Good morning, ladies and gentlemen, and welcome to the Volkswagen AG Investor, Analyst, and Media Call of Q1 2025 Conference Call. I am Youssef, the Cars Call Operator. I would like to remind you that all participants will be in listen-only mode, and that this conference is being recorded. After the presentation, a Q&A session will follow. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. This conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Pietro Zollino, Head of Corporate Communications. Please go ahead.
Good morning, everyone, and a warm welcome to the First Quarter 2025 results call of Volkswagen Group. This is a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Treasury, and myself, Pietro Zollino, Head of Corporate Communication. With us today is, as usual, Arno Antlitz, our CFO and COO. Welcome, Arno. You should have received the press release, the interim financial report, and all other related materials which were published this morning. If you do not have them, you can find all the documents on our group website. In case of any issue, give us a call or drop us an email, and we will send them straight to you. The contacts are also on our website. Now, let me hand over to Rolf, who will give you a brief run-through of the call.
Thank you, Pietro, and very good morning to everyone on the call. I hope the weather on your side is as sunny as it is here today in Wolfsburg. Thanks for joining us today. Let's have a look at the agenda. Arno will first present the key highlights of the first quarter, and after that, we will take a closer look at the financial results and the full-year outlook for 2025. Following his presentation, we will host a Q&A session for the investor and analyst community, which is moderated by myself. After the session, we will have a short break before we continue with the media Q&A, which will then be hosted by Pietro. Since today's call includes forward-looking statements, as always, the safe harbor language and other cautionary statements on the slide will govern today's presentation. Please read it yourself because I will not read it to you.
With that, I hand it over to Arno. Arno, go ahead, please.
Yeah, thank you, Rolf. Ladies and gentlemen, we saw a mixed start to the year 2025. We continue to make significant progress in implementing our strategy. Some tangible results could be seen some days ago at the Shanghai Auto Show. We have some encouraging news on the customer side. Sales revenue was up 3%. Order intake in Western Europe grew even by 30%. Our BEV share was up 10%, up to 10%, and the BEV share in Western Europe more than doubled to 19%. This is evidence that our vehicles are very well received by our customers. As expected and as guided, Volkswagen Group got off to a slow start to 2025 in financial terms, and on top, we had to book some special effects and restructuring expenses. On April 9th, we pre-released some of our KPIs.
Therefore, let's dive straight into the presentation with the highlights of the first three months, and let me explain to you why we think our performance in Q1 was still respectable. The largest product renewal in our group's history has continued in Q1 with quite a number of new model launches. This includes exciting new models such as the Audi A6, the Skoda Elroq, and momentum will continue into 2026 with the launch of the Urban BEV family. An even bigger step will be the ID. Everyone, we have shown a first prototype of the affordable electrified future of Volkswagen expected to hit the markets in 2027. During last week's Shanghai Auto Show, we've provided a follow-up on our in-China for China strategy. Truly amazing achievements on the product and technology side, but we also did not stand still to optimize costs and our financial setup.
Following Volkswagen's agreement in late 2024, Audi's management and works council negotiated the future of the brand's German plants, and this is done to make Audi more resilient and more flexible and leaner going forward. We successfully renewed our rEVOlving credit facility with 44 banking partners and increased the amount to EUR 12.5 billion from EUR 10 billion. Last but not least, we have completed the placement of 11 million Traton shares, and with that, we increased the free float to 12.5%. Our colleagues in China are delivering. Time to market is down 30%, allowing us to develop vehicles in 24-33 months. Material costs are reduced by 40% with the ambition to bring it down even further by another 10% until 2026. The highlight, the highly competitive central zonal architecture CEA is being locally developed.
The China Electric Architecture will enable numerous software features that are tailor-made to the wishes of Chinese customers. Our joint venture Horizon will launch highly competitive Level 2 Plus and Level 2 Plus Plus ADAS solutions in 2025 and 2026 respectively. The execution of our in-China for China strategy is fully on track with customer-centric, China-specific, and highly competitive product substance, both in terms of tech and in terms of cost. We will launch 30 new models by 2026. Back to the first quarter results. Global deliverables in the first three months of 2025 increased to 2.1 million vehicles. This is 1.4% above prior year quarter. Incoming orders in Western Europe were strong with an increase of 29% year-on-year, and BEV order index was particularly strong, up by 64% compared to the same period last year.
