For the publication of the figures for the Q1 of 2020. Just for your information, this conference call is being recorded. I would now like to hand over to Paik von BestenBostel, Head of Communications at Volkswagen AG. Ladies and gentlemen, a good morning to you from here in Wolfsburg, and welcome to the presentation of the quarterly figures for the Volkswagen Group. Recently, we posted the ad hoc message to give you some key data from the quarter.
But here we have the report for the Q1 of 2020 with a lot of information for you. I'd like to welcome Frank Witter, who is the Chief Financial Officer of Volkswagen AG as well as Doctor. Kristian Dahlheim, who is Head of Group Sales. Both of these gentlemen will give you a brief presentation. And once they have finished their presentations, we as always will be available to answer your questions.
Christian Dahlheim will start. I'll hand the floor to him.
Thank you so much and good morning to everyone. I would like to talk about the deliveries in the Q1 and then I'll give you an overview of our current market expectation for the entire year. Despite a difficult market environment, we started quite well into the year 2020 up until the time when the outbreak of coronavirus stopped this development, 1st in China and since March in almost all of the other regions of the world. Subsequently, Volkswagen Group in the Q1 2020 delivered worldwide a total of 2,000,000 vehicles and cars to customers, a minus of 23% year on year. Thus, all over the world, we're slightly better than the overall market.
In the region, North America, our deliveries went down in line with the markets by about 13%. The positive results of the 1st 2 months were overshadowed by the decline of deliveries in March by more than 40%. In the United States, delivery since beginning of the year went back by 13% as well. The situation is very volatile and it depends on the various federal states. Because of even more strict regulations, in particular in Ontario and Quebec provinces, the situation in Canada is even more difficult, which led to a decline in deliveries of about 23%.
In Europe, overall markets in the Q1 went down by about 23%. Our deliveries declined by about 19 percent. Picture, when you look at Western Europe and Central and Eastern Europe due to the different spreading speeds of the coronavirus was rather diverse. In Western Europe, deliveries saw minus of almost 20%. Corona hit all of the major markets in an already tense environment.
Despite the interruptions in production, there was no complete stop of sales in the region, but many dealerships and vehicle registration offices had to be closed in the course of March, which, of course, had a major impact on deliveries in that month. So deliveries in March went down by 45%, whereas the market shrinks by about 53%. Major negative deviations we see in Italy, France and Spain at the moment because these countries are hit most severely by the coronavirus. Despite these effects, the Volkswagen Group in Western Europe developed clearly better than the entire market. In Central and Eastern Europe, deliveries in the Q1 went down by about 9% and in March by about 21%.
Since the coronavirus and the corona crisis spread towards the East, highest declines in absolute terms were seen in Poland and the Czech Republic. Contrary to that performance in Russia in the Q1 year on year was stronger because neither corona nor the oil price decline is visible in sales performance in the Q1 at that. In the region, South America deliveries of the group went only back by 4.2%, whereas the market saw a decline of almost 15%. Because of the continued financial crisis in Argentina, deliveries declined by 34%, the market by 36%. Brazil, because of the good start of the year, saw 4.4% more customers accepting a car compared to previous years.
Since corona reached the region and dealerships are closed more or less and workshops as well and there are stay at home orders, March has a strong decline, Brazil minus 14% Argentina minus 58%. In the very important region for us, which is Asia Pacific, the Vosiban Group together with a marketable decline of deliveries of about 34%. Since the outbreak of the virus in China, which led to radical decline of sales by 74% in February, in March, we see an important sign of recovery. Lockdowns and travel bans were discontinued, production activity was restarted and the dealerships have reopened. This led to an increase in customer demand.
The market went down by 40% in China. We lost 35% and thus at least we outperformed the market. Now subsequently, I would talk about China in somewhat greater detail. As you all know, the current corona crisis is a burden for the entire automotive industry and it is a true challenge also when it comes to market forecast. Despite that, I would like to give you our current take on the situation in China.
There are more and more signs for recovery because the chances are good that in early summer, the automotive market could reach the previous year's level on a monthly basis. All the 2 1,000 dealerships of the Volkswagen brand have reopened. Audi and Skoda have opened more than 95% of the dealerships. And the number of customers coming to the dealerships in the last weekend of March has reached a level that's comparable to previous year. 32 of a total of 33 car and component factories have restarted production activities.
