Ladies and gentlemen, welcome back and a warm welcome again to everyone who is joining us on this webcast and here to all of you in the room at Weissach. We hope you enjoyed the break, but more importantly, that you gained plenty of insights from the presentations and the discussions this morning. As announced earlier, we would like to give you now the opportunity to engage directly with the Porsche management team and to ask your questions. We know there is a quite strong interest, and at the same time, we want to make sure that we finish on time so that everybody here in the room can make the travel arrangements.
Just one brief request. To give as many of you the opportunity to participate, please limit yourself to one or two questions in the first round. If we have time left at the end, you know we are more than happy to come back and have additional questions. With this, now let's get started and I invite the management team on stage. Very good. I see there is obviously some interest, and we get started with Patrick of UBS, and then we take Henning of Barclays.
Thank you. It's Patrick from UBS. Thank you very much for hosting this day. A lot of work goes into that and highly appreciated. Two questions, Björn, if that's okay with you. First one, that's the CEO/CFO question. In the EBIT bridge, there was this volume price mix bucket, and I think your mean price mix rather than volume. If you could just help us understand how you think about the phasing of the new models driving that mix and ASP expansion. I'm thinking about the Mission S, the large SUV, I guess that's coming before the Mission S.
If you can just give us a better understanding to which extent these new models are contributing and what is simply a richer mix in the 911 family, including the individualization, or simply price, just to get a better feel how that mix and price bucket is coming together. My second question is on the capital allocation framework.
Jochen, you gave us at least 50% dividend payout ratio target earlier today, and a 15%-20% net liquidity target, which you will probably meet at the upper end already this year. Should we think about a dividend payout ratio that goes really substantially above 50% over time? Because if I add your revenue and your free cash flow margin target, that implies more than EUR 4 billion free cash flow per annum 2030, which would really require a payout ratio that is approaching 80%, 90% or so rather than more than 50%. Thank you.
Okay, Patrick, thank you very much. A lot of, say, sub-questions in the two questions you raised. I try to answer them as you ask about them. First of all, I think as we made very clear throughout the morning and also in the workshops this afternoon, we are following really a value and not a volume strategy. That is important. I also mentioned that we expect in the midterm volume levels, around that level that we had achieved in 2025. That gives you an orientation of the size of the business that we are expecting. You can also see that in the turnover range, EUR 41 billion- EUR 45 billion, that we've seen there.
When it comes to product, as we always communicated, product strategy is really key for our value creation story. When it comes to phasing, we've just launched the electric Cayenne this year. We will have the 718 electric car next year, and the ICE and plug-in hybrid Macan car is a car that is supposed to enter the markets in 2028. Thereafter, there are additional product ideas we talked about, additions in the 911 segment.
We are thinking about the D-SUV segment, adding a car above the Cayenne, which is under evaluation, and especially these ones will drive the mix optimization and the pricing increases that we have in our plan. On the second one, you are right. Our value creation story is a cash generation story. We expect to have really promising cash conversion rates coming from a disciplined capital allocation approach that we have and the optimizations that we are doing, and also coming from the elevated levels of depreciation, amortization that lie as a burden on our profitability development.
We will be very cash positive, and you're right, we are at the upper end or probably even above the 15%- 20% net liquidity that we have in the books. What are we doing with the money? That's the question. First of all, we invest in the company. That's most important that we deliver and execute on the product strategy and on the cost optimization work that we have. Second, capital efficiency and balance sheet efficiency is key.
We plan to continue in funding our pension deficit. With the remainder, it's about dividends. We are happy that we could announce today that we changed our dividend policy from 50% payout of net income into at least 50%. That's what we are targeting. As you can see, there's at least in there, and you do not hear a cap. We will decide year- by- year, looking at the balance sheet, at net liquidity, at the cash flow, but also at the needs to finance our industrial plan to decide the dividend year- by- year.
Next in the row would be Henning, and after Henning, we take Nicolai from Deutsche Bank. If we keep on with the structure to hide five more questions in the second, please be a little fair to everybody in the room, because we see plenty of hands over here.
Hi, Henning from Barclays here in the middle. Thank you for having us. First question, perhaps a little bit on the trajectory to the midterm target. I understand bottom end of the 10%-15% by 2030, 2031, but perhaps you could help us a bit with the interim 2028, perhaps to understand the shape to the bottom end of the 10%-15% a little bit better. That is the first question. That is probably to Jochen, and to Michael. On the volume, Patrick asked about the price mix bucket of the volume price mix. I want to ask about the volume.
