vicinity of H1 with Q3 slightly lower and Q4 slightly higher. And I would say this is exactly what happened for quarter 3, if you look at the 441,000 units sold. Overall, sales were influenced by the market environment in China and continued diligent stock management to mitigate U.S. tariffs and adjust the dealer inventory.

Also worthwhile to notice, I would say, top end actually increased year-over-year by 10%, driven by G-Class, S-Class, AMGs, and all in all, I mean, that leads to a higher tax share of 15.4% in the quarter. Also interesting to see in China, the top end sales increased by 13% year-over-year.

On the electrified vehicles, we could notice a 10% year-on-year increase, driven by our plug-ins. Sequentially, our best sales increased by 22% in the third quarter versus the second quarter driven by first deliveries of the electric CLA in Europe. Overall, we reached an xEV share of 22% in the quarter.

On the cars financial sales I just explained, revenue developed a bit better, thanks to a higher CBU share and top end share. The ASP remained stable. EBIT sits at an adjusted value of $1.1 billion. Cash conversion above 1. Let's look a bit more in detail on the Page 9 on the profit evolution.

In quarter 3, we achieved an EBIT adjusted of EUR 1.1 billion with a return on sales adjusted of EUR 4.8 billion, respectively, 6.3% ex tariffs. On an overall note, if you look on the chart, you'll see that through our work on cost levers, we were able to offset the impacts of a dynamic market environment, including tariffs, the situation in China, and effects from FX.

Let me guide you a bit more in detail through the bars on the chart, volume structure net pricing, what is inside lower unit sales that were nearly offset by a better structure due to a higher CBU and top end share, flat net pricing, lower contributions from China. And overall, the effects from tariffs, which amounted to roughly 150 bps in the quarter, slightly lower due to the stock management and lower U.S. group sales. The largest single part of the FX effect you see on the chart is Turkish lira, which we maintained pricing compensation. The remainder is driven by Korean won and Japanese yen. The industrial performance is meaningfully positive, driven by the material cost savings and efficiencies in our operations. Similarly, we achieved cost savings in the other cost categories, including reduced direct selling expenses and lower noncapitalized R&D cost. Altogether, these buckets contributed to over EUR 1 billion positively in 1 quarter.

Looking on the cash flow for cars. See a bit adjusted at EUR 1.5 billion. So we had some tailwind from the working capital, positive contribution coming from trade receivables due to lower part supplies to BBAC at higher inventories, but also higher payables which offset each other. The net investments in PPE equal almost a depreciation level. And on the others, we have the adjustment for the noncash effect of the NLP charges, not yet cashed out, dealer provisions and the reversal of the BBAC equity result.

Moving to the vans, Page 11. Sales are at 84,000 units due to a competitive market environment. In Europe, we see the competition in the fleet business continuing. At the same time, we could double the xEV share to 10%, thanks to improved availability of our events. In Europe, we achieved a best share of 14%. Revenues reached EUR 4 billion, driven by the sales development and unfavorable mix and a softer net pricing also impacting EBIT. More on that next page, and on the cash flow side, you see reduced stock levels, which had a tailwind in terms of working capital. However, that was more than offset by the investments into our new land architecture and the ramp-up of the respective PPE. With that, we ended with EUR 300 million of EBIT adjusted for vans.

Looking on the vans profitability evolution, Page 12. Volume structure net pricing, I already explained before. Additionally, we saw a lower aftersales business and an impact from provisions for achieving CO2 targets. On the cost side, vans benefited mainly from operational efficiencies, onetime valuation effects and lower SG&A costs, R&D and others are wash. That leaves us with EUR 412 million EBIT adjusted, EUR 10.2 million in a dynamic market environment, which is, I think, a good achievement.

Page 13 on the mobility. The penetration rate increased. The new business volume decreased versus previous year, mainly due to the development of the unit sales and the FX effects. Portfolio remained stable over the quarter. Quarter 3, EBIT adjusted is at EUR 313 million with a return on equity adjusted at 9.6%. The main drivers of the improvement versus previous year are positive development in the portfolio margin, continuously healthy acquisition margin, which are in line with our target returns. The improved cost position for SG&A expenses are also supporting the margin improvement. These positive effects were partially offset by higher cost of credit risk due to a softer global economic outlook.

In the U.K., the FCA recently published a draft redress scheme concerning Motor Finance Commission models. Based on this development, we provisioned a mid-3-digit million euro amount in the third quarter, driving the significantly lower EBIT booked at minus EUR 180 million. We are currently reviewing the FCA's consultation paper and are considering our response to the FCA.

Page 14 on the group EBIT, cars, vans mobility, I explained already. In the recon mainly you have the at equity result of Daimler Truck, EBIT adjusted is therefore at EUR 2.1 billion. The adjustments refer to the restructuring and the legal proceedings at [ NBM ] on the restructuring charges.

Let me give you a bit more color. Please refer to our NLP personnel cost program, cost reduction program. So we had an effect of roughly EUR 1.4 billion in the first 9 months of this year. As you can see that we were making good progress on this topic. Please expect also some further progress in the fourth quarter on the NLP program, however, lower than in quarter 2. Thereby, the group EBIT booked sits at EUR 750 million. The EPS is at EUR 1.22, which includes positive effects from revaluation of deferred taxes due to a lower corporate income tax in Germany starting in 2028.

If you look on the cash flow, we already talked about cars and vans, so you see cash taxes at minus EUR 300 million, significantly lower than in previous years. The rest, I would say, is a wash with that. We achieved a solid EUR 1.4 billion free cash flow with adjustments of EUR 200 million due to the first cash outs for the NLP program.

Page 16, comfortable, healthy net industrial liquidity at EUR 32 billion.

And obviously, that brings us to the Page 17, the stuff you, I think, eagerly expected, anticipated share buyback. You know we have that capital allocation framework in place. You know what it means. So we are, therefore, honoring our commitment to return free cash flow generated to shareholders. We stated earlier this year that we would initiate a new share buyback once we had better visibility on the cash generation. Now we generated EUR 5.6 million in cash in the first 9 months of the year. And we paid out at the same time EUR 4.1 billion of a divi. That means we have generated roughly EUR 1.5 billion year-to-date after the divi and we anticipate further positive cash flow for the remainder of the year. Therefore, we've decided to initiate a new share buyback program with a volume of up to EUR 2 billion plan to start next Monday, 3rd of November, and the program is expected to run for up to 12 months. As we said, we remain committed to our capital allocation framework, and we are pleased to be in a position to execute it now.

With that, I mean I would come to the outlook section, Page 18 on the divisional guidance. I mean first, and please consider the disclaimer regarding forward-looking statements at the end of this presentation in relation to the outlook. On the cars division on the sales guidance with 1.3 million units year-to-date, we continue to see 2025 significantly below 2024, mainly due to China. H2 sales are expected in vicinity of H1, with quarter 4 slightly higher than quarter 3. On the U.S. side, we see underlying customer demand higher in quarter 3 than in Q3 and continue to manage stock levels to target, Q4 group sales are expected slightly higher than quarter 3.

In Europe, we expect solid momentum in the fourth quarter. The customer order intake is on a healthy level, which takes us into 2026. And in China, the market environment remains challenging and the competition intense. Therefore, we expect quarter 4 in the similar ballpark as quarter 3.

On the global test share for the full year, we expect this to be well within the 14% to 15% range. Quarter 4 is expected in the ballpark of quarter 3. The xEV share is at 21% year-to-date. Therefore, we continue to see full year between 20% and 22%. On the return on sales, I mean, adjusted with 5.7%, including tariffs and 6.7% underlying year-to-date with a slightly higher volume in quarter 4, continued dynamic pricing environment, a stable mix, cost seasonality, including fixed cost capitalization as well as higher tariffs, we do confirm the guidance range of 4% to 6% and expect to be well within this range for the full year. With the cash conversion rate year-to-date now at 1.4. We raised our CCR guidance by 1 notch to a range of 0.9% to 1.1%, no change on PPE and R&D.

On the van side, sales usually come in higher in quarter 4, and this is expected to be the strongest sales quarter of the year with the sales development in line with earlier expectations. Consequently, we're keeping the sales and the xEV guidance as unchanged.

On the return on sales adjusted, in the first 9 months, we achieved a healthy 10.7% return on sales adjusted against the year-to-date run rate we expect for the fourth quarter a positive impact from higher volumes. Commercial dynamics to continue, headwinds from seasonality of material cost one-timers and the ramp-up of the transformation of factories for the next generation of vans. We expect the impact from the tariffs to be less than 100 bps on the van side. This aligns well with our previous assumptions. And I mean, therefore, we confirm the full year guidance range of 8% to 10%, including tariffs and expect the full year to finish at the upper end of the range.

With the CCR year-to-date, at 0.9%, we raised the CCR guidance also by 1 notch here.

On the mobility, we are at 9.1% return on equity adjusted year-to-date and we expect the full year unchanged in the range of 8% to 9%, also rather at the upper end.

And leaves me to comment on the group guidance, Page 19, a follows obviously same assumptions as a segment guidance. On top of the divisional guidance, the group EBIT will be impacted by the restructuring and the legal proceedings, as I commented before, and with EUR 5.6 billion of cash generation year-to-date, we are well on track with regard to the cash generation for the full year.

And with this, I hand back to you, Ola.

Thanks, Harald. I think this environment will remain dynamic, and I can say this, we're very aware of the challenges ahead of us. And that's why our fundamental priorities are firm, desirable products, technological leadership, customer focus, profitable growth and, of course, attractive shareholder returns. We have a plan. And I think that the results of the first 3 quarters clearly demonstrate our execution focus. At the same time, we're not afraid to adapt when circumstances change. The animal that is able to adapt is the one that survives and thrives in evolution. So going forward, we'll offer our customers the full range from BEVs and hybrids to high-tech ICE all the way to V8, because customers decide what suits them best and we will continue to listen to the customer.

We can respond to market demand with new products because our architectures allow technologically convincing and cost-efficient solutions. No technical compromises in terms of the packaging of the cars for the customer. We're constantly readjusting our go-to-market strategy because the operating optimum of a business is a moving target, certainly in the market that we're in right now. We're taking on the challenge in the Chinese market with China fit tech and products and a new approach to fundamentally improve product costs because the hyper competition in China is not going away anytime soon. This is certainly a multiyear task.

