Colleagues, ladies and gentlemen, good morning and welcome to our conference call, BMW Group for the Second Quarter, 2022. We have with us here as always, Oliver Zipse, Chairman of the Board of Management of BMW AG, and Dr. Nicolas Peter, Member of the Board of Management of BMW AG, Finance. The gentlemen will begin by giving an overview of business development, and after that, as always, you'll be given the opportunity to ask your questions. Today, we begin with Mr. Peter. You have the floor.
Thank you. Good morning, ladies and gentlemen. BMW Group successfully managed the second quarter of 2022 and delivered good results despite difficult business conditions. Overall, the first half of the year was characterized by continuing semiconductor bottlenecks and supply chain disruptions. This meant the BMW Group was not fully able to meet demand.
As a result, vehicle sales were down 13.4% from the previous year's all-time high. Despite this, we sold a total of 1.16 million vehicles and were still able to expand our leading position in the global premium segment in the first half of the year. Here, electromobility remains an important growth factor. As of June 30, the BMW Group had delivered almost 76,000 fully electric vehicles to customers in 2022, more than double the figure for the same period last year. For the second half of this year, we expect solid growth in deliveries compared to the second half of 2021. Deliveries declined in the first half of the year due to supply bottlenecks, the war in Ukraine, and disruptions in supply chains. We therefore expect a slight decrease in deliveries for the full year.
However, we intend to at least double best deliveries for the full year 2022 compared to last year. Ladies and gentlemen, let's take a look at BMW Group's key financial figures. Compared to the previous year, group revenues climbed 21.6% in the second quarter and 19.1% in the first half year, reaching around EUR 65.9 billion at the end of the first six months. This significant growth primarily came from the full consolidation of our Chinese joint venture, BBA, in group financial statements. Group earnings before tax for the second quarter totaled just over EUR 3.9 billion. The deviation compared to the previous year is due to technical effects. On the one hand, the prior year quarter included income of EUR 1 billion from the partial release of the provision in connection with the EU antitrust proceedings.
On the other hand, the second quarter of 2022 was also negatively impacted by effects from the full consolidation of BBA of approximately EUR 1.1 billion. In the first half year, group earnings before tax climbed by 65.9% to almost EUR 16.2 billion. The one-time effect of around EUR 7.7 billion from the revaluation of previously held equity interests in BBA at fair market value was a major driver. Accordingly, the group EBT margin was at 11.3% for the second quarter and 24.5% for the full first half of 2022. Our research and development expenses in accordance with IFRS rose by 14.3% year-on-year in the first six months to just over EUR 3.1 billion.
Our R&D activities remain focused on electrification and digitalization of our vehicle fleet. The R&D ratio, according to the German Commercial Code of 4.5% at the end of June, was on par with previous year. We expect the figure for the full year to be within our target range of 5%-5.5%. We are constantly working on the future of sustainable individual mobility. To this end, we're continually investing in new products in our production network and in a comprehensive digitization of our sales network. With the plant expansion in Shenyang, we have further expanded our production capacity. Our cutting-edge Plant Lydia, recently opened, is already setting new standards for vehicle construction with its consistent focus on e-mobility and groundbreaking digital applications.
Capital expenditure in the first half of 2022 totaled more than EUR 2.9 billion, an increase of EUR 1.2 billion over the same period of 2021. The year-on-year increase is primarily due to upfront expenditure for the ramp-up of e-mobility and investments at BBA. The CapEx ratio for the year to the end of June 30 was 4.4%. Ladies and gentlemen, let's move on to the individual segments. I will begin with the automotive segment. Here, segment revenues for the first six months climbed by 18.8% year-on-year to just over EUR 56.7 billion. In the second quarter, they grew by 20.1%. This increase in revenues largely stems from the full consolidation of BBA.
We were able to offset volume effects from the decrease in sales through good price realization for our premium products. Sustained momentum from the strong model mix contributed to this, as well as continuing positive conditions in the pre-owned car markets. Revenues were also lifted by currency translation effects. The cost of sales in the automotive segment amounted to EUR 48.1 billion in the first half year, an increase by 23.1%. Effects from the consolidation of BBA amounting to around EUR 2.3 billion contributed to the increase in the cost of sales. As planned, this included depreciation from the purchase price allocation, amounting to about EUR 1 billion at the first half year, as well as an elimination of around EUR 1.3 billion in intercompany profits from intra-group deliveries.
