Dear colleagues, welcome back to the second part of our earnings call. We are going to continue in German, but there is translation. Now, we are looking forward to your questions. As always, we will give you some housekeeping remarks, and then we will hear the first question.
Ladies and gentlemen, we will now start with the Q&A. If you would like to ask a question, please raise your hand. It is at the bottom of your screen. If you are connected by phone, please press star and then nine, and then you will be able to ask your questions. We are going to announce you by name. Now, in order to withdraw the question, please lower your hand in the Zoom app. If you are connected by phone, then press star and nine again. The first question comes from Rachel More with Thomson Reuters. Please switch on your mic now.
Good morning. Can you hear me?
Yes, we can hear you. Please ask your question.
Thank you very much. First question: The effect of the structural measures was expanded to 2.5% from 1.25%. What is expected for the future, and will it go beyond Q4, so also into the next year? Then, a question about the midterms: What does this mean for the strategy, the political developments? Do you expect tariffs to be reduced? Anything else? What does it mean for BMW?
Thank you very much for the first question. Walter, you have the floor.
Thank you. As we announced yesterday, we decided to have structuring measures and portfolio measures in the focus and to steer them in Q4. You asked about next year, so beyond Q4, that is March 2027, well, w e are using the momentum that we have now, and we will bring everything along into our future.
Okay, thank you very much.
Just one remark coming from me about the midterms. Let us wait for the final results. It is a highly interesting result, and BMW Group has been working at 30 sites in 12 states for over 50 years. We have the largest plant in Spartanburg in South Carolina. Now, in the past 50 years, we worked with the governments of both political parties. We always had a good cooperation, and we will have this in the future as well. Thank you.
Thank you very much. Next question, please.
Felix Stippler from the Handelsblatt. Please open your mic now.
Good morning. I have two questions concerning the e-portfolio. You talked about portfolio measures in comparison to Gen5. Could you give us more details? What models are we talking about and what period, particularly concerning the phasing out? Then second question, the Neue Klasse and the corresponding ICEs, what about the margin? In Europe, in some markets, you already reached your goals, we heard. Could you give us an update? How many markets do you talk about? And then, the China, the market in China and iX3 Neue Klasse, what about that?
Thank you very much, Mr. Stippler. Mr. Nedeljković, you have the floor.
Mr. Stippler, please bear with me. We are not going to discuss individual derivatives concerning Gen5. What we see right now is a high demand for the Gen6 derivatives. Also, concerning profitability of the derivatives, it makes sense for us to ramp them up early. The customers expect quick deliveries, so we focus on ramping up the Gen6 derivatives. As you heard, we have new derivatives per quarter, and we are going to launch them all until the end of next year. This gives us momentum, and we are able to withdraw in some segments the Gen5 technology. This is our aim, and now, the comparability of the margins, I hand over to Walter.
Yes, thank you. In Europe, in the core markets, we have the same for the iX3, and we are on a good course for the new models, whether it is X5 or the X3. They are on a good track outside of Europe, in the United States because of the tariffs, and in China because of the competition. Well, our statement stays the same.
Thank you, Walter. Ne xt question, please.
Our next question comes from Frank Volk from Automobilwoche. Please open your mic now.
Good morning, Mr. Nedeljković and Mr. Mertl. You underlined that the decision was taken yesterday to have this remarkable turn, or how shall I put it, to have this new orientation. Could you give us more details? How was this taken? What are the core elements? As you said, well, 2026, well, we are going to advance the measures. We are also going to see the expenditures. The move shows that you trust the Neue Klasse very much. Could you give us an update about the incoming orders? Then, one short question about Shenyang. In the Chinese media, there are reports about the layoffs in Shenyang. Is that already part of the current program, or is this an additional measure? Thank you.
Thank you very much, Mr. Volk. Milan Nedeljković will give you an answer to the first two questions. Milan, you have the floor.
