Good morning, ladies and gentlemen. I bid you welcome most warmly to Wolfsburg. Due to the current situation, we've resolved this year to hold our annual media conference in the virtual world. Health of everyone involved is simply a greater priority. Kai von Westerwelle, for this reason, apologizes for not being able to come. I will stand in for him before going back to my family. Mr. Diess will first give an overview of the past financial year, and then Mr. Witter will drill down into some detail and give you the gist of things, and then Mr. Diess will come back and round things off. After the speeches, you can ask your question by phone. The whole board will be there to answer your questions.
Ladies and gentlemen, I too would like to bid you a warm welcome to the annual media conference of Volkswagen AG, which in light of the coronavirus pandemic, is taking place in an unusual format this year. Ensuring the health and safety of our employees and their families is the most important priority in this situation, and the primary objective is to slow down the spread of coronavirus as much as possible.
To that end, we at Volkswagen have also taken a number of measures. Given the present significant deterioration in the sales situation and the heightened uncertainty regarding parts supplies to our plants, production is to be suspended very soon at our factories in the near future. Production will be halted at our Spanish plants, Setúbal in Portugal, Bratislava in Slovakia, and Lamborghini and Ducati in Italy before the end of this week.
Most of our other German and European plants will begin preparing to suspend production probably in the next two weeks. Plants not affected until further notice will be announced as soon as possible. In China, on the other hand, with the exception of the plants in Changsha and Ürümqi, as I said, production has been resumed. That's what I want to tell you about the impact of the coronavirus on our production network. At the same time, we think it's important to tell you as we planned, what the development of business in the Volkswagen Group was like in the past year, and to give you an overview of the current situation. 2019 was a very successful year for the Volkswagen Group. In 2019, we turned in a strong operating performance and laid some vital groundwork.
The global automotive market contracted by 4%, which was the first time since the economic crisis in 2010, and it will shrink to less than 80 million units. Volkswagen Group, however, was able to substantially increase its sales revenue and increase its market share. Volkswagen generated an unprecedented level of earnings, and Volkswagen has never invested as much in the future as it is doing now.
All 670,000 employees of our company can be proud of what we have achieved. Thank you very much for their great commitment and the exceptional efforts and dedication they have shown for our company. The 7.1% increase in sales revenue was stronger than the deliveries increase, 1.43%. We sold better-equipped, more profitable cars at higher prices. As a result, we strongly improved the quality of our business. Operating profit was EUR 19.3 billion prior to special items.
The operating return on sales was 7.6%, which was slightly above our target quarter. The net cash flow was EUR 10.8 billion, which was substantially higher than it was in 2018. As a result, we have sufficient liquidity and the necessary substance to push forward in accomplishing our ambitious plans for the future. Ladies and gentlemen, most of our brands, regions, and business units in 2019 achieved progress in their operating performance, sometimes substantial progress. In absolute terms, the Volkswagen Passenger Cars brand improved the most, despite the huge investments necessary for the future, mainly on our electrification initiative and the Golf model change. Bentley, for the first time now after two years of losses, was back in the black. A streamlined efficiency program and higher sales as a result of the new Continental GT helped it achieve the turnaround.
Financial Services too also made a significant contribution to boosting profits, both in terms of financing and leasing agreements and in service and insurance, we were able to make progress. Scania further improved profit and return, and the new generation of heavy-duty trucks got off to a successful start. As a result, it is helping Scania solidify its reputation as the most innovative and profitable truck manufacturer.
Above all, the new generation of engines Allows these new trucks to reduce CO2 emissions by 67%. The new powertrain is now also going to be used by MAN in its vehicles. The new MAN TGX celebrated its global debut just a few weeks ago. That was the first major step in leveraging synergies between the two truck brands. The powertrain accounts for more than one-third of costs and one-off expenses in the truck business.
In 2019, Traton took a crucial step toward its future with its IPO, a key aspect in the unswerving efforts of Andreas Renschler and his team in their strategy to turn it into a global champion. The next step was when Traton made a takeover bid for the U.S. manufacturer Navistar. The U.S. is the world's most profitable market for heavy trucks. Škoda not only delivered an improved profit, but also assumed further group tasks.
For instance, overall responsibility in India. In the future, Škoda will produce and market new MQB models tailored to that specific market from its own brand and from the Volkswagen brand. SEAT was able to advance into higher price segments and attract new customer groups with its sporty sub-brand CUPRA and new models like the Tarraco. Porsche, too, further boosted profits and again posted the highest return at over 16%.
With the new Taycan, Porsche demonstrates the huge performance potential in electrification. It goes from 0 to 100 km an hour in 2.8 seconds. The vehicle is thus making a big splash with customers. More than 15,000 customers have already signed a purchase contract. Audi has held its own well in a particularly challenging situation. The new Audi e-tron was rolled out successfully. Audi has agreed and launched Audi.Zukunft, an efficiency program that will significantly boost its competitiveness. We will complete the new line-up on the Audi Board of Management under the leadership of Markus Duesmann in the coming months. I would now like to take this opportunity to again thank Bram Schot for his commitment and efforts in turbulent times. The Audi.Zukunft program is one of his great accomplishments.
He steered Audi in a professional and commanding fashion before handing over to Markus Duesmann. Ladies and gentlemen, in all regions, we are working intensively to revamp and revise our model range. We can see the success of this in South America with the new models based on our MQB platform. Models such as the Polo, the compact sedan Virtus, and the T-Cross are winning back market share there. In the autumn in South America, following its comprehensive restructuring and program and high upfront expenditures, Volkswagen was back in the black again. Further emotional models based on MQB, such as the Nivus, are to follow in 2020 and 2021 and will generate additional growth. We grew sales revenues in North America by 15%. Scott Keogh and his team aim to break even this year.
In particular, the Volkswagen Atlas and the Volkswagen Tiguan Allspace meet the tastes of our American customers. Half of our U.S. customers at the Volkswagen brand are already opting for an SUV. Two more SUVs will follow in 2020 and 2021, including the Atlas Cross Sport. Preparations for the ID.4, our first all-electric SUV, are in full swing. One of the plants it will be made at, starting in 2022, is Chattanooga in the U.S. In addition, a battery production facility is also due to be located there. Last year, the Electrify America fast-charging network made significant progress. It now has a total of more than 400 charging stations, meaning we're already number two behind Tesla and are therefore well prepared for our electrification initiative in the U.S. Like in India, Škoda has assumed overall responsibility for the Russia region.
We've been profitable since 2018 in Russia, which experience shows is a volatile market. Both VW and Škoda are gaining market share there. Two new entry-level models and further SUVs from the two brands are in the pipeline. The Chinese market contracted for the first time in 20 years by 6.5%. The Volkswagen Group grew deliveries by 0.6%, thus increasing its market share by 1.4 percentage points to 20%. The highest growth in market share in the entire group.
Our Chinese organization, led by Stephan Wöllenstein and our joint venture partners, are also to be congratulated on turning in a performance only slightly below the previous year's levels. I'm particularly pleased about the launch of our new young Jetta brand in China. With the Jetta models, which have been optimized for Chinese customers, we're competing in the most fiercely contested price segment for local Chinese manufacturers.
The first-ever car for four out of five customers is in this segment. We were able to become competitive, thanks to intensive work to cut costs, lower complexity, and to come up with new sales concepts. In short, the launch was perfect. Ladies and gentlemen. Strong brands, outstanding products, and a powerful global sales organization are the bedrock of our business. The success that we saw once again in 2019 depends to a crucial extent on the attractiveness and quality of our product portfolio.
We intend to stick to that strategy with our enhanced second generation MQB platform. The new product range will be inaugurated by the Mark eight Golf. The new Golf has won over the international and German auto press and ushers in the next round for our MQB. It boasts far lower emissions, sets the benchmark for fuel economy, and is far safer and much more digital.
It is quite impressive with its raft of new, sometimes much-improved powertrains. The latest diesel engines, new spark ignition engines with different power outputs, a CNG model, mild hybridization, two plug-in hybrid models, and a new GTI with three different power output levels. In 2020, the important sister models of the Golf will follow, the new SEAT Leon and the CUPRA Leon.
The fourth generation of the Škoda Octavia as a sedan or saloon, and as a station wagon or estate. In the premium league, the new Audi A3, initially as a sportback and later as a sedan. Key vehicles for each brand, highly attractive and well-differentiated. Audi is working to reinvigorate its brand promise, Vorsprung durch Technik. Successful models in 2019 were in particular the Q2 and Q3 compact SUVs, the Audi Q8 and the RS 6, the most powerful variant of the A6.