We see a trend well-to-do customers are faster in buying. Again, premium market in February was at minus 75% in March at only minus 25%. So therefore, with Bentley and Porsche, we were able to create growth in March. Generally, in China, you see that the big brands, the brands with the bigger market shares are gaining in market share again. This recovery, of course, hinges on the following conditions.
Coronavirus in China must not resurge, and the global economy must not slow down the recovery of the Chinese business world. Moreover, a state package, boosting package must be or could be necessary in order to increase internal demand across China or beyond China. We think there will be heterogeneous development. Corona has hit almost all of the countries, some later, some earlier, which has an effect on the recovery. Some on some general comments, you see a couple of scenarios as to how such a recovery could be coming.
You can distinguish between a V shape, a U shape and an L shape. We generally for all the major markets, we generally take that a V shape will be happening. So we take it that after a certain period of time, we will reach a situation as before. Again, of course, it's different depending on the markets because as I explained, you see a classic we see a classic V form of a recovery after the crisis. Within Western Europe and Germany, we see first positive signs for gradual recovery with a step to step taking up of production in previous year.
We most of the dealerships were able to open their doors to the public In order to keep a balance between sales and production and securing liquidity, Volkswagen Group offered to the dealerships liquidity support by longer payment terms, temporary increase of credit lines and improved interest conditions. Please keep in mind that economic strength and political conditions and potential government stimulus packages play an important role for the degree of recovery and the velocity of recovery. Therefore, all of the forecasts for market and sales development are very volatile at this point of time. From our point of view, from today's point of view, for 2020, we take it there will be a global decline of the market of between 15% 20%, which coincides with external institutes' view. We take it that our strong new product portfolio with models like the new Volkswagen Golf, the Skoda Octavia, Audi A3 and the SEAT Leon and a further broader offer with e vehicles will support the recovery as soon as customers want to buy cars again.
And we have a we can rely on a strong and agile network of dealerships, and we expanded our online sales channels. I'd like to hand over to Frank Witte, who will talk about the financial performance of the group.
Now lower volumes as a result of the COVID-nineteen pandemic impacted moreover, currency effects had a negative impact of around €600,000,000 while mix effects, a better price positioning and also the operating performance of our Financial Services division had a positive impact on sales. Operating profit before exceptionals came in €900,000,000 which was €3,900,000,000 lower than in the prior year period. This is before the one off charges from the issues surrounding diesel and this which were €1,000,000,000 at this time. Now the reason for this decline is essentially direct and indirect effects of the COVID-nineteen pandemic. In addition to the contraction in sales following a drop in customer demand, there was turbulence on commodity and capital markets, which led to negative effects on fair value of commodity hedging and also negative exchange rate effects.
Our operating return on sales thus dropped to 1.6%, down from 8.1% in the prior year. Ladies and gentlemen, I'd now like to speak about the general trends in our group brands. I'd like to begin by pointing out that the vast majority of our brands remain profitable during the 1st 3 months of our year of the year despite it being a very challenging time. Sales revenues at Volkswagen Passenger Cars came in at €19,000,000,000 down 11.9% from the prior year. Operating profit contracted to €481,000,000 down from €921,000,000 in the prior year, not including special items.
But volume reductions, which resulted from the COVID-nineteen pandemic, were not able were not offset by cost increases and mix deteriorations. They were not offset by sales support measures and improved price positioning. At Audi, sales revenues fell to €12,500,000,000 Operating profits fell to €15,000,000 down from €1,100,000,000 in 2019. The decline in volumes charges from the valuation of commodities transactions particularly for aluminium and negative currency effects were not offset by reduced fixed and development costs. Sales revenues at Porsche Automobile came in at €5,400,000,000 Operating profit fell to €529,000,000 down from €820,000,000 in the prior year.
Currency effects also had a negative impact as well as cost increases. At Skoda, sales revenues came in at €4,800,000,000 which was just slightly below the prior year level. Operating profit came in at €307,000,000 which is €103,000,000 than in the prior year. The positive mix effects were not able to offset charges from the decline in volumes or negative currency effects. Sales revenues at SEAT fell at €2,600,000,000 short of the prior year level coming in 16.2% lower.
Operating profit primarily due to volumes fell to €48,000,000 down from profit of €89,000,000 in the prior year. Sales revenues at Volkswagen Commercial Vehicles fell by 18.9 percent to €2,700,000,000 As a result of the sales decline, operating profit fell to €14,000,000 In the prior year, this figure was €291,000,000 In addition to volume reductions, unfavorable exchange rates and the rise in fixed and development costs diminished profits. Product cost optimizations and mix effects had a positive impact. Postmark and Financial Services continued to perform well. Operating profit improved slightly in the 1st 3 months of 2020 to €654,000,000 As such, Financial Services continue to constitute an important earnings pillar of the group and also a strong partner for our brands.
