Volvo Car Aktie

Good morning, everybody, and welcome to Volvo Cars 2026 Sustainability Update. My name is Vanessa Butani. I'm Global Head of Sustainability here at Volvo Cars. And I'm going to hand over to Michael Fleiss, our Chief Strategy and Product Officer, who is going to start us off today. Thank you, Michael.

Thank you. Also, good morning from my side here. Very happy to speak to you about sustainability. So starting with our framework -- our strategic framework to provide freedom to move in a personal, sustainable and safe way. This strategy is with us for quite some time. And we break it down to personal, we understand our customers and we develop our products for our customers. Sustainability, we talk a lot about today, very important to us and very close to our heart. This feature actually was introduced in 1972. 1972, Volvo talked first time about environmental friendliness. So really important to us. And then Safe. Safe is with us since we started -- the company was started in 1927. So 3 strong pillars for our strategy and they are constant for quite some time.

In this deglobalized world, we need to build resilience. And that's mainly for us, but even more important for our customer base. So we need to have sustainability across the operations. We need to decrease pollutions. We need to reduce waste. We need to reduce water consumption. We need to create a safe environment for our workers, and we need to be sure that human rights are followed. That's really important to us, and we will talk more about that later on, and the team will present that.

But for us, as a car company, the biggest influence is obviously CO2. So I will focus more on the CO2 part. But resilience means also in these times, reducing our investments. And we are really happy that our big investments we have done are over now, and we can harvest on these investments, which are the development of the SPA3 architecture and [indiscernible] manufacturing site.

So for us, it doesn't change. Electrification is our future because they are just better cars. That's a fact. If you drive one, you will find it out. It's just a better car. And we are happy to see that our competition is slowing down. That means we can create more opportunities to move into that market space and create -- increase our share. And the EVs are not good because they are supported by the government. Again, it's a better car. And we need to make sure that range, charging time and price are becoming similar to the combustion cars.

We see in the world reduced speed of going for electrification, but still, the electrification is the biggest growing segment in the automotive industry. And for us, it's really important to have our software-based system for all cars with our new-gen core system, which we have introduced in SPA3. It is lower cost for us, and it's a better experience for our customers. We have just recently updated millions of cars in 1 day, and that is the power of this technology.

Also perhaps good for you to know. Recently, Standard & Poor's created a ranking system for software-defined vehicles. Guess what? Volvo has the best system sharing that place #1 with only NIO. So NIO and Volvo have currently the best software-defined vehicles out there in the market.

Also part of our strategy is that we even more make sure that we have common architectures, just explained by the software, but also synergies with our colleagues from China, where we can have synergies based on the legal requirements. And this will enable us to create better products, but also more cost-efficient products.

Yes. As I said, the transition is slowing down a little bit. You can see here our 3 biggest markets: Europe, North America and Greater China. On the left axis, you see the millions of cars sold and on the bottom axis, the years. And here, you see -- when you see the dotted lines, that was a forecast from 2 years ago. And the solid lines is the latest forecast. And you can see it's marked with a gray and green arrow, the difference. So there's 2 to 3 years difference in the tipping point. And the tipping point means when do we sell as much BEV cars as ICE cars in the market. Europe and China, a few years delayed. North America even more, but still, you see also on this graph, the only growing segment is battery electric vehicles.

And here, you can see latest data now also how we compare with our competition because we are the fastest-growing electrified company, and we will continue to be that. You have here competitor A, B and M compared to Volvo cars. Blue color is BEV cars and light blue is PHEVs. So you see clearly that we are leading percentage-wise compared to our competition. And we continue to lead, and you see also that we are growing both with BEVs and PHEVs.

So by now, we have a fantastic balanced portfolio. On the top of the picture here, you see the mild and plug-in hybrid cars. And on the bottom, you see all our BEV cars. You see same number of cars, both on BEV and PHEV. And very important, the car on the bottom in the middle, the EX60, our latest -- just recently launched star. So what have we achieved with that EX60? To start with, you can see this picture in 3 sections. The first section is -- so the BEV is a better car. We have lower running costs. Right now, we have better performance. We have more space and comfort because the combustion engine is not in the way in the front. So the whole cabin becomes bigger and the car is more sustainable. But we had to solve range anxiety, charging and price. These are the 3 main factors why customers are -- not all customers are willing to go for the better car.

With EX60, we have solved all of these problems. The EX60 can charge as fast as an ICE car is filled with fuel. The charging is as fast as you have an average stop in the petrol station. And we price it on the BEV -- PHEV price with better margins. So we are a car company, which without subsidies from governments can make money, even more money with the BEV than with a PHEV.

So with that, I'm giving the word back to Vanessa. Thank you so far.

Thank you, Michael. Let's talk sustainability. Sustainability of Volvo Cars is deeply embedded in how we think about long-term value creation, risk management, resilience and strategic positioning in a rapidly changing automotive industry.

Today's session is designed to be practical and transparent. We want to explain where we're heading, how far we've come and how sustainability translates into real products, performance and consumer value. We'll cover 4 main areas today.

First, we're going to go through our 2030 and 2040 sustainability ambitions and how they guide our strategy. Second, we'll look back at 2025 as a milestone year, what we achieved, where we have yet to reach our goals and why. And thirdly, we'll talk about why sustainability matters commercially, both from a consumer and an investor perspective. And finally, we're going to use that fantastic EX60 as a concrete case study, showing how climate action, circularity and responsible business all come together in one product. This is about showing direction, execution and accountability.

So let me start with our ambitions. We deliberately set long-term sustainability targets because the transformation of mobility is not a short-term exercise. It requires sustained investment, technology shifts and collaboration across entire value chains. And those targets remain as they were. So by 2040, Volvo Cars aims to be net zero across our value chain. So that means addressing emissions not only from our own operations, but also from the materials, the manufacturing, logistics and of course, the use of our cars. We also want to be a circular business, one where products, components and materials are designed to stay in use for as long as possible at their highest value and where recycled content is considered first before we consider using virgin resources. And nature positive, moving beyond reducing harm, toward contributing to the restoration of ecosystems across the value chain. These ambitions reflect where regulation, capital markets and society are moving as well as what we believe is necessary to be a resilient premium carmaker in the decades ahead.

By 2030, our key ambitions include a 65% to 75% reduction in CO2 emissions per car compared to 2018, 90% to 100% electrified sales globally, meaning every car we sell will have a cord, climate-neutral energy across our own operations and continued progress on low carbon materials, circular design and renewable energy. Electrification remains the biggest lever, but it's not the only one. As electric vehicles scale, emissions increasingly shift upstream into steel, electronics, aluminum and batteries, just as an example. Together, all of these materials account for about 80% of the emissions we're making an electric vehicle. So that's why our strategy goes beyond tailpipe emissions and looks at the entire value chain.

2025 was an important year for us. It tested our strategy in a very real market environment and gave us a check-in on how we're doing towards our long-term strategy. So in 2025, 46% of our global sales were electrified, the highest share among legacy premium peers. We saw strong demand for our battery electric vehicles even as infrastructure and incentive environment varied significantly per market. And 3 products are particularly important. The EX30, which entered production at our Ghent plant in Belgium in April 2025, helping bring electrification to a broader customer base. The EX90, which set a new benchmark for sustainable luxury by combining cutting-edge safety technology with lower life cycle emissions enabled by fully electric drivetrains and responsible material choices. And the EX60, our new fully electric premium SUV, which is priced at a level previously associated with plug-in hybrids. This is a deliberate step to make fully electric vehicles more accessible in one of the most competitive segments.

From a climate perspective, we reached several key milestones as well. In 2025, we achieved a 31% reduction in CO2 in the emissions per car compared to our 2018 baseline. This means we met our corporate ambition of a 30% to 35% reduction. This was driven primarily by electrification, supported by a 37% reduction in operational emissions versus 2018. And in manufacturing, even if we didn't reach full climate neutrality, 7 of our 9 plants now use 100% climate-neutral energy in their operations, and 4 of those achieved that status in 2025 alone.

When it comes to materials, we exceeded our 2025 ambition of 25% recycled and biobased content for new car models with the EX60, which reached 27%. We reduced water withdrawal per manufactured car by 29% compared to 2018. This is an environmental win, but also a reduction of cost and risk.

Circular business generated SEK 149 million in combined revenue and cost savings last year. That circularity paying back. In 2025, we conducted 88 human rights risk audits and people policy assessments at high-risk sites across the value chain. That means site visits, interviews and continuous follow-up to drive meaningful change, strengthening the process around our commitment of protecting people across our value chain. And from a financial perspective, 97.9% of our outstanding debt qualifies as green or sustainability linked, which is very close to our ambition of 100%.

But we didn't meet every 2025 ambition. Although our electrified car sales did reach 46%, that was below our 50% ambition. And green financing came very close, but didn't quite reach 100%. The 2 of our manufacturing plants, Charleston and Daqing didn't quite reach climate neutrality either in the planned time line, but we are working with them to make sure that we do close that gap. And reducing emissions from materials has been very challenging. We only reached 3% reduction versus 2018. However, the trend there is encouraging where we've seen that emissions are decreasing every year.

The gaps that we have were partly driven by external factors like slower charging infrastructure rollout, reduced EV incentives and policy volatility in several markets. In addition, some ambitions are based on assumptions that didn't fully materialize like the contribution reduction trajectory of battery emissions. Combined with shifts in electrification pace and product mix, this resulted in lower progress than anticipated. But what's important here is that these are operational challenges, not a change in our strategic direction. We remain committed to our long-term direction, and we have clear plans in place to continue driving progress.

Sustainability is maturing, and we need to continue to show our value to the business and build on the value that we've already created. So last year, we introduced this framework, the sustainability value pyramid to convey that sustainability is a value driver across 3 dimensions. This framework is now the lens through which the leadership team looks at every decision. It demonstrates the full value of sustainability, focusing on both value protection and value creation.

To fully realize the business value of sustainability, there's a need for a strong foundation. Here, we focus on ensuring compliance and mitigating risk. If the base isn't solid, the pyramid will tilt. Moving up, we focus on competitive advantage, which is both about protecting and creating value. So for example, when we reduce energy and water use, we save money. And now we're looking further into the circular economy where we can remanufacture parts, take back old vehicles and drive much better revenues and reduce costs doing that, particularly with using recycled materials. And the top of the pyramid is about consumer value, how we communicate the great things that we're doing behind the scenes to the consumers, making them choose us. And if we're not solid on the lower layers of the pyramid, we wouldn't have strong messaging at car launches or be able to substantiate sustainability communication in general.

Our 2025 ambitions laid the groundwork for our road to 2040. Now we're defining the next chapter. We're updating our sustainability strategy to set clear ambitions through 2030 and put us firmly on the path to net zero, becoming a circular business and a nature positive future by 2040. This builds on what we've already achieved, not by starting over, but by accelerating what works and going further where it matters most with a clear focus on creating value for the business, for people and for the planet.

In addition to this, we also recognize our 2 superpowers as a business, safety and sustainability, and they complement each other really well. We know that the world cannot be sustainable if it's not safe, and it can't be safe if it's not sustainable. So let's dive into climate action, and I will hand over to Aileen, who will talk us through that. Thank you.

Thanks, Vanessa. When we talk about the new Volvo EX60, we're not just introducing another electric SUV, we're showing in very tangible terms what our climate strategy looks like when it becomes a real compelling product. The EX60 is a game changer, not only in performance and range, but in how deeply sustainability is built into every part of the car. Yes, it has zero tailpipe emissions. But more importantly, it lowers the environmental impact far beyond what happens on the road without compromising comfort, safety or driving experience. And that's crucial because going electric, while essential, is only one part of the equation.

Our ambition is clear. We aim to be net zero by 2040. To get there, we have to address emissions across the entire life cycle of the car from raw material sourcing, to manufacturing, logistics, the use phase and end of life. That's exactly where the EX60 comes in as an embodiment of this strategy. EX60 followed our product sustainability steering process, which integrates sustainability factors such as CO2 and recycled content as key decision-making criteria in the design, engineering and sourcing of the car. This process enables more consistent and data-driven decarbonization across the supply chain.

But don't take my word for it. Here are the results. EX60 achieves the lowest carbon footprint of any fully electric Volvo to date, on par with a much smaller EX30. For a premium midsized SUV, the EX60 sets a new sustainability benchmark for Volvo Cars. This car is packed with sustainability achievements. So let's dive in.

Starting with manufacturing. The EX60 is built here at our plant just outside Gothenburg. This factory runs on climate-neutral energy, where we recently introduced a huge technological innovation, mega casting. By mega casting, we replaced hundreds of stamped parts with a single large cast component. This component is made up of 50% recycled aluminum and significantly reduces material waste, manufacturing complexity and the total weight of the car. Fewer parts also means fewer suppliers and fewer transports, all contributing to a lower overall carbon footprint for the car. In fact, mega casting facility alone is LEED Gold certified, the first in the world to receive this level of sustainability certification.

But manufacturing is only part of the story. The EX60 marks a major shift in how we work with materials. And I'll let Owain go into the details later, but I can start by saying that the EX60 sets a new benchmark for recycled and low-emission materials in a Volvo car. Without compromising quality or durability, it contains 27% recycled content in the complete car, an impressive achievement. We've reached nearly 50% recycled aluminum and partnered with SSAB to introduce their near zero emission steel in the car body structure.

Moving over to the battery. The battery is often the single biggest contributor to an electric car's carbon footprint. And this is another area where the EX60 pushes forward. Thanks to our cell-to-body technology, the battery is integrated directly into the vehicle structure. This design reduces weight, increases energy density and contributes to our longest electric range yet. The battery cells contain 30% recycled metals, helping reduce dependence on newly mined materials. At the same time, EX60's new 800-volt electrical system improves both efficiency and performance. It allows for faster charging, more efficient energy use and better overall battery management. All of this information can be found in the digital battery passport, reflecting our belief that providing customers with clear and credible information is essential for informed decision-making.

So much hard work has been done across this car. I've only had time to mention a few key contributors. So if you want an even deeper dive into the measures we've taken to reduce our carbon footprint on the EX60, we published a full carbon footprint report on our website according to the ISO standard.

Beyond this specific car, we've also strengthened our internal data model to calculate the precise carbon footprint of every car that rolls off the line, connecting the material composition of parts to more specific generic and supplier data, making it possible to substantiate verified emission reductions. And as we bring back the focus to the EX60, what does this car represent? It shows that our climate strategy is not theoretical. It's engineered into our cars, embedded in our factories and shared transparently with our customers. The EX60 proves that we can deliver a spacious premium electric SUV with a carbon footprint of a much smaller car and that sustainable progress and great driving experiences can and must go hand-in-hand. The EX60 is not a one-off program. This represents the future of our car programs.

And with that, I'll turn it over to Owain to share some more about our circular economy work.

Thank you, Aileen. As sustainability is maturing, the role of the circular economy becomes clearer. And in 2025, we generated a total of SEK 1.5 billion in revenue and cost savings. And it represents the operating model by which we deliver the planetary and people improvements alongside business benefits, such as reduced exposure to energy price volatility and regional access to critical raw materials.

At its core, circularity is about productivity of resources. Less is best and then secondary comes first. Aileen has already highlighted the benefits of mega casting, which showcase a great example of resource efficiency. I want to highlight another development where we have increasingly improved our efficiency over time with 7% increase in the efficiency of the stamping of the EX60, which saves resources and cost. But we also want to use what's left over at the highest value possible. That is why we have been focusing on closed loops, where the scrap is returned, remelted, reused and brought back to us. And in doing this, there is no compromise on safety, strength or durability. The EX60 is the first car in serial production to use SSAB Zero steel in key components. It is a major step forward in decarbonizing one of our largest material hotspots. Steel drives about 25% of our material-related emissions, making it a critical lever for reduction of our CO2 footprint.

SSAB Zero is produced from over 90% recycled materials, and it uses fossil-free electricity and biogas to deliver around about 70% lower CO2 compared to conventional steel. But we know that we need a range of partners to scale this up. Therefore, we've also collaborated on a project called ScanLoop with Salzgitter. This uses the same rail loop that delivers the scrap to us -- sorry, the material to us, uses it to return the scrap back to the supplier and it avoids empty backhauling. And this train is powered by climate-neutral electricity. It creates an end-to-end closed-loop production and transport loop. That improves material efficiency and logistics emissions.

Additionally, I am pleased to share that on the 1st of February this year, we kicked off a closed-loop partnership in the EU for aluminum, utilizing our sheet scrap and turning it back into very high-grade sheet aluminum. We have had a couple of aluminum closed loops set up in China for a few years, but this expansion really supports the generation of local closed loops to mitigate risks from scrap access as well as price volatility. These show how circular material flows can be good for business, cut emissions and strengthen supply resilience. These are at scale.

It's important to highlight, though, we don't do any of this alone. This is through collaborations, and these collaborations represent a new way of working in a more circular operating fashion and shows that we're valuing resources highly. We know that customers moving to electric vehicles appreciate reassuring offers around batteries. And that's why the EX60 battery warranty is our longest yet. It's 10 years and up to 200,000 kilometers. Durability is at the core of our business and part of the portfolio of circular initiatives. The EX60 has been designed for targeted repairs of serviceable components to avoid full system replacements. The outcome of this is fewer write-offs and the battery remains replaceable even though it's structural. And customers get lower total cost of ownership and there are higher residual values that lower risks for our customers, leasing partners and insurers.

Alongside this, in Q2 this year, we've just launched the first refurbished parts offer, which generates new circular revenue streams and it complements the remanufacturing business, which recently turned 80 years old. So although Michael highlighted that we started in 1970 talking about environmental, circularity has been with us for a really long time, too. These refurbished parts target older cars to reduce their repair costs, but maintain that OEM quality and warranty, plus they reduce the emissions per part by 50% to 90%.

Becoming a circular business delivers business resilience alongside the sustainability benefits. And it directly supports the value pyramid that Vanessa mentioned earlier. Customers get expanded lifetime services, supporting lower total cost of ownership and higher residual values while also leading us to have a wider portfolio of revenue streams and profit pools. Competitive advantage comes from driving efficiency in our operations and increasing recycled steel and aluminum, which use 75% and 95% less energy, respectively. This helps to reduce our exposure to raw material and energy price exposure and volatility. And closed material loops limit supply disruption as well as set us up for future mandated recycled content levels. But we still have a long way to go to achieve our goal of becoming a circular business. We are heading in the right direction and building the right collaborative ecosystem to make this happen, but we have more to do.

Right. I'll hand over to Ida now, who's going to take us through the human rights and Responsible Business progress. Thank you.

Great. Thank you. So let's talk about people now. At Volvo Cars, we put people first in and around our cars. We safeguard responsible business conduct throughout the complete value chain, and we drive a high-performing organization built on inclusion, equality and well-being. In general, we impact quite a lot of people throughout our quite long and complex value chains from the extractions of raw materials to the end-of-life treatment of our products. Protecting and improving lives throughout all these stages of the value chain is central to our sustainability strategy. And it underpins our commitment to human rights, respecting and promoting human rights.

Previously, you heard Vanessa talk about our sustainability framework and our sustainability value pyramid. And that the pyramid would tilt if there is no solid base. We apply the same type of logic to people. I mean all the great achievements that you heard my colleagues talk about on climate action and circular economy would mean very little if we would not, at the same time, take care of the people, both in our value chain and in the wider society.

But let's look at some specific examples even here. We've already talked about our strong focus on materials. And one particular important factor is our ambition to achieve full traceability on all critical raw materials in our cars. Only if we know who is involved in our supply chain and where each activity takes place, then we can, for sure, address the challenges and the risks that we have identified.

The EX60 battery supply chain as, an example, is part of our blockchain-based traceability system, establishing a chain of custody for cobalt, nickel, lithium and graphite from mine to car. This blockchain traceability system allows us to know our full supply chain and to identify and address the risks that we have identified. It allows us to engage with relevant suppliers directly and meaningfully and it increases the transparency to customers, investors and regulators. This year, we've also taken further steps to make sure that we can map and trace more supply chains, not just core battery raw materials connected, such as steel, aluminum and natural rubber.

But let's go back and apply a more strategic lens again. Let's talk about due diligence. We apply a risk-based due diligence approach. We do basic due diligence on a broad basis, and we focus enhanced activities on high-risk supply chains. Our human rights compliance program built on international guidelines and in including the identification of our most salient human rights issues is the basis and guide for the organization in order for them to understand where and when each risk requires enhanced due diligence activities.

Our due diligence activities form an ongoing process. They're both proactive and reactive, and they are continuously improved through engagement with suppliers and other relevant stakeholders. Examples of these enhanced due diligence activities for suppliers of high risks are, for example, on-site audits, tailored supplier trainings and corrective action plans where issues are identified and addressed. Audits are actually our window towards workers and people in our value chain. They help us to secure a broad range of perspectives, specifically from vulnerable groups. To fully understand and influence our impact, workers and representatives from surrounding communities are interviewed during these audits, and the results serve as a valuable input to our continuous improvement of human rights due diligence.

During 2025, we conducted a total of 88 on-site audits, where 23 were audits in the battery supply chain beyond our directly contracted business partners. And 85% of the corrective action plans that were generated were addressed and closed. We also trained both suppliers' key staff as well as our own staff on responsible sourcing practices, with particular focus on the role of leaders and the expectations of compliance regulation coming ahead of us, such as the EU battery regulation and the European deforestation regulation. No global supply chain is risk-free, but transparency, accountability and continuous improvement is how we manage those risks responsibly.

With that, I hand over to Fredrik, our CFO.

Thank you. So talking about our financials, I guess they need to be sustainable, both from a business perspective, but also from an environmental perspective. And we are in quite a good pole position in both areas. So on an overall level, we have invested quite drastically in the past, and I'll show you a slide. And those investments have been directed towards making more sustainable products at a lower cost, which really hits both marks of creating more value from sustainability, and we're set to harvest on those investments.

We have a market which is moving. We are a bit more pragmatic in our transition to electrification. We are tailoring the speeds to different markets. But the direction, as Vanessa said, is very clear. And as Michael also said, electric cars are truly the future, and that is what we are going all in on.

In terms of making this transition financially sustainable and also leveraging scale, we are also leveraging Geely, our sister company to a larger extent. They are today the third largest player in the world when it comes to new energy vehicles. And together with them, we can also make our business more sustainable. And we're financing all of this, of course, with green financing as we have started many years ago.

But double-clicking a bit on our investments. So this graph basically shows how much we have invested in the past. And as you can see, we are coming down quite a big amount of investments. And that's good in terms of building a sustainable business, but actually also good because we're starting to harvest on some of the really big sustainability investments we've done. We have and are finalizing some of the one-off infrastructure investments that we have done linked to our SPA3 platform and the EX60 in specific. I think Aileen talked about it. We have invested in mega casting, for instance. That's a big CapEx investment, but it does allow us to use a lot more renewable or recycled aluminum. We have done large investments into cell to body also going into the EX60. And that basically means less materials going into the car, 70 kilos less weight, 25% lower cost. So it hits all marks. It's a better customer experience, a better driving car. It is better-for-the-environment car with less materials used and it is cheaper to produce.

Similar when it comes to software, we are creating cars which are updatable. We've just updated 2.5 million cars to a better infotainment system. Every Volvo owner pretty much since 2020, 2021, just got an upgrade on their screen, making that car feeling fresher for longer, which is also part of sustainability, making sure that the cars last longer. They're also now getting Google Gemini. So your 2021 Volvo EX40 or XC40 as it was called at the time, will basically have probably the world's best AI agent to chat with, which is being rolled out this year. And we can do that because we are streamlining all our resources and efforts into our core compute software and leveraging the fact that we are recognized by Standard & Poor's as the only Western OEM on the highest level of software-defined vehicles.

So this is good for business and good for sustainability. In terms of funding these investments, and we do that with green financing. We issued our fifth green bond last year, and we have just updated our green financing framework. We remain Dark Green rated from S&P, and we use this external financing only into our future investments linked to electrification. To date, 97.9% of our debt is now green with the latest bond. And this will go naturally to 100% as we amortize off some of the last loans we have, which are not green.

In terms of EU taxonomy, we have a quite low alignment, and that is because we have a very conservative interpretation of the DNSH criteria, no significant harm. And we are committed to aligning all our future BEVs to the EU taxonomy as well. We're starting doing that with EX60 and all the investments going into the future BEVs are aligned. I think the challenge we've had and especially if we look at the current cars is that there are, especially substances, which is our only problem, I would say. There are some substances which are hard to replace, where there may or may not be another option. They're typically not in our direct value chain, so it's hard to analyze. And in some areas, we have seen conflicts also where we have, since 1972, had environment as a core value, as Michael said. But since 1927, we've had safety as a core value. And there are these trade-offs in terms of flame retardants, in terms of brittleness from UV, which are challenging, to be honest. With the EX60, we're taking the next step in that and focusing on it going forward.

That also means that our OpEx share of aligned will increase and CapEx will increase and turnover will increase. And you will start to see this coming quite soon as the EX60 has now started production and that car and all cars on that platform are fully aligned.

So to summarize today a bit, I guess, sustainability is at the core of what we do. And electrification is the core of our sustainability. We are selling more cars with a cord than any of our competitors. We have very challenging sustainability ambitions for 2030 and 2040, but we are making progress, and we have a plan to get there. We are doing that by embedding this in our products, in our operations and in finance. And we see that this combination is really driving value. The new beginning for the company and also a new beginning for sustainability is really the EX60, which we've talked a lot about. But it is a best-in-class product, and it is more sustainable than ever. And that's really where our business will start pivoting into the next direction in terms of both profit and environment.

So with that, let me hand over to Q&A.

Thank you to all of our speakers, and I'll ask you to join me here as well. [Operator Instructions]

I'll start with a few that have already come in, and we'll try to answer as many as possible. Maybe first, let's see if who want to take this, but we see that the countries and different regulations are backing down on sustainability ambitions, not the least EU with a delayed ICE ban. How does this impact Volvo Cars and our sustainability strategy?

For me, it doesn't matter. I mean we do sustainability because we want to be a car company which is good for the environment, good for the people. If countries are changing their minds, we don't. So it's very clear to me.

Good. Clear answer. Then we have a question on our ties to Geely. Besides the access to low-cost high tech, are there any opportunities to do more with Volvo Cars with Geely to drive climate action and circularity?

I think a great question there. And yes, it does give us a lot of opportunity because being able to reach through Geely a full other group of suppliers and finding low-cost opportunities, also finding opportunities within circularity gives us great opportunity. So we're very happy about this. Of course, we always maintain our standards, right? And we work together to find the best solution to go forward.

Great. Then a bit on blockchain. You mentioned using blockchain for some of your raw materials. How do you work further with the data that you collect? Maybe, Ida can [indiscernible].

Yes, exactly. Like I said, just knowing who is involved and where they are located in the entire supply chain is a huge value for us because then we can address the activities, strongly focus on exactly what -- where to address. We audit every tier in our battery supply chain from the raw material mine all the way to the traders and the cathode and anode producers, et cetera. So that's one of the key activities that we do. And the blockchain is, of course, a digital safety net for us to make sure that if there are changes, we know right away and we can address it. So just being sure that there is consistency and transparency is that what we do with it.

I'm wondering we might need Owain for the next question on battery recycling. Is there scale to it already? And will increased regionalization have an impact on how we work with battery recyclability?

Yes. So good question, and there is scale globally. And there isn't so much scale locally around Europe. We know that there's a significant and increasing pressure on local supply chains around the IAA as well. So I think there is a need to do more investment and collaboration in the European markets on advanced battery recycling, particularly refinement of the black mass. But technically, it's viable. Economically, it seems sensible, but we just need more global footprint really and local footprint.

That's actually the questions that we have currently received. I'll give a moment if anyone is having any further questions. Otherwise, I don't know if you want to say any ending words, Vanessa.

I think just -- thanks, everybody, for joining us today. We really want to show how we continue to take strides forward, really driving value with sustainability to build a stronger business for Volvo Cars. So thank you very much. And if you have any additional questions, do just send them later on.

Thank you so much.

Good morning, and a very warm welcome to this Volvo Cars press conference where we will be talking about our first quarter financial results and our strategic direction as a company.

My name is Ron, and as always, this morning, I'm joined by our President and Chief Executive, Hakan Samuelsson; our Chief Financial Officer, Fredrik Hansson; and we're also joined by our Chief Commercial Officer, Erik Severinson. At the start of this press conference, Hakan, Erik and Fredrik will walk us through our performance. And thereafter, we'll throw it open for a question-and-answer round.

You can participate in the Q&A around in 2 ways. Either you can send in a question via the chat so then simply type in your question. You should be able to see the chat window at the bottom of your screen in which case, I'll read out the questions on your behalf. You can also have the opportunity to be able to ask a question, use the link at the bottom of your screen, in which case the operator can help you navigate, and we can hear you directly in this room. But I'll come back with more information ahead of the Q&A round.

But for now, I'll hand it over to you, Hakan.

Thank you, Ron, and welcome to the presentation of our quarter 1 result. It has been a mixed bag quarter. I mean external factors, extremely turbulent geopolitical situation, tariffs, currency also has been negative for us. Altogether, that has given us a revenue drop of 12%, 11% volume drop.

But we have also seen a very successful internal work with cost and cash. And that is really the reason why we have closed the quarter. Despite 11% volume drop, we have a profitability level more or less equal to first quarter last year. And that is thanks to the really good progress on factors we can influence and control.

Looking into the quarter a bit closer is then in a situation like this is really important to concentrate on factors we can control and that is -- we have 6 unique benefits from Volvo. And the first one is electrification. And there, we see real opportunity and electrification will be our driver for growth outlook going into the second half year.

We will also remain a strong global brand despite a rather clear movement to a regionalized world. So we need to, in China, for example, work much more with the sort of China for China strategy. We will see much more locally adapted cars to really be competitive on that very tough market.

And there, of course, we have a unique opportunity to work together with Geely to really develop the cars that will really fulfill the demands of that market. China is also a very special market when it comes to supply of mechanical components.

I think we can lower our cost structure a lot by using China suppliers for even cars in Europe as one example. Fourth factor is really when it comes to electrification, we are -- really have developed a car and the technology, which is really leading on the market, including a core compute technology, which I think is something you need to really develop a true software-defined car.

And this is something where all suppliers need to go this way, and we are really glad that we have this transition behind us because it's a very tough period to go from a distributed electronics to a central compute architectures.

Five is that we are now entering a phase where we are back to more normal investment levels and also investment levels we defined with an affordable frame. And that will, of course, also be very supportive for cash flow looking forward.

And last but not least, we need also to understand this business is not just producing cars. It is also meeting customer expectations in the way we sell and service those vehicles, and we will hear a bit more from Erik about that later on.

If you look into electrification, first quarter, BEV growth for Volvo was 12% up, and that was the fastest growth in the premium segment. We reached then a BEV share of 24% also leading in -- amongst our peers and even higher percentage if you include chargeable cars. So all cars, which can be charged is now very close to half of our production, which is also class-leading.

So strong momentum from electrification, and on that market, also, of course, very important now to have a really top product. EX60 is really a car without compromise, It is developed as an electric car and is introducing some new groundbreaking technologies, sell to body for a longer range, more batteries installed in the car, and mega costing to bring down cost, eliminating more than 100 sheet metal parts into one single casted big body part.

We also introduced with this car the Hugin Core, game change and core system, the base for software-defined cars, as I said earlier. This is also a system which has been very -- we're proud to be recognized by Standard & Poor as the only established carmaker who are on the levels 5 level when it comes to software readiness. And this is thanks to the Hugin Core technology.

We will also sell this car in a very transparent way. will be 7 base model, you choose color, you choose interior trim and you can choose a couple of other options like wheels or tow bars. That's it. So it will be easier than ever to find your favorite Volvo on our new car selector site.

Production started successfully. Demand is way above expectations and also very important to see that the profitability of the orders are also above expectations. So it's really an important car now for the second half year when we -- with electrification will come back to growth.

But it's not only this car, it's also important to add other cars to really increase addressable markets. For example, our smallest electric cars will be updated with a better interior, but we will also introduce a new entry-level powertrain so to really increase the addressable market.

In China, we do similarly with XC70. There will also now be front-wheel version to addressing a lower price bond and really having a China developed car fulfilling the expectation of Chinese customers. Our flagship cars, the EX90 and ES90 will also be introduced on further markets in Asia.

