Ladies and gentlemen, welcome to the Volkswagen AG investor, analyst, and media call Q1 2024. I am Shari, the call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Pietro Zollino, head of corporate communications. Please go ahead.
Good morning, everyone, and a warm welcome to the Q1 results call of Volkswagen Group. It's a joint call for both media as well as investors and analysts, which is moderated by Rolf Woller, our head of treasury and IR, and myself, Pietro Zollino. I'm heading corporate communication. With us today is Arno Antlitz, our CFO and COO. Let me provide a few remarks before we start. You should have received the press release, the interim financial report, and all the other related materials, all of which were published this morning. If you do not have them yet, you can find them all the documents you can find all the documents on our group website. In case of any issue, give us a call or drop us an email, and we will send them straight, straight to you.
Before I hand over to Rolf, I would like to inform you about a change in our reporting. Volkswagen Group has decided to change the reporting frequency for deliveries from a monthly to a quarterly rhythm, starting from Q2 2024. The main reason is that comparisons of monthly figures are often distorted due to, for example, differing numbers of working days. With that, let me now hand over to Rolf, who will give you a brief run-through of the next one and a half hours.
Thank you, Pietro, and a very good morning to everyone on the call also from my side. Thanks for joining us today at this beautiful morning here in Wolfsburg. Let us have a look at the agenda ? Arno will first present the key highlights of the Q1, and after that, we will take a closer look at the underlying financials of quarter one, and thereafter to the full year outlook 2024. Following the presentation, we will first host a Q&A session for the investor and analyst community, moderated by myself. And after the session, we will have a short break before we continue with the media Q&A, which will be hosted by Pietro. As a reminder, and as always, the safe-harbor language and other cautionary statements on page two of our presentation will govern today's presentation.
I would like to encourage you to read the disclaimer carefully since all forward-looking statements are qualified by this language. As you know, I won't read it to you. With that, I hand over to Arno. Arno, please go ahead.
T hank you, Rolf. And a good morning to all of you from my side as well. Let's dive straight into the presentation with the highlights of the first three months, starting with an icon that is celebrating its fifth birthday. The eighth generation of the Golf was just launched, and the full lineup from entry-level to GTI will hit the markets this year. Tiguan is our global bestseller. 7.5 million customers have opted for the compact SUV since its debut in 2007, and it is currently in the rollout with new model variants to be added over the course of the year. Same holds true for the all-new Passat, an important model for our fleet customers. All three models, Passat, Tiguan, and the Golf, will also come with a PHEV option offering up to 120 km fully electrical range. For all these models, we see an encouraging order intake.
ŠKODA just revealed the Epiq, its first entry-level BEV. The model will be delivered to customers from 2026 onwards at an attractive price point starting at around EUR 25,000. Most important, the Q1 has seen the very successful launch of the first Porsche and Audi models based on the PPE, the Premium Platform Electric, a great progress in our group's transformation towards electric mobility. Our capital markets day in China last week was another milestone in our building block strategy of the Volkswagen story. About 170 guests joined the event at the Phoenix Center in Beijing one day before the Beijing Auto Show opened its doors. Let me highlight my main takeaways of the day. Despite challenges such as fierce competition and evolving market dynamics, we pursue a clear plan to strengthen our position as a market-leading international manufacturer.
Our target is to increase the proportion of operating result to around EUR 3 billion by 2030, including the fully consolidated joint venture in Anhui, and to achieve a 15% market share by 2030 in China. We expect the market to grow to 28 million vehicles by then, and vehicle penetration in our vehicle sales should reach 50% in 2030. To meet our goals, we've taken decisive action. Together with strong partners, we enhanced our technological competitiveness with a locally developed zonal electric and electronic architecture, local advanced driving assistance functions, or sophisticated infotainment solutions in our smart cockpit. The introduction of LFP battery technology is expected to reduce battery costs by one-third. In total, we expect to reduce material costs by 40% with our China Main Platform and achieve cost parity with local BEV leaders in the price-sensitive compact A-minus segment by 2026.
Thanks to the new local independent structure with the Volkswagen Group China Technology Company, VCTC, in Hefei, we will shorten time to market for new products by 30%. Over the next three years, the group's brands plan to launch 40 new models in China, half of which will be electrified. With these actions and our highly profitable combustion engine car business, we are well prepared to continue to play a leading role in China. Back to the Q1 results. Global deliveries in the first three months of 2024 increased to 2.1 million vehicles, 3% above prior year quarter. Despite the geopolitical tensions, global supply chains continue to be robust. However, our deliveries were held back by temporary supply shortages, in particular affecting Audi vehicles with V6 and V8 engines. Incoming orders continue their encouraging positive trend in the past month in both BEV and combustion engine car segments.
The brands of the Volkswagen Group collected in total 730,000 new orders in Western Europe in the Q1. BEV order intake was particularly strong, more than doubling compared to the same period last year. As a result, the order book in Western Europe improved to a solid level of about 1.1 million vehicles by the end of March, including 160,000 battery electric vehicles. Growth was primarily driven by a strong increase in China, totaling 8%, as well as North America, where deliveries increased by 5% year-over-year. Our South American operations recorded even double-digit growth, with a particularly strong increase in Brazil from a relatively low basis. In our home market, Europe, deliveries were slightly down year-over-year to about 970,000 vehicles, largely due to weaker BEV deliveries. Demand for battery electric vehicles was muted at the beginning of the year in Europe and North America.
Substantial growth in China could not fully compensate for this, and as a result, BEV deliveries declined slightly by 3%. BEV deliveries reached 136,000 units, corresponding to about 7% of group deliveries. BEV deliveries were down in Europe and the U.S. by 24% and 16% respectively, while BEV volumes in China almost doubled. BEV incoming orders, on the other hand, had doubled versus the Q1 2023. The BEV share target of 9%-11% is confirmed. Performance in the coming quarter should be supported by the most recent and upcoming launches, such as the all-new ID.7 Tourer, the Macan Electric, and the Q6 e-tron, resulting in an increasingly competitive product offering. Let me now give you a summary of Q1 financials. All in all, there are no big surprises in the sense that Q1 was never going to be our best quarter.
As planned, we are preparing for exciting product launches later in 2024 at Porsche and Audi. During this ramp-up phase, costs and consumer behavior were affected, especially Porsche was held by well-flagged cost increases ahead of their model changeover. As previously indicated, we have had supply shortages relating to 6 and 8-cylinder engines at Audi. However, we are now in the process of ramping up supply, and the situation should improve already in Q2. It will take a while for the efficiency program at brand Volkswagen to show its full impact, not least because of the wage increases initiated in 2023, which are unfolding their full impact now in 2024. As all as also previously guided, 2024 will be the peak year for R&D spend, and we can see this effect in the Q1 numbers.
These have all been flagged previously and factored into our 2024 forecast, which is why we remain confident about our 2024 outlook. With that, let's move on to the financials and the operating performance of the Volkswagen Group. Vehicle sales came in at 2.1 million units in the first three months, slightly down year on year at -2%. Excluding our joint venture operations in China, vehicle sales were down by -5% to 1.4 million vehicles year to date. These vehicle sales are the driver of our automotive sales revenue. Group sales revenue was slightly lower year on year at EUR 75.5 billion, which is down -1% versus last year. Strongly improved sales revenue in the financial services business could almost compensate for the decline in automotive sales revenue of -4%.
Operating result came in at EUR 4.6 billion, corresponding to a margin of 6.1%, 1.4 percentage points below the prior year period. Net cash flow in the automotive division totaled minus EUR 3 billion in the first three months, about EUR 5 billion below the prior year level. This is largely related to a significant buildup of working capital, of in total EUR 4.6 billion, after we managed down our inventories at the end of last year. As indicated in our full year results call in March already, we had already anticipated a reversal of the exceptionally strong release of working capital at year-end 2023, which contributed to the strong full year cash flow of EUR 10.7 billion in 2023. In total, we recorded a cash outflow of EUR 5.9 billion from the buildup of inventories in the quarter under review.