Ladies and gentlemen, let's have a quick look at our truck and bus brands. Sales at TRATON fell in the Q1 of the year in industrial business from €6,300,000,000 in the prior year period to €5,600,000,000 in the Q1 of this year. Operating profit fell significantly by 70 percent to €135,000,000 Our operating margin thus contracted from 7.3% in the prior year to 2.4%. Scan Your Vehicles and Services sold 19,000 vehicles, down from 24,000 in the prior year period. Sales revenues thus fell to €3,000,000,000 down from €3,400,000,000 Operating profit came in at €256,000,000 down from €370,000,000 in the prior year.
The operating margin thus achieved a still respectable level of 8.6%. The decline in vehicle sales, we did have a decline in vehicle there was a decline in vehicle sales, but there were positive effects from mix improvements and lower fixed costs. During the reporting period, MAN Commercial Vehicles sold 28,000 units, which is 17.2% lower than in the prior year. Sales revenues dropped to 2.6 €1,000,000,000 down from €3,000,000,000 in the prior year. Operating profit fell to negative €83,000,000 down from €150,000,000 in the prior year period.
As well as a decline in volumes, earnings were impacted by additional costs related to the introduction of the new truck generation. And ladies and gentlemen, while it is important to speak about the trends and development in the first quarter today, it's even more important to focus on our path back to recovery. Without doubt, this has been a very strange year and it's only just begun. And nobody has a real idea of how severe and how long this crisis is going to be. It is thus impossible to deliver a reliable forecast for our company today.
However, what's obvious is that operating profit for the full fiscal year is going to be significantly lower than it was in 2019. On the other hand, looking at the recovery in China, we can see what is possible. Now maybe we won't be able to have a V shaped recovery curve in all countries and all markets. It is possible that we can expect a certain recovery. In number of European countries, dealerships are already reopening.
A lot will depend on consumer behavior and also from general macroeconomic developments. We hope that governments will continue to introduce further measures for stabilizing and stimulating the economy. We will fight for every company sorry, for every customer and we'll as always proceed with moderation. We're not writing the year off and we will do everything within our power to deliver the best possible results. And I will now hand back to Paik from Best and Bostel.
Mr. Dahlheim, Frank Witter, thank you very much. Ladies and gentlemen, you have the floor. Can we have your questions, please? Who will start?
Can reach out to us. So please continue with your explanations. I'm waiting, says Mr. Van Bastenbrostel. So in case your question has already been answered, you can withdraw your question by pressing star 2.
So star 1 in order to ask a question. I have various questions, but maybe I limit myself to 3. Mr. Witte, you talked about incentive programs that you wish for the whole of Europe. If I imagine, incentives for purchases are a thing that the premiers are discussing today.
So is it your expectation that something is going to happen there? A lot of discussion is around the dividend is happening around the dividend at the moment. Do you think that the dividend will be reduced with a view to the liquidity situation? And then I would like to know whether you have unperforming, nonperforming credits and loans under Financial Services and what precautions have you taken? Maybe you can give us a number.
Thank you. Mr. Witter? Good morning, Mr. Schwartz.
Let me start working through your questions in the sequence you mentioned them. In the presentation of Mr. Dahlheim's and mine, it was to become clear that it's very important that you are necessary level of energy. I think there are very good examples from the past and there is evidence of the fact that the automotive industry can be one of the industries that is pulling us forward. The automotive industry sends for an enormous amount of the economic performance.
It's about 10%. And in 2,009, we saw that we created an enormous momentum, not just for the automotive industry, but for the entire business world. This is not just about the manufacturers. It's about dealerships. It's about suppliers.
We can create a momentum. Thus, we think it is important to show confidence and create some movement with in the world of in business. And that's why this suggestion comes here. And we think that there will be more confidence, there will be a payback through value added tax and other taxes. That's the logic behind it.
And I'm almost talking like a salesperson. Momentum and confidence and power within the industry that this is all linked to it. Now on to dividends, yes, of course, you are right. We are intensively debating it. With the dividend, the suggestion that we made is a suggestion for fiscal 2019.
