Good afternoon, ladies and gentlemen. I would like to welcome you all to our telephone conference for the second quarter results. With us today is Harald Krüger, Chairman of the Board of Management, and Nicolas Peter, our CFO. First, Harald Krüger will give you an update on the business performance during the second quarter. Nicolas Peter will then take you through our financial results. Afterwards, we will have time for our Q&A session. Harald, please go ahead.
Good afternoon, ladies and gentlemen. Today, I would like to address three main points: our electro model program, our market performance, and our profitability. Many of you were at our first #NEXTGen in the BMW Welt at the end of June. We were very pleased with your positive feedback and the feedback from the media and social networks. At the event, we showed our clear approach to the future to offer sustainable mobility with a variety of drivetrain technologies, and our focus is clearly on the customer. Our customer's needs and desires are diverse across the globe, as are the regions and locations where they live. Therefore, we are offering our customers various attractive solutions during this phase of great technological change in our industry. Our approach towards sustainable mobility is holistic, including vehicles, production, and the supply chain. Let me give you two examples.
First, as of next year, all of our 31 production sites in 15 countries will obtain the electricity they need from renewable energies. Second, we are already developing our fifth-generation electric drivetrain. It will be first used to power the BMW iX3 starting next year. From then on, our electric engines will no longer use rare earths. We see all these things as part of our overall responsibility. We have set ourselves ambitious goals for the electrification of our fleet. By 2021, we will double sales of our electric models and plug-in hybrids. In 2023, two years earlier than planned, we will have 25 electrified models on the market. More than half will be fully electric. By 2025, we expect our electrified vehicles to be growing by an average of more than 30% per year. As you can see, we are making great strides in this area.
The growth curve is exponential. In Germany alone, we sold over 10,000 electrified vehicles in the first six months of 2019. That is around 60% more than in the same period last year. Sales of our fully electric BMW i3 surged 85% in our domestic market. Three of the five top-selling plug-in hybrids in Germany are from the BMW Group. In the first half of the year, i3 sales climbed 21% worldwide, even though it has been on the market since 2013. Electrification also continues at MINI. Sales of the Countryman plug-in hybrid were up more than 50%. In July, we presented our fully electric MINI in Rotterdam and Oxford. The MINI Cooper SE will roll off the production line in Oxford later this year. It's enjoying strong popularity with over 40,000 interested customers.
Already today, with 10 models, we offer customers a wide range of electrified vehicles in all segments. At #NEXTGen, we made it very clear. We support the aim of a CO2-neutral society, the same goal formulated by the new European Commission president for the EU by 2050. At the BMW Group, we are consequently expanding our fully electric range. The i3 from 2020, the i4 and the iNext from 2021, and our new technology flagship, the iNext, will provide us with building blocks for the future. To ensure that we can focus on both present and future needs and still remain profitable, we are relying on a mix of different technologies. That is clearly what our customers want. Now on to the second topic, our sales performance. We are growing in a declining and highly competitive world car market.
The BMW Group achieved new all-time highs in both the second quarter and in the first half of 2019. In the second quarter, that also applied to the brand BMW, Rolls-Royce, and BMW Motorrad, as well as the BMW Group. In our largest sales market, China, we beat the trend with growth of almost 24% in the second quarter, and we won market share. Through June, the brand BMW was number one in the U.S., was number one in the U.K., and in Germany, we grew more strongly than the entire market in the premium segment. Globally, we were able to significantly reduce the difference between the brand BMW and Mercedes-Benz in the first half year. In the months of June, BMW was ahead of Mercedes. At group level, we continue to lead the premium segment. Our new model rollout continues at full speed.
The new BMW 3 Series and the BMW Z4 have been in showrooms since March. The new BMW 7 Series will now also be launched in China. Sales of our X models were up by almost a quarter in the first half year. The new BMW X7 has been available since March and enjoys high demand as segment leader. The X7 brings the popular and highly successful X family to seven models. In early July, we also announced the new BMW X6. This completes the renewal of our X series. Over the past two years, all X models from X1 to X7 have either been refreshed, newly launched, or launched for the very first time. The new BMW 8 Series is part of our rollout plan in the luxury segment. In addition to the coupe, the convertible has been available since March.