Segment EBIT stood at just under EUR 2.5 billion in the second quarter and just over EUR 4.8 billion for the first six months. This is a decrease of around EUR 1.3 billion compared with the same period of last year. However, as already mentioned, this is due to some technical effects. On the one hand, the previous year had benefited from the partial release of the provision for the EU antitrust proceedings. On the other hand, the EBIT for the current year has also been impacted by the BBA consolidation effects mentioned above. The EBIT margin of 8.2% for the second quarter was within our target range. At the end of June, it stood at 8.5%.
Excluding the consolidation effects mentioned above from the BBA full consolidation, the EBIT margin would be 12% for the second quarter and 12.6% for the half year. This reflects the strength of our core segment in the second quarter, particularly given the difficult business conditions. The financial results for the segment totaled around EUR 8.1 billion at the end of June, compared to a figure of approximately EUR 1.3 billion in the previous year. On one hand, this reflects the one-time effect of around EUR 7.7 billion from the revaluation of the previously held BBA shares. On the other hand, with BBA's contribution no longer included, the at-equity result decreased significantly by EUR 800 million. Thanks to a strong operating performance, the segment's free cash flow for the second quarter totaled almost EUR 3 billion.
At the end of June, it had reached around EUR 7.8 billion. This figure includes an inflow of EUR 5 billion from the acquisition of BBA's liquid funds, less the purchase price paid in the first quarter. Temporary closures of Chinese dealerships due to the coronavirus pandemic dampened the cash inflow from operating activities in the first half of the year. As a result, liabilities for advanced payments from retailers and bonus payments to dealers decreased significantly. Due to strong demand for all electric vehicles, the BMW Group will increase its investments in electro mobility from the second half of the year. In addition, we expect a slight decline in deliveries for the full year. This will only partially be offset in our results by positive price and mix effects and the development of the pre-owned car markets.
For this reason, we're now aiming for a free cash flow of at least EUR 10 billion in the automotive segment for the full year. In the first half of 2022, the financial services segment concluded just over 850,000 new contracts with retail customers, down 20.8% from the previous year. The decrease in vehicle sales is also reflected in the number of financing and leasing contracts concluded. In addition, the financial services sector continues to be highly competitive. With a strong product mix, we were able to partially offset the reduction in volume of new contracts. The volume of new business from all financing and leasing contracts with retail customers was therefore only 12.3% lower than for the same period of last year. Our financial services portfolio generates consistently robust and stable income.
Combined with continued high income from the resale of end-of-lease vehicles, this lifted segment earnings before tax to almost EUR 2 billion for the first half year. This represents an increase of 2.3% compared to the strong prior year. Despite difficult external conditions, sales in the Motorcycles segment were on par with the previous year. In the first half of the year, we sold just under 108,000 motorcycles from our attractive model lineup. The segment's operating earnings for the first six months of the year totaled EUR 235 million, with an EBIT margin of 14.1%. Ladies and gentlemen, let's move on to the guidance for our key performance indicators. Despite the challenges in its business environment, the BMW Group is on track to bring the financial year 2022 to a successful conclusion.
Thanks to the full consolidation of BBA, we expect group pre-tax earnings to be significantly higher. In the automotive segment, we expect solid sales growth in the second half of the year compared to the same period of the previous year. In the first half of the year, the ongoing supply bottlenecks, the war in Ukraine, and interruptions to supply chains have led to a decline in deliveries. As a result, we no longer expect vehicle sales to reach the same level as in 2021 for the full year. We're therefore currently forecasting a slight decrease in vehicle sales. Regardless of this, we still expect the EBIT margin in the Automotive segment to be within the range of 7%-9%. The percentage of electrified vehicles should also increase significantly, and the number of all-electric vehicles should more than double.