We wanted to increase to a payout ratio of 24.5%. That's a payout ratio that is clearly below our strategic target of 30%. And if you compare us to other industries and other Finally, this decision is up to the Annual General Meeting. Finally, this decision is up to the Annual General Meeting to make. So it will be checked depending on the further course this year we'll be taking.
So as to whether there will be a momentum that will be created, whether confidence and liquidity comes into the company. This is what the suggestion needs how the suggestion needs to be seen. It came in February. We knew of corona, but we did not know of all the effects. So we have to keep an eye on it.
But it was important to me to show that for a concluded rather successful fiscal year, this suggestion was made, but we see how the year will develop. Then you talked about nonperforming loans. Well, you know our company quite well, and you know about the reporting situation. Traditionally, we have a very good high quality portfolio. The credit loss ratio is at around 0.4%.
It's been very stable around this number. So given the high quality of our portfolio, we believe that we will be able to move through this crisis rather well. That's what our experience says. Of course, we have taken precautions. The provision ratio is clearly above the failure ratio, credit loss ratio.
So I think we're in a good situation.
Then we will hand over to Frankfurt to Christoph Hochford. Sir, what is your question, please? I also have 3 questions that I'd like to ask. 2 about strategic projects. Mr.
Witter, could you give us a bit of an update on the talks about your collaboration with Ford? Now was that will the what's going on have any impact on the plans for the cooperation in the crisis at the moment? Will that have any impact on this cooperation? And is it possible that FORT could license the MEV technology in Europe? Another question, could you perhaps give us an update on the Navistar acquisition plants?
Are they on ice at the moment due to the current situation? Or are they still continuing? My final question, perhaps you could give us a more specific indication of what you anticipate for the Q2 Because we heard this morning that you expect to be profitable for the full year. What is the situation like for the Q2? Good morning, Mr.
Raul Waltz. So about the Ford cooperation, there are 3 pillars that we are discussing with Ford at the moment, as you will know, one of which is on Argo, autonomous driving And we, of course, want to and we want to be the lead on this. Now the second part of the cooperation is our cooperation for light commercial vehicles. And the third part is the supply of MEB components. Now for us, there is no reason to cast any doubt on any of these three pillars.
And we've been working on we're working intensely on all of these three issues for a while now. Now just to speak about Navistar, just to put this into context, we have a clearly defined global champion strategy because we have our trucks and bus functional area. And Navistar could form a significant component of this because it has a strong footing in the North American market, which is a very important market for trucks and buses. So as to whether it makes strategic sense, I would say absolutely, no doubt at all. That said, at the moment, not much is happening with the activities at the moment because we all have new priorities.
Now whether or not this will whether or not we will have a successful conclusion of this transaction, I believe that we'll have to reassess this over the next few weeks and months. But generally speaking, we stand by the bid that we submitted, but we'll have to see how realistic this is given what's going on at the moment. Now on to the second quarter. We've tried to outline what we expect the rest of the year to go and we believe that the second quarter will be the most difficult of the 4 quarters of this year. This is due to the fact that in April, with the exception of China, most of the markets were shuttered.
They were basically in lockdown and it was impossible to do any business. And now in Germany, in May, gradually, we're starting to loosen and hopefully, we'll return to some semblance of normality, there is uncertainty surrounding this. So I believe that financially, the Q2 will probably be the worst based on our current assessments. And we still expect to deliver positive earnings for the year as a whole. And we'll learn more over the course of the year, but this is a play this is our assessment and we believe the Q2 will be the toughest year.
And now back to Hamburg.
Going to Hamburg, Mr. Kruk. Good morning. Mr. Witter, Volkswagen is on the break when it comes to financials, investment, etcetera.
The sales planning in the important markets being as they are, mean does that mean that you have more time to decide for the multi brand plant in Turkey? Are you putting a question mark behind the project maybe? And second question, when will you decide about the date? Will you do that in the AGM? And question to Mr.
Dahlheim, the delivery of the new ID3s will come in summer. Now there is the virus against this backdrop. Will you reduce the internal ID3 sales numbers? Those were my questions. Thank you.
Mr. Witter, good morning, Mr. Kruk. Of course, you are right. We are questioning everything everywhere with investment and with costs, this is true.
But we also have clear priorities. There are projects, which are very important when it comes to the completion of those. For example, the ID family is 1 to name but one subject. Also strategic development in the software arena is another issue. Those are very important topics for the future where we do not want to incur damages because of saving, but our controllers have a lot of backwind at the moment.