Since July, production has begun for three more 8 Series models at our Dingolfing plant, the Gran Coupé and the M models of the coupe and convertible. We expect the Gran Coupé to be the top-selling 8 Series model. In late September, BMW will launch the new 1 Series, the new 3 Series Touring, and the revised X1. X1 will also be available as a plug-in hybrid from 2020. This variant was previously only available in China. As you know, the brand BMW will be releasing 21 new or revised models this year alone. Now to my third point, our profitability. The BMW Group has often successfully mastered turbulent times in its past. Today, volatility, changing conditions, and increasing regulatory requirements are part of our everyday business. The BMW Group will continue its successful development, and it is investing heavily in future technologies to ensure this.
We are able to do so because we are profitable. Our EBIT margin in the automotive segment was 6.5% in the second quarter. We are on course for the expected target range of between 4.5%-6.5% for 2019. I would like to emphasize again, for the first half year, the EBIT margin without the provision related to ongoing antitrust allegations from the European Commission was 6.1%. This would fall within our original guidance of 6%-8% for the entire year. As you can see, the BMW Group is clearly on track to meet its goals for the financial year 2019. Ladies and gentlemen, allow me to finish on a personal note. This is my last quarterly conference as CEO of BMW AG. I joined the board of management in the midst of the global economic and financial crisis back in December 2018.
As part of the board, I could play a significant role in shaping the course of the BMW Group for more than 10 years, over four of those as chairman. During this time, we forged new paths. I firmly believe the BMW Group is robust, innovative, and in a strong position to manage the complex challenge that's facing the company today. BMW has been my professional home for more than 27 years. You will understand, and I'm sure that the BMW Group will always have a special place in my heart. I wish my successor, Oliver Zipse, much success in the coming years as CEO. I also truly appreciate the telephone conferences with you over the years. It gave me the opportunity to share my views not only on our company, but also to address the challenges facing our industry.
Likewise, I also personally found our open and dynamic dialogues after our analyst meeting to be very productive and insightful. Here, we addressed topics ranging from e-mobility and autonomous driving to geopolitical developments around the world. Thank you for your constructive and, at times, critical views on our industry and beyond. I know you will certainly continue to do this in the future. This open exchange benefits us all. Challenging assumptions can often lead to improvements in industry and a company's overall performance. Thank you.
Harald, thank you very much. Now, Nicolas Peter. Nicolas, please go ahead.
Ladies and gentlemen, good afternoon. I would like to take this opportunity personally, but also on behalf of my board of management colleagues and all our associates to thank Harald Krüger for the excellent and trusting cooperation over the years. It has been a pleasure working with you. The conditions in our industry are changing faster than ever and becoming more and more unpredictable. Taking on the responsibilities of a CEO in times like these deserves the utmost respect, as does your decision not to seek a second term of office after more than 10 years on the board of management. I can say I look forward to working closely with Oliver Zipse in his new role, whom I have known for a long time and greatly respect. Ladies and gentlemen, let's now focus on business development in the second quarter in detail.
The BMW Group remains on course after the first six months of 2019. In a challenging, declining overall market, we increased our segment share. As previously announced, the operating result for the automotive segment has improved compared to the first quarter, and we are on track to meet our goals for the year as planned. Our performance shows that we are in a strong position compared to many competitors, despite a difficult political and economic environment. The company's half-year sales topped 1.25 million vehicles for the first time, thanks largely to our young and attractive product portfolio. A good example of this is the X7. By the end of June, the X7 had already been delivered to more than 13,000 customers around the world. Our performance remains particularly dynamic in China, where despite a declining overall market, we reported double-digit growth.
Ladies and gentlemen, let's look first at our financial figures for the group. Group revenues for the second quarter rose by 2.9% to EUR 25.72 billion, benefiting in part from a slight currency tailwind. We once again made high upfront investments in the second quarter as we strive to shape technological change. As expected, currency and commodity prices, higher depreciation, and measures for emission-free mobility also had a dampening effect. The financial result for the second quarter came to minus EUR 148 million. I will provide more details later for each segment. Impacted by the lower financial result, second-quarter pre-tax earnings totaled EUR 2.05 billion. Due to the provision made in the first quarter in connection with antitrust allegations by the European Commission, pre-tax earnings for the first six months decreased to EUR 2.82 billion. The group EBT margin stood at 8% for the quarter and 5.8% for the half year.