Another thing not related to the hardware is the update. We have always said that Volvo will be a car that will be better during its life. And now we do a very big example of that, 2.5 million of our cars already delivered to customers will be updated and get totally new improved user experience inside the car. So I think this is also an example of what we will see more of.

But there will also come more car news in the future. So stay tuned for that.

Let me then stop and by looking into really what we are working on this very turbulent, tough market. We are increasing our efforts in cost and cash. We had a very successful year last year, SEK 8 billion saved. We had an ambition to do SEK 5 billion more this year. And in quarter 1, we saw SEK 1.4 billion of that being materialized.

So we are well on track to see the SEK 5 billion happening during this year. And as I said, investments will now be in an affordable level to really support our development back into positive cash flows for the company.

Synergies, we are increasing our efforts to jointly with Geely work with procurement to bring down material cost of our cars here in Europe as well. Another example of syngeries is we are consolidating the production of the Polestar 3 car, which we contract produce for Polestar, has been earlier done in China and U.S. Now we concentrate that to Charleston in the U.S. to have a better utilization of the factory.

Another example is which we have introduced. Volvo will take over the full responsibility and add those cars as an addition to the Volvo offered products to our customers. And this will, of course, be a very valuable addition for us. We have a broader program. We can go down in pricing for certain models. And for our partners is also, of course, a very valuable addition, especially as we are going into an electrified future with less service.

Top line is also something we need to focus on much more. We have been successful with the cost focus. Now we need to focus on the top line. And it's, of course, electrification as a driver for growth, but it's also operational sales performance.

What can we do more short term? How can we activate our network to be sharper in selling our cars. It's also about bringing out a new way of offering our cars, a more customer-centric offer. That is where we start with our EX60.

So I think that's a good transition to leave the world over to you, Eric, to talk a bit more about what we do on the commercial side.

Thank you, Hakan. So I want to start talking a little bit around what does the world look like on the macro. If you look at the 3 main regions in the world, it's a quite different basket that you see. You see a very tough market in both U.S. and China, whereas Europe remains resilient for us.

I'll talk a little bit more in detail about Europe on the next page. But looking at Europe as a whole, we see that the premium segment is up, but of course, there is a pricing pressure in Europe as well. So it's very important for us, as Hakan mentioned, to secure the pricing quality in the market.

We have a stable market share and we have a very strong increase in Europe on the order pace, which I will talk more on, on the next side. The growth in Europe is happening through electrification. That's very clear. We see clearly now in the last 3 weeks, 4 weeks is the energy crisis started. It is very much electrified cars that drive the growth in Europe.

If you move to U.S., it's a much tougher market. It's a tougher market than we expected, to be honest. And it's driven basically by 3 different activities or impacts. And it's, first of all, a record low consumer sentiment in U.S. right now. We saw a rapid deterioration of consumer sentiment in the last month since the Middle East crisis started. And that is, of course, impacting the car market, where the whole market is down in U.S.

At the same time, you have removal of incentives for electrification, such as the 45W regulation in the U.S. That has driven the full electric market down by 34% in the quarter. And thirdly, the tariff and pricing equation is impacting the market as well. We are seeing an increased competition in segments where competitors have locally produced cars.

And of course, in those scenarios for us, importing cars, it's very important to be very prudent on our margin structure, protect the top line and making sure that we are keeping a premium price position in the market and healthy margins, which has impacted volumes in the quarter.

If I go to China, China remains the competitive center of the automotive world, if I put it that way. There is a lot of new entrants, is driven by the domestic players. We are seeing, however, that the traditional premium is down, Volvo is also down, but we are holding our overall market share, and we're growing on PHEVs with the XC70.

And we think that the long-range PHEV product for the premium customer in China will be very important because it is a perfect bridge if you're moving from a combustion engine car into an electric car. We can also see in China that transaction prices are under pressure. However, when we are looking at it from the Volvo perspective, our transaction prices are holding better than competition, which also gives us a proof point on China.

But it will be very difficult to drive profitable growth in the coming quarters in China. So we are also there taking active measurements to protect our pricing quality.

But let me double down on Europe. Europe is our most important region when it comes to both volume and above so on earnings. And in the commercial strategy foundation we have put in place now, we have 2 legs. One is perform here and now, and one is transform for the future.

And if I look for the performance piece, what we've done here in the quarter, we are one of the fastest-growing premium BEV brands, and we're increasing our overall retail order base heavily in Europe right now.

If we look at the sales side, we have 10 markets in Europe with a double-digit growth. We had, for example, U.K. with an all-time high, Norway as well. We had 18% growth on BEV sales. We are taking market share on BEVs. The growth in Europe is coming on the back end on electric vehicles. And this is on deliveries.

So this is before the EX60 has started to hit the market. If you look at the order pace in Europe, it's an even stronger story that comes forward. And of course, we're seeing that on the back end of the EX60. And also, we can see that we're converting those orders on a higher margin than what we had in the equivalent product on the PHEV side.

Now of course, it is also a very competitive market. We see that in certain markets in Europe, such as Germany, that there is also a high pricing pressure coming because a lot of volume is going into Europe. So it also means that it will be important for us in the coming quarter to balance the equation as well to really protect our margins and making sure that we pave the way for the EX60, which will start impacting in the second half of this year.

If you look on a little bit more of a long-term perspective or transformational activities, as Hakan talked about, is very much about making the customer -- putting the customer in the center also in the sales journey when they're buying the car and when they're owning the car. And first of all, the most important thing is to have one Volvo for every customer. With the addition of EX60 now and look at Europe, we have a very complete portfolio with PHEV, very competitive still, but state-of-the-art electric vehicles such as the EX60.

We have launched the care offer, which is an all-inclusive hassle-free offer for the customer with one transparent price in the market in Sweden. We have bundled that in Sweden also with the free energy for 3 years when you buy EX60. Of course, that drives a lot of interest from our customers. We can see that consumers really value that simplicity and that hassle freeness of owning a car.

Simplicity, Hakan already covered. We are exploring that with EX60 and we are really seeing the momentum in the product also by the ease of buying it, the ease of understanding what it is that you're buying. So that's also something we're pushing very hard. And additionally to that, we are working very hard to also have more flexibility and more adaptiveness in our delivery system to our customers.

So all in all, we have a strong underlying momentum on the here and now. We are on track for our transformational activities. There will be a heavy focus on sales, of course, in Q2, and the EX60 will start impacting the second half of the year.

But with that, I'll hand over to Fredrik to take us through the financials.

Thank you, Eric. So let's walk through the financials, starting with an overview of Q1. And I guess the summary a bit, as Hakan said, is very focused execution in a challenging external environment.

Retail sales was down 11%. Wholesale, only 3%. This year, basically, as retail is now more normally balanced to wholesale. Revenue, however, down a full 12% and that's largely driven by FX.

Profit margins largely flat versus last year, but still at a challenging 2.2%. Cash flow minus SEK 10 billion due to seasonality as common in Q1 and also due to the previously announced inventory buildup of the EX90 and EX60 in Tushlanda to protect the full year output as we ramp up the EX60 in that plant.

Importantly, on cash flow. Last year, we had a linked transaction, which positively contributed. If you justify for that, we see that we have a better cash flow this year than we had last. Double-clicking on revenue. Last year, we were at SEK 82.9 billion. We see that volume is actually counterintuitively maybe taking up revenue slightly.

That is because we have a slightly better channel mix, so less fleet sales and rentals and things with buyback guarantees on. Sales mix and pricing is pushing it down SEK 3.4 billion. And then FX, as I said, impacting a lot, SEK 6.7 billion. And in the past 12 months, the SEK has been one of the strongest currencies in the world, as you know. So versus the dollar, for instance, we're at a 17% weaker dollar.

Other is down year-on-year, but that's largely one-offs due to sales of subscription card portfolios that we did last year and not recurring this year. So ending the quarter at SEK 72.6 billion.

Turning to EBIT. And maybe before diving into the numbers, we have a new format that I want to introduce to increase transparency towards you guys. So before, we have basically not really shared any of the cost development in terms of year-on-year. And all our capitalization and depreciation and amortization has been grouped into one big bucket called other.

So for transparency, we're now separating out what we actually measure in the cost and cash program that we launched in Q2 last year, which is variable cost and the indirect spend. We've also singled out the changes happening year-on-year in the capitalized product development and depreciation and amortization. That's really because we are now entering a different phase.

We're coming down from this big mountain of investments moving towards affordable frames. That also means that new assets are coming online, which is good for top line, but it does also weigh down on our accounting profits as we start to depreciate and amortize.

So with that, if we turn to the numbers. So last year, EBIT was at 2.3%, SEK 1.9 billion. Volume is taking it slightly up, but as Eric alluded to, the market equation is challenging, bringing the profit down with sales mix and pricing being down 1.9%. We are largely offsetting this by the clear performance improvement driven by the cost and cash action program. So year-on-year, it's a SEK 1.7 billion improvement in variable costs running across all major dimensions: materials, logistics, manufacturing and warranty.

We also see indirect spend. So spend being more the cash view I should say, real money going out. There, we have a SEK 1.4 billion improvement in everything not going into the car. That said, on an accounting level, capitalization is lower, which is taking down the result in part from lower spend but also as we are in different stages in our car programs.

We also have depreciation and amortization on a higher level, bringing down the result. FX, underlying actually negative, but we have hedges offsetting that. And then here, it's stated as a positive SEK 0.5 billion because last year, we had negative balance sheet revaluations, which are not coming back this year.

Lastly, we still have another bucket, minus SEK 400 million. That has still a lot of positives, better parts and accessory sales, CO2 credit sales. It also has a very big negative, which is the U.S. tariffs, of course, weighing us down year-on-year.

We end the quarter at 2.2% and SEK 1.6 billion.

Turning to cash. This was heavily impacted by seasonality and inventories as always in Q1. We start the quarter with a very strong liquidity SEK 81 billion. We have SEK 8 billion contribution from the underlying business in EBITDA. Inventory then taking that down with net working capital in total, down SEK 8 billion.

Other working capital down SEK 3 million and then SEK 7 billion of investments, as previously communicated, largely linked to the EX60 now starting production or started production last week and also finalization of the actual plant.

Financing, slightly down. That's a repayment -- scheduled repayment of debt that happened in the quarter. So we end the quarter also with a very strong liquidity of SEK 70 billion in total, SEK 46 billion in cash.

So if we briefly then look ahead, focusing on the very near term, we see that the execution of our cost and cash actions is progressing also into -- now and into the second half. That said, we have a very challenging market equation, as Erik talked about, Beyond this, we also see elevated raw material costs, which is increasingly flowing into the result.

And due to the conflicts in Iran, oil prices and freight costs are also increasing, which is starting to weigh us down as we look ahead. In Q2, we also had a very positive thing. The new beginning began. The EX60 started production, which is great. But as you know, we are ramping that up during the second half, meaning that the profit contribution starts towards the later part of the year. However, as we go online, that means we have launch costs and we also start with linear depreciation and amortization of some of those assets.

Turning to the second half. We do see volume growth from things we can control. So an uncertain market, but we are, as Hakan and Erik said, we are expanding our portfolio. We have the XC70 front-wheel drive in China. We have an entry variant of the EX30. We have new markets for the EX90 and ES90, and very importantly, the EX60 is starting to ramp up.

And that also means that we see that our bev share will grow. And we also get a lot of confidence, both in the short term and current year, but especially in the longer term from the very profitable order momentum we're seeing on the EX60, which will start to contribute as we progress throughout the year.

So with that, our ambition for full year volume growth and cash flow remains. So let me hand over to Ron. Thanks.

Thanks, Fredrik, Thanks all. And now we are all set to start the Q&A session. As I said at the start of the call, you can join the Q&A round either by sending in your questions via the chat. We already see a lot of questions coming in. So I think that's well figured out.

But you're going to also have the opportunity to be able to use the phone lines. So please use the link below and press star 1, 1, then we'll be able to hear you.

But let's get this started. The first question coming in, whoever wants to take this. You have a volume growth ambition for the year, which we reiterate, but as you say, U.S. and China is looking weaker than expected. So how do you drive volume growth in the remaining quarters to meet that ambition?

Maybe I can answer on that one. I think first of all, it's not volume growth. It's not a target on its own. We need to be very prudent in retracting markets on protecting our margins. So I think first of all, I would like to say that we will optimize for profitability in these markets.

What -- the key way of driving volume growth is basically 2 things. One is to have the right products at the right time. We see that now with the order pace of EX60 and the second piece of that is to have a commercial machine that works really efficiently together with the network, together with the marketing, together with the brand building activities, et cetera.

And we are addressing both those levers, I can say, in the different markets in different ways. Both U.S. and China have new product launches. And in Europe, we have a strong momentum on the back of the EX60.

All right. That's good. Regarding EX60 profitability, we have a lot of questions on EX60. So let me try to club them in some ways. So let's start with the profitability one. EX60 profitability, Hakan, as you said, is higher than expected. Can you give some color, how much, anything we can say on that?

Maybe you can say it. I mean, one of the basic with this car, this car should be the first electric car, which is really priced on the same level as a normal plug-in hybrid. So I think it's opening up this car as an alternative for more people.

So -- but even with that pricing, you can say that the margin for this car will be better than for a plug-in hybrid. I think that's -- yes, that's maybe how we can quantify it without going into numbers.

Good. Staying with EX60. This is from. Are there any EX60 production delays. They asked that customers who were among the first to place orders were promised during delivery this summer. Will we meet that? They say we also hear there are some issues with the supplier and but overall, EX60 on-time.

Yes. Probably a lot of issues, which there always are, and is, of course, a very challenging ramp-up all new technology. I mean, nobody in the world have made the cars with the cell -- battery cells directly into the body. So that's, of course, a huge challenge.

But having said that, we are within the plan. And then so far, it looks all according to plan. And then we are looking also into possibilities, could we squeeze out some extra costs, but maybe some extra shifts during the vacation as something very positive challenges and problems to look into. But -- so all according to plan.

We started the production last week already. So plant is running.

And I draw out the first car and it worked.

That's right. The more EX60 question, but let me first bring in a caller now, and that's from GP.

Yes, this additional cost savings in variable costs, are there any more specifics how much that will affect this quarter. and also how it will affect head count in the organization?

We don't comment specifically on how -- what's happening in the coming quarter. But this is -- we launched the cost and cash action program in the second quarter of last year. As we communicated in Q4, the cost target set out in the SEK 18 billion was SEK 8 billion. We achieved that already last year, well ahead of time. So therefore, we're stretching the bone now with another at least SEK 5 billion cost reductions. And we see that we have a plan to get there.

In terms of big headcount reductions that we did already last year with 3,000 people leaving us by the end of October or November 1. So we don't see that recurring. But we will be prudent in hiring. We are focusing on leveraging the new structures we have set up to get -- become smarter and leaner and meaner maybe.

Okay. All right. Staying with the EX60 questions coming in on the production for this year. We've also said increased production, Give us some color on production and expected retail sales on that production.

No. I mean production, the plan we have now is around 40,000 cars and then I think the problem selling those is not a big problem, Erik. How many of those cars will be really delivered this year, can we say something?

I don't think we can say an exact number, of course, but we can say that we will sell every car we can produce this year when it comes to the EX60 and of course, we are trying to pull ahead as many deliveries as possible of those 40,000 cars into this year, but 40,000 production volume means slightly lesser deliveries for the year.

Good. This question comes in from Kiran who asks, U.S. government has now started tariff refunds. How will that impact our cash flow for 2026?

Would be good. Do we get them, Fredrik?

Hopefully.

Hopefully, that's going to help. This question is from, Belgium reporter from Digit. He asked the Belgian government has created a task force to support the Gent plant. Can you elaborate on the situation of the plant relating to your production being the only European plant without mega casting? Will we introduce that and we confirm other products that will be introduced, so something around Gent?

I think we have been building cars in Gent since many, many years. very important factory for us. So we would, of course, like to stay there and expand. But we -- I think we have had a cost problem in that factory for a long time. And that's really what the question is referring to.

We are working now to see how can we bring down cost in that plan. So it will be really competitive. And if we have a program for that, of course, then there is -- we are open to use this factory, we're open to look into also possibilities.

Maybe we can contract assemble cars for other brands in the group, other Geely brands who wants to enter Europe. So very important that we do that. And that would, of course, secure the future of that plan. So I'm looking forward that we really can come to positive results and very concrete savings as well and we would very much like to be the last one standing in Belgium.

That's right. This is from Autocar, Charlie Martin, Charlie asks much has been made of EX60's capabilities as a software-defined vehicle. Please could you elaborate on what new opportunities this opens up a Volvo as a business and for the consumer? How does this compare to previous Volvo models?

Maybe I can start on that one. I think -- I mean, I usually say that the software-defined car is for the automotive industry, what the smartphone was for the phone industry. It is, in essence, a car that will become better every day, and it allows us to do quick iterations of customer features, to upgrade the vehicle, to improve residual values, to focus on different things in the customer journey.

In essence, it makes the car better. I think that's the starting point for our offering. It's not by definition to drive selling software to our customers, is to give the customer a better product. and a product that grows with the customer over time. And therefore, this is so important step in the technology journey.

There are 2 kinds of car companies. There are those that have gone through the software-defined journey and there are those that will have to go through that. There is nothing else in the industry right now, and we are part of the first group, which brings me a lot of comfort selling the cars to the customers right now.

Good. Another question staying with software preparedness. Given Volvokar software capabilities and recognized now by S&P with Level 5 rating, are you in talks to share that tech with other OEMs?

We will be open to discuss that. But first priority is, of course, to deliver to our customer new features. And I think with the central architecture, the big advantage is you can be much faster and more responsive to new ideas. And I mean you never know exactly what will be built.

I mean nobody had an idea of what type of apps you would have in an iPhone in the future. But here, you have a platform which is really open for developers. Today, the development is done in 100 different boxes, and we have to steer it with the requirement and wishes to the suppliers with the central architecture, we are, of course, in a totally different way, controlling the development. and that will be much faster and better. I mean that is what our customers will see looking forward.

Right. We also have a lot of analysts on the line and sending in questions. But let me take a few more from the journalist before we -- this comes in from Lennart Russ, who asks, how have the recent changes and ongoing review of EU's 2035 CO2 targets for cars affected both your internal planning and your current sales performance?

I think maybe you can correct me, Erik, if I'm wrong, I don't see any really sales development from that. I think it's, of course, we feel a bit unfair that if you have done big investments in being fast out on the market and then suddenly it's not valid. The guys who have not done it or on a level field with us, that's not fair. .

And of course, we would also calculating with certain income from selling of tax CO2 credits, the value of those is now, of course, also less worse. So that is disappointing. But if you look into our main strategic direction, it remains the same.

And I mean, even if 10% of the cars could be non-BEV in the future, I don't see a big change in any of the automotives R&D activities. I think we will see a lot of new electric cars brought out on the market. And for sure, we are betting on that. because it's a better car.

So even without the legislations, customers get a better car and they get a lower cost of per mile with driving electric. So -- and of course, it's part of our strategy, it's our way to grow as a company.

Now let's move over now to the analyst side of the Q&A. For all the journalists, you -- of course, we have the press lines open. So feel free to send in your questions, and we'll be there responding to them.

But now let's move over to the analyst side and we could have a couple of callers who might have just joined us. So maybe, Fredrik, I'll turn to you first to just give us a very quick overview of the main Q1 takeaways.

Yes I think main takeaway is stable profitability in the quarter, 2.2% despite 12% lower revenue, driven a lot by FX. Importantly, strong growth in electric cars, especially in EU, 18% despite the EX60 not being rolled out to the customers yet and contributing.

Also very strong performance in terms of our cost and cash actions, really showing that flowing through to the numbers. In terms of cash out, it's more than SEK 3 billion less in cost as compared to last year.

That said, tough market, a lot of competition in China, a lot of slow demand in the U.S. and also U.S. tariffs weighing down the result as compared to last year.

All right. So let's dig into some questions. Let me take the first caller then this morning, and that's Harry Martin from Bernstein.

I have one question on costs and then one on the on the relationship and thinking with Geely Group. So on the cost side, can you just help with the way that the impact of higher raw materials, both semiconductors and the other material costs that have been increasing in certain markets in recent months, how quickly that flows through into your P&L with all the hedges and the agreements that you have in place?

And then also if you could quantify the impact of lower warranty costs in Q1, that would be helpful. Some of that was called out as a positive. And then, yes, I mean, on the relationship with the parent shareholder. We've obviously seen various new stories about the Geely brand growing globally. I read a piece yesterday about the opening of some dealerships in France.

So how does that play into your potential competition with Volvo branded cars and how does it play into the strategy to integrate and generate more kind of savings within the group?

Maybe Fredrik if you want to start with the cost question and then.

Yes. so on raw materials, it flows through a bit differently depending on what raw material and how it's contracted. About 1/3 of it we have hedges for. And then it will continuously roll in. But we're starting to see now already in Q2 that a lot of the elevated levels that has been going on for some months will roll in with higher force.

In terms of lower warranty costs in Q1. That is a pattern we've seen for quite some time. And that is basically largely on the meta level, driven by the fact that we have more software update capabilities, fixing our problems, meaning the problems are fixed at no cost.

And the underlying quality of our cars when it comes to actual repairs that need work that cost money is pretty much on a record level. low level, I should say. And that means that we are releasing a lot of the provisions we've done in the past because we are performing better on sort of hardware quality, if you will, and software quality, we think for free.

Maybe I can answer on the competition piece of the question. So I think, I mean, the automotive industry has always been a very competitive place. There are many different brands to compete with and when we are talking within the Geely Group, it's important to remember that we have a quite clear brand separation. We're also addressing different customer segments, as Hakan alluded to on the where we will now take over as a sales partner for that brand in Europe.

We see a very good opportunity of addressing 2 different customers with the Volvo car and I think it starts with that. We have a very clear plan and also to have a very thoughtful way of approaching different customer switches, but I think we're having within the Geely Group in Europe right now.

And something on the Geely synergy part as well? Does this...

In addition, I mean the Chinese car industry will, for sure, enter Europe, and there will be new unpleasent competitors. They will probably replace some of the old school competitors we have. So -- and of course, it's very difficult for us to believe that Geely would refrain from going into Europe.

So in some respect, there could be some competition, but I would say mainly, addition. So I mean, if Geely enter with Geely brand, I assume that will be in another price element. So would compete not to Volvo, but to other brands on the market.

Synergies is also coming from that, of course. I mean, we have really 3 synergies with 3 areas. One is really development of cars for China, which needs to be much more China for China, super competitive out of pilot, cockpits, smart cockpits and everything, I mean, very difficult for us to develop. There we can just take software from Geely and put into our cars we sell in China. It's one very obvious example.

Second example is really hardware components, which we could take from Chinese suppliers and which are then bought in a totally different volume than only Volvo, will bring down the cost level of our fantastic new EX60 car, for example, a big potential.

And the third area is we will focus totally on all electric cars on the news platform, but we need bridge solutions, long-range plug-in hybrids like the XC70 we have in China, would also need such cars here for U.S. mainly and maybe also for Europe. And those cars, of course, we could develop to a much lower development cost.

We would never -- would not be within our affordable frames, Fredrik, So we need to be smart and do it in another way, and that's a third example of synergies with Geely Group.

Staying with our callers then. The next one is Pushkar Tendolkar from HSBC.

I have a couple of questions. I hope you all can hear me. So my first one is on EX60. So if I look at the last 3 years, volumes for the EX60, it's been very stable at around 230,000 unit level. Combined EX60 and XC60, what sort of a level do you think at a steady state? So not necessarily '26 but going forward when you have the full availability. And just related to that, what sort of flexibility do you have to adjust production across those 2 powertrains for that particular model depending on where the customer demand is?

And just the second one on the cost and cash program. If you can provide us -- I mean, you had on the P&L savings of SEK 3 billion now in Q1. If you can give any color on how you progress towards that SEK 5 billion target for 2026, that would be helpful.

Good. Should I start with the sales and the flexibility piece and then you cover the cost and the financials. So first of all, when you look at the total global XC60 sales, it's important also to note that we are having local production in China of the XC60 and one part of that volume you referred to is, of course, sold in China, where we're now entering with an XC70 as well. So part of the XC60 growth also will be added towards the XC70 in China.

But if I go to Europe, what we are seeing is that the combined order pace of XC60s and EX60s is providing growth for the company. I will not comment on the exact numbers, but we can definitely see that with adding a product such as the XC60 to an already very successful product as the XC60 that drives growth.

As to the flexibility, well, the good thing in that sense is that we're building these 2 cars in the same plant in. So we have a very high flexibility in that plant of shifting between models. Of course, if not 100% you can shift, but we have a high flexibility since we have the cars in the same plant. But I'm very confident that combined, we have a very strong product offering in the SUV segment.

And U.S. will also start producing XC60.

Yes. We will also localize the U.S. -- the XC60 into U.S., which will further relieve Tushlanna to meet even more capacity on the EX60. Good point. .

I think on the cost and care progress towards SEK 5 billion.

We're making good progress. And of course, it's important to note that we started this program Q2 last year. Now we're comparing Q1 to Q1 and a lot of the actions we already implemented last year now is now fully flowing through in this quarter.

You will not see the same year-on-year effect next year as we started implementing the program. But we are progressing well. We're saying at least SEK 5 billion. There will be some headwinds in this with raw materials, logistics costs, et cetera. But to us, that SEK 5 billion includes those headwinds.

I hope that answers your question, Pushkar. This is a written question from Matthias Holmberg from DNB. The EBIT bridge shows SEK 0.5 billion year-on-year FX contribution despite a negative SEK 6.7 billion FX revenue headwind.

Please help us understand how much of the EBIT level FX benefit relates to balance sheet revaluation versus transaction hedges? Is any portion of this as nonrecurring?

Yes. if I round it a bit, you can say the SEK 500 million positive you see is balance sheet revaluation we had last year, which is not showing up this year. So then on a year-on-year basis, it is actually a positive.

If you look at the underlying flows, they are negative, but they are also offset by the financial hedges we have, right?

And staying with the topic of the FX, can you provide some numbers on the FX impacts on the balance sheet revaluations to help us differentiate between real spot and revaluation based FX headwinds.

I think in Q4, we had a very large revaluation effect. It was almost SEK 1 billion, and that's very dependent on the fact that we have almost SEK 400 billion balance sheet and FX swings in the last days of the month have a large impact. For Q1, we don't really see a big balance sheet revaluation effect.

Good. Question from Ross MacDonald on the Lynk & Co piece. On the Lynk & Co sales model for Europe, how should we think about the benefits to the Volvo Car shareholder? For example, how much do commissions from selling these cars split between dealers and Volvo Car? Related to this, how should we think about risks from cannibalization? You've partly answered the question but maybe specifically.

But it's a good question. I think that -- I will not comment in detail on volumes and numbers, of course, on it. But what we see, first of all, Lynk & Co is a brand, which we can position in combination with the Volvo brand addressing a completely different customer segment.

As Hakan talked about, that is a different kind of car from design, from price points, appealing to different customers. The benefit for Volvo on that, of course, is that we have a higher volume, for example, in our network. It's important for our retailer partners. It's important for our service business. It's important to drive growth to basically appeal to more customers.

So I think that is a quite important part on how it will contribute to Volvo. As for the commission and how we sell it, the dealer remuneration, the whole point is to use the Volvo commercial machine, if you like. And then using similar setup that we already have in place with our network.

So it will basically follow the Volvo logic on how we're selling cars in Europe. And therefore, it was also very easy to implement for our retailer network, which I think is the most important thing of this is it's a plug-and-play solution using an already existing network.

All right. Good. The next caller, and that's Nikita Papaccio from Deutsche Bank.

The first one, I mean, thank you for the color on your Q2 and H2 situation. So as I understand correctly, Q2 should be impacted by D&A and EX60 production ramp-up. So I would assume a lower margin before seeing better margins in H2. Is this the right way to see this?

We're not guiding specifically on margins, but there's, of course, a lot of headwinds we're pointing at in Q2.

Yes. And if you then think about the U.S. tariffs, I mean, Q1 was impacted because we had no tariffs in Q1 last year. How should we think about this going forward?

The tariff situation was quite unstable last year, as you remember. So it is a bit tricky. We had extremely high tariffs, 27.5% U.S. tariffs in Q2, not fully flowing through to our financials, though, because you had cars on inventory that came in before.

So if you look at the full year, we expect the sort of what we've guided before, about 1% EBIT impact on the full year. that will not play out fully linearly based on how the tariffs actually changed year-on-year. Yes, complex answer.

Fredrik, maybe add something regarding the tariffs into Europe, which was -- is now going to be 0, down from 10%, how will that influence because it's still not materialized?

No. So that is an upside that we see, right? So if Europe acts what has been stated, basically 0 tariffs for U.S. imports into EU, especially if they do that retroactively, that would, of course, be a big benefit to us. So we're hoping for that.

Perhaps some upsides. .

Question from Agnieszka Vilela, Nordea. But I think this was again back to Q2 color, and I think you've already answered that question, Agnieszka. So hope that answers the previous question, so you had the same one.

H2 growth drivers. We speak a lot about Q2. So can you tell us a little bit about H2? What -- when does the turnaround happen? What do we see in H2 driving growth for Volvo?

You want? Should I?

Now, you start, I'll chime in.

I think what we're seeing in terms of product or growth is really product-driven growth and product-driven growth is something we can control. I mean, we know that we are expanding our addressable market with the entry price point of the EX30 going down. Same thing in China with a front-wheel drive version of the XC70. That's also expanding the addressable market because we're touching a different audience.

And then EX90 coming to more markets and most importantly, the EX60, huge demand, great profitability on the order intake, great media reception, a lot of excitement, and people haven't even test driven the car, right? As we get it out to dealers, even more people will want to buy it. And then our challenge is just how can we produce to that demand. And that will support the second half.

No, I agree, and I think also to add to that, maybe the new ways of working with our commercial network to be more efficient as Hakan also talked about with our retailer partners, driving a different sales process, being even more prudent on how we follow up with the lease, all the massive interest we now generate from the EX60.

But also importantly, the different way we're offering the cars, like all-inclusive offer we have now with care, including free energy in times like these where energies and everyone slips, it's quite powerful to be able to say if you buy an EX60 you will have no fuel cost for the coming 3 years.

So we see a lot of customer interest also coming out of the way we're offering on products, which I think personally would be a huge factor on how we will drive growth in this market going forward.

Good. And we have -- probably will take this one last question. Maybe I'll turn to you, Hakan. It's also probably a good way to bring this call to a close. We presented -- Volvo Cars presented its strategy update some months ago with a clear value creation approach. But since then, we've seen Volvo Car's EBIT margins come under a lot of pressure. As CEO, what are you doing to bring Volvo Cars back to the 8% guidance or the ambition that the company has set?

It's basically to continue doing the things we can control, continue building up a high-performance organization with a really good productivity. And of course, just continue bringing out the cars. We are quite sure we need to be able to transform into the electric segment as fast as possible because that is our way of growing the company and bringing up profitability.

So EX60 is the first one, of course, on a totally new platform, but we are planning other cars on that platform as well. So we still have the ambition 2030 Volvo should be able to offer electric cars, all electric cars to our customers. But we will also have for those customers who are still not ready to charge, we will have plug-in hybrids of the second generation to have a very flexible transformation.

So we will be ready, as we have always said, 2030, but of course, we need to also wait for our customers. And therefore, we have this addition which we will do in a very cost-efficient way, utilizing synergies from Geely. So short answer is we will stay on course, and we are very confident that our strategy will deliver a company that we will exactly what we said with the capability to deliver 8% profit margins.

All right. Hakan, Fredrik, Erik thank you very much, and thank you, everybody, for tuning in. If we have missed answering some of your questions, of course, the Investor Relations calls and the Media Relations team is there to take all your questions. But from all of us here, have a great day ahead. Goodbye.

Thank you.

Good morning. It's been 2 weeks since we revealed the EX60 to the world, and the verdict is loud and emphatic. It is the very best-in-class, a car that has been designed, engineered and manufactured right here in Gothenburg, where we are coming to you from this morning.