We're targeting a slight reduction in CO2 emissions in the new vehicle fleet and CO2 emissions per vehicle produced. For the financial services segment, the consistently good development on pre-owned car markets led to a rising segment result. For this reason, we are raising our target range for the return on equity by three percentage points. It should now be within the range of 17%-20%. In the Motorcycle segment, we anticipate a slight increase in deliveries with an EBIT margin within our target range of 8%-10%. Ongoing inflation and interest rate hikes will continue to shape the macroeconomic environment in the coming months and impact demand. Accordingly, the above-average order book, particularly in Europe, is expected to normalize towards the end of the year. Our guidance assumes that political and economic conditions will not deteriorate significantly.
It does not include any significant tightening of sanctions against Russia or countermeasures by Russia, including an interruption in gas deliveries. An expansion of the conflict situation spreading outside of Ukraine, as well as further significant and prolonged lockdowns in response to the pandemic are also not factored into our guidance assumptions. Ladies and gentlemen, the BMW Group is capable of delivering consistently good results, even under challenging conditions. Our robust operating performance gives us a high degree of financial strength and earnings power. Our priority is the long-term growth of the BMW Group. To achieve this, we're investing in the transformation of our company in a targeted and sustainable manner. BMW Group is ideally positioned for the future. Despite the increasing challenges, we are looking ahead with confidence. Thank you.
This was Nicolas Peter. Thank you. Now over to Chairman of the Board, Oliver Zipse.
Good morning, ladies and gentlemen. BMW Group is a high-performing company with a global presence. It is financially strong, highly robust, innovative, and what's important, and more important than ever, extremely flexible. This is especially important in the current situation with all the diverse and overlapping challenges we face right now. We are always focused on our company's perspective for the future. BMW Group takes advantage of opportunities for the long term. This is now being demonstrated once again by our three anniversaries this year, the centenary of our plant in Munich, 50th anniversary of BMW Hochhaus, and 50 years of BMW M GmbH. These milestones will serve as a springboard for the next chapter in our company's history. We know what our strengths are, and we're ensuring the success of our business through profitable growth and by gaining market share. The key lies in operational excellence and flexibility.
This lays the foundation for transforming the BMW Group, its technologies, its structures, and its mindset. We're pursuing all of this with a clear focus on our goals for 2025 and 2030. It is important to us to maintain a holistic view of all the changes taking place in our environment. This enables us to assess new situations objectively in the early stages, quickly draw the right conclusions, and find appropriate solutions with our suppliers and partners for the mutual benefit of everyone. This applies to both securing semiconductors and other components, and to supplying our European plants with energy. We conduct strategic scenario planning. Our decisions are based on facts and specialist expertise. We do not follow every trend, and we are able to withstand headwinds. That is what makes the BMW Group resilient. At the same time, we remain strictly focused on our long-term economic success.
We're always mindful of our customers' mobility needs as well as our social responsibility. That is why we serve all markets with our BMW, MINI, Rolls-Royce, and BMW Motorrad brands represented in the relevant segments, from premium to the ultra-luxury class. We are perfectly on track with our technologically flexible approach. Customers love our diverse portfolio. Our all-electric models, like the BMW iX3 and the MINI Cooper SE, are particularly in demand. Although our innovation flagships, the iX and the i4, are still being rolled out in some areas, new orders are already exceptionally strong. The iX also introduced BMW Operating System 8, the most powerful data processing system you'll find in any car. Its range is pretty impressive too. The BMW iX xDrive50 set a new record for range in an electric SUV in a test carried out by our car shopping guide, Edmunds.
In a real-life EV range test, it drove 377 mi. That's nearly 607 km, and exceeded its EPA range by an impressive 62 mi. It also used less energy per 100 mi than any other electric SUV and even some smaller EV models. In the second half of the year, efficiency of the electric drive train is even more important than absolute storage capacity. In the second half of the year, we expect further sales momentum to come from the all-electric BMW iX1 and the BMW i3. That's the long-wheelbase version of the 3 Series in China. We're only building that one for China, in China. The new 7 Series has been rolling off the production line at the Dingolfing plant since July.