One Audi model of great importance for the entire group is the e-tron. The Audi e-tron proves that we have e-models that suit customers' taste in the premium segment. Since the end of 2018, we've sold some 32,000 of them. In Germany and Norway, which are currently the largest markets for e-vehicles, the e-tron was already the best-selling electric car in the premium segment, ahead of Tesla at the beginning of 2020.
Porsche has launched the sportiest e-car on the market, the new Porsche Taycan. The future of the car, ladies and gentlemen, is electric. We're introducing e-mobility starting from the premium segment. That's the most economical path. This year, we will advance into the volume segment with the ID.3 and the ID.4, based for the first time on our MEB, and further models from the Škoda, SEAT, and Volkswagen brands.
As a result, we are taking a major stride toward zero-emission mobility for all. Ladies and gentlemen, we are preparing for the challenges in the industry with our Together 2025+ strategy and profit improvement programs at our brands. In 2019, we laid many important foundations. The Volkswagen Group Components division has been an independent business unit since January 2019.
With sales revenues of some EUR 35 billion and some 75,000 employees, the Volkswagen Components division is one of the world's largest component suppliers. It is a division undergoing transformation. In no other area is the group's radical change greater. The transformation from the combustion engine to electric drive is taking place here in particular. As a result, key future tasks are now based at large German component production sites. Salzgitter now makes electric motor components and battery cells. The Components division produces battery systems in Brunswick.
Kassel supplies the entire electric drive to our vehicle production plants. The Components division of the Group will also be developing battery cells itself in the future in cooperation with the Swedish company Northvolt. This ensures that we can set the pace of technological development ourselves. The Group Components division is also tapping into new fields of business, such as producing and selling mobile charging stations and buffer storage systems.
It also takes care of repurposing the battery after it has been used in the car, and ultimately, the entire life cycle of valuable battery raw materials. Recycling, of course, is also a part of our end-to-end responsibility for the battery. We do not want to give away control of the battery and raw materials over its entire life cycle. A pilot recycling plant will be created at the Components division location this year in Salzgitter.
In addition, the Components division is working unswervingly to optimize its product portfolio by dispensing with uncompetitive products. Volkswagen Commercial Vehicles has taken a major strategic step by establishing its cooperation with Ford. The successor to the Amarok will be one of the first fruits of this collaboration. Furthermore, we've made the decision to integrate the Center of Excellence for Autonomous Driving, led by Alexander Hitzinger, with light commercial vehicles. Autonomous and partially autonomous mobility solutions for transporting people and goods will be created on the basis of the ID. Buzz. The stake we plan to take in Argo AI, a transaction we expect to close in the first half of 2020, will ensure we can leverage synergies in this very resource-intensive field of development in the race for the first autonomous vehicle fleets.
Ladies and gentlemen, because we aim to increase the entire group's authority, agility, and flexibility, we intend to simplify structures and complexity at many places throughout the company. We are doing this so that we can focus fully on the current process of transformation in the automotive industry and in commercial vehicles. We are uncompromising in our goal to seek new owners for parts of the company that are not among our core competencies. That makes sense for Volkswagen, and it's better for the strategic development of these units and at the end of the day, also for the security and viability of the jobs there in the future. That's why we intend to sell our majority stake in Renk.
We expect the transaction to be closed in the second half of 2020, and we continue to look for a meaningful industrial solution for MAN Energy Solutions, too. We also made decisions to improve our governance and reduce administration costs in 2019. Ladies and gentlemen, in taking stock of 2019, we should also include how we continue to deal with the aftermath of the diesel crisis. We were able to reach settlements in the proceedings in Canada, Chile, and Australia, among other countries. In Germany, too, we also recently were able to reach a settlement with the German Federation of Consumer Organizations as part of the model declaratory action it filed, and also thus reduce the number of individual lawsuits for the German courts to handle.
Furthermore, we were able to terminate the administrative fine proceedings against Porsche AG, conducted by the Stuttgart prosecutor's office by accepting administrative fine orders. More than 99% of the diesel vehicles with type EA189 engines in Germany have already undergone the relevant technical upgrades. We've upgraded more than 7.5 million vehicles worldwide. In addition, Volkswagen has undertaken to offer voluntary software updates for another some 1.5 million diesel vehicles in Germany, so as to reduce NOx emissions by an average of 20%-30%. It will soon be three years since the U.S. monitor Larry Thompson and his team began helping us to address the repercussions of the diesel crisis, and that team now numbers almost 200 members. Thanks to their work, we've entrenched truly far-reaching changes in our structures and processes.
They extend from the anonymous whistleblower system and strengthening of independent auditing to reclaiming compensation from management in the case of compliance violations. Thanks to the monitorship, Volkswagen has become a better, more transparent and more responsible company. In the future, it will not slacken its efforts to drive the improvements it has initiated in relation to its processes, culture, and responsibility. Ladies and gentlemen, 2019 was a successful year for Volkswagen, a year in which we set the course in many important strategic areas. Thank you.
Thank you, Mr. Diess, for your introduction and explanations. I'd like to ask our CFO, Frank Witter, to present the business trends 2019 in some detail. He will explain what has happened and give you an outlook on the business trends for 2020, in as far as that is possible. Mr. Witter.
Good morning, ladies and gentlemen. I'm very pleased to see you back at our annual media conference and welcome you. As you know, we've announced the key data for the 2019 annual financial statements at the end of February. Today, we've also now published the annual report. I will now explain our business figures in detail. Volkswagen, during this fiscal 2019, has closed with sound figures and stayed the course despite an environment which was a challenging one. Let me just mention the trade policy tensions, the intense competition which we felt in all our core markets, the cooling of the Chinese market, which is our second home market now, that has kept us on our toes, and the fundamental technological change within the entire sector and industry.
It is a good thing that the group sales revenue at EUR 252.6 billion were up 7.1% over the previous year and even above our expectations. Looking at the key drivers of this development of sales revenues, on the hard side, the positive effects here we have for the entire year coming in the mix, the type mix, which made a positive contribution. We also sold higher unit volumes, and there was a very strong business growth in the financial services division. Negative impacts were the exchange rates, particularly in Latin America and Turkey. Positive effects from the U.S. dollar could not overcompensate these negative detrimental effects. We had a 13% improvement of the result to EUR 19.3 billion, EUR 2.2 billion higher than the pre-year financial 2018.
Before special items, the operating return on sales is 7.6%, which is even above the 6.5%-7.5% corridor, which we'd forecast despite the difficult environment. It has been and will remain be our Strategy 2025+ target to achieve all our milestones. When it comes to operating profit as a development from 2018 to 2019, you see on the left-hand side the passenger car division.
Here, particularly the volume mix and prices area was very positive at EUR 3.7 million, and this was a main driver across the year. At the end of the day, also, we made headway with product costs, saving EUR 0.6 billion. We had some headwinds. The entire year was volatile. When it came to exchange rates and derivatives valuation, at the end of the year, we had EUR 0.2 billion influences and higher fixed costs, which we expected, at EUR 2.8 billion.
This is due to depreciation on high investments or amortization of the high levels of investments into technology and plants from the previous years, and also in the income statement, we had a higher charge stemming from development costs amounting to EUR 1.1 billion. This is exactly about the electrification, CO2 measures, and digitization, interconnectedness of the vehicle and of the group. These investments come in here.
Commercial vehicles were a very pleasurable development here at EUR 0.5 billion above the previous year. I'll provide further detail when explaining the brands later. Operating profit at Power Engineering division, very difficult environment. Operating profit on par with the previous year. Financial services, not just positive when it comes to sales, but EUR 0.4 billion above the previous year. Despite the persistently challenging environment, we were able to improve the operating profit of the group before special items to EUR 19.3 billion, fully meeting our expectations. Unfortunately, in fiscal 2019, again, we had negative special items from the diesel issue.
Although they dropped by EUR 0.8 billion, they were still at EUR 2.3 billion in our books, having to be recognized mainly from legal risks and legal defense costs and also the administrative fine of EUR 0.5 billion of the Stuttgart prosecutor against Porsche, and the model declaratory action cost us EUR 0.8 billion as well. Let's now move on to an overview on the individual brands. You'll find more detail in the publication of my colleagues in the brands.
As my colleague, Mr. Diess, mentioned, the operating profit in passenger cars was very good at EUR 3.8 billion. We're making headway towards our margin of 6.3%, 4.3% at the moment. This is 0.5% improvement over financial 2018. Of course, mix improvements come in as well and price improvements, particularly where it was necessary because of the exchange rates. Unfortunately, unit sales dropped by 1%, slight decline.