Mr. Volk, thank you very much for the question, particularly concerning the reasons for the decision. Well, we stated that there are two key elements. First, we have and started a restructuring process, which we announced at the Capital Market Day. It will significantly change our structures. In parallel, we have an HR program, a restructuring program. Employees can get a severance payment and leave the company. Now, there is very high demand for the restructuring program. This gives us possibilities. We can accelerate our transformation process this way. This momentum should not get lost. We see enormous potential which can be harvested in a very short amount of time. We can transform the company fast, and this was planned for the next year, but we will probably have implemented it by the middle of next year.
So, this was our reason to take further steps and to implement those steps this year in terms of the transformation. Then, the momentum of the Neue Klasse. The Neue Klasse had received positive feedback in Europe. We had more than 100,000 orders for iX3 until December, and we launched derivatives. The customers like them very much. In China, we also launched the Neue Klasse. The interest in the United States is very high, so we have very good tailwind in this respect. Hence, the second consideration to do more. This is why we did increase the production in the new plant in Debrecen. We now have the third shift in place, and we are preparing to also start with the production in Mexico. So, we make progress step by step, and it's a very good momentum that we have right now.
Thank you, Milan. Walter, you will answer the third question concerning China.
Yes, of course, we focus on the HR program in Germany, as we announced in June. This is the core of everything. Of course, we have to adjust the capacities worldwide for this year, of course, but also for the next, the upcoming occasions. So, it's a usual review progress. As I said, we focus on Germany, but it's for the entire world.
Thank you, Mr. Mertl. Next question, please.
The next question comes from Joachim Herr with Börsen-Zeitung. Please open your mic now.
Good morning. I have three questions. Mr. Nedeljković, you said that you would like to reorganize the company. In May, you assumed your position as CEO, then you lowered the guidance in June. Now again, you are lowering the guidance. Now, would you say you wrongly analyzed the developments in the sector when you started? And then, Mr. Mertl, you talk about portfolio and structural measures. You would like to expand them, so there is additional burden earlier, and you're saying it's concluded until mid-2027. So, f or the second half of 2027, do you expect a better margin than before? And last question, severance program. Well, you did conclude it faster than expected. Could you give us some figures? 8,000 positions, is that still the figure we're talking about? Thank you.
Good. Let's start with the first question. Milan Nedeljković, you have the floor.
Good morning, Mr. Herr. You talked about the decision that was taken in June when we corrected the guidance. Well, at this point in time, we stated that we as a group were surprised of the speed with which the ICEs were reduced in China. In June, we had an impact of almost 40%, a decline of almost 40% of the ICEs on the market, not BMW, but on the market in China. Now, this forced us to adjust the guidance because we couldn't maintain it. Now, w e look back at the year, and our volume remains stable in China. At the point in time, it was clear that we would have to adjust our structures and processes.
In the board of management, we decided to adjust the strategy concerning our own setup and to be more agile and to be more efficient, in particular concerning our purchasing processes and development processes to walk down new roads. This was the core of our strategic adjustment, and of course, this leads to the reduction of personnel and the adjustment of the structure, all goes hand in hand. Now, we didn't mention a figure at the time. We are not going to mention it today either. It's an ongoing process. And of course, the structural adjustment and the HR adjustment, they go hand in hand, and we will see what makes sense. We will really take the decisions step by step, and the implementation has been very successful.
Thank you very much. So, w e will walk down that road. So, this gave an answer to question one and three. Now, what about question number two, the better margin? So, the measures were taken earlier, and then there was a question about the margin for the second half of 2027. Walter, you have the floor.
Thank you very much. Now, we can do things faster, hence we use our momentum that we have right now. And of course, this will lead to a faster return the faster we act, even if we have to provide more input in some periods. This is why we announced it yesterday night. We are going to use the momentum. We can implement more structural measures the faster we act, and we didn't see this six months ago. The faster we implement it, the faster we have the return, the faster the measure supports us in the profitability for the future. So, to be fast, to be profitable in a shorter amount of time is a good thing. Thank you.
Thank you very much. Thank you to Joachim Herr. Next question, please.
Next question comes from Christof Rührmair from dpa. Please open your mic now.
Yes, good morning. Some of my colleagues already asked my question, so please bear with me if I come back to the severance programs, the restructuring program. I am not 100% sure. Did you expand this? So, will more jobs get lost in the very end? You don't want to give us a figure, but maybe you could talk about it. Or did you just implement it faster because you saw that it's easier? So, w ill the overall figure increase because there is such high demand? Thank you.