As a CFO, I'm not seeing a problem in that. But you know the examples, be it consultants and marketing, no stone is left unturned. Now the plant in Turkey, that was the second part of your question, I believe. Let me elaborate a bit. Why did we discuss the plant in Turkey at all?
Well, behind it, there is a major amount of progress that we see when we move together the superb and the common parts, but at the same time, a differentiation vis a vis customers. And in an ideal case, those cars as different they may be, in their expression, you can still produce them in one plant. And this type of capacity to build both cars in one plant, we would not have had, which is why we discussed setting up a plant in Turkey in the 1st place. Plus take into account the fact that Turkey is a market for sedans, and we expected major additional potential before corona times. Just like many other things, this needs to be looked at again.
But I was I think it's important to make it clear to you what the reason behind it is, which was driven strongly by product optimization. Decision is pending. It's open as we communicated it. And in the next weeks months, we will have a final decision on it. It's not a major pressure point where we need to decide it just now.
The question of the AGM as such is still pending, we'll take a look at what the first experience will be with virtual AGMs. It is an option, but internally, we have not decided on it, Mr. Kruk. We will have an AGM in this fiscal year, which is legally required, but there is no precise meeting date. Mr.
Dalem says, good morning. On your question on the ID3 answer 1, we are still staying to the launch of the car in summer. As you know, the Zwickau plant has been restarted last week and it continued operations throughout. 2nd question, did we reduce the sales numbers? Well, we've taken a close look at it, but we will mainly stay with the budgeted numbers for the ID3.
The market distortions that we have, we don't think that they will come through. We think that we compensate for it by major market shares.
The next, we have a question from Berlin. Thank you very much. I have a question about technology spending. You're saying that there is no zone unturned when it comes to checking costs? BCOAS?
Now? Is it the case that electromobility is no longer going to be a priority for the current period in time given the crisis? Do you want to reduce spending on IT, technology? And if you do want to cut costs, What about simplification? What about streamlining?
So I'm just wondering what type of measures you're looking at.
And whether some
of the things you've been looking at doing to cut costs over the past few years, whether this will be stepped up and accelerated So I expect you have a low capacity utilization at the moment. Do you expect that all of the workforce will return to work as of the same number of people that you had before the crisis? Mr. Boston, thank you for your question. Now technology expenditure also has to be scrutinized.
As you said, we've also got spending on research and development. What I tried to underline before is that we're not questioning our strategy. Electrification is and will continue to be the path that the Volkswagen Group needs to be on. We have committed ourselves to the Paris Climate goals. However, we are also firmly convinced that the only possible way to meet the CO2 standards in that will be required, then we're going to have to continue with our electrification strategy.
But of course, we are looking at model derivatives things that we have in the pipeline at the moment. And overall, and this isn't anything new, Mr. Boston, but the topic of reducing complexity, if you look at the transmission engine combinations, these are options where which we will have to look at. But there's certainly, we're not reversing our strategy towards technology. I've spoken about software skills, etcetera.
We're certainly going to keep focusing on this because we are firmly convinced that this is the right strategy for us. But we're not turning our strategy on its head. We are on a stable path for our strategy, although we will have to scrutinize some of the details as well. You spoke about job retention, because we have the quotes about the job retention scheme in Germany. There were various types of such retention schemes that have been launched in other countries as well.
We are resuming business very carefully. So what we're trying to do is make cars safe, make the car building safe for employees during the crisis. We've done a lot of planning because distancing, for example, face masks and also trying to keep shifts separate from one another, how to keep the employees apart, keep them distanced during breaks. These are all measures that we've looked at. Things have gone well so far.
As you will know, traditionally you will know that employment security is very important to the workforce, and this is not something that we're going to make any changes to. We've got our future packs, and we want to use tools such as a part time work for elderly workers, etcetera. But we are gradually resuming production. The speed at which we do this and it will depend on when the dealerships can reopen and start doing business because after all, it's going to be customer demand that determines how quickly people return to work in production.
Ladies and gentlemen, I see 2 further participants on the line, Stefan Menzel and Jan Schreiber. Mr. Menzel, can we have your question, please? Good morning, Mr. Witter, Mr.
Dahlheim. Greetings to Wamsberg. I have two questions. So far, it has always been the target to reach breakeven in the United States this year. Mr.
Witter, I believe that we'll have gone. Don't know whether you want to say anything on that. And I have a personal question, Mr. Witte, whether you maybe will stay on for a longer period of time because of the situation of crisis, because at such a time of crisis, you need tried and tested people on board? Thank you.