You are saying corresponding to the bottom end of the 10%-15% is a volume level similar to 2025. That is about 280,000 units. You are characterizing the assumptions as conservative. I would just like to understand, next year is probably going to be 220,000 right? How conservative is a 280,000 assumption within that, perhaps even a China assumption below 10% sounds good, but if it is 10% of 280,000, it is still 28%, which is almost 40% growth from where you are going to be this year. Perhaps just if you could characterize a bit how conservative these underlying volume assumptions really are, and if you are generous, perhaps which segments you see the volume recovery from the 220,000 to the 280,000 coming from. Thank you.
Henning, I start with the first question, which was about 2028, which is not midterm, and it is not 2026 and 2027, as Björn suggested. That is not the years that we want to debate today on the next quarters that we have. I still pick up on those. As you know, 2027 will be a bit of a tougher year for us, especially with the portfolio effects that we have. The ICE Macan will be gone, and as you mentioned in your second question, we will be down on volume. Therefore, we also expect lower profitability and cash positions in the next year.
That is 2027. We strongly believe that that will be the trough. From that onwards, the positive effects will kick in, and the plan that you have seen into the midterm will build up step by step. For 2028, we expect a better profitability and also better net cash flow and conversion rate coming from the, what we call internally, the M1, the ICE and plug-in hybrid Macan that will be added, but also from the positive effects from all of our cost improvement measures that we have. I mentioned the Zukunftspaket, that you are aware of, which will give us a substantial potential on the cost structures.
However, 2026 and 2027, we have the one-off payments to organize the Zukunftspaket. As a net effect, it is rather burden in these years, but in 2028, we will see first positive effects. All in all, 2028 better than 2027. First major step for the recovery story, but 2028 is not midterm. You should not expect the ranges that we communicated today for that specific year yet.
Regarding the volume and the recovery of your volume you are talking about, I think it is important that in the next 2027 and partially also 2028, first we have to refill our portfolio. The recovery comes mainly from 718 and Macan ICE. Then on top, to build more momentum and get better price mix and probably also volume mix, there will be new entries in the D segment.
The car you have seen, maybe there will be an SUV beyond the Cayenne. Regarding China, I just can underline, we have taken a really conservative view on that, and the under 10% is really under 10%. A recovery in China is not in our plan right now. A recovery is only possible for us as Porsche if we have the right product in China. No other growth or other impact is possibly baked into the plan.
Next in the row, as said, would be Nicolai from Deutsche, and after this, we would have Abbas from Millennium.
Hi, it's Nicolai from Deutsche Bank. Thank you for taking my question. First one is on the model portfolio. You are mentioning that you are cutting derivatives, but at the same time, you are adding complexity with new models. Why not merge the Taycan and the Panamera to reduce complexity? Also on volumes, as you are launching the all-electric 718 next year, what kind of volumes can we assume for this model?
Without going in details, unfortunately, I do not want to do that, and actually, I cannot because for competition reasons. We are focusing on cutting the derivatives that have a certain overlap and are not as performant or profitable as we have with others. This is the first thing we do. To merge the Taycan and the Panamera, I think they are in totally different segments. They are also answering to totally different customer demands with different propulsion technology.
Actually, I do not think that is something we can follow on. 718, we cannot say any volume to that, but I can tell you, as I said also in my presentation, that's a cool car. I hope also Walter is still convinced, Walter Röhrl is still convinced by the car. We will see. It's the first mid-engine sports car in the market, and we are hopeful that it will perform well.
Thank you. Next in the row then will be Abbas. After Abbas, then we have Horst from Bank of America.
Hi, it's Abbas from Millennium Capital. Thanks for the event again. Two questions. The first one is on sharing platforms with the VW Group. Perhaps historically, there's been some sort of delays or postponements. In the upcoming plan with the launch of the M1 as well as the K1, can you tell us if there's been any differences in how you're sort of working with VW Group/Audi in terms of making sure you hit those milestones when it comes to the launch of these very important vehicles?
That's number one. Number two is the next couple of years where you have some portfolio gaps, the 911 model will have to do a lot of work, right, in terms of delivering financial results for the company. Again, how do you think about keeping control of sort of volumes of that model, derivatives within that model, over the next couple of years? Keen to understand the sort of the 911 model phasing over the next two or three years.
[inaudible] Yes. First part I will answer, and second part, Matthias will take over. Regarding delays, I think you have to understand what is the starting point for in development, right? If you create a totally new platform full of innovations, the risk is higher to delay. I think we have chosen a very balanced view on that, and the maturity we are basing on with our programs, with the platforms we have in the Volkswagen Group, is massively higher than in the past.