The ramp-up costs for the important future projects, for instance, the Golf 8 and the ID.3, and also the exchange rates had negative impacts. For Volkswagen Passenger Cars, EUR 1.9 billion special items on par with the previous year, 2018, had to be factored in. Audi knew that the first half of the year would be the stiffest ramp. They had EUR 4.5 billion, 2% lower than the figure of the prior year. Operating profit before special items, improvements in the mix and product costs had a positive effect, as did the Audi transformation plan and the consequent Audi strategy. These are important factors when countering the headwind. Nevertheless, higher upfront expenditures for products and technologies had to be factored in, and as with VW Passenger Cars, the exchange rate negative impacts had to be digested.
The operating return on sales, slight improvement to 8.1% after 7.9% the previous year before special items. Škoda brand improved its operating profit, very strong, EUR 1.4 billion in 2018 to EUR 1.7 billion. The rise in unit sales to over 105,000 vehicles had a positive impact, as were positive mix effect and pricing measures helped cost increases for upfront expenditure for new products had a negative impact.
The operating return on sales at 8.4% is a tremendous achievement, again, 0.4% better than in 2018. SEAT, in terms of the leapfrogging ahead, is our world champion at 75% improvement in operating profit at EUR 445 million. Volume and mix effects had a favorable impact. Another reason were the models Arona, Ateca, and Tarraco being very popular SUVs with the customers. With the SEAT Mii electric, we've got the fast stand production electric model at the SEAT brand.
The operating return on sales was improved by 1.4% over 2018 to 3.9%. Bentley. Very interesting to see the change that has been worked towards. You can see how difficult 2018 was. It's a positive thing to say that we're in the black figures again. We have EUR 353. The previous year was EUR 65 plus. We had minus EUR 288. We are now selling more units and cost savings that the team has not only planned to do, but was able to deliver on.
Mix and exchange rate effects were positive contributions as well. The operating return on sales rose to 3.1%. At least it's in the black again. Porsche Automotive. The first quarter was going to be difficult because of availability issues, but then the year ran extremely well for our colleagues in Stuttgart. Operating profit could be increased to EUR 4.2 billion.
Operating return on invest at 16.2%, slightly lower than the previous year, but we're quite pleased with that. Volume and mix were the main drivers. Optimized product costs, an achievement of the Stuttgart team. Exchange rate effects and cost increases, particularly for upfront expenditure, had a negative impact. The diesel issue negative special items were EUR half a billion. The previous year, we recorded none. Commercial vehicles.
A very strong first half of the year. The second half was marred by availability issues because in commercial vehicles, WLTP hit the manufacturer a half a year later than in passenger cars. EUR 780 million operating profit after a strong 2018 at EUR 780 million, we now have EUR 510 million. The improved product costs could not offset the higher development costs. WLTP is something I mentioned already, but we still have an operating profit of 4.4%.
Scania, the generation, we've moved on to the new truck. The result is 24.8%, an increase to EUR 1.5 billion. Higher vehicle unit sales, also a very important and strong genuine parts and services business have contributed, as did improved mix and exchange rate effects, which were a tailwind, so 10.8%. That's a strong margin after the 9.3% in the previous financial year, 2018. MAN Commercial Vehicles, also positive. We've made headway at EUR 402 million operating profit after EUR 332 million in 2018 financial year. Higher unit sales have helped us, and the recovery of the business in Brazil after the long crisis have recovered. Despite of this, we had needed to factor in that the previous year had a burden from the restructuring in India. We have 3.2% operating return on sales.
That's not entirely satisfactory. We'll have to discuss further measures with our partner on how to set business at MAN to an even more robust footing. Volkswagen Group China, who I believe Herbert Diess has already mentioned, can be proud in this environment to have sold 4.2 million cars in this area. That's another rise of 0.6%. That is an achievement. It has become our second home market.
The most significant individual market in the group with 40% of unit deliveries of our vehicles there. In this difficult environment, the quality of our brands, particularly Porsche, Audi, and Volkswagen Passenger Cars, has generated returns, and our market share has improved again to 19.8% after achieving 18.4% in financial 2018. Of course, operating profit attributable to our joint ventures at EUR 4.4 billion, which is marginally below the already record year of 2018.
It's a tremendous achievement, and the operating profit of our joint ventures are obviously not part of the bottom line of the group, the operating profit, but they have a profit impact at equity in the financial result. Financial services are a very important part and parcel of our group earnings. A strong brand, and it makes an operating profit contribution. We are very pleased with the 13.3% with a record figure of EUR 3 billion, achieved mainly driven by the strong business growth here, but also cost-cutting programs, which are gaining traction. Now on to the financial result, to the group's financial result. At in sum EUR 1.7 billion, EUR 300 million short of the last financial year. The important factors contributing to this, the equity result at EUR 3.3 billion, is exactly on a par with the previous year level, which was healthy.
The interest result deteriorated by EUR 1 billion due to interest expenses, which rose due to three drivers, a higher refinancing volume needed, the accrual of provisions, which are interest-geared, and from January, we have the IFRS 16 effect, which is the leasing interest, which has to be factored into the financial result. The other financial result is volatile.
There are valuation effects which need to be factored in, and the securities and fund result is very positive, contributing good figures. Let me summarize the highlights of the annual financial statements. The operating profit of financial 2019 at EUR 17 billion, even after the already mentioned special items, is at a very high level. As we explained, the financial result totals EUR 1.4 billion, pre-tax profit at EUR 18.4 billion was higher than the EUR 2.7 billion of the previous year earnings before tax.
The tax rate was 23.6% compared to 22.3% the previous year. Earnings after tax increased to roundabout EUR 14 billion after the EUR 12.2 billion in financial 2018. If you need any details or figures on those figures, let me refer you to our investor relations internet website. You know from the previous years that with the ROI, we've created a value-based management concept. It is the operating result after tax in relation to average invested capital. You know that the Chinese joint venture are factored in on a prorated basis. The ROI in 2029 rose. First of all, we had invested capital, which increased significantly. We had the IFRS 16 effect, contributing roundabout EUR 5.5 billion, and additions from CapEx and capitalized development costs had to be factored in. Higher invested capital.
The higher operating profit overcompensated that, so to speak, so that the ROI after 11% in 2018 was improved in financial 2019 to 11.2%, which puts us on a course to achieve our targets of our Strategy 2025+. On to the financial situation of the automotive division, internally and externally both. One of the, if not most important, key indicator is net cash flow, which are sales revenue minus the payouts and tie-up of capital due to increasing investments and inventories. At EUR 10.8 billion, net cash flow, as forecast, was considerably higher than the previous year. The higher earnings, of course, lower cash outflows from the diesel issue and the lower rise of inventories have created the biggest positive impacts.
Looking at net cash flow, usually adjusted for the diesel payments and M&A activities, merger and acquisition, the net cash flow of the automotive division was at a proud EUR 13.5 billion. Net liquidity. This is hardly a surprise of the automotive division, is materially affected by the net cash flow. In addition to this, there were further factors which should be mentioned at this juncture.
First of all, the inflow of cash from the IPO, the initial public offering of Traton, created a positive contribution of EUR 1.4 billion. The dividend payment of EUR 2.4 billion to the shareholders of Volkswagen AG rose by EUR 0.5 billion year-on-year of the previous financial year. That's a negative effect. Settlement payments and the purchase of MAN shares offered for sale amounting to EUR 1.1 billion had a negative impact. Of course, this is also added.
It's the effect from IFRS 16 provided EUR 5.4 billion in negative impact on the recognition of net liquidity. This is not an effect with a bottom-line impact. It's only a recognition thing and an accounting thing. At EUR 21.3 billion, net liquidity from the automotive division remains very sound and is again EUR 1.9 billion above the level recorded at the beginning of that year.
Capital expenditure was higher. We knew that in 2019, a lot of upfront expenditure in CapEx in new technologies was needed. EUR 14 billion, or EUR 2.8 billion up on the previous year. A lot of investment into securing the future production sites and the new models such as the Golf, Atlas, Audi A3, and for Audi e-tron, Q3, A6, A7, Porsche Taycan, the Bentley Continental series are just some examples without listing a complete major investments sites.
It just shows that we're investing in our future. The CapEx ratio at 6.6% was on par with the previous year and the lower end of the corridor projected of 6.5%-7%, which we planned for. Primary research and development costs came EUR 0.7 billion in over the previous financial year, 2018, at 14.3 billion EUR. They were incurred mainly as a result of new models being developed, electrification of our vehicle portfolio, and an efficient range of engines, also IC engines, and digitalization interconnectedness. That of course required major expenditure. Our R&D ratio at 6.7%, though, was still below the previous year and within the forecast range of 6.3%-7%, of course. Ladies and gentlemen, the profit contribution to Volkswagen AG shareholders is at EUR 13.3 billion, up from the EUR 11.8 billion in 2018.