Good morning, Mr. Mintz. Well, I'm not going to move away fast. It's no secret. My contract runs till the 30th June next year, so I prolonged it and it's more than a year's time.
So there is no reason to deal with it at the moment. And by the way, I'm relatively certain that the company will find a very suitable successor of mine. So at the moment, this is not an issue. So there are no news on that front. Basically, you gave the answer already.
We were well on our way as regards to Volkswagen Passenger Car Brand and Breakeven in the United States in 2020. Because of the situation that we elaborated, we won't be able to achieve it. So yes, that's a setback, but this does not change our general approach. But in 2020, under the conditions of corona, this is impossible, unfortunately.
And now Mr. Scheibe, please. Good morning, Mr. Scheibe. Now I heard on TV that the production disruption is costing you €2,000,000 per week.
Now some of your plants are resuming production. Could you give us some kind of indication of how much the disruption has cost you? And tell us what your cash outflows look like at the moment. Are there any new figures or maybe a weekly figure for cash outflows resulting from the current situation. And now I want to ask you about the prospect of a second wave of the virus.
If this happens in China or happens in Europe, would you be able how would you deal with this? Would you be able to cope with the 2nd wave? Good morning, Mr. Schreiber. Maybe I will start with your question about the 2nd wave.
Now of course, everybody is hoping that we can avoid a 2nd wave by taking a serious approach to adhering to the measures, because we have clearly very precisely defined measures. Now preventing a second wave is a responsibility of each one of us, of course. Of course, no one can rule out a second wave. As Christian Dahlheim said during his well, Christian Dahlheim referred to this during his presentation, We do, of course, hope that if there are even minor setbacks that they certainly don't take on uncertainties that experts keep warning us about. Are you saying that we shouldn't return to business as usual too quickly?
Let me come to your question on liquidity. Liquidity is an absolute priority in addition to protecting our employees and also securing our processes, including our suppliers and our dealership network. And you mentioned this €200,000,000 per week. This figure was based on the decisions that were taken on factory closures. So it didn't really look at the outflows and the inflows.
So this is very significantly across the different markets and across the different brands. It was a good indication this figure, but of course, we worked to mitigate this. And as we have underlined during this conference call, we've kept a very, very close eye on costs and expenditure. And in some important markets, production has resumed. Of course, it's not been that simply because of the dealerships that may have reopened, but not everybody is returning to buy cars at the dealership.
But at least business has resumed at the dealerships in Germany. Now in the Q2, as things stand today, because we said that the Q2 is expected to be the most difficult of the year. But we will have measures to take where liquidity is concerned. And we believe that we will have an improvement in liquidity over the 3rd and the 4th quarter. Mr.
Diess mentioned this EUR 200,000,000 per week, but it doesn't but the thing is I want to also make clear what I'd like to make clear isn't something that we're going to be having for a long period of time.
So the A kind of wise?
The question on the second wave, can we withstand it? Mr. Witter says, well, since no one knows about the dimension, I can say we as a group believe that we have a really good situation. You know that we come from a rather successful situation in 2019 as regards our income statement, the profit and loss account and our liquidity situation. But of course, we can be heard like everyone else.
And depending on the dimension, this will shake us up pretty severely, which is why it's so decisive that all of the countries starting in China where the origin was, but now in Europe And we've seen the dramatic development that we had in North and South America. So that everywhere by consistently sticking to the framework as required that we keep the 2nd wave if it comes at all, keep it as small as possible. We are acting on the going concern basis. But of course, it's a serious situation, not just for the automotive industry, but for everyone. Mr.
Von Bestenboschle, Mr. Dahlheim, yes, maybe I can add to this. Of course, we know that the world is not going to turn back to normal in the course of the next 3 months. That's important to me to say. Our processes in dealerships, as of course, we converted that to online deliveries and contactless deliveries.
So in a second wave, in the next 12 or 18 months, we would be able to work in a changed world with our safety measures and still nurture our sales. So the processes have already been converted to a changed world. Mr. Von Bestenbossel. In the list of the German participants, I have Christoph Hetzner.
And then I would like to ask the English speaking participants to ask their questions. Now Mr. Hetzner? Good morning. I have three questions.