Excluding the provision, the figure for the year to the end of June was 8.7%. Ladies and gentlemen, running a sustainable, profitable business remains our top priority. We are therefore making systematic investments today to secure our future, even in the current challenging business environment. A high degree of flexibility is essential. With our efficient combustion engines, plug-in hybrids, and battery-electric drivetrains, we are highly diversified and open to different technologies. At the same time, we are continuing our research into fuel cells. In addition to further developing our drivetrains, we are also focusing on increased connectivity between drivers, vehicles, and their environment, autonomous driving and mobility services. Second-quarter research and development expenditure according to German Commercial Code amounted to EUR 1.48 billion. The figure for the first half year was around EUR 2.83 billion. The R&D ratio for the second quarter stood at 5.7%.
As previously announced, the ratio is likely to stay between 6% and 6.5% for the full year. It will therefore be lower than last year's exceptionally high figure of 7.1%, as planned. Ladies and gentlemen, we continue systematically gearing ourselves for future-oriented topics. This principle is also reflected in our investment strategy. In the second quarter, we invested a total of around EUR 1.18 billion. Capital expenditure for the year to the end of June reached EUR 2.18 billion. This seasonally atypical increase in the first half year stems mainly from the large number of product ramp-ups, as for example, the new 3 Series and the 1 Series, and the opening of the new plant in Mexico. Going forward, we will be able to export the 3 Series sedan from San Luis Potosí to more than 40 countries that have free trade agreements with Mexico.
The CapEx ratio for the year to the end of June reached 4.5%. Despite the introduction of IFRS 16, we still expect the ratio for the full year to be only slightly higher than the previous year's 5.2%. Ladies and gentlemen, let's move on to the individual segments. In the automotive segment, deliveries to customers remained stable from last year as planned. Despite the model changeovers I mentioned and the highly competitive environment, especially in Europe, segment revenues for the second quarter increased to EUR 22.62 billion. The segment's operating earnings for the second quarter totaled EUR 1.47 billion. The EBIT margin was 6.5%. Due to the provision we recognized in the first quarter, the margin for the first half year was 2.8%. We are on course for the expected target range for the entire year of between 4.5% and 6.5%.
Without the provision, the figure was 6.1% and therefore within our original guidance of 6%-8%. The increasingly challenging market environment and sustained intense competition dampened business development. As expected, higher manufacturing costs and scheduled depreciations also impacted earnings. R&D spending remained high as planned, focusing in particular on development of vehicle architectures and drivetrain, as well as new products, electrification, and connectivity. In the financial result, the preliminary one-time revaluation effect from combining mobility services with Daimler was mostly offset by a planned loss in equity accounted investments in YOUR NOW companies. In the previous year, the result included a positive valuation effect in connection with the acquisition of DriveNow. Let's look at the segment's free cash flow. At EUR 869 million for the second quarter, it was, as expected, significantly higher than in the first three months of the year.
We are also targeting a positive free cash flow in the second half year and aiming for a figure which should approach a similar level as last year. In addition to high capital expenditure and upfront investments, market development in a number of regions is proving more challenging than originally anticipated. This is dampening earnings and cash flow generation. Ladies and gentlemen, let's move on to the financial services segment, which continued its growth in the second quarter. The number of new contracts concluded with retail customers rose by 4.4% in this quarter to more than 500,000 contracts. With more than 5.35 million retail contracts as of 30th of June, the total portfolio increased 2.3% from the end of 2018. The China region notably reported strong growth. Pretax earnings for the first half year rose 3.8% to EUR 1.2 billion.
This positive development in the first half year is largely due to portfolio growth and the continued stability of the risk situation, with reduced residual value risk expenses in individual markets. The second quarter figure was EUR 573 million. This figure is impacted by negative effects in the financial result from the market valuation of interest rate derivatives due to falling interest rates across the globe. Let's look next at the motorcycle segment. BMW Motorrad performed well in the first half of the year. A total of around 93,200 motorcycles were delivered to customers, an increase of 7.1%. This positive business development was reflected in the operating result, which at EUR 102 million for the second quarter, was also higher year on year. The EBIT margin was 14%. Ladies and gentlemen, let's turn to the forecast for the current year. In the first six months, business developed in line with our expectations.
As planned, we were able to improve on our first quarter performance. We expect this solid earnings development to continue into the second half of the year, boosted further by our product momentum. We are therefore able to confirm our outlook for 2019. As long as conditions do not deteriorate significantly, we expect to remain in our announced guidance range for the full year. In the automotive segment, deliveries are forecast to increase slightly. More new models will be launched in the second half of the year. We expect the new 3 Series and the larger X models, in particular, to generate positive momentum. We remain on course for an EBIT margin within our adjusted range of 4.5%-6.5% for 2019. In the motorcycle segment, we are planning for a solid increase in deliveries. The EBIT margin should remain within our target range of 8%-10%.