A warm welcome to our fourth quarter financial results. My name is Ron. And as always, I'm joined by our President and Chief Executive, Hakan Samuelsson; and our CFO, Fredrik Hansson. At the top of this earnings call, Hakan and Fredrik will walk us through our performance during this period. And thereafter, we'll throw it open for a question-and-answer round. You can either type in your questions, and I'm going to read them out for you, or simply use the phone lines to call in. But I'll come back with more information closer to the Q&A round.

But for now, I hand it to you, Hakan.

Good morning. And welcome also from me to this quarterly presentation. So if we go back a bit to the year where we started the year, we had a very challenging starting point. We had the sales dropping. We had a low profitability and a negative cash flow. So we set out a program really to reset the company and put it on track. And we identified 3 areas, which I'll come back to a bit.

And the first one was then profitability. We need to fast bring the company on the track to profitable growth. We defined a SEK 18 billion package was seen as very challenging. We thought that internally as well. And we can see now that, that has really been done faster than we thought also internally. So we had a good cost saving of indirect cost and variable cost of around SEK 8 billion, which we have done. We have done cost actions to improve our cash flow. We also introduced a more leaner organization. We reduced the headcount with around 3,000 positions, which we also have done with very little disturbances and frustration from people. It has worked very good. And we also have brought down our investments to affordable level. So I think even though this not have brought the bottom line that we would see internally, we have had really improvements faster than we thought.

The second area, which we set out as very important, was to bring back the company on the direction to electrification. And there, of course, we need new products. And very importantly, in China, we launched the first second generation of plug-in hybrids because this company should be ready to be all-electric 2030, but we are also realistic for those regions and customers still not ready, we need a bridge solution, which we call the second-generation plug-in hybrids, really an electric car, but with a backup engine to get the longer range. That has been launched in China. It's a success on the market.

And then very importantly, we have brought out the SPA3 to launch that. You saw in the video here in starting, and very important car because it shows the future of Volvo as an all-electric, absolutely top player in the all-electric premium segment and we have nothing to shy away from with this car. We are absolutely leading in performance with that car. So it will be a game changer for Volvo, and it will also increase the addressable market. And last but not least, in electrification, we now have the 90 segment, is really complete out with customers. We have the SUV EX90, but we also have a sedan ES90, both selling and both are really Volvo flagships.

And third area we defined then in the beginning of the year is we need to be more regional in our business. And this is really the necessity for us to maintain a strong global brand, then we need to be regional in our tactical approach to the market. China is the first where you can see effects from this. I think we have now -- even though on a very tough market where our European colleagues are really struggling, we have increased our market share in the premium segment, and we have a more solid volume, is kept on this level. And now we also are introducing the XC70, which is a driver for growth.

In the U.S., we will localize more cars. XC60 will be the first one, the best seller in the U.S., but we also said there will be a next-generation hybrid coming there also. And this is, of course, to build where you sell, avoid tariffs, but also really the best way to avoid the currency fluctuation, which is now a problem for us in U.S. We need to have a natural hedging. And that, you can do with more local production.

And last but not least, Europe, we have ramped up the EX30. Now it's built in Ghent. It's not imported from China. And now we will boost the volumes of that car in the next step.

So a year of a strategic reset. And if you look now into the more financial figures, what did we deliver during the year. Volume was, in the quarter down, also down even more for the full year. So at least we have a lower trend in the reduction. And more importantly, the BEV sales is up 12%. I think that was also one of the ambition we have with the year. Pricing pressure increased, of course. We have lost some incentives in U.S. for EV cars, also in China. And the EBIT was also down to 2%, which, of course, is not the level where we want to be, but we have some external factors, tariffs and exchange rate on top of a very tough price competition, of course.

What I think is positive is that we return to positive cash flow. That was really the -- internally the #1 target for the company. We need to stop burning money. We need to come to positive cash flow. And that we did for the full year. We came back to SEK 2.5 billion cash flow for the year and very solid in the last quarter with SEK 8.8 billion. And altogether, we had an EBIT margin of 3.5% for the year. So of course, not where we want to be. But if you look at this really severe headwind on the market external factor, I think it's still a reasonable result. And I think it's a good base to build from now when we enter into 2026.

If you look into electrification, I think it's also good signals and showing that we are on the right way. The percentage of electrified cars up to 46%, close to half of our cars are now chargeable. I think that shows we are on the right way and very promising for the future. With the EX60, we are increasing the addressable market segment with 200%, and that's, of course, with a very strong game-changing technology in that car. It's a good driver for future growth.

So if you look into the EX60, very successful launch. This car has an all-new no-compromise architecture for an all-electric cars, introducing some really game-changing technologies, mega casting, aluminum part, in the ear casted part, replacing hundreds of sheet metal parts. It has cell-to-body technology. I think it's the first one in this class in the market that does that, lower weights and increases the range. And also for this segment, first car with the central compute from -- which we call HuginCore. And that is then a carryover from our SPA2 cars. So now we have the same software pack for all our electric cars, which I think is a really important thing if we want to come up with quality and have a very rapid development of new features. Production starts in April, everything is on track, and the first cars will reach customers in June -- in the summer, I should say.

So with that, thank you, and I leave it to you, Fredrik, to go into the financials.

Thank you, Hakan. So summarizing Q4. I guess it was strong cash flow in a challenging quarter is the headline, which I think is very true. Retail sales were down 3%. That in a market that was actually down even more. Our wholesale was down a full 8%, and that's really due to last year's push, which was quite unprecedented. We did a big one-off inventory reduction. And since then, we've kept our car inventory on much more controlled level. So that was more of a nonrecurring thing, which happened last year. This translates to lower revenue, of course, with lower wholesales, but revenue was even more impacted by a strong currency in the SEK.

In terms of profit, it's not unexpected, but it is a disappointing 2%. Q4 is typically a tougher margin quarter. But as previously indicated, we also have -- we also foresaw a challenging market, which we now saw, and we have quite significant effects, both from FX and from tariffs. On cash, we are very proud of our results, and we have prioritized this. Yes, last year was stronger, but that was due to the one-off inventory reduction, which was basically SEK 18 billion of reduction. And we've kept our inventory low since, so we couldn't repeat that this year. This year, instead, we see the cost and cash action plan really kicking in. This cash of SEK 9 billion does include SEK 2 billion of the last tranche of our Lynk & Co sales. But even if you exclude that, it is a very strong performance.

If we turn to revenue and focusing on revenues, excluding contract manufacturing, we were at SEK 109 billion last year. Wholesale volumes being lower naturally takes that down. We see a hit from sales mix and pricing as well. And then the biggest hit is really from FX and the very strong SEK, which has a negative impact on our revenues. All in all, this takes us to SEK 92 billion in the quarter and SEK 94 billion if we include the contract manufacturing.

For EBIT, we started last year at 3.4%, also then on the back of a somewhat suppressed gross margin, which we often have in Q4. Last year, we had a one-off item impacting comparability linked to NOVO when we consolidated that. That negative effect is not hitting back this year in the SEK 1.8 billion. If we look at this year then, the volumes, which are lower translates, of course, into a lower EBIT. We have a significantly lower sales mix and pricing coming from overall challenging markets across region. We have 45W consumer incentive uncertainties and backlashes in the U.S. In Europe, we've also repositioned the EX30 a bit on a lower price point, but that is also on the back of the lower cost that we have when we now have Europe for Europe production.

FX year-on-year is negative, SEK 1 billion. In Q4, if you look at the dollar, which is the real standout currency, it's a 13% weakening year-on-year and more than some of the other currencies. That said, if we look at the underlying flows, that's largely covered by the financial hedges we have, but these are quite large balance sheet revaluation effects we see here. On other, that is a positive, and it's a positive despite that it's significantly pushed down by negative effects from tariffs. These were also higher in Q4, in part due to higher U.S. sales. Importantly, this is being mitigated by our cost actions. So all in all, this leaves us with a 2% EBIT or SEK 1.9 billion.

Turning to cash. We see a strong cash flow from the cash actions we have, and this has been our priority. We start the quarter with SEK 51 billion in cash, SEK 8 billion contributed from EBITDA and then a strong SEK 10 billion from net working capital, both actually being able to squeeze out another SEK 3.5 billion in terms of inventory from an already low level but also improvements in payables and receivables. Investments takes it down SEK 7 billion. That also includes a positive effect of SEK 2 billion. So the net number is SEK 9 billion if you exclude the Lynk & Co payment. All in all, we end with a very strong liquidity, so SEK 58 billion in cash, SEK 81 billion in total liquidity as a year-end position.

Very quickly on the full year. I think we have a similar story on top line. Retail sales is down, wholesale is down, and that translates to lower revenue. On EBIT, it is a similar story of FX, of tariffs, of pricing pressure but also very much counterweighted by the successful delivery of the cost and cash action program. And on cash, the Q4 strong cash flow means we had a very strong ending of the year. So we are generating cash on a full year basis, and we are generating more cash than we did last year. And this is really a result of the cost and cash action plan.

Talking about the cost and cash action plan, we launched this program in Q1 with the intention to save SEK 18 billion in 2026 versus a 2024 baseline, so basically a 20-month program, if you will. We've now achieved this 1 year earlier. And this is a great testament to really controlling what we can in an uncertain environment. With laser focus, with dedicated follow-ups, with a lot of ideation, with a mindset shift across our company, we can achieve a lot in a very short time.

And that's also why we want to build on that momentum as we go into this year. We are now stretching the bow here and taking further actions. If we look at variable cost and indirect spend, we see a great momentum, and we see more opportunities in the programs we're already running. So we are adding SEK 5 billion bottom line impact targeted for 2026, which means that versus the original baseline, we will now reduce cost by SEK 13 billion in 2026 versus 2024. Again, controlling what we can in an uncertain near-term market.

On CapEx and working capital, we talked about this in the strategic update we had in November. And we are now moving down to more affordable levels, which goes well beyond this SEK 18 billion program. And this is a recap of what we said in November. But we will now, in 2026, move down to affordable levels of investments. And this is really enabled by finalizing a lot of the one-off infrastructure investments like Kosice, like mega casting, like cell-to-body. It's about moving towards structurally lower investments in software, benefiting from the fact that we now in all electrified cars coming have the same HuginCore software stack, which means that we can create better quality, better features at lower cost. And lastly, access to high-tech, low-cost China-for-China technology through Geely.

That said, '26 will not be linear. So we have quite high investments planned in the first half, with finalized large stages of the Kosice plant, which we need to pay for, and we are also launching the EX60.

Lifting our eyes a bit, we also want to remind you of our long-term strategy for value creation, which clearly remains. We communicated this in November. We are building a company with about 8% EBIT and strong cash flow generation, and this turnaround is on track. The near-term market is challenging, but we are executing towards this path.

And on the highest level, we said we're going to reach this by doing 4 things. One is to reach affordable investments. And there, we are clearly on track. Second was fixed cost discipline. There, we are delivering, and we are now aiming even higher, and we intend to make this a structural culture shift for the long run. The third was really Geely synergies and variable cost reductions. And there, we've seen the first wins, but there's much, much more to come. We're only scratching the surface. And lastly, it's about electrified growth. And here, we are laying the foundation with a best-in-class EX60 and a lot more to come. But as stated before, these are long-term building blocks.

So Hakan, do you want to summarize and share a bit on '26?

Yes. What could we say about the next year? And of course, we are working with the things you talked about, Fredrik. So we will see a continued cost and cash actions. I mean the SEK 18 billion program very successfully encouraged us to set up a new program for this year to reduce our costs with another SEK 5 billion. I think that is something where we really see that we will be able to do. We can control it ourselves. We will also bring down our investments to an affordable level. That is also something we can control and know that will happen.

We can also know that we will increase the addressable market for electric cars in the whole midsize segment. SUVs for midsized segment, we have lacked the car. And now with the EX60, we have absolutely the best car on the market for that segment. And we see also huge interest for this market segment also while there are others attractive competitors also going into that segment. So I think we will see a boost of interest for electric cars coming here during this year, and we are really well-positioned to meet that.

We will also, for the full year, return to volume growth, utilizing this momentum we see now in the market and better electric cars. So for the full year, we will be back to growth. And for the full year also with the discipline in investment, discipline in working capital, we will also see that we will get a clearly better cash flow than what we reached in 2025.

So that is what we can say about the year. So I think to summarize, a reasonable result for '25, looking into the very challenging environment but also a foundation really now to accelerate and improve in 2026.

So with that, I think thank you for listening, and then we go over to question and answers. I give it to you, Ron, to lead us here.

Thank you very much, Hakan and Fredrik. So we are all set now to start the Q&A round. And looking at some of the chat messages, it seems that there were some of the viewers, face issues following the live link. So apologies for that. But of course, this video will be available on demand right after. But we have many, many callers who are with us, and I understand you could follow the earnings presentation clearly.

So let's -- without further ado, let's get this Q&A rolling. And we're getting a lot of questions online, Hakan. So let me take an online question, and then I'll bring in our callers.

This one comes in from James. Given how challenging 2025 has been, how do you intend to return to volume growth and positive free cash flows in '26? Can you describe the building blocks for that?

I think rather it's clear. One is to continue the very successful cost and cash action program, and we set up another SEK 5 billion. That will always be the improvement in the right direction. Then, of course, the growth, we need to have a stronger offering in the all-electric segment. We have been missing a big part of that market segment. And of course, we also have been -- have problem with the localization -- not problem, but I mean, we moved it from China to Europe, and I mean it takes time.

Now we can ramp up the smallest car. And of course, we also have the quality now on the level where it should be for the software on the EX90. And then, of course, a very important here in new cars. So I think we have a solid program there for all-electric, and that together with the cars where we are really have a strong position, and that's plug-in hybrids, we will, of course, have them also for next year. So I think we have the cars for growth, absolutely.

And then, of course, the last element in our strategy, we should also have more momentum closer to customers, and that's why we are regionalizing. And I think, I mean, the Chinese organization is now more autonomous. They can work in a way with marketing and sales as you should do in China. And I think you already see some tendency there of improvements. We are gaining market share in a very tough premium segments where we are competing with other importers. And in U.S., I think so far, we have been struggling with currency, but we are now moving. We are being more local. We'll move over the XC60. We'll introduce another car. So also there, we are ready to really sell cars built in the U.S., which is also very good for the currency, of course, where we are struggling right now. It's the only way of solving that long term.

So I think the regionalization will also be a factor to really answer the question. Be more regional, have a strong electric product offering and a very disciplined cost control work. That -- those are the elements.

Very good. So let me now invite some of our many callers who are with us this morning and who have been patiently waiting. Let's take Harry Martin from Bernstein. [Operator Instructions]

The first one I wanted to ask about semiconductor availability and pricing. Are you negotiating directly with your key semi suppliers? Or will this mostly go through the Tier 1 supply chain? And do you have any expectation for the impact? We've seen headlines about quite meaningful increases in semiconductor pricing into 2026. Do you have any of that baked into the outlook this year?

And then the second question, coming back again to the free cash flow growth in '26, the guidance there. 2025 was aided by the Lynk sale proceeds, SEK 7.8 billion. So how difficult will it be to grow from that number when you have things like the inventory build on new models, some more restructuring and quite possibly the U.S. dollar headwind ongoing as well?

And then the final one, just on liquidity. Total liquidity was down SEK 8 billion this year despite the positive free cash flow. What is the minimum liquidity that you want to hold going forward? And will that liquidity number grow again next year with the guidance, so the positive cash flow?

Maybe I can take the first one, Fredrik. And that semiconductor, yes, we are -- we learned that really during the pandemic that you cannot just rely on talking to the first level of suppliers. You need to go to the Tier 2 suppliers who are really supplying our suppliers and really secure that, that we learned and started doing. So today, we have that.

And regarding the cost increase, I would say we don't see that as a major factor in our total cost level for the car. So -- but we have a good control of the supply chain.

Cash flow, Fredrik, you may take.

No, cash flow, it is -- I mean, it's really about reaching affordable levels of investments, which is a really big contributor. Then it is about returning to growth, and it is about delivering on the cost and cash action program. So it's those 3 building blocks and the outlook we see for that makes us very confident to say that we will have clearly higher cash flows this year.

And I mean, investment, we have been invested heavily in the last year. So I mean that needs to come to stop and it will. I mean that, I would say, is the biggest contributor, which we can also control. So I would say we should be rather safe in that. We will reach totally much better cash flow levels in the future from that.

And importantly, we start to reap the benefits, right? So a big part of the EX60's great cost position is the fact that we have done these investments, not to forget.

In terms of liquidity, we don't go into what liquidity targets we have. But I can say that we have a very, very healthy liquidity right now. And with more cash generation, that will grow into next year, and then you reach a point where it's too healthy.

And then we can start talking about, that would be a nice problem to have.

Yes.

All right. Thanks, Harry. I hope that answers your questions. Let's stay with the callers. The next one is Joss Asumendi from JPMorgan.

Hakan, a couple of questions, please. And Fredrik, can you talk about restructuring cash outflow that you expect in 2026? And CapEx, directionally, are you expecting it to be flat, up or down?

Second, Hakan, can you talk about product cycle? And how do you expect this to help volume and mix in 2026? And then finally, if you could give some color, please, on the profitability of your electric cars at the moment, EBIT margin or gross margin or any metric you wish to speak about? But a bit more important, which do you think are the key measures to improve the profitability of your electric cars in '26 and '27?

I can start with that, you can fill in, Fredrik. But I think the really big difference here is, for the first time, we will have an electric car, the EX60, which we can sell and price on the level of a normal corresponding hybrid car and still having an improved margin. So I mean, there is absolutely no risk that we will lose profitability if customers now go from a hybrid EX60 to an XC60 to an all-electric EX, and that is a game changer. Otherwise, we have always -- when people go electric, the costs were higher. So that is something really positive. And I would say also looking forward, our all-electric percentage will be higher. So today, we have 44% chargeable cars, all electric and plug-ins. So I think that mix will go up, and that's really the key to a growth.

You talked about the cash flow and investments. I would say, investment after years of heavy investments in new products and in new factoring cost that has come to an end, and they will not be replaced by anything else. I think we are quite confident we will be on an affordable level. And I think you can look into the figures where we were before we started this last big mountain in your curve, which you show there, Fredrik. And I mean, we need to come back to something like that, and that is affordable level and affordable level is defined as where there is free cash flow that has to come because long term, of course, the company has an ambition to return money to its owner, not to invest it into constantly new products.

Yes. Fredrik, can you fill in more?

Maybe adding on the structure of the cash flow for the year, as I heard the question. So I think 2 things important to note when it comes to cash this year. So one is that, as I mentioned, we have planned investments in the first half, which will be quite heavy. So we've just finalized critical stages of completing the Kosice plant. We were actually there last week, was it, looking at it, super impressive plant, by the way. Now the builds -- some of the big builds are coming. Another thing happening, especially in Q1, is that we will start to ramp up EX60 in April. And for us to protect our full year output from the Torslanda plant where it's made, we need to build -- consciously build up some inventory of XC60s and XC90s to be sold later in the year. So we have some very planned sort of cash drains in the first half of the year, which naturally means that the second half becomes better as we're ending clearly strong.

No. But no doubt, even for the full year, there is definitely we will be on this affordable level, and we will have a clearly better free cash flow than last year. But I think it's very important for people to understand the seasonality, as you say. First half year, there are things that will just come in, last invoices will come in for the factory and so on.

And there was one more question on the product cycle volume mix for 2026.

Volume, as for the full year, we will go back to growth, but with a higher percentage of electric cars.

And I mean it's really supported by a full year of XC70. It's supported by a full year of European EX30s. It's supported by the EX60 that starts to ramp up in the second half of the year. It is supported by the ES90, which is just starting to reach customers. So we have a lot of sort of product momentum. And importantly, that product momentum is in the parts of the market that is growing, right? The overall premium market is expected to go down. We are expected to grow. And we're doing that on the back of launching and having very attractive offers in the segments which are growing, which are the future electric segments.

And I think maybe you can say it also as this, we will have a growth in the year. What gross margin we will get, a lot of external factors. But the impact from the electrification will not be negative to our gross margins totally because first, we have a very good cost position for the EX60. But then, of course, with electric cars, we also will get new customers, new money coming in. So I would say we would not lose profit margins by electrifying now when we have the program we have. And also, of course, that is a driver to growth, without jeopardizing our margins, which I think is new. And that's really the game changing with the EX60. Traditionally, otherwise, electric car always have higher cost than [ you were ].

And I think that's a key point because that is also -- looking at our track record and then looking to the future, that is the strategy, right? So we are clearly stronger when it comes to PHEVs and BEVs in terms of market share and building -- continuing that momentum as that market continues to grow across all 3 regions, while ICE products are shrinking across all 3 regions. That is the fundament of our strategy. So electrification is always additive to our profits.

Yes, absolute profit.

All right. Let's have another caller now. So this one is from HSBC, and that's Pushkar Tendolkar.

I hope you can hear me well. Just on the profitability side, it's a clear deterioration in Q4 versus the strong improvement in Q3. Some of the headwinds that you mentioned, I believe they will also continue in 2026 or even probably get worse in terms of, let's say, pricing tariffs will continue. So it just -- is that Q4 then is the level of margin underlying and then the cost savings on top of that? Or there are other levers to pull up the margin as well within 2026? That's my first question.

The second one is about whether you can provide us any update on this U.S. ban on cars with China-made communication software. Are you still in discussions with the Department of Commerce? Or where exactly do you stand right now? Are you in the clear?

Yes. And then the third one is this last strategy update was probably the first time that Volvo talked a lot in detail about Geely synergies. And just yesterday, we are seeing news that Geely is going to utilize a factory probably of Fords to make cars in Europe. I just wanted to ask you whether there is a possibility that Geely can actually use Volvo factories as well to make their cars if they are localizing in Europe? Or what's your view about this in terms of all the synergies that you have guided for the medium term?

I can start with that. Fredrik, can you take the first one? Of course, I mean, our ambition is to share common architectures, common parts with Geely, especially on the hybrid side. I think we need to -- when it comes to all electric cars, we have a really good architecture, which we should really use for more fully electric cars. But of course, to avoid double investment, we should rely more on Geely technology for hybrid cars. And that is what we are looking into.

That, of course, could open up opportunities also that other label cars could be built in our factories, but that is something we have to look into. You need to know exactly what cars would that be. And I mean, the cars built in Volvo factories are decided by Volvo. And -- but it could, of course, be something interesting for us. We have to look into when we know what that car is, what platform is it built on and so on. So it's a long shot and a lot of question marks before you can say that will work. But it would be, of course, good for both of us if we could find that.

ICTS is then these requirements in the U.S. for connected cars, which is a lot of questions that are asked about us as we are owned by a Chinese shareholder, and that is a process we are having. I think it's with the Department of Commerce in the U.S., and then there is a process going on, and there should be an answer coming up here not in a too distant future. But as we have said many times before, this is not something that keeps me awake during the night. So we have been in the U.S. for 70 years, and we will be -- continue being a very strong brand on the American market.

And moving to the first question on headwinds and continuation in '26. I think a few things. First, if you look at Q4, that is typically a seasonally low margin quarter. And in part, you have full year incentive programs to dealers and other things being paid out, which is impacting that, which you don't have in other quarters. We see heavy tariffs in Q4, and I think we see some potential tariff upsides. If you look at the U.S. -- Europe to EU tariffs, we are now paying them. If you look at the lower U.S. to EU tariffs where the statement has been that this will be reduced to 0, that is a big positive for us as we're manufacturing EX90 in the U.S. with a big export to Europe. As that is ratified, that's actually an upside.

We also have quite a lot of product support. So we have all the cars, and all the EX30 inventory of China-produced cars with a higher tariffs is now basically flushed out out of the European sales, so it's only European for Europe going forward. We have upgraded the EX90 with an 800-volt system. We have the ES90 coming. We have the XC70 as a big product in China, which is part of the reason why we grew -- or a big part of the reason why we grew 2% in Q4, and the market was down 12%, right? And then you have the EX60, and I think we've talked about the profitability on that as that hits the streets after summer with the ramp-up.

And then I think it's a lot about commercial excellence as well. We're pushing on cost, and we're taking the next steps in variable cost, helping the margins, but we're also looking into how can we better sell the strawberries we have, if you will. So a lot of action there and a lot of these headwinds, which are a bit Q4 unique, but it will be a challenging year, and there is a lot of uncertainties.

I'll take one more question from one of the -- online from one of them tuning into us. So a question to you then, Hakan. Now with the successful reveal of the EX60, can you confirm that the timing of the start of production is on time and customer deliveries is on time? And also, what have been some of the learnings from EX90 into EX60?

Yes. The learnings to start with is that, of course, introducing a core compute system is a huge step. And there are only 2 types of companies in this business, the ones who have done that, very painful process and the ones that has that to do in the future. And I think we are very happy to be part of the category that has done it. So everything we learned from the SPA2 and the EX90 is now carried over into the new car. So that is really the main carryover, is the software pack. So everything, the quality we have during 2 years really secured in that software that is now in the new car. So I think that's the main learning.

And can you confirm, I think EX60 start of production and customer deliveries as we go?

Yes. That is now our planned date. Production starts in April, and first customers should come to -- the first cars to customers in the summer. And this is, of course, a plan and not without challenges, but I would say we are on track with that plan.

And we also saw you and Anders driving the car in Stockholm, not too many days ago.

So it is also drivable.

It's already driving.

So I would say it's the best car to drive of any Volvo in terms of handling.

Yes. More callers then. So let's go to Deutsche Bank now. And it's Nikita Papaccio, who's dialing in for us this morning.

I hope you can hear me well. I would have 2 questions. The first one is on the tariff impact you expect for 2026. So let's leave the U.S., EU tariff rate coming to 0 to the side because, I mean, it's not ratified yet. Should we expect a run rate of Q4 for 2026? Or how do you think about the U.S. tariff impact in '26?

And then my second question is on your cost saving plan for 2026, the additional SEK 5 billion. Should we think about this like a linear or more back-end weighted cash in? So maybe some color here would be really helpful.

I think on the tariff impact, we saw a quite high impact in Q4. Some effects there linked to used car sales and EX30, for instance, will not repeat, but it's -- I mean, we do have a big tariff impact. For the full year in '25, we basically said that the net impact of this was about SEK 1 billion after taking mitigating actions. As we look into next year, I think we have -- we'll have more opportunities for mitigating actions. So tariffs are impacting the entire market. And therefore, over time, the market will need to price for it, all else equal. And I think we expect to see some of that movement during the year.

But we are now, especially in the U.S., in a sort of hard to forecast environment also as the 45W was taken away with the consumer incentives. And what typically happens then is that, as we've seen play out in Sweden and in Germany, there's a big sort of prebuy, which also happened in the U.S. There's a period of uncertainty, both in terms of customers, they've already bought the car and -- in terms of pricing. And that tends to normalize over 6 to 12 to 18 months in terms of volumes coming back up, in terms of pricing and profitability coming back up. So we would expect to see the same in the U.S., but let's see how it plays out.

In terms of the SEK 5 billion plan, we're constantly implementing actions there. I think the indirect cost part is relatively linear. There is quite some seasonality also in our indirect cost. In terms of summer vacations, then we spend less on engineering, of course, et cetera. But I would say the indirect cost quite linear. On variable cost, that is depending on commercial negotiations and introductions of new engineering concepts in the plants, which typically happen in conjunction with model years, for instance. So you typically have a big step in when May production starts and November production. So that's a bit more step change when it comes to the variable cost.

Good. Hope that answers your questions, Nikita. This question comes in from Sam Perry, Auto analyst. A short-term data point, but from your January sales release yesterday, deliveries were down 16%. Is it expected that these sorts of rates of decline will continue through to H1 before the new models drive up volume in the H2?

No. I would say, of course, it will not continue because for the full year, during the year, we will come back to growth figures. So -- but of course, January is often a low volume. We push out a lot of cars in December. It takes some time until dealers start ordering again.

Have any better comment, Fredrik?

Yes. But I think an important point there was also to play back the tape on what happened last year, right? So if you remember, in Q4 2024, we had this unprecedented inventory flush out, if you will, where we reduced total inventory by SEK 18 billion. That was a big part of wholesaling cars to dealers. And then in Q1, they need to retail those to customers. So there was a lot of pressure, if you will. And when we now look at Q1 and January being down, that is the comparison month and quarter we're comparing to. For Q1 now, we expect retail deliveries and wholesales to be much more in balance, right? And the wholesale is really what's driving the financials.

That's a good explanation. We had really sort of very good January because we have pushed out a lot of cars. And now we are comparing with not really a normal figure -- normal level. So -- but when we compare with more normal months, this figure will not occur.

Exactly.

Good.

All right. So another caller then from Handelsbanken. Hampus, please go ahead with your question.

Just 2 questions from me. Just some clarification on the cost takeout program. Are there any one-offs that you're aware of that is coming with this takeout program? And then second question is more on -- if you can add some flavor on being a couple of weeks into the EX60 launch in terms of order activity. I'm not expecting you to put out any numbers. But if you would do, like, more, like, comparable with the EX30 launch? That was a very successful one.

And also, given that the EX60 is such a competitive product against the plug-in hybrids, how do you see like XC60, one of the most successful plug-in hybrids, trading against the EX60 in terms of customers? Maybe taking the step into battery electric, how should we think about that potential cannibalization risk? Those are my questions.

So the last one, I think, is really important and that, I mean, for the first time, we really could say we really -- it's not so important for us, we will have a very strong offer. The ones who wants a hybrid will buy a hybrid. If they want an electric, they buy that. And I mean, we price these cars on a similar level, and then the margins or the profit with the electric one is equal or better. So we could be very -- these 2 cars together is a really strong offering. And...

But I think importantly there also is -- so it doesn't matter if it cannibalizes, but we also see a great growth opportunity, right? Because this is the biggest premium electric segment. And it has also been dominated by one big player, a lot of customers coming out of those U.S. cars that they bought 3 years or 4 years ago now, they bought at a premium price point. Today, it's a different price point. But those consumers, I think, should get into a Volvo instead, as simple as that.

Yes. But the 2 cars together is a huge, strong driver for growth and the mix we can be open to.

Yes, exactly.

And then I think also an important part of your question, are there any one-timers? I think what's really important to say we are not planning any layoff packages. So I mean, this will be done by scrutinizing indirect cost in all areas, and it will also be done with a very restrictive view on rehiring when we have people leaving the company, then it's the time to think, okay, could we organize this in another way, is there an internal solution? And with that, we will have tough targets to reduce our headcount but without any type of packages and extra money that needs to be reserved.

And also in terms of the savings, I mean, this is really -- when we now did a big redundancy program, we structurally reorganized the company. We took away hundreds of management layers. We are set up to be able to be more efficient over time. And we are investing a lot into data, into AI, into automation. On the car side, we are moving towards one software stack. All of that fosters not only better cars and deeper insight, it also comes at a lower cost, right? So it's really scale in a lot of the things we do back end.

And I think Hampus had one more question. EX60, can you give us some flavor of like the response and...

No. Yes, it's very difficult to talk about orders. I mean, from dealers, you could say a very high number, you could say a lower one. But I mean, I think the production this year will definitely be delivered. And compared with others, I have the feeling this is probably the most successful launch I have seen. And I've been with, how many was -- I think, 14 launches. And the response has been really positive and also because we are targeting now an area where there's a lot of interest from journalists and consumers and retailers. So very positive. And now we just -- now we have to bring it out to the customers till the summer and really meet these high expectations. And I think all systems are in green and go, but of course, challenges. But that's why we are here to work hard.

Good. We have time for some few more questions. This comes in from James Atwood at Autocar. Maybe more for you, Hakan. You've talked about the premium car market shrinking in the coming year. Do you see this as a temporary blip or the start of something deep and long term?

No, I wouldn't say it's something long term. I think there will always be a sort of division on the market. I mean that's in every -- all consumer products. So really, there is a sort of mass market segment, and then there is people who want something special and paying more. We call that premium cars. And that will continue existing also when the cars will be electric. There will be other features and horsepowers or chrome and leather that brings that value, but there is a lot of things and thinking directional software features, infotainment and autonomous drive and so on. We will have the premium cars.

And I think it's also interesting to understand, last time we really did a restructuring of our company and introduced a so-called SPA platform. The ambition was now we have to catch up and be premium. We need to join the premium guys here, Audi and BMW and Mercedes in the top. I think we are in that league now. The ambition now with the next -- this new beginning with this SPA3 platform, that is to be the leader in all electric premium cars. And the EX60, when you look at the data on paper, I think it's absolute best car on the market. Now we have to build it and show that to our customers, I think will be a significant game changer for this company.