Looking ahead, we expect the market environment to remain challenging, and we retain a realistic view. But we also remain confident in the strength of our product pipeline and the upcoming ramp-ups, which will have their full impact beyond 2026 and will unfold fully during 2027.

Mercedes is driven by a management team also with new minds, fresh ideas and a lot of energy. We'll jointly press ahead with our product and tech launch program. And of course, we will remain focused on enhancing the customer experience. And we'll continue to drive efficiency across our company, and we're committed to generating attractive returns for our shareholders. We are determined. Thank you.

Thank you very much, Ola and Harald. Ladies and gentlemen, you may now ask your questions. I will identify the questioner by name. However, please also introduce yourself with your name and the name of the organization that you're representing before asking your question. A few practical points. [Operator Instructions]

[Operator Instructions]

We start the Q&A and the first question goes to José Asumendi from JPMorgan.

Jose Asumendi from JPMorgan. Congratulations on the results today. Two questions, please, Ola. The first 1 is maybe to you. I'm seeing very rapid developments on robotaxi and autonomous driving. Jensen at NVIDIA yesterday mentioned Mercedes as one of their key partners in this journey. I was thinking if you could please talk about this top down and bottom up transition when it comes to ADAS. So increasing the level of autonomy and ADAS features on the entry vehicles and then also testing that robotaxi. And then specifically, if you could also speak about the partnership with Momenta.

And then for Harald, if you could maybe speak about the auto division, when we think about the fourth quarter and you talked a bit about the restructuring charges you see in Q4 in the Auto division as well as the impact of tariffs that you have in the budget in Q4 and any mitigation measures you're planning to implement?

So good morning, Jose. With regard to ADAS, you can now very much see the benefits of the platform that MBOS gives us. So we do now have a very, very strong digital foundation to stand on, where we can also integrate and work with different partners. As I mentioned in my speech, and you know this, of course, we're launching L2++ in China now. And in terms of software and also the hardware capability of the cars, in essence, the sky is the limit. If you want to take this beyond level 2++ into level 3 and level 4 territory, then you need to have more redundancy on board. This we have already proven with the current S-Class that we know how to do this. And it goes without saying that this journey will continue.

The push forward by NVIDIA yesterday to announce that they want to take on the full scale L4 challenge is something that we very much welcome. And having worked together with NVIDIA now for more than 4 years, establishing the foundation for this whole tech stack. I mean it's a natural choice that when L4 comes to fruition that Mercedes is part of that game. That doesn't mean that we're now going to turn ourselves into a mobility services company. That's not the message. But we have, I think, the best technical foundation with our vehicles, both hardware and software to do this. We will work as part of this consortium on that task.

In China, we know that China has its own digital ecosystems in many respects. And that is how ADAS is developing in China. That's why I'm very happy that many years ago now in kind of the first seating round or second round when Momenta was even just a small start-up. We spotted them. We were 1 of the very early investors, and we have worked with them ever since and that now has come to fruition with the launch of a whole generation of cars that we're launching here in the next 24, 30 months in China. So with Momenta, we can take this journey as well because that foundation that I mentioned that the MBOS gives us that works in the East, and it works in the West.

Your second question on quarter 4. First, maybe on the tariff side, you can see in the third quarter, we had a tariff impact of 150 basis points in the quarter. commented before that on the quarterly run rate, that was a bit lower due to lower U.S. group sales. As said before, we expect quarter 4 group sales to be at a bit higher level. Therefore, expect a bit of a higher charge on the tariffs in the fourth quarter. I think that also explains the guidance which we're giving here for the full year and the fourth quarter.

On the restructuring program, the NLP program, well, that's 1 -- that's an adjusted element. I think I commented before on the group level, basically, you had EUR 800 million of a charge in the third quarter. That makes it a year-to-date of 1.4%. I said, I expect some more in the fourth quarter, but less than in the second quarter. Second quarter, it was EUR 600 million. So I think you can roughly make the math, what that should be at group level. If you look on the Page 9 of the deck, you will find the car numbers in the third quarter, 666. So I think it gives an idea compared to the EUR 800 million, what the share for cars can be in the fourth quarter. Again, it's adjusted item. But let me emphasize the payback of that, I mean, it's rather spontaneous and fast is that quite a lot of the people will leave until the end of the year or at the beginning of 2026. So that will lead to some significant head count down. And obviously, that will lower the personnel cost charges, in 2026. So we do expect payback of that one in the vicinity of 2 years or less.

Thank you very much, Jose. And my next question goes to Tim Rokossa from Deutsche Bank.

It's Tim from Deutsche Bank. I'd like to reiterate what Jose just said that analysts get marked for saying that, but that was a great quarter. I think you are clearly delivering on what you had promised us, also with the share buyback program, Harald. 2 questions. First one, just very quickly, a follow-up to what you just said. Are there going to be more charges on restructuring next year? Or will you largely be done in '25?

And then my 2 questions. When we think about the cost savings coming in and all sorts of other moving items that we know so far, the implied run rate for [ costs ] of like 4.5% to 5% for H2, is that a good run rate that we should think about as an exit run rate into next year? And what are the moving items on the cash flow side that we already know about today? You have the FCA charge that will be cash out next year. You probably have some cash out for the restructuring at the same time, there's probably some cost savings coming in. What is that you can already share with us?

And secondly, Ola, probably to you, when we think about the supply chain, Nexperia being a very prominent example, do you see any immediate production risk out there at the moment? Or is everything sort of stretched but manageable?

Yes, Tim. So on restructuring, I think, when -- whatever we have in mind that we want to do, I think that's basically considered in the books. Any further evolution in terms of footprint, what is not yet in our minds today would be another item for 2026, but I don't want to speculate on that one. So I would say from today's point of view, everything is either recorded in the books year-to-date or in the outlook for the remainder of the year.

In terms of the cost savings, I think, we made good progress in the third quarter. I'd emphasize, I think, the EUR 1 billion improvement in the third quarter compared to a year ago at the second quarter, where I think we commented that is roughly EUR 800 million. So that makes us think, if you take a year-to-date approach, I think, it's a pretty sizable number. But we will not rest there. I mean, we'll continue as commented just before. The benefits of the NLP program, will kick in, in 2026.

As we know that the market environment is tough, and we assume that to remain challenging. And as we take a realistic view, I think, we are trying to prepare ourselves for that one. So that also in 2026, we can make further progress on cost savings. In terms of cash generation, I think, it's a bit too early to speculate now about 2026. Of course, sure, I mean what is provisioned today should normally lead to a cash out at a later point in time, the majority of the cash charges. We're talking here in the third quarter, SCA as well as NPP and NLP, I mean, will therefore fall into 2026. I mean that is for sure. But I think you might confirm that we have a track record that we'll try to stretch cash generation by all means and we'll approach 2026 with this in mind.

Tim. Let's just take a step back and look at this situation from a distance first. In a modern high-tech car, you have pretty much all 5 continents inside that modern car. And there are many nodes across many components and technologies that provide a large share, in some case, the full share of what modern cars need. Nexperia happens to be 1 of those nodes, albeit with relatively straightforward components, but components that you find in many, many, many subassemblies, ECUs, et cetera.

There is a significant difference between this situation and what we were talking about only a couple of years ago when we were dealing with the chip crisis. This is a politically induced situation, where one of those nodes have been hit, which means that the solution to this or the resolution to this resides in the political space, primarily between the United States and China, in this case with Europe kind of caught in the middle. And I know that there are intense talks going on, on pretty much all levels to see if this can be resolved. It's not the same as we had during the chip crisis. For the short term, we're covered, and it goes without saying that we're scurrying around the world to look for alternatives. But I don't want to make a prediction at this stage how the whole thing plays out. So I'll leave it at that.

Thanks very much, Tim. And the next question goes to Patrick Hummel from UBS.

Patrick from UBS. Well done on the share buyback. Basically, my questions have been asked by Tim, I'll focus on China. Can you talk a little bit about what your expectations are for the market in the next few months, next couple of quarters with all the low visibility that we always have to deal with when it comes to China, you said the market remains challenging. I think there is no fresh product in China for a little while. At the same time, you're working on your dealer network to streamline that. If we put it all together, volume, pricing, dealer compensation, are you reasonably confident that things are not going to deteriorate in the coming quarters? Or is it fair to assume that 2026 will probably see another year of decline in China?

So Patrick, whereas the call today is not the call where we make guidance or projections specifically for 2026. Of course, you know that. Let me just talk about what is affecting the Chinese situation. And that's why I also said in my speech that these fundamental premises that affect the Chinese market are not changing anytime soon. We still have an economy that is trotting along, and where you can see that this cautiousness on behalf of the consumer also in the upper segments, that cautiousness has remained for more than 2 years now, and there's no fundamental change in the immediate future that we think will change this. The hyper competition that we're seeing in China with significantly more than 100 players vying for this market, and the -- what I believe eventual consolidation of that market, it's not something that happens overnight, but it's a process that probably takes several years.

So what do you have to do in that situation? I mean, it always starts with the customer. It's kind of the gist of my speech. The product rollout that we are now starting which, of course, also affects China in the next 24 to 36 months. Every one of those products that we have in the pipeline, we are talking nothing less than almost like a reskinning of our whole portfolio here in 3 years' time. We have very, very carefully thought through what do we think the Chinese customer wants. I mean, beyond the obvious things that you need more space, but a perfect smart cockpit infotainment offering, an ADAS offering that meets the expectation of the market. But next to that, product focus and product offensive that yes, we'll roll out over a couple of years now. It's also about the cost structure and how do we rejig our setup in China. And this is what we have said before, kind of become more Chinese. So eventually, at the end of that process, we are more or less 100% China for China.

Part of that is, of course, looking at your cost structure in the immediate term as well, looking at capacities, making sure that you manage that. Thank goodness, we have a very flexible production system set up there. So we are adjusting. And also the dealer body, focus on the strength -- strong ones, if they're underperforming ones. Now is the time to adjust that. So we are pulling all the levers in China. And I don't want to make a prediction, as I said, for 2026. But it's clear that this is something that is not a short-term issue.