In the financial services segment, we expect return on equity to be on par with last year and above our target figure of 14%. Group earnings before tax will also be significantly lower year-on-year as a result of the provision for ongoing antitrust proceedings and the decrease in the financial result from the previous year. Our guidance assumes that political and economic conditions will not change significantly. Ladies and gentlemen, our strong performance in a declining overall market shows that our attractive products and groundbreaking technologies are winning customers. Flexibility will also remain key to our future success. It allows us to respond to demand in different regions of the world at any time and adjust volumes in line with market development. At the same time, we continue to activate all levers at our disposal to secure our profitability.
The BMW Group is and will remain a strong company. Our innovative strength and the focus on growth based on a very solid financial profile provide the best basis for future success. Thank you
Thank you very much, Nicolas. Ladies and gentlemen, the line will shortly be open for questions. Please wait for some technical advice.
Thank you. Ladies and gentlemen, if you haven't already and you want to ask a question, could you please press zero and then one on your phone keypad now in order to enter the queue? After I announce you, just ask that question. If you find that question has been answered before it's your turn to speak, just press zero and then two to cancel. There'll be a brief pause while the questions are being registered. Our first question is over the line of Arndt Ellinghorst at Evercore. Please go ahead, sir. Your line is open.
Yes. Hi, everyone, and good afternoon to Munich. Arndt Ellinghorst from Evercore. Two questions from my side, please. Firstly, for Nicolas, on the cash flow. Nicolas, if I were to positively challenge you on the second half free cash flow, just by the math, you've had a $3 billion working capital outflow in H1, and with the strong product momentum, that's a significant amount swinging back. If I understand you correctly, CapEx should broadly be flat in the second half versus the first, and you clearly have stronger earnings in H2, versus the first half. Where am I wrong, assuming that you should generate about $3 billion, if not a bit more of free cash flow in the second half alone after the $300 million in H1? The second question, please, for Harald.
Can you give us some color on your expectation of the full battery electric and PHEV mix in Europe, the % mix in Europe for this year, what you expect for 2020 and for 2021? It would help us a lot to model you a bit more precisely, given all the concerns on the CO2 targets. Thank you very much.
Thank you very much, Arndt. We start with Harald and then Nicolas. Harald, please.
Hybrid mix for Europe for this year and 2020. In the second half of 2019, we will have two more important volume models for the plug-in hybrid being launched, which is the X5 and the 3 Series Sedan. We already have the 7 Series Sedan in place, but the 3 Series and X5 are important volume-wise. By the end of 2019, we will have the X3, the X5, the 2 Series Active Tourer, the 5 Series, the 3 Series, and 7 Series as plug-in hybrids available. The X1 as an extended wheelbase in China. We are targeting from 2019 to 2021 to double our electrification sales and vehicle sales in electrification, which is a push on the one side, and demand by the plug-in hybrid as well as the fully electric vehicles.
We are launching the X1, the MINI Electric by the end of this year, and we have an interest around about 40,000 customers already which are interested in the vehicle. We will have the iX3 next year, then in 2021, the iNEXT and the i4. If you look at the overall figures, we believe that we had a 15%-25% electrification mix in the year 2025 originally. As we pulled two years forward, we will see that in 2023 or earlier. That gives you a feeling about two main points, doubling the volume until 2021. The mixture of 15%-25% electrified vehicle sales is definitely probably two years earlier than originally planned. This one as a cornerstone. It depends a little bit also on the infrastructure development in Europe. It's not just for the companies.
The German government, for example, is now supporting the financial subsidies for a longer period of time, until 2030. That is of great help. As you know, the infrastructure development in Europe, for example, is different in the countries. We need that support. That's why it's overall still difficult to forecast, but it will be a strong, deep curve forward.
Okay. Thank you very much, Harald. Nicolas.
Arndt, maybe to start with, as always, we have a very strong focus in our company on free cash flow management. I would agree with most of your comments despite your conclusion. Definitely, inventories, we had a little bit atypical seasonality as we were building up stocks as planned in the first quarter of the year. This was mainly due to the launch of the X5 and the X7 ramp-up of the 3 Series, beginning of the year. Second quarter was already not flat, but flatter compared to the first quarter. We will see a relatively flat Q3, then a reduction in our inventories in the Q4, in particular, based on the strong momentum of all our X models, 3 Series now being successfully introduced into the market and the launch of the 1 Series. On CapEx, you are, as well, fully right.