And I think another comment on premium. With the EX60, we don't need more affluent customers, right? So you don't need to pay more to get into an electric car. That hasn't been the case before. So otherwise, there could be a risk when even the premium customers need to be richer to move electric. But with the EX60, we're basically saying that is not the case.

Yes. And staying with you, probably, Hakan, and this is a long question, but let me try to paraphrase this. But I think what he's asking essentially is that we've seen a lot of our competitors over the years scaling back their BEV ambitions, write-offs -- big write-offs that's happening. Now recently, you have a big BEV player in the world. Tesla, in this case, sort of clearly indicating that they're sort of looking at a future beyond just physical cars, driven by -- it's much more humanoids, AI and robotaxis. But you and Volvo has been very clear and ambiguous about your electrification direction. Just help us, again, understand why that is? What is Volvo seeing that the others are not seeing?

Probably we are seeing that any brand cannot be electric. It's not a propulsion option here. You can have diesel, petrol or electric, everything else equal. I think people looking for an electric car is looking for something totally new. I think that's why Tesla really are successful and an electric GM product less successful maybe. So you need a brand that is suitable for being electric. And I would say one of the ones absolutely most suitable to be electric is a brand that is known for being safe, being functional, being a human-centric car. I think those customers would appreciate electrification. If you're looking for something which has a special engine sound or roaring acceleration, you are probably not so impressed with an electric car. So we have the right brand for being electric. And if others scale back, it is good for us.

Now we see the electric market is growing, and we see that we have a higher market share with electrified or electric cars than with conventional. So it is a sort of step change for our company. We need to follow the transformation. We need to lead it. We need to be fast, but then we will come out as a bigger company with a bigger market share in the new electric premium segment, which will not be characterized with leather seatings and chrome and horsepower. It will be characterized by other things that we are, of course, developing to put in the car.

So I mean, primarily, we see software and digital development as a possibility to make better cars. And I think we will stay in the car business. There's nothing wrong with that. And we will be a leader in the all-electric premium segments. That's our ambition. And I think we have the technology and platform for it, but a lot of work to be there.

And maybe adding one thing on the horsepower because to some, it is important, right? But for us, we don't have the 680 horsepower, V8 twin-turbo engine, super high-margin car, which we are afraid of cannibalizing all. If you buy an EX60 and you want 4-wheel drive, you get 680 horsepower for free, basically. And we don't mind because we're not losing out on sales on something else, which is very, very profitable, right? So I think that is -- it's not the main brand proposition, but we toss it in a bit on the side. And I think others have a harder time doing that.

And also, I mean, our customer probably appreciate the acceleration, you could change lane, easy and so on. But you are not interested in driving 250, 4 hours on the highway. I mean -- but our cars are also limited to 180. But all of this horsepower looks good. But I mean it's really the agility you get with it that our customers appreciate, not the high-speed performance.

Right.

Maybe we have time for one last caller for the day, and that's Agnieszka Vilela from Nordea.

I hope you can hear me. I have two questions, maybe starting with Hakan on EX60. What a successful launch would mean for you in terms of volumes, year 1 and year 2, if you could share with us? And then another question on the negative price/mix impact in Q4 specifically. Was the pricing or mix the bigger headwind for you? And also if you could share your pricing strategy? I think that earlier in 2025, you were very much determined to defend your pricing. Now you talk a bit more about the pricing pressure.

Successful launch. I mean, we could reveal a bit about volumes. I mean, we should roll out around a bit more than 40,000 cars, is what we can do this year. And I'm quite sure that, that will happen. And then I think looking into the next year, I think you can look into the volumes we have with the EX60 and assume that part of that will be electric, but add on top also that having a plug-in and electric should also be, of course, a possibility to grow. And I think when you see where we land after this year, I think you can do a forecast for '27 by looking into the mix we will have at the end of the year. Now we are still at the beginning of the year.

So let's summarize, say, our ambition now is to bring that car out and produce the first year and, then that will bring growth in the 60 segment. Let's see what the mix will be. And as we said, we are rather agnostic. Customers choose what -- but the sum of the XC and the EX will be higher than we have with the XC today.

And maybe it's worth saying also, in this year's production, right, we are doing a very controlled ramp-up, learning a lot also from the EX90 and some of the challenges we have there. So this is about getting a product out also with high quality, which is key. And then longer-term growth opportunities, I think, are endless.

One more question on pricing in general, pricing pressure in the market and...

We do see pricing being a big element in Q4, I think especially in the uncertainty, both in the U.S. and in part in China with these consumer incentives going away. So as that normalizes, I think that will also support us on the pricing side. In terms of defending margins, I mean, to me, the key optimization is really creating absolute profit and absolute cash flows. So it's finding that balance, right, in an uncertain market.

Good. I said Agnieszka would be the last caller, but let me take one more caller since he's been waiting for a while. Ross MacDonald from Citibank.

So mindful of time, I'll keep this to one question. But I think important to ask, Volvo, given your leadership in the EV space. Obviously, I think since we've heard from you last, there's been some changes in the proposed 2035 CO2 rules in Europe and also discussions there now around minimum pricing for Chinese cars coming to Europe. So very interested on the CO2 side, if you think that this is now a potential final ruling, if you think the commission is on the right track with these proposed changes?

And then linked to that, on the minimum pricing from Chinese cars into Europe, is there any way Volvo can benefit from that? I know you want to be local for local, but obviously, you have some compelling models in China that you potentially can now bring in tariff-free into the block. So very interested if you would intend to do that over the midterm.

We don't see beginning with that any big potential. I mean the cars that we could be interesting in looking into taking in, our hybrids and are not penalized with these high tariffs. And all-electric car is only the one is really ES90 that we are bringing in from China. But that is, of course, something we could look into, but it's not something really important right now. And I think it's also not that easy to agree on such a minimum price, which is favorable for us as well as the one exporting the car. So I mean, it's a very difficult question. I think there is no simple solutions on that. I think at the end, if you want to avoid the tariffs, I think you need to produce locally. That's the purpose of the tariffs, and I don't think it's any possibility to negotiate yourself around that. That, I don't think will work.

When it comes to the legislation, we have always said if you want to push electrification in Europe and stabilize or create a strong auto industry in Europe, I think it's good with clear signals that we will be electric to a certain period. So we have never argued against the 2035. And what has happened now, if you analyze it, seems like a very, very mild deviation. You could have some percentages of petrol cars if you use CO2-free steel. And I think that's not an option that we are looking into to use.

So for us, it really hasn't changed anything. From 2035, we need to be able to sell only electric cars in Europe. So we, to be frank, don't see any big differences. It's probably for some niche sport cars producers might see it's an option to use this 10% or whatever it will be.

Good. And now to bring this call to a close, and I'll sort of -- this question has come up in different ways, but I'll try to summarize 3 or 4 questions that we've received. Back to you, Hakan, also maybe a good question to bring this to a close, a little bit back to long-term value creation, right? We unveiled the long-term value creation strategy during the strategy update in November. But of course, the world remains turbulent and will probably remain for the foreseeable future. So if you were to sort of summarize like how do we get from the run rate in Q4 to 8% plus and strong free cash flows?

We didn't have a really good answer to the challenge in coming to us from outside. I mean you have a climate, is a big challenge. We should electrify not only to contribute to a better climate, but also bring our customers good products. So that threat might be seen as a threat by other, for us, an opportunity. We will come out as a stronger company, electric. And I think all indicators we can see now indicates that is what is happening. We have higher market share in electrics and so on. And now with new technology, we bring down costs, so we will have profitability.

Second thing is which is unique. We want to be on the market with a strong global brand also in the future. Then you need to regionalize your activities. You cannot have one product for all. It has to be more adapted variants. There has to be adapted and different approaches to marketing and how you communicate with customers. I think we have really defined that and are on our way to a more regionalized operations, maintaining one strong global brand.

And the third thing is our connection with Geely and the Chinese very strong supplier industry will be seen more and more as an advantage. We can have more common parts and bring down our cost structures. We can avoid double investments in Chinese software as well as in Western software. We can rely on cars sold in China, we can rely on Geely developed software, and we can save a lot of money.

So I think we have a good answer to these 3 external challenges. And if we just continue and have a bit patience doing that, we will come out as a much stronger company in some years' time.

Thank you, Hakan. Thank you, Fredrik, and thank you, everybody. As I said, the link to this live webcast in case you missed parts of it, will be available, so make sure to tune in. But for now, we need to bring this to a wrap. But of course, you can reach out to us through our PR channels or the Investor Relations team for more questions. We are here to support you.

But from all of us here, thank you, and have a great day ahead.

Thank you.

Hello, everyone. Warm welcome to Volvo Cars and our studio here in Stockholm. Before we kick off today, I just wanted to share some practicalities. First of all, we have the emergency exits behind you. We have restrooms right over here in the corner on this floor, and then we have restrooms on the second floor as well.

This meeting is live streamed. Those online, you have a little chat box just below the screen. You can start posting questions. I've seen some of you have already started, that's great. You can do that throughout the whole session today.

So jumping into the agenda for today. In just a short bit, you'll hear some introduction remarks from our CEO, Hakan Samuelsson. Thereafter, we'll dive into the commercial approach. We'll do a quick look into the product strategy as well as cost savings and synergies. After that, we'll take a short break. There will be some coffee downstairs. We'll get back into the room, and we'll dive into the EX60 and learn more about the tech behind. We'll then end with the session together with Fredrik, our CFO, on the pathway to higher profitability. After that, Hakan will do some ending remarks, and then we'll head into the Q&A. So make sure you have all your questions ready for the end of the session. And as a final treat, we have lunch downstairs after the session, and you'll be able to mingle together with the executive management team.

So with that, a warm welcome, and I'll hand over to our CEO, Hakan Samuelsson.

Thank you, Jenny, and good morning to all of you, and welcome to -- this is a bit classic room for Volvo because Maria and I, we were talking a bit here before. And almost exactly 4 years ago, we were standing here, and I remember we rang the bell for listing the company. And my reaction was, was that only 4 years ago. So that's probably because a lot of things has happened. So -- but it's a good time to give you a bit new insight into where we are going, and I will return to that.

But before I do that, I think I should introduce the team who is here with me because we have some new people in the team, and they are really the people who will now lead the way putting this company back on track. So who do we have? We have -- okay, don't -- this is not special order. So -- but Erik Severinson is now Head of the Commercial Operations; Michael Fleiss is Product Strategy and Product Planning; and CFO, Fredrik Hansson. I think he's well known to you, where do we have the other guys -- Where is Anders Bell? There he is, hiding behind Fredrik, R&D and CTO; sitting beside Francesca Gamboni, Industrial Operations procurement. She will talk today about how we will save cost. And then we have 2 members also who will only be here to answer potential questions but will not -- today will not present is Hanna Fager, People Officer; and Helen Hu, who is legal, but also will now head up Communication, Public Affairs and then Corporate Affairs, I think we will call it. But okay. So we'll have an expanded responsibility in the team. Did I forget somebody? No. That's the team that will now put Volvo back on track because I think you could say that without sounding too cocky.

And what did we do? We started in April, then we presented a turnaround program. We need to rapidly come back to better performance. We presented the SEK 18 billion cost and cash program, which you saw already in quarter 3 is now starting to deliver a bit faster than we thought, to be honest. We -- after summer, then changed a bit course and say now it's time to start focusing on top line growth and sales. And we reorganized our commercial operations. Erik then came in leading that. And Erik, you will, of course, today tell us your ideas how to revitalize and turn around our commercial operations. That's very important.

And today, we come then to the third step, which is updating our strategy. And we will -- I mean, say first, the reason for all of this is really to define a steady course forward for the company because in this very turbulent times, I think it's very important to have a steady course, what do we want to do with the company and also securing continuity when it comes to succession. So we need now a strong team. So that's one of the -- my mission really to build a team that knows exactly the course and can do that without getting nervous and losing traction in the future.

So -- and we will also do this in a bit different way than a conventional business plan type of report with very clear targets and quantified performance per year. I think it's really important to define what we want to do. And you will, of course, decide is the right thing to do or not. That's up for people investing in our company to decide. But I think it's really important to define this is what we want to do and that you are right on that. And then, of course, I think we should also give you indication what could the value be of these different blocks that we're going to talk about. But I think it's wrong to just focus on giving exact targets quantified. So we will not do that in time. It will just -- this is the value of the block.

It will materialize in the years to come. I think that's much better instead of focusing on target and then going out doing more of the same that will not deliver anything. So we need to be clear on that we want to do something differently and better. So that's how we will work.

And we will then build this strategy on 3 external challenges coming to our industry. And I think it's really important for us all in this industry, if we want to stay in business, we need to have an answer to these challenges. The first one is really CO2 reduction climate, which boils down to electrification. That's the best way to solve that. Secondly, globalization. Yes, it was nice when we had it. But right now, we will get something else. The world will regionalize. There will be trade restrictions, tech restrictions and then barriers tariffs, we read every day about that. So you need to have an answer on that. And the third is hyper competition, okay? We always say that it's a really bloody competition going on, but -- will be worse. And that is easy to understand because the car industry was dominated by Western players, European and Americans, now -- and Japanese, sorry, and Koreans, but Western.

Now there is a new big player knocking on the door and really taking already half of the Chinese market. That's already causing big problems for the people in China, the Westerners, especially the Germans. Now they will, of course, use this capacity also outside. So realistically, they will take a big chunk of the market and then it get crowded for everybody else in the remaining part. So I think expect hyper competition.

And how do we now react to that? That's the question, and you're going to get the answer from the speakers here as they go into it. But I believe we from Volvo have a unique possibility to have good answers on these 3 challenges. And the first then is electrification. I mean that's really one of the absolute best ways of reducing CO2 because it's good for the climate, but even more important, if it's really going to have an impact, it's also good for customers. It's really a better car. Everybody knows that has driven an electric car. It's only one thing that has to be fixed.

Why are people not buying EVs? No, you need longer range. It has to be -- you have to drive as long as with a normal car. And you should be able to charge it in the same time it takes to fill up and go to the bathroom for a normal car, that will also happen. And most importantly, it should have the same price. We will talk about that today. When that has happened, I think we will have a totally different growth in this sector, which is already growing. So if you believe electrification will come, and we are absolutely convinced this opportune for the company, don't try to slow it down, rather stupid. If something is changing, you should accelerate. So good luck for those who want to lobby about slower legislation and so on. We are not doing that. We will be ready 2030 with electric cars for all, but we are also not blue wide. We will, of course, also need some back, say, bridge solutions for countries, regions and customers who really still cannot charge. So I mean, a pragmatic approach, but we will be ready. And if the industry want to survive, we should pick up, we should accelerate, not slow down.

Another really important thing, which really is not directly connected to electrification, but is developed now in parallel, we need to have a core compute system. If we are going to have new features in the car fast, you cannot have that in 100 different boxes and relying on suppliers. You need to be able to have one software you can run on your own platform, a really painful step to change a car into that direction. I can only be good that we are through that now. Of course, maybe you could think we could have done it a bit faster, but okay, I don't -- it's a really big step and it took us a couple of years. But now we have a good foundation to be a really core compute one software car. So it's a good investment.

So we will then have these all-electric cars and the smart bridge cars to a very good total investment by having a good cooperation with -- and utilizing parts from their platform to do this faster.

End of globalization, we need to go into regions. So if we want to stay, and that is absolutely our target, Volvo should continue being a global brand because a strong brand needs to be global. You cannot be a local brand. Then you need to regionalize. Then you need to have strong empowered more autonomous regions, China, U.S. and then the rest, which is easier because it's closer to us. But we will start having America and China more autonomous, do the marketing, do the sales in a way that is suitable to your market, and we will also produce the cars locally and within more regional adaptions to really fulfill the expectations of -- on the customers.

And with the regionalization, something else is really important. We need to modernize the way we sell cars. We need to listen to customers' expectations. Erik will talk about that also. They have really 3 rather simple expectations. What does the product look like? All of you have tried to understand that in a configurator knows that we are not too good at that today. It has to be much more simple and easy. Second question, what's the price? All of us know also that's not the easiest question to get a good answer on depends they say. And then the third question, when can I get the car? Normally, is not very accurate answer when it comes, more or less, let's see, could take longer or shorter. So we need to be also with the regionalization come closer to customer and the exact answer is not the same in all regions.

A strong global brand, Volvo will remain in all regions when other brands are getting nervous and pulling back, which is happening. A lot of Americans are leaving China. A lot of Europeans have trouble. We will stay, and we will do that with the unique connection we have with China and

Third, hyper competition. Yes, it will be tough. So we need to be smart when it comes to lower our investments, still having the program we need. Michael will talk about that, how we then can create and build this bridge cars for customers who are still not ready for all electric and how can we bring down the material hardware cost. Francesca will tell us about that. And I mean, getting access to the absolutely lowest cost structure in the world, which is a supply net in China. It's not that easy as to go there and knock on the door. But through our connection with Geely, we have, of course, an absolutely unique opportunity to get benefit from this very low-cost supply network.

And very important, I mean, we will have a lot of modularity, common parts on the hardware. But when it comes to software and critical semiconductor components, it's a no, of course, there we have to live with a totally regionalized setup. China for China, software and semiconductors will not be the same, very different. But in the West, we will have totally different software and components.

And to summarize this is other people think that the Chinese is now the enemies coming in will make life difficult for us. We are, of course, not in that situation at all. We could -- with our connection with Geely, this, I think, will be seen and we realize that also. But I think from outside, it will be seen more and more as a strength for Volvo to have this unique relationship with the new very tough competition coming in. For us, it's not just a competitor coming in, it's also our partners.

So that is really where I wanted to lay the foundation for the discussions, how are we going to answer these 3 challenges, what is our answer. And for that, we should go a bit deeper. And then first stop in the journey is with Erik and the commercial organization. So please, Erik, take over.

Thank you, Hakan. And I'm going to talk a bit about our commercial turnaround, our commercial transformation. And the headline is to win customers that stay. And that's really what our task is when you look at our commercial system right now. The automotive industry is a messy place at this point in time. We talked about the hyper competition and the regionalization. But then in order to have a commercial discussion with you today and in general, actually, you need to start with who are you. And to be 100 years old in an industry of more and more infants coming in is a great superpower. And we will need to build on that. So Volvo, our brand is something that we can capitalize on in this time of transformation. And we have a very strong brand, which stands for freedom to move by Sweden for life.

Always, Volvo has been founded around the main principle of being human-centric. That was why we, from the early days, focused so much about safety. And that is why we are leading on electrification. And that is also why we're using technology to improve people's lives and not just putting in technology for the sake of technology. And our Scandinavian design is wrapping all that up. So when we go out in the world, Volvo is a global brand, and that is a great asset to have when we want to drive this transformation. The messier the automotive industry will be from a commercial perspective, from a brand perspective, but more important, the brand values and the brand recognition will be. So that is our foundation for our commercial turnaround going forward.

And then when you talk about how we want to drive this company going forward, there's really 2 things which we are building our strategic change on right now. And that is to have 2 thoughts at the same time in our heads all the time. We need to perform here and now, drive profitable growth, focusing on the next day, the next week, the next month, the next quarter, the next year. If we don't do that from a volume perspective, from a cash generation perspective, from a profitability perspective, everything else is basically semantics. But at the same time, we need to also have a transformational agenda. We talk I mentioned about electrification and also finding new ways of reaching our customers, offering them modern ways of buying a car. If we don't manage to have both these things at the same time in our heads, we will not succeed in the future. So our future strategy is very much now built on these 2 words: perform and transform.

So let me talk a bit about growth. And the path for growth will be for Volvo Cars through electrification. Now that has been debated or being discussed, is electrification really happening? And is this really the right strategy? Well, no matter which type of data you look at, and you probably look at more data than I do, the only thing that is growing within the automotive industry is electrification. This graph shows the premium market is the latest S&P numbers divided by region, showing the forecast is from '25 to 2035. I could have taken any other forecast institute data. It will show the same thing. It's divided on BEVs and non-BEVs. And what you can see here and forecast is always a guess, but what you can see, of course, is that the only thing that is growing is BEV and the rest is shrinking. And this is actually even including PHEVs on the bottom half, which is an electrified car, which up until 2030 also will have some growth, which we're also betting on. So for 1% car brand like us with a strong brand global recognition, the path to growth is to bet on the growing segment, not on the shrinking segment. So yes, electrification is the right path to growth for Volvo Cars.

And if you take that then and how do we then materialize that into our product portfolio. Our brand is a promise given. Our product is a promise kept, we say. And then we need to have an offer for every Volvo customer. And this is in a transitional period and I'm showing the SUV lineup on the large SUVs in Europe. So this graph basically shows that our current offering we have in the market here and now and the XE90 petrol, for example, that's an 18% market share in the large SUV segment. It's #1 in that segment among the petrol cars.

The PHEV version of the same car, 22% market share, also #1 when it comes to PHEV in that segment. And the EX90, which we have maybe talked about all the problems for so many years about this, that is currently already #2 in its segment at a 23% market share with a strong retail order growth right now in Europe. So when we succeed having an offer for every customer in a segment where we're trustworthy with the brand that everyone believes in, we have a fantastic track record of being successful. So our way to growth going forward and succeeding here and now is to replicate this from a product perspective in more segments. And then we have one issue, right, which lack a car.

So if you look at this page is showing our total portfolio of SUVs. You know about the 30 cluster, EX30 is doing very well in its segment. We have the 40, both ICE and BEV, the 90 I talked about, but we have a gap. The biggest car segment in the world is midsized SUVs. The biggest electric car segment in the world is midsized SUVs, and we haven't had an offer. From 21st of January, we will, and Anders will tell you about just how good that offer is, and that's the EX60. By adding the EX60, we will increase the addressable BEV market for this company by 200%. Today, we're addressing roughly 25% of the market. We will address 75% of the market by just adding this car.

So this is massively important for us and also complementing this portfolio with bridge products such as the XC70 going forward, which is electric cars with the backup plan will also help driving growth in this company. And this is not now me talking about something that might happen in 2029, 3, 4 years out. Now this will happen 9 weeks out here in Stockholm in Ag on the 21st of January. So this is coming. Investments for this has been done. Harvest time is now.

So I'm very confident about that we will have the right lineup. But is there a demand for BEVs right now? If I look at the market here and now and look at the numbers, does the customer buy battery electric vehicles? So this graph is showing our year-over-year retail order pace growth, meaning how much more orders we're taking versus last month for BEVs and for the total company. The blue line is our total year-on-year order growth right now. In Europe, this is year-to-date. And the red line is the BEV order growth. And as you can see, there has been a shift from -- I would have loved to said from September and onwards, but it's actually happened before my time, so it's already in June. We see a momentum in Europe on electrified cars, electric cars right now on BEVs, especially. There is a growing market, very much growing market for our products fully electric in Europe right now. That momentum, we will continue to fuel with the launch of a car such as the EX60. And we're having successes on the EX30 as well. And we're seeing pickup pace also in the order pace on the EX90 in Europe. So the customer demand is here right now.

When we come with the right offering, we will have a fantastic opportunity to drive electric growth in Europe, that is. And for the customers that are not there, as Hakan also said, we'll continue to invest in the product -- plug-in hybrid products, which is a good bridge technology.

So then why are customers not buying a BEV, because there is some hesitation still. Now I would love to say, objectively, a BEV is a better car, but you might say I'm biased. I am, but I still think a BEV is a better car. If you look at the running cost of a battery electric vehicle, it's lower -- is lower than what you would ever achieve on a combustion engine car. The performance is better. It's more silent, acceleration is better. The interior space of an electric vehicle is equivalent to a normal combustion engine car one size bigger and it's more sustainable. It is a better car, but we need to solve 3 things. We need to solve the range among our customers. We need to solve the charging time, and we need to find a price point that is equivalent than today's cars. And when it comes to the first 2, we need to have electric vehicles that will go as far as a combustion engine car. And then we need to charge as fast as your average stop of a vehicle is. I mean what we will launch now in 9 weeks from now, you will have a car where you will need to go to the toilet long before the battery runs out. And when you're back from the toilet, the car has charged. When we reach that point, there is no hassle of having a fully electric car on that 1% journey you're making 2 times per year to the mountains, et cetera. It will be as convenient as driving a combustion engine vehicle or a plug-in hybrid for that matter as well.

And many markets, when they get the product like that, they will convert. Sweden, I think, is a fantastic opportunity now. Us coming with some of our competition, we will convert that market. But even more importantly, people will not get more money to buy cars for just because we want to sell them electric vehicles. So we need to find price points that is equivalent to where we are buying cars today. And this car will be priced as a -- Most of variant for Volvo cars in Europe right now is an XE60, -- We know there is a customer demand at those price points. So we will price this vehicle as parity where we are pricing our carat best sold cars. And we will do that with a better margin. And Anders will explain to you how we will achieve that and how we will achieve the cost benefits of our new electric vehicles. But when we have these 3 problems solved, I don't see much reason to be honest why I shouldn't drive an electric car.

So we are ready to go electric when the customer are from a product perspective. But when the customer hesitates, we will also have a good bridge, which we will hear more about later. So that is about what we will sell, but we also need to talk about how we will sell it. It's so funny when you come into this industry and I've been there for long, it's so conservative, and it takes so long time to change. And sometimes when we drive change in this industry, we look at it from a company perspective, what would we want to do? How do we think is the smartest way of selling a car to our customers, to you. But we need to think about how do you want to buy a car. That should be the starting point for our discussion around how we want to sell vehicles, for example. And you're buying a car in the same way as your parents bought a car more or less. And that might be good. Some customers want that, and they should have that opportunity. But some of you will want to have a different purchase experience. And that what I want to talk about.

And Hakan stole my thunder a bit because he said, what is it that the customer really want to understand when they're buying a vehicle or anything actually. You want to know what is included, what do I get? What will it cost? And when will I get it? And actually, I would add, can I get it now? So what we will have, and I will talk you through it in the coming 2 slides, but a simple offering, fewer variants where you can have an all-inclusive offer, including energy, including wallboxes, including insurances, et cetera, you have that hassle-free car ownership. That is something that we will have.

Transparency, online purchase option, sign up, this is your monthly fee. That is very much appreciated by customers. We know that. And delivery precision. It's not only about precision. You're in a lease contract or in your company car, you're returning it in 3 months, you order now, you want to get a new car in 3 months from now. But you might also come in looking for a second car for the household, you daughter just an 18 yesterday and I need a car tomorrow, we should have a solution for those customers as well, instant delivery.

And how will we do it? Now you're all thinking about how will they put that on the balance sheet and all that. I'll get to that. But if we solve these 3 things, we know the customer will appreciate this. And we have talked about flipping markets and changing our system, our commercial system for many years now. That has been maybe a little bit of an introvert discussion. We have done many good things. The markets where we come the furthest on this is probably U.K.

U.K. now, we have record market share, almost 4% market share, both having record sales, and we're also getting our best earnings that we ever had in that market. Now there are good learnings from U.K., but we need to take that to the next level and take the good things from what we've learned and putting that into a new way of offering cars, which I will talk about in the next slide. But the important thing, what you need to remember as well, I will not stand here and say we will flip all the markets of Europe within the coming 6 months. It's not about flipping a market. It's about finding the right customer offer. And when you find the right customer offer, we will have a smart way of scaling it.

So what we will do is that as a next step, in Sweden, starting in Q1 next year, we will extend and have a new offering basically. Clear consumer-friendly monthly price for electric cars with all-inclusive option, including energy. We know we can include energy in this because we can control the charging of the vehicle, smart charging. We can charge the car when the prices are low, we can offer the customer bidirectionality. We can do this in a very profitable way from our side, and it also gives a lot of hassle-free thinking for the customer.

At the same time, having an instant delivery option in our offering without building a massive stock as well as a tailor-made option. We're not taking that away for you that want to go to the car salesman and sit down and go through all the specs and the roof rates and the size of the wheels and the color of the seats and all that, that option will, of course, be there. But also for you that comes in today after your daughter's 18-year birthday and want that yellow EX30 that she's talked about for so long and you want it now, we should be able to serve you as well.

And continuous implementation of AI-supported online shopping. I mean today, when you come into a car showroom, someone helps you, a salesman comes and ask you, how can I help you? What can I do? What do you want? When you come into a car configurator, you get exposed to 50 different choices and you need to pick and if I choose that choice, that changes and that choice, that changes. We can do that much smarter in a much more -- we're using AI or an AI assistant agent to have a more conversational car configurator engine and also simplify the amount of choices that the customers need to make online, helping them getting into the right product much faster. This will be continuous rollout as well.

And when we combine all this, then we have something that we know the customer wants. We have today currently in Sweden, we have 7,000 current Care by Volvo customers, which Care by Volvo is like the first iteration of this. So we know the demand is there. Those customers come to me now and say, I like this product so much. Please don't discontinue Care by Volvo. Continue with that because I like it as a customer. There are tons of discussions internally on how to do it, and we have learned how not to do it in many ways, but the customer demand for this kind of product is there. We know that.

So we talked about what we will sell. We talked about how we will sell it. And now I'm going to talk a little bit about how do we tell our customers who we are and what we can offer them in a new way. Because one way, of course, in the commercial transformation is also to reach our customers. And we need to do that at a lower cost than we're spending today. We need to find more efficiency in our marketing basically.

And one way of thinking differently about this is to -- instead of having a budget-based marketing spent equally across the product portfolio, each country get their own share based on the revenue and then they do use central assets to go into market and use billboards and TV ads, there is a much more targeted way of doing this. And we have some examples already now where we will change our strategy, targeting specific consumer groups, which we're not so present in today. For example, maybe the Latino community in U.S. in Miami, for example, that's an interesting community for us. Being family-oriented, we're not very strong in that one.

How can we work towards those? How can we work towards certain halo locations? If I'm successful in Miami, I will be successful in Florida. I don't need to spend all my money evenly across Florida. I can focus on that part of Miami. But also putting our marketing behind our products in a different way. Instead of spending as much money on an XC60 as an EX60, I can focus it around the EX60 and get the traction across the portfolio by focusing our resources on one car. And this is the example to the right here is Adam Scott, I don't know if you know it's an American actor, doing -- sitting in an EX90 and the tagline is of a family car, but it's always the best kept secret. Adam Scott is a big Volvo fan, and we're putting him in the EX90, and we're reaching a new kind of audience with him because we're using him as a person towards an influencer community, has a wide following base, of course. And we're using it behind one car. And customers sees that and they come in and they're buying an XC90 maybe. But it's much more efficient to come this targeted approach for U.S. with the person that is relevant for that market on a product that people are interested in to drive traffic to the showrooms.

But then maybe the most important thing on changing our marketing is to have a much more digitalized way of looking at marketing, to have signal-based optimization, meaning that I can see what works. I can see where I get traffic. I can steer ads to certain channels. I know if I find traction in a certain channel in Miami for Hispanic people with a certain model, I can still more efforts there.

And when you enter through one of those apps or through one of those channels, you end immediately up in an online buying journey to connect a digitalized marketing approach with an online offering is massively efficient. We have seen examples now in Sweden where we're running it. We have a lead to offer conversion rate, which is more than 70% up versus what we've had before. And we think this will give up to 20% reduction of marketing spend per car going forward.

So to sum it all up, what will this then mean in terms of numbers? So what is our ambitions that we think we should try to achieve with this? First of all, growth. Well, of course, growth will drive profitability. That might be between 2 to 3 percentage points. That will happen through electrification, through a diversified product lineup and through 100 years of heritage and a strong global brand.

Commercial excellence, there's so much to do in this conservative industry, and it's about giving the customer a better option to buy cars. That will inherently drive efficiency on our end as well. 1 percentage point maybe, lower commercial cost per sold car, less top line leakage, reduced marketing spend, simplified car offer and improved customer delivery position.

And the last one there, improved customer delivery position and simplified car offer will also allow us to reduce inventory. So we can reduce inventory by having a central stock, we can use that in an off-balance setup with the parties we have in the market today, but that is enabled by having much fewer offers, fewer variants. If I have 50 variants instead of 500,000, it's much easier for me to predict what customers -- what cars I need to build to get to a customer even before the customer has ordered the car.