This brings me to our automotive net liquidity, which recorded a corresponding decline of about EUR 3 billion compared to the year-end 2023. Overall, at EUR 37.2 billion, net liquidity continues to stay at a very solid level. Coming to our divisional performance, passenger cars recorded an operating result of EUR 2.6 billion, about a third below the prior year period. The margin amounted to 5.3%, down by 1.7 percentage points. Commercial vehicles continued their strong earnings trajectory also in the Q1. Results advanced further to EUR 1 billion, return on EUR 1 billion. Return on sales today is a strong 9%, confirming that the group is well on track towards delivering on their full year targets.
The financial services division recorded an operating result of EUR 0.9 billion, corresponding to a decline of 24% year-over-year, in line with our expectations due to the normalization of the used car business. Let's have a look at the drivers behind the operating result development in the passenger car segment. Volume price mix contributed a negative EUR 0.5 billion. As already mentioned, vehicle sales, including China JVs, were 5% lower. Mix was adversely affected by weaker model mix, in particular due to the V6 and V8 engines at Audi, a negative regional mix due to the negative relatively weaker performance in Europe, and not least, brand mix. However, model and brand mix should clearly improve in the coming months. Pricing continued to be slightly supportive, benefiting from rollover effect from last year's price increases but burdened by higher temporary sales promotions for our electric vehicles.
Compared to the prior year period, operating result in Q1 benefited from a swing of fair value effects outside hedge accounting, amounting to about EUR 900 million. Product costs were a slight headwind year-on-year, mainly due to the one-offs. But we continue to expect product costs to provide tailwind for the remainder of the year. Fixed costs and other costs increased considerably as a result of higher R&D costs, higher depreciation and amortization, and the ramp-up of new business like PowerCo, like Scout, or our fully consolidated joint venture Anhui, as well as continued general inflationary trends. Let's have a more detailed look at overhead cost development. Our group has demonstrated remarkable overhead cost discipline in recent years, which has led to a significant improved overhead cost ratio and a much more robust cost structure. In Q1 2024, we were not able to continue this trend.
Higher overhead costs driven by the carryover effect of wage increases from 2023 and lower sales revenue resulted in a strong increase of the overhead cost ratio in the Q1. This development clearly shows the need for speeding up the implementation of our efficiency programs in the coming months. It's our clear target to improve our position here throughout the remainder of the year. Moving on to automotive investments into R&D and CAPEX. As already flagged at the full year results conference in March, automotive investments are expected to peak this year. The currently high investment levels, in particular in R&D, are reflecting the accelerated transformation of the Volkswagen Group's brands towards electrification and digitalization. As a result, R&D expenses increased by almost EUR 1 billion to EUR 6 billion in the Q1.
CAPEX is at elevated levels due to currently high upfront investments in battery and software, as well as execution of our regional strategies. Relative to automotive sales revenue, the investment ratios stood at 14.4% up on the prior year level due to high investment, as well as lower automotive sales revenue in the quarter. This is clearly a level that needs to be significantly reduced going forward. Even stronger focus on group synergies, more efficient R&D processes, and the reduction of this year's peak of ICE investments will drive the reduction in expenditures. Moving on to the performance of our brand groups, platforms, and financial services business. Brand Group Core recorded flat sales volume. In Q1, sales revenue declined slightly by 1% year-on-year, supported by continued positive price mix but held back by higher temporary tacticals for our BEVs.
The operating result grew by 20% to EUR 2.1 billion and a margin of 6.4%, 120 basis points above prior-year quarter. Each brand contributed to this performance, expanding operating margins year-over-year with significant contributions from the smaller brands. ŠKODA and SEAT CUPRA stood at about 8% and 6% return on sales, respectively. Volkswagen Commercial Vehicles achieved even a 9.6% margin. Also, Volkswagen brand recorded a step up in performance to 4%. Nevertheless, there is still some way to go to achieve the target of up to 5% this year. Brand Group Progressive recorded sales revenue significantly below last year's level, mainly due to the constraints of V6 and V8 engines. Operating result came in at EUR 0.5 billion, corresponding to a margin of 3.4% and 740 basis points below prior-year quarter.
In addition, operating profit was burdened by valuation effects in the magnitude of about EUR 0.3 billion, in particular resulting from Audi's residual value model. Adjusted for valuation effects, the underlying margin at Brand Group Progressive came in at about 6%, clearly below their full year target range of 8%-10%. Brand Group Sport Luxury achieved a 14.8% operating margin in its automotive business despite lower sales volume and higher ramp-up costs due to a record number of new model launches this year. In addition, Porsche recorded an increase in development cost and depreciation on capitalized development cost, as already flagged in the full year results call. Coming to TRATON, operating result continued to be negative and came in at EUR 552 million loss, slightly up from prior year number but down versus the Q4 2023.
Reported net cash flows stood at a positive EUR 0.5 billion, as CFO benefited, like last year, from a EUR 1.1 billion intra-group income tax refund, the underlying cash flow totaled to -EUR 0.6 billion. Our battery business continues to make fast progress in the ramp-up of the organization, as well as the construction of Salzgitter plant, which is developing according to plan. Despite the continuous build-up of the organization and higher CAPEX, an operating loss at EUR 79 million was kept largely unchanged compared to Q1 2023. Needless to say that we review the global BEV sales expectations continuously and are prepared to adjust the capacity and CAPEX planning in PowerCo unit accordingly if necessary. TRATON continued its positive topline and earnings trajectory and delivered another strong performance in the Q1. Unit sales normalized and decreased by 4% year to date.
The lower volume was compensated by favorable product mix, better average revenue per unit, and a continued higher demand for vehicle services, driving sales revenue up by 5%. Operating margin came in at a strong 9.0% and with that confirming the stronger profitability levels achieved in 2023. The increase in profitability was driven by sales revenue growth and improved cost structure. In the period under review, Traton delivered a net cash flow of EUR 0.4 billion and was able to reduce net indebtedness in its industrial business further. Volkswagen Group Mobility kept the overall contract volume stable. A slightly lower number of financing contracts was compensated by an increase in the number of both leasing and insurance contracts. The credit loss ratio continued to be stable. Operating results in the financial services division in the first three months 2024 fell by about a quarter to EUR 881 million, or a 6% margin.
Operating profits were sequentially up compared to Q3 and Q4 2023. This expected decline reflects a continued normalization of used car prices and provisioning for residual value risk, as well as a significantly increased interest rates. And as you know, we take a conservative stance when it comes to residual value risks. Moving on to our performance in our China joint ventures. From a volume point of view, we saw a strong start to the year with deliveries increasing almost 8% to 694,000 vehicles. This was also driven by growth in BV sales, which nearly doubled year-over-year. As a result, the BV share in the deliveries in China advanced from 3% in Q1 2023 to now 6% in the quarter under review.
The proportionate operating results of our China JVs amounted to EUR 0.4 billion after three months in 2024, down 31% on the prior year number and in line with our expectations of EUR 1.5 billion-EUR 2 billion proportionate operating result this year. The decrease is reflecting the margin dilutive effects of the ramp-up of our BV business in a very competitive market environment. Finally, on to the full year. We confirm our outlook for 2024. We continue to expect sales revenue to advance by up to 5%, the operating margin in the bandwidth of 7% and 7.5%, and automotive net cash flow in the range of EUR 4.5 billion-EUR 6.5 billion. As already anticipated back in March, the Volkswagen Group recorded a muted start to the year with a slight decrease in sales revenue and operating margin of 6.1% below the full year corridor and recorded negative net cash flow.