Our models are well received in the markets, and new models across drivetrains and types enjoy great customer demand such as the ID.7, ID.7 Tourer, Skoda Elroq, Cupra Terramar, Audi A6 e-tron, or the Porsche 911. As a result, order book in Western Europe has been growing to about 1 million vehicles at the end of March, reaching well into the third quarter. In the coming months, we expect additional tailwind from numerous new models. Delivery's growth in the first quarter was driven by a strong performance in Western Europe and North America region, which were both up 4%. Our operations in South America achieved double-digit growth overall, supported by a particularly strong increase in Argentina, where we more than doubled volumes. Growth recorded in all three regions has more than compensated for the decline in China.
Our BEV deliveries saw growth and reached 217,000 units, corresponding to 10.2% of group deliveries and 59% year-on-year growth. Our BEV share in Western Europe grew even stronger and more than doubled year-on-year to about 9% of our sales. With that, let's move on to the financials and the operating performance of Volkswagen Group in the first quarter. Vehicle sales came in at 2.1 million units in the first three months, slightly up year-on-year at 1%. Group sales increased by 3%, driven by both automotive and financial services. Operating result came in 37% lower at EUR 2.9 billion, corresponding to a margin of 3.7%. Our product offensive continued across all brands, in particular at Audi and Porsche. The substantial increase in BEV sales and their share in the group's volume is evidence of our strong product momentum.
On the other hand, the strong increase in BEV share led to the expected margin dilution since, as of today, margins of the battery electric vehicles are still significantly below those of ICE cars, thus putting pressure on our margins. On top of this development, special earnings effects totaled EUR 1.1 billion or 140 basis points in margin in Q1 2025. Around EUR 0.6 billion have been booked to provision for potential penalties in connection with the current CO2 regulation in Europe based on the current regime. Around EUR 0.4 billion costs were incurred for restructuring measures at CARIAD and Audi. Another EUR 150 million provisions were booked related to the diesel issue. Effects from the valuation of vehicles in transit in connection with the import duties introduced in the United States at the beginning of April burdened results by EUR 150 million.
Excluding the special effects, Q1 2025 operating margin would have amounted to 5.1%, roughly in line with the expected muted start, but definitely not at a satisfying level. We need and we will continue to reduce fixed costs and expand productivity measures to compensate for the margin dilutive effect of the BEV ramp-up throughout the remainder of the year. Cash flow in automotive division totaled to EUR -0.8 billion in the first three months, about EUR 1.7 billion above prior year quarter. Overall, a solid cash flow performance in the muted first quarter, which was impacted by about EUR 0.5 billion cash out for restructuring initiated in 2024, largely related to the end of production in the Brussels plant. The lower operating result was more than compensated for by less working capital outflow, as well as lower investment spent in the quarter.
This brings me to the automotive net liquidity, which declined by about EUR 0.2 billion compared to the year-end 2024. Two additional items are worth noting in addition to the net cash flow: M&A expenses of about EUR 700 million, largely related to the acquisition of a stake in Sauber Formula 1 from Audi and an investment of Porsche in Varta, and about EUR 400 million inflow from the placement of Traton shares. Overall, at EUR 33.2 billion, net liquidity continues to stay at a solid level at the end of Q1 2025. Coming to the divisional performance, passenger cars recorded an operating result of EUR 0.6 billion, about 50% low below the prior year period. The margin amounted to 2.8%, down 3.2 percentage points. Commercial vehicles saw a decline of 38% to EUR 0.6 billion. This corresponds to an operating margin of 6.2% below the full-year guidance range.