So basically ordering cars from pipeline by a drastic reduction of variants. That will enable that as well. And also a complete change on how we are driving our order to delivery process using much more digitalized tools, predictability, et cetera through AI. So this is our ambition. This is what Hakan has signed me up for, and this is what we are looking forward to deliver now under our perform and transform strategy.

I think that was my last slide. And by that, I'll hand over to Michael, and he will talk about the future.

Yes. Good morning also from my side. I'm Michael. I'm heading the Product and Strategy team in Hakan's management team. And I've started 2 months ago after Hakan called me and wanted me to come back because I was at Volvo before, but I was sometimes away. But now I'm back, and I'm so happy to be back in this team.

So I will talk about our 5 pillars for our strategy. The first one is fully electric is our future. And it has been and it will be even more right now because we have now products which are even more profitable than our plug-in hybrids. But we need to cater for our customers who are not ready yet for transforming into a BEV. So we will increase our bridge to electrification. To become more profitable, we will work even closer with our colleagues at Geely and harvest on the low-cost supply chain and on the speed to market with our colleagues from Geely. Fourth pillar is regionalization. Hakan talked about it. We will separate our markets into Americas, China and then Europe. And the last point is core computing, a really strong software-defined vehicle, which we -- which Anders has created on the EX90, but even better now on the EX60.

So starting with electrification. Electrification is there, and it's the fastest-growing market in the industry, and we will be on it more than our competition. This is a great opportunity for us, and we will be very successful in that. And we are transforming faster than any of our legacy competition. On this graph, I show you competitor A, B and M. And you see on the dark blue, that's the BEV car share and in the light blue, it's the PF car share. And you can see clearly, Volvo has in the past, based on registrated cars, outperformed this competition, and we will grow even further and even stronger in this market, and we will grow in this market profitable.

But electrification has slowed down a little bit. And this graph is demonstrating that. We call it tipping points. So when the BEV curve is intersecting with the ICE curve. And the dotted lines are forecast 2 years ago and the solid lines are -- is the current forecast from S&P. You can see that the tipping points are changing. But still, as Erik said, it's the strongest growing segment is the BEVs. So to summarize this one here, BEVs are growing the strongest. ICE is decreasing. Tipping points have changed by 2 to 3 years, and we need to find a solution for our customers who are not ready yet to buy a BEV.

So how do we do that? First of all, we have a fantastic lineup of electric cars. You see the EX3040, EC40, ES90 and EX90, and you see a preview of our EX60 here. So the taillight, you can see how it looks like. And 21st of January, you will see the full car and see the full potential. And as Erik said, Anders will talk more about this fantastic car.

So we have a fantastic lineup in the biggest profitable market in the world. With the EX60, we will increase even more market share because that is the biggest selling car in the world, the D SUV segment. And with our EX60 priced on a PHEV, we will make even more money than with the PHEV. So -- but we have customers who are not ready yet. So our transition to BEVs from 20% to 100% will probably take a little bit longer. And for our customers who are not ready yet, we need to find a solution.

And our solution is to, first of all, sensibly invest into our SPA1 and CMA products. So we will have significant design changes and hardware changes for all of these cars in the next 12 months to refresh our best-selling products on SPA1 and CMA. But then the bridge to electrification. So how does it look right now? We have started in the very past with pure ICE cars, then mild hybrids, plug-in hybrids and then BEVs. And this bridge is not long enough.

So what we will do now? We will first upgrade our PHEV cars, as I said earlier, with the CMA and SPA1 cars. But then the big news is we will create the second generation of PHEV cars. These cars will be like a BEV. They will drive like a BEV. They will have the infotainment like a BEV, and they will feel like a BEV. But you have a backup engine for customers who are living in an area which is not ready yet for -- with the infrastructure and they cannot charge or for customers who doesn't want a BEV yet.

So I cluster our customers in 3 clusters. One, customers who are transformed, they are already here. Customers which will be transformed, they might buy this car here. Drive it, enjoy the BEV feeling of that car and probably fill the car up once or twice a year. Next car will be a BEV because I enjoy so much a BEV. And the third group of customers is the ones which are transitioning later, and they will probably stay a little bit later on longer on that car. So we have a solution for all of our customer segments and the second segment to be transformed, I'm pretty sure they will buy this car, the next car will be a BEV.

And we will do all of that, as I said, by like strengthening our margins. As Erik said, we will price our EX60 BEV on the PHEV, and we will have more margins with the BEVs. And we are also on a good way to have price parity between a BEV and an ICE car. So Anders will talk more about how we have created such a fantastic low-cost EX60, and I'm sure you will be convinced about that car when you see it in January.

Next pillar, as I said in the beginning, we reinforce our collaboration with Geely because we want to make more cost-effective products and bring them faster to the market.

So how we do that? We have done it in the past. First column, XC40, EX40, one of our most selling products built on a CMA platform together developed with Geely in a JV, super successful product. EX30 small platform from Geely. Volvo haven't had it. So we participated on Geely's small platform and built an EX30 on that platform. With that, we created the B segment -- premium B segment, which was not existing. Super 6 was so in the market. And then the XE70, our first second-generation plug-in hybrid, where we say it's a battery car with a backup plan.

But that's not enough. So we need to further increase our collaboration with Geely to really go down in costs. So how we do that? We divide our cars in modules, and these modules will be standardized, together with Geely in a so-called CBP, commodity business plan. This is something which Volvo has done for decades. But the news is now that we do that together with Geely. So we work together with our colleagues of Geely, look into each module and think about how can we make this module common, take a climate compressor. You can -- we have a lot of climate compressors in our group. If you modify them so that they are common, all of a sudden, we can use all the same climate compressor. By that, we increase the volume of that product, we will reduce the amount of investment and we reduce the price by the higher volume. So it's a fantastic opportunity to improve our cost on the hardware by not changing our high quality and safety standards, and we will improve our profitability without changing our brand.

Next item is the regionalization. So the world is going for electrification for sure. But as Hakan said, the globalization is over. So we have separated our markets in China, Europe and U.S. And we have done that to make sure that we have a car for each market. So we need to listen more to our customers in these regions, create a car for these customers with the features the customer want in that market to avoid logistic cost and tariff costs. And we have 2 examples of that already. We recently launched in U.S. that we will bring a new hybrid into that market, tailored for that market, tailored for the customer produced in U.S.

And another example is the XE70, which we have already launched in China, tailored for the market, built on China technology with China software in a super fast speed and in very low cost. And this car is targeting the new energy vehicle market, which is a clearly growing segment. Without our superpower with Geely, we wouldn't have been able to do it in that fast time and at that low cost. This car was launched recently, and we have really good sales volumes on that one. So a success story in China, and we may bring it to Europe.

BEV car has -- is a BEV car with a backup engine, as I said. 1,200-kilometer driving without recharging or refueling, 200-kilometer electric range. Due to our component sharing with Geely, we have lower costs, and we are quicker to the market. And this product is made for our Chinese customers with China technology.

And then the last point for my presentation, core computing. As I said, I was -- I came back to Volvo 2 years ago. In the last few years, which I have not been at Volvo, I have been probably watching Volvo like you, and my heart was bleeding to see how difficult it was for Volvo to go through the painful story of SPA2, delays and high investment. But Anders has changed that. He has fixed this SPA2, especially now after the latest quality improvement within your software. So the car is ready.

So what has given us this painful journey? We have a truly software-defined car. We are one of the few OEMs in the world who have such a technology. Others have tried, they have failed. Others are still trying and they're investing much, much more money in Germany and then they invest even more money in the U.S. to get where we are. So you could say it was a bad time. But overall, we have created a fantastic product. And this software-defined vehicles, we are now rolling out not only to our BEV cars, so the EX90 -- the EX90 and the EX60 will have it. We will also roll it out to our hybrid cars, the most important hybrid cars. By that, we create a customer feeling. This is software in our hybrid cars like our BEV customers enjoy it.

And even more important, we increase our volume on the core computing. By that, we reduce the cost, and we reduce our internal cost because Anders has to

take care of less software variants. It's only one software variant for all of our cars in the future. So painful journey, but super successful technology, and we will build on that in the future. And with that technology, we will grow profitably.

So to summarize, again, the world is going electric, and we are ready to go electric with the world when our customers are. And with our new products, we will grow profitable in this biggest growing segment in the world. Our bridge to electrification will be longer, and we have fantastic plug-in hybrids, which we call a BEV car with a backup engine. We increased our synergies with Geely to participate on low cost and fast time to market and have solutions for the Chinese market to grow profitable there.

Our regional approach is targeting our customers even better in the markets, the Americas and China, and we will avoid logistic costs and tariff costs. And again, the core computing system with one software track. So really reduce the cost of the software internally and create a better product for our customers, not only for BEVs, also for hybrids.

With that, I hand over to my colleague, Francesca and she will talk more about how we do the cost reductions.

Good morning. I am Francesca Gamboni, Chief Industrial Operation Officer at Volvo Cars. Basically, I oversee procurement, manufacturing and supply chain. So in a nutshell, I oversee all the variable product cost. And this is exactly what I'm going to talk to you about today is our variable product cost. And I hope I'll manage to transfer to you how we are confident that on the product cost, we will do a step change in our cost competitiveness this year -- in the following years by leveraging our superpower, what we call in procurement, our superpower, which is being part of the GV Group.

So again, as I said, I will explain you the way we will do it. So I think you'll understand that it is a concrete way of working that is going to bring value to our way we are -- the way we are working. I will start by saying how we are going to do it. So basically, we have 5 levers that we use in order to leverage this cost -- this step change in cost competitiveness. We go through leveraging scale, and I'll go through each one of them, and you will see that it is absolutely concrete and that there are real ways of doing and the benefit is enormous. It's really huge. And especially the benefit is unique because we are the unique carmaker, which is capable of accessing this great opportunity, which is the GD Group.

So starting with the first areas, the first way, leveraging scale. So what do I mean with leveraging scale? Well, it goes by itself that if you go in front of a supplier with 700,000 volumes or with 37000, it changes. You enter from a different door and you have a red carpet instead of entering from the back door. So that obviously goes by itself and is obvious. But also, we are -- in the BEV world, we are going together -- we are playing together with the third BEV biggest producer in the world. So that also changes the relation that we have and changes how important we are in front of the supplier.

So that obviously doesn't need any explanation. But that's not the only advantage that we have. By also putting together the supplier panel, we access innovation and technology and a network and an ecosystem and a Chinese ecosystem, which we would never be able to access on our own because we do not have the content and we do not have the capability of accessing. So this opens doors also to a lot of innovation and technology, which obviously gives us a competitive advantage versus other OEMs. But of course, to do this, what do we need? We need to have a common supplier panel. And that is obviously the basis, the beginning.

Good news, we have 130 common suppliers today together with Geely 130 common suppliers represent 75% of our spend. So that's a good news because it's the majority. Now if you would ask how many suppliers do we have, we have 500, but 130 represents 75% because obviously, we go first for the biggest spend because that's where we can gain the biggest value. Our plan is to increase this share of common suppliers and get to 200 common suppliers in the next couple of years, so increasing 50%. This will bring our spend, our common -- with common suppliers up to 90%. So basically, we will have the totality of the spend -- the majority -- the great majority of the spend on common suppliers. How do we get to commonalize the suppliers? We basically at each RFQ for the ones who are not familiar, which request for quotations that we have, we obviously open up to the supplier of the other company. And that's how you get in more suppliers in our supplier panel.

So that's basically the way that we are increasing the supplier panel. We have started harvesting already this last 6 months, and you have seen the results -- the good results in our challenge in our EUR 18 billion challenge, where you have seen that part of it was variable cost reduction, and that was going in the right direction. And we have seen that we get cost savings when we have a joint negotiation and a joint approach, we get cost savings up to 8%.

So this is quite encouraging. It's quite good. We are just at the beginning, but it's extremely encouraging. We have started with semiconductors, with batteries, with wheels, with steel, and we are going into all in also in displays, cameras, sensors. So there is all the commodities, one by one, we are entering in all the commodities where we have joint supplier panel, common suppliers with joint negotiation. Doing joint negotiation is -- and again, for the people who know the procurement is not only advantageous because you have a bigger role in front of the supplier, but also because you can share shoot cost.

Now I'll explain what a shoot cost is. When you go, people think that procurement is just going out for dinner with the supplier and coming back with a discount. It's a bit more complex than that. Basically, you need to be prepared. So when you go to a supplier, you prepare and you do and you come with a shoot cost, meaning what would be the cost that you think the supplier can reduce by introducing a number of improvement and because you are competent in manufacturing, in procurement and supply chain. So you study what are the areas that you are going to challenge your supplier with. And of course, every carmaker does the same. But if we can share together with Geely, the shoot cost, so challenge the shoot cost, they have other ideas, other ideas, other bases, other references, other ways of doing things.

So it would help us having a more complete shoot cost, having a shoot cost, which will allow us to challenge even further the productivity and the competitiveness of our supplier. So that's the second advantage. And that's the first areas, the first lever. And we have 5, but maybe I'll take less for the other ones, but still, I hope I'll manage to transfer how important these are and what is the opportunity behind it.

Cost benchmarking, what does it mean? So we have tiered down our XE40, XE60,X90. And we have looked at what are and compared costs and look at what are the opportunities. And as my colleagues also have repeated, we will never -- as we will never compromise on safety, sustainability and quality, never, ever. But there are still some very good opportunities that we can identify by comparing solutions, by comparing costs. And of course, you could say we could also tier down one -- a car of one of the ABM competitors that we have. But again, you can tier down, you can compare, but you don't have ideas of what the cost is and where the opportunities are. And of course, you can find opportunities, but not as much as if you can really deep dive on what the solutions are and where the opportunities are. So that's another great opportunity, and I'm at the second one.

Third one, culture and best practice sharing. We are, as was mentioned also by Michael in terms of time to market. We are not comparing only the product, but we are comparing together with we are benchmarking together with Geely, also processes. So how they are doing things compared to us. And again, it is a fact -- I mean, it's not only a legend, it is a fact that the Chinese speed, it's a reality. The Chinese are faster are faster than we are. And they are faster because in some ways -- and they are faster -- sorry, I think phone. I thought that's -- so I'm not going to answer bad moment.

Okay. So again, so again, we are comparing processes. We are comparing processes to find best practices. So they are faster. And again, repeat again, without compromising quality, sustainability and safety. still, there is some learning. For example, on average, they have 12 months quicker time to market than we have. And why? Because they have an agile industrialization and ramp-up, which -- where we can learn a lot of things, where we can learn, we can -- it's a best practice that we can look into, and we are looking into it.

And of course, again, we don't compromise with our steps and with the way the focus we put on quality, sustainability and safety. But still in our decision-making process, we see that we can improve. So we can really be faster in taking decisions and recouping some time to market. So again, the second -- the third pillar is the best practice sharing and the culture where there is a lot of learning from both sides, to be honest. The fourth pillar is increased commonality.

Now Michael has mentioned this. So CBP, what is it? When you source a strategy -- when you source a commodity, you are in the execution, you source. But we also build strategies on our commodities. So this is normal. Every carmaker has commodity strategies. We haven't invented them. So the CBP is -- maybe they are called differently, but it's the strategy of a commodity. So by commodity, you decide what is the technological road map that you have, what is the sourcing strategy that you have. So you look a bit further on what is the evolution of that commodity and how you're going to go for it. You decide, for example, if you're on the sourcing, you regionalize, you double source, how you cover risks, what kind of players you want to play with, how, where, what kind of technology you want to follow. And that's something that is just a long-term strategy. The CBP is the long-term strategy. What is different is that now we do it together with Geely.

So we do the strategy together with Geely, which means that we include in our strategy also elements like commonality. So how do we commonize -- how do we -- scalability, for example, reduction of complexity. So we introduced these elements on which that we look together into together with Gee. Now what is the advantage? From a procurement perspective, I explained to you why it's an advantage to go to the supplier with a bigger volume, but maybe different parts, but I'm a more important customer because I have a bigger volume. If I then can also have a bigger volume on the same component, then I have a second layer of cost reduction because obviously, the fixed costs are spread on a bigger volume. So obviously, I have a second level of cost reduction, which is driven by the commonality.

Last but not least, resilience. That is a very important topic because Again, we know disruption is the new normal. I mean, being supply chain in the past, nobody knew who supply chain manager were. And now today, they are raising at CEOs levels and because everybody realized hoops, it's important. It's an important job. I mean a supply chain manager, I had the question down at the coffee. Supply chain manager wakes up in every morning and says, what's going to fall on my head today because every day, there is a disruption.

Every day, there is something somewhere. There is a war. There is a ship which gets blocked in the sea. There is geopolitical tensions and trade and shortages, you name it. So of course, resilience is very important within the operations. And resilience is all about finding alternative solutions. It's all about agility. And if I want to resume it in a nutshell. It's all about -- I mean, when ship hits the fan, it's all about what kind of alternative solution you can find in order to continue your operations. And that's about the rule of the game in the last decade because, again, disruption is the new normal.

If you can count on solutions coming also from another -- a different side, obviously, you're more resilient because you have alternative solutions, the ones you can think on the ones you can access, but also the one Geely can think of and can access. And also in terms of reserving capacity, if we, for example, mentioned semiconductor crisis, which I think everybody has been affected, if you can reserve capacity together with another player, obviously, you lower your risk, you lower your tied up capital and risk.

So again, resilience being part of the Geely Group is quite important. So -- so to resume, again, we are working on 3 pillars. The first one is with Geely is on the strategy. Again, I spoke about the CBPs, I spoke about the fact of building a common strategy by commodity. The second one is about execution. So I spoke about joint negotiations, joint supplier panels, and this is how we go for it the day-to-day. And then I'll say a few words on the steering framework on the management framework because this is also important because, again, synergies, and this is -- I mean, I have long experience on it, should not be at corn, should not be a one-off.

So I arrive, I do big task forces, big synergies, harvest and then that's it and then the companies continue and they go back as they were before. Synergies means getting at the best cost competitive position and then staying there. Staying there means that we are -- that all the best cost positions are at birth. They are not at call. It means that we conceive them at the best cost competitive position. And to do that, we need to have a management framework, a governance that allows us to do that.

So in a nutshell, we have now a governance and a management structure that allows us to do this. A few examples, for example, we have match payers means that at every level of procurement, we have a match payer who works hand-in-hand, Geely and Volvo. Second example, we have divided all the suppliers with one unique lead, either the lead is Geely or the lead is Volvo. And that's extremely important when you have one face because if all these kind of -- I mean, I have a long experience to know that coordinations they are kind of weak, they don't work. There's one phase needs to be in front of the supplier. So that's the -- we spoke about we have also negotiation waves.

So 4 negotiation waves there every season, we go and we go together. Joint hackathons, for example, hackathons. Hackathon is where you generate ideas, where you put cross-functional, all the cross-functional and the brain brainstorm and you start generating ideas on how you can reduce cost. Every company kind of has them. We have them joint. So more ideas, collective intelligence, world global intelligence, not only European, but -- so different way of seeing things and generating ideas.

So these are all areas on which we are working together. And then again, common supplier choice committee. So every time we have a choice committee is once you have a certain point you nominate for a new business, a supplier, then you have a committee where you decide, yes, from all the different cross functions, yes, this is the right suppliers for criteria A, B, C, D, E, and we all agree on it. And now we do it jointly. So again, different perspective and ensuring that we are commonalizing the supplier panel. So it's concrete, it's really concrete and there are real actions. We have started the harvesting now. We have started and again, you have seen some results already in the EUR 18 billion, let's say, challenge, which is where we are ahead of the game and variable cost reduction was one of it. And we have a lot to harvest more going forward. So -- last slide, which is a positive. I would like to -- again, I hope I've managed to share my enthusiasm and also how I strongly believe in that we're going to do this step change, how we're going to really do a step change in our cost competitiveness, which will bring us to a position where we are not only going to be cost competitive like the best ones. We're going to be the best one because nobody has the opportunity that we have.

And that's unique for Volvo because others don't have access. I have a long experience. I never had this opportunity of really accessing the best ones in cost. And again, we can say many things, but from a cost perspective, really the Chinese they see many other aspects. They have developed many other processes and many other, let's say, ways where we have to learn, where we can learn, where we can go there and say, okay, how did you do it? And can I do the same? Can I do it the same and fast, particularly fast, quickly before the others.

So again, I hope I've managed to transfer why I'm very confident. We are very confident that we will do a step change. And we believe that this will bring -- will add 2% or 3% of EBIT contribution to our bottom line. So this is all I wanted to share. Thank you.

Super. So now we have a short break, 10 minutes. We have restrooms here, restrooms downstairs and some coffee. So a quick break and then right back here, and we'll continue with Spot. Thanks.

With that, we'll get back to the agenda. And without further ado, I want to welcome Anders Bell, our CTO, on stage.

All right. Welcome back, everybody. I'm going to roll up my sleeves here because this is going to be wild. I'm going to cover -- try to cover now in 20 minutes, what I usually don't even attempt of covering in less than 2 hours. So bear with me. My name is Anders Bell, Chief Engineering and Technology Officer. I want to keep the engineering in the title because that's kind of the grit, the finger -- the dirt under the fingernails, engineering is what we do. technologies what we work with.

So ideally, Chief Engineering Officer, but that abbreviation was already taken. So hence, CTO. My job is to lead Volvo Cars Engineering through the most profound technology shift in the history of automotive. So before now, you get a bit concerned because now you're going to talk a lot about tech stuff. But an alternative job description is that I take a small pile of money, small, but still a pile Fredrik would point out, transform it to technology, which we then pass through Francesca's industrial system and Erik's commercial system and transform that into a big pile of money. That is basically the job.

So I'm going to talk business and profitability to a very large extent today, but how we achieve that through clever application of technology. SPA3, first and foremost, I get a lot of questions. We are super excited. I will come back to this in the end of my presentation as well. Super excited leading up to 21st of January. I usually say the only thing we haven't invented I wish I had is a time machine because I always want to go back in time and fix stuff. You can always do things better. But this time, I actually want to travel into the future because I can't wait until 21st of January when we come back here to Stockholm to launch what is -- will be the best electric vehicle in the world. It's a historic moment for us. We are on time. We are on cost and we are on quality. Yes, we are working extremely hard at this point, which we always do leading up to a big launch. This is arguably the most important launch in the history of the company. We are working extremely hard as we always do in front of a major launch, especially on a new platform.

So areas of evolution I will cover today, kind of keep it in 3 big piles of topics here, the uncompromised scalable BEV architecture. Remember the word uncompromised. This is important. You need to park that in your memory bank. How we deploy into this architecture, cutting-edge battery electric vehicle technology, how we apply vertical integration and horizontal optimization to achieve results that benefits the customer and the company. And together with this, the fully software-defined vehicle on a Ontrack software. And this is really the profound change in automotive that is ongoing. We talk a lot about the electrification of the car.

The whole industry, will it happen? How fast will it happen? When does it happen each region? What's the technology? This is happening at the same time, the computerization of the car. They could have happened independently, they chose to happen together. The merging of -- finally of automotive fully merging into the digital society. And these are happening at the same time. This is not change plus change. This is change times change. It's change square. This is why it's such a profound moment in time. So we believe Well, I kind of know, but we believe that SPA3 is the best electric vehicle platform in the world. You all watched IA, Munich, a lot of reveals. I'll come back to some reference points. We also watched it, and we are super confident afterwards. We have a really great product, a fantastic platform coming here, where we can scale all the company's business needs in a completely new way from the smallest electric vehicle to the biggest electric vehicle. Whatever needs the team here will have in terms of size, price position, markets in the electric vehicle world, we have made a platform that we can deploy to those needs in a very clever way. So to bridge -- literally bridge, we talked -- Michael talked a bit about the electric car with a backup plan. the Generation 2 plug-in electric vehicles.

Today, I just want to bridge with that to give you context before I go carry on and talk about the uncompromised battery electric vehicle. The context here is, as HÃ¥kan mentioned as well, we will have the same core compute software-defined vehicle system in our Generation 2 plug-in electric vehicles. So they will be essentially on the same technology stack with track software and share modules and parts. So these are designed in the same context in the same tech stack. So that's how you need to view the plug-in Generation 2 technology that we'll be talking about. This would provide us with peak effectiveness, cost scalability, modularity, upgradability. Let's pause on upgradability for a while. Why is upgradability important? -- because we need to -- in this fast-moving, hypercompetitive automotive industry, we need to make sure that the cars rolling out of the factory every day is competitive over time. We cannot let them degrade over time and then we replace them 5, 6, 7 years later. We need to continuously upgrade with the latest involvement in technology, efficiency, cost, customer satisfaction every single day.

Proof point, we are now in 2 weeks away cutting over to the 800-volt system on EX90. The 800-volt system, which is launched in the EX90. Now we're cutting over current EX90 cars, massive cost reduction, faster range, higher performance, everybody is happy, and that also goes into SPA3, same system. So the technology and the sharing of the technology and the progressions between the cars and be able to upgrade continuously over time is a key factor in this, which also leads to manufacturing efficiencies, not only for ourselves, but also across the supply chain. So what have we done in SPA3? And this is kind of where I could talk for a long time on how removing the constraints of the combustion engine opens up completely new ways to scale and modularize a car. So we talk about the software-defined vehicle. We also need to talk about the energy-defined vehicles, electric vehicle defined around energy found on the car. But we also need to acknowledge that we are leaving the combustion-defined vehicle. We don't talk about the combustion-defined vehicle because that's been the car since it was born over 100 years ago.

Removing the constraints of the combustion engine in the uncompromised battery electric vehicle platform allows us to create unified setup for batteries, e-machines, HVAC chassis, electrical. Battery, you can see over here, this is an EX60 battery pack here. So if this is the big box of LEGO, then you go down and look at the battery pack itself is another box of LEGO inside the box of LEGO. So the battery pack already designed here around the cells is modularized to provide all sizes and price positions across a wide range of products from the smallest Volvo electric vehicle to the biggest Volvo electric vehicle, high and low, tall or short, we can do them all. It's all cleverly designed and how we standardize the extrusions, the power electronics, all around a standardized form factor, large prismatic cell, which Francesca can go to any region, any supplier, any chemistry as long as it fits in that blue box over there, we can consume it.

So on to proof points. of what have we done to ensure high-margin, great electric vehicles. I'll give you a few examples. We talked previously about mega casting, how this takes 100 parts, make them into one, which you machine and then directly put into the car, replacing 100 parts. 100 parts that need to be shipped, handled, welded, put together. We're saving around 35% on the cost of the rear floor. Also how we integrate the battery pack into the vehicle. The battery pack is actually the floor of the vehicle. There is an opening when you build the body structure. The battery pack completes the car, and we actually mount the seats directly on top of the battery pack, saving 25% cost. And if we double-click on this one, here's the generational journey on battery technology system evolution at Volvo Cars.

From 2020, late 2020 when we launched the first EX40 then we call XE40 recharge, I think, I wasn't around. You can visually see here the progression over the last 5, 6 years, how we evolved from working on adapted combustion engine platforms and then making BEVs out of them to where we are today on SPA2 running production, massive step in cost reduction per kilowatt hour, going up in energy density, increasing the total pack size, the capability we can make larger packs. We don't need to fill them all, reducing our CO2 footprint and taking out 40% charging time from where we are today on the 800-volt system. That's over the course of a few years. Then we take another step. Now we are truly designing on an uncompromised battery electric vehicle architecture, and we find completely new ways to design. The simplicity, you can visually see here how much more efficient it is, another 25% of cost on kilowatt hour level, plus we get 20% higher energy density to how we design a structural pack, another 40% reduction in CO2 footprint, another 15% in charging time.

I think we're going to increase that even more. I got some good news yesterday. So this is the S-curve of how we improve performance, improve range, improve charging time and get cost down, completely breaking the traditional automotive equation and breaking the cycle of being stuck in the combustion world and embracing all in on electricity. Next example, thermal system or HVAC. Here, I didn't even put Gen 1 because that would be a combustion system, kind of apples compares. Gen 2 here is 2024 launched a SPA2 EX90 system, very good thermal system. Look at what we've done for Gen 3 in SPAR 3, 35% 20% cost reduction, which is on a thermal system that's been around for not 100, but tens of years and just continues to optimize, taking a step like that is unheard of at 50% improved cooling capacity and 33% lower energy consumption.

So you get a 20% lower cost, you get 50% better cooling capacity. What does that mean? It means we can preheat pre-cool or preheat the pack, so you can have faster charging. It also means we can keep the cells in the optimal durability temperature quicker so we can guarantee the lifetime of the battery will outlast the car. It's all these little things. 33% lower energy consumption, you get much longer range. That will be evident when we launch the EX60. This is a key contributor to how we can achieve that range. Third example, drive units, another core key technology for a battery electric vehicle. So this is Gen 1, perfectly good first generation. 2 years later, we replaced what we launched in CMA 2020 -- late 2020. 2 years later, we launched -- replaced the first-generation drive units with our first in-house design drive unit and cut over into the model year '24 for CMA cars. 16% cost reduction, 45% increase in torque, 30% up in power, slight up on weight, which was acceptable 6 percentage points of efficiency. I'm going to stop a little.

So we're talking about 86% efficiency, 91%, 93%, that's overall efficiency. So I'm going to take a little detour. When we talk about efficiency and electric cars, so I'm going to do pop quiz. So if you have an electric car, let's say, 85-kilowatt hour battery pack, which is kind of average for a pretty long-range car. You're fully 100% charged. It's been in your home charger overnight, you go out in the morning, it's 100% charged. You're like ready, what do you say, Ben, happy as Larry and ready to take on anything that comes at that day, you have early charge apps and everything. If you're traveling far, you know exactly where to go.

Do you know how much energy you have in that pack translated to petrol expressed in liters. I don't expect anybody to know. You will have around 9 liters, translated to megajoules to kilowatt hours. You are actually starting your day with 9 liters of energy in your car and you're happy as Larry. That's how efficient. This is why the electric vehicle is a superior product. You know this. What is the efficiency of a combustion engine? This is 93. Yes, that's on a really, really good day. That's in reality in Scandinavia, you will have days at 18 -- the efficiency of this -- the product is so much higher. And this is Generation 3. So this one is in production in CMA and SPA2. And now we're cutting over to the 800-volt system. So ES90 is already here. EX90 will be here in 2 weeks, and we're launching SPA3 EX60 with this guy. In-house design, in-house manufactured and another step-up in efficiency, taking the weight back power up torque, we're perfectly fine. We don't need more. This is the speed of development. This is the S-curve of fully embracing electric vehicle technology, realizing to make kick as electric cars, you need to have dedicated platforms. You need to vertically integrate yourself to a level where you can horizontally optimize the system. Otherwise, you will not win in electric vehicles. So putting this together in context, I'm going to kind of start assembling this again.

In-house hardware vertical integration doesn't mean we make everything ourselves. We make this guy in-house. We make the battery pack in-house, this system we buy. That's perfectly fine as long as we can do the system integration and all the software integration. But then we can optimize the system across. We've done things like we -- this unlocks that we can, for instance, with small compromises, allow the electric drive unit to produce excessive heat in corner cases that allows us to remove the auxiliary heater from the thermal system, saving EUR 150 per car. You can only do that when you do this. Another example, we have a brake system up here somewhere. We can take a raw signal from the brake system pass through the inverter to control the vehicle motion of the car, removing corner cases that's normally dimensioning the drive unit and the drive unit amounts to take about EUR 50 of cost because we don't -- we can remove those constraints because we have a flat topology system, we do the in-house software.

So we can, with confidence, downgrade some of the stupid parts of this system and save money and wait because we know we don't need to design for those cases anymore. These are a few examples on how we assemble everything together. And again, it's the combination of compromised battery electric vehicle platforms and all in-house software integration that is the key. On software, we are now have merged all our cars to one software track. So it means that EX90, EX90, EX60 and all these new cars, including Generation 2 plug-in hybrids will all be from the same software master. I will come to that shortly. This unlocks faster speed, efficiency in development. It means basically every single function or fix we do, we need to do once it's ready for all cars. This is a massive change for a car company, truly becoming not only a car company but a software company as well.

You need to be both. What does it mean for our customers? First all this talk, the tech stuff here, the technology platform, what does it mean for our customers? There's literally no end to where we'll go with this journey. Immediately, we will have safer cars. We can provide more efficient cars. We can integrate in your ecosystem, in your apps. We have widgets for Apple. We have other solutions for Google. We can launch more innovative functions, outstanding user experience and faster, better quality software updates. For us as a business, it's also massive.