Milan, you have the floor.
Mr. Rührmair, thank you very much for your question. Now, the HR restructuring program, we provided a budget, and hence, we can group the employees. This was the target, and we fulfilled it. So, the correct groups got involved in the program. This way, the restructuring can be implemented fast. So, this enables us to do it faster, to do it at earlier points in time, but also to have an expansion from the plan. So, both aspects play a role.
Good. Thank you. Next question, please.
The next question comes from Kana Inagaki with Financial Times. Please open your mic now.
Hello. Hi. Thank you for taking my question, and I'm sorry to ask in English. I had two questions on China. You mentioned about how the downgrade in June was prompted by the collapse in ICE sales. Are you anticipating now the death of ICE vehicles in China? And the second question is, obviously, you're planning the launch of new EVs in China, and that will create new momentum for sales. But I was wondering, maybe this is not just for BMW, but maybe for the broader foreign car industry, what is the risk that Chinese consumers have really shifted to loyalty to the domestic brands and that it will be actually difficult, even if new models are launched, to actually revive that kind of the sales momentum? How much of that risk are you anticipating now in China? Thank you.
Thank you very much. We're going to continue in German, but there is translation. Walter Mertl, you have the floor. Please give an answer to the first question. China downgrade, collapse on ICE sales. Let's start with that question, and then the launch of new BEVs. We just talked about it, but of course, we can give you an answer to that question as well.
Well, good morning. The Chinese market is, per September, at a decline of 22%, and BMW also saw a decline of 22%. So, it's in line with the market. Even in the third quarter, the overall market has a decline of 24.6%, and BMW a decline of 24.8%. So, it's in line with the market as well. The ICE market has a further, a heavier decline. For us, it's 31%, and the BEV has a decline of 13%. You know that BMW has 95% in the ICE market because with the current products, we are not represented in the BEV market. So, we are looking forward to the Neue Klasse. We have competitive products with Neue Klasse, and we will now be able to serve the BEV market more than 150,000 [inaudible] . Now, y ou also asked whether the ICE market is dead. We do not think so.
We think the ICE market will be alive in specific price segments. It will continue to do so up to the next decade. We are convinced of this. But of course, with the Neue Klasse, we serve the BEV market, and the BEV market will increase proportionally or over proportionally. And we are firmly convinced that we will be very, very successful. Then, to conclude, you asked about the Chinese customers and their loyalties. Is that a risk? Well, of course, it is about appealing product for us. That is the first step. If you have appealing products, there will be demand. And Baoma is still a very successful product in the market. Otherwise, we would lose more than the market, and this is not the case. We are in line with the market, and hence we assume that we are well-positioned.
By the way, the Neue Klasse technology is for fully electric vehicles in China and also for ICEs, as it is in the entire world. This will give us a very good setup. Thank you.
Thank you very much. If I remember correctly, this year in China, it is the year of the horse. Just a small remark on the side. It is an indirect translation of Baoma, as Mr. Mertl just said. Next question, please.
Next question, Tim Loh from Bloomberg News. Please open your mic now.
Good morning. I have a few questions concerning updates. Mr. Nedeljković, in September, you told us that BMW would like to exploit new business fields outside of vehicle production with AI. BMW is the brain. That is the idea. Now, what has happened specifically since then? Do you already have customers outside of the vehicle business? If not, when do you expect the first customers to come, and how would you like to make money with BMW in this field? Second question, it is a similar question. So, the Senior Vice President level and the reorganization, I was just wondering what has already happened specifically? What functions or structures do you think can be abolished, and what type of work could be assumed by AI in the future at this level?
Thank you very much, Tim. All right. The CEO will give an answer to both questions. First, AI, new fields of business, and then second, changes on the Senior Vice President level. Mr. Nedeljković, you have the floor.