Basic earnings per share totaled EUR 26.6 per ordinary share and EUR 26.66 per preference share. The board of management and the supervisory board are delighted to propose to the shareholders a dividend of EUR 6.50 per ordinary share and of EUR 6.56 per preferred share. This is, ladies and gentlemen, an increase of 35% of the dividend, and the payout ratio thus rises from 20.4% to 24.5% for financial 2019. We stress that our strategic goal remains a payout ratio of at least 30%. The annual general meeting of Volkswagen Aktiengesellschaft is scheduled to take place on May 7th, 2020 in the CityCube in Berlin. We are all aware of the complicated situation, and we are intensively speaking to everyone involved and also the authorities and will make preparations and we will keep analyzing the situation.
The figures of the financial year 2019 prove that we have worked hard for a position from which we can successfully shape the transformation of Volkswagen Group amid this continuing challenging environment. The years 2020 and 2021 will be decisive for us and are linked to several challenges, such as the adherence of the CO2 limits in Europe, for instance. Moreover, there are further challenges such as the volatile commodities and products markets, for instance, in the first two months of this year, but also geopolitical tensions, which are persistent. Although at the moment people are focusing on different news items, we need to keep track of these geopolitical tensions as well. Ladies and gentlemen, of course, all over the headlines is the spread of the coronavirus.
The impact and the duration and severity of this pandemic is uncertain, and it is virtually impossible to give a reliable forecast of our financial year. We're in task force mode, and we're leveraging all measures to keep our employees and their families safe and to protect them, and also to stabilize our business. I'll be happy to take your questions after the presentations. Back to Marc Langendorf.
Thank you, Mr. Witter, for your presentation. Before we begin with Q&A, the operator will explain the process to you on the telephone. I would like to take this opportunity to give the floor to Mr. Diess to address the main challenges for this fiscal year.
Ladies and gentlemen, with regard to the new CO2 targets in the European Union, 2020 is a watershed year. As of now, the stringent new regulatory requirements apply. By far, the most efficient way to meet fleet targets is through profitable electric vehicles and in the premium segment in some markets, also with plug-in hybrids. With our product portfolio, we are well-positioned to tackle 2020 and 2021. All in all, we will have 15 electric models and 18 new plug-in hybrids in the marketplace. The electrification of our fleet is thus now underway. Sales of these models has already gathered significant momentum in the past few weeks. The order backlog for some of these vehicles already extends beyond the middle of the year. Our efforts are focused on the supply of batteries and our demanding new product launches.
In order to secure our return targets in spite of these endeavors and uncertainties, we will also use these two crucial years to leverage synergies in the group to far better effect in terms of plant capacities, common parts concepts, brand management, and in reducing redundancies. At the same time, we are tackling the current greatest challenge. The car is becoming a complex internet device, generating data and using data.
Yes, it is true, the number of mobility offerings as an alternative to the private car is growing, in particular in urban areas. Will they be able to replace the car in the foreseeable future? Will car-sharing providers and their platforms elbow their way between us and our customers? They will try to do that and keep on honing their business models. We are convinced that the car has a great future.
There is no other means of transportation that meets such a wide range of different mobility needs in such a reliable, flexible, and convenient way. It is a promise of individual freedom for millions of people. In addition to that, the car is changing at an extremely fast pace. It is becoming electric and thus producing zero emissions and becoming sustainable. Moreover, the amount of electricity that the entire fleet needs represents a constant and reliable demand that will help drive the energy transition.
The car is becoming highly connected, always online, and thus far safer and even more convenient and comfortable. To ensure that Volkswagen continues to play a leading part in this radical transformation, we must create the conditions so that the automobile can be run as an internet device with constant software updates and a growing number of new services.
Our fleet will become both a generator and user of huge quantities of data, helping ensure that vehicles keep on learning to drive better and better. To operate successfully in this area, too, Volkswagen needs to substantially strengthen its software's expertise. To build that up, we are making strategic acquisitions, entering into strategic partnerships, and also clustering our expertise within the group. We've already taken some initial steps by taking over WirelessCar and diconium, by cooperating with Microsoft to establish a cloud-based platform, and with our Car.Software Org, which pools our digital expertise throughout the group.
Since the beginning of January, the 1st of January, the organization has been up and running under the leadership of Christian Senger. It brings together some 3,000 IT experts from our group's holdings and subsidiaries, and that number is expected to rise to more than 10,000 digital experts by 2025. Implementing this plan is a top priority. Ladies and gentlemen, to recap, in 2019, Volkswagen laid the vital groundwork for all key changes. 2020 is a very difficult year.
The coronavirus pandemic means we're facing unknown operational and financial challenges, and at the same time, there are concerns about sustained economic impact. In our most important market, China, the situation, though, has now stabilized. With a few exceptions, our sites there have now resumed production. Deliveries are growing once again in March and are slowly beginning to normalize. The crisis in Europe and worldwide has yet to come.
We can fall back on what we've learned in China in terms of hygiene and organizational measures. We are temporarily reducing capacities and securing logistics chains. Our focus is on protecting our employees and their loved ones. We are doing our utmost in close cooperation with the authorities to master the crisis. We will succeed in overcoming the coronavirus crisis in Europe and the rest of the world by pooling our strengths, cooperating closely, and keeping high the morale in our group. Thank you.
Well, ladies and gentlemen. Thank you, Mr. Diess, for the opening statements. I will now open the floor for questions. The operator will have told you to press asterisk one to put a question to one of our Board members. We've expanded this round here for reasons of this unusual situation. Mr. Sommer, responsible for Procurement and Component Manufacturing, will join us on stage. Gunnar Kilian is here. He's Head of the Task Force in addition to his other responsibilities, the Task Force on the coronavirus. I believe probably most questions will pertain to these topics, and the other Group Board members are also joining us via telco. One good tradition will be continued, however. The first question will be asked by Henning Krogh from Automobilwoche, the car mag.
Ladies and gentlemen of the Volkswagen Group Board, thank you for not organizing this as a FaceTime meeting. Corona concerns us all. VW, as the world market leader, is taking precautions rightfully. My question is, Mr. Diess, corona will generate EUR billions in burdens for the mobility industries. Do you consider to stop paying the potential CO2 fines to the EU? Mr. Blume, if you're there, and Mr. Brandstätter, when ramping up ID production, every week and every day counts, also in R&D. Could corona cause temporary shutdowns?
Will VW hold on to its statement that you will launch this BEV in summer before September? When you were speaking, Mr. Diess, I was joining the telco when you were speaking. Will the AGM be a FaceTime event, a physical event? When will you decide whether to organize the AGM on the internet exclusively? The last question goes to Mr. Kilian. Do you expect that after the restart of the production of VW plants, there'll be bottlenecks in parts supplies because the suppliers can't provide? Will there be short work in the VW plants? Can you exclude that VW will file for state subsidy to help its employees?
Mr. Diess if you would care to start.
Well, I'll start with the questions directed to me. Yes, I've heard that in this industry there is this discussion. We are prepared for that, and we are getting close to achieving our fleet targets. The electric vehicles are selling well. The order book is good for both BEVs and PHEVs. Of course, it's very difficult to foresee and to forecast how the mix will change in such a difficult year such as 2020 and the way customers decide.
We do not expect that we will have to divert from our fleet targets. Temporary shutdowns, of course, there will be some. However, we'll focus on the outstanding R&D development work for the ID. This is fairly independent of what happens near the production plants, we continue to believe in the launch of the ID.3 in summer. On the AGM, Mr. Witter?
Yes, I'll be happy to take that question, says Mr. Witter. Good morning, Mr. Krogh. We're planning the AGM for the 7th of May. The stock corporation law obligates us to have a face-time meeting on May 7th. The preference, of course, is to go online. We are considering the situation, and we are considering the information need to be satisfied for as many people as possible using digital channels. However, we must organize a face-time meeting, a physical meeting, whether we can do it on May 7th, we cannot foretell yet because developments are underway. Parts supply, the last question, and possible state help for this. Well, just very quickly on parts supply. At the moment, from the experience of China, we've been able to keep our parts supply secure. We are secure this week.
We are working from day to day with the supply chain and with the increasing difficulties and problems of the logistics transportation in Europe. It becomes more difficult. We are expecting interruptions in the supply chain next week.