Thank you, Patrick. And the next question goes to Mike Tyndall from HSBC.

It's Mike Tyndall from HSBC. I wonder if we could talk about CLA a little bit. So we've now got that product in the market. You've now probably got a better sense of where production cost is. Should we be thinking about -- this is the book end of all of the refresh. Is it notably more profitable to produce than the predecessor? Are we seeing significant drop in supply compensation because the expectation on BEV is now married to the reality. I wonder if you could talk a bit about that.

And then, Harald, I guess the obvious question is, you've kept the return on sales ranges for the full year, but it certainly looks like you could have tightened them up. Is there something you're seeing that makes you want to say, look, I need that space? Or is it just a question of being conservative?

Yes, Mike, well, if you look on the CLA right now, first, I would say, great market endorsement. Ola mentioned, I think, the test results, but also if we look into the order intake, which I think is another good indicator in terms of market acceptance. So we're very happy with the order book building up. And as we deliver vehicles to customers, we obviously can see what the margin does on the vehicle. And even though it's a bit early days, I would say. If I compare to equivalent products, the CLA didn't have a best predecessor. So it's a bit difficult in terms of a like-for-like. But overall, I think, the margin which is coming up from the vehicles delivered already, definitely has a structural change compared to previous EV model. So I think that is opening a chapter in terms of the next -- the new generation EV vehicles, not only in terms of product, but also in terms of variable cost base and therefore also in terms of margin evolution.

Your question on the fourth quarter. Fourth quarter, I commented before, will carry a bit higher tariffs. It will carry also seasonal cost phasing. It will also carry a step up in terms of some supplier one-off compensation, which we still see at a higher level in fourth quarter than in the third quarter. We keep the guidance range at the 4% to 6%, but to be clear, I think, the options you offered in terms -- is it -- is there something we see, which we didn't share? Or is it more prudence? I would rather hint to the latter one. And for sure there is still uncertainty, I think, on tariffs on a couple of relationships. I think everybody is looking forward to tomorrow when we think about China and the U.S. So I think that just keeps a bit more flex in the space in terms of keeping the guidance at 4% to 6% in terms of the underlying. I think you heard us commenting before that we rather see that at the midpoint. And therefore, I would judge it more as a matter of prudence.

And the next question goes to Philippe Houchois from Jefferies.

Right. I've got two, if I can. The first one is on the U.S. market. We've seen, again, changes in the tariff environment between the inclusion of engines in the potential offsets and the 3.75 production credits being kept for longer. Obviously a benefit to the U.S. car makers. I'm just trying to wonder -- I'm wondering into 2026, last year or this year, you've done mostly destocking in the U.S. How much of a benefit to you is there from the changes in the offset calculation from the White House? And then how much benefit is there from you being able to use your high mix of vehicles and sell more V8 and bigger engines in the U.S.? And should we think of the U.S. as being quite positive next year as you rebuild stock, have a better mix and potentially have a bit of relief on the tariff side?

And then if I can -- second question more specifically on FX, you had a significant headwind on FX in the third quarter. I'm just wondering as we think about 2026, what can you tell us about your hedging policy? And what it means as given the more expensive euro and the cheaper dollar, what it means for your '26 earnings?

Maybe I'll start with the market, but I'll let Harald comment on the financial impact because you mentioned the offset 375, which is for parts. Obviously, I know you know. Yes, it is true that particularly in Q2 and Q3, we made our best efforts to manage wholesale to optimize the financial result. That is the bottom line. And again, I don't want to go into now a specific kind of market guidance for 2026. Of course, it's clear. So I'm going to stay away from that, but I would like to say this is a general statement looking forward. If I take a 5-year view on the U.S. market, how we are set up, the product portfolio that we have, the products that we have in the pipeline, also this fundamental product offensive here in the next 2 to 3 years.

Yes, I do believe that in the next 5 years, that will also benefit us in the United States, and we look at the United States as a growth market and a market where we want to increase our footprint. So that is absolutely clearly part of our strategy. Having said that, the 15%, yes, not 27.5%, but the 15% of a significant part of the vehicles coming into the United States remain. So that has then not gone away, and we will try to manage that as best we can, but maybe details on the financials of that.

Yes, Philippe, you're absolutely right. I mean the extension of the 375 in terms of going for longer and staying at 375 rather than coming down has a supportive impact. I think at earlier stage for the year, we commented that the tariff copy could have a run rate of, I mean, around up to 200 basis point run rate moving forward. You could see in the third quarter, it was 150. I commented before that fourth quarter could be a bit higher. We now take that picture, I mean, into 2026, again, without making predictions now on 2026.

But I would say probably, I mean, the tariff bill comes in rather at 150 to 200 basis points, but not 200 as such. And the 375 credit scheme, I think, is a favorable element in this respect. On the FX side, for 2026, well, I don't want to look into crystal ball here. But if you look on how we are hedged for in terms of the U.S. dollar and the renminbi, I think we're pretty well covered throughout 2026. So probably not too much of an exposure in that respect. If I look at other currencies, well, if we see continued softness in the Korean won and the Japanese yen. That's something where we would be less covered for 2026. Whereas on Turkish lira, we see now for quite some time softness on the currency, however, kind of a natural hedge via pricing. I hope that helps.

Thanks, Philippe. The next question goes to Horst Schneider from Bank of America.

Yes. I want to get back basically to Munich Auto show. When we met there, I had the impression everything was a little bit more subdued. Now I think the environment is a little bit brighter. Can you summarize now what, in the end, is the delta versus Munich Auto Show? What really got better versus your initial expectations? Is it just top end? Is it then price mix and you think this is going to continue also through the coming quarters. So we can expect a little bit better results, mainly on the back of positive price mix.

Then the second question that I have is, again, on industrial performance, cost cutting. You made very good progress here, and you say you continue to cut costs also in 2026, of course. When do we achieve basically the peak of -- in bridge term? So how long can industrial performance basically remain such a strong driver? Or when is the item coming down from a bridge perspective maybe?

So Horst, I have to go back and look at my own speech that I gave there in Munich. But you know that we usually take a sober and matter of fact approach to our communication. So I could not detect a major difference in my tone or style between Munich and now. But what we did say in Munich is we're staying the course and the results today is we're staying the course, and we delivered on the key performance indicators, as had been announced.

What did give me a positive feeling in Munich, though, most definitely was the reaction to the products that we were presenting. I had the opportunity not only to, of course, engage with you guys and press and so on, but with very many dealers, very many customers. And if you had stayed on in Munich, I don't know if you did, you could see that people were standing in line, 20 people behind each other just waiting to just get a glimpse of the GLC. So the message that we did get from Munich was the new face of Mercedes the iconic grill taken into the future seems to have hit the nerve, a product that is technologically very advanced, in many dimensions leading. But combined with the what we call Mercedes-Benz welcome home feeling that everything is thought through. It's a Mercedes through and through. That also seems to have hit the nerve. So if there's anything that we are, I don't know, feeling encouraged by. And now with all the other products that we're going to launch is that the second-gen BEVs, but of course, this carries on to the ICE as well that we're on to something. That is certainly true.

Horst, maybe quickly on the numbers. I do remember that I almost ended up in a negotiation with some of you, whether it is 4.0 or 3.95 for the third quarter in May. I think in terms of sales, it came in line with expectations. Top end share, I think, was stronger. I think that was a favorable tailwind. I think also efficiencies, we made good progress in the third quarter. So in terms of the underlying, I think, yes, we can say that, we did better in the third quarter. And definitely, we want to take that momentum moving forward. You could also see on the cash flow, I think that was supportive, including working capital. And I will not rest here, as commented before, we'll keep going with our performance improvement program, 2026 into 2027.

I'd like to remind you what we outlined in February this year during the CMD in terms of the ambitions we take on us to mitigate for the headwinds and we do know that since we had the CMD in February, the market environment became even more demanding in China on volume and on pricing side, and that means we rather reflect how to take it even to a higher level to make good for the incremental headwind we are facing. But as Ola said before, here and today is probably not the point to talk about 2026 in more detail, but the approach, the spirit we and the team takes is clearly to work rigorously on the performance also in 2026 into 2027.

The next question goes to Henning Cosman from Barclays.

I was just also actually going to ask on the -- Harald just mentioned the February plan, I sometimes find it little bit difficult to keep track of where we stand. I think in February, the target had basically implied 300 basis points more or less just from the cost savings on flattish volume, flattish price/mix. Harald said about a 2-year payback of what's going to be roughly EUR 2 billion of provisions by the end of the year. So I guess that's 2 points. But I'm just wondering a bit about the reference point. Are we still thinking about 300 points improvement potential, but then apply that to the midpoint of the Mercedes-Benz cost margin range. So 5% plus 8%, or have we eaten into the 300-point improvement potential by that EUR 1 billion that we're going to see this year already. So if you can just help me there a little bit as to where we stand and we still think about 300 points from obviously now a lower starting point.

Second question, just a bit of housekeeping. Your main competitor in Munich, obviously, spoke about a bit of a distortion from late refunds from U.S. tariff cash held in escrow, you didn't really comment on that. Is there an opportunity for you to receive that next year to perhaps offset some of the cash out or were you just more aligned all along and had anticipated the timing of the refunds better?

So on the cost savings, so let's wrap up shortly. In February, I think, we outlined what are the savings expectation and targets that we have under different chapters on production costs, on material cost for -- compared to 2024 actuals into 2027, 8% on material cost, 10% on production cost, 10% on fixed cost, 10% on funding. These targets, I think, I mean, are still valid. And if you look into the slides of 2025, I think we're tracking pretty much in line with these maybe even slightly ahead of it. And as I said just before, we don't take it easy and then slow down. We will come back on the initial trajectory. We'll definitely take them as a base and push the savings forward into 2026 and into 2027, and probably rather look at a higher level, on the variable cost challenge compared to the numbers, we gave in the CMD in February.