I would say, the plan we have and the development times we have assumed are realistic, and we can hold them. Yes, I think that is important. You are right, we have seen delays in the past. But again, that was related to really, really highest innovation levels. First ever electric car, first ever 800 V, first ever new electronic architecture, and all together. We have taken really a more balanced view on that. I am confident we can deliver.
Yeah. On the 911, you are right. We are super successful with our icon. And we continue to do so. And it is not about, as we tried many times to explain today, to push more volumes. It is more to enrich the mix at the higher end. It is the core piece of our product strategy. And we derived from what we have at the moment. We will add additional, especially when it comes to individualization, Exclusive Manufaktur and Sonderwunsch options in order to extend the current portfolio which we have.
And, this is the car where we create highly individualized variants together with our customers. Another example is, we still see potential with our core offer. For instance, just recently, we launched in the U.S., the 911 with manual transmission, the 911 S manual transmission. You see, there is always a couple of ideas, but it is not about pushing volumes.
Next in the row then is Horst from Bank of America, and after him, we are going to have Harald from Citi.
Yeah. Thanks for taking my questions. Horst from Bank of America. First of all, on these volumes, on these 280,000 units, a follow-up on that. In the press, we were discussing before, if it should be less than 280,000, maybe just 200,000. So Michael, why are you convinced that 280,000 is the right number? Why shouldn't the general level of volumes be lower for Porsche to make it more exclusive, to increase the prices more, to have a better mix, higher margin?
Related to that also, it was discussed that if you should close a plant in Germany, for example, in Leipzig, we still have got the tariff situation. You could have produced also cars in the U.S. So why didn't you consider that? Then would have saved you lots of tariffs. Small follow-up, you always talk about midterm, and sometimes you mention 2030s. Just want to clarify, midterm means 2030, or does midterm mean 2030, 2031?
Last question first. The third question you asked first, so it's 2030, 2031. Regarding Leipzig, for us it's not an option to go to the United States. The volume we have is not sufficient to pay back an investment as high as it is necessary to transfer a car production in another country. Please consider also that is not only an investment question, it's also a timing question. If you don't hit with your planning of a new factory, your life cycle, you will lose much more money on the top line than you can save with your investment and with lower cost in another country.
Regarding United States, you have to consider that, yeah, you may have an advantage on tariffs, but consider also, you still have to import a lot of stuff to the United States, and labor costs are not actually lower or significantly lower than here in Germany. Then the 280,000 units question. I'm totally convinced of what we have shown today with the price volume positioning of our company. The volume we are doing, so apart from the highly profitable things we have shown you, the volume we are taking with us is still in the top premium part. It's still good margin at creating a unique situation for cash generation. So I'm convinced that's the right sizing of our company.
So—
And sorry, to add one thing comes to my mind. Please consider the 280,000 is maybe you consider it the same like, I don't know, one year ago. But this is happening partially also in other segments with other or additional model lines. So again, the center of gravity is moving upwards.
Next in the row then would be Harald of Citi, and then thereafter we have Stuart of Oxcap.
Thank you, Björn. Thank all of you for a very comprehensive framework that you've given us today. My question I think you have been answering today, but I'd like you just to expand a little bit further on. The world's completely changed from the time of the IPO, right? And a number of things have obviously happened that have impacted on your company. I think it is fair to say that I think for many investors, it took a little while for Porsche to change direction and to respond to the different world. You've now got a brand-new plan.
You've reduced fixed costs. You're reducing costs very aggressively. You're pretty fixed on a brand-new model plan, which is more flexible than in the past. So all of these things will help in the future. But if the world changes again, I don't know, let's say European interest rates or French interest rates or global interest rates go much higher, how can you assure us that the company will be quicker to change, to take action more quickly, to improve the overall resilience of the business, and to make the decisions that need to be made, if you understand what I'm trying to say. Porsche is a great brand. It should be much more resilient than it has been in the last three or four years.
Harald, thank you for your question. I think you are right, and that is also the reason why we have taken really conservative assumptions for our environment in the context of our business plan. I think that's very important, and I can say without telling numbers, but for example, on the China case, we have reduced significantly the assumptions we had in previous plans. Definitely that is important. The other thing is, you don't know what you don't know.
Things can happen. I think it's even more important than only having a plan to have flexibility. Okay? For example, in the Zukunftspaket, which we have done with our works councils, we have this flexibility. Obviously, there are some barriers or milestones we have to pass, but I think we have proven also in this situation since the beginning of the year that we find a way as Porsche, in Porsche, to react if it is necessary.
Next in the row, then we would have Stuart, and after Stuart, we take Mike of Bloomberg Intelligence.