We had a little bit an atypical seasonality with some more CapEx in the first half of the year. This was in particular due to the fact that we had the ramp-up of our plant in Mexico. Conclusion of it, we stick to our guidance for 2019, meaning we will approach the EUR 2.7 billion in free cash flow step by step, quarter by quarter.
Good. Thank you very much, Nicolas. Next question, please.
The next question is over the line of Henning Cosman at HSBC. Please go ahead.
Hi. Thanks for taking my question. Could you please talk about your expectation for the at-equity result and the financial result for the second half year a little bit, maybe both with respect to the China joint venture as well as the mobility joint venture? That would be great. I appreciate that you said earlier on the press call, you were quite flexible with respect to maybe reallocating some production in a case of a hard Brexit. I think you're currently exporting about 140,000 units of the MINI from the U.K. for sales into Europe. Could you give us a bit of a better idea how flexible really you are in terms of how much of that you could possibly move to the Netherlands, and how flexible the cost structures in the U.K. also are in case you would have to do that? Thank you.
Thank you very much, Henning. We start with the second part, flexible production in case of hard Brexit, with Harald, and then Nicolas. Harald, please.
I would like to start that the U.K. is an important market for us. It's the fourth biggest market in the world. We are a big player, and it's the home of two brands. Clearly, if it comes to a hard Brexit, it's a lose-lose. There is nothing which is good for companies as well as for the people in the country. We are very flexible. We could adjust volumes, on the one side at Oxford, also at Nedcar in the Netherlands. We are also in the phase of ramping up the MINI Electric in the third and fourth quarter of this year. As I mentioned in my speech, there's a demand already, which is increasing year by year, and I'm optimistic on the MINI Electric as a very successful car. We can adjust production between Oxford, as well as Netherlands and Nedcar.
Both are very competitive in terms of costs. The flexibility is, we are building the hatch version at Oxford as well as at Nedcar, so you can move around if required. So far, I believe the demand is still ongoing for the MINI. With the new MINI Electric, we will see a further increase next year. Flexibility is with shifts, flexibility is with additional shifts, with potential shutdowns, but we haven't planned another shutdown in Oxford for this year as we are ramping up the MINI Electric. The models which we build at Nedcar for sure are flexible in the demand, and BMW is always having the most flexible production system, so we could build more or less whatever is required and making sure that our working capital is definitely in balance.
Nicola?
Henning, if we look at the walk-down from Q2 2018 to Q1 2019 or from first half 2018 to first half 2019 regarding the financial results, the main reason for the deviation is the NOW family, as planned, as I said in my speech. BBA was flat. On one hand side, we've seen a very positive development based on the more than 15% increase in deliveries in China. On the other hand side, we are investing as we speak, in the startup production for the new 3 Series we will launch later this year, the X2. This had some and somewhat offsetting effect. Pricing in China was stable in a challenging environment, and to be very clear, I would expect for the second half of the year in terms of financial result and black zero.
Good. Thank you very much, Henning Cosman. Next question, please.
We go to the line of Dorothee Cresswell at Barclays. Please go ahead. Your line is now open.
Hi there. Thank you for taking my question. The first is around cost-cutting efforts. I wondered whether you could give us some idea by how much the Performance > NEXT efficiency program has already boosted your EBIT year to date, and what the biggest areas of improvement are there so far. Just coming back to the YOUR NOW joint venture. If I understood you correctly on the call this morning, the losses there will be more than EUR 300 million in the year. I wondered, is that just reflective of the cost that comes with growth in mobility services, or is there an element this year of set up and merger costs that drag that down? Thank you.
Thank you very much. This will be answered by Nicolas Peter.
Dorothee, thanks for your question. I will start with your second one. No, this is exactly as planned. We are exactly in line with our business cases, and there are no costs related to any merger activities in those numbers. Number 2, Performance > NEXT. We kicked off Performance > NEXT already at a very early stage as you know, in 2017. We are covering with Performance > NEXT really all relevant performance areas of the companies. We are permanently expanding and stepping up those efforts, which means that the program is really dynamic. We have, in particular, over the last couple of months, been focused on material costs for current models. We are very focused on prioritizing future investments. We have developed some IT systems which will help us to analyze more precisely further potential within our companies and our processes.