I think, definitely, when we get to 2026, we'll get -- we will give more color on that in terms of what does it mean, how is the plan moving forward? But I would say for now, these targets remain intact with a bit of, I think, a tailwind we can take from the 2025. On the, what we call, the escrow held on the tariffs and the refunds, yes, I think, there is some refund to be expected. We -- I would say we take a cautious view on that. P&L-wise, I think it's still clear what we did. So the tariffs at 15% from the -- from Europe to the U.S. have been applied and applied retroactively in the P&L. We take a bit more cautious view with regard to, yes, Europe as Brussels seems to be a bit slow and the amounts, therefore, to be recouped from the pre August situation are yet to be cashed in. But at maximum, I think we see that in the 2-digit number, not in the 3-digit.

Harald, well done on the cost.

Thanks very much, Henning. We have time for 1 last question, I would hand that over to Stephen Reitman from Bernstein.

Yes. Two questions, please. First of all, congratulations on the very good reception you've been talking about with the CLA. I know it's again, it's very early days, but can you talk about what you're seeing in terms of -- are you seeing any conquest from other brands? What is the reaction on the vehicle in what you're seeing from around the world as well?

And secondly, on the vans business, still a very high margin and probably a lot better than the commercial margins that some of your competitors are probably seeing -- I mean, I'm talking about particularly in the commercial space rather than your passenger vehicles. Could you comment a bit more about how you see that going on?

So Stephen, I'll start with the CLA. As you know, we have now launched in the European markets and are rolling out quickly and we're launching now in China and in the United States, and then we'll go overseas. I think it's a little bit too early days to say exactly where conquest comes from. But because we didn't have a predecessor electric vehicle in this segment. So for us, it's almost like -- it's a conquest across the board, combined with some people or more people switching from ICE to BEV, but it's too early days to make a more serious analysis of how that's going. What we can say, though, is that we look at early customer feedback and early customer feedback next to the general feedback on the car has been very positive.

And on the vans margins, Stephen. Well, you're right, 10.7% year-to-date, 10.2% in the quarter. We guide 8% to 10%, but you heard it loud and clear, rather towards the upper end of the higher end of the band. That's the target for this year. Again, here is not the point to talk about 2026. But as we commented on cars before, I think, we take a realistic view on the market evolution, which is also more competitive than some time ago. We clearly see that. But the same thing, try to fight it by mix, by structure, by cost improvements. At the same time, ramping up. However, the new van platform in terms of the product, but also in terms of the PPE. That will constitute some headwind in 2026. The ambition of the team is definitely to keep the margin high, but I would not speculate now whether it's a high single digit or whether it is a double digit. Let's work on that, and we'll get back in February on it.

Is there any particular reason why you're doing so much better in Germany than in the rest of Europe?

Germany has always been our best market for our commercial vans. We have unbelievable customer loyalty. We have an unbelievable service network. And by the way, our product is pretty good, too.

Thank you very much, ladies and gentlemen, for your questions and for being with us today. Also, thank you very much to Ola and Harald for answering the questions. I know we had a few more questions in the queue. And as you know, Investor Relations remains at your disposal to answer any further questions that you might have. And now to all of you, have a great morning, a great afternoon and a great evening. Thanks, and goodbye.

Welcome to the global conference call of Mercedes-Benz. At our customers' request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be directly followed by a Q&A session. [Operator Instructions]

I would like to remind you that this telephone conference is governed by the safe harbor wording that you'll find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

May I now hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations and Treasury. Thank you very much.

Good morning from Stuttgart. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you on both the telephone and the Internet to our Q2 results conference call. I'm very happy to have with me today Ola Kallenius, our CEO; and Harald Wilhelm, our CFO.

To give you more time for your questions, Ola will provide a brief introduction, followed by Harald, who will detail our financials. After that, we will move directly into the Q&A session. The respective presentation can be found on the Mercedes-Benz IR website.

With that, I would like to hand over to you, Ola.

Thank you, Christina, and good morning, everybody. In a very dynamic business environment, you can see in our Q2 results that we have produced a solid financial performance in line with what we had expected. Of course, the financial performance is affected by the tariffs. We're going to get into more details on that in this call, and Harald will drill down on it. But next to what's happening in the world, in the market, we have also been very busy and very focused on delivering our biggest product offensive and technology offensive in the history of the company. This is a journey that we have been on now for the several past years, and it's coming to fruition.

The first calling card of this product offensive is the CLA, and it's now being delivered to customers. The response that we have received from customers, from dealers and industry watches around the world has been extremely positive, and we feel encouraged by this. But this is like an appetizer of a 8-course meal, where in the next 3 years, we're going to launch more than 25 individual models. And it's happening rapidly. We have presented a new CLA shooting brake, which is very important, especially for the European market, also for business customers in the European market. It's been traditionally a popular model.

And at the IAA, the International Auto Show in Munich in September, only a few weeks from now, we will show you the first vehicle of our so-called Mercedes-Benz electric architecture, which ushers in a whole new era in electric mobility for Mercedes-Benz, and we're very, very excited about it. But it's not just about our main brand, Mercedes-Benz. Our friends in Affalterbach have shown a concept car, which is nothing less than spectacular. Many of you maybe ask yourself, my goodness, what is this? This performance vehicle seems unreal. Is it really real? And I can tell you this, you probably be surprised when we launched the series version of this next year, how real it is, watch this space.

At the same time, our van division is also going through a historic product and investment offensive really, where we're going to replace the complete lineup of our vans in the next 2 to 3 years, and that's also around the corner. And they are equally busy compared to the passenger car people.

On the customer side, I could go on for the rest of the day talking about what we're doing there, both on the physical touch points and also in the digital world. But I just wanted to highlight 2 things. We have now started the sale of the owned retail in Germany. So the first few transactions are in the pipeline here. And the interest has been tremendous, which we also view as a positive sign. And we opened at the very top of our portfolio, the first Mercedes Maybach brand center in Seoul. Should you be traveling in Korea, I highly recommend that you stop by. It is an unbelievable celebration for that product -- for those products and that brand.

And last but not least, in terms of key messages here on Page 2. As you know, we have been focused over the last few years on cash flow generation. Again, Harald will go into detail, but we produced another solid quarter in terms of cash flow.

If we turn to Page 3, I don't want to go into too much detail on the earnings. I just want to highlight 2 things. The free cash flow, as I just mentioned, but also in terms of the EBIT, you can see that there are 2 numbers there. That is because of restructuring. You know that we announced at the beginning of the year that we would start restructuring, especially here in Germany, especially on the indirect staff side. That's progressing according to plan, and that is why we have made some provisions for that.

Moving to the next page, Page 4, dissecting the sales. Yes, the market environment is challenging, especially in China, but also through the whole tariff discussion, there was management of how to deal with wholesale in the United States that we try to do to the best of our ability, and I'm sure that will continue into the next quarter, which affects the wholesale figure in spite of the fact that the retail sales were quite strong in the U.S. in that quarter.

In terms of Top-End, we stayed at a healthy 14% as a percentage of the total sales. And on the xEVs, we had slight growth. You can see that the plug-in hybrids are very successful here, and we are managing our battery electric vehicle sales in the current environment. We're watching, especially in the European environment now with the 2025 regulation in place that many market participants are trying to above and beyond the natural demand, push volumes up. We are managing this, in my view, in a more careful way to also protect the integrity of the brand, not just on the ICE side, but also on the BEV side.

And as I mentioned here at the beginning, we're just on the verge of a massive product launch here in the next 2 to 3 years on the electric side. So we will see our electric BEV-only sales once that product offensive comes to fruition, grow and especially important will be the vehicles in the core segment like the new electric GLC and the C-Class that we're launching in next year, and we'll have the full first year in the market in 2027 on a broad range of products. So here, intelligent management growth of xEV.

With that, I switch to vans on Page 5. The van market was also affected by the current economic environment. In that economic environment, you will see that as we go into the Van figures. If you follow the Van segment as such, everybody is challenged. But I would say we're probably the best student in the class here. Not everybody discloses their financials in this case. But for the ones that do, you can see that they are significantly, significantly more challenged than us. That is not the call to be complacent and certainly not arrogant.

What I want to do is to say kudos to the van team for managing this in a difficult circumstance. And that kudos actually goes to the whole Mercedes-Benz team. I've seldom been in a more dynamic environment in the auto industry than what we're expecting now. But everywhere I go in the company, I meet focused people, motivated people, people with a can-do attitude and looking forward to everything that we have in the pipeline, take the challenges and in an agile way, try to manage them.

On the BEV side, to go back to electric vans, yes, we are growing, but it's also true that the BEV ratio of light commercial vehicles compared to what maybe regulators and many people thought 5 years ago is on a different level. Yes, we're super happy that we just signed probably the largest single order of e-vans with Amazon here recently with 5,000 units. It's a sign that our electric vans are very attractive, and next generation in the making, as I mentioned.

But as part of the discussion that is happening in the industry with the EU and in this year, I also have the role of being the speaker of ACEA, the European Manufacturers Association. And you might have read the opinion piece that I put in the economist only a couple of weeks ago that now is the time to actually have a reality check here and have an honest and forward-looking conversation how we, in the European auto industry through regulation, create a better path towards decarbonization, and we are open for that conversation looking forward to it.

With that, I would like to hand over to Harald, who's going to take us through the financials, please.

Thanks, Ola, and hello, everybody. Let's go back to the financials of cars on the Page 6. Ola, you took us already through the sales, so we explained that one. On the revenue side and the ASP side, we see the competitive market environment. And obviously, we go a bit deeper when we now look on the Page 7 on the EBIT and thereafter on the cash evolution.

Page 7, EBIT evolution for cars. So let's have a look on the underlying business performance. If you adjust the quarter 2 for the tariffs, you are at 6.6% return on sales adjusted in the second quarter. That means a mid-3-digit million euro tariff impact in Q2. Including the tariffs, the return on sales adjusted is at 5.1%.

So let me take you through the key effects, I mean, in that quarter. First, in volume structure net pricing, we see lower contributions overall from the China business. Then we see also the effect from the lower unit sales, some softer net pricing, lower used car business and costs related to CO2 compliance. And last but not least, as just mentioned before, the tariff impact. A part of the FX effect you see here on the chart is linked to Turkish lira for which we have pricing compensation. The remainder is mainly Chinese yuan and Korean won.