Ladies and gentlemen, welcome to the Volkswagen AG investor, analyst, and media call Q1 2024. I am Shari, the call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Pietro Zollino, head of corporate communications. Please go ahead.
Good morning, everyone, and a warm welcome to the Q1 results call of Volkswagen Group. It's a joint call for both media as well as investors and analysts, which is moderated by Rolf Woller, our head of treasury and AR, and myself, Pietro Zollino. I'm heading corporate communication. With us today is Arno Antlitz, our CFO and COO. Let me provide a few remarks before we start. You should have received the press release, the interim financial report, and all the other related materials, all of which were published this morning. If you do not have them yet, you can find them all the documents you can find all the documents on our group website. In case of any issue, give us a call or drop us an email, and we will send them straight, straight to you.
Before I hand over to Rolf, I would like to inform you about a change in our reporting. Volkswagen Group has decided to change the reporting frequency for deliveries from a monthly to a quarterly rhythm, starting from Q2 2024. The main reason is that comparisons of monthly figures are often distorted due to, for example, differing numbers of working days. With that, let me now hand over to Rolf, who will give you a brief run-through of the next one and a half hours.
Thank you, Pietro, and a very good morning to everyone on the call also from my side. Thanks for joining us today at this beautiful morning here in Wolfsburg. Let us have a look at the agenda ? Arno will first present the key highlights of the Q1, and after that, we will take a closer look at the underlying financials of quarter one, and thereafter to the full year outlook 2024. Following the presentation, we will first host a Q&A session for the investor and analyst community, moderated by myself. And after the session, we will have a short break before we continue with the media Q&A, which will be hosted by Pietro. As a reminder, and as always, the safe-harbor language and other cautionary statements on page two of our presentation will govern today's presentation.
I would like to encourage you to read the disclaimer carefully since all forward-looking statements are qualified by this language. As you know, I won't read it to you. With that, I hand over to Arno. Arno, please go ahead.
T hank you, Rolf. And a good morning to all of you from my side as well. Let's dive straight into the presentation with the highlights of the first three months, starting with an icon that is celebrating its fifth birthday. The eighth generation of the Golf was just launched, and the full lineup from entry-level to GTI will hit the markets this year. Tiguan is our global bestseller. 7.5 million customers have opted for the compact SUV since its debut in 2007, and it is currently in the rollout with new model variants to be added over the course of the year. Same holds true for the all-new Passat, an important model for our fleet customers. All three models, Passat, Tiguan, and the Golf, will also come with a PHEV option offering up to 120 km fully electrical range. For all these models, we see an encouraging order intake.
ŠKODA just revealed the Epiq, its first entry-level BEV. The model will be delivered to customers from 2026 onwards at an attractive price point starting at around EUR 25,000. Most important, the Q1 has seen the very successful launch of the first Porsche and Audi models based on the PPE, the premium platform electric, a great progress in our group's transformation towards electric mobility. Our capital markets day in China last week was another milestone in our building block strategy of the Volkswagen story. About 170 guests joined the event at the Phoenix Center in Beijing one day before the Beijing Auto Show opened its doors. Let me highlight my main takeaways of the day. Despite challenges such as fierce competition and evolving market dynamics, we pursue a clear plan to strengthen our position as a market-leading international manufacturer.
Our target is to increase the proportion of operating result to around EUR 3 billion by 2030, including the fully consolidated joint venture in Anhui, and to achieve a 15% market share by 2030 in China. We expect the market to grow to 28 million vehicles by then, and vehicle penetration in our vehicle sales should reach 50% in 2030. To meet our goals, we've taken decisive action. Together with strong partners, we enhanced our technological competitiveness with a locally developed zonal electric and electronic architecture, local advanced driving assistance functions, or sophisticated infotainment solutions in our smart cockpit. The introduction of LFP battery technology is expected to reduce battery costs by one-third. In total, we expect to reduce material costs by 40% with our China main platform and achieve cost parity with local BEV leaders in the price-sensitive compact A-minus segment by 2026.
Thanks to the new local independent structure with the Volkswagen Group China Technology Company, VCTC, in Hefei, we will shorten time to market for new products by 30%. Over the next three years, the group's brands plan to launch 40 new models in China, half of which will be electrified. With these actions and our highly profitable combustion engine car business, we are well prepared to continue to play a leading role in China. Back to the Q1 results. Global deliveries in the first three months of 2024 increased to 2.1 million vehicles, 3% above prior year quarter. Despite the geopolitical tensions, global supply chains continue to be robust. However, our deliveries were held back by temporary supply shortages, in particular affecting Audi vehicles with V6 and V8 engines. Incoming orders continue their encouraging positive trend in the past month in both BEV and combustion engine car segments.
The brands of the Volkswagen Group collected in total 730,000 new orders in Western Europe in the Q1. BEV order intake was particularly strong, more than doubling compared to the same period last year. As a result, the order book in Western Europe improved to a solid level of about 1.1 million vehicles by the end of March, including 160,000 battery electric vehicles. Growth was primarily driven by a strong increase in China, totaling 8%, as well as North America, where deliveries increased by 5% year-over-year. Our South American operations recorded even double-digit growth, with a particularly strong increase in Brazil from a relatively low basis. In our home market, Europe, deliveries were slightly down year-over-year to about 970,000 vehicles, largely due to weaker BEV deliveries. Demand for battery electric vehicles was muted at the beginning of the year in Europe and North America.
Substantial growth in China could not fully compensate for this, and as a result, BEV deliveries declined slightly by 3%. BEV deliveries reached 136,000 units, corresponding to about 7% of group deliveries. BEV deliveries were down in Europe and the U.S. by 24% and 16% respectively, while BEV volumes in China almost doubled. BEV incoming orders, on the other hand, had doubled versus the Q1 2023. The BEV share target of 9%-11% is confirmed. Performance in the coming quarter should be supported by the most recent and upcoming launches, such as the all-new ID.7 Tourer, the Macan Electric, and the Q6 e-tron, resulting in an increasingly competitive product offering. Let me now give you a summary of Q1 financials. All in all, there are no big surprises in the sense that Q1 was never going to be our best quarter.
As planned, we are preparing for exciting product launches later in 2024 at Porsche and Audi. During this ramp-up phase, costs and consumer behavior were affected, especially Porsche was held by well-flagged cost increases ahead of their model changeover. As previously indicated, we have had supply shortages relating to 6 and 8-cylinder engines at Audi. However, we are now in the process of ramping up supply, and the situation should improve already in Q2. It will take a while for the efficiency program at brand Volkswagen to show its full impact, not least because of the wage increases initiated in 2023, which are unfolding their full impact now in 2024. As all as also previously guided, 2024 will be the peak year for R&D spend, and we can see this effect in the Q1 numbers.
These have all been flagged previously and factored into our 2024 forecast, which is why we remain confident about our 2024 outlook. With that, let's move on to the financials and the operating performance of the Volkswagen Group. Vehicle sales came in at 2.1 million units in the first three months, slightly down year on year at -2%. Excluding our joint venture operations in China, vehicle sales were down by -5% to 1.4 million vehicles year to date. These vehicle sales are the driver of our automotive sales revenue. Group sales revenue was slightly lower year on year at EUR 75.5 billion, which is down -1% versus last year. Strongly improved sales revenue in the financial services business could almost compensate for the decline in automotive sales revenue of -4%.