I'd like to build on that, Mr. Krogh , if I may. Both the distribution situation and the supply of our plants with parts, as Dr. Sommer has just explained, are in close scrutiny. Possibly we will apply for state funds.
The next question is from Jan Schwartz from Reuters.
Thank you very much. A lot of questions have been asked, answers given. Your forecast is something I'd like to hear, whether you officially not standing by it, because it still is in the documentation. What with the effect of Corona, this cannot be kept up. The production interruptions, considering these, you said most plants in Europe and Germany of VW. Does that concern the other brands as well? Are there exceptions to this? I'd like to know what about the Turkey plant that surely is on the back burner. I'd like to get an assessment here. Last point, with energy solutions, you said you're looking for an industrial solution. Exceeding this, are there divisions or areas which you are focusing on now more to improve your financial clout?
Perhaps I can begin with the outlook for 2020. Yes, Mr. Schwartz, that's correct what you said. Currently, a reliable forecast isn't possible because above all, no one can estimate how severe it'll be and how long the Corona situation will last.
As a result, it's quite obvious that right now we're in the task force mode to secure our facilities, taking care of employees, stabilizing business processes, and liquidity is important, too. Another point is what Dr. Diess mentioned, the situation in China. There, there are indications that the situation is improving. We don't know how long that will last, but it's important that all of these measures that are being taken, some of them are quite drastic, must have the necessary effect, and then that we can look for some positive signals whenever they may be.
Therefore, for 2020, well, we can say we don't want to completely write the year off, even though right now it's not at all foreseeable as to whether the forecast that we made at the end of February can be achieved, in particular with regard to the assumptions regarding Corona. We want to get through the year as best as possible. Our priority is, of course, our employees, their loved ones, families, liquidity, and business processes.
Yes, the second question was the Turkey plant says, Mr. Diess. The need for additional European capacities still does exist. The Passat has been taken out of Emden. With regard to Turkey, we have another fallback option in Eastern Europe. As a result of the shift of Euro seven requirements to a European level, we have a little more leeway with this decision, but in the next few months, we will make a decision on that new site. Then there was a question about additional corrections with regard to our portfolio. In principle, I can say that the strategic work in the group is continuing, even in this critical environment.
Of course, we're going to be reassessing the timescale, then liquidity and cash position in the group will be taken into account, too. There was a question about the individual plants and brands.
Gunnar Kilian. Well, Herbert Diess said when he began that basically since the 2nd of January, let me give this general explanation. We've been working in the task force mode, we are, of course, closely working together with our colleagues in China on Corona and the measures agreed on for that. Now how we proceed from here with our different plants and in the brands is something that's being handled by the group task force. As Herbert Diess said, during the course of the day, each of the brands will be providing information on how step by step they might be stopping production and planning to do so.
Okay. Thank you.
The next group of questions, Christoph Rauwald, Bloomberg.
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[Non-English content] Respond to and take advantage of and we still believe that capital markets will still be open even though the current credits spreads currently have run out, but we believe that we have the necessary measures that we're going to focus massively on ensuring that the outflow of liquidity is reduce to a minimum, but of course, we do have a fix cost that are substantial as well that we got preparing.
Now with regard to M&A activities, I can say that of course a situation like this makes me to have a cool look. Keep a cool head and looking at this situations, when are we wanted to change our portfolio? Of course we never do at any cost, and it's important assure that assets that we do believe our valuable shouldn't just be shed at any price are we going to focus on ensuring that we get good prices. Currently of course our market is in special situation, which means that, the evaluation, repriotization definitely a necessary.
Thank you. Next question Nord Landesbank NDR .
Thank you very much for the opportunity to put questions. I am still a little surprised at how quickly you want to shut down several European plants. Of course, the question arises on the possible financial risk entailed. The federal government has made it clear that they will put their weight in favor of the companies and OEMs, both the small and the large ones. My question is to Mr. Diess: Do you feel that the measures of the federal government are enough to offset the losses, or would European help measures be necessary and to have to be more substantial to be adequate to meet the crisis? Which plants will be shut down? Is my second question. When will the employees be informed? Will plants be closed today or will that begin on Friday only?
Mr. Diess answers. First, I'm pleased to learn that both at a European level and from the German government, we have heard quite clear commitments that they were ready to assist companies which were in trouble because of the Corona crisis, although they have good business cases which really work, that they would be assisting them. Please bear with us that we do not have a finished plan on the table for this sort of thing. The priority is to shut down the factories, to slow the spread of the virus at the right point in time, not too early and not too late either. We're in this process in Europe. That's different, of course, from region to region. In Italy, as you may imagine, our plant have been closed already for days and weeks, sometimes.
In Spain, at the beginning of the week, we shut down our main production facilities. Not everything, but the main facilities, and we're currently in discussions on how we will roll this out through the group this week and next few days, but in a well-controlled manner. Bearing in mind the logistics chains and the inventories, the plants will be slowly shut down. In conjunction with the works councillors and the different plants and sites. We have a huge number of plants and sites. These shutdowns beginning next week and then for the next two to three weeks in Europe will come about. The overseas factories, we don't see the critical situation there yet for any of these. We feel that this will be a systematic and well-considered procedure.
First, of course, in Germany there is regulation, there is shorter working hours compensation, and we are shutting down the plants because of the contracting demand, and we will work shorter hours, and we will be able to bridge this with this compensation for the short-time work in Germany and for Europe. This would lead too far if we were to discuss all the rules and regulations governing these situations in every country. The financial risk, from my point of view, cannot be assessed yet. That will depend on the duration of the crisis, of course, and of what will happen to the economy after the crisis. Our biggest exposure, and this was mentioned time and again, is China, of course. There we have the largest market share. We are the biggest car maker by far in China.
There, we were able, in coordination with the companies and the government, we were able to restart the economy. Sales are starting again, the showrooms are open, and customers are buying cars again, which shows us that with a good crisis management and good coordination between politicians and companies, corporations, even a dramatic crisis such as Corona can be managed. We are confident that we'll be able to do that in Europe as well.
Angelika Slavik from Süddeutsche has the next question. Ms. Slavik, are you there? She is not asking a question. That would be a first. Well, then we'll move on to Mr. Schmid, Sebastian Schmid from Die Börsen-Zeitung. Let us move on to Sebastian Schmid from Die Börsen-Zeitung. Ms. Slavik is not audible. Maybe we can move on to the next in line. They're working on it. It's a classical situation.
They're trying to play for time, of course. My apologies. It's the first time that we're having a virtual annual media conference. We're not sure what the reason is or why we can't hear any of those asking questions. We're waiting for an information on our phone system. Due to the number of people working from home office, we need dramatically more bandwidth. Of course, we saw this last night when we held conferences, so we'll have to prioritize things because our annual media conference is, of course, important. Good. We'll move on. This is an English question. Please answer in German, although the questions are put in English.
May I ask a question?
Okay. Yeah.
Hello, can you hear me?
Yes.
Hello.
Yes, we can hear you.
Hello?
They can hear you. You cannot hear them.
I can hear you.
We can hear you. Please ask your question.
Okay.
They can hear you. You cannot hear them.
Okay. Can you hear me?
Yes.
Yes.
I've got two questions. Question one, do you still hope the ongoing decline of demand in Europe will be offset during the year? And/or will it take several or more years for it to normalize? My second one is the kind of follow-up question. Does the current corona development force Volkswagen to delay its electrification target in 2028 and the five-year investment plan?
To forecast unit sales for the rest of the year is surely very difficult from where we stand today. This will be a function of how quickly we can overcome the crisis, how long it takes, and what economic stimulus action is taken. Compared with China is coming back. Our scenarios assume a slight decline, 3%, 5% as a middle assumption for this year, 2020. For Europe, however, I believe it is too early to make any forecasts and assessments.
Nevertheless, I believe that when the crisis can be overcome as quickly as people did in China, we may expect a recovery in Europe after the crisis and a recovery of the markets as well. I believe we should expect that. How long the crisis takes surely is a big unknown here in Europe. Volkswagen delay, we have no delays. We stand by our electrification plan and push. The ramp-up of the MEB cars will take place this year, and we will not need to reprioritize our investment into electrification.
Thank you. The next question comes from Philippe Munier.
Okay. I have two questions. One question is regarding the Volkswagen Group Components. Which percentage of sale do you plan to have outside Volkswagen Group? Would you say that you are comparable to Hyundai Mobis? My second question is about user interface. I understand that user interface are becoming more and more important, including head-up display. My question is, how do you see the future of user interface and head-up displays?