Yeah.
I see hands. Don't you worry. We run through the sequence, and we do our very best to get you all squeezed in.
Thank you for the question. Stuart Pearson from Oxcap. Just quickly on the cash flow targets, I do not understand the timing of the 10%-15% EBIT margin in the midterm, but maybe a little bit surprised that the cash flow target has the same time horizon. Should we understand that the 9%-12% cash flow target requires the 10%-15% EBIT margin, or could it perhaps become a year or two ahead of that? I just wonder if the cash flow curve might be a little bit quicker. Then the second question on the Macan replacement, the ICE model, the M1.
Is that the same business model as the outgoing Macan ICE, or could this be a sort of a lower volume, higher mix model? I am just wondering, historically, we might have thought of the Macan as like a lower margin model for you, but at that point in time, 2028, 2029, I guess that might not be the case. I just wonder what we should think about the profitability of that Macan when it arrives. Thank you.
Stuart, let me start with the first one, on the trend and the shape of net cash flow, how it will develop from what we see in the actuals in this year and then into the midterm. First, we do not give special guidance and concrete information for the years to come. I think that is clear. That is not the direction that you are hinting at. Cash flow will improve as return on sales will improve. That will go more or less hand in hand because we need these operational efficiencies to also improve on cash flow again.
From a general perspective, we will also see the trough, in terms of net cash flow and net cash flow margin in 2027, and then improvements step by step over 2028, 2029, into the midterm. Of course, the levers that we have talked about today in terms of optimizing our capital allocation discipline, reducing CapEx, optimizing R&D, is something that helps a bit earlier. There might be a bit of a progression in the earlier years, but in general, give and take, you will see the same shape in the curve of improvements that we have from the trough in 2027 into the midterm, for both KPIs.
Shall I take that?
Macan, do you do that?
Yeah.
Okay.
Okay. Macan, the same business model. We will not disclose any concrete volume figures, but one thing is clear. We explained the unique positioning of our brand, between sporty premium and sporty luxury. This is, of course, something where we have a product gap at the moment, especially when it comes to attainable choice for our customers. That's the intention, bring back the Macan ICE, because we have really demand for that in that segment. This doesn't mean that we are not bringing high-end derivatives for this model. That's absolutely the intention, and it will help to fill the product gap which we have at the moment.
Next in the row then will be Mike, and after Mike, we have Tom over here from RBC.
Hi, it's Mike Dean from Bloomberg Intelligence. Thanks for taking my question. I didn't get a chance to drive the Boxster or be in the Boxster, and I'm hoping that you didn't just go ahead with it, because it's great to drive, but it has a reasonable margin as well. I'm just wondering, how do you see your BEV margins develop over the timeframe of the strategic plan? Is BEV ICE margin parity a possibility?
Yeah. First of all, we are really looking forward for the 718, and it's a pity, Mike, that you did not have the chance to sit in that car yet. We should organize that, then you will be as convinced as we are and as Walter is, as Michael told you about. This is going to be a real sports car, a great sports car with fantastic driving characteristics. Now, when it comes to the financial performance of such a car, in the current generations of our electric vehicles, we are very candid on that one and transparent that these cars are margin diluters compared to the ICE and plug-in hybrid cars that we have in our portfolio. Why is that?
We see similar pricing positioning when it comes to end customer prices for an electric car and an ICE car in the same segment, so there's no price premium for electric cars. At the same time, the bill of material is still very much higher. That's in general the case from a technology perspective. In our case, it's even more so because, as we also communicated on several events, is that we are sitting on this rather low volume compared to the higher volumes that we were expecting on the old strategy that we had during IPO time. So that's giving us additional headwinds that we have. Now, we want to change that situation.
With the electric cars to come that we are developing, we are really also focusing on cost optimization, also on getting the volume estimates right. We've heard a first and very important example this morning with the cylindrical cell, with the platform that we're using, that will give us cost advantages and performance advantages at the same point in time. With these levers, margins from electric cars will get better. If we will see margin parity in the future, let's see.
Now we've got Tom, and after Tom, we take Anthony of ODDO.
Tom Narayan, RBC. Thanks for taking the question. We did not hear a lot on autonomy, which I know maybe some people think could be counter to the brand DNA. We know you have this partnership with Mobileye for Level 2+ and Level 3, with some delivery starting next year and into 2028. How does autonomy factor into your overall strategy? Then a second question, we heard about the 15 standalone vehicles that you are making super profitable, very high price point. I guess why not do more than 15? Is that capacity constraint, supply constraint, or could that be demand constraint? Thanks.