Focus is ongoing, on one hand side, on reducing complexity in our portfolio, lowering manufacturing costs, and reducing complexity, as you know, means optimizing number of derivative drivetrains, focusing on optional equipment and colors. We focus as well on indirect purchasing. Indirect purchasing is extremely relevant as well because it is an annual volume of more than EUR 20 billion a year, so we can easily calculate what the impact could be. To give you an idea what we've achieved already in the first half year of 2019, it's a low three-digit million EUR additional saving amount, and we expect something in the same magnitude for the second half, which means a mid three-digit million EUR amount for the full year.
Thank you.
Thank you very much, Dorothee. Next question, please.
Is over to the line of Ashik Ramanathan of Redburn Partners. Please go ahead. Your line is open.
Good afternoon, team. Thanks very much for taking my questions. It's Ashik from Redburn here. Two questions for Dr. Peter, please. First of all, the China dividend, I believe it made up about EUR 640 million of your EUR 869 free cash flow in the second quarter. That represents a pretty strong conversion ratio from the 2018 income of BBA, so something like 90%. My question is, how does this look going forward? Do we expect the cash dividend from China to continue to rise as you localize further? Will that be offset by the ramp-up costs in China, particularly for the BMW iX3? I'm thinking now to your competitor in Germany who received something closer to EUR 1 billion from their Chinese JV. Would this EUR 1 billion cash dividend be an achievable target for BMW in the next couple of years? That's my first question.
My second question is on the topic of localization. I just wondered if you could help me understand the impact of localization on your core P&L. If we take the X3 as an example, previously that was imported into China from the U.S., and say we index that at 100. Once we localize, we only get 50% of the profits, but we benefit from royalties and part sales. Does this mean that index profits drop to around 75? Am I in the right ballpark here? Is that much lower, much higher? I am just trying to understand the relative dynamics as we increase the localization rate through to 2022 with the X2 and potentially the X5. Thank you very much.
Ashik, maybe to start with first the topic of dividend. You're absolutely right, EUR 643 million is the correct amount. As you are fully aware today, we are in a 50/50 joint venture with our partner, Brilliance. The annual dividend amount is as always subject to an agreement between both shareholders. This is something we review based on the results, but on also another relevant items year on year. We have not fixed ourselves a target of dividend payout of, you've mentioned EUR 1 billion in the years to come. Why? Because our business model will change in a significant way once we've increased from 50% to 75% our stake in the joint venture, which will happen in 2022. Coming to your second question, starting from 2022, this of course will be different, the calculation you made. Why?
We will have the full impact of our automotive business in our automotive segment as we have today just the sales of the CKD margin between BMW AG and our joint venture in our automotive business. This is why a dividend payment can be seen as a very operational.
Okay. Thank you very much, Ashik. Next question, please.
Is over to the line of Kai Mueller at Bank of America Merrill Lynch. Please go ahead, sir.
Thank you very much for taking my question. The first one, as you mentioned earlier, you'll continue to do your fuel cell research and investing. I know you've been working closely with Toyota as well. They're now moving also in the EV field. Is that something you would potentially also think of partnering up in the longer term on maybe some newer platforms later down the line? On a second point is, really your Rolls-Royce numbers have been very strong in terms of the units. You flagged the Cullinan being the big driver for that. I know you don't disclose profitability, can you give us a sense of when you talk with units up 42% year-over-year, can we think about the profitability being at least the similar amount?
To what extent is that now becoming a bigger and more meaningful portion of your automotive results?
Thank you very much for your question, Kai. We start with Harald and then Nicolas. Harald.
First of all, I start on the question of the fuel cell research cooperation with Toyota, which is very successful and is running for a couple of years already and will continue in the future. We will also come up with cars and a smaller series on fuel cell vehicles at BMW. That is something which we see as part of our future. It depends on when the breakthrough for that technology is. It will start with bigger and large cars, but it's definitely what we call technology-wise, you must be open. There is not the one battery electric solution for the future, can be fuel cell vehicles in the longer term as well. That's why we focus on combustion engines, on diesel engines, on electric drivetrains, like plug-in hybrids, like pure electric vehicles, and like fuel cells. Can we imagine to work also on EVs with Toyota?
We had a very successful project with Toyota, which is the Z4. That Z4 project was very successful. We launched the product together with Toyota and their product. We are in working relationship with Toyota. There's currently nothing planned in terms of EV cooperation. As you know, we have a cooperation with Jaguar Land Rover on the electric drivetrains. What does it mean? BMW has a high competence and is driving it. You need strategic cooperations in certain ways, but you need to be very competitive at your core. Secondly, was the Rolls-Royce item, about the profitability that Nicolas will talk, but on the sales side, the Cullinan is very successful. We are on high demand. The order income is already reaching into 2020. If you order a Cullinan by today, you probably will get one in 2020 first quarter.