This vehicle raises the bar for automotive manufacturing to a new level for the car itself and also for production. The 7 Series will be the first vehicle from large-scale standard production to drive itself off the finish line and find itself a parking spot in the dispatch area. It'll be built on the same assembly line as the iX, the 5 Series, and the 8 Series models. This kind of model diversity on the single line is unique and provides confirmation of our expertise in system integration. The all-electric i7 will be in showrooms from November on. It will be followed by the i5, the high-volume electric version of the new 5 Series next year. By the end of this year already, including pre-series models, we will be producing 15 BEV models.
By 2025, we aim to have delivered a total of 2 million all-electric vehicles to customers. We're doing everything we can to make sure that at least half of our global deliveries come from BEVs before 2030. Our goal is to ensure our customers' mobility and to be as climate friendly as possible. We firmly believe that a mix of BEVs, fuel cells, and highly efficient combustion engines is the best approach for the system as a whole at this time. The role of hydrogen in individual mobility also needs reassessing. In our view, hydrogen is the missing piece of the puzzle that can complement electric mobility in places where battery electric drivetrains are unable to gain traction.
Talking about charging or local power networks, towards the end of the year, we will launch production of a small series of the BMW iX5 Hydrogen, and we're already thinking about a possible next generation. Ladies and gentlemen, for the current year, we see both positive trends and risks for our business development. Without supply bottlenecks, we would have sold more vehicles in all three main markets in the first half of the year. In the second half of 2022, despite uncertainties in the supply situation, we expect a solid increase in our deliveries to customers than in the same period of last year. Our order books are well filled several months out. BMW Group remains number one in the global premium segment, and we offer customers an attractive range of products with a large number of new models and a great variety of drivetrains.
As previously announced, we intend to more than double our sales of all-electric vehicles for the full year 2022 compared to the previous year. After the first six months, with an increase by more than 110%, we are on track to do this. Our product and drivetrain strategy is now realizing its full dynamic potential. We wouldn't be BMW if we weren't already gearing up our company for the next big leap forward. Our Neue Klasse will be coming in 2025 as announced, exactly the right time when the e-mobility ramp-up will be reaching new levels. The Neue Klasse will speed up market penetration of electric vehicles even further. For the launch of Neue Klasse, we're planning a compact sedan in the 3 Series segment and a sporty SUV.
By the end of the decade, Neue Klasse should already account for more than half of our global sales. We could also imagine a hydrogen drivetrain for this new vehicle generation. Neue Klasse is so much more than a comprehensive new product portfolio with the core characteristics electric, digital, and circular. It defines what the BMW Group will stand for in the future and will make us an entirely new company. Because BMW was founded in 1916. In the 1960s, the company reinvented itself with the old Neue Klasse. In 2025, we will totally reinvent ourselves for the second time with the Neue Klasse. We see the Neue Klasse as a complete reset for the car and our understanding of mobility. Over the next three years, our preparations will be intense, encompassing all areas of the company, which is particularly important to me.
At the same time, we are systematically transforming our production network for e-mobility, as these three examples show. First, at our oldest plant in Munich, every second vehicle coming off the production line will be fully electric by the end of next year. We will also be producing the Neue Klasse there from 2026. Second, in China, we have expanded the Dadong site in Shenyang, where we are localizing the long wheelbase version of the X5 for our Chinese customers. We have also brought a comprehensive plant expansion onstream at the Tiexi location. This is where we are producing a long wheelbase version of the new 3 Series best for the Chinese market. By the way, we planned and simulated this plant in an entirely virtual environment. It is fully geared towards e-mobility.
Third, the same applies to our new plant in Hungary, for which we laid the foundation in June. Debrecen will be the site for the initial launch of Neue Klasse from 2025. For the first time in BMW history, we will be launching a new plant with a new vehicle architecture and a new generation of the electric drivetrain. Something else that is unique. Debrecen will be our first vehicle plant to operate completely carbon-free and without natural gas. We will be using heat transducers that can run on electricity or geothermal energy. This message has been extremely well received around the world. Each and every one of our production locations worldwide will become an iFACTORY, and that means lean, green, and digital. Our plants already performed very well in the latest customer study by the U.S. market research company, J.D. Power.