Operating result came in at EUR 4.6 billion, corresponding to a margin of 6.1%, 1.4 percentage points below the prior year period. Net cash flow in the automotive division totaled minus EUR 3 billion in the first three months, about EUR 5 billion below the prior year level. This is largely related to a significant buildup of working capital, of in total EUR 4.6 billion, after we managed down our inventories at the end of last year. As indicated in our full year results call in March already, we had already anticipated a reversal of the exceptionally strong release of working capital at year-end 2023, which contributed to the strong full year cash flow of EUR 10.7 billion in 2023. In total, we recorded a cash outflow of EUR 5.9 billion from the buildup of inventories in the quarter under review.
This brings me to our automotive net liquidity, which recorded a corresponding decline of about EUR 3 billion compared to the year-end 2023. Overall, at EUR 37.2 billion, net liquidity continues to stay at a very solid level. Coming to our divisional performance, passenger cars recorded an operating result of EUR 2.6 billion, about a third below the prior year period. The margin amounted to 5.3%, down by 1.7 percentage points. Commercial vehicles continued their strong earnings trajectory also in the Q1. Results advanced further to EUR 1 billion, return on EUR 1 billion. Return on sales today is a strong 9%, confirming that the group is well on track towards delivering on their full year targets.
The financial services division recorded an operating result of EUR 0.9 billion, corresponding to a decline of 24% year-over-year, in line with our expectations due to the normalization of the used car business. Let's have a look at the drivers behind the operating result development in the passenger car segment. Volume price mix contributed a negative EUR 0.5 billion. As already mentioned, vehicle sales, including China JVs, were 5% lower. Mix was adversely affected by weaker model mix, in particular due to the V6 and V8 engines at Audi, a negative regional mix due to the negative relatively weaker performance in Europe, and not least, brand mix. However, model and brand mix should clearly improve in the coming months. Pricing continued to be slightly supportive, benefiting from rollover effect from last year's price increases but burdened by higher temporary sales promotions for our electric vehicles.
Compared to the prior year period, operating result in Q1 benefited from a swing of fair value effects outside hedge accounting, amounting to about EUR 900 million. Product costs were a slight headwind year-on-year, mainly due to the one-offs. But we continue to expect product costs to provide tailwind for the remainder of the year. Fixed costs and other costs increased considerably as a result of higher R&D costs, higher depreciation and amortization, and the ramp-up of new business like PowerCo, like Scout, or our fully consolidated joint venture Anhui, as well as continued general inflationary trends. Let's have a more detailed look at overhead cost development. Our group has demonstrated remarkable overhead cost discipline in recent years, which has led to a significant improved overhead cost ratio and a much more robust cost structure. In Q1 2024, we were not able to continue this trend.
Higher overhead costs driven by the carryover effect of wage increases from 2023 and lower sales revenue resulted in a strong increase of the overhead cost ratio in the Q1. This development clearly shows the need for speeding up the implementation of our efficiency programs in the coming months. It's our clear target to improve our position here throughout the remainder of the year. Moving on to automotive investments into R&D and CAPEX. As already flagged at the full year results conference in March, automotive investments are expected to peak this year. The currently high investment levels, in particular in R&D, are reflecting the accelerated transformation of the Volkswagen Group's brands towards electrification and digitalization. As a result, R&D expenses increased by almost EUR 1 billion to EUR 6 billion in the Q1.
CAPEX is at elevated levels due to currently high upfront investments in battery and software, as well as execution of our regional strategies. Relative to automotive sales revenue, the investment ratios stood at 14.4% up on the prior year level due to high investment, as well as lower automotive sales revenue in the quarter. This is clearly a level that needs to be significantly reduced going forward. Even stronger focus on group synergies, more efficient R&D processes, and the reduction of this year's peak of ICE investments will drive the reduction in expenditures. Moving on to the performance of our brand groups, platforms, and financial services business. Brand Group Core recorded flat sales volume. In Q1, sales revenue declined slightly by 1% year-on-year, supported by continued positive price mix but held back by higher temporary tacticals for our BEVs.
The operating result grew by 20% to EUR 2.1 billion and a margin of 6.4%, 120 basis points above prior-year quarter. Each brand contributed to this performance, expanding operating margins year-over-year with significant contributions from the smaller brands. ŠKODA and SEAT CUPRA stood at about 8% and 6% return on sales, respectively. Volkswagen Commercial Vehicles achieved even a 9.6% margin. Also, Volkswagen brand recorded a step up in performance to 4%. Nevertheless, there is still some way to go to achieve the target of up to 5% this year. Brand Group Progressive recorded sales revenue significantly below last year's level, mainly due to the constraints of V6 and V8 engines. Operating result came in at EUR 0.5 billion, corresponding to a margin of 3.4% and 740 basis points below prior-year quarter.
In addition, operating profit was burdened by valuation effects in the magnitude of about EUR 0.3 billion, in particular resulting from Audi's residual value model. Adjusted for valuation effects, the underlying margin at Brand Group Progressive came in at about 6%, clearly below their full year target range of 8%-10%. Brand Group Sport Luxury achieved a 14.8% operating margin in its automotive business despite lower sales volume and higher ramp-up costs due to a record number of new model launches this year. In addition, Porsche recorded an increase in development cost and depreciation on capitalized development cost, as already flagged in the full year results call. Coming to TRATON, operating result continued to be negative and came in at EUR 552 million loss, slightly up from prior year number but down versus the Q4 2023.
Reported net cash flows stood at a positive EUR 0.5 billion, as CFO benefited, like last year, from a EUR 1.1 billion intra-group income tax refund, the underlying cash flow totaled to -EUR 0.6 billion. Our battery business continues to make fast progress in the ramp-up of the organization, as well as the construction of Salzgitter plant, which is developing according to plan. Despite the continuous build-up of the organization and higher CAPEX, an operating loss at EUR 79 million was kept largely unchanged compared to Q1 2023. Needless to say that we review the global BEV sales expectations continuously and are prepared to adjust the capacity and CAPEX planning in PowerCo unit accordingly if necessary. TRATON continued its positive topline and earnings trajectory and delivered another strong performance in the Q1. Unit sales normalized and decreased by 4% year to date.
The lower volume was compensated by favorable product mix, better average revenue per unit, and a continued higher demand for vehicle services, driving sales revenue up by 5%. Operating margin came in at a strong 9.0% and with that confirming the stronger profitability levels achieved in 2023. The increase in profitability was driven by sales revenue growth and improved cost structure. In the period under review, Traton delivered a net cash flow of EUR 0.4 billion and was able to reduce net indebtedness in its industrial business further. Volkswagen Group Mobility kept the overall contract volume stable. A slightly lower number of financing contracts was compensated by an increase in the number of both leasing and insurance contracts. The credit loss ratio continued to be stable. Operating results in the financial services division in the first three months 2024 fell by about a quarter to EUR 881 million, or a 6% margin.
Operating profits were sequentially up compared to Q3 and Q4 2023. This expected decline reflects a continued normalization of used car prices and provisioning for residual value risk, as well as a significantly increased interest rates. And as you know, we take a conservative stance when it comes to residual value risks. Moving on to our performance in our China joint ventures. From a volume point of view, we saw a strong start to the year with deliveries increasing almost 8% to 694,000 vehicles. This was also driven by growth in BV sales, which nearly doubled year-over-year. As a result, the BV share in the deliveries in China advanced from 3% in Q1 2023 to now 6% in the quarter under review.
The proportionate operating results of our China JVs amounted to EUR 0.4 billion after three months in 2024, down 31% on the prior year number and in line with our expectations of EUR 1.5 billion-EUR 2 billion proportionate operating result this year. The decrease is reflecting the margin dilutive effects of the ramp-up of our BV business in a very competitive market environment. Finally, on to the full year. We confirm our outlook for 2024. We continue to expect sales revenue to advance by up to 5%, the operating margin in the bandwidth of 7% and 7.5%, and automotive net cash flow in the range of EUR 4.5 billion-EUR 6.5 billion. As already anticipated back in March, the Volkswagen Group recorded a muted start to the year with a slight decrease in sales revenue and operating margin of 6.1% below the full year corridor and recorded negative net cash flow.