Yeah. Tom, thanks. I take the first question on the level of autonomy and autonomous and assisted driving in general. Yes, this is a topic that is also of interest for Porsche, but to make it crystal clear, we do not need to be first to market with such technology. Having access to technologies within the Volkswagen Group, I think we will be a follower. One of the partners is Mobileye, where we are developing an elevated assistant driving system that will have potential up to navigate on pilot. But once again, for us, this is a technology where we see us as a follower.
Yeah. Maybe the second part of your question, I can take over. I guess you refer to the vehicles here you have seen in the Home of Sports Cars, correct? The 15. Actually, it will be more. We have just realized this 15, actually it was 11, we have 15 in planning, and actually in total, it is almost 50 Carrera GT models, which we are on the project, and which we will see in the future, and this is only one model.
You see there is a huge potential, and that is the reason why we are so keen on that, and that is the reason why we desperately wanted to show you what we have prepared. It is not only this one-off things and Restomod recommissioning, it is also a few ideas we have, limited series, special editions, which we did in the past, super successful. I guess I do not have to repeat the workshop, which you have seen. That is exactly the intention, why we want to increase capacities there, and we will do that very soon.
Thank you. Next in the row then will be Anthony. After Anthony, then we have Daniel of Metzler.
Thank you. An important part of your program is centered around cost reduction, which is maybe not too usual for a luxury company, including reducing costs on the manufacturing side. I would like to know how you are planning to ensure you maintain product quality and brand differentiation, while at the same time, cutting costs in the business.
The second question is on shareholder returns. Just wanted to check and have your view in terms of, is that exclusively ordinary dividend or could there also be other types of shareholder returns to be explored, probably quite limited on the buyback, but is there still a bit of opportunity there, and also any merits to potential special dividends at some times? Thank you.
Let me take the first part of the question regarding quality. You mentioned also distinction from other brands. On quality, my whole professional life, I work hands-on on quality. I never experienced that less investment did not pay out in quality. Quality pays by itself, and it will the same here. We have a really ambitious plan, but we have many actions already taken, and we are strongly convinced we can make that what we have done.
There will not be any compromise on quality by any budget or whatever, because it will pay out definitely. The second point is regarding differentiation of our products. We want to be synergetic where the customer cannot see it, where it is transparent for the customer. There is a lot of money we can save. That money we save, we can invest in differentiation in new products. There is no contradiction in that. I think the plan is really plausible in this regard.
Anthony, on your second question, I think that's expanding the one that Abbas was mentioning earlier in terms of shareholder return, dividend policy, and what we are planning to do. Just quick summary again on the key messages on our capital allocation policy and then to your concrete question. Yes, if we follow our plan as we've laid it out this morning, we will have a very strong cash flow. We don't want to exceed 15%-20% as an orientation of net liquidity on our books. We are in that range or even above. The question of shareholder return arises.
Pension funding is one that we will take into consideration to be maybe even faster there, and we've updated our dividend policy to at least 50% going forward without a cap in the communication. We will take it year- by- year and decide on a reasonable dividend proposal to the Annual General Meeting to also have a decent total shareholder return on that one. Now, we will take into consideration our net liquidity position when we discuss the dividend. That's clear. On share buybacks, I think you've given the answer to the question yourself.
With the free float situation that we have, that would definitely not be a good idea. We're definitely not planning into a share buyback program. Third, special dividend was something that you were mentioning. We are not planning in such a scenario at this point in time. We will do it year- by- year, look at the various KPIs that we have, looking also into the future, because first and foremost, we will invest in the company, and if there's excess cash, we will take that into consideration when it comes to the yearly dividend.
Next in a row then would be Daniel. After Daniel, then we've got Robert.
Thank you for taking my question. The first is on the Mission S. That seems like a logical step to become more exclusive. Why did Porsche not consider that in the past? When you discussed that internally, what were the main concerns? The second one is on the midterm targets. For the EBIT margin, the range is 5 percentage points. For the cash flow, it is 3 percentage points. What makes the EBIT less predictable? I would have thought the cash flow is the more volatile part in the midterm targets. Thank you.
I take the first question. I think this segment where we target on with the Mission S is not a traditional segment. It emerged, let's say, seven, eight years ago with a Ferrari SF90. This is something which gave us the opportunity now to think about that. When you ask about the discussions we had or the concerns or whatever, I think the most important step or approach we have to do is that the 911, which is not only an icon on the market, but it is also from its industrial logic.