All BMW plants in Europe took top spots or made it into the top 10. In total, BMW Group won eight awards, the best performance ever. Ladies and gentlemen, for this reason too, we remain optimistic. In a complex environment dominated by macroeconomic developments, we are deliberately playing out our strength, rising raw material and energy prices, energy insecurity in Europe, high inflation, interest rate hikes, and worsening financing conditions. All these things affect our business as well as consumer behavior. Semiconductor supply difficulties remain the dominant and decisive issue for our sales performance. Against this background, we have updated our sales guidance for 2022. We now expect deliveries for the whole year to be slightly lower than the previous year's high level. Our EBIT margin in the automotive segment should stay within the range of 7%-9%.
The crucial factor will be how the supply situation develops, not just for semiconductors, but also energy supplies in Europe. Our natural gas competence team is actively preparing for a potential gas shortage together with our suppliers. Extensive reviews are currently underway at our locations in Germany and Austria. We're looking at all areas and all fuels to see where we can reduce our gas usage. We could potentially envisage making up the electricity from gas-powered cogeneration plants by purchasing external power. We are evaluating whether this is feasible and what the possible implications might be. We have shared tips with our employees on how to save gas and electricity at work and at home. What generally applies, and we're benefiting from this now, resource efficiency has been a key issue for production at the BMW Group for many years.
We are the leader in many areas, including lowering CO₂ emissions and water consumption per vehicle produced. Over 99% of the waste from our production is recycled or recovered. At present time, no one can reliably predict how the situation will develop in the coming months and years. We at BMW believe in seizing opportunities wherever they arise. The flexibility of our vehicle architectures and our global production network are proving extremely valuable, as are our strong partnerships with our suppliers. We're able to serve diverse markets efficiently. At the same time, our e-models are winning important competence tests, and there can be no question for us about whether to stand by our sustainability goals. This is more important than ever in the current volatile environment. We take the long view, and we know where we're headed.
The vision vehicle we unveiled at the IAA 2021, BMW i Vision Circular, showed exactly how entrepreneurial thinking can work in a circular economy. In January 2023, we will take things to the next level when we present a digital vision vehicle at the CES in Las Vegas, as well as our next gen. It will showcase our digital expertise both in our vehicles and as a company and partner for tech players around the world. For the IAA 2023, I can already promise you a glimpse of Neue Klasse with a spectacular digital experience for our customers. You can see we're on the right track, and we have ambitious plans for future. Thank you.
Thanks to our chairman, Oliver Zipse. Colleagues, you now have the opportunity to ask your questions. I'd like to ask the colleagues to give the technical information for the conference.
Ladies and gentlemen, if you'd like to ask a question, please push the keys zero and one on your telephone. Your questions will then be received in the order asked. To withdraw a question, press zero and two. If you're listening over the loudspeaker, I'd like to ask you to pick up the receiver to ask your question. Thank you, and a moment for the first question. First question, Christina Amann, Reuters.
Good morning. I have a question mainly about the order book and the demand situation. Herr Zipse, you said that your order books are well filled for several months ahead, but at the same time, there is slowing momentum, and that the extremely good order book will probably normalize towards the end of the year, which permits me to conclude that you're already receiving fewer orders than you did in the past months.
Could you further specify this? How about the price development? In the past few years, Corona, chip shortage, the price development was pretty good for new cars. Will that now change?
Thank you, Ms. Amann. We'll begin with Mr. Zipse. Price development, Mr. Peter then.
Good morning, Ms. Amann. Well, the order book, the way it looks like now is, especially for the second half of the year, we're expecting a normalization of orders. This is quite different in the various regions of the world, but what we do see is that new orders received are somewhat reduced. That's something we do see. At the same time, however, we have an order backlog, especially when it comes to e-vehicles, which is at an all-time high.
For the entire outlook, you'd have to see the one effect, filling the orders we already have in the book, and on the other hand, as we openly communicate with new orders received, we see a reduction compared to the previous year, and we're including that in our further planning. Price development new cars.
Well, good morning, Ms. Amann. The price development in all regions of the world, it continues to be very good. If you look, for example, at the most recent auto data figures from the U.S., which are published on a monthly basis, also compared to our competitors, we have a very strong position there, which is good news. It also shows how desirable our products are.