We expect an improvement underlying operating and financial performance already in the Q2 and stronger earnings trajectory during the remainder of 2024. In order to deliver on our full year outlook, we factor in a significant step up of sales and earnings momentum at both Porsche and Audi based on the ramp-up of new models, a much stronger product mix at Audi due to a better availability of six and eight-cylinder models, a decisive implementation of the performance programs at Brand Group Core to achieve a margin well in the range of the guidance corridor of 6%-7%, and a rigid cost work and overall disciplined investment spending across the entire Volkswagen Group.
What gives us additional confidence for the quarters to come is that we can count on a solid order book, an improving order intake, the gradual materialization of effects from numerous strong product launches, and a very solid truck business. To further support our efforts to reduce personnel costs in the administrative function of Volkswagen AG, the board of management in April resolved the offering of selective severance payments. It is important to know for the severance pay program that we, as an employer, must also accept the severance pay request. This ensures that we do not lose key employees. We expect this to result in expenses of total EUR 900 million and will accordingly book a provision in the Q2. We aim to compensate for those effects in the full year.
Ladies and gentlemen, in the coming months, we will focus on the ramp-up of our great new product and the decisive execution of the performance programs across the Volkswagen Group. We continue to have a very solid balance sheet and financials. We continue to transform our company towards electrification and digitalization. Our great product substance and flexibility between BEVs and combustion engine vehicles will help to master the current challenges. That said, we remain fully focused on stringent execution, capturing synergies within the group, and delivery on net cash flow. Thank you very much so far. Let me now hand back to Rolf.
Thank you, Arno, for that comprehensive and detailed presentation on the Q1 financials. We will now proceed with a Q&A session. Anyone who wants to raise a question, please press star followed by 1. We start right away with the first question, which comes from José Asumendi from JP Morgan. José, please go ahead.
Thank you, Rolf. Thank you very much. Just a couple of questions, please. Arno, can you please comment a little bit more on the dynamics of the result in China? A little bit what you saw in the Q1 in terms of volume, in terms of maybe pricing, and any elements around incremental fixed costs. And second, can you comment on residual values? How is this impacting some of the brands across the Volkswagen Group? Is this a one-time that you expect to see in the Q1, or do you expect any recurring items in the coming quarters? Thank you.
Thank you, José. Thanks very much for your questions. I think you have also participated from our perspective very successful capital markets day in China, where we laid out a lot of details already. First and foremost, I must say the proportionate operating result we achieved in the Q1 is fully in line with our expectations for the full year of EUR 1.2 billion. If you look at the more market dynamics, we clearly have to decide between ICE and BEV business, as always flagged and as flagged already.
We have a very strong ICE business with very solid margins and cash flow delivery. And on the BEV side, you see a, I would say, let's call it very challenging pricing environment. And we always said also that we will make sound compromises between pricing and volume in order to have a balanced approach in line with our value over volume approach.
So having said that, we will, in the, I would say quarters going forward, benefit continuously from our ICE business, which has, I think, we jumped over 20% market share in China. And in our BEV business, we will make, as said, compromises between ramping up the volume, staying in the market, at the same time improving the cost position of our BEVs in China. And with the cost measures and the competitive measures kicking in our platform, for example, then bringing the LFP battery, bringing more advanced driving assistance functions, improving in-car entertainment, we will then continuously participate in the growing BEV segment. And we already gave you the indications also for 2027, more than EUR 2 billion proportion operative result in China. Residual value. R esidual values, I would say overall, residual values are still stable, also slightly differentiated between BEVs and ICE.
If you remember, they were very high in the last two to three years after COVID. So we always said we see a normalization. That means residual values came down slightly over time, but it's more like a normalization with a little bit more pressure on the BV side. But we must also take into account that due to the subsidy schemes in the markets, the proportionate residual value is also influenced. And if you take out that effect, then we see, I would say a normalization of the residual value situation. They are still strong, but slightly under pressure in the BV side.
Thank you, Arno.
Thank you.
Thanks, José. And we move over to the next question, which comes from Tim Rokossa, Deutsche Bank. Tim.
Thank you very much, gentlemen. It's Tim from Deutsche Bank. I have two questions, please. The first one is an evergreen. Arno, you and I discussed about it many times. There's no doubt less complexity would do very well for you guys. Traton had a very good Q1. They shuttled the CMD now. The free float is an issue for investors. When do we finally see you guys making use of the higher stock price when there's something happening on that side? And then secondly, I thought that your comments on the order intake were actually quite encouraging.
Now, I've heard over 16 years that I look at autos, all OEMs always saying that car launches were a great success and that the order intake really does surprise them to the upside. Can you put a bit more flesh to the bone here? We're hearing very good comments about the order intake for BEVs. Is that developing year to date, or did it just happen in March? For the new models, does the order intake that you record currently suggest double-digit growth, or is there any other quantification that you can give us? Thank you.
Tim, first and foremost, to the first question, TRATON. Let me start a little bit from a more global perspective. First and foremost, we are very pleased with TRATON operating performance over the past 18 months and pursuing their strategy. MAN has achieved the turnaround and presented impressive figures for 2023. Scania has regained its former strengths, operating a double-digit margin. Volkswagen Truck and Bus continues to deliver solid results. Navistar is now fully integrated. So strategically, they are well on track. There's still a lot of self-help potential, and they are looking confidently into the remainder of 2024. And you're right.
We've been frequently told by analysts and investors that the liquidity and free float in the shares are holding them back to unfold their full potential in the stock. We have always said we are open for a next step at the right time. This view has not changed. This is what I can say at the moment, Tim. In terms of order intake, look, it is specifically encouraging for us that the order intake was really up in the BEVs. It was specifically up in February and March. We had still a rather weak January, but February and March was strong. It more than doubled to the prior year period. We still have some more chances if you take into account that a Macan, Q6 e-tron, a very important car, is the Tourer, the ID.7 Tourer.
For the time being, we have only the limousine in the market. So they will specifically continue to drive order intake even further. With this order intake, we are confident to achieve our 6%-8%, 8%-10% market proportion operative share of BEVs this year. Even more important, that will give us momentum with, for example, an E6 to the 2025 BEV share targets. So let me specify the target for this is 9%-11% BEV share. We are well on track on that target.
Thank you.
Thank you, Tim. Thank you, Arno. The next question comes from Michael Punzet from DZ Bank. Michael, please.
Yes, good morning. I have two questions. First one is on the negative effect of EUR 400 million related to hedge accounting because, as you mentioned also, that this effect was related to the residual value provisions at Audi. Maybe you can explain a bit more in detail what is the key driver for that and what should we expect for the full year. The second question is with regard to your guidance for the industrial cash flow. In the presentation, you mentioned EUR 4.5 million-EUR 6.5 million. And in the footnote, you mentioned possible investments of up to EUR 4 billion in battery. But if I remember correctly, in the full year conference, you mentioned a figure of EUR 6 billion. So what is the right figure to take into account for the forecast for the full year industrial cash flow?
I start with the second question. The target for the net cash flow or the outlook for the cash flow is EUR 4.5 billion-EUR 6.5 billion. That hasn't changed. But what we have into, what we factored in in the EUR 4.5 billion-EUR 6.5 billion is we foresee in terms of cash flow about EUR 6 billion for the ramp-up of our battery business. And then this is what we indicated in last year's conference call. And EUR 4 billion out of that is R&D and CAPEX, and about EUR 2 billion is additional M&A. These were the differentiation between the EUR 4 billion and the EUR 6 billion.