A few of the examples I mentioned on the technology side before is only possible, thanks to this approach. We can continue to provide first rate card for our customers. We can lower cost. We've become a much more efficient company. But most importantly, on the software side, we're moving the complexity from the hardware layer to the software layer. And most importantly, all the development in the software realm will be accumulative, meaning what we do tomorrow is built on what we did today, meaning that while we're doing 5 years, which I have no clue what we do in 5 years, I know it's going to be awesome will be built on all the stuff we've done in the next 5 years.

We will build new functions on top of the capabilities we launched there will be new functions on top of the combination of functions we already achieved. And how does this work? This is try to -- this is profound. Having one software master where all the developers signal database management, all the improvements and new features goes into one master and where we through configuration management and signal databases can steer the right software module to the right car, right market, right customer is a massive change for us. Super hard to master. But once you're there, you're there, then you have the platform. We are going to structure this into 4 major planned releases per year. But this is not just releasing for the EX90. These are releases that goes to the entire fleet.

So all the cars on the road, all the cars coming out of the factory and all the cars that are on the drawing board that we are yet to reveal are getting releases from the same master 4 times per year, 2 of them aligned with our big factory cutovers, which happens in quarter 4 and 2, but all with meaningful upgrade for the customers.

Of course, we can do hot fixes in between. We really don't want to do that ideally. But of course, we can always do minor tweaks and fixes in between, but 4 meaningful releases per year from one unified master. Very few car companies have come to this point. It's super hard to master. super hard to get there. But once you're there, now we can polish the machine kind of -- now we pressure tested it so much. So now we have a true diamond here, and now we know exactly what great looks like, and we are going to keep polishing every single facet of this diamond for the years to come.

So in a nutshell, SPA3, uncompromised battery electric vehicle. It is on time and cost and quality, cutting-edge BEV technology, which you can only achieve through vertical integration and horizontal optimization. And all our cars at the highest, they're born digital, designed to be software-defined from ground up and they're all deployed on one track software. So all of this -- and I get a lot of questions, how about which is your key competitors and how will the EX60 do in relation to the Neue Klasse and all that? You have to wait until 21st of January. But I called it before Munich.

Hakan said it afterwards as well. We're going to -- we have something really, really great coming here. Behind this smiley is -- I mean, these are traditional automotive metrics. but we have all the reasons in the world to smile here. We have the Neue Klasse, EX60. We love a good competition, all the respect for what they have achieved in Germany here. So it's -- we really thrive -- and also I think HÃ¥kan mentioned, we love the fact that there are more choices for the customer, and we love competition because it keeps us on our toes. But we have a real winner coming here, not only in a spec sheet but as a total integrated product.

All right. That's it for me. Thank you very much. Hand over to Fredrik.

So we have smiling engineers. We've had crying engineers for a few years. I'm glad to see they're smiling now. So now we've heard the strategy in a lot of different areas. And I'm going to try to sort of summarize what that means for us in terms of financial potential and what our pathway to higher profitability and cash flow generation is.

And I'm starting with recapping a bit because our pathway that we've talked about now for a couple of months stays same on the highest level. It is about electrification, regionalization and profitability. We believe that we are extremely well positioned as the world electrifies, and we will use those opportunities. And we are also bringing down spend to secure that profitability comes regardless from the NOK 18 billion cash program and beyond. And the NOK 18 billion program is a bit in the near term. That's what we're promising for 2026.

We've talked about this a lot. I talked about it in the Q3 report just a couple of weeks ago. But in short, we are executing. We are ahead of plan, and it is already now helping our financials. But today, it's not about the near term. Today is about the longer term. So I want to talk about what that means financially. And as Hakan said in the beginning, this is not about providing guidance or a detailed time line as to when we reach what profit, but we are showing the fundamental pieces of our strategy. So we want to show what that means in terms of structurally building a more profitable company. And our strategy builds a company for long-term value creation. We are building a company that should structurally achieve higher than 8% EBIT. We are building a company that should generate very strong positive cash flows.

And if I jump into each of these, starting with EBIT, I want to sort of size a bit the strategic opportunities. What are these building blocks or puzzle pieces that we talked about and how much will they contribute to bottom line as compared to where we stand today. And starting with what Erik was talking about, profitable electrified growth. We see a 2% EBIT improvement potential from electrified growth. And I think the keyword there is electrified because we're talking about more profitable electrified products.

Growth is a factor, but not the key factor for our profitability here to be noted. We're doing that by expanding our offer. We're doing that based on SPA3, which we believe is the best BEV platform in the world. And we're also extending our bridge to electrification with groundbreaking second-generation PHEVs, starting with the electric motor and adding a small combustion engine as a backup. And I think this is an important point. I'm going to sort of make it again because we are extremely well positioned for profitable electric growth, and it starts here and now.

So if you look at the left-hand side, and this is going to be a bit complicated, but we are expanding our addressable market here and now, starting with the EX60. If we look today, this is the premium market where we have offers, what size cars we have offers in. And today, we're touching 65% of the premium market. That is the Volvo models we have. 65% of the volume. If we look at BEVs, we're actually only touching 25% of the market volume out there. We have the EX30 in the B segment. We have the EX40 in the C segment. We have the EX90 in the E segment. But -- and with that, as Michael showed, we're still leading in terms of share of BEV cars among traditional players. We have the highest share of BEV sales among all players despite the fact that we're only playing in 25% of the market. And with the EX60 that will start to ramp up next year, we're basically increasing that with 200%, as Erik said. We're going from 25% addressed market to a 75% addressed market because that is the most important segment in the world.

It's a Tesla Model Y segment. It's the most important segment for Volvo. The XE60 today is by far our best-selling car. We haven't even had an offer. And next year, we have. And it's a very beautiful -- we haven't shown the car, beautiful rear headlights and more to come. So the pie is expanding. And when the pie is expanding, we're quite confident that we have good opportunities because the right-hand side shows what we have done with the pie we had before. This is our track record looking at year-to-date data in the premium segment. If we look at all cars, Volvo has an 8% market share globally. If we look at BEVs and in the BEV segments we sell, we actually have twice the market share. We're at 17% market share. And on PHEVs, we're even 3x larger than on average.

That means that our brand, as Erik talked about, is extremely well positioned for the electrified future. We're punching really below our weight in terms of offer, but we are taking significant market shares in relation. And this is sort of the cornerstone of our strategy, right? We want to be a bigger company as the world electrifies, and we are already on that track. This is year-to-date data. Now we're expanding the market, which means new opportunities. In terms of addressing the market, we need to do it with the right product.

And as we said, we believe we have the best EV platform in the world. The engineers are smiling on the left-hand side. I'm also smiling on the right-hand side because as Erik said, this is now priced as a P. It's actually affordable. You don't need to pay more, but we will get better margins, and I'm smiling. The customers will also smile because you also get better features. This is a better car, better performance in basically all aspects. More to come on this on January 21. This is not a reveal of the car, but no, we're a bit too excited to not share this with you now. Second pillar in sizing this is synergies and variable cost reductions. And as Francesca alluded to, 2% to 3% cost reductions. This is about executing on the structured way of working we have already established. And the big, big opportunity is then the hardware collaboration with Geely, basically the third largest BEV player in the world and also tapping into China technology and more local China products without large investments. And I think this is such a unique point for us that it's worth double-clicking on because we have something extremely unique in terms of access to China cost, China scale and China technology for China.

Geely is the best player to be with. If you look on the left-hand side here, this is the current year-to-date ranking in terms of global market shares on BEV sales. So Geely has as a totality, 10% global market share, slightly less than Tesla right now, but Geely is also growing at 25% a year. That is scale. Francesca talked about what scale gives you. You cannot find more scale than this, especially not in China. And that means that on a global level, we work on hardware, software, we keep East and West separate. But on hardware, we have 75% common suppliers in terms of spend, and we're increasing that. We're now working through that to get the cost savings out, and Francesca showed some examples of what it can mean. The other important point when it comes to controlling investments is that Geely has scale in Eastern technology for China.

A Chinese consumer uses a different infotainment system. They have a different voice assistant. They have different apps. They have different ADAS systems. They have different AI algorithms. All of that, we don't need to reinvent and pay for ourselves. We can piggyback on Geely for those products in China. And lastly, we can do more than that. We can share components and product and co-developed platforms, creating cars like the XE70, and there's more to come to make real tailored products. And as Michael showed, taking us out of the traditional premium in China into the new energy vehicle sector, really competing also with the local Chinese with the latest and greatest China for China technology.

Third pillar then indirect cost reductions, 1% to 2%. And part of this, we've already started. The cost and cash program we talk about is a lot about indirect. We've seen some of the savings already in Q3. Here, the key is keeping fixed cost discipline, making sure that we leverage all opportunities not to grow our fixed cost base. And there's ample opportunities with AI and automation and making that flat. One big opportunity that we will start to leverage a lot more is what Anders talked about, One Track software development. We're also reducing hardware complexity. But on OneTrack software development, it's worth repeating, right? That will, on a cost perspective, investment perspective, enable a lot of synergies. We're now stopping reinventing the wheel.

If we build a feature for one car, that feature exists in the other car. It's completely groundbreaking as compared to how automotive works. That means lower cost, but more importantly, for the customers, that means that now we're out of the quality swamp, we can start to surprise and delight. We can build features at scale for all our cars and spend our time on that.

And as we are basically one of the first 3 players to market with this, which already have now 2 products in the market, which are working at quality that means that we're past the learning curve, super expensive and painful learning curve, but we're past it. Lastly, on indirect, we are doing a commercial turnaround. Part of that is also marketing efficiency and reducing our selling expenses, as Erik showed. So that all ties into that. We also have some headwinds, if you will, or negatives. Depreciation and amortization, we have invested a lot, and I will talk more about investments in a minute, but that investment will start to go online.

So paying for the past product investments, paying for the very critical infrastructure investments we've made into electrification and the first software-defined vehicle platform and the OneTrack software will take a toll on our margins. So if we look at the totality here, this is sort of the delta from where we stand today. These are sizings to give you a flavor of the type of potential we see. These are not one-to-one fully additive. But what we are saying is that we are confident that with this strategy, we will be structurally build the company for the long term that is delivering more than 8% EBIT.

So that was EBIT. Let's talk about cash flows, and I like them strong and positive. A big part of EBIT is, of course, helping cash flow as well. That will help improve the operating cash flow. So I'm not going to focus on that because I just talked about it. I'm going to talk about investments because that's more here and now. And when we talk about investments, we are now finalizing a lot of one-off infrastructure investments that will last for decades.

What you see on this page are things that will have a return between 20 and 40 years plus. We're building a new plant in Kosice, many dollar signs, but it's a BEV dedicated plant in the EU, which will be completed in 2027. Then we have that capacity, and that will stand there for 40 years. We're not building another plant next to it. We have cell-to-body. We have mega casting and e-motors, all of those Anders talked about. Those are building blocks into making SPA3 so cost efficient. But they're also quite big investments.

But now we have done them, and we are finalizing them. So recapping what Anders said, 25% pack cost reduction, both on system level, but also on the actual pack, excluding the cells. We have mega casting, 35% reduction on the rear floor, a big component. e-motors, big component, 40% cost reduction. And then lastly, of these big infrastructure investments is the software-defined vehicle platform. It's really doing the base software to get the first EX90 car out, which we are now building on and will be working on the software on forever, I guess.

Big painful experience, big price tag, but it is done. And that's the key with our investments. We have a big investment mountain. We're coming down that mountain quite quickly. You saw the completion dates on the previous slide. This mountain is now behind us. If I look at a lot of our competitors, I would argue this mountain is ahead of them, and I would not want to be them. So how do we do this then? Well, we're finalizing the one-off infrastructure investments that I talked about.

We will have structurally lower investments in a lot of areas. OneTrack software is one enabler for that. And then in China, we have access to high-tech, low-cost China for China technology through Geely, meaning we don't need to reinvent the wheel and spend all our money from start to build an Eastern software ecosystem. What we're also doing here is maintaining a low level. We talk internally about affordable investment frames. You can argue if that's a good word or not. But it's really emphasizing the capital and cost discipline we've instilled in the company.

We will, of course, do great return on investment investments, but we are prioritizing within the frames we have. We will keep investment levels down. And if you look at this graph, it's actually not adjusted for inflation and FX. So if you were to do that, if you're in 2018, that's actually 45% higher. So this is a structurally very low level in absolute. So with that, we're building for the long-term value creation. We have the right strategy for it, taking us into the future. It will create more than 8% EBIT and strong positive cash flows. Final remarks, Hakan.

So before we go into questions, let me summarize a bit. I think we talked about the challenging future, the new really challenges, which will come to all of us in the industry and what answers do we really have then and what unique answers because just saying we will continue more or less the same, but we will try harder. It's not very credible. We need to define a way forward. And I think that's clear. And these are then really, I think, the most important 6 points. One is electrification is an opportunity for Volvo.

We have said that several times. But I think we're way too pessimistic in believing this will not happen. And in a way, it's good, of course, because the more of our competitors believing this will not happen, the more our competitors slow down and go back to diesel, the better for us. But even -- I mean, you saw the growth rate, even if it's a bit slower, totally relevant, we have a huge market, which is definitely big enough for us. And this is our opportunity to come out in a totally different pecking order than we were in the diesel and petrol field.

And as you see, our Geely, our owner is #3 in the world. I think very few people realize that way before Toyota, Ford, General Motors and Kia. And if you believe in the electrification is the future, you cannot wait until it's complete and then jump in. You have to jump in early. And we will definitely do that. But okay, let's have a bit hedging here also with long-range hybrid generation tool. But of course, that would be enormously expensive if we started from scratch doing it ourselves, okay?

But then let's do that in a smart way together with Geely synergies. I mean then we get this insurance in a very low-cost way, but the future is, of course, the all electric cars. We will also remain a strong global brand. I mean -- you talked about, Erik, our brand values. They are very global. I mean there is no difference. Everybody in the world believe it's important with safety. They believe it's important with sustainability. It's important to have a company that's human-centric. We are all humans in all continents.

There is no reason to regionalize the brand, but we really need to realize the operations and exactly what type of cars we have. And that will secure that we will remain a global brand when many others will go back being an American brand or European brand only. That will not happen with Volvo.

And then in this hyper competition, we have really Francesco, you call it superpower, like Spider-Man or something. But okay, our superpower is this unique synergies. And I think you explained very well also this is not something you can start teaming up and say, let's coordinate our things win-win. No. This takes 3, 4 years to build up the trust and cooperation that is needed to have match pairs and have common sourcing and say, we take care of this part, you take care of that cannot be done overnight, very unique.

And this is, of course, I call it affordable BEVs. We're not going into the budget segment. But BEVs will never happen because of subsidies or incentive systems. So they will come and go. They could help a bit in the beginning, but the only one that can drive transformation is, of course, we have good cars and they have to be affordable. And that I think Anders showed in a very convincing way, how are we able to price this new car as if it had been a normal hybrid car.

Yes, then you need to have -- if you don't want to pay with margins, then you have to have smart changes in the design, then you need mega casting sell to body, all of that -- and one software. If you think you're going to have a software-defined car in 150 different boxes from suppliers, good luck. No, you need to have it in one box, in one computer, then you can speed up and you bring down cost and quality will improve. And that has been a painful process, but now we are through. We are ready, and we will have it in the 90 and the 60 all cars, very important step.

And I think investors are most nervous about this. Volvo has invested for the future a bit too long. If you go back, we have done that for 20 years. We have always invested a lot, so now we really need to say, okay, now we need to be smart, use the synergies to avoid to come down to an affordable level. It can only be done with synergies. And then, of course, with a certain discipline, we need to use our organization, need to do the prioritization.

This is an affordable frame. We cannot, in EMT do that by cutting afterwards. And then this will happen. We will be down and you saw the curve and that will secure, of course, a positive cash flow, which we need because we need to invest also in new products that will come. And last but not least, we need to stop talking about flipping the market, agent models, commissions, margin who cares about that if you are a customer. You want to know what the product looks like, what does it cost and you hate hearing that your neighbor got the same car cheaper.

You need transparency on pricing and real, honest pricing and fast delivery times. The times for 1.4 million combination and upselling is gone. Nobody wants it. Customer doesn't want it. Production is a nightmare for production. Let's package cars and bring them to customer as they want them. And I think that is really the key, what Erik said.

So this is my 6 points. And before we go to question and answer, let me then a bit go back as I started by going back 4 years. Now I said thinking there saw 6th of November, I recognize that date from history class and everybody us Swedish history know that 393 years ago, that was a day where the fog was very tight over the battlefield in Germany. And it took till midday until the visibility returned. No more comparison with that.

But today, now we are midday. So hopefully, the visibility has cleared a bit also for you what we want to do in the future to meet these new challenges. So with that, but maybe there is still some fog. So let's go into question and answer, Maria, and you will lead us to clarify the last things. Thank you.

All right. As all the speakers get ready to answer the questions, [Operator Instructions] But before we open up for the room, we released a press release this morning, and we have seen some comments on that. So I would like to start with that a question for you, Hakan. So the early comments are then from the market, and it's based on the release. We said that we will see an 8% EBIT margin. When do you expect that to happen?

That is the question. And I think we have tried to answer it a bit less summarize again. I mean, normally, when we do this type of events, I think we have focused too much about targets and results too little on what do you really want to do differently because I'm obsessed with more of the same will not be a success factor. We need to change, do something differently. So let's today try to focus on that. This is what we want to do and be clear on that instead of just being very precise on targets in 4.8 or whatever. But of course, we, as a management, if we want to do things differently, we must have an idea what is the value of that.

And then we said, okay, let's also present the value of the blocks, but exactly how they will materialize, we will not go into. But this strategy consists of these elements and it will be executed in the years to come, but we will give no more guidance exactly when that happened. I think we will also come back to you, of course, every quarterly report, and we will, of course, then come back to this question. But today, I would stop here.

Clear. Thank you. Yes. [Operator Instructions]

Hampus Engellau, Handelsbanken. I have questions more on the product side, maybe a little bit multiple question, but it relates to the EX60, XE60 and EXE70. And my question is, firstly, what will make you bring the XE70 to Europe? Secondly, will there be a second-generation plug-in hybrid on the XE60? And how do you see the the EX60 play in that? And also, is there possibility today to take the XE70 to the U.S.

All right. Yes, Michael.

Probably starting with the XE70 in Europe. As I said, this car was made for China with China technology. So we have said that we will bring that car to Europe, but we need to obviously Europe -- make it ready for Europe. So that will take some time. But the plan is to bring that to Europe. Why do we do that? Because this is the first BEV car with a backup engine.

So we believe that market in Europe, especially, is not really there yet, but we believe we can create a market there. And again, these cars will help either to convince our customers who are short before buying a BEV or we will keep our customers with this product for the ones who doesn't have the infrastructure available. On the XC60 then, as we said, we launched -- we will launch how should I say, we will upgrade our cars. And obviously, XE60 will be part of this upgrade program. If we bring the second generation to that one, so first let us upgrade that car, and then we will see if we bring a second-generation [indiscernible] to that one also.

I think maybe I can chime in without commenting in detail on future product plans, will be the standard answer, right? On the EX60 and your question was also a little bit how that fits in the market with having both an XC60 and an XE70. And I think that fits really well because we see plug-in hybrids being a very clear transition into BEVs. So people taking a plug-in hybrid, learning how to charge the next car is a BEV. And today, we have not had a next car for the XE60 PHEV buyers.

And that's where the XE60 will be such a fantastic addition to our portfolio. So I'm actually very happy from a commercial perspective, looking at the lineup in the midsized SUV cluster with all those 3 cars actually.

Mattias Holmberg with DNB Carnegie. You've talked a lot today about the deeper cost and sourcing synergies with Geely. And given that your relationship with Geely goes quite far back, I'm interested in why now and what's changed and why wasn't this done earlier? And also, I'm curious to hear if this will increase your Chinese content in your vehicles and also how you balance the cost benefits versus the, say, local content risk that you could then face in the U.S. or EU?

Maybe I can start and then you can fill in a bit general. I mean it's a good question. You could always put that question, of course, if you find some new way of working, you could always say why haven't you done it earlier, yes. It just takes time to build up the cooperation, I would say, and to learn how to work in this deep way as Francesca tell will take some time. I think another factor is also, of course, to really have a good cooperation, you need to be on an equal level. And I think it's no secret that Geely 10 years ago was very different from Geely today. So they have done an enormous development and is now, of course, on a level they are much more possible for us to have a very fruitful advanced cooperation. That is my starting point, but you can add maybe, Francesca.

Indeed. I mean, as I used to say, I tend to look forward when I drive instead of looking in the rear mirror, so why? But again, I think the organizations were not -- now they are mature. They were not mature enough for this kind of collaboration in the past. And again, as Hakan said, it takes time to get to that collaboration. When we talk about the content, having same suppliers, and as you see, we have 130 suppliers, which are common suppliers is -- doesn't mean producing everything in China. It means having the same suppliers, which are all global suppliers. And in fact, we're going in the opposite direction then as Hakan åkan was talking about, we are regionalizing especially a number of commodities. As you know, for example, batteries, we are localizing batteries. I mean everybody knows that today, the best and the highest technology on batteries is Chinese, but doesn't mean it has to be produced in China.

And we are localizing the batteries in Europe and looking also in the U.S. because we want to have more regional content. So again, going in the other direction, having access to a bigger supplier panel and to bigger possibilities, not only to in terms of power as a customer in front of the supplier, but also in terms of other suppliers that might have innovation and technology, which could be interesting for us, doesn't mean producing everything in China. It means simply having the access to different suppliers, which could be Chinese, like, for example, in the batteries, there's no mystery that today, they are far advanced than all the other suppliers in the world.

Good. We'll bring a question from online also. So this is from JPMorgan, José, and this is also for you, Francesca and Anders as well. Thank you for a great presentation. Do you see an opportunity to produce Geely Group vehicles in the dedicated Volvo Car plants, further leveraging the potential of cost saving and tech progress?

So indeed, indeed, I mean, this is something quite normal, sharing capacity within the automotive industry. I mean -- and definitely, if you have a strong partnership, so shall there be, again, opportunities to produce new cars in our plants, which is already the case, we share in China. But for example, in other continent, we will look into it. And if there is capacity and possibility to reduce cost or to share, let's say, capacity, that's definitely open. First of all, with our -- again, with our partner, with our owner and our partner, where we share, obviously, a closer partnership. But as usual, like all carmakers, there is an opening also of collaboration with other carmakers. It's something -- has always been the case and will always be, we will look case by case.

With Polestar, I guess.

On the tech progress?

Yes, absolutely. I mean the platform sharing is not new to us, right? There's still a lot of cars like CMA is a shared platform, very successfully so within the wire group. There's still a lot of cars being built on CMA in China, also SPO. There's a lot of car being built on SPO in China still. So collaboration on platforms is absolutely is open and something we need to do. And on top of that, kind of we are very -- like being where we are on this journey on the software-defined vehicle, we kind of -- we learned a lot on kind of stuff that are painful and hard and expensive that doesn't differentiate the product.

Those should absolutely be standardized. So we're in a position where we're very strongly encouraging standardization of emerging automotive technology. This is in a world where everybody -- EriK usually says there are 2 types of car companies, ones in the software-defined vehicle world, the ones who have completed the transition, which is a very, very, very short list and the ones who have yet to do it. And we are super open, like this -- the tech stack we developed is in a large extent, the base stuff that the customer doesn't really care about, wake up and shut down, software download protocol, cybersecurity platform, all the boring stuff that could -- that's noncompetitive, nonproduct differentiation. It's right for standardization, if you ask me.

Good. I think we had another one here in the front.

Erik Golrang, SEB. 3 questions. First one on pricing of EX60. You mentioned price parity with the XC60 hybrid. And I guess the range of that, I mean, it starts at around 560 or so in Sweden and then up to 890 or something for the top spec. So will there be -- where in that range will it be, lower end or higher end?

I think the point I made was that we will price this car where we know there is a customer demand at that price point. And that is in that range of where we're having today, if I put it that way. I will not go into the detail exactly where we will place the EX60, but it's also important to remember, we're coming with a completely new car, state-of-the-art technology, and it's an electric car. So of course, it will be also priced as a new car once it comes. But we know that we have a product where there is a customer. And that is the key message. And then there will be a price range on the EX60 as there is a price range on the X60.

But maybe adding some flavor. I mean the average XC60 PHEV consumer will pay the same as an EX60.

The point I made was that there is a price point for the customers where they're buying cars for today. And at that price point, we were able to offer them an EX60 as well.

And then 2 more questions. You talked about your superpower, which is Geely. I guess there's still a bit of a flip side to that, the China ties and your U.S. operations. So an upside -- an update to that would be great. And then lastly, I thought the comment on culture sharing was quite interesting. Can you implement China speed elsewhere?

Do you want to start, Hakan?

Yes. China, I think Francesca commented on that we can learn a lot from how they work and they are more holistic thinking developing cars. But when it comes to the flip side of this, I think we have stressed way too much on that and the public talks a lot about that. We are very well aware of that, but it does not limit us from working in areas as compressors, seat and so on. It's just a fantastic opportunity to lower cost. But when it comes to software and critical semiconductor components, it's no, no. I mean that's just accepting the rules in the new world. Those areas cannot be shared. So we need to have cars which are absolutely western in software and electronics. And then we need to have them in China. And then, of course, you read here that our competitors are spending billion to develop autopilots and so on for their Chinese cars with special Chinese ships. And I think Michael touched that, that's a copy and paste for us.

We can just take that and put in our Chinese cars, of course. But in the cars we sell in the West, they will be very different. And then the whole process for any restriction in U.S., yes, that's going on. It's not so fast anymore with the governmental shutdown. But -- we know we have done that work, and we have a very close cooperation with our legal teams, and I don't know exactly right now, but it's a normal process. And I will say I'm not in any way nervous about this process. We will continue being present in the U.S. also in the future.

The culture? On the China speed, I mean, I was saying I discussed already the -- I said already the industrialization, for example, and ramp up in the way they take decision. But also, for example, they have different methods. For example, in the cost estimates, they tend to do the cost estimate saying, okay, let's start with the best of the world and then -- and we see what would be the best cost, the lowest cost. And then we add the specificities of, for example, or the different specs that we have.

And so we add up whether we start starting with, let's start putting all the context and do the cost estimate with all the context in. And by the time we are finished, I mean, the opportunity is gone. So let's start with the best of the world and then we strip in everything we put in all these specific specs. So again, this is something we are learning to go in quicker to start with, okay, where is the opportunity, identify the opportunity and then you have time to fine-tune on how it is really for you, but then you grab it, you don't lose it. Otherwise, by the time you're finished, you're already in another world.

Good. Another question over here.

Yes, Agnieszka Vilela at Nordea. So on your new generation electric vehicles such as EX60, you say that you aim to achieve a similar or better gross margin compared to the -- and that's impressive given the fact that content you still have batteries. So I wanted to ask like can you confirm that the product content will be lower? And also, is there a volume prerequisite to reach similar gross margin? Like if you sell half of what you sell now for XE60, will still be able to make a similar margin?

I think on product content and others can add. But we're saying is the performance of an EX60 is actually better, right, on many aspects. So there's -- that's not the comparison. In terms of scale, of course, we assume a scale of the car. We will not next year, sell as many EX60s as we sell XE60s, but we're quite confident in the calculations we have to get to those levels. So...

Another question then from online viewers. This is from Ross McDonald, and this is on the residual value. So on BEV growth, a key consumer hesitation relates less to BEV price, but to BEV depreciation. How do you think about residual values for BEVs over time as technology continues to improve? And how can you mitigate against any residual value weakness if EU policymakers delay 2035 ICE ban?

You take that? I think it's a good question, and it's a relevant question also if you want to do your lease calculations, you have to know what the residual value. But you should also ask yourself, what will the residual value be of a petrol car 5 years from now? And I think sometimes in these discussions, we forget that aspect of it. There is what Anders explained, that state-of-the-art technology base for electric car. There's nothing saying in any way that, that should have a lower residual value than a combustion engine vehicle at that time. I would argue quite the opposite. I would be more nervous buying a diesel 3 years from now than buying a BEV 3 years from now. And I think that if you look at the technology and the efficiency of electric vehicles, we can make them last longer. So I would argue electric vehicles should have a higher residual value. And we now have discussion I meet with the residual value setters on an almost weekly basis right now in front of the X60 launch, and they are starting to see this as well. So I am very confident that the value of BEVs will last, and they will last better than the value of combustion engine cars.

.

Yes. Another question from the audience.

Sam Perry from BNP. You've spoken a lot about how your future is tied to EV growth. Can you just talk a bit about how you view the U.S. market in that context given it could be sort of stagnating from an EV penetration perspective and maybe without further investments in your ICE offering there, you'd have an aging fleet relative to the peers and with upward pressure on pricing from tariffs? And then second question would be around the Geely cost savings. Would you consider using the Horse JV, which they have with Renault for powertrain sourcing further down the line as a potential avenue for cost savings?

Should I start with the market question you take the other one. So I think looking at the U.S. market right now and looking at the electrification phase, if you go back a few years in time, I think we all estimated that electrification will be a bit more of a liner journey. It's not. It's going differently in different geographies. And also, you shouldn't look at U.S. as a country. You should look at U.S. as a continent. There is a certain electrification phase in California. There is a different one in Texas, and there's another different one in Boston, right? And when we look at U.S. right now, it's so important for us to see that's probably where overall, the market is transitioning a bit slower. That's where we need our bridge. That's where we had the communication just a few months back on bringing the XC60 to Charleston plant and also continue to invest in that plant in a next-generation plug-in hybrid.

Now the underlying trend of growth to electrification is still the same. It's just that the pace is slightly different in U.S.

Yes. And on the horse, it's already a supplier. So it's already a common supplier, and it's where we get our engines. And definitely, yes, we share it, and we manage it together and we find opportunities together and we cost benchmark together and great opportunities on this. It was already before. So again, a lot of opportunities on that side.

And you can probably add on the horse side. I mean, we talk about a lot about Geely synergies. We are doing that to -- Horse does it together with Geely and even with Renault. So there's even more synergies on that

Speaker 8

Indeed.

Good. Yes, another question.

This is Nikita Papaccio from Deutsche Bank. 2 questions for me, please. The first one, I appreciate that you're not giving any time line. But if you're thinking about this 2% to 3% margin improvement coming from electrified growth, what do you think you will need in terms of models on SPAR 3 or Gen 2 plug-in hybrids to reach this 2% to 3% margin?

A big part is naturally SPAR 3 and the lower cost position we have there. And as that mix shifts into the portfolio, that will stand for a big share of that profit increase. But I can't really go into details without being time bound. So I will leave it there.

But you can also so we have a very high market share already today in plug-in hybrids. So I think this generation 2 is more prolonging that in time to be able to have that solution longer. I would say the growth will come from affordable BEV cars, which suddenly start performing as better cars. That is the growth.

Okay. And my second question is on Lumina and LiDAR systems. I mean, last week, Lumina announced that you stopped ordering the LiDAR sensors for ES10, EX90 and delayed decision for your upcoming new model generation. Could you -- I mean, I thought LiDAR systems are relevant for your safety and ADAS functionalities. Could you maybe explain your thoughts here? And if you are considering replacing Lumina with maybe a GD supplier?

So it's a good question. And I think to look back at LiDAR, you talked about LiDAR, you need to talk about automation of driving and you need to go back a few years and kind of what we thought was the right thing a few years ago, not only us but the general industry, how fast will we move into more and more advanced automation and what does it take to get there has changed a lot significantly over the years.

LiDAR is still a very powerful and surely important technology for us, but we also learned a lot during the last few years on how to create very powerful functionality more based on cameras and radars. So we already plan to reduce our dependency, if you call it that, on LiDAR for our supervised autonomy functions. So now with the unfortunate recent developments industrially, we are just accelerating that a bit to -- so we can keep on producing without LiDAR and keep on developing very powerful functionality on the ADAS system, which is like the approach, and you mentioned safety, which is important, right?