We continue to also have a very positive situation in the Asian markets, not just China, also markets such as Korea, which is developing very well. In Europe, too, there is a positive development. This is reflected in the price development, but also in the residual values, which remain to be very good, especially in the large leasing markets, the U.S., U.K. and Germany. At the same time, the mix development is very good, 13.4% decline from one half of the year to the next. If you look into the individual classes of vehicles, then you can see a pretty good development, better than the 13.4%, for example, in the 5 Series, the X3, the X5, the X7, Rolls-Royce. The mix develops very nicely here.
Thank you. Next question, please. Franz Hubik, Handelsblatt. Good morning.
Thanks for your time. A couple questions from me. Herr Peter, maybe. The leasing, the high marketing revenue. If you have doubts about demand, if that's going down in Europe, would that also mean that pre-owned car business normalizes? A question, Mr. Zipse, on the funding guidelines or subsidies that will be reduced for e-cars and plug-in hybrids. What do you expect from that?
We'll begin with Mr. Zipse and then Mr. Peter.
Well, good morning, Mr. Ruprecht. Well, the fact that subsidies for new electric cars and plug-in hybrids, that would be normalized or would be reduced, that was already taken into account by us. Doesn't come as a surprise because with the ramp up of all of this becomes pretty expensive and it will have to be phased out. The markets are functioning very well.
We're assuming that we will remain at the same level per year. We will not have a sharp increase as we saw in the past two years, but there will not be a decline either. That's our forecast at the moment.
You have to see the advantages for the customer fully remain being able to drive electrically, even if I don't have a charging infrastructure that is available completely and everywhere. I mean, for a very long distance, I don't depend on the charging infrastructure, and that continues to be an advantage. Subsidies given for leased vehicles, these are not being removed. It doesn't mean that all of the advantages are being taken away or withdrawn. This is no news to us. The plug-in hybrids, we think that the level that they will remain on the same level for quite some time.
The return from leased cars and effects on pre-owned cars. Well, we're looking at the figures quite closely every year. At the current point in time, we don't see any weakening of the good revenues obtained, but due to our risk provisions, we would be well prepared for any developments.
Thank you. Next question, please. Wilfried Eckl-Dorna from Bloomberg News.
Good morning. Two questions. One, on the demand situation, you're saying that this is becoming normalized now. Could you perhaps give some guidance? Which model series, in which of those do you already see declining orders compared to the previous years? Are those the more expensive or less expensive models? And since when have you felt this effect? A question, this is because you mentioned it on the topic of gas supply and bottlenecks. Where do you have greatest concerns?
Is this more about your own plants, or do you see potential problems with your suppliers? And how do you prepare for such possible bottlenecks together with your suppliers? Will you increase your inventories, some parts, or are you already warning your suppliers that supply chains could collapse? And what do you do against that?
Okay, we'll begin with Mr. Peter, and then gas supply, that'll be Mr. Zipse will answer. Mr. Peter.
Well, Mr. Eckl-Dorna, I think firstly, you need to distinguish according to models and markets when we talk about the development of demand. What is quite favorable is demand for fully electric vehicles. That begins with the MINI E and goes over the i4. The iX is very, very good, and this motivates us, as I said. It motivates us to make further investments.
iX1, i7, once these are available in the markets, then we expect demand to further increase, and then we want to be well prepared. At the same time, as I've just mentioned, based on the current sales figures, and we see this in our order book, we see that there is pretty good demand for the X models. All X models, in fact, 5 Series. Better than general market development, and in particular in Europe, we see good development of new orders despite already having a full order book. Which means for this reason, we're not nervous at all about the coming quarters in view of developments in Europe. Europe is a region where the 1 Series and 2 Series play a larger role, and here we're seeing this more strongly than in other regions. Especially as far as the mix is concerned, we continue to be very confident. Thank you.
Second part of the question related to gas supply, Mr. Zipse.
Good morning, Mr. Eckl-Dorna. The situation can be referred to as being complex, so I cannot give you a trivial answer. That wouldn't do justice to the situation. First of all, about BMW. Every year we consume about 3,500 GWh of energy. Two-thirds of that come from natural gas, and out of that, the major part comes from combined heat power plants, of which BMW operates a total of 37 in Germany and Austria. Out of those 200 GWh, about 500 are converted into electric power. That's the power part of combined heating and power. Here we're assuming that we can fully compensate that.