M&A is specifically for getting more control over the value chain. As we always said, it doesn't make sense to just invest in battery capacity in terms of factories. We have a threefold approach. It's development of a Unified Cell. It's ramping up our own battery capacity in Europe with two factories and in the U.S., in Ontario and Canada. The third pillar is having more control over the value chain for raw materials, specifically cobalt, nickel, and lithium. This leads to the difference of the EUR 4 billion and EUR 6 billion. Again, EUR 4 billion in total, I would say reserved for cash out for battery this year. And EUR 6 billion and EUR 4 billion of that is CapEx.
T he Audi residual value model, I'm sure my colleague, Mr. Rittersberger, will go into more detail on Friday. I think they have their call on Friday, right? It's a it's a model for the financed vehicle in the German market. And it's basically accounted as valuation effect on-site hedge accounting. It's a derivative. And since it's a derivative, we book it like a derivative. And there was a burden of about EUR 300 million for the change in residual values this year. And this is why we booked that.
If you add that back to the performance of the Audi, which is 3.4% EBIT margin Q1, you end up at 6% closer to the performance of 8%-10% what you could expect from them. And the difference between the 6% and the 8%-10%, which they indicated, is basically the impact of constraints of the 6- to 8-cylinder at 6- and 8-cylinder models, which hold them back both in terms of volume and in terms of margins.
Okay. Thank you.
Thank you, Michael. Important to note when you look at the year-end presentation from March, there is no change in guidance for the net cash flow. The footnote still stays the same, EUR 4 billion. But I think the clarification from Arno was precise and very good. So next question comes from Horst Schneider from Bank of America. Horst.
Good morning. Thanks for taking my questions.
The first one that I have that relates more to the outlook, basically, until the rest of the year. So if I get it right, basically, you say that Q2 is going to be back in the 7%-7.5% range, and then you need to achieve a higher margin in H2. Just want to understand what makes you confident, really, that H2 then is better than H1, given that the price pressure in the market is probably rather increasing. So in other words, what is the level of visibility that you have for H2, given that your order book probably just reaches until September now? And then I ask the next question thereafter.
Okay, Horst. Thanks. First and foremost, let me start with that we fully confirm our outlook for 2024 in total. To be a little bit more precise for Q2, before the booking of the restructuring of the severance package, we expect to be clearly in line with our margin guidance for the full year also in Q2. And now, on top, we book that EUR 900 million in Q2, which might lead to a burden in that respect. But we promise to catch up on the remainder of the year. So what makes us confident? If you go through the EBIT bridge, there's basically, in a lot of elements, there's confidence. First and foremost, Audi was really held back by a supply constraint of V6 and V8 engines, both in terms of volume, but much more important in terms of margins, specifically at the 8-cylinder model.
So that will improve already in Q2 with a significant improvement then in Q3, Q4 going onwards that will both improve by volume but also by mix. Then from the material cost topic, we had a slight burden in Q1 due to one-off effect at product cost, but we still are back to about at least EUR 1 billion positive in that bucket. And then we have the product momentum, both at Porsche and on Audi, going forward, specifically Porsche, with a huge number of model launches in very important model lines, which will drive their profitability. And last but not least, from a, I would say, fixed cost burden versus efficiency measures effect, we saw the wage increase in mid of 2023. And the full year effect, we have now in 2024, specifically Q1, where we compare with the Q1 2023 where the wages were not increased.
On the other hand, the efficiency measures, specifically at Brand Group Core and Volkswagen brand of the efficiency program, they will kick in throughout the remainder of the year. The net effect of the burden of increases last year and the efficiency measures will also give us confidence for the remainder of the year. These are some of the ingredients, Horst. Hopefully, you can factor them in the bridge, which gives us confidence specifically for the second half of the year.
But again, then my question regarding the visibility on the order book. Am I right in assuming that the order book currently reaches till' September? And what we're also going to see in H2 is then a significant increase in the BEV share. But that is all within your planning. That does not make you any worried about the H2 outlook at the moment?
No. This is in our planning. We even expect an increase in incoming orders. Look, key models were not available to order in the Q1. Passat, a very important model for brand Volkswagen, Tiguan. Not all the engine models at Tiguan were open to order and others at other brands. So we expect the order intake to even increase throughout the year due to availability of the models. And yes, the BEV share will increase throughout the year. Yes, they are margin dilutive, but they're all factored in in our outlook.
Okay. That's great. The last one that I have, just more a housekeeping item in the trade-off, PowerCo versus CARIAD. Is it fair to assume that from now on, basically, the CARIAD losses will get smaller in terms of quarterly run rate and the PowerCo losses will increase since you ramp up the capacity for 2025?
The PowerCo losses will increase with the ramp-up. This is clear until 2025. The CARIAD, we don't want to, for obvious reasons, give you a quarterly outlook for the CARIAD business. But what will happen at CARIAD business? I mean, you have the spending on the one hand. On the other hand, as you know, the sales revenues of CARIAD and the top line of CARIAD depends on the number of models that are sold. Basically, CARIAD is paid by a licensed model, car by car by the brands.
So with the ramp-up of the MAB, for example, ID.7 Tourer, with the ramp-up of Macan Q6 e-tron, then the first 1.2-based cars, so significant ramp-up of sales is expected at CARIAD. And that should improve the situation further.
Okay. Great. Thank you.
Thank you, Horst. We are moving on to the next question, which comes from Henning Cosman from Barclays. Henning.
Thanks for taking your question. I just had a very small clarification on how you're going to be reporting the provision in the Q2. So in the line item that corresponds to your full year guidance, you will fully include it, right? It will not be somehow adjusted out as a one-off. So just to clarify, Arno, what you said, the Q2 margin, as you show it, could again be outside the bottom end of the full year range? And then you're saying you have enough tools at your disposal in the second half to offset that, which effectively means that's on top of what you would previously have expected in the second half when you weren't yet anticipating the EUR 900 million provision.
That's exactly right. When we say we aim to compensate for that additional effect, is that we really try to or we aim for compensating that. That means we won't deduct it or won't adjust for that. We confirm our guidance, including the EUR 900 million. But as also said, it might be not we might be not able to fully compensate it in the Q1 alone. So the Q2. Sorry. In the Q2 alone. We will book it in now in the Q2.
So we might not be able to fully compensate it in the Q2, but we aim for compensating it through the remainder of the year.
Okay. That's clear. Thank you.
Thank you, Henning. And we are moving on to the next question, which comes from Daniel Schwarz from Stifel.
Yes. Thank you. I had one question regarding the management compensation. The new free cash flow component that you introduced this year, could you say what the target corridor is in 2024, so the minimum-maximum target? And are the targets adjusted for M&A, for example, what you're spending on the battery side? Or if you would decide to sell Traton or Porsche shares, would that be adjusted for? And the second question, also clarification, the EUR 900 million provision, will that lead to a cash outflow in 2024, or is it stretched over a longer time period?
Daniel, it's an absolute cash flow figure. Of course, it had bandwidth. But I don't think that we disclosed the actual mechanism behind it. It's basically all in. So it's based on the EUR 4.5-EUR 6.5 guidance, including the cash out of investments, for example, in battery, but also including now the additional cash out for the severance payments. It's basically up to the supervisory board to decide on that. Rolf, can you add? Maybe to add that, because you explicitly asked for it, I mean, a potential sale of TRATON shares would obviously not be net cash flow because this would be accounted as cash flow from financing. No, you're right. The EUR 900 million, it will be booked in the Q2.
The cash out is obviously then once each personnel accepts it, we expect then the cash out, I would say, Q3, mainly Q3. And so this is how you could model it in the cash flow. I would say the majority can be expected in Q3.
Thank you.
Thank you, Daniel. And we are moving on to the next question, which comes from George Galliers from Goldman Sachs.