It is unique because we are offering on the same platform, a car from EUR 130,000- EUR 300,000. We can't damage it at all. So, we will make sure that there is zero cannibalization between the segment we are pointing on with the Mission S, the platform Mission S, and any 911 derivative.
Okay. Sorry.
No, no. There was a second question.
Yeah.
What was that again t hat was on cash flow?
Why the cash flow—
By the range EUR 500 million—
The cash flow is not more volatile—
—and EUR 300 million
—difficult, sensitive, or like—
Net cash flow prediction is definitely more sensitive and a bit more difficult to predict into the future because we have also all these movements in the balance sheet and the working capital, so the run-through of the business. Of course, we need a decent range there as well. I commented earlier on how we expect the various years to develop. We will have the trough in 2027. We will have first improvements in 2028, and then the strategy will kick in.
With the 9%-12%, compared to the 10%-15%, we are at really promising cash conversion rates, and there you can see that the effects of high depreciation, amortization, which are a burden in our profitability, that turns around on the net cash flow side. We will be above the net cash flow conversion that you might expect from a profitability minus the tax ratio that you have in the various countries. That's our perspective on net cash flow. It's really strong and something that we really recommend everyone to keep an eye on.
So now Robert, and after Robert, we've got Michael Raab from Kepler.
Thank you, everyone. Just a more strategic question. Michael, when you joined, and also today, you reconfirmed this positioning of Porsche in between premium and luxury. But then everything we've essentially seen today points very tilted to the luxury and the top end. Why, in a more strategic language, do you maintain this middle ground position, or do you see yourself with the initiatives you've announced today actually still being in between but moving further towards the luxury side of things?
Exactly like that. Let me see. If you remember the chart, the center of this area was moving upwards and to the left. And the center of this, if you resolve it, as we have done partially in the zoom in for the top 10,000 vehicles, definitely the center of gravity of this area will go upwards. Definitely. And that is part of it. But anyway, please consider, we talked about because you are interested in news, right? We didn't talk so much about the ICE Macan. That is also an important player in our plan, but this will come up already in 2028 as a launch, and then first full year in 2029.
Next one over here will be Michael. After Michael, we have Mike of HSBC, and then Andrea of Mediobanca.
Mike Raab, Kepler Cheuvreux. I think I got with your earlier comments that you intend to tie some of the variable remuneration of your employees to your stock. Could you elaborate exactly what that means? Does it mean the stock is going to be benchmark, or does it mean you're going to pay them in stock? If so, where would those shares come from, please?
Maybe you can take that.
Yes, we are talking about really physical shares, preference shares, that we plan and intend to offer to our employees as a part of the compensation. The plan is that we would substitute part of the special bonus payments that we usually pay in spring of next year for the performance of the last year to substitute that by real shares. We do that to make our employees real entrepreneurs so that they also understand the capital market logic, total shareholder return logic, being an entrepreneur, fighting for quality, for product, for cost improvement measures.
That's something that we're really looking forward to. We intend to do that because we need final approvals from the AGM, which we plan to ask for next spring. These shares would be bought back from the market. They would sit on our books for a short period of time before we release them to our employees, and then they are kind of free float again because then our employees are private shareholders, as any other private person can be that can buy the one or the other share on the stock market today. Preference shares.
Preference shares.
Preference.
Just preference shares.
Thanks.
Those that are listed.
Hi there. It's Mike Tyndall from HSBC. A couple from me if I can. I guess the first one's for you, Jochen. We talk about BEV volumes being lower than expected, and I guess the consequence of that is supplier compensation, which has historically been a fairly large number. When does that roll off? Does it have to wait for the replacement of those cars, or can you contract that away?
When does supplier compensation go down, and how does that reconcile with the 10% procurement saving? The second question, maybe this is an obvious one, but the current generation, Panamera and Cayenne, are very much an extension, if I'm not wrong, of the older models. Have we fully factored in a replacement for them out to 2035, or is that still to come in terms of expenditure?
Mike, I take the first one. Supplier compensation payments that we indeed have, and they are substantial, and we have to pay them, and we are settling the supplier claims case by case based on the fact that once we started the development of our electric cars, we were thinking about much higher volumes that we were expecting in the market than those that we currently see. Therefore, suppliers are sitting on their structures, on their cost structures. Their calculations have been on a different basis, so we need to find solutions with them. That's the situation.
These compensation payments are substantial, and you see them in the books also this year and also in the future because, as you also said in your question, they really roll off from our books once these products expire because these compensation payments are not one-off payments, or most of them are not one-off payments. They play out in the sense that we pay higher prices for the various parts that we get from the supplier. So with each and every car, we're sitting on an inflationary basis of the material for the BEV car.