Components business. Our components business only has very low volume sold to third-party customers. Engine supply contracts and some components, that is not a major share. That will change with the marketing of our MEB, our electric platform. The components of the MEB toolkit are made in our own production sites as part of our component manufacturing division. In 2023, there will be a serious third-party customer business based mainly on the new technologies, however. Of course, it's in our interest to generate additional scales through component manufacturing, which we will share with third parties, of course. Dr. Sommer will probably have a few remarks on this to complement this.
The head-up displays and the user experience inside the vehicles, of course, constitutes a core competence for us. We have different user experiences in Porsche, different from Audi, different from Volkswagen. That's a function of the vehicle type. Head-up displays play an important role here, particularly with MEB, our electric vehicles. We are getting an augmented reality head-up display in the volume segment.
Surely, there will be displays and ways of interacting with the vehicle are a big differentiator in the car of the future, particularly when it comes to communication from the car, distraction-free, to be able to work on emails, for instance, during the phases where the cars will be able to drive more autonomously and a lot of voice control will be done. User experience is a central research and element and differentiator for us, and we will continue to forge ahead here.
Thank you. We're still having some problems with the technical transmission. At least one of the lines is having trouble. Ms. Slavik was nice enough to send in her questions via text. I'll read them to you. She has two key questions. I hope you can hear the questions or the answers, at least, Ms. Slavik. You said the telephone system doesn't love you, but I apologize in any case for the current situation. First question, Ms. Slavik, how long would Volkswagen be able to hold on in a complete shutdown of the European market? Question two, how is the board of management protecting itself to ensure that Volkswagen is going to continue to be able to act, even if there is a COVID case on the board of management?
Apart from that, I'd like to call upon journalists to just send me a text with their questions if they have any, or they can send me an email and then I can read them up here. I'll begin with Ms. Slavik's first question. The one thing is Europe, and the other thing is other markets. With regard to the question as to how long Volkswagen would hold out, well, there are so many different assumptions we'd have to make there that we couldn't be serious in giving an answer now. Of course, our cash flows depend to a great extent on Europe, but not just on Europe. Mr. Diess also said that in China, in March, there are strong signals that the market is picking up.
Could be something like EUR 800,000 to a million , getting back to that, even though in February, the figure was extremely low, EUR 250,000. We've got a good net liquidity basis in the automotive division. We have a broad range of funding and refunding measures and options available. Of course, we're also optimizing our outflows from the company. As a result, it's very important for us to work in a focused fashion, but not to be too overly concerned. It's important to keep a cool head now and make sure that the measures, and we do have a lot of measures, should be taken to secure our liquidity. We've got to do this, and we have no doubt that these tools will be available to us according to everything we know today.
Mr. Diess says, second question, how is the Board of Management dealing with corona in our daily activities? Well, we heard very early from China about what should be done, and we're doing that. As you can see, we on the Board of Management are keeping far apart from each other. A lot of our discussions have been switched over to video conferencing, telephone conferencing. This is working quite well, and it's also good practice for all of us. With regard to travel restrictions in the company, I can tell you that, for instance, quarantine times apply to anyone who comes from a crisis area. These things apply to the Board of Management, too. In addition to that, the presence in our offices has been substantially reduced.
A lot of us have changed over to home office work, our cafeterias have now been changed over to lunch packets, and in the weeks to come, this will be done in all of our factories, too. We're basically implementing all the things we've learned in China and what our specialists, our company doctors and so on, are proposing in order to make sure that the spread of the virus is as slow as possible. I think so far, we are all still able to work quite well. In terms of travel activities, well, I can see that it's astonishing that we realize that a lot of things, a lot of our work can still be done without having to travel. Of course, our video conferencing activities are helping us take care of our work. Thank you.
Next few questions, one from Edward Taylor from Reuters first. He has three questions, actually. First question.
On the industry consolidation. Second question is could this accelerate or delay plans to win control over the China joint ventures? That's basically it.
Please go ahead and answer the questions.
Mr. Diess says, yes, first of all, the virus, of course, is impacting all companies in the same way, just as severely. Nevertheless, we believe that in China, we are a bit ahead because in China, we've got a market that is recovering perhaps a little bit faster than others in this phase, and they might have a bit of a lead in that. As a result, we might have a bit of a lead there.
Making a prediction about what impact this will have on a shakeout in the industry, that's difficult. In China, we don't see any major disruption of the relationship with our joint ventures. Nevertheless, we are interested in and would like to continue to expand our position in the joint ventures in China. We've got three joint ventures there. We are considering our investment plans in order to see how we can continue to strengthen our position in China. This is completely irregardless of the crisis.
Next question, Martin Murphy from the Handelsblatt. He would be interested in how the board of management has so far looked at the crisis management of the German government and at the European level. What is their judgment there? Second question, further assistance and subsidiaries, are they necessary above and beyond the short-time working subsidies? Third question, the works council. In a letter that was published, the works council criticized the fact that the factories are not going to be closed until Friday. What is the opinion of the board of management on this? Well, sure. Go ahead. Mr. Kilian.
I would like to begin right away with the last question. That is stopping our factories as of Friday. Of course, I received and read the letter from the works council. Let me state here this. I mentioned previously that since the 2nd of January, we are in task forces and are working on task forces around the world to come up with the appropriate measures for the Corona situation. I think at Volkswagen, we have been quite convincing in our reactions.
We see that in the case numbers very early, very systematically, we reduced business travel to the essentials. Corona cases in the entire group in the entire world so far, only number 25. In Wolfsburg, for instance, we only have three cases. Two of these people came back from a private trip. They weren't even in contact with anybody in the company, in the factory.
There's one case we had in the factory that we sent a number of people into quarantine as a result of that. We've been acting very systematically in order to protect our workers, and that's our focus. With regards to the production programs at the factories, what we're discussing here, in particular with our colleagues in the sales division and in purchasing, to see how the market situation and the supply situation at our factories is developing.
Today, we're going to have further meetings, and then we will announce via the brand when we are going to be shutting down the factories. We're also doing this with great responsibility for the logistics change out on the road. We're going to have an orderly process to shut down the factories. Of course, this will be done in close coordination with the works councils.
Mr. Diess says, crisis management of the government, the governments. In China, everything is very focused. We're used to logistics crisis management there. It was very successful in China. In Germany and in Europe, it won't be possible to do it that way. Nevertheless, I do believe that the German government reacted in due time and is doing it systematically and consistently. I hope that people understand that things will be done synchronously everywhere because the risk situation and the progress of the crisis varies, and the health systems, medical systems in different countries varies. It's an important subject. Crisis management. It is and was very important for us. We take into account the fact that logistics flows are given priority. They're staying open. We have a supply network from upper Italy to Eastern Europe and all around Europe.
This is important to ensure supplies to our factories. This has been successful so far. As we slow down our production and stop production, that won't be as necessary. Of course, it's very important for us to ensure that logistics flows remain open. We want, in particular, to ensure that our newly launched battery electric vehicles get the necessary supplies, which is being well addressed. Then financial support. This is essential in the short to medium term. For that, we have discussion platforms with the governments. At a European level, we can see that in Europe, well, the governments don't want to leave this up to industry alone. Therefore, we're satisfied with crisis management.
Mr. Witter says, I'd like to add something because I talked about liquidity a number of times. It affects us. Of course, we're also thinking about our many suppliers and our dealers to stick to our industry. There are many different companies, small businesses, artists, and so on. It's very important to realize that the European Central Bank must make banks quickly capable of helping when necessary. I think that the measures that have been initiated and statements from the German government are very strong. They're pointing in the right direction. If there's anything needed in addition, we'll all learn about it. As I said, it all depends on how long and how intensive the Corona crisis is.
Right. Thank you. In as far as the journalists have sent me emails, only the phone line has broken down. Using GlobalMeet, most can hear us out there, and we are audible. Olaf Preuss from Die Welt has the next question. He wants to know how the strengthening of Volkswagen Group Components, the relationship of the group with its suppliers changes, particularly when it comes to electric parts and electric digital supplies like Continental and Bosch. Will there be more competition with these suppliers? Question to Dr. Sommer.
Dr. Sommer answers. Fundamentally, in component manufacturing, we are trying to drive transformation towards electrification and modern technologies. It is not our aim when it comes to electro-mobility and speaking about batteries and power electronics to make everything ourselves. However, it is our strategy to actively contribute towards the development of technology and also for our company in the transformation when it comes to employees and value chains to be in control of these value chains. We see opportunities for suppliers to join us on this trajectory in both growth and supplying parts.