This is our kind of fundamental approach to automation. We're all about safety. This is how the company was started. We also approach ADAS and automation of driving from a safety perspective. Our vision is -- our vision is to get to 0. We need to accelerate our journey towards 0 because that's the only goal we can have really. And 0 implies removing the human from the equation because humans are imperfect. So fundamentally, we need to design systems or cars that helps the imperfect human to stay safe. and that implies automation. So we're still investing heavily, and we'll continue to roll out more and more advanced automation functions in the stack presented, which now spans also to our Generation 2 plug-in hybrids.

Maybe in addition to that, I mean, I think also we should say we have now with technical development, seized opportunity to have supervise systems without LiDARs. So I don't see any risk here if there will be disturbances in the supply chain either. So LiDAR is maybe pushed into the unsupervised systems coming some years from now. That's where we need the LiDAR. But right now, it's no risk in supply shortage, I would say.

One follow-up on the investment trajectory you showed there on the slide. I think the definition was a bit different. It excluded JVs and associates. But underlying, is there any change to what you showed now compared to the update you gave us this spring? And if so, what are the changes?

Yes. We excluded the JVs and associates to look at sort of the core Volvo business, it makes it a bit cleaner. But -- so the history hasn't changed. But if we look at the future, we are lowering our investments. Part of the cost and cash action program we talked about is about taking down investments, and we're putting this affordability frames, if you will, to make sure that we structurally stay on a lower level. And that's a lot about leveraging synergies in our own systems for China products, leveraging synergies with Geely, taking the decision to go to One Track software and structural changes in what we do. So it is low.

We're coming down to the flat level faster.

I guess to Fredrik again. The headwind from the depreciation and amortizations of 2 to 3 percentage points, when do you expect it to appear? Will it be gradual? Or will it come in faster?

It's coming gradually, I guess, as things go online. I think a big chunk of that is linked to the infrastructure investments we talked about, where some are just done. Some are completed next year. And then in '27, you have the plant, of course. So it will be a gradual.

Good. Another question from the online audience here then. This is from Shapiro. What platform will the new PEs for the EU and U.S. be based on? A few follow-ups. Let's start there.

PEs or PF.

PFs. New PEFs for the U.S. and EU.

Yes. For sure, we can say these cars will be built with a lot of commonality with our modules I talked about in the CBP. So we will have a vast majority of the technology being shared within the GD Group.

And then further upgrades to the facelifted SPA plug-in hybrids SPA 3 with engines.

Good question. Anders showed, I think, very good how.

He has used the package space for the engines. So fill the hole there radiator.

If I may, I mean, this is what I only got 20 minutes. I could spend, as I said, 2 hours on the day today. But we start -- you need to start from the right area. I think there's various -- if you start -- if you build your future being all battery electric vehicle and you start with a massive compromise, you're not going to win. You need to start with a compromise less battery electric vehicle, which is what we've done on Sport 3. That needs to be a sport but your entire future depends on your success there. There's various ranges of how do you value that the compromise. The compromise, if you build BEVs on a basically an adapted combustion engine platform, you would have compromises in the entire front end of the car, your front overhang, your L 113, the big packaging, all the stuff that you shouldn't care about as car customers, you will basically -- you carry that into all your BEV cars. Various studies kind of depending on who you talk to, say, well, how do you transform that into cost penalty, between EUR 1,000 to EUR 2,000 is what you can find online as reference. And I say they're probably in the higher end of that range. If the inefficiencies you bring you will put on your battery electric vehicle because you're an adaptive platform. And I'd say that's a low number.

So we need to start from having the absolute benchmark uncompromised BEV and then figure out how do you solve the bridge. That's the right way to do it. But the most important thing when we talk about platforms is the square I tried to draw around or I go around both. Platforms are still interesting. Platform are interesting, but we talk more about architectures. The cross usage between the different platforms on the high-value components -- and most importantly, that they all are in one software track. This is why I talk about tech stack more than platforms these days because platforms interesting is the modularity between them and the fact that you have them on one software master in one tech stack. What do I mean with tech stack? Well, it's everything designed deliberately to coexist. That's important to remember. So everything inside that box is very meticulously designed to fit together with cross usage, with modularity, with commonality, with one software. That's the 3 we are continuously pruning with stack, all that minimizing complexity on creating all the customer offers on, et cetera. That's the machine that's spitting out the products, which at the end of the day put on the table.

It's Owen Patson from Jefferies. Just 2 questions, please. The first one is you've spoken or Volvo has spoken in the past about kind of closing the ASP gap to peers. So just kind of thinking, again, bridging to 8% EBIT margin, does that assume continued progress closing that gap? Then the second question is on working capital. So we've kind of spoken about investments within cash flow. There's a few puts and takes. There seems to be like there's the cash action plan but -- and growth and there's also inventory reduction. Where does that all net out? Do you think -- is working capital going to be a contributor to cash in the next kind of couple of years?

Fredrik or Erik?

[indiscernible] and then you take the difficult part of the question.

Yes.

So ASP marketing spend is basically what you're talking about the marketing spend efficiency, and I won't comment on your statements that we're less efficient than the industry. That's not relevant. If we are, we aren't. But put it this way, what we need to do would need to find a different way of reaching our customers and reaching our customers in a much more efficient and much more targeted. And that's what I was trying to explain. And by doing that, your conversion rate or your cost of converting a consumer from a lead into an offer is dramatically reduced and your conversion rate is then by that also increased. And we see by doing these things, we can take our marketing spend per vehicle down by up to 20%. That is the ambition that we have to be...

Want to sell more.

The question marketing or average sales price. average will be price as BMW, I guess, is the question. If you think about that, I answer the working capital. Working capital, I mean, we see that we will be able to grow without tying up capital. In terms of releasing working capital, we are working on it as part of the cost and cash action plan. I think I showed in Q3 quite drastic step change reductions we've done in inventory. Of course, that has a limit. I think as Erik alluded to, how we're now regearing our commercial system, that will release even more inventory. But it is not the main cash driver, if you will. Some trimming opportunities, but a lot has been harvested.

I would always add then when you talk about working capital, okay, the factory stock is on our balance, but then how many cars are on the dealer stocks, which is not on our balance, but they are, in some way, indirectly still paid by us. So I think it's really important to bring down the physical total stock and that you can do only with the complexity reduction and exactly the concept we talk about. So -- but you will not see it in working capital, but there will also be benefits coming from that.

And also a better synchronization between the production plan and the sales plan, which is what we are doing day by day in a better coordination and you see the results.

And if your question was pricing versus competition, then I misunderstood you. We won't comment in detail on the pricing versus competition. What we're saying today is that we will price our new car EX60 in a price where we know that there is a customer base already today. I think that's the key message...

As we always do.

Margin.

We see that the CapEx is going down. Can you give any indication of a dividend? Will there ever be a dividend in Volvo Cars?

I hope so. But of course, I think it's a good question, a bit premature to answer it really. First, we need to bring the company back to positive cash flow and profitability, and that's what we are focusing on now. And when there will be a profit, it is, of course, something that what the Board should decide on after we closed the year. So -- and we will close in January. So that we will get the signal about dividends from the Board. If there are any, I don't know. Let's see.

Good. We have a few minutes left on the Q&A session. Any other questions from the room? No. I'll turn to the chat then. XT70, we have talked about no. But then if there are no other questions from the room, I would just like to give the opportunity to you, Hakan, to have some final words before we close this.

What should I say then? I should -- basically, I think I already said that. I hope we gave you now a bit new approach to this because I think if we talk about strategy or leadership, I always focus on something I say, doing the right things beats doing things right and sweating more. So it's very important that the company has an ability and the intelligence to decide and there to decide this is what we want to do, and that will deliver the results.

And as we already learned at Scania many years ago that we said this is how we do it. We have modularity and then we always ask the journalists and investors, a result that comes from hard work and doing the right things. So -- but we know it will be much better than it is today because we will do things smarter now. So I hope we managed to communicate that we have a clear path and ideas how we will do things differently to meet these 3 challenges that everybody will meet now.

And if you don't have a good answer to those 3, I think those companies will have big problems staying in business. And I hope we show us that we at least have an idea, we will do this. And then I think it's up for us to prove that we will deliver results from that, and we will tell you how fast this will materialize. And you as investors and new investors have to decide basically, is this a company that really will be stronger 5 years from now, then we should take a look at Volvo. I don't think you should take a look at [indiscernible] if you believe what's happening with the business cycle, is this going up or down? Should I short it or what should I do? Okay, we have those shareholders also. That's good for liquidity. But I think we need more shareholders that believe in our story.

And I think now in IR, we will concentrate on communicating the story and following up, telling you what's happened, will it deliver and gradually build up confidence in the company so that we can attract more shareholders. And if we get more shareholders interested in buying this, we will have a bigger free float. And I think that's something we also want to have. But it is based on that we have a good company performing and that we have more people wanting to invest in the company. So I think that is my closing remark. And just at the end and just say thank you all for coming, and thank you for your big interest in the company. I think that's a big commitment for us and a big trust that we need to fulfill and then deliver back to you and all other investors.

Good morning, and welcome to Volvo Cars and our headquarters here in Gothenburg. My name is Erik Kronqvist, and I'm the Head of Investor Relations here at Volvo Cars. We're here today to present the third quarter results that was released just earlier this morning. And with me, I have Håkan Samuelsson, our President and CEO; and Fredrik Hansson, our CFO.

As usual, we will start with a presentation, and then we'll move into a Q&A session. [Operator Instructions]

With that, I would like to hand over to Hakan.

Thank you, Erik, and good morning to all of you. If we look into the quarter and summarize it, I think it was a good quarter, solid performance on a very tough market. I mean, a tough market, you saw that on the volume side, we were down 7%. The total market, I think the premium market down around 5%. So we definitely did not have any tailwind from the market, although it turned into positive in September. Pricing is also remained very tough, of course, on a shrinking market, but we managed to offset that in one area at least and that with our bestseller XC60 has been upgraded and that helped us a bit. Tariffs has been very turbulent. Right now, it has clarified a bit. We know now that it will be 15% into U.S. and we know also it will be zero into Europe, which is 10% lower than before, which is an advantage for, for example, us selling EX90s to Europe. Altogether, we had then an EBIT margin of 7.4%, which I think is really good.

What is also good is that we have achieved this with our own measures. It's not coming from outside. There were some one-offs. Fredrik will talk about that later. But mainly, this was a result of a very good work in our organization on the cost side, both material cost and indirect cost.

So if we look into our turnaround program, which we started in April, it was focused on 3 areas: electrification. We believe this company will come out as a stronger company electrified. We believe we need to come closer to customers. We need to be more regionalized with empowered regions and with more accountability. The reason for that is we believe with that, we will have a better growth. That's the reason for our regionalization. And then, of course, profitability must be now the main focus, and we are executing on our SEK 18 billion cost program. And already in this quarter, really effects from that came in faster than we planned and anticipated.

So look into then the electrification, which is very important. We see we need to have on the market fully electric cars. We need to be ready to be fully electric 2030, but we cannot force our customers to be that. So we have decided also that we need bridge solutions. the so-called PHEVs. But if you look on to the market fully electric car, that is in Europe, up 26% in the first 8 months. So I mean, very difficult to complain about that there is no growth of EV cars. And the total share is now in Europe also very high. So what we are doing is EX60, EX90, our flagship, we are now ramping up. The car is now finally ready for demanding customers. We have done major software upgrades. The EX30, we have successfully ramped up in Ghent. So now we are producing in volumes which our sales organization is requiring. We have a brand-new sedan, the ES90 started production as planned in August.

And then looking ahead, we have next year a very exciting new product really in the bread and butter segment, the SUV segment, which is really the biggest on the market. We will have a very strong car. I will come back a bit to that. We also have launched our very first next-generation plug-in hybrid. And when I say next generation is, I mean, then it's a plug-in that is basically an electric car, but has a combustion engine as a backup. The first generation were really combustion cars with electric motors. And we have also upgraded our XC60, our absolute best-selling car so far. And that upgrade has been very well received on the market and also has helped us to improve our margins.

If I look into the second area in our turnaround program, the regional approach, it is delivering. The reason for the regionalization is, as I said, to enable profitable growth by empowering the regions to take more local actions. And what we have seen in China is a new governance structure. We are running the China operation basically through a Board. I'm the Chairman of that Board and some other people, but much more empowerment locally. We also have seen a very good development so far, relatively seen. I mean all Westerners have huge problems in China with declining volumes. Our business in China is more or less flat, and that is compared with others, not that bad. Looking ahead also, we are now ramping up the XC70 production, and that is going to deliver a very healthy growth in China now in the last quarter. And the car has been received very well on the market.

In Europe, we see BEV orders now picking up as we now -- also we are ready with the small car, the XC30, EX30 and the EX90 finally ready after all the delays we have seen. So that's positive. And we have also seen strong performance of some very important market, especially the U.K. had a very good quarter and a very solid market share in the U.K. In America, we also have strengthened our presence industrially. We have announced 2 new products that we will build in Charleston. And we have a new team leading Americas. I think we also have new approaches to marketing, which I think is very promising for the growth in that region. Then going over to the third box, the very important one, profitability and cost control.

I leave it over to you, Fredrik, to talk about that.

Thank you, Hakan. Let me start with some of the main messages financially. So we had a strong performance in a seasonally weak quarter. And as Håkan mentioned, this is in part boosted by all-time high performances in U.K., Brazil and other markets in September. We see that our SEK 18 billion cost and cash action plan is materializing faster than planned and is contributing to the results. We also see cash flows negative and impacted by seasonality from vacation shutdowns and also continued high investments. If we look at the key financials, from a sales perspective, it was a challenging quarter for the premium market. It was down 3%. For us, we're down as much as 7%.

And a big reason for this drop in sales volumes is lower EX30 deliveries compared to last year as we've awaited the full ramp-up of the local European production at lower tariffs, and that ramp-up has now happened during the third quarter. These retail sales then translate to lower wholesales and to lower revenues. And despite lower revenues, we report a strong EBIT of SEK 6.4 billion or 7.4% One adjustment has been done for the restructuring costs. So if you exclude that, we're at SEK 5.9 billion and 6.9% EBIT.

Cash flow, seasonally low at SEK 4 billion, driven by a quite normal year with the summer shutdowns, I should say. But let me double-click a bit on each of these. So starting with revenue and focusing in on the core revenue, excluding contract manufacturing. That was last year, SEK 88 billion. We see volumes going down, taking revenues down another SEK 5 billion. Sales mix and pricing actually helping us and positive on revenues, and that's very much linked to the good reception of the XC60, which had a full interior facelift that came fully live into the market during Q3. We have quite sizable revenues from licenses in this quarter, which is more of a one-off, both from new sales in the quarter, but also deferred revenues from previous sales that has now been realized. FX on revenue is quite strongly negative due to a very strong SEK. And then we had quite a chunk of revenue coming in other, which is in part used cars and a good contribution from CO2 credits. So all in all, we're at minus 5% revenue in the core business.

Looking at EBIT then. So last year, we were at SEK 5.8 billion or 6.2%. This year, that's taken down SEK 1.1 billion by lower volumes. We see sales mix and pricing also pushing down in part due to pricing, but also due to the higher U.S. tariffs that we didn't have last year. Depreciation and amortization is higher. And worth noting here is that last quarter or last year, Q3, we had a positive one-off adjustment in depreciation and amortization of SEK 1 billion. So if we normalize the Q3 last year, the result was more SEK 4.8 billion rather than SEK 5.8 billion. And you see that year-on-year effect here.

Licenses, that sale is flowing through to profit. And then FX on a profit level is actually positive, largely due to SEK 300 million of realized profits on hedges. But I think the good thing here is that we are quite balanced on the underlying flows. So we have a weaker dollar and pound revenues coming in, but that is offset by lower costs in CNY. The other category here is quite sizable. And this is largely from lower variable and fixed costs, also showing earlier than planned results from a cost and cash action plan. And in this, we also have SEK 800 million or so from CO2 credit sales, similar to last quarter. All in all, EBIT, excluding restructuring was SEK 6.4 billion, 7.4%. And that and there I have a restructuring provision I forgot to mention. But we took a provision linked to the reduction of 3,000 people that we announced in Q1. We had a provision of SEK 1.5 billion. What we see now that we are -- where we have executed most of the program is that we're not spending as much money as we set aside. So we're releasing SEK 500 million from that.

So -- if you sort of exclude some of these one-offs like restructuring and sale of licenses, which is more of a one-off character, the underlying operational result was more around SEK 5 billion. And if you want to sort of simplify, which I sometimes do, you could say that a bit less than 1/3 was one-off items of the result, 1/3 came from cost reductions in general, emphasized by the cost and cash action program and 1/3 is sort of flowing through from the business.

If we look at the quarterly development then, we see a quite clear positive trend. And in this, we will continue to see effects of our cost and cash program. But that said, the short-term market is expected to be increasingly challenging. So perhaps it's unwise to extrapolate too much from the sort of near-term very drastic trend here. Cash then in Q3, it was impacted by seasonality. Our European plants are closed during summer. But that said, we exit with a strong liquidity of SEK 51 billion in cash. If we look at the details, we have SEK 13 billion in EBITDA from the underlying business. Net working capital is flat. We have a quite significant negative in other working capital. Part of this is cash, primarily payments linked to tax and VAT. But in this, we also have quite large noncash items linked to FX balance sheet revaluations, reversals of accruals linked to discounts and warranty and also the reversed redundancy provision I just mentioned.

Investments at minus SEK 7 billion, but it's important to note here that this also includes transactions linked to selling the last big chunk we have of on-balance cars. that we had in Germany. And that was sold to the tune of SEK 1.7 billion. So if you look at the underlying investments, the number is more closer to SEK 9 billion. Financing, slightly down from FX and lower leases and then as stated SEK 51 billion in ending cash balance. So those were the hard financials.

If we zoom out a bit and look at the cost and cash action plan. As you remember, this covers variable cost, indirect spend, CapEx and working capital. And I feel we're making great progress on all these dimensions. In Q2, we shared some updates that you see here. But looking at Q3 and Q4, we see that we are now taking further steps. So on variable cost, we are formalizing more special task force to make sure that we get synergies primarily on hardware components together with Geely. We've also done a lot of work on logistics setups. One very tangible action is that we're taking out one of the ports we use for finished vehicle flows into the U.S., which is then reducing our logistics cost in total.

On indirect spend, as I said, we are reducing indirect costs faster than we expected, and we are well on the way to execute the redundancy program, removing 3,000 positions from the company. On CapEx and working capital, we are reducing our planned investments, and we're maintaining a very strict working capital discipline. And I want to, as a last point, double-click a bit on these 2 last points. So firstly, on reducing the planned investments. The peak is behind us, as we've said before, and I think you've seen this page before. But it's worth to remind ourselves that we are now finalizing the major investments in our new product architecture. Year-to-date, we have reduced investments with 25%, and we're looking into further reducing investments to set a new sort of affordable level of investments. And we have a Strategy Day on November 6, where we will also talk a bit more about the details of this and how it looks ahead.

Lastly, I wanted to highlight our working capital discipline. And this page shows total inventory over time. And as you can see here, we did a real step change in inventory in Q4 already last year with a SEK 17 billion reduction within quarter 4 of last year. And since then, we've been able to maintain a significantly lower level. But that said, that also means that it's hard to repeat the reduction we did in Q3 to Q4 last year. But we are grinding and we're not done with this. But the real low-hanging fruits have happened.

So that was a bit of financials. Maybe, Håkan, if you want to summarize.

Yes. I'll be glad to do that. And if you look then at the quarter and summarize that, okay, the market was more or less continued tough, nothing really new. tailwind is missing. We had a very solid market and EBIT margin and the effect -- the reason for that was coming from our own hard work with cost, which I think is very positive, which I'm very satisfied with to see also. Cash flow was not where we want to see it long term, but we must remember this is the month where we have the monthly shutdown. So it's a typical seasonality. And also, of course, that we are seeing now the last part of a very heavy investment program, as Fredrik just showed you. Very positive is that the sales is back, okay, 1 month, but still it's a new trend. So it's a new trend in sales in September. It was a new trend in profitability with the quarterly results. So it's maybe too early to say we have achieved a turnaround. It's still a very good signal we are moving now in the right direction.

Looking ahead, we will expect continued challenging market, but we will also see further effects from our cost program. The SEK 18 billion was really planned to deliver in '26. Now in this quarter, really a bit faster than we anticipated. We saw effects already in this quarter. But the main part of the program is still, of course, lies into the future. When it comes to investment, I think it's very important also to state our ambition, we need to come back down to affordable CapEx levels. And that is going to happen as we have the peak behind us, as Fredrik also shown, and we need to reach here an affordable level and reach -- come back to stable cash flows.

And last but not least, also next year, we will have a new beginning when we complete our all-electric lineup with the most important car of them all. We already have the 30, 40 and 90. Now we need the 60, which is the best-selling segment in the EV segment. And that, of course, will be a big step into our electrification. It's also a big step into making an electric car that is going to be affordable for consumers, also delivering much longer range. So it's a car that is more similar to a petrol car when it comes to performance than we have seen earlier. So very exciting news in January 21 to look more into this car. And before we go into questions and answer with Erik, I would just like to remind you our strategy update when we will go deeper into our way forward and tell you more about how we will put Volvo back on track and that we will do on November 6 in Stockholm. So you are really welcome to tune in.

With that, I give the word to you, Erik, to lead us in the question-and-answer session.

Thank you, Hakan, and thank you, Fredrik. [Operator Instructions]

Actually, we can start with a written question already. Your result was very strong, and you mentioned one-offs as one factor. How should we view that going forward?

It's a good question. We always have one-off type events flowing a bit back and forth in the quarter. I think -- for this quarter, it was a bit extraordinary. I mean we had a big restructuring provision where we see that we have not spent the money we thought we needed to spend to do the headcount reductions that we planned and that we have now executed. So that's actually -- that's not something that will come back again. We don't foresee any major layoffs going forward either. And sale of licenses, I guess, is another key thing to highlight. That is something which flows a bit from time to time, but I think the amount this month was quite large, both due to new license sales in the quarter, but also some deferred revenue now being realized in the quarter.

Thank you. And then we can move on to the first caller. I think we have Hampus Engellau from Handelsbanken.

Firstly talking a bit on the U.S. market. How do you see the end of this tax credit, USD 7,500 in September, it kind of boosted BEV sales. How do you see the backdrop on that for you guys in Q4? And then more a general question, around Europe sentiment for the premium market, if you could discuss that and also your position?

Should I start?

Yes.

So I think if we start with U.S. and the end of 45W, I mean, in all honesty, it's a bit too early to tell exactly how the market reacts. Of course, it is a negative that you take away a very large consumer subsidy for electric sales. But we see the sort of glass a bit as half full there. We have a very strong position. I mean we are market-leading in premium in PHEVs. We are not leading in BEVs, and we want to strengthen our positions there. So I think if I see the glass as half full, I see now that others are taking a step back. We have several manufacturers that are suspending production. And we see that as an opportunity to sort of regain some of the ground because I do believe that there is an underlying demand for electric vehicles from U.S. consumers. And you also have more of a level playing field to some extent as a lot of the electric sales, especially in the premium segment, is imports, meaning that everyone is exposed to the same level of tariffs more or less.

And the market is also positive to plug-in hybrids where we are very strong and that will probably continue longer. And that's also why we introduced now to build the XC60 in the Charleston's factory. So there, we really have the right car for America, I think, also in this respect. The second part, I didn't quite understand of the question.

Europe premium sentiment I took -- and I think it's a bit of a mixed bag if we look at Europe, right? So in September, we had a lot of records, including U.K., which is our most important market in Europe. So we see a strong demand for Volvo Cars. We also see that we have lost quite a lot in BEV sales. Last year, we had extremely strong EX30 sales. It was the third best-selling BEV in Europe, all categories. Tariffs then hit, and we've spent the year now to localize that into Ghent. And that ramp-up of the localization has concluded now during Q3. So that means that we are in a different position to play on BEVs in Europe. That said, it is a quickly growing market, 26% growth, as Hakan said, but it's also a challenging market from a price competition point of view. And we need to sort of navigate that. But that's one of the reasons why we see an increasingly challenging market ahead of us.

And lastly, I should add actually, I mean we have the EX90 now with a major software update and also a model year update, which gives it an 800-volt system, quicker charging, new safety features. That will be a great product for Europe. And with the tariffs now being set in U.S., we have yet to be enacted, but at least statements of U.S. to EU tariffs going down from 10% to 0%, meaning that the EX90 produced in Charleston has a better cost position now for Europe, which is also positive.

Finally, good tariff news.

Yes. That's the first one, actually.

Thank you. Next caller online will be Agnieszka from Nordea.

I have 2 questions. Maybe I will ask them one by one. So starting with the tariff cost, can you specify what was it in the quarter? And also with potentially lower tariffs on exports from Europe to the U.S., do you know anything about the status of that process? And would the lower tariff cost then impact your decision to move some production to the U.S.?

Do you want to start with the last question or shall I start?

Yes.

So on tariff in the quarter, we don't disclose the details of that. But as you know, we had -- from an EBIT perspective, we paid 27.5% tariffs in July. And then from August 1, it's down to 15%. From a cash perspective, we're still waiting for that money with -- and let's see exactly when it comes. The status of the EU -- U.S. to EU process, we are trying to understand. Our best understanding is that this will be an act -- needs a vote in the EU, which is likely to happen sometime next year, maybe August. So there is still uncertainty in our understanding of exactly when and also if it will be retroactive. So we're waiting more clarity.

But the U.S. have despite that uncertainty said 15% is going to be valid from August.

Yes. And then the last question or maybe a slightly more nuanced answer to your first question on the tariff impact. So even though we don't detail it in the quarter, we before said that with the high tariffs that came, this will impact group EBIT with 1% to 2% in the full year of '25. What we see now with low tariffs in the beginning of the year, high tariffs midyear and in between tariffs in the end of the year and also us taking pricing actions, we see roughly a 1% group EBIT drop from the tariff rollercoaster, if you will, and the mitigating actions we're taking.

So then I can take the last question. Are we going to change any plans regarding localization? No, I think you should not plan too much according to tariffs. You need to have another logic behind it. And I think we need to grow in America. We need to be industrially present to a much higher degree than we are. And we have a factory and the best way of getting down the cost in the factory is to fill it. The worst thing you can do it have it half full. So we need more production, and then we will bring in the XC60 is the first step, and then there will be an all new car by the end of the decade in that factory as well. And I think that is really good for our performance in America, and it will make us also a much more local U.S. car builder in line with our regionalization. So I think it's really strategic, and it will not move with the percentages up and down.

Build where we sell.

Yes.

Thank you. And move on to 2 written questions. Number one being licenses. What is driving this item? And how sustainable is it? Number two being the price/mix contribution. Now I actually lost the question here on my iPad. I think it was a question about the cost mix. And if you could add some flavor to that.

Cost mix?

Price mix.

Price mix. Sorry. On price mix.

If we start with licenses, I mean, from time to time, we sell licenses and we help other cars OEMs develop and manufacture cars. I would see this amount we have in the quarter as unusually high amount. And that is in part because it was new sales, but it was also deferred revenue that was now recognized. So I would see it and treat it as more of as a one-off and not something that is recurring. On sales mix and pricing, if we give some nuances, I think on revenue, it's quite clear. That was a positive contributor of SEK 1 billion, and that is largely driven by the fact that the XC60, our most important volume car and a real profit driver for the company has had a really good reception with interior facelift. So all new dashboard screens, and we've seen a big pickup on that. We're growing 13% in volume in the quarter on that car. We also see a large drop in EX30 sales for the reasons I explained before. And on the revenue line, I guess, an EX30 is significantly cheaper than an XC60. So that also impacts on revenue.

If you look at EBIT and sales mix and pricing, again, we see a negative effect of SEK 1.6 billion, if I remember correctly. And there, you see pricing pressure. I mean, we've had continuous pricing pressure in China for the last 12 to 18 months. And in that, you also see tariffs from the U.S. hitting in then. So let me end there maybe.

Perfect. Go on to the next caller, Nikita Papaccio from Deutsche Bank.

I would have 2. The first one, maybe short-term driven on Q4. I know you are not giving any guidance, but could we talk about EBIT key building blocks. So I understood that we see -- we will see more positive from cost savings. At the same time, you will conclude major investments. So maybe you can give us more color here? And then my second question is on the Dutch semiconductor supplier Nexperia. Do you see any impact in your supply chain? And what can we expect here?

Let me start with the first one, maybe. So you rightfully said, we don't provide guidance, and we don't provide guidance for Q4 either. But -- if you look at the building blocks, I mean, one part is that we expect to see even further effects from the cost and cash action plan. We are very firm on the execution of that. And as I mentioned before, we are to date ahead of our plans, which is very comforting. And that is maybe the other building block and the more negative uncertainty. And that is that we're seeing pricing pressure and negative dynamics. We talked a bit about it in the U.S. There's a big uncertainty now with 45W and how that will play out, especially in the near term, given that a lot of electric sales have been pushed in the third quarter.

In Europe, we see the BEV growth, but also the BEV pricing competition. And in China, we see extreme strong competition in the traditional premium segment. I mean the full market is down 14% this quarter, premium, traditional. We are flat, and we are launching the XC70 as a mean to step out of the traditional Western premium segment, but there is still a lot of price pressure there. So costs we can control and that we will focus on, but there is an increasing uncertainty and pressure in the market.

And if you go into this, I think it's Nexperia, the Dutch supplier of semiconductors, which has caused now this ban to deliver to semiconductors. That is, of course, a problem we share with the whole car industry. It's something that is going to be sold on a very high level, outside our control. But we are in a good company in a way that is comforting also. I mean, other has a bigger problem. But what we can do is, of course, to be fully focused following this week by week and really learning from how we work with this during the pandemic because we had something similar than these semiconductors are supplied to our suppliers, and we need to really follow the supply chain all the way down to be able to be on top of this. So this we are doing week by week, and we are seeing no immediate problems so far, but we need to come back on that.

Thank you, Håkan. Moving on to yet another written question, and this is actually 3 questions in one. Number one being, should we expect also positive impacts from license fees, currency and other items in Q4? Number two, can you please comment which items that will drive cash flow in Q4? And number three is on tariffs. And what is the EBIT impact for the year and which mitigation actions are you taking?

Sorry, could you take the last question?

EBIT impact for tariffs and for the full year.

For the year -- very detailed for you.

The mitigation actions that we are taking.

Yes. If I start with the first question, in terms of licenses, I think I maybe answered it before. So I would see it as a nonrecurring item. So not a material thing to expect every quarter. On FX, I guess the verdict in the quarter is still out. So we've seen extremely large swings during the year. I don't have a crystal ball to see exactly what swings we might see in the quarter. What I know is that we have quite strong hedge positions on the dollar and other key currencies. And what's comforting to me as a CFO is that I see the positive effects now, yes, they're coming from hedges that are being realized. But the underlying flows, if I exclude the Turkish lira, which we control with pricing, the underlying flows are extremely well balanced. So what we lose on revenue in pound and dollar, we actually gain in lower costs coming in, in CNY.

In terms of items affecting cash flow in Q4, I mean, Q4, we will continue to invest. And I mean, we are investing a lot in the EX60. We have just launched ES90 starting to roll on the roads. and we are building the Kosice plant. So this large sort of infrastructure investments, if you will, that we do for EX60 with mega casting and cell-to-body and the Kosice plant, those are investments lasting 20, 30, 40 years, 70 years, if you look at the Torslanda plant over here. They're more of a one-off character, but they also take some time to complete, right? So we will continue to have high investments, but we are now setting very clear affordability frames to see what can we spend because we need to get investments level down even further than the levels we are at today. We will talk more about this on the Strategy Day on November 6.

Another part impacting cash flow is, of course, the underlying business. And there, let's see exactly how the equation plays out. We see some uncertainties, as I said. But Q4 is, from a volume perspective, typically a strong quarter, but we do see a pressure on the profitability of those volumes. And then lastly, working capital and inventory. As I showed before, we did a really big step change in inventory in Q4 last year. We've maintained that discipline, and we have an extreme discipline in terms of making sure we don't sit with too large pipelines of production inventory and new cars. But that also means that it's very challenging to take down inventory yet another SEK 17 billion. It's more of a one-off step change that happened late last year. So that gives you some of the items impacting Q4.

And then the last question was EBIT impact of the tariff. I think I almost answered that, right? So full year net effect, including mitigations, it's about the 1% EBIT drag on the group full year numbers.

And the third question on tariffs.