If you look on the remainder on the chart, on the right-hand -- moving to the right-hand side, well, basically, you can see our efficiency program at work in all categories in material costs, in operations, in selling expenses, in R&D. We call that program NLP, Next Level Performance. And if you add up the numbers, it shows you an EUR 800 million contribution or improvement in that quarter, which equals roughly 300 basis points improvement in terms of ROS in the quarter. So you see, I think we're trying to do our homework.

On Page 8, looking on cash evolution, we see adjusted at EUR 1.4 billion. What are the moving parts? Light headwind from working capital by a bit higher inventories, some favorable contribution from trade receivables, driven by lower volumes in BBAC, however, offset by lower trade payables due to lower production output at the same time. The net investments are only slightly above the depreciation level. And in the other buckets, you find the divvy of BBAC and the reversal of the equity result and as well the NLP personnel cost measures, which have not yet been cashed out.

Page 9, over to the vans, same thing, sales explained already. So let's jump right away, I would say, to the EBIT and cash explanation, Page 10. So quarter 2, a healthy return on sales of 10.4%. That includes a small impact from the tariffs, but probably not worthwhile to mention here.

What are the key changes compared to the quarter a year ago? In the volume structure pricing bucket, lower volume, partially offset by an improved mix and some softer net pricing and a higher leasing share as well as a bit of a lower aftersales business contribution. FX, same thing, as I commented before on cars. The industrial performance continues to support, driven by lower product-related expenses despite higher cost for CO2 credits. And in the other bucket, we see mainly the absence of prior year impacts.

On the cash side, see a bit adjusted EUR 227 million. Net working capital, a bit of a headwind by inventory. The financial investments, the net financial investments reflect the sale of our business operations in Argentina. And on the net investments in PPE and intangibles, we see that they clearly exceed the depreciation. That's in line with the guidance as we continue to ramp up of our van architecture. So on the others, we also see positive cash effect from leasing and FBAC divi.

On the mobility, the new business is driven obviously by the development of the sales volume on the industrial side and the situation in China, partially offset by a higher average financing and leasing volume per contract. The change in the portfolio is mainly driven by FX effects. On the EBIT side for mobility, we see EBIT adjusted at EUR 290 million or return on equity adjusted at 8.9%, a bit higher cost of credit risk due to a softer global economic outlook and improved portfolio margin, however, offset by a lower volume in Q2.

And then as well here, you see on the right-hand side of the chart, improved cost position for SG&A supported by our efficiency measures. In the other bucket, you also see contribution from our financial investments in quarter 2. Without the expenses for the ramp-up of the charging business, the MBM return on equity adjusted would sit at a double-digit 10% return on sales.

Looking at the group EBIT, Page 14, cars, vans, mobility, we explained the recon is negative mainly due to a lower equity result of Daimler Truck. EBIT adjusted at EUR 2 billion. What are the adjustments? Mainly the one-timer related to the restructuring charges from our NLP program, which reflects, I think, good progress we made so far. So we had a good start. If you bear in mind that actually we got started with it in June. And that means we have here in the quarter 2, as you see on the chart, EUR 560 million, which got recorded for the people who signed up already. And as we speak, we gained further traction on that program, which will yield further efficiencies in the future to come.

On top, we see the adjustments for the M&A transaction related to the sale of our business operations in Argentina. Thereby, the group EBIT reported sits at EUR 1.3 billion.

On the cash flow side, Page 15, we'll see the income taxes, the cash income taxes paid at minus EUR 350 million. The recon related to the Daimler Truck divi, which we cashed in, in the second quarter, and that leaves us with a solid cash flow on the industrial side of EUR 1.9 billion.

Looking on the liquidity side, Page 16, the free cash flow we explained already before. The divi has been paid out with a EUR 4.30 in May, which is EUR 4.1 billion. And it means we generated in terms of free cash flow, EUR 4.2 billion, which fully covered the divi paid so far, and that leaves us with a very comfortable EUR 30 billion net cash position.

Now let's turn to the outlook section, Page 18. As always, please consider the assumptions carefully, on the chart. Let's start with the cars sales guidance. So with 900,000 year-to-date units, we now see 2025 significantly below 2024, mainly due to China. We expect H2 sales in the vicinity of H1 with quarter 3 slightly lower and quarter 4 slightly higher.

If we look on regions in the U.S., we see a stable underlying customer demand, looking at the retail side of things with H2 approximately same level as H1. In the group sales for the U.S. for the full year, we expect them to be slightly lower than the retails and the previous year as we manage stock levels to target. Any potential impact of U.S. trade policies on consumer sentiment needs to be seen.

On Europe, we continue to see a robust sales performance, and we expect that also for the remainder of the year with a healthy customer order intake and a solid backlog taking us into quarter 4.

On China, the macro side remains subdued and the competitive environment continues. We also see banks withdrawing high commission offers from the market, supporting pricing, however, affecting volumes so far. The global TEV share for the full year, we expect that to be between 14% and 15%, which means basically in H2, same level as in H1. And on the EV share, year-to-date, we are at 20-ish. So we continue to see that in the full year between 20% and 22%.

On the return on sales side, return on sales adjusted for cars, in H1, we achieved a solid 6.2%, including tariffs. If you take out the tariffs, that leaves you with an underlying margin of 7% in H1. How do we see H2 compared to H1? Volume basically flattish. We see the current commercial dynamics to continue for the remainder of the year. We see some headwinds from material cost phasing due to one-timers in H2 and the more technical impact from fixed cost capitalization as we will reduce inventory towards the year-end. For the full year, we expect the underlying margin within the initial guidance range of 6% to 8% pre-tariff within the lower half of the band now even with lower full year sales.

On the tariffs, we assume today's tariffs to stay for the remainder of the year, and we consider the EU-U.S. trade deal of Sunday. What does it mean? We still see the largest impact from deliveries from the EU to the U.S., mainly that affects new vehicle business and aftersales. Second to that is now Mexico to U.S. with parts still playing the biggest role here. Third is U.S. to China, mainly new vehicles, especially GLE and GLS. And then the remainder of the world in terms of deliveries into the U.S. as well, we take into account the relief from imports from the U.S. to Europe.

If we take that all together, we now see the full year tariff impact at around 150 basis points for the full year compared to the 300 we said in quarter 1. However, uncertainty remains with regard to the effective date and the transitioning. This brings us to a new full year guidance range of 4% to 6%, including tariffs. Considering the tariff phasing, please note that the full year impact arises from only 3 out of 4 quarters with the respective impact on the run rate. Cash conversion rate is now expected to be between 0.8 to 1, including tariffs. No change on PPE and R&D.

On the van side, sales, as usual, there is a stronger H2 compared to H1. However, due to a lower H1, we now see full year sales significantly below previous year level. xEV unchanged. On the return on sales adjusted, in H1, vans achieved a healthy 11% return on sales adjusted, well within the guidance range. And I think, as you pointed out, Ola before, outperforming competition. This included a small impact from tariffs in Q2.

For H2 compared to H1, we see the following impacts: headwinds from seasonality of cost and the ramp-up of new factories in the context of the van architecture. For the full year, based on the new volume guidance, we do see the underlying performance 150 basis points lower. Assuming tariffs to stay where they are today for the remainder of the year and based on the recent Europe-U.S., EU-U.S. trade deal, we expect an additional full year impact of approximately 50 basis points. This leads us to a new guidance range of 8% to 10% for the full year, including tariffs. CCR unchanged, also including tariff impact, no change to PPE and R&D.

On the mobility side, we come from 8.8% return on sales adjusted in H1. We expect the full year unchanged, guidance unchanged in the range of 8% to 9%, driven by a continuous positive impact from the portfolio margin in the second half of the year and a slightly higher cost of credit risk.

On the group guidance, that follows obviously same assumptions as on the segment side. Following the adjustments of the divisional guidance, we now see the revenue significantly below previous year due to the sales development. We continue to see the group EBIT and free cash flow significantly below previous year, now including tariffs. Please consider the one-off charges from M&A and the efficiency program with more to come in H2 as an adjustment between the EBIT adjusted and the EBIT reported for the full year.

Looking at the investments, 2025 will only be slightly above 2024 and will be the peak before we start to come down in 2026. However, the phasing of the investments is back-end loaded in H2 versus H1 in 2025. Taking that into account and the margin outlook, including the tariff impact in H2, cash generation in H2 will be impacted accordingly. This will leave us with most of the cash generation achieved in H1 for the full year.

What does that mean with regard to capital allocation? Well, we just got more visibility on 2025. The divi paid in May is now fully covered by the free cash flow generated year-to-date. We stick to our capital allocation framework, which stipulates that cash flow earned will be paid back to our shareholders, and that means the cash to come from operations or M&A will be subject to that capital allocation framework.

With regard to the Daimler Truck stake in Q1, we said that the partial stake sale is strategically on the agenda. Daimler Truck successfully held the Capital Markets Day, which was positively perceived by the capital market community. This reinforces our strategic perspective and approach on that topic.

And with this, I hand back to Ola.

Thank you, Harald. I would like to end this presentation by extending an invitation, an invitation to come and visit us at the International Auto Show in Munich in September. On Sunday, September 7, we will have the world premiere of the first vehicle of our so-called MB.EA, Mercedes-Benz electric architecture, that is the carrier of several new and important models in the core segment.

From a modular point of view, this architecture is intelligently and fully flexibly integrated also on the modular side with the MMA architecture. We can, for this completely brand-new electric drivetrain that we have developed, use not only appropriate drivetrain components, but also more importantly, completely flexibly the different battery technologies that we have developed from state-of-the-art high energy density NMC to more cost-optimized LFP technology. And I think this is what's so unique with these architectures that they all fit in the same envelope and you have full flexibility between them, which is, I think, almost unique for any car company.

But I cannot overstate how important it is that it's also the new era of MBOS, Mercedes-Benz Operating System. This doesn't only change the product, it changes the whole value chain in and around the product, how you produce the product, how you service the product, how you take care of the product in the market. So this is more than a new chapter. This is a new world for us.