Good morning. And thank you for taking my question. Obviously, the research and development expenditure was very high in Q1. I was wondering if you could give us some insight into how you see the absolute expenditure on R&D trending in Q2 and the second half relative to the EUR 6 billion in Q1. Second question I had was just with respect to the overall net liquidity. Obviously, it sits below EUR 39 billion-EUR 41 billion that you're targeting for the full year in Q1. But maybe revisiting a broader question, when we think about what is the targeted level of automotive net liquidity in the long term, can you remind us what you are looking for? Obviously, some of your peers are at close to 20% of top line. Is that an appropriate level for Volkswagen, or do you not need that much? Thank you.
Thanks for these two questions. In terms of R&D, I mean, we gave a guidance in terms of the top line, our sales revenue, and the guidance of R&D and CapEx. This should be proportionally in the Q1, Q2, and Q3, ideally. Then in the Q4, we have a higher outflow in the CapEx because this is typically where the big investment projects basically are cleared.
The outlook for investment ratio combined is confirmed between 13.5%-40.5% for the full year 2024. This is what we can say. But clearly, with the majority of that will be R&D, and the smaller proportion of that will be CapEx. We are aware of the number, both in terms of overall number, both in terms of I would say, benchmark to our peers. We know where volume competitors stand. We know where premium competitors stand, also in different regions of the world. We clearly indicated where the benchmark is for us. We always said it's like 8% for volume, 10% for premium. So we, in the long term, shoot for 9%. And this we indicated on the capital markets day last year in summer. So we let be target for 11% in 2027 and eventually 9% in 2030.
And the levels are also clear. We have to work on more synergies. The runout of the combustion engine upfront investments will help us. And this is the way we want to go forward there. In terms of net liquidity, target is what we indicated is more than 10% of group sales. But we also see that some of the competitors who have much more net liquidity compared to sales, they have also a stronger rating. So there's also a trade-off between holding more cash and the rating, which in turn leads to a better refinancing cost, less cash out for interest, which in turn then leads to better cash flow. So this is where we're looking at, also depending on the cycle of the business. But for the time being, our target is clearly indicated as more than 10% of sales.
Thank you.
Thank you, George. So I can see no further questions here on my list. And thank you for the vivid Q&A, the very good questions we had. If anything is left unanswered, please contact the team in Wolfsburg. The next time to meet with us is at one of our numerous conferences we will attend. Our annual shareholder meeting will take place virtually and is scheduled for May 29th. Half-year results are to be presented on the 1st of August. And the respective pre-close call will be hosted. Sorry, Horst. Hosted on July 10th after the market close. So we will now continue with a short break, about 5 to 10 minutes, before we then start with a Q&A session for the journalists. Thank you again for your numerous participation. Take care. All the best. And speak soon. Thank you.
Hello and welcome back to our Q&A session now for media. On my list, I see Frank Johannsen from DPA. Frank, do you want to kick it off? Frank, we can't hear you. I don't know if it's on our end or it's your end. I want to remind everyone who wants to ask a question, please press star one. Frank, we still can't hear you. Okay. I would suggest we circle back and try to figure this out. Christian from FZ, do you want to kick in, please? Unfortunately, it doesn't work either. So let's give us a couple of minutes to try to find out what's happening here because with the analysts and investors, it worked. So give us five minutes, please.
Operator?
Ja, hallo. Können Sie mich hören? Jetzt.
The line is open.
The line is open. Okay. So it should work right now. Okay.
Christian, you want to try again? Thanks.
Yes. Thank you for taking my question. Can you hear me now?
Perfect. Loud and clear.
Okay. Perfect. So just a question on the engine topic. Could you give some more details why you had some trouble with the V6 and V8 engines at Audi? And another question on the surveillance program. You will make an Rückstellung. Sorry. I don't have the English word. Of EUR 900 million in the Q2. Is that right?
I'll start with the easy one. The provision will be EUR 900 million in the Q2. That's right. But as I explained, the provision will be in the Q2, and the cash out then will be then eventually Q2 and Q3. On the V6 and V8 engine, there's a certain specific part that we don't have enough capacity.
Audi is in the process of adding capacity, adding a second supplier. What I would like to ask you, Friday is a call at Audi, Jürgen Rittersberger, and he will really do a really in-depth explanation of that effect, also how it's resolved and how it affects then basically a more positive mix effect and volume effect going forward. And I would rather refer you to Jürgen's call on Friday because it's a very specific Audi topic. But as said before, we expect an improvement in the Q2 already and then specifically also in Q3, Q4.
Okay. Thank you. Can I add one more? Can I add one more question?
Go ahead.
Looking on the European BEV business, it doesn't look very good at the moment. What's your perspective looking ahead on the European BEV market? Do you see upside, or will there be a permanent problem in that segment for the next months and maybe years to come?
That's a very good question. Let me start from 2030 backwards. Our plans and our forecasts haven't really changed due to the ramp-up of BEVs. And eventually, the future will be electric. This is our conviction for various reasons, CO2 emissions and others. And so we still plan until 2030 to have 50% BEV share. But the way from, let's call it, today until 2030 will be not linear. It will be different speeds of development in different regions. China will develop very fast. U.S. and Europe will develop also, but not as fast as we have originally planned and expected. That's part of the truth. On the other hand, you have to also take into account that we don't have electric cars in all models.
Look, we add great models this year, E-Macan, Q6 e-tron, eventually E6. This will open a whole BEV model range in the premium segment. Then 2026, I must say only by 2026, we bring in the ID.2 and the ID.2 family, a EUR 25,000 car basically in the segment of T-Roc and T-Cross. So it also takes a little bit of time until all the segments will electrify, first and foremost. Second, charging infrastructure will evolve. Then we work on also implementing LFP battery technology in the ID.2, which will bring down the cost and eventually also the prices. So it will take a while until the BEV penetration will increase. It will increase quarter by quarter, year-over-year, but not as fast as we have expected.
And secondly, what I also must say in terms of specifically our situation, look, we are in a situation that we spend a considerable amount of energy, time, and resources to keep our, let's call it, last generation of combustion engine cars competitive. We bring great combustion engine and plug-in hybrids, Passat, Tiguan, T-Roc, also new cars at Audi. So in between, we are rather flexible. And we have great BEVs. We ramp up our BEVs. Don't get me wrong. We are fully committed to ramp up our BEVs. But we are also flexible and have great combustion engine and PHEV. And this flexibility is also a strength of the Volkswagen Group.
Thank you.
Thank you, Arno. Frank from DPA, you want to try again?
Yes. Can you hear me now?
Yes.
Perfect.
Perfect.
Thank you. So just a couple now, only three questions.
The first question, just to make it clear, did I understand you right, Mr. Antlitz? You told that you had an order intake of 730,000 in Western Europe in quarter one. If I calculate correctly, 60,000 less than your deliveries in the same time. So your order book shrinks by 60,000 if I calculate correctly. Second question, you said EUR 2 billion of the EUR 6 billion investments in PowerCo will go into M&A. Can you tell any more details? What's planned? Is it all for this year? Are there already plans that you can state what to buy other companies, which may stay stayed now? And third one, picking up the last question to the best share. Next year in Europe, the fleet target for CO2 emissions will increase or they will decrease. The plan was to reach the target by a higher share of BEVs.
So have you already a plan B now? What to do if this will not work due to the low BEV sales in this year than you expected before? Will you increase prices for the ICEs, or what will you do to solve the problem?
Thank you. Okay, Frank. That's a very comprehensive question. I tried to come up with solid answers to all of them. Look, our order book is standard 1.1 million cars, which is basically on prior year level, but it's on last quarter's level. But it's very healthy. And specifically, since we increased the order intake of BEVs by more than 100%. So why are we more confident going forward? The order intake was 730,000 cars, although a lot of very exciting cars and very popular cars, you couldn't order at the beginning of the year because of the model changeover.