It's more difficult where you need gas as a process gas or where it is converted into heat. Sure, partly you can do that using electric power, but there will be some areas where going back to zero will make it very hard to continue operations. In any case, there will be a residual amount of gas that is required to keep BMW running. I guess that would be somewhat lower than the need we have today. That's the situation at BMW. I think your question was also what happens with the suppliers. I think it's not the direct suppliers, the tier one. It's more process industry, process technology. Our supplier suppliers, especially the chemical industry, who might be affected.
From our point of view, since they use process gas to operate, and if that were to be turned off completely, then they would have to cease operations, and that would impair all process chains. In brief, it would be a very severe problem if there were a complete shutdown of gas supply. A certain conversion into electric power is certainly conceivable.
Thank you. Next question, please. Victoria Waldersee from Reuters.
Good morning. Thank you. Back to sales growth. You said there are a lot of uncertainties that are not reflected in your guidance. Why are you so confident that there will be growth in the second half of the year? And where do you expect that, in which brands and markets? And then gas.
You're saying that you're considering buying power from elsewhere to partly compensate gas usage, but if all companies do that, then that means there is an additional burden on the German grid. Are you afraid the German grid cannot cope with the needs of the industry?
For Waldersee, Mr. Zipse will begin with the answer about gas.
Yes, Ms. Waldersee, this certainly touches on what I just said. A partial compensation, combined heat power, that would certainly be possible because there are small gas power plants for producing power. If locally, I mean, that can be solved pretty simply. If the local power supplier has capacities, you can replace. If they don't have capacities, replacement is not possible. It's not that difficult to understand, so I cannot really comment on all of Germany because these power generators operate locally.
However, we assume, because this is only a small share of the overall energy supply, that there will be solutions. Surely, you're addressing a major question here. In the short term, I mean, relocating, shifting energies on a large scale, that's never trivial. Even if it is possible, I mean, we're seeing this right now. It will definitely become very expensive. You will certainly not keep the price per kilowatt hour. That's probably the major problem, that there will be massive increase in costs.
Second part of the question related to sales forecast for the second half of the year, also in relation to the market. Mr. Peter, please.
Well, perhaps let's go back to the first six months. There has been a decline, as we've clearly communicated, but compared to our competitors in the first six months, we performed pretty well.
This is also what we expect to happen for the second half of the year. You all know our definition of solid growth. It means between 5% and 10% in the second half of the year compared to second half of 2021. Why is it? Why are we confident that we can achieve that, and that we can enforce our price as well? Well, that's firstly because we continue to have a high order backlog. Secondly, thanks to our portfolio, we have pretty good momentum in the Asian markets. It's not just China, it's also markets such as Korea. In the U.S., there's also a favorable development, and it's the entire package. Because of that package, there is a lot of indications that that's a development we're going to see.
Thank you. Next question, please. Joachim Herr, Börsen-Zeitung.
Good morning. I have two points. One is about demand. Mr. Peter, you said in view of the order backlog, you're not nervous for the next quarters, but inflation is increasing. You mentioned that in your speech. Interest rates are also increasing. In your opinion, will it be true that the premium segment does better when the economy is poor? Do you not expect a decline in demand in the mid-term? About price increases, do you expect that the increase in costs, raw material prices, and energy can be fully compensated by higher sales prices? What does that depend on, how strongly you can increase prices?
Thank you. Nicolas Peter will answer both questions.
Well, Herr Herr, you basically gave the reasons. Inflation, interest rates, these are the reasons why normalization of incoming orders is currently taking place.
Well, premium continues to do well, otherwise we wouldn't be that optimistic for the second half of the year. I also addressed this at the end of my speech earlier. Our priority is on long-term growth of the BMW Group. Here we are optimistic. Based on the strength of the brand, the good products that we place on the market. This is reflected, for example, in the fully electrified vehicles. In the first six months, if you exclude one U.S. supplier, we were the leading supplier of fully electric premium vehicles. We have good momentum there, and that makes us optimistic. If products like the iX1 or the i7 come on the market, we also have continuing high demand for the i4. You also know our plans of introducing further fully electric vehicles.