The same holds true of digital technologies. Here, the technology is evolving, and we are having to move towards doing things ourselves. It's not a part of dividing value-adding shares. It's developing future data handling functionalities. Here we are in the role as the central architect, the builder. It is not so much the traditional digital technology, but for the new digital technology and interconnectedness, new business fields open up and the technology companies of all states have the opportunity of evolving with us. Thank you.
The next question is from Joe Miller from the Financial Times. He wants to know when it comes to CO2 targets in this company and this next year, whether there are talks underway on industry-wide-fleet targets with Brussels and what is our estimate will happen when the European automotive market will get impacted by this? Will we change our targets?
Mr. Diess answers. Well, most of all, it's a question of the associations. The VDA, the German Motor Industry Association, will speak here, and then for ACEA and worldwide. I can only speak on behalf of Volkswagen. We've committed to keep these targets for 2020. We've got these plans, and from our position, we would not call for a letup in these targets to become less ambitious. There is a question from Mr. Schweiger from Braunschweiger Zeitung.
What is the lesson drawn from corona in China, Dr. Diess, you mentioned this during your talk. What can we learn from China for Europe? Dr. Diess is taking the question and answers.
Well, we have to say that we weren't physically in China, but we had daily contact with our leadership team locally. There are more than 2,000 German executives in China who have experienced how the crisis was dealt with and overcome. We have two targets. Maybe a late reaction, much later than it is here in Europe, but it very much focused on containment, on stopping travel, on keeping people within the regions, avoiding the spread, and cleanliness and sanitary measures for the entire population. More distance between people, wear masks, avoid traveling, and to prevent a countrywide spread of the disease. In concert with that, to be able to overcome the crisis economically, maintaining the production and logistics chains to keep the economy running.
Critical components that were needed to overcome the crisis, to deal with the crisis under specific protection measures, but certain logistics and production processes were kept running. As soon as people found that the healthcare system can deal with the crisis and were coming to grips with it, they were refocusing on restarting the economy, coming back to their production plans. You'll see that in the course of the year, special measures will be taken to improve demand and to get the economy up and running again to make it healthy again. The crisis management seems very successful from where we stand in China, and so we have hopes that our business in China could wrap up with quite a satisfactory annual result.
I was just informed that the phone lines now have collapsed entirely. If you have questions, please write me an email or a text message, we'll answer them. The next question from Frank Johannsen from Leipziger Volkszeitung. He wants to know, his question pertains the ID.3, the annual report 2019. Only 50 cars were built of that particular model. You're still saying that despite the shutdown in Zwickau, you assume that the ID.3 will start to be delivered in summer. Is that a realistic target that can be achieved? That's Mr. Johannsen's question.
Mr. Diess answers. Zwickau is well prepared for this. Mr. Kilian and I had the opportunity last week to see what it's like on the ground. Production's well planned. The cars run through the lines. The quality of the cars has achieved a very good level already. I found it very positive that the team there really is behind this car, loves it, and many cars here around Wolfsburg as well are being tested in Zwickau as well.
The software completion rate, of course, requires complex engineering. Many people need to collaborate and jointly drive this forward. Here, we have introduced a lower number of meetings allowed of groups that meet physically to deal with faults and bugs and to develop the software. Few meetings, but we assume that work can continue so that the ramp-up for the ID.3 will be running as planning in summer. The factory is really finished, and the software will be by summer.
Thank you very much. The next question is from Mr. Seierlein from, car side retreat. It's a dealership. How will Volkswagen support its dealerships if they have to shut down because of corona? How is that going to be possible if the bonus system is going to be corrected?
Mr. Witter answers. Mr. Witter says, "I'll start and my colleague, Mr. Dahlheim, can maybe complement." Liquidity, of course, is of the essence for our dealership organization. The payment target due date is being discussed, the extensions of these deadlines, and we have many dealerships. For instance, with Volkswagen Bank, their customers and, of course, will be available to them. We'll continue that, and that's a clear focus point because that, of course, is an instrumental part of our business model.
Whether bonuses will be adjusted for the overall year, that's surely not a discussion on the tops of everyone's minds because nobody has a realistic idea of what normal means and from when we can speak of normal operation in the different countries. Hardly any customers come in to look at the cars in the showroom, so many of these are shut, and surely we will discuss this in the individual brands when the time is right.
Christian Dahlheim does not want to comment. I think he's quite happy with the answer. Right. On to the next group of questions. I've got questions from Christiaan Hetzner from Automotive News. Topic one is on the battery cell. LG seems to be responsible for the stop of the Audi e-tron production stop.
What are the consequences for procurement and sourcing, and will that accelerate our plans to build another cell factory in addition to Salzgitter, possibly in the city of Emden? The question two is, will Zwickau be able to make the 100,000 MEB vehicles as announced this year? On Audi, he wants to know whether we will see a new strategy for Audi under Markus Duesmann compared with May 2019, where Audi, consistently Audi, was established by Bram Schot.
Why are we paying out a three-digit million amount to repurchase Audi shares when you already have a control agreement in place, and whether that is adequate in view of today's situation. The last question on the regions, will the group achieve the break even and make a profit in the U.S.? Again, I believe in your speech, Dr. Diess, we've answered that question. What are the plans on Audi and on the battery cells and procurement? Dr. Sommer.
Mr. Sommer says, "Maybe I should begin with the battery cells. For the Audi e-tron, we've got two suppliers. One of them is LG. LG currently is producing in Poland, ramping up there up to 70 GWh. There are lines starting there that have been delayed compared to the original plans. As a result, once in a while, there are some interruptions in the supplies, and they are felt in our Brussels factory where we produce the Audi e-tron. We are in constant contact with LG, working there with them on-site to solve the problems to secure the best possible supplies. We believe that productivity as a whole for the entire year will be achieved in order to ensure that we can meet our car production requirements." Now, has this prompted us to think about an additional cell production plant?
No, actually, we saw from the word go that we want to ramp up production with our suppliers from Europe and from the Far East. At another point in time, we decided to set up a center of excellence in Salzgitter to invest in that. There we can go into the details of supply cost, technology structures. Last year, with our partner Northvolt, we came up with a blueprint for our own battery cell production, and in 2023, it will go from 16 to 24 GWh. That means that supplies from LG have not provided us with any new knowledge. We're continuing with our dual strategy, supplying from internally and getting external suppliers, too.
Mr. Diess says, with regard to Zwickau, well, yes, a brief interruption of production of a few weeks in Zwickau. Well, the crisis in China was three weeks production interruption. Therefore, the 100,000 MEB vehicles can still be built there. We still can do that. Therefore, we currently believe that this will be achieved. That number Audi, new strategy, German name, consistently Audi. I don't think there's a need for a short-term change at Audi. Audi has a product strategy, which in my opinion, could be very successful in the years to come.
In terms of processes and costs, Audi has their cost-cutting program called Audi.Zukunft, Audi Future, and they're very systematic in their work there. Over the long term, of course, Mr. Duesmann will set some new emphasis at Audi. Audi is the technical heart of the group. Vorsprung durch Technik has to come from Ingolstadt, and of course, we expect new stimulus from the new team there. There was another question, the third one. There was an add-on about the squeeze out. You should do the squeeze out.
Mr. Witter says, "Yes, I'd be pleased to." As you know, Volkswagen AG currently owns 99.64% of Audi shares, and as a result, the free float of Audi shares are marginal, very small. There are very good legal reasons for this. If you look at the German capital market law, the reasons are, for instance, ad hoc duties and so on. This can cause some very complex situations with regard to the Volkswagen Group. If we were able to just reduce this to one set of duties with regard to capital markets, that would give us major advantages.
We're talking about substantial costs here every year due to reporting and AGMs and so on. As a result, the decision that we made did make good sense, and it was right. Of course, it's important to look in the weeks and months to come at developments in terms of the Corona crisis to see what we can or can't do, or how we should prioritize things and how we should do the timescale. In terms of the content, we are still convinced that this is the right step to take, and if there are new factors, we'll constantly take them into account and reassess the situation.
Okay, thank you. Profit outlook U.S., I think we've already talked about that. The next questions are from Bill Boston from The Wall Street Journal. He'd first of all like to know about production in January and February, how that developed, and whether a detailed outlook, at least for the first quarter, could be provided in terms of production, deliveries, and EBIT. Perhaps even the first half of the year for six months. The third group of questions is about cash outflows for acquisitions that have been announced in the outlook.
He just wants to understand what was meant there, Navistar battery capacities and whether or not the plans are going to be changed in light of the coronavirus and its impact, whether they'll be postponed or whether this is retroactive. He'd like to hear about the production stoppage and what this means in particular for the factories in Chattanooga and in Mexico. What it'll mean there in the weeks to come. Last group of questions are about CO2 compliance, whether or not a postponement of that is going to be implemented in order to allow objectives to be met.