And here, we're already in series production. So we are delivering these vehicles to customers today. Needless to say, with the MB.EA and the first model on that new software architecture, software hardware architecture on the GLC, we will up our game again. So watch this space. You can look at MBOS. It's like a river that flows and never ends, and you can now add water to it. This now being fully over-the-air reachable and in production now. I don't know if I'm aware of a legacy maker, a legacy carmaker that actually has one of these in production now. Many are announced. We are in production now. And very rapidly, we will proliferate this through our complete product portfolio, not just the fantastic new electric cars that are in the pipeline, but this will find its way over to the ICE side as well.

This will be busy times, hard work for our R&D team and production, of course, marketing and sales and the other support functions. But the ball has been kicked and the game is on now. So in rapid succession, you will see these products enter the market. So I think it's the most exciting time coming up for Mercedes here in the next 2 to 3 years in an environment that is also exciting, not for the right reasons in this case, but we will stay agile, and we will adapt to that environment as well to make sure that Mercedes stays the course.

Thank you very much, and looking forward to your questions.

Thank you very much, Ola and Harald, also for the exciting outlook on what's to come. We will now move into the Q&A section of the call, and I will identify you by name and please make sure to introduce yourself with your name and the name of the organization that you're representing before you ask your questions. Just a few practical points. [Operator Instructions]

Before we start, the operator will explain the procedure.

[Operator Instructions]

We start the Q&A and the first question goes to José Asumendi from JPMorgan.

A couple of questions. Maybe, Harald, can you talk a little bit about the impact of tariffs that you already outlined on the guidance, but a little bit more in the direction of which mitigation measures can you take in the course of '25 and '26 when it comes to price increases, further localization of products or any other measures you're building into that guidance?

And second question, Ola, can you talk please about how Mercedes-Benz is positioned on Level 4, Level 5 autonomous driving? Who are your key partners? Where do you test the vehicles? And how do you strategically position Mercedes-Benz on the robotaxi race to be able to offer that -- also that premium package when it comes to safety?

Jose, on the tariff side, I mean, the guidance which we give here on 150 basis points is the direct tariff impact. As over time, I think it will be difficult to differentiate, I mean, any volume or pricing and therefore, I mean, net margin impact. So I think that is the visibility we want to give you here, 150 basis points, as I said, I mean, you could almost say half of that, I mean, is a lag Europe, I mean, to the U.S. and the remainder being spread.

But rest assured that, obviously, we'll try to do each and every effort, I mean, on the commercial side. However, we're not commenting on the commercial policy and strategy here to mitigate and also as we announced, pursuing further low localization efforts as we commented already in the Q1. So we're looking at, I mean, everything in this respect, but nothing new to report on top of what we announced already.

Jose, with regard to autonomous drive, you could say that in the last 4 years as one piece of MBOS, we have completely rewired the whole foundation of our ADAS strategy to introduce already now in the market with the CLA, an absolute state-of-the-art benchmark compute power sensing set and software stack. If you look at how you extrapolate that into the next 2 to 3 to 4 years, we are primarily focused on the individual personal use segment. So we think that Level 3 that we were the first OEM to introduce onto the highway here in Germany and also in a couple of states in the United States. So we have kind of planted that first flag on the moon now to look at what is happening on the regulatory side, how far in the next 3 years or so can we take Level 3 highway and then potentially into urban.

Level 4 on an individual use case starts with parking, where we had already the first product in the market actually a couple of years ago to just experiment with it. But when GenAI entered into the frame and you can kind of rethink how you do the software stack, you can go to a complete end-to-end foundation model on top of the, let's say, 2 boxes that you have had up until now, one for perception sensor fusion, another box for planning and control.

Now that you can complement this with GenAI and create really a holistic end-to-end foundation model, the game changes, but one thing doesn't change, and it's the ability to prove the safety case. And I think this is where our approach with our strategic partners, both in the West, but also in China, we will introduce it in a responsible way. But we have every single tool in our toolbox now to go anywhere. And should Level 4, Level 5 find its way into individual use cases in the foreseeable future, we can and will be in that game. But I do see in the immediate future, and that's what we're launching now, super sophisticated Level 2++ systems. And there's lots of shades of gray here, obviously, but kind of point-to-point navigation feels like fully autonomous, but you're still responsible. Then a growth of the Level 3 envelope and Level 4 parking, and then we will see where the journey goes. What we're not planning to do is to become a large-scale mobility provider competing with local transportation or taxis. We have no immediate plans for that at the moment.

Thank you very much, Jose. And I would hand over the next question to Patrick Hummel from UBS.

I would have 2 questions for Harald, if that's okay. First one, Harald, basically, that sounds like you will resume the share buybacks in very due course because you covered the dividend, as you pointed out, with the H1 free cash flow. You haven't precisely guided the free cash flow. I hear you loud and clear that H2 is going to have a lower free cash flow, but I think you also probably did a bit better in H1 already than you had expected. So I'm just trying to guesstimate what the share buyback volume for the remainder of the year could be? Is a range of EUR 1 billion to EUR 2 billion realistic for the last 5 months of the year?

And my second question is regarding the margin guide in cars. You kept the 200 basis points range, 4% to 6%. But now we do have more or less clarity on the tariff outcome. I'm just wondering under which circumstances we would even see the low end of that range at 4% because applying your logic, it sounds like we should end up at least at 5%. Is that 4% for whatever may get worse in China? Is it for a non-timely implementation of the tariff deal? What needs to happen to see the 4% as an outcome?

Yes. Thanks, Patrick. With pleasure. I'll take the 2. So I mean, number one, yes, I think cash generation demonstrated to be pretty strong in H2. Definitely, we'll take it with that spirit, I mean, into H2. At the same time, I think I explained before that, I mean, the investment profile is more backloaded. And at the same time, with the margin outlook and the tariff impact impacting H2, that means cash generation that will definitely run at a lower end in H2. I also commented that quarter 3 sales will be lower than the quarter 4 sales, I mean, to come, which also impacts the cash phasing in the remainder of H2.

Therefore, I think you hear a bit of a more cautious approach in terms of the cash generation on the operational side for the remainder of the year. At the same time, I think I also commented that any M&A proceeds, whatever they're coming from, are also subject to the SBB framework, capital allocation framework. So in a nutshell, cash generated in H2, wherever it comes from, clearly, I mean, we will consider. But the profiling, I think, rather suggests that this is more back-end loaded towards the year rather than short term.

Point number two, on the margin side, well, I commented 7% underlying in H1, a bit of a headwind in H2 underlying, as commented before on cost phasing. So I think that suggests a number which is a bit lower than the 7%, right? So if you add up the 2 numbers and you divide them by 2, it gives you, I think -- you end up, I mean, with a comment on the guidance range in terms of sitting in the lower half of the band. And then you take the 150 basis points off and here you go. At the same time, we need to say, I mean we don't have details at this stage in terms of, I mean, the transitioning to the new regime, the one which has been agreed on Sunday, details are yet to come out on that, I would say. And that's why I think at this point in time, it is sensible to have a broader guidance range in terms of the 4% to 6% and rather having a too narrow one. That is the back of it.

Thank you, Patrick. And I would give the next question to Tim Rokossa from Deutsche Bank.

Ola, to you probably first. Now that the EU deal is hopefully done, can we expect another more car-specific deal to follow on top of the one with the EU. You sounded pretty optimistic on this in the past. We know that you are very engaged with the discussions with the Trump administration. Will this include some form of export or investment credits, for example, in your view?

And secondly, Harald, I'm sorry, I have to follow up on this again, but you are responsible for making this a very integral part of the Mercedes story, the buyback program. What's really preventing you from launching it now? I mean you clearly -- you are always of the view that your stock is undervalued, certainly right now. You have generated enough free cash flow. Why don't you just start buying back the stock? And in that context, how should we think about the truck stake as well, which has done pretty well?

Tim, we have been extensively engaged in the conversation that has been going on between the United States and the EU as a thought partner to the political decision-makers. In the final hour, as you could see on Sunday, the 2 parties decided for a broad-based relatively clear and simple deal, the 15% in the one direction and as far as cars is concerned, 0% in the other direction. Some areas were left out where I think there is discussion to be had if you read what the different parties say, steel pharmaceuticals, maybe stuff on the digital side.

But for all intents and purposes, that global deal for now is it. If it is possible to complement that with additional, I don't know, sector-specific or even company-specific amendments, I would say at this point, that is very uncertain. It's not something -- if it is possible, certainly, we would try, but it's not something that I would, at this stage, calculate with in our plan going forward.

Yes. And on the capital allocation framework, I mean, very happy to hear that. I mean, it's that much appreciated by the community. And you heard clearly before that we are committed to it. I think I commented on the cash generation, the free cash generation from the operational side of things in H2. I don't need to repeat that. So, so far, the cash generated this year pays the divi, which has been wired in May, right? So basically, that part is achieved, accomplished. And that means any cash yet to be generated in the second half of the year. I mean we will look at that for SBB activity.

You heard that, H2 cash generation is definitely lower. Any M&A would be part of the envelope of the policy of the framework. And I think consciously, we reminded, we repeated our statement on the Daimler Truck stake in terms of strategic agenda, but also in terms of DT progressing with the CMD. And any proceeds which would be accomplished, I mean, from M&A or by DT stake definitely would support cash generation, and then we'll have a look at that. But maybe this is a bit more back loaded in the year than right now.

Thank you, Tim. I would move on to Tom Narayan from RBC.

The first one for Harald, on the tariffs, I appreciate the commentary there, the triple-digit million so far, 150 basis points for the full year. Some other OEMs have disclosed a little more specific amounts or at least on quarterly cadence. Just wondering if you could help us dimensionalize the tariff impact on a quarterly cadence basis? Does this increase per quarter in the back half? And obviously, it incorporates the trade deal. Just hoping for a little more color on how we should think about it on a quarterly basis.

And then the second one is a follow-up to Jose's question. There's a lot of news on Tesla being trying to get approval -- regulatory approval in Europe with unsupervised FSD camera only. I mean we'll see if it happens. The rest of the industry is embracing multisensor LiDAR, radar, et cetera. In the event Tesla is able to get regulatory approval in Europe, would you consider exploring a similar camera-only approach? Or is it kind of a different customer demo and LiDAR and camera prices coming down?