First on Audi, I was a bit surprised by the very strong decline in your premium brand. Maybe you can tell us why that was specifically the case and maybe you can elaborate a bit on the development. And then a couple of questions on the market, a question specifically to you. You talked about the dealerships. I think the Volkswagen brand has about 3,000 dealerships everywhere in Europe.
Will there be adjustment during the crisis? Will you maybe take over other dealerships if there are major problems occurring? And on a potential scrapping bonus or cash flow clunker scheme, the view to the order of magnitude of the crisis, do you think this can be just successful as it had been 10 years ago in the financial crisis? Thank you. Answer Mr.
Witte. Good morning, Mr. Hetzner. Let me start with Audi. I alluded to it just before.
Basically, it's volume mix, it's prices, the volume development. And then we have the issue of derivatives, in particular, aluminum needs to be mentioned. If you take a look or if you imagine a chart of how the aluminum price developed in 1 quarter alone and in particular in the month of March, how cheap aluminum became. And of course, if you have hedges, then you can imagine what type of tremendous lever you have there. So the topic of derivatives and hedges were a major driver that had a particular effect at Audi's apart from the situation that it was pretty difficult volume wise.
So those were the major drivers on the fixed cost side. And also, I'd like to mention something positive. People did a tremendously tremendous amount of work and good work at that, but these types of developments cannot be completely be corrected. Christian Dailam is going to talk about the market and the potential scrapping bonus scheme. The thing with such an incentive scheme, we have good reason to believe that this is an instrument which will take immediate effect, which can take and have an immediate effect on customers' behavior.
So it is a big lever. And therefore, we believe that compared to alternative measures, it could actually be having some advantages as seen in the past, something which is important to us. And I think I can talk on behalf of many other OEMs, we need this pretty fast. We need quick decisions, hands on decisions, not too complicated packages and programs. That would be an advantage, which from our point of view would make a major contribution.
And thus, I would like to hand over to my colleague, Christian Dahlheim, who will talk about the market and potential packages. Mr. Dalheim, let's start with a question on dealerships. Yes, of course, your observation is correct and the dealership associations have talked about it without a good start and restart of the business world, major number of dealerships will have liquidity concerns. I've said in my contract that we gave help to dealers by prolonging payment terms.
This cannot be extended endlessly. For the next 3 to 6 months, we are well set up also together with our dealerships, and this brings us to a potential stimulus package. A powerful move forward is good, would be good. Dealerships can't survive for a whole year with the sales numbers as they said. Now on the basis of our forecast, we don't see that major insolvency situations will appear, but we'll see continued consolidation, which been started and will positively accompany.
A concrete question, will we take over dealerships? Let me give you a differentiated answer. First of all, we believe in dealerships as entrepreneurs, dealers as entrepreneurs, we do not have an interest in that. But with Porsche Holdings, Salzburg and our own retail companies, we do have an instrument in order to secure certain strategic sites. Should that be necessary, we do that and have that done so in the past.
And basically, on the packages system, could it be similarly successful? Just one number. In Germany alone, we have 21,000,000 cars, EU4 or older, 9,000,000 are EU3 and older. So at 1, we believe there are sufficient cars out there, which for reasons of the environment, we could reach out and take out of the market with such a package. And we believe that such a stimulus package would work with the reserved impetus to pay particular to buy in particular in Germany, we do need a stimulus for customers to go out and pay in order for them to be safe.
So we believe that this could actually stimulate buying behavior to have adequate sales packages with a CO2 incentive.
If anyone's interested in this topic, I'd just like to point out that the Economic Research Institute in Heller in 2019 2010 analyze the situation. So you can get some extremely interesting statistics from this campaign. I'd now like to switch to London to Peter Campbell from the Financial Times. Peter, your question, please. Three questions, if I may.
First on Chinese buying habits, for help reasons to stop things in public transport. Do you think that's right? And are you seeing any evidence in your early Chinese sales? And my third question is over products. Going to happen in your CO2 COVID this year over this year over the next year over the next year over the next year?
Thank you. Well, just to respond to your first question about Chinese buying habits. We believe there is a clear trend and it's that the premium market is jump is coming back much more quickly than the other markets in March certainly. So we believe things are more or less getting back to normal. We don't think that there's been any structural change in the body types.
So they're buying just as many SUVs as they did previously. There's been no real switch from one type of vehicle to another. And sales of electric vehicles are more or less at the same level as they were prior to the crisis in December. Now as such, the premium segment is returning more quickly, but the type of vehicle SUV, etcetera, is more or less the same. Now onto your second question, the return towards private transport, I believe this is correct.