Mr. Loh, thank you very much. You asked about AI. Now, AI has been an important topic within the company for a decade, and in our processes and also in our products, we install and integrate more and more AI applications. So, AI penetrates the company, as you can see, consistently, and we have a high skillfulness in terms of AI. We can use AI and complement processes and products with AI. So, in the future, we will think about this more. We have skills. We would like to cooperate with other companies. How can we make use of the skills? So, please be patient for a bit more. It's not the right occasion to talk about this today, but there is potential on the market concerning AI, and we can use AI for more than just our internal processes.
Now, the Senior Vice President, the densification, those are the levels of the Senior Vice Presidents. It's not so much about the individuals. It's about the units within the organization. And of course, when you go down the hierarchy, you have interfaces to other segments. So, there is a restructuring on this level, and hence we reduce the number of individual segments this way, and we can bundle interfaces. So, at the end, we have a very process-oriented, customer-oriented organizational structure. We have fewer interfaces in the future. That's the background of this agility and the efficiency. Those are the main targets. So, p lease understand, I can't give you specific examples of those organizational changes, but we would like to have more entrepreneurial responsibility in the processes. We would like to focus more on the customer and create more value.
Thank you. Next question, please.
Next question comes from Max Hägler from DIE ZEIT. Please open your mic now.
Good morning, Mr. Nedeljković, Mr. Mertl, Mr. Schöberl. Thank you very much for handing me the floor. I have a simple question. U.K., Europe, and commerce, and then the phasing out of this trade deal. Do you think we are in for a good end? Is it going to conclude well, or is it going to be difficult in 2027? Now, the severance program, we have to talk about it. On the positive side, the program went better than expected, but there's also a critical aspect to it. It says something about the market if so many people leave so fast. What are the reasons for this? That's the first point. Then, second, what about the team that is left behind? How do they motivate them?
Then, third point, the Senior Vice Presidents, maybe they might leave and say, "Well, I would like to stay, but you don't want me here, so I'm just going to go." It's a difficult situation for the company, particularly in terms of the motivation.
Thank you very much, Max Hägler. Thank you. Now, I would like to talk about the U.K., Europe, the trade, and the trade deal. Mr. Hägler, it's way too early to say anything about the future in this respect. We received positive signals from the EU in this regard, but can we tell you anything else? No. That's also part of the IAA, so it's an overall package that is being negotiated. We have to wait and see. Please understand that we can't tell you right now how it's going to end. Of course, the U.K. is a very important site for us, but we just have to wait and see. Now, the other two questions, severance program, as also you mentioned a critical aspect, and then how do we deal with the leaving Senior Vice Presidents? Mr. Nedeljković.
Mr. Hägler, thank you very much. The BMW Group has highly motivated teams, committed teams, and we are very connected to our products and the company. This is the feedback that we got from surveys. So, it's not a question of motivation. It's rather about us achieving to implement the change program, to have it run in parallel to the severance program. And t he severance program offers very appealing things. So, the structures changed, and of course, there is a need for change for individuals. Well, the individuals have to decide, "Will I leave? Will I go along with this?" Of course, we focused on specific elements in the transformation, and yes, our plan worked, and the plan works not because of a negative impact, but many employees use the opportunity. The package that is offered is adequate within the sector, and it's also a very good package. It's a good offer.
So, the Senior Vice Presidents, as I said, we're talking about the segments, not the individuals. And o f course, we have possibilities in terms of the age structure. We can have changes on the inside, and we see possibilities. We used the possibilities early, and we prepared early for this. So, i f you see it together, it gives us momentum, and I'm really proud of it because the executives are highly motivated. They are highly willing to implement the change. It's fascinating. I'm thrilled by this. I can tell you, it's a momentum, and BMW can be very proud of this, proud of how we tackle this very important issue. Thank you.
Thank you also to Max Hägler. Next question, please.
The next question comes from Christina Amann with Thomson Reuters. You have the floor. Please open the mic.
Good morning, and thank you for handing me the floor. I didn't really understand. Maybe you explained it. There is additional burden, and how much is because of the depreciations, the vehicles that run out, are phased out? How many vehicles are we talking about? And how much of the burden is attributed to the HR measures? Maybe you could also talk about the future. Now, you lowered the guidances, both for the return and also for the sales. What is the forecast for the sales for the upcoming years? And now, the return, do you uphold the medium-term prognosis of 10%-13%, or can you maybe accelerate this more? Thank you.