Look, the new Passat, new Tiguan, they had a model changeover. We were not able to open basically the model book or the configurator for all of the variants. Despite of this situation, we achieved the 730,000 order intake. So this is why we are confident that both the order intake for combustion engine cars and BEVs will further increase. At the BEVs, as said before, E-Macan, Q6 e-tron, and the Tourer will hit the basically order book and the showrooms, which will drive then also the incoming orders further. 1.1 million cars is a rather healthy order book. It's still above pre-COVID levels. This is important to note to the PowerCo, I think there's a lot . I would like to clarify that again.
In what we said, in our cash flow guidance for this year of EUR 4.5 billion-EUR 6.5 billion, we foresee let's call it foresee about EUR 6 billion cash outflow for the ramp-up of our battery business. We explain that specifically because it is ramping up a business where we don't have business today, so no turnover, no sales. It's really on top so that you can also reflect a little bit what our real cash performance is.
It's a cash flow of EUR 4.5 billion-EUR 6.5 billion plus an additional EUR 6 billion we foresee for PowerCo. That EUR 6 billion is in total for PowerCo. And if you divide that roughly, it's about EUR 4 billion for the ramp-up of our business in terms of CapEx throughout the world. We are ramping up now 3 plants in Europe. In 2 plants in Europe, we have the ramp-up of Salzgitter plant.
In parallel, we ramp up in Valencia plant, and in parallel, we ramp up Ontario, Canada. We foresee about additional EUR 2 billion for strengthening our value chain in terms of having more control over the value chain, lithium, nickel, cobalt. Here, I must ask, for understanding, it's too early, and we can't really tell you specific transactions here. But rest assured, we will move on to that topic as well because it will always only make sense if you ramp up a capacity of battery that you have also secured your raw materials. We don't want to run into the situation that we have a battery capacity on hand and have not competitive supply of raw materials, specifically lithium. In order to have a safe and secure and also cost-competitive supply, you need both. You need capacity, but also you need to have the raw materials secured.
This is the story behind PowerCo. In terms of, I think, the third for 2020 going forward. 2025. 2025 onwards. Look, we expect to be 100% compliant 2024. The compliance in 2025 will be more challenging due to the new targets. From today's perspective, we strive also for being compliant in 2025. What gives us confidence here is the new cars that hit the road. I talked about the Tourer. I talked about E-Macan, Q6 e-tron. Also, E6 is then hitting the road. But on the other hand, we see a very challenging pricing environment in the BEVs, specifically in Europe. And we also embarked on a strategy that we say value over volume. We want to find sound compromises between pricing, basically margins, and volume.
We have to also take into account so it's too early to give you specific guidance for 2025 because we don't know how the market conditions will be by 2025. We work on the cost side. But what I can say from today's perspective, basically, we work on achieving the target for 2025, and we strive for achieving the targets also for 2025.
Okay. I can see on my list. Next would be Christina Ammann from Thomson Reuters.
Oh, I hope you can hear me. Yes. Perfect. Wonderful. Oh, fantastic. Well, the first question, I guess, Mr. Antlitz, you've just answered, was an outlook on 2025. That's two issues. On the one, this year, two regulations. And the other question was on the overall market. You're expecting a better market in the second half. Will that last into 2025 or not? The other question was on the BEVs orders.
You said they were more than doubling Q1. How do you think where do you think you end up at the end of the year? How is that going to keep on? And can you say also something on Audi and Porsche, who are both having issues this quarter? Is that approach on the or is the luxury market or the high-end market still intact? And what does that mean for your value over volume approach? Thank you.
Thank you, Christina, for your two questions. For the BEV orders, we have a very good order intake. Right now, we expect the level of order intake per month to basically more or less stay on that level until summer. And then summer, the new models kick in. As said, Q6 e-tron, E6, the Tourer is then also fully available.
With the new models, we expect then also then an even stronger order increase then from there going forward. The question on Audi and Porsche, it's really the situation that led to the margin of Audi and Porsche in the Q1 are really explainable by technical factors. First and foremost, I referred to the availability of 6- and 8-cylinder models at Audi. This is a specific part that we have not enough supply. Audi worked on it. And we are confident as soon as the supply is ramping up, starting with the Q2, but specifically done in the second half of the year, availability will increase. And then Audi will come back to all strengths. And Porsche also, well-flagged already in the year-end result call. They have a huge number of model changeovers in 2024, which gives us even more strengths in 2025.
If I remember it right, Oliver Blume talked about the transition year 2024. It's not unusual that if you have model changeovers, that both in terms of costs that are incurred due to the ramp-up costs, preparing of the new production, and also in customer behavior, the period where you ramp up the new models, they are slightly under pressure. Then you could expect after the new models all in place, it could be even a more positive momentum then. This is why we are both for Porsche and Audi, we are still very confident about their future trajectory and success.
Okay. From what I can see, I have one more caller. It's Lazar Baković from Handelsblatt. Lazar, you want to kick in, please?
Thank you. I hope you can hear me.
Very good.
Thank you. Thank you, Arno, for taking the question. Questions one quick on the V8 and V6 motors. There was a similar problem at Mercedes in the Q1, which had problems with turbochargers. It was due to a supplier called Hasenclever that also i s supplying other premium OEMs. And the question would be is Hasenclever the reason for this specific situation that Audi is currently in? I think they filed bankruptcy last autumn. I t would be interesting to know if it's this specific company. And the other question would be on the free cash flow, which was negative. So maybe you can give me a bit more details, which were the biggest tickets that really put the cash flow down and what makes you confident that you are in line with your goals for your cash flow this year?
Lazar, thanks for the questions. Although, as said, I would like really to leave the technical details to my colleague. It's not the same case you just mentioned. It's a different situation.
Okay. Thank you.
It's not the Hasenclever. In terms of free cash flow, let me explain it a little bit more in detail. Look, we are a victim of our own success. Last year, we had supply constraints in the delivery of our finished goods throughout the year. If you remember, we were missing trucks, trains, people at the ports. And so we really set up a comprehensive team on that. And this team was very successful. It was so successful that we debottlenecked the whole situation. Q4, we achieved a very good cash flow. But that was due to that basically, most of the inventory was sold to the customer.
Our inventory pipeline was rather empty, but which also led in terms to a free cash flow of, I think, EUR 10.8 billion last year. So very successful. And now we started this year with our pipelines basically sorry, of course, not empty, but with a much lower inventory. And now we have two effects. First and foremost, we are increasing the inventory throughout the whole world. Look, we produce cars. We have to get the parts for it. And then we ship them to U.S., to Japan, even Australia. So there's a lot of pipeline. And second, since we prepare for a huge model launch at Audi and at Porsche, it's also not unusual that before this new model launch, you build these cars already. They sit already on the yards and on the books, and you deliver them to the customer.
So these two factors were planned and anticipated. But in total, that led to a buildup of finished inventory of about EUR 6 billion. So basically, EUR 6 billion more inventory, two-thirds of that are finished goods and one-third of that unfinished goods. And so if you reflect then now our negative free cash flow of EUR 3 billion, so minus EUR 3 billion minus EUR 6 billion of that is due to the inventory. And so part of it that will somehow be resolved throughout the year because at the end of the year 2024, again, we'll ramp down the pipelines, use all the parts we have. So this is why we are confident that we achieve our free cash flow target in 2024.
Okay. So if I'm not mistaken, I think we diligently worked through the question queue, leaves me only to thank you for your participation in this joint call for both media as well as investors and analysts. I want to thank you, Arno, for hosting this call, and Rolf. We are looking forward to get in touch with you again maybe during or around the annual shareholder meeting. We wish you a wonderful week. Stay safe.