We will also have good momentum in the future, and at the same time, also in the markets where combustion engines play a major role. We are well on track. Second part of the question related to compensation of raw material prices. Okay, well, you cannot really have price increases on the one hand to fully compensate for raw material and material costs on the other hand. Sure, these developments are also reflected in our books, the developments in the raw material markets. Well, we cannot fully compensate those. That's a clear answer. No, we can't. Still, we stand by our 7%-9% EBIT margin because, you see, it's a combination of price increases, efficiency increases, cost savings. All of these combined work against this. We can uphold our guidance.
We have time for two further questions, I'd say. Andreas Hess, Münchner Merkur.
Good morning. For the first six months, you said that sales decreased because of supply chain problems, semiconductor issues, bottlenecks with individual pre-products. For the second half of the year, you're assuming solid sales growth to take place. Therefore, my question, has the supply situation improved? Can you say a few words on that? In relation to that, recently, Audi extended short time working right into the fall because of supply bottlenecks. In Munich, you also had short time working in the spring for the same reason. Is that off the table?
Thank you for the question, Mr. Hess. I'll give both questions to Mr. Peter.
Well, let me get back to bottlenecks in the first six months. Yes, these were the reasons that you just listed, especially the semiconductors.
On the one hand side, semiconductor problems will not be fully solved in the second half of the year. Definitely not. We're still optimistic compared to 2021. We will be able to grow in the second half of the year. We are optimistic, and this presupposes that we have more semiconductors available. Otherwise we could not achieve the growth of between 5% and 10%. Short time working at Audi. Well, I cannot comment on what other OEMs do. I can only speak about what we do. If we had a problem right now, then we would communicate it, and if it were to come, then we would communicate it. That's all I can say about it now.
Next question, please. Thomas Mangan-Hermann, Redaktionsnetzwerk Deutschland.
Good morning, everyone. Two additional questions, please. The calculations that Mr. Zipse made about reducing dependency on gas, could you put a line under all of this? Could you say that you're able to cover for 1/2 or 2/3 of your gas? Or, I mean, you're thinking in scenarios. Could you somehow summarize all of these calculations? Second question, in your press release, it says that headcount by the end of the year will be markedly increased. Can you further specify how many will you hire, more or less?
Herr Mangan-Hermann, thank you. We'll begin with the reduction of gas needs and whether that's quantifiable. Mr. Zipse?
Well, good morning. I already said this is not a trivial question. Of course, we work and think in scenarios, but that's why we do it, so that we don't have to form an overall average.
Therefore, we cannot really answer the question as such, because it strongly depends on where, at which point a potential reduction of gas will come, and then if that happens, how we will be able to compensate for it and where we can make savings. Adding it all up and giving one answer, that wouldn't adequately do justice to this question.
You cannot even give us a range from, to, just to give us any idea, any number?
No. No, I can't. As I said before, it really strongly depends on the 37 locations of our combined heat and power plants. I already said that you can assume that the share of those plants that turn gas into power, there, I do think that most of this could be replaced by other forms of electricity supply.
You could certainly add to this, and you could say it will be significant, but I wouldn't really wanna do a ranking to say who can save how much. This would not reflect the facts nor the time. We don't think that's necessary now.
Second part of your question, the headcount, increase in headcount. Nicolas Peter, please.
Well, Mr. Mangan-Hermann, this clear increase that's due mostly to the full consolidation of BBA. Because all of the employees we have in China, in our joint venture, they are now added to ours. So it's not a real increase, no new hires. We'll have slight increase in headcount without BBA, a very slight increase in headcount. But the main increase, that's due to the BBA consolidation. Where we do actually increase headcount, that's especially when it comes to digital competencies, digitalization of products, and also digitalization of sales.
Software engineers, mostly.
All right. Thank you.
Thank you to Nicolas Peter and Oliver Zipse. Colleagues, thanks to you as well for taking the time to join us today. Despite all of the challenges, we now wish everyone a beautiful summer. Some of us are on holiday, but most of us are always here. Anyway, have a nice time, and see you all again soon. All the best from Munich and Zipse.
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