All the other models as well are running good. Rolls-Royce is currently very positive, and we believe that with the Cullinan, we will conquer new customers, and we will continue to conquer new customers, which were driving different products before. It shows that there's a demand for those type of cars in the world. Not high volume, but profitable, I can say, clearly profitable, and also very good for the brand.
Kai, if we talk about the profitability of Rolls-Royce, maybe two or three remarks. When we talk about engine output of Rolls-Royce, we tend to say sufficient. This is exactly what I would answer regarding the financial strength of the Rolls-Royce brand. Definitely very pleasant. If we would be in a video conference, you would be able to see me smiling. Joking aside, this is clearly underlying that our strategy, with a focus on SUV, not only with Rolls-Royce, but also with the BMW brand, is working out extremely well. We've launched the X5, less than eight, nine months ago, doing very well in its segment, dominating the segment. The X7 from the very beginning is outselling the competitors. We are gaining customers from other brands. The X3, if you look at our half-year sales numbers, an increase year on year of more than 90,000 cars sold worldwide.
This is showing that in those segments, and those segments have a higher contribution per unit than other segments, we are doing really well.
Yeah. Please, if somebody would like to go for a test drive of a Rolls-Royce, please let us know.
Okay.
Thank you very much.
Thank you very much, Kai. Next question, please.
Over to the line of Tom Narayan at RBC Capital Markets. Please go ahead, sir.
Yes, thank you. Tom Narayan, RBC Capital Markets, thanks for taking the question. The first question's on the MINI brand. Given declines in deliveries there, presumably, SUV demand has been one of the drivers in that dynamic. The question is that with SUV-ification happening and not seemingly slowing down, does this pose a structural threat to the MINI brand longer term? Secondly, on EVs, specifically the strategy of dedicated platform, full BEV versus flexible architecture, plug-in hybrid, and a BEV combination. One of your large German peers is doing an aggressive BEV approach with a dedicated platform. You're doing a more flexible one with more plug-in hybrids. Just curious as to the rationale there. If you were bigger, perhaps, like your German peer, would you perhaps take their approach, or is this simply just a difference in philosophy? Thanks.
Okay, Tom, thank you very much. We start with flexible platform and Harald.
The key question on the flexible platform or dedicated EV platform, there are two main criteria which makes the difference in that decision. One is, how do you assume that the world is continuing the next months, weeks, and years to come? We see a very different approach from country to country. If you look by today, and I would like to explain that. If we look at Norway, for example, BMW is selling around about 75% of its fleet is already electrified vehicles because there's a very good infrastructure, there's financial support, there's low cost of energy. If I look like countries in the south of Europe or in the southeastern Europe, we have low volumes in terms of electrification because the infrastructure is not there, the reliability is not there. Even if you offer the same product, the customers decide different.
That's why the plug-in hybrid will be also for long-distance driving, a solution. You can drive purely electric in the city. We have a pilot in Rotterdam, which shows that the customers are, with a plug-in driving, a hybrid driving, are purely electric in the city and drive then with a combustion engine for the long distances. This is also a case for the U.S., because in the U.S., a city like L.A. is completely different to driving through the countryside in Ohio. We believe we would like to leave the customer the choice. The pure electric vehicle platform is only benefiting if you have high volumes and high scale. For the transition phase, because who of you would like to know or does know how many electrified vehicles BMW will sell in 2023 in Russia?
The answer is very difficult to prognose. The flexibility to react in both directions, yeah, and take Plant Oxford as an example. If the customers demand 50% MINI Electric volume, we can deliver. If the customers demand 10% electric volume, we can deliver as well, always truly utilizing our plants. That's why we have made the preparations and flexibility put into the manufacturing processes of all our plants, because that demand is changing from week to week, from month to month, and it's depending also very highly on the infrastructure development. That across the globe is different. That's why we believe with our approach of a flexible platform is definitely the right approach for the next years, that's why we are doing it.
Okay, Harald, thank you very much. The first part was the MINI demand. SUV demand is strong. Nicolas?