Mr. Witter says, "I will begin, Mr. Boston." This year, as a whole, still can't be predicted. We mentioned that already. January, February, in terms of production, sales, deliveries, everything is more or less about 15% below the figures for 2019. This is no surprise. One of the biggest factors here is and remains the development in China. Dimensions I just told you about are for the group as a whole. If you take China out, developments, as Herbert Diess mentioned, were that basically February didn't happen. In March, we believe that the market is heading back toward about 1 million vehicles there. As a result, developments vary.
China is now on a recovery path. Other markets, such as Europe, are now feeling major negative impacts. As a result, a forecast for EBIT for the first quarter is extremely difficult. I could perhaps at least just give you a general idea. In the first quarter 2019, we had about EUR 4.8 billion, which was a margin of 8.1%. It was a very strong quarter in terms of EBIT, and I believe that on that basis, we'll be cutting that by at least half. The cash situation, that is and remains our focal point, in addition to our focus on our workers and families and their concerns, and then core processes. As a result, as I indicated, we're looking at that and are also looking at our M&A activities. We're prioritizing those M&A, and it's the squeeze out and other measures too that we're looking at.
We're very sensitive in terms of our liquidity position. On the other hand, of course, despite everything, we've got to continue to set the right strategic course. This includes, for instance, our partnership with Northvolt, and we've got some important strategic discussions going on in China, too. As a result, we must not completely lose sight of the strategic dimension, but in terms of the timescale for implementation, we perhaps might have to show some flexibility that we hadn't planned for so far. I think this is quite obvious in view of the current circumstances. Chattanooga, Mexico? Nothing.
Mr. Diess says, "What? So far, no impact in Chattanooga or Mexico. We'll have to wait and see how the crisis develops."
Okay, I believe that we answered all those questions. William Boston from The Wall Street Journal also had similar questions about M&A activities, and I think we also answered those. As a result, the next question is from Leon Leggett from the BBC. He asked about the dedicated plans for Wolfsburg and whether the factory will be shut down. Go ahead.
Gunnar Kilian says, "Well, we're also discussing things for Wolfsburg. We're talking about how long production will continue this week, and we will have the final discussions in the brand today and then communicate those decisions." Next, two questions from Jack Ewing, New York Times. First question: Do we expect that the consolidation process in the automotive industry will be accelerated by the COVID crisis, and whether the automotive industry will look different after the crisis is over? What teachings can be drawn from the crisis? For instance, whether or not the supply chain has to be done differently. "
The consolidation trends in the industry actually were occurring before the crisis," says Mr. Diess. The industry is still very consolidated. We've got just a few groups that do about five to 10 million vehicles. In addition to that, you've got the premium manufacturers that are still independent. We do believe that due to the new and very complex technology, there will be further consolidation. It'll come from autonomous driving and the interconnection of vehicles. The one-off expenditures are immense, and the economies of scale will be greater. Due to the economies of scale and how important they are, I think 10 million units is big enough. It's hard to imagine that we would be able to generate additional economies of scale in the current value chain. Therefore, we're not in search of new partners.
We are working with Ford in a partnership there. That's a good idea. Of course, we're working with them in commercial vehicles, and commercial vehicles in the U.S. It is not our focus to further change things as a result of consolidation. In technology terms, of course, we'll be taking further steps, software in cars and MEB, our electric platform. The second question was, could you help me out there? What was the second question? What we can learn from the crisis. What we can learn from the crisis, and whether the supply chains should be done differently. Well, supply chains, maybe if you do that, Mr. Sommer.
Mr. Sommer says, "Yes. To begin with, I'd like to pay my compliments to our supply chain and all of our suppliers." This is something that I've got to mention here. If you look at the production in China and the logistics chain and how it was restricted there, and the same applies to Europe, too. Of course, a little bit later. Together with our purchasing people and our engineering people and this logistics chain, it applies to production and supplies.
We've always found a way up to this very day to come up with approvals for alternative technologies, and come up with new logistics channels, and sometimes massive efforts were needed in order to keep up production. As a result, I think that with our strategic global position that we have, including in purchasing together with our suppliers, I don't think there is a fundamental need for renewal there. We are well-positioned here. Of course, there is a global pandemic now. Of course, we can't be prepared for that for all eternity. Everyone understands that.
We'll leave it up to our experts to decide what to do in terms of our supplies. We'll have to look above all to the future to decide what impact that will have, including on our stability, including financial stability of our supply chain. We can't say that yet today. This is definitely something that we are going to be looking at, analyzing. Our analysis capacities and our communication here will be strengthened. This is something that we can't say yet precisely due to the supply situation.
Thank you. We have two sets of questions from Carsten Steevens, Börsen-Zeitung.
One question on the building and the expansion of the software competence. Is there a timeline beyond the target to have 10,000 digital experts by 2025 exceeding that target? What significance would additional purchases and partnerships have? What is planned, in what areas do we see the biggest gaps? The second group of questions focuses on the diesel crisis. Question to you, Mr. Witter. What are the charges incurred after the year 2019 as an aggregate total, what was the cash outflow in 2019, and what do you expect for 2019, 2020, and possibly the following?
Mr. Sommer starts answering, "May I begin with the software consequence? By 2028, we want to invest EUR 7 billion in our own software competence. The Car.Software Org with the associated subsidiaries, we want to create our digital platforms across all brands, developing them there and launching them in the market, of course. We will further look into new technologies. The digital skills needed in the market will be developed.
Surely, no detailed plans on possible acquisition needed have been drawn up. We concentrate on the core competencies, stability of software architecture, and cloud computing, data handling, and connectivity, of course, to be able to create the digital experience for our customers we have in mind. At the moment, we see that there are no dramatic gaps in these areas. Using partners, acquisitions, and our own competencies, we are p utting everything in place that the market will need in the future.
Mr. Witter, let me focus on the diesel issue. The special items in operations as an aggregate total were EUR 31.3 billion for financial 2019, EUR 2.3 billion. In 2020, we expect EUR 2.9 billion, and in 2021, EUR 1.2 billion. As an aggregate total, as outflow the special item around about EUR 26.2 billion were done. In 2019, it was EUR 1.9 correction, which we paid out EUR 2.9 in 2020, and in 2021 it's EUR 1.2. Thank you very much. The next question is from Ignacio Anasagasti from La Tribuna de Automoción. He has two questions. First, when will we appoint the new head of SEAT? Why has the VW decided to have the commercial comeback of the SEAT brand in China in 2021-2022 delayed or cancel it even? I think it goes to Dr. Diess. Yes, Dr. Diess.
I'm pleased we've taken this decision. SEAT wanted to start in China, they would really have chosen the worst possible time to do that. Last year, in 2019, we saw that we had a very strong year indeed in China, winning market share in the group, the brands Volkswagen, Audi, and Porsche. We likewise felt that the smaller brands in this consolidation phase of 2019 did suffer. We had to suffer setbacks with Škoda, and Škoda's been in the Chinese market for 10 years with a large product portfolio, and Škoda's had a very difficult year with losses incurred there. I believe it's safe to say that SEAT took the very fortunate decision not to enter that market in 2019 and 2020.
China is a very big market. You have to put in a lot of effort and resource to enter that market, probably for an entry into the volume segment of passenger car production, it's too late. There will be another clear consolidation phase. There will always be niche brands, but the growth potential of SEAT is in more European markets. SEAT has very small market shares in Spain, Italy, and of course, Latin America.
That's a growth field, surely. I'm very pleased to see that SEAT has been able to tap higher market segments, more luxury market segments with the SUVs, with the Tarraco. The sales value has grown stronger than unit sales, and we are confident that by more qualitative growth will let SEAT forge ahead. They had a very successful year in 2019, a very strong team. They've achieved a lot, and we are working to fill that leadership position and solve the succession.
Let me thank all of those who've come and answered questions here on stage and contributed, and those who've joined us on the phone lines. I've just looked through my queues. I've not received any other questions by journalists, either by text message or email. The phone lines that are still running have no more questions in the queue, so that we'd wrap up. Thank you for joining us. In the course of the day, we'll probably come back with some details on the effects of the shutdowns planned for the individual brands. Mr. Kilian has said we would do that in a well-ordered and calm process, and we'll get back to you in the course of the day.
Otherwise, the entire department will be available for any questions you might have to take them during the course of the day. In the afternoon, we'll have the analyst call to which you are most warmly invited to join us on the analyst call when more questions are answered. Thank you.