So it really takes until the life cycle of these cars are gone, and that was also the reason why I said with the other question we had half an hour ago that the best cars are margin dilutive, the BOM is high, and these additional payments are also there. How that does fit to the 10% BOM optimization that we've heard of today, that's a different subject. Of course, we're focusing on improving material costs on all products.
Not only the electric ones, but also on the ICE and plug-in hybrid cars, because margin optimization is key for our strategy, for our value strategy, and also for the break-even point. The 10% that you've heard is an optimization for new car products that are about to be launched in the next years. Therefore, that's an effect that is still to come and is baked in into our midterm ambition.
Maybe I take—
Panamera.
—the question to the successor of Panamera and Cayenne. Both are baked into the planning we have today and are in the midterm planning, not in the following planning. As we presented, both successors are planned as ICE and plug-in. In parallel, especially on the Cayenne, we will continue to produce and also develop the electric Cayenne. All in the plan.
Now we've got Andrea, then we've got Philippe, and then as we will run out of time, the last question over here.
Thank you. Good afternoon. I'm Balloni, Mediobanca. A couple of questions. First one is a follow-up on cost savings. Sorry for asking again about that. It's a pretty relevant portion of your EBIT bridge by 2030. I was wondering if you can give us an idea about a ballpark number in term of final impact on 2030. I just understood that a first portion will be seen in 2028, if I understood correctly, but I don't have in mind the final impact on 2030.
My second question is a more general one. You started today's presentation saying that all the assumption behind the business plan are very, very cautious for many different reason, and this is something that, if doesn't change, should bring the target to the low end of your guidance range by 2030. I was wondering if you can give us an idea about the potential upside. What is the main or the most likely catalyst that could drive an upside potential, moving the target closer to the medium or to the top range of your guidance? Thank you.
Andrea, thank you very much. Coming to your two questions, first one was on the cost optimization programs. They build up over time, so we will expect more substantial effects in the midterm in 2030, 2031, as opposed to this year, next year, and the ongoing phases. Maybe if I just try to make that a bit more, say, realistic and that you can have a bit more color to that one is if you take our Zukunftspaket, so the optimization all around productivity and all around personnel costs. We expect a burden in this year.
We expect a burden next year, EUR 300 million-EUR 400 million each year based on the one-off payments we have. First positive effects kick in, but the one-offs are just too high. In 2028, it will be slightly positive, so first positive effects there, and then the effects build year- by- year because the people, the 9,000 that we talked about, are no longer in the company and also the other optimization effects come into place.
To give you an orientation, in the midterm, we are talking about EUR 500 million on a yearly basis as a positive effect out of that Zukunftspaket. The same logic holds true for the other optimizations that we are doing. We talked just in the other question about material costs. Of course, that also takes some time. The best way to improve material costs is new car products and new car projects, so it's much more difficult to find potential in the current series than in the project.
Again, the benefits will be rather in the midterm than in the short term and the phase between short and medium term. On your second question, what would be necessary to achieve a return on sales margin rather in the mid or in the higher range of the 10%-15% range? That's a good one, and that's important to understand. Important to understand, and I'm really grateful for that question to make it really clear. Based on our risk-conscious and conservative assumptions, especially for geopolitical and external factors like foreign exchange, we are in the lower bracket of that range. Having said that, our industrial plan that we are following, the strategy that you have seen, is an ambitious strategy.
We're not lowballing there. There are a lot of levers that we've worked on. We have the measures in place. We have the responsibilities. We're making progress step by step, but still, it's an ambitious plan. More favorable outcomes would require a more favorable macroeconomic environment. The easiest thing to explain would be foreign exchange. If you have a U.S. dollar against the euro, rather on the levels that we see currently in the market or an even stronger U.S. dollar, that would give us tailwinds compared to the plan that we have in our books for the midterm.
As we are running out of time, Philippe, please make it short so that we can also take this last question.
Yeah. Thank you. I will try to be short. Thank you. Philippe Houchois, Jefferies. I think at some point you mentioned the ratio of 2: 1 in terms of BEV or ICE versus BEV. How does that take you to CO2 compliance? I know it is past the midterm targets that we are talking about, but are you able to comply on your own given your size, or are you ready to pay fines, or are you going to be able to use synthetic fuels we have not talked about, we have not talked about carbon-free steel that might help you to get to your target.
That is my first question. The second one, as you run a smaller, more focused, more upscale business than you had in the past, I am just wondering about how much potential there is to also improve the management working capital. Like many German company, you have a reasonably significant working capital. I look at Ferrari, they have none if you net off inventory, payables, receivables. Is that some kind of target that you might be aspiring to improve your cash conversion even further? Thank you.