Thank you, Mrs. Amann. It's good to have the CFO here. He will give you an answer to the two questions. All right, let's start with the additional burden concerning the vehicles and how much is attributed to HR, how much is attributed to the vehicles, and then the sales in the upcoming years, profitability, et cetera.
Mrs. Amann, thank you very much. Now, we are not going to discuss the split here today, but as we said before, we are now taking the second step. We can take it earlier than expected, as we said before. It's the correct combination from individual measures, from all elements. Now, the guidance, the sales, and the return, it's great that you mention it. Now, the guidance, the volume, we confirm that we have an EBIT margin of more than 2% in connection with what I said about the EUR 2.5 billion. This is very important. Now, concerning the return going forward, now, exactly, we are doing this. We announced it yesterday. We have one more piece of the puzzle. We can be faster, and we can go to the 3%-5% of the EBIT margin in 2028. What can be accelerated, what cannot be accelerated, we will see.
When we met three years ago, the EBIT margins were totally different. What happened in the meantime, it's a long list. A lot happened in the meantime. Now, I can be very optimistic. We have a new product portfolio, the Neue Klasse. A lot will happen in 2027. The portfolio is updated. We are very appealing on the market. The feedback confirms this. We are going to support it also with the measures which we announced yesterday, and we will talk about the rest at a later stage. Thank you.
Thank you very much. Next question, please.
Next question comes from Christoph Kapalschinski from Die Welt. Please open your mic.
Good morning. Thank you very much. I would like to have more details on the following. What does it mean for the customers if you say that you are going to phase out Gen5 faster than expected? Now, do they have to hurry if they want to get a specific vehicle? Which models are affected? What does it mean for the customers? Some of your competitors in Europe, I think, given the high demand of BEVs, deliberately try to reduce the BEV offer in order to sell more ICEs for better margins. Are you doing the same? And maybe, you could also describe why the effect of the earnings from the faster phase-out of Gen5 is mentioned now for the first time, even though Gen6 has a stronger margin.
Then, one last question on China. You talked about a low share of NEV. Are you optimistic? Do you think that this could have a negative impact on the start of the Neue Klasse, because in this area, your footprint is pretty small?
Thank you very much. We start with Mr. Nedeljković concerning Gen5 phasing out and then competitors in Europe.
Mr. Kapalschinski, the statement then Gen6 is ramped up. This is what we do together with the customers. The customers are demanding our vehicles, and the market is really trying to get this new technology. There is also high demand for all of the derivatives which were launched with Gen6. So, we have high demand, and people are thrilled. So, we are happy about this, and this is why our forecast is positive concerning the product momentums. At the same time, the Gen5 models can be reduced to smaller volumes and to withdraw them. So, it is not a negative impact on the customers. On the contrary, the customers are very happy that the new generation is available earlier.
Okay, thank you. Now, competitors in Europe, that they reduce the BEV offer deliberately.
Well, our competitors know what they are doing, and we know what we are doing. We have a good product portfolio, so I would like to talk about the Q3 value again. So, the BEV share grew. We have a high volume of BEV share at 47% with the hybrids, or almost 50%, as I said in my presentation. So, this speaks for our products, I would say. Now, the question concerning the improvement of the result, phase-out or discontinuation of Gen5, I would like to underline all of the measures help us for the future in order to achieve our earnings targets. If we talk about C1 and BEV, just one remark concerning the CO2 values. Now, still, we are on target. We have a better focus this year. We will reach the target again and achieve all of the EU targets, and we can do this very well.
Then, China, as I said before, with the Neue Klasse, we are competitive. We have done many test drives in China. We get very good, positive feedback. We will start at the end of next week with the sale of iX3, and then we will launch one product after the other in China. And this makes us very optimistic. We will have and consolidate our footprint.
Thank you very much, Mr. Mertl. Ne xt question, please.
Next question comes from Andreas Höß from the Münchner Merkur. Please open your mic.