We've conducted surveys and we've addressed exactly this question. And people will stop using car sharing, public transport offerings. If you have a look at these, these are things where you have to share a carriage or a vehicle with other people. You can see people are very reluctant here. So we do believe that this trend could result in people who don't actually have their own vehicle today might start considering whether they buy 1.
Now I don't know how strong, how durable this trend will be. We'll have to wait and see because you also have to fit in with the traffic infrastructure in any given city. But we do believe that there is positive momentum in this trend and this is something that we have observed in China. There has been increased retail traffic. Now the next question was about model launches.
We've got the Leon and the Octavia. They've been delayed. But in summer, as soon as the markets reopen, we will launch these vehicles. We do not expect that the launch of our core MEB vehicles, so the ID3, in this case, the ID4 and the Audi vehicles will be delayed. As I said at the beginning, we do not expect the sales figures for these vehicles to reduce.
And then I will go to Kuzey Foukal from Nikkei.
Kuzey Foukal from Nikkei. Would you ask your question please?
Thank you for my questions. I've got 2 questions if I may. 1st, please let me double check. So Mr. Vitter, did you say the operating profit in the second quarter would be positive or you mentioned just about per year profit?
And the second one is, I also would like to know about priority. So could you tell us what investment or project you are going to postpone or cancel if there are any if you have already decided? Thank you.
Good morning. Operating profit in the 2nd quarter will be negative. For the entire year, the forecast is that our operating profit will be positive as a group. That's what we assume will be the case. We do not yet have issued any detailed communication as regards the projects that we will be changing, this is going to be addressed in future operations.
Everything that is in the final status will be coming to an end. Christian Dahlheim has already mentioned that our priority is electric cars, which are very important to keep to the CO2 fleet targets. Of course, we are discussing measures for the pipeline of projects, be it possible delays or reduction of derivatives or various options. But the short term issues that we have will be finalized by us. All the rest would be negative.
Thank you very much. The final question, we have Stephen Wilmot from The Wall Street Journal. And if there were no further questions after this, then we would close the call. So I would thus like Stephen Wilmot to answer his question.
Good morning. Hi there. Hi there. Good morning. Good morning.
Two questions. One is you mentioned online sales as offering a path back to normality, which is compatible with social distancing. How does that work with your current dealer arrangements? Do we need a sort of transformation in the way that the OEM dealer relationships are structured to make that work more fully? Or can it be accommodated within the current contracts?
2nd question is, you've mentioned a lot about purchase incentives, cash for tankers, etcetera. Do you want those to focus on electric specifically, so battery cars? Or do you would you like the broadest possible incentives that would accommodate a wide range of vehicles of all sort of technology neutral stimulus as it were? Thank you.
So let me start perhaps with your second question, Stephen. Now there is there are support measures in place for electric vehicles. Now we believe that what we have that the modern combustion engines and fully electric vehicles is the correct path. When it comes to improving also reducing CO2 emissions, which is why such campaign, such programs would be applied to all of our vehicles. It's probably easier and also because for fully electric vehicles in some countries, there were already some programs in place.
Christian said that around 20,000,000 vehicles of EU4 or EU3 engines and they're still on the roads in Germany. The average age of the vehicle here is 10 years, which means there's no significant potential that can be achieved here. And especially for online sales, I will hand you over to Christian. Yes. Just to explain.
Firstly, when we speak about online sales, we're not saying that it will have solely online purchasing because the customers will either be able to execute either part of the purchase or all of the purchase online. This is a trend that has increased and due to the crisis, it is even more pronounced. But the actual purchase of the car will take place, it will be purchased from the dealer. You asked about the difference between the differences would make to the relationship between us and the dealership, I would say. Yes, the 1st April 2020 in Europe, we did sign new dealer contracts, so they became effective as of 1st April.
And we have clear rules about how the dealerships are compensated if the purchase is made online. The same applies to overseas markets as well, where the U. S. Market is concerned and sale always takes place from the dealership. And there is a clear rules there are clear rules surrounding how the dealerships are governed.
We don't need any new rules because we have them in place for how much margin they get if it's online. So ladies and gentlemen, thank you very much. Thank you very much for joining us this morning. We are seeing hello from the factory, which thank God has been resumed production. And we hope you have a very nice Maywalk weekend.
Thank you very much. Ladies and gentlemen, today's teleconference is now finished. We would like to say thank you very much for participating and hope that you have a lovely day.