Well, Tom, maybe first of all, MINI is definitely not depending on the strong result of the Countryman. Countryman doing, you're absolutely right, extremely well. Countryman accounts for approximately 25% of the overall MINI volume. 75% coming from the other models, and in particular, the three-door, the five-door classic MINI, and the convertible. The convertible is the strongest convertible in terms of sales numbers in the whole segment, are doing all very well. Beyond this, we are optimistic that with the MINI Electric, which has just been introduced couple of days ago, we will gain further momentum in our EV approach. I would really summarize the MINI brand is based on the strong product portfolio, and definitely the MINI Electric will support this in the years to come. Incoming orders already indicate that this car is right on spot.
Thank you very much, Tom. Next question, please.
It is over to the line of Daniel Schwarz at Credit Suisse. Please go ahead, Daniel. Your line is now open.
Yes, thank you very much. I have a follow-up question on China. How healthy or profitable is the supplier base in China? I'm asking because we've seen significant drop in share prices and earnings estimates of dealers that have above average exposure to BMW. Is that of any concern for you? Are you planning any support for dealers in China? The second question would be on M&A. I mean, obviously, you have a very solid net cash position. You already own MINI and Rolls-Royce, and as you said, you're very happy with the performance of Rolls-Royce. Could you imagine adding another British brand to your portfolio if it was good fit to the existing portfolio?
You get a-
Thank you very much, Daniel. Yes, Harald.
Daniel, you get a very quick answer on the second question. We don't think at all to add one more brand. We are very happy with the three brands. We have don't underestimate also Motorrad. We have BMW Motorrad, and we will electrify the Motorrad's products as well. That's also for future of mobility an important pillar because even with an electric vehicle, you can stand in the traffic jam and not moving forward in a city like Paris or Rome. Electric motorcycles are important for us as well, but we are very happy with the three brands, Mini, Rolls-Royce, Motorrad, and BMW.
Okay. Thank you very much, Harald. The first part of your question about dealer profitability in China
This will be answered by Nicolas.
Daniel, first of all, I think your question is very relevant. We are fully aware that the dealer profitability is something which is of high relevance for our business model. This is why we are focusing, not only in China but in all markets, on dealer profitability. Talking more specifically about the situation in China, as you know, when we talked about it nine months ago, we supported the network with a special payment at the end of 2018 to stabilize in this complex environment when we had the significant trade tensions between the U.S. and China, which impacted the Chinese market. We have not planned a similar action at this point in time, as we are quite satisfied with the development of our network's profitability.
This is based on the strong product and volume momentum with increased sales in the first six months in China by more than 15%. Of course, we are following it very closely. Why? Because we have multi-franchise dealers, which might be impacted by the development of other brands as well.
Good.
Thank you.
Thank you very much, Daniel. Last question, please.
Okay. The last question is over to the line of Arndt Ellinghorst again at Evercore. Please go ahead. Sir, your line is open.
Yes, thank you. It's actually not a question. I really wanted to say something to Harald on behalf of the entire finance community. I'd like to thank you very much for the very open and consistent discussions throughout the past four years. I'm also really glad to hear that you found our feedback mostly constructive as well. As you can imagine, it's extremely important for us to have a good and open dialogue with management teams that listen to our concerns, the criticism, and the feedback. Taking a step back, it certainly speaks for the quality of the company and your leadership that BMW didn't have some of the very embarrassing diesel issues or problems with WLTP. You've launched more EVs and PHEVs than all of your peers. You're shaping your China exposure, and you keep delivering sustainable earnings and cash flow.
I think that should be really applauded. You're leading the company really in a good financial health and with pretty sound earnings momentum, even though it's a bit depressed for all the reasons that we know. Again, Harald, really, thank you very much for all the insightful discussions, and we wish you all the very best for your personal and professional future. Importantly, we also hope that Oliver Zipse will also take the dialogue with minority shareholders very seriously. Thanks very much, Harald, and I wish everyone on the call a great summer.
Arndt, thank you very much on behalf of the financial community, and I would like to thank back. It was always very good discussions and good questions, and I loved the dialogue. I loved the relationship, and I think we keep in touch. Please continue, really, that trustful partnership with BMW. That is absolutely important to us. I can just send the message, challenge my colleagues as well in the future. They will love it. Arndt, thank you very much really for our trustful partnership together with all of our colleagues. I do wish you all a very good summer and a good way forward. I'm thankful for our discussions we had in the past, and we keep in touch. Thank you.
Thank you very much. Ladies and gentlemen, thank you for joining us today at our next quarterly conference call in early November. You will already have the opportunity to speak with Oliver Zipse as the new Chairman of the Board of Management and, of course, Nicolas Peter. We wish a pleasant day and look forward to seeing you next time. All the best. Bye-bye.