Mr. Nedeljković, Mr. Mertl, good morning. Thank you for giving me the floor. I have one question concerning the HR program. Sorry, I have to come back to it. Just to make it clear, so it's definitely concluded. Is that correct? That's question number one. Then, you said you allocated a specific budget for it. I think you talked about EUR 1 billion of provisions. Is that the budget or is it higher? Could you give us a figure? And it affects Munich. Here, we have the FIZ, here we have the headquarter with the tower. How much percent of people using the severance come from Munich? And now, the models of the Neue Klasse, which will be launched a bit earlier, and other models which are discontinued, does it also mean that the portfolio gets a bit streamlined or is just the Gen5 replaced by Gen6 models? Thank you very much.
Thank you. Let's start with Milan Nedeljković.
Mr. Höß, good morning. Concerning the question about the severance program, yes, we concluded the severance program because we allocated a budget to it, and within three weeks, we had high demand and we were able to conclude it. Just some contracts remain on the table. They have to be signed. As for the rest, the demand was higher than we had planned for in the budget. So, we concluded, and we are going to focus on other structural measures. We try to implement other structural changes in other areas, so the company has a new focus. So, HR, of course, will be on the table still, but not within the context of that program. And you asked about the number of people from Munich. Now, you're talking about the headquarter in Munich. Well, I'd say the majority comes from Munich.
I am not aware of the exact figures, but I'd say more than 90% come from Munich, and that was also the target of this program, because in the plants themselves, we made the offer, but we didn't focus on the plants so much. We have great capacity. All of the German plants have a very good capacity. We have up to three shifts in the plants, so we focused more on the indirect areas and segments, as I said, steering and development and purchasing and planning. That was the focus of the program.
Milan, could you please talk about the Neue Klasse? Will we have the new models earlier, or what about the replacement of Gen5 models?
Well, Neue Klasse, this year, we see a remarkable increase of the production capacities. Primarily, there is high demand for the current models, so we try to increase the volume for each derivative. In some cases, we anticipated the models in some regions. We have it earlier by some months, but it's about the volume. That's the key focus. Then, one more thing, whether you allocated a specific figure as provision for the severance program. We didn't announce any figure, of course, and I would like to see this confirmed by Mr. Mertl.
Well, good morning. We never announced a figure. You mentioned a figure. We never said this. As I said, 0.25%, and now we're talking about everything, whether it's the structural measures, the portfolio, whatever structural measures is. To me, this is more than HR. Now, we talk about 2.5 EBIT points auto car. So, this is what we're talking about. We're not talking about the split. We're not talking about a specific figure.
Thank you, Walter Mertl. If my information is correct, then this is the last question.
The last question of the day comes from Louis van Boxel with AFP. Please open your mic.
Good morning. Thank you very much for handing me the floor. I have a question on China, Shenyang. Now, you mentioned the export from Shenyang to Asia-Pacific. Why Asia-Pacific? Could you imagine to export also to other regions of the world? And second question, general question about synergies. Are there processes, parts, a specific know-how that you developed in China, and which is used in other regions of the world, or could be used in other regions of the world? Thank you.
Thank you very much. I hand over to Milan Nedeljković for the two questions.
Good morning, Mr. Boxel. Thank you very much for your questions. Now, the exports. As you said, the BMW brands, the focus is on Asia-Pacific. We have MINIs being exported to Europe, but actually, the strategy is local for local. Now, whenever it's about global resilience, we try to have supply chains and production in the regions of the world where we have the sale. Asia-Pacific is a good choice because we have an economic community and we can have trade between the countries, which makes sense, and export is enabled. Of course, we have a long wheelbase version of our vehicles in China, hence the product strategy is a bit different from the one in Europe, or from the one in the United States. So, we are not planning to export it to other regions in the world.
Now, the know-how and the technologies, there is an exchange with the sites in China and an intense exchange. We learn, both sides learn. We transfer technologies within the legal framework. Now, in China, there are cooperations with Momenta, where the ADAS stack was developed there. So, we gained our own experiences, which are now being transferred to Europe, but always coming from our own structures. So, we learn from one another. Nevertheless, we try to keep the tech stack for each region in that region of the world.
Thank you very much, Milan and Walter Mertl. Thank you, dear colleagues. This brings us to the end of our call. I would like to thank you for your participation. All the best to you. Goodbye.