I take the first part of the question with the 2: 1 ratio. You are right. And the reason to have that is also flexibility. And to be able to react in case first regulations and then customer demand changes. If only regulation changes, it is not good, so it has to be both, right? And we have the flexibility. That is the reason also why in the high volume, let us call it, or in the bigger segments, we provide both technologies from Porsche with our cars. We will fulfill our CO2 reduction targets, and everything which is related to cost and payments we have to do is in the plan in a, let me say, realistic, conservative way.
Nevertheless, we are monitoring what are opportunities we can have. It is difficult to predict what will happen also on the market of credits, CO2 credits, and so on. But you've seen that I think we have done a good move with finding a pooling partner and reduce our costs. We will do that also in the future. Obviously, the best is we find a solution with the Volkswagen Group. When we are finished the first two years now in the other pooling, then we will look again what is the best opportunity for us.
Philippe, on your second one, that was about working capital optimization, which is definitely a lever for optimizing net cash flow and capital employed. So we are targeting improvement measures in working capital as well. You've seen in the bridge this morning that coming from 2025 into the midterm, there was a positive effect out of working capital because we were not fully optimized in 2025. There's some potential there. So we will work on that. We are never finished on that one, and there are optimization levers.
Having said that, a net working capital position of zero is something that you should not expect for our business model, which is definitely different from Ferrari that you were mentioning. We have our own subsidiaries in the biggest markets. We have the logistic phase, so we have to finance the cars until they reach the customers, until we get the payment, and we do not have prepayment processes for most of the cars. So there is a working capital item that we need to finance, just to give you one example why it won't be a net zero, but there's potential there and we've shown it in the bridge.
Thank you very much for allowing me to ask the last questions. I did come from Hong Kong, and it was a worthwhile trip to see the team in action, and I particularly really appreciate the ambition and the urgency in this plan. To that point, one of the biggest challenges is really on the cost side, where you have to get more flexibility with labor. On that side, how much more work we have to do to really get to those outcomes in a few years? Is there a lot of barriers to execution?
That's one question. My other questions is on Macan and on Cayenne. In our base case plan, do we assume the mix and the pricing continue to be quite good and going up in a few years' time, or we have to change the pricing and mix, to a different level, perhaps lower in the future? Thank you very much.
Let me talk about the cost work and the cost reduction we have in our plan. It's important that let me say the major part of the labor cost we have within Porsche is approved by, we call it the social partners, so the works councils and us. We are now deploying that in contracts and so on, but it is approved and there's a strong commitment from both sides to realize that. I think we have done a lot of progress, and this includes also flexibility. Small flexibilities like, let me say, labor organization, work organization, right, but also bigger ones.
If we have to adjust and fine-tune something in this arrangement, we can do that. We have the same understanding here. I feel really that we have enough flexibility to react in both directions, hopefully upwards, but you never know. I told you what I think about the world right now. We will continue to work on cost programs anyway. Then Macan and Cayenne. I think if you follow only a price strategy, that doesn't make sense. You have to have the right substance on the product, and then you can price it because it means value for the customer.
That is what we pursue, and that is why we want to bring more sportivity in every car and for every model line, we will have, let me say, a nameplate shaping model, which will give us the opportunity to position the car or the model line in the right place in the market and create the right value appreciation by the customer and therefore, the reasonable Porsche pricing delta and premium, which the brand and the product deserves.
Ladies, gentlemen, thank you very much. This was a quite efficient Q&A session with 17 analyst investors asking questions and this spot on for one hour, not bad. This brings us now to the end of the Q&A session, and with this, the conclusion of today's event. We hope that we could provide you with a comprehensive update on our Sportwagenschmiede 2035 strategy, as well as the measures that we are taking to strengthen Porsche's competitiveness, long-term value creation, and most important, our strategic flexibility.
Very strong thank you to Michael, Matthias, Michael, and Jochen, and to Tobias Sühlmann, and the presenters of today's workshop for hosting you, and a very big thank you to the entire organizational team that made this possible over here. This is to all the colleagues behind the scenes and to the colleagues that you can see in this room. Before we come to an end, we would love to point you to our Q3 disclosure.
Next week, we have our pre-close call, then we can talk numbers again. On top, we would also point you to the Icons of Porsche in Dubai. This will be the next larger event that we are going to host. That is at the end of November. We already had some of you pointing to their interest to join to this event. We keep you posted about this. Safe travels. Enjoy your day, afternoon, or morning, wherever you listened in. Thank you and goodbye.