Tom, on the tariffs, I think I said on quarter 2, that's a mid- 3-digit number. Look on the chart, you find the detailed impact even if you calculate 6.6% underlying in the second quarter compared to the 5.1% including tariffs. So that's 1.5% sitting there in the second quarter. If you take that amount, that will be roughly same order of magnitude in quarter 3, and then it will be a higher number in quarter 4, still being in the mid-3 digit, but higher mid-3 digit than quarter 2 and quarter 3. I hope that clarifies.

With regard to ADAS, let's take a look at what we have now and what we believe is necessary for what you're describing. To do Level 2++, which is super sophisticated and it kind of feels like a Level 4 systems in most cases, except for when it's not. And this is the whole point of ADAS going towards Level 4, the tail end of the corner cases is a very, very, very long tail end.

To do a robust Level 2++ system in our humble opinion, and we're launching it now with the CLA requires 27 sensors. That is a mix between cameras. Of course, that's the main road, radars and ultrasonic sensors. If you want to go beyond Level 2++ and you want to go to Level 3 and certainly, if you want to go to Level 3 urban and the journey to Level 4, I know it's a little bit shades of gray, and you could have a long conversation about what is what.

We believe you need additional sensor redundancy. That is where the LiDAR would come into the picture as we have it today on the S-Class and the EQS for our Level 3 highway system, because there can be circumstances where for a split second, a camera can be blinded. And in that split second, no matter how unlikely it is, something comes in the way of the vehicle. We do not believe that it would be sensible for Mercedes-Benz to -- when you pursue those higher levels to not use the sensor redundancy. That is our firm belief.

With regard to the European regulator that we have been working with for -- I don't know if there was a European regulator in 1886 for horses. But if there was one, I'm sure we worked with him when we did the first car, and we have been working for decades with the European regulator to try to convince them that the incredibly sophisticated technology that we have that we deem as safe when used appropriately can also be deployed in Europe. But as we sit here today, we're not even allowed to deploy Level 2++.

If the EU regulator changes their mind and we will encourage them in a safe manner to allow these technologies as they're allowed in China, for instance, then we will certainly be there. If you want to dig deeper into what it takes to weed out the corner cases of Level 4, I would suggest you have a longer conversation also with a company that is active with a robotaxi service in California, speak to them.

And my next question goes to Stephen Reitman from Bernstein.

Sorry, can you hear me now?

Yes, we can Stephen.

Yes, on the U.S., please, 2 questions. First of all, now we have some much better visibility on the level of tariffs. Could you now maybe just think about your thought process about mitigation, particularly in terms of pricing now? I think, obviously, we understand how all the manufacturers are reluctant to provoke the administration with price increases before there was some better visibility. But now we actually have this. What are your thought process on that?

And secondly, with the -- seems to be a very progressive dismantling of emissions regulation in the United States, what does that implication have for your strategy in the United States in terms of maybe pushing more of your ICE vehicles in your overall mix? How do you see that?

So yes, Stephen, as commented before, so I think we outlined the direct tariff impact as we see it based on the most recent events and commented more in detail in the questions thereafter. Again, in terms of commercial policy, I mean, we're not commenting that. Definitely, I mean, we'll see where we have elasticities we can make use of in the market, in which areas, in which products. And obviously, at the same time, we need to see, I mean, the demand side of things and how consumer community is going to respond to the new situation and, I mean, the setup and what competitors are doing in this respect.

Therefore, rest assured, I mean, we're spot on, on that. But no further commentary, I think, I mean, at this point. Globally, we see the U.S. in a healthy state in terms of underlying demand, as commented before. On the retail side, we see definitely further opportunities moving forward with a great product lineup to come into the U.S. So clearly, we see U.S. as a growth opportunity and want to capture that moving forward. We'll be competitive on the product side, on the commercial side of things, at the same time, pursuing globally the localization as we announced during the Q1.

Stephen, your questions around emissions. The way we read the so-called big beautiful deal is whereas they have not yet, to our knowledge, presented the exact new CAFE standard going forward. The text of the big beautiful deal in our interpretation says that should you not meet that standard that is yet to be determined, your penalty is 0, which means the whole credit and that whole system that we have been seeing for years or decades, I don't know how long we have been in that, kind of disappears.

What would be our approach to the market? Our approach to the market is, and I think this is a good thing, certainly for the customer, is the market forces decide. So we have a full-fledged portfolio going forward. Yes, we have super attractive high-tech electrified ICE cars that will be kept with state-of-the-art technology. MBOS will find its way into the ICE cars as well and so on and so forth. We have successful long-range plug-in hybrids, kind of been a little bit of a renaissance of that in the U.S. market recently. So I think we're good position there. Here, we are probably the leading premium luxury manufacturer in that segment in the markets where it's most relevant.

And then we have the fireworks of battery electric vehicles. So in spite of the announcement that they would take the 7500 credit away, we don't believe that the BEV demand in the United States goes to 0. We still think that the medium- to long-term adoption rate of BEVs in the U.S. will creep upwards. Maybe it will creep upwards slower than if the previous regulatory trajectory had been kept in place. But nevertheless, we believe in the mid- to long term, it will creep upward. So we have an all-of-the-above offering, and we will let the market forces decide what the take rate will be and are looking forward to delighting our customers in the United States and also look at the United States in the long term as a growth market, obviously, as Harald just said.

Thank you very much, Stephen. Thank you very much, everyone. This concludes our Q&A session. Thank you to both of you, Harald and Ola, for answering the questions. And of course, as always, Investor Relations remains at your disposal to answer any further questions that you may have.

And now to all of you, have a great morning, a great afternoon and a great evening. Thank you, and goodbye.

Hello, everyone, unfortunately, we had a bit of a technical hiccup here, and we had to change the invite. Very sorry for that, very sorry for the inconvenience. But yes, we've got enough time, I think, to go through all of the points, which I will start to do.

So good morning, good afternoon and good evening, everyone. This is Christina speaking. I'm Head of Investor Relations and Treasury at Mercedes-Benz Group. On behalf of Mercedes-Benz, I would like to welcome you to our Q2 2025 pre-close call.

I'll give you a quick summary of already public information and current key developments of the quarter about Mercedes-Benz Group AG. Subsequently, we will have a few minutes, as always, for your potential questions. Please be aware the quarter is not closed yet, and therefore, the answers to potential questions are limited to our current knowledge. We're happy to go into more depth as part and following the disclosure. [Operator Instructions].

Please note, our presentations contain forward-looking statements that reflect management's current view with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements.

Forward-looking statements speak only to the date on which they are made. So let's start with Mercedes-Benz Cars. We'll go through group sales for the quarter 2 2025. And I'll start with a quick review to our results conference 2024 and what we guided for 2025. We said that we're looking at sales slightly lower than 2024, and let me share what we see in our 3 markets. Everything that I say, of course, relates to the second quarter only.

Looking at Europe, sales are robust as expected. In the U.S. and in China, we had to carefully calibrate our group sales to navigate dynamic global tariff policies. For China, we also maintain our cautious view as we continue to see sales lower. Again, we already guided that at the beginning of the year.

The U.S. market continues to see solid momentum, however, resulting in a strong increase overall in the overall retail sales that also applies to the top end side. All in all, Q2 sales are expected in the ballpark of Q1 2025. On the TEV share side, we see ourselves within the guidance corridor of 14% to 15%, but rather at the lower end of that corridor. Regarding xEV, happy to share that we anticipate xEV sales up in Q2. And looking at the CLA that obviously had its sales release in Europe, we do see that orders are gaining momentum.

Now looking at return on sales. In Q1, obviously, we achieved a return on sales adjusted of 7.3%, and we did confirm the full year guidance before tariffs. For Q2, we expect the margin for the underlying business also to be within the guidance range, but rather at the lower end. Considering tariffs now, obviously, we live in a world of tariffs, we said that we could see a margin impact of 300 basis points for the full year 2025.

The 300 basis points would obviously be a full year effect arising from 3 quarters only. So the tariff impact per quarter is respectively higher. So there are certain things that were considered in the 300 basis points and certain things that were not factored in. So let me take you through it.

Just again, the 300 basis points considered some mitigations such as prestocking. The current tariff ease between the U.S. and China, however, and the U.S. tariff offsets on import parts were not factored in. So now considering the U.S.-China tariff ease and the potential from the U.S. tariff offset and also April only ramping up in terms of tariffs, we currently view the tariff impact for Q2 as below 300 basis points.

Now looking at Vans, at the Van division, I'll also start with what we said at the beginning of the year, we guided the full year sales slightly lower than 2024. And as observed in the first quarter, we continue to see a competitive environment for vans [Technical Difficulty] sales are expected lower versus previous year, yet substantially -- sorry, sequentially improving. So what that means is quarter-over-quarter.

As expected, we also see our EV share on vans increasing. Due to the market environment, we may see a Q2 return on sales adjusted before tariffs rather at the lower end of our guidance range. And regarding tariffs, let's also review what we said. We said that we could see a full year 2025 margin impact of up to 200 basis points. Also here, this did not consider the U.S. tariff offset potential.

Considering the ramp-up of the tariff effect and the potential offset, we expect the tariff impact Q2 RoS adjusted for Vans to be small. Now let's move on to the mobility side of the house. For mobility, the situation in Q2 remains largely unchanged when you look at Q1. So what does that mean? We continue to see competition in China impacting the penetration rate. And the portfolio margin, we do see still at a subdued level, also, of course, as a function of the volume loss in China.

On a global level, however, the acquisition margin continued to look healthy. Just a word of caution on the mobility side, of course, the recent worsening of the global economic outlook may, of course, result in higher cost of risk, not something that we see today, but just something to keep in mind.

Overall, we expect Q2 return on equity adjusted within the full year guidance range. Now let's look at the free cash flow of the Industrial business. As previously communicated, we expect the free cash flow of the Industrial business, including any impact from tariffs, significantly lower than Q1, but still meaningfully positive.

All right. Thank you very much for your attention, and let's now move into your questions.

[Operator Instructions]

Now let's start with the questions. The first one goes to Tim Rokossa from Deutsche Bank.