1%, very clear answer.

Yes, perfect. Next question then, Erik Golrang from SEB.

Give some comments on -- I mean, we've seen some of the EX60's competitors presented recently from Mercedes and BMW. How do you feel about the price and specification of the EX60 compared with those?

I think what is important here in this SUV segment, that's really important for Europe and that there will be now 3 players going to launch very attractive cars into that segment, I think, is positive for all 3. It's positive for electrification. I think it will boost the interest really for having a second look also for the people who have doubted a bit so far, can electric car be something for me? And we will have a very good answer into that segment. So I'm very confident with the performance of the EX60. It will be a new beginning in the EV business. So it will not be the new class. It will be the newest class.

Moving on to a written question. How much of the cash action plan is now in effect and how much is expected in Q4 and for the rest of 2026?

We don't -- we're not done yet. And I mean, we set out an ambition to reach on indirect spend more than SEK 5 billion, more than SEK 3 billion on variable cost, '24 versus '26. And also on investments and other investments in CapEx, working capital, another SEK 10 billion. We're -- we don't -- we come closely into guiding if we start to disclose exactly where we are. We will talk a bit more about this on the Strategy Day, but we're not done. We expect more to come. And we are also continuously seeing what else can we find? What are the next steps of this. Not expecting to do a big next redundancy, but we need to come in a position where we work with what we have and grind based on that so that we see the fruits of our new investments coming to life in terms of top line before we dare to put the break pedal off the cost and investment structure.

And moving on to yet another written question. The layoffs, what's the status of the layoffs? And could you give some clarity on -- are we done for now or?

The 3,000 package we announced will materialize has really been -- most of those people have left the company. Maybe some hundreds are still going to leave in the months to come. But I mean, 3,000 people have left the company. That is totally clear. 2,000 of those are employees, 1,000 were temporary people, so-called consultants. And this is something we don't want to repeat every third year. So -- but that requires another type of discipline, which you said, Fredrik. So I mean, to avoid this, we will work much more with the headcount targets combined with other type of financial targets, investment targets, and we need to think according to a new mindset and that is prioritizing within affordable frames.

And then that is also true for headcount. So I mean, we have to be very restrictive just replacing somebody who leaves the company, but really use that to reorganize and find somebody internally first priority and that we will have a yearly reduction of headcount also coming in a very good way instead of laying off people. So that is something we will need to do to really have a leaner and a better performance organization going ahead and avoiding coming into the same situation again with layoffs.

Thank you, Hakan. Next caller being Philippe from Jefferies.

I hope you can hear me. My question was, we've seen on the bridge, there was a SEK 1.2 billion increase in income from licensing. And I was on a different call at the same time. So if you can clarify what that was, if that is new. And the second one is more longer term and thinking about based on the work we've done, we concluded that the Volvo Cars is fairly advanced in terms of software development, particularly on this software-defined vehicles. And I'm just wondering to what extent there is an opportunity for Volvo Cars to do something similar to what we saw between Rivian and Volkswagen where Volkswagen has now leverage the competence of Rivian. And it seems to me that Volvo Cars is in a position to do similar arrangements and help other carmakers against them, of course.

And as a subsidiary question to that is to what extent is the software-defined competence that you have your own and how much of it might have a significant amount of Chinese content, which might impair your ability to work with other carmakers?

Maybe I'll start with the second one. First of all, when it comes to software, we need to be very clear and divide that between East and West. So I mean the software we will use in cars in Europe and U.S. will be very different and compared with software in China, totally separated. Some critical components need also to be separated. And to really be leaders in that, we need to do it ourselves. I mean, so here, there is limited synergies with Geely, but a very important components to really be a software-defined car is to have the computing platform to have that. So I mean, we need to come into a system with a central compute instead of having 100 local boxes with software we buy from suppliers. I mean that is not the structure for a software-defined car.

So we have now taken this really painful step, you could say. I mean it has not been easy, but now we have taken it, and we will, in the future, have central compute on all our cars being released from now on basically. So that is what we need to do, and we need to do this ourselves. And I think the first priority is to get this done and then to deliver this to Volvo customers. That's priority #1. And for the time being, we have no ideas or thoughts about selling software to others or cooperating in any way. But of course, that's always an opportunity and might be interested one day, but it's not on the radar right now.

Yes. And then the first question on the licenses. We don't go into the details of it, but it is basically licenses and work carried out in the third quarter, but also a big chunk of deferred license revenue, which is now realized. So see it as more of a one-off, which is not recurring in the quarter.

Thank you. And that seems to be the last question for today. So thank you, Hakan. Thank you, Fredrik, and thanks to all of you for joining us today during this presentation. As always, if you would have any further questions today or later on, please just reach out to us within the Investor Relations team here at Volvo Cars. But for now, we say thank you, and have a good day.

Thank you.

Thank you.

Good morning, and welcome to Volvo Cars headquarter here in Torslanda, Gothenburg. My name is John Hernander from the Investor Relations team here at Volvo Cars. And today, we're here to present and discuss our second quarter results just released today.

With us today, we have our President and CEO, Hakan Samuelsson; and our CFO, Fredrik Hansson.

The procedure will be as per usual. We will start with the presentation from Hakan and Fredrik, and then we will move into Q&A. [Operator Instructions]

With that, I will give the word to Hakan to start the presentation.

Thank you, and good morning to all of you listening. I'm here now to present my second quarter, more or less in line with our expectations, a very challenging quarter. So what we saw last quarter is more or less continuing. The volumes are still under pressure and that, of course, influence the pricing on the market. Pricing is, of course, also influenced by new competitors, especially in the EV segment. And on top of that, we are also seeing tariffs for imports into both Europe from China and also from imports Europe to U.S.

So a very challenging environment. So here, it's, of course, important to focus on what we can do and that is really our turnaround program, which we presented already in the last quarter, and that is based on 3 areas. It is electrification, really utilizing this transformation to create a stronger Volvo. I think the electric market is maybe not growing as fast as we thought some years ago, but it's still growing and it's definitely big enough for Volvo to be successful on that market.

Regionalization, we need to come back to growth in China and U.S. and that we believe will happen if we empower the regions more and give them more autonomy to react to local conditions, and that's happening also.

And then, of course, we need to really concentrate on profitability. And we have our program with SEK 18 billion where we are fully on track and we are beginning to see the very first results from that.

So let's look into then these areas and where we are and what we have done since last time we met. Electrification, fully electric, and of course, also pragmatically plug-in hybrids, plug-in hybrids with longer range as a solution that probably we will need for some more years than we thought. But it's very important here to really have the cars for electrification. And then we are very glad that the EX90 now, which has been delayed more or less 2 years is now finally ready for a ramp-up after some considerable improvements of the software quality in the cars.

The same is valid for EX30. It's also now ready for ramp-up after the localization in Ghent. So we don't need to import this car from China anymore. So now we can avoid the tariffs and now we are ramping up the volumes as we speak.

We also have a brand-new sedan on coming in, in production at the end of the year. And in China, we are also launching a very first long range PHEV which will go into production in the third quarter and is one of the most important thing for us to come back to volume growth in China.

And very important is the EX60, which will be our best seller produced here in Gothenburg and will be our very first electric car with a very competitive cost positioning and it's also then making it possible for us to really get high volumes electric cars, but also good margins on electric cars.

The regions, I said, the objective here is, of course, to have strong regions and come back to growth through more local decision-making, and more local accountability. And what we have done in China, we have established a more -- a new governance model, which means that China will be more run like a daughter company through a Board, of course, following certain corporate guidelines and so on regarding a brand and other things. But much more freedom to adapt to local conditions and to be able to grow faster.

And we are also increasing the synergies with Geely. One example is, of course, we can introduce cars based on Geely platforms. The XC70 is one example, but we can also lower our costs by having a cooperation on more parts and components level. So that is happening in China.

In Americas, also new leadership, more autonomy, more empowerment to really come back to growth in the Americas as well. And we have then also decided to move the XC60 from being imported into U.S. to being built in our Charleston plant. And that is a car which will bring high volumes to the factory, together with the increase of the EX90, will give that factory a much better utilization in the second half of '26.

Here in Europe, we are introducing and producing the EX30, as I said, which is a possibility for us now to come back in this very important electric segment in Europe, where we have been low for some months, waiting for local production in Ghent. And very importantly, also in Europe, we have decided for a cooperation with Polestar to build their new Polestar 7 and engineer it also in cooperation with Polestar. And we will here build that car in our new Kosice plant in Slovakia, which is under construction right now.

And then, of course, the third area is the turnaround plan, the SEK 18 billion cost and cash measures and that is well under track, but I will leave that to Fredrik, he can explain that better. So please, Fredrik.

Thank you, Hakan. So let's come to that, but let's first start with a bit of a financial update. And if we take the quarterly financials in brief, I think it has been a challenging quarter for many reasons, but we are operationally better than in Q1. We have a strong positive cash flow. And importantly, our turnaround plan is fully on track. We also have some very big noncash items, which is impacting the bottom line.

And if we start with double clicking on the one-off. So we had 2 big items impacting profitability. Firstly, it's the impairment of the EX90/ES90 platform and this is really about rightsizing the assets to the known realities we see, mainly driven by delays and tariffs. And here, the EX90, first car out, it is a fantastic car. It's the best car we've ever built. I drive it myself, and I'm extremely happy. It's also been awarded the World Luxury car of the Year.

That said, it did suffer from quite significant delays and software quality issues. And that's really from us introducing this car as the first car with core compute, climbing that mountain of technological leadership, if you will, that very few or even no traditional Western OEM has done yet with cars in production. But with this recent update -- and that's been challenging.

But with recent updates to the car now, it's actually significantly improved and it is ready to scale up. But it has been delayed for almost 2 years. And that means lost volumes, and it means increased engineering cost.

The other big part impacting here is tariffs. And I think especially for the ES90 where it will not be feasible to sell that in the U.S. It's a sedan well suited for the U.S. market. But with the tariff situation, we don't see a path forward. Also in EU and the profit equation has shifted from -- since the program was incepted as this car is produced in China and exported.

So this results in total in a one-off noncash impairment charge of SEK 11.4 billion, which basically means that we take more cost now that we otherwise would have taken in the future. This also means that it reduces depreciation and amortization, i.e., improves the EBIT going forward by roughly SEK 1.2 billion per year.

Secondly, we have the restructuring cost, and that's really linked to the turnaround program we announced earlier this quarter with a reduction of 3,000 white collar head counts. It's a one-off charge impacting EBIT now in the quarter with SEK 1.4 billion, and we will start to see the profit effects of this coming into force throughout the year, but especially in the fourth quarter. And the whole program is geared towards 2026 profitability.

So with that, let's jump to the financials. So retail sales was down 12%, wholesale down 13%, revenue down 8%. And I'll come back to the details of this, especially the revenue. But a key thing to note on this page is that we now see retail and wholesale in balance. We had a big imbalance in Q1, but we're now back to normal levels where we expect it to be.

We see EBIT down also excluding the one-offs, it is a very challenging market with U.S. tariffs kicking in at full force. And noting here, we're comparing this to Q2 last year, which was an all-time high EBIT quarter for the company. So it's a tough comparative set.

I think there's a very positive note, though, in this quarter and that is the cash flow. We had a very strong cash flow, SEK 4 billion, and that's really from improved working capital, lower investment levels and showing the first signs of our turnaround plan starting to materialize where we get the first effects on cash.

If we look at things a bit sequentially, so a quarter-by-quarter view comparing versus Q1. We see that we are sequentially improving on all parameters. Now to be clear, there's some seasonality in this, but we also see some of the first effects of the turnaround trend starting to materialize.

On cash flow, disregarding the seasonality, we are SEK 10 billion better. In Q1, we also had SEK 6 billion inflow from the Lynk & Co sale. So if I adjust for that, it's a SEK 16 billion improvement quarter-on-quarter.

Going into the -- some of the details then on revenue. So if we compare to Q2 last year, the decrease is mainly explained by lower volume, and that is driven a lot by lower EX30 sales. So in Q2, we are still importing the car from China, which means that we had a 19% higher tariff than we had last year. FX was also negative due to the strong SEK and this was partially offset by used car sales, which have now reached normalized levels. And we had revenue in the other bucket there, which in part is inflated by a big one-off transaction linked to used U.K. subscription cars of SEK 3 billion, which is included in that other bucket. A key thing to note here is that this inflates revenues, but it's both profit- and cash flow-neutral in the quarter.

But so in total, we landed revenues at SEK 90.5 billion, excluding the contract manufacturing, which is an 8% decline as compared to last year.

If we turn to EBIT, Q2 last year, again, was all-time high so a tough quarter. If we look at this year, we see a challenging market and price pressure that has now rolled for 12 months, basically, meaning that SEK 2.5 billion is lost from volumes, SEK 3 billion is lost from sales mix and pricing. We do see some positives from FX, but this also includes positive effects from our hedges. And we are quite well hedged also for the coming 12 months ahead.

Other, minus SEK 0.5 billion, it's a negative, but it's only slightly negative despite the fact that this includes massive impact from the U.S. tariffs and increased depreciation and amortization. And this was basically offset by lower indirect costs and quite significant variable cost reductions.

So all in all, we have an adjusted group EBIT of SEK 2.9 billion or 3.1% despite the somewhat inflated revenue number back -- on the back of the U.K. transaction I just described. If we include the one-offs then and the noncash impairment, we'll end at minus SEK 10 billion on a group EBIT level.

Turning to liquidity. We started the quarter with SEK 47 billion of cash and ended with SEK 56 billion of cash. So that's a strong SEK 9 billion improvement in liquidity, both from a strong free cash flow improvement of SEK 4 billion and then a bond of SEK 5 billion that we issued in the quarter.

On free cash flow, we see that EBITDA contributes SEK 8 billion. Net working capital improved SEK 11 billion on all the underlying parameters, including very well-executed production planning and inventory management.

We had investments of SEK 14 billion, but that includes transactions done within the quarter linked to U.K. and basically the change of our financial services setup, which technically was us buying a company, i.e., an investment and then selling the car, i.e., net working capital reduction. So if you normalize for this, you can say that the investments ended at SEK 11 billion negative and net working capital at plus SEK 8 billion, which is a more fair view to look at it.

Importantly then, and as we see the first effects of our cash flow in this quarter, the SEK 18 billion cost and cash action plan is fully on track. We announced this target in Q1, a SEK 3 billion variable cost reduction in '26 as compared to 2024, absolutes. A SEK 5 billion reduction in indirect spend in '26 full year as compared to 2024, absolutes. And then on CapEx and working capital, a SEK 10 billion reduction beyond the planned reductions we already have as we're stepping down the CapEx mountain.

If we look at the developments here, we see on variable cost we have during the quarter initiated with force joint procurement activities together with Geely, really leveraging the scale of the total group in our negotiations with suppliers.

On indirect spend, we announced a 3,000 head count reduction and we've already started to execute on that. So by today's date and as we go into vacation here in Europe, 1,100 people have already left the company.

On CapEx and working capital, we do see effects. We've had lower investments in the first half of this year as compared to the first half of last year, and we also see a reduction in working capital. A very big reduction in absolutes, but also in relatives as compared to where we are on sales pace, we see a real reduction coming in from this program.

So with that, let's leave it to Hakan again to summarize.

Short summary. So what did we see? We saw revenues and volume continued under pressure. We saw the profitability if we see it from quarter-to-quarter, which I think is one natural logic right now because I think the quarter 1 was a sort of down point and now we need to improve from that position. Then we saw a very slight improvement in profitability in EBIT without the one-off posts.

But most importantly in this quarter is that our turnaround program, we can confirm is fully on track to deliver the SEK 18 billion we have as a target and very positive to that, I think, is the cash flow, which I think you should see as an indicator that this program is delivering. I think that's very promising. And it starts, of course, exactly where you would expect it to be seen first and that is on the cash flows. I think that is the most thing important with this result in the quarter and something that we are really positive and satisfied.

With that, I think I end my summary and ready to take any questions from you. And I think, John, you will lead us in the questioning.

Yes. Thank you, Hakan, and thank you, Fredrik. We now move into the question-and-answer session. [Operator Instructions] And we have a couple of callers calling in. We will start with Harry Martin from Bernstein.

I'll start with the XC60 production locally in the U.S., how long do you expect that to take to reach the level of volume that would make a material change in capacity utilization in the Charleston plant? That's the first one.

The second question, just on the benefit from selling the on-balance sheet cars in the U.K. I think you had a similar benefit in Sweden recently to the revenues as well. Are there any more markets where you have similar resets to come just in modeling firms?

And then the final one on cash generation and free cash flow. There's a lot of different moving parts in Q2, but I wanted to focus more on normalized free cash flow. If I give credit for the investment reduction plan versus 2024, it looks like free cash flow breakeven would be around SEK 40 billion of EBITDA, that will be about SEK 15 billion-plus and more than that adjusted EBIT in years when you have high restructuring charges as well. Is that the right way to think about the cash breakeven? And does that imply that it really will be 2027 or beyond before this business starts generating cash again?

Okay. Maybe I can start with Charleston and then, Fredrik, you can think about the other two.

We are bringing in a car from -- which is today made in Torslanda. So we are doing that as fast as we can, really, which will mean some parts will continued being produced in Sweden and brought to Charleston. So we can do it rather quickly. So we expect by the end of next year, we will have the production ongoing. And then, of course, we need some months to really ramp it up to the levels we are selling the car so we will take another couple of months. But we should in the beginning of year '27 then, very early, we would have the volumes. And the volumes last year, we sold 40,000 of this car line in the U.S., that gives you an indication of the volumes looking forward.

And then if we take the question on the used cars in U.K. or back book, as we call it internally in the company. Now this was the last major transaction, if you will. And I think a key point to note on this transaction was that when we sold cars in Sweden, that was cars that was on our balance sheet that we offloaded from the balance sheet.

In U.K., this is a different story. So it's more about switching the financing provider. So these cars were not on our balance sheet, and they were only now temporarily on our balance sheet intra-quarter. So we bought the company in the beginning of the quarter containing Volvo Cars and then we sold that to our financial service joint venture in the U.K.

Technically, that means basically a wash in terms of both cash and profit, but it does create this effect. I showed on the liquidity walk that it looks like we're investing cash flow into a company. And then when Volvo sells cars, that's, of course, running business. So it ends up in another bucket. So one needs to sort of neutralize those, but they are not really impacting neither cash flow nor profit in the quarter. It is, however, impacting revenue then. So revenue becomes a bit inflated, which means that EBIT percent excluding that would be 3.3% instead of 3.1%, for instance.

On the last question, I'm not sure I fully followed, but I take it as when do we start generating cash again, if I summarize it.

Good question.

And it's a good question and our key focus, right? And it's also why we have launched this turnaround plan. We're not providing any guidance given the uncertainty, and I think especially the order of magnitude of the tariffs in the second half of the year and the years to come will have a material impact on that. So it's hard for us to provide guidance.

But what we can say is that we are climbing down the investment mountain. We have, with the EX60 now coming next year, made drastic cost reductions and those cost reductions also come with a CapEx price tag. We have mega casting, we have cell-to-body technology, we have in-house e-motors, all innovations that will structurally create a cheaper car to produce with better performance. And we believe that, that's going to be a real unique offering in the market in our most important segment.

Once we've paid for that fully and once Kosice then is fully up and running, then these big structural investments in our investment mountain taking us to core compute, taking us to cell-to-body expanding the production capacity, those are nonrecurring things. We will not build another mega-casting foundry in Torslanda in the coming 40 years, I can assure you. So that will leave us at a structurally significantly lower level of investments, and it will bring great products and growth for the company, which in combination should have all the prerequisites to create really strong cash flows.

We don't guide exactly when, what and how, but those are sort of the puzzle pieces or fundamentals playing into this.

Thank you, Harry. Then we have the next caller, and that is Hampus Engellau from Handelsbanken.

Can you hear me?

Yes.

Excellent. Just cutting off, sorry. Yes, 3 questions on my side. Just to clarify, on this one-off charge related -- the part of it that is related to tariffs and the ES90, is that based on like 25% tariffs? Or is it based on what most people expect, the 10% tariff? That's the first question.

Second question is more related, if you could maybe say something about CO2 right sales compared -- what you expect in this year compared to last year given the change in Europe?

And then the last question is related to the XC70 long range, a very interesting vehicle. When will you take that to Europe and U.S.? And what risks do you see in cannibalization with the EX60 and the XC70 long range?

Can I start with the last one?

Yes, start with the last.

With a not very precise answer because we are normally not that precise about product development. But in China, we are developing a car which is very attractive for the Chinese market. I think it's more car and electric car with a backup engine than a plug-in hybrid. And of course, this is a car, which I think will be something European consumers also will want to have in the future, and we are looking into various possibilities to be in that market segment with the different cars we have in our portfolio. And that is really what you could say.

But the cannibalization, I think, is a wrong word. I mean, we will always have product development and there will be new cars. And of course, we need to continue that and I don't think you can see new cars as cannibalizing from old ones. I mean, that has -- will happen. So what's important is we should keep our market share to customers who wants to have an electric car, but don't need to worry about a flat battery somewhere on their way to order, for example. Those are the customers who probably would like to have something like this one.

Long answer with not any precise information, sorry. But Fredrik?

If I continue with the other two. So I think on ES90 and the tariffs, I guess the current situation is it is manufactured in China, which means we have 147.5% tariff on the core. Part of that we can use our duty drawback system for as we are manufacturing and exporting cars from the U.S. as well in the same category. But it still leaves us with a 45% extra tariff, if you will.

So it's both the automotive tariffs and additional China tariffs. So even if there's a change in the automotive tariffs, we still see that this will be a challenging profit equation for the car. I mean, we are, on average, not for this specific car, but if I talk in general terms, we're a 20%, 25% gross margin. And if you have 45% tariff that's naturally detrimental to the whole equation and the feasibility of launching and introducing it as that also has costs.

There's no plan in moving the ES90 production to Europe?

No. We don't have any plans for that currently. Of course, as with everything, let's see how sales develop and let's see how tariffs develop and then we adapt accordingly.

On CO2 sales versus last year, I think the big difference is -- so last year, the bulk of our sales, it was a smaller volume and it was mostly in the U.S., very low volumes in Europe. I see this year with the tighter fleet emission standards in Europe, we see quite significant profits from selling in Europe, whereas we don't see a clear path forward to selling credits in the U.S. given the recent developments on -- and rulings on said mandates and changes to the CAFE credits.

If you look at the numbers and absolutes, then I guess we are reporting SEK 1.6 billion for the first half year, which is significantly more than we did last year. In the quarter, isolated, I think we sold credits for SEK 400 million Q2 last year. So it is a more substantial amount here in Europe. And we expect this to continue, of course, as we have contracts in place.

Thank you, Hampus. Then we go to the next caller, and that's Pushkar Tendolkar from HSBC.

And I have a couple of questions. So the first one is after these impairments that are related to, let's say, lower volume assumptions -- lower profitability assumptions for the EX90 and ES90, is there also a risk for the EX30 as well? Because there also your volumes are much lower than what you would have expected earlier? Or if not impairments, do you have to pay penalties to Geely for lower offtake of volumes than what you would have previously communicated to them. That's the first one.

The second one is then about -- just about growth, right? How does Volvo plan to drive growth because right now, I mean, at an annualized level, 700,000, 750,000 units. At one point, the target was 1.2 million. You are investing in a new plant as well. So what is the plan to grow? How do you see that in the medium term?

Maybe answering that one, growth driver is a good question. I would then highlight the new regions, bringing more empowerment to the regions, taking faster decisions, reacting to customer demands locally that we do because we want to grow faster in China and U.S., that's really the reason.

Second is, of course, having the right cars. That's why that's important to roll them out and especially the EX60 is, of course, definitely a growth factor for us.

And thirdly, it is also to be better on the cost side. And that's, of course, one reason to -- way to come down in cost, to have a better design. I think EX60 is designed for a much lower cost from start. Mega casting and cell-to-body technology, as an example.

But also utilizing more synergies with Geely is also a growth driver. We can do that on the part and component level. We can do it on the car level where we can broaden our offering with their technology. XC70 is a good example. So that, I would say, are major growth drivers looking forward.

And maybe adding to that and emphasizing, I mean, we are in the next 12 months basically -- or I shouldn't be that specifically in -- during 2026, we are expanding our addressable market. The XC70 in China alone, that is a play into the new energy vehicle segment. That is the 25% CAGR growth segment we're going into, where we're combining the best of local technology and Western brand credibility, which means we will tap into something unique. So we see great opportunities there to address whole new customer groups.

And I think likewise, and emphasizing on the EX60, I mean last year, we sold 230,000 XC60s. That's, by far, our most important car. That is the core and bread-and-butter of Volvo cars. We are still leading in electrification among all the traditional premium OEMs despite the fact that we don't have an offer in our 60 segment. It is the world's most selling car, all categories. Tesla Model Y is in that size segment. We're not really playing there. And here, we're coming with the EX60 on a super-cost competitive and high tech setup.

So we have really high hopes that, that will also not just eat from the cake we have, but actually expand the product offer and the markets we serve. And that should give us growth.

And then regarding possible write-off, I could say we don't see that. And the reason for the write-off is not lower market volumes. We will always have market volumes going up and down. The reason for this onetimer was a 2 -- more than 2 years' delay with lost revenues and additional R&D cost. I mean, that we don't see is going to happen. So the volume of EX30 is not a risk factor in this respect.

And the volumes are now picking up. They have been a bit low because we had a pause here going from imported Chinese cars to locally produced. Now that production is ramping up, so the volume of that car will also now pick up.

And the contracts is also not a factor that will influence any possible write-offs going forward. We cannot go into exact our contracts. But I mean, those contracts are flexible enough to -- for us to adapt to the volumes we need.

Thank you, Pushkar. We now have a written question here from Mattias Holmberg, DNB. And he would like clarification of the U.K. transaction, both how it sort of impacted the free cash flow, working capital and also your comment on sales and margin, just a clarification.

Let me try again. So the context is we're basically switching financing provider for this, you could say. And as part of that, we bought the company, which contained cars for roughly SEK 3 billion. So that was an investment hitting investment cash flow SEK 3 billion negative. That we did in the beginning of the quarter.

At the end of the quarter now, we then sold those exact same cars to our financing joint venture for them to take over operations of this. When we then sell those cars, given that we are a car company, that's not selling an asset, that is selling a car, usual business. That means that it goes into the revenue line instead. And on a cash flow basis, it reduces our inventory, if you will.

So on cash flow, investments, if you neutralize for this, is SEK 3 billion lower. And net working capital improvement is SEK 3 billion lower as well.

On revenue, revenue is SEK 3 billion higher, all else equal. Profit, this is a nonprofit transaction. So we're not losing or making any money on it. So it doesn't impact profit at all.

What happens though is as it inflates revenue as we're buying a company and selling cars, that dilutes all the percentage points if you look at gross margin percent or EBIT percent, for instance, as we're selling SEK 3 billion of cars with 0 profit, you could say. And it's really a structural move to move into the new provider, you could say. Hopefully, that clarified it.

Otherwise, Mattias, just reach out to us at IR and we'll be happy to help, of course. We go to the next caller, that is Nikita Lal from Deutsche Bank.

I would have also 2. The first one is on the cost from the localization of the XC60 in the U.S. Can you quantify it? And when will it be expected to hit the P&L?

And the second question is on the tariff impact. Could you give us any figures how this impacted Q2? And if we should think about a higher or lower impact in the coming quarters because of mitigation impacts.

Yes. I think if we start with the XC60, I mean, we're not disclosing the exact amount, but it's a low or very low single-digit billion. And that's on the back of the Charleston plant, we have already produced SPA cars. So SPA1 is the base platform for the XC60. As late as last year, we still produced XC60s on the SPA1 platform. That means that the plant is already adapted for that production. That means that we can find very cost-efficient ways to basically do this.

On tariff impact, we're not disclosing the details of it. But I mean, we did have, I would say, almost full impact of tariffs in the second quarter. We also have mitigating effects we're starting to take, some we started already in April in terms of reducing discounts. We are now with the new model years, model year '26 also increasing the MSRP, so the price tag, if you will. Some of that has come already now then in Q2 as we started in April. Some more will come in Q3.

But on a total level, we've said before that this will impact group EBIT by 1% to 2% in the year, and that's the same level of guidance we're talking about. But it is hitting at very high force in Q2.

Thank you, Nikita. Let's go to the next caller, and that's Sam Perry from Exane.

Can you hear me?

Yes.

Yes. Perfect. Sorry, could you just clarify the EBIT impact from the CO2 -- the emissions credit sales and what you could expect that to be going forward as well?

So it's -- the sale is basically at profit, you can say. So it's SEK 1.6 billion impacting EBIT this quarter, and that accounts for the full half year then. So both Q1 and Q2 sales. And we've received the cash for Q1 already.

Going forward, we don't provide guidance. But I mean, we expect this is contingent on our fleet CO2 emission levels. And as we've talked about before, EX30 will start European production at full scale, meaning more electric sales in Europe, for instance. So we expect fair amounts also going forward.

It does boost Q2 profit a bit. But one should also note that we've had a lot of probably 10 smaller items linked to changes in capitalization, true-ups and things sort of disturbing comparability. So if I take Q1 and Q2 and flush all of that out, I still at the bottom line see a higher EBIT absolute in Q2 as compared to Q1.

But those sorts of things would have been -- I guess, just trying to sort of clarify sort of one-off positive impacts year-over-year from the sort of balance sheet cars that you've spoken about in the U.K. and the emissions credit sale combined. If I look at that, that's pretty -- that's a large portion of your EBIT for the quarter.

Yes. And it is -- I mean, it has thus become hard, right, because there's a lot of things impacting and there's also a lot of smaller items we're not disclosing, which is also impacting and a lot of them are hitting negatively now in Q2, which will not be of a recurring nature.

So -- but again, so if I adjust for all that changes in capitalization, [ VME ] impacts on subsidy schemes changing temporarily in the U.S., for instance. And some one-off payments, adjustments in warranty, it's a long list of things. If I normalize for that and compare Q1 to Q2, I still see an absolute Q2, which is slightly stronger than Q1.

Any more questions there, Sam or...

No.

Okay. Thank you very much. We have 2 written questions now coming in. You seem to lose market share on EVs in the first half. What are the main drivers behind that and what is needed to turn? That's the first question.

And the second is that should we expect a significant reduction in CapEx for the rest of '25?

I think the first one is a rather easy explanation and this EX30 was sold in high volumes imported from China. And then the tariffs came and put a halt on that. And then we had a sort of month here where we paused that sales and now it's coming locally produced in Ghent, and now we are ready to come back to higher volumes. So I think that is the big explanation for market share losses during these months.

And when it comes to CapEx, I mean, we are also not guiding for the rest of the year, so it becomes a bit hard. But what one can say about CapEx is that it is -- it's very linked to car launches, right? So we typically pay for the tooling, which is the big part of the CapEx investment in a new car after production has started.

So if we look at this quarter, we, of course, started production of the EX30 in Ghent. If we look at the second half, we will start notably production of the ES90, which will then impact CapEx as we're paying for that tooling.

But we are also as part of the turnaround program looking into what of these can we delete, push, kill. And already in Q2 now, we have taken out significant deletions, not just moving, but actually deleted things. Not impacting our overall strategy, not impacting our ability to grow or the core products, but things we've decided not to do basically.

And the future-oriented big investments in new platforms and so on, that has been taken. And now we are on our way down to a more -- back to a normal investment level. And that's, of course, really important for our cash generation.

Then the last question here. There has been some media reporting that you will also start to build the XC90 in Charleston from 2028. Any comments on that?

No. I think I saw that speculation. Also, of course, one day we will need a new XC90 as it was launched sometime 2015, okay. But I think it's -- there will be probably more speculations about them before we can say anything more concrete.

So right now, we are adding the 60 and then we have the 2 electric cars built in Charleston. And when that picks up now in volume, I think we have a reasonable utilization of that factory, which is, of course, really good also for our financials because there are fixed costs that has to be taken, and they are there even without the volume.

All right. That happens to be all the questions now, and thanks a lot for the interest. And if there's anything you need to clarify or want to follow up on, of course, just reach out to us at IR.

But thank you very much, and look forward to talk to you again in the third quarter, if not sooner. Thank you.

Thank you.

Thank you.