Yes. Thank you, Christina, Tim here. Okay. One question only then. Can you walk us through the theoretical process of how and when you would adjust your guidance to any tariff reality, i.e., the industry was obviously hoping for a deal. BMW was quite specific on this, so was VW. So far, it hasn't materialized yet. I think there's still some hope on the next few weeks now. Should that not materialize at what point in time would you tell us that it doesn't, would start raising prices and give us a new indication for the full year?

Sure, Tim. Absolutely valid question. Thank you very much for that. Obviously, interesting to everyone. And obviously, we will give you additional color at the actual disclosure call. So this call obviously is for information that's already available. We try and frame it a little bit just to give you a better understanding of what to expect in the second quarter, obviously, with tariffs being in place.

In terms of the process going forward, that, of course, guiding for the full year, obviously, what we pulled out in the first quarter would require a bit more visibility and stability, not only in terms of the tariff regimes that's out there, obviously, any sort of deal or non-deal, but also the effect of commercial measures that have not been included so far and have not been materializing for us and for the competition.

So we need a bit more visibility to then adjust any sort of guidance for the remainder of the year. But as soon as we have that, we will obviously share that with you.

Then let's move to Patrick Hummel from UBS.

As far as your volume comment for cars is concerned, roughly stable versus the first quarter. Was that a commentary on retail level, on wholesale level? And can you just help us understand what kind of tactical inventory management might have influenced that figure? Because I would have thought on wholesale level, the first quarter was quite soft that we would see a step-up in the second quarter.

There was a comment on the wholesale levels for Q2. So when I said Q2 sales, I expected in the ballpark of Q1 2025, that relates to group sales. I've also mentioned that, obviously, with the introduction of tariffs and the super high levels we've seen between the U.S. and China for a while, and obviously, the introduction for the tariff -- new tariff levels, Europe, U.S., we have seen a bit of a stop and go.

So calibrating group sales a bit tactically is what we saw in Q2. And overall, that results roughly in the ballpark of Q1. The comment I made on retail sales related to the U.S. market specifically, I do believe that's of interest to understand what's the consumer side of things. And there, we have seen a strong increase in retail sales, basically also on the top end, as I mentioned, and that was my comment relating to retail sales. Otherwise, I was commenting group sales.

Thank you, Christina.

Welcome, Patrick. And I'm moving on to Horst Schneider from BofA. Horst, over to you. Horst, I can see you, and I love your cap, but I cannot hear you.

Now you can hear me probably.

Yes. Perfect.

I actually put my Mercedes cap on. So identification with the company. Now a question on Mercedes. I guess and since you said without tariff, margin would be at the low end of the range. Usually, Q2 is a quarter where the margin is rather at the higher end of the range, and then it comes down into the summer period due to production. Is that largely related to volume? Or were there other negative effects, specifically pricing, which pulled the margin down? On tariffs again, since you said that the free cash flow is still meaningfully positive in Q2, do you -- have you already paid tariffs? Or is the tariff payment actually just coming with some delay? Yes, these are the first 2 questions.

Yes. Yes, happy to answer your questions. On your first one regarding the underlying performance for Q2, what are the reasons? I mean remember the Q1 result, obviously, return on sales adjusted at 7.3%. We had a very strong industrial performance that we already flagged would not necessarily repeat to the same extent in the second quarter. And then, of course, we had a tariff and the calibration of the group sales, also a bit of a stop-and-go situation here.

So with that, we are within the guidance corridor, super important to mention, but rather at the lower end. And on the tariff side, at some point, and I think we're starting to see that, it will be difficult to distinguish between indirect and direct tariff effects. What I've given you now, of course, is the direct implication on payments, on tariff payments that happened. So that can be distinguished.

But of course, the comment I made to the extent of the group sales, that gets to a point where it's difficult to differentiate. So what we can see overall, we are within the guidance range as communicated when it comes to our underlying business and then the tariff impact comes on top.

In terms of the free cash flow, yes, I did say, obviously, lower than the first quarter, which was very, very strong with the EUR 2.4 billion. We do see a positive figure here for the second quarter. Yes, there is payments on the tariff side already, and that is impacting the free cash flow. So that is included here.

And Christina, when you say tariff impact Mercedes Cars, less than 300 basis points, how should we read that? It's more than 200 or it's rather than still close to 300 basis points. Can you narrow this range maybe a little bit? Or it can be also just 100 basis points. How should we interpret your statement?

Yes. I would love to give you that transparency. Let's close the quarter first. But it is -- I wouldn't say below 300 basis points if I wasn't sure it was below 300.

But if it was below 200, you would have said below 200 basis points, correct?

Depends. Yes, I don't know yet where it is. So I need to somehow draw a line in the sand, I get your question.

I guess your answer is still there's a big range of uncertainty also for you, correct?

Yes, because we -- I mean, it's the 30th of June, right? Let's close the books. Let's see the final results, and then we can give you more granularity in terms of the impact. But it is -- I mean, it's a good question in the sense that it is -- the quarter is impacted by the tariff payments, and we could see a run rate materializing.

Good. Then let's move on to you, Jose. Over to you. Can you hear me?

Just one question related to free cash flow. If you could please repeat again the comments that you've done on working capital, please? And then also on CapEx, any meaningful CapEx reductions sequentially second quarter versus the first quarter?

Yes, you're very welcome. I did not make any comments specifically on working capital. I made a comment with regards to the impact of tariffs. So I can happily repeat. So we said that we did communicate already that the free cash flow of the Industrial business, including the impact on tariffs, as just elaborated on, would be -- would result in a free cash flow in Q2 that is, first of all, meaningfully positive, but second of all, significantly lower than in the first quarter. So more color on that, obviously, with the disclosure.

There's no official -- is there an official definition of meaningfully.

Not that I know. No hidden messages here. All right, Jose. Then Stephen, I will move on to you for the next question.

Two questions, please. First of all, you said about the reception to the CLA has been encouraging. Could you remind us which markets you've actually launched the vehicle in already? And maybe provide any more color on what encouraging really means? And secondly, in the United States, have you put any price increases through? Obviously, you're not putting any tariff-related prices through because you've been quite careful about that. But have you put the normal price increases you would normally do on an annual basis, inflation kind of thing?

Very welcome. Yes, on the CLA, so obviously, we launched it in Europe, in Germany, first and foremost, of course, we do see quite encouraging numbers here. I cannot share any details yet. But when we compare with obviously the predecessor models, it looks super encouraging. And also what we see in some of the remaining EU markets, U.K., Spain, Benelux, the Nordics, Poland. So this is starting to gain traction there.

It's important to note that we don't have demo cars in all of the markets yet in the dealerships. So it's difficult to give a clear or to do a clear comparison here. But what we see internally in terms of orders coming in, it is quite encouraging. So we do look at it very positively.

In terms of your second question on price increases in the U.S., no, we have not included any commercial measures or implemented any commercial measures as yet. It's a bit difficult, of course, because you have to look at it segment by segment, vehicle by vehicle and also look at what competition is doing.

So I think there's some activity that we can observe when it comes to our direct competitors, maybe not too much. So we haven't really factored that in. So that was my comment also to Tim earlier in terms of when we'll be able to guide again or what does the process look like? I think we need a bit more visibility on the commercial side to be able to do that. Welcome, Stephen. And over to you, Philippe. Philippe, can you hear us?

Okay. Philippe? We cannot hear you yet. So I will try with Henning first and then see if we can get you, Philippe. Henning, can you hear us?

I just had a question for the group level with respect to the reconciliation line. I think it was uncharacteristically weak in the first quarter, driving some of a mixed results. So I was just wondering if you had a comment there if that should be more normalized again or what to expect there?

No, I don't have that with me right now, but we would give you obviously more color when we go through the figures and disclosure date. So bear with us, and we'll share more details and then it should be easier to compare. Welcome. I will try again with Philippe. I cannot hear it. Okay. I'm moving over to Mike Tyndall. Mike?

Just wondering what you've said in meetings or anywhere else about share buyback.

Yes. Good question, Mike. Thanks. And definitely will give you some details, obviously, with the full disclosure. But what we said before, so happy to repeat, is that, of course, we announced the next round of share buybacks. We also said that we will stand by our capital allocation framework. So that remains in place.

The only reason why we haven't started that yet was because we needed more visibility then on the impact of tariffs on the full free cash flow for the full year. So we are gaining a bit more insights. And once we have that, you will get some news. So for now, I cannot share any additional information, but the fact that we remain committed. All right, Philippe, I'll try again. No, Philippe cannot hear us. We have another question from -- sorry, Harald, over to you.

Can you hear me okay?

Yes, we can.

Just a clarification on -- I gather -- I understand the Mercedes Cars guidance very well and the color on tariffs, obviously very helpful. But is there any color you can give us? So you said 300 basis points for the full year, which basically over 3 quarters basically gets to you about 400 basis points per quarter. Now you're saying less than 300 for certain and potentially down to 200, let's say. What is the gap? Is the gap just the inventory in the second quarter? Or are there other mitigating effects that were better than expected, such as the offset on parts? So what specifically drove the improvement relative to what you told us 3 months ago, please?

Yes, absolutely. So I mean, certain things were already included in the 300 basis points like the prestocking. So that would include the inventory. But of course, there were announcements just before the Q1 release that we did in April and a little bit after, one being the de-escalation, if you can call it that way, between U.S. and China and the other one being the offset on imported parts.

So both of these were not included in the 300 basis points. So this plays a role in now the impact coming down below 300 basis points in the second quarter. And of course, April only being basically ramping up in terms of the tariff effect. So these 3 things would make it lower than 300 basis points for Q2.

Perfect. So for the full year, logically would mean that the full year effect then also would be lower than 300 basis points if we include these 2 effects, right?

So yes, we will. Obviously, that's a mathematical deduction. So we will. When we get to the disclosure, we will share more detail on that. How exactly that's going to look like? We obviously need to run the numbers. And then when we have the disclosure at the end of the month, we will give you a better view and transparency as you have seen from us in the first quarter.

All right. I think you didn't hear my comments. So I will close the call with that. Apologize for the technical issues just at the beginning of the call and for any inconvenience that has caused. Thank you very much for your valid questions, and we will talk very soon. Thank you, and goodbye.