The division expects a pickup, in particular in the second half, and confirmed its full-year targets. The financial services division recorded an operating result of EUR 1.1 billion, corresponding to an increase of 90% year-over-year. Let's look to the drivers behind the operating result development in the passenger car segment. Volume price mix contributed to a EUR -0.8 billion, with the higher volume outside China could not fully compensate for a negative mix and pricing due to the higher sales incentives for BEVs. On top, CO2 provisions had a negative impact of around EUR 0.6 billion. Fixed costs and other costs increased to a large extent due to restructuring measures. Let us have a more detailed look at the overhead cost development. The group recorded a slight increase of overhead costs in absolute terms.
This was due to increases at Porsche and Traton, as well as related to the ramp-up of new business fields. On the other hand, we achieved first effects from restructuring measures. The overhead cost ratio was stable in the quarter. We've just started accelerating the execution of our efficiency programs across all brand groups and business fields. Rest assured that we continue to drive implementation of the defined measures with full force to improve our position from here in the coming quarters. The measures in implementation related to Zukunft Volkswagen, which we agreed in December, play an important role here. Zukunft Volkswagen is delivering results as evidenced by the reduced headcount. The tariff agreement is implemented. In the first three months of 2025, Volkswagen AG reduced the number of active employees by about 2,000 at its German locations.
In total, since the end of 2023, headcount declined by about 7,000 as a result of our performance programs and the hiring freeze. Moving on to the performance of our brand groups, platforms, and financial services business. With the passenger car segment, brand group Core recorded strong sales revenue growth of 8% year-on-year. The operating results stood at EUR 1.1 billion and a margin of 3.2%, 3.2 percentage points below the prior year level. Headwinds were recorded from a significantly higher BEV share and special effects related to a CO2 regulation and an increase of allowance for the diesel issue in a magnitude of EUR 150 million. Including special effects, the operating margin would have amounted to 4.6%. The product momentum at Audi is paying off. Brand group Progressive recorded sales revenue significantly above last year with a plus of 12% driven by growth in unit sales.
Despite the strong top line, operating result came in at EUR 0.5 billion, corresponding to a margin of 3.5%, only 10 basis points above the prior year quarter. Positive effects from volume growth were compensated for by high ramp-up costs related to new model launches, provisions for vehicles in transit, and the strong increase in BEV share. Operating margin of brand group luxury came in at 8.7%. The decline was mainly due to lower sales, in particular in China, higher material and R&D costs, as well as expenses for adjustment of the company organization. Let me outline some effects at brand group core. Skoda margin continued to stay strong at 7.5%, and brand Volkswagen recorded strong product and sales momentum with sales revenue plus 10% above prior year, but was burdened by special effects in a magnitude of EUR 350 million.
Even after these effects, the brand's margin amounted to just 2%. Both brand Volkswagen and brand Commercial Vehicles had an encouraging start to the year in terms of fixed cost reduction, but need to speed up implementation of productivity measures in the German plants. CARIAD continues to increase license income backed by increased sales volume on the 1.1 and 1.2 software stack. Sales rose accordingly by 33% to around EUR 0.2 billion. Operating results stood at a EUR -0.8 billion, excluding the mentioned cost related to restructuring measures of EUR 0.2 billion. Results would have been stable compared to the prior year period. The PowerCo ramp-up of Salzgitter plant and the build-up of the organization is continuing, which led to an operating loss of EUR 0.2 billion in the first quarter, some EUR 100 million higher than in Q1 2024.
Traton saw a slow start to the year, both in terms of volume and financial results. In the first quarter of 2025, Traton recorded about 10% lower unit sales, which translated into a corresponding decline in sales revenue in the quarter. Mainly due to the resulting lower fixed cost absorption, the company's operating result declined by 38% to EUR 0.6 billion. Our financial services business performed well in the quarter, supported by improved contract volume, especially in Europe. Operating result increased by 90% to EUR 1.1 billion. The used car business benefited from positive remarketing results, while the normalization of used car prices continued in the quarter. The credit loss ratio slightly increased to a still solid level of 0.42%. Expenditures on CapEx and R&D in the automotive division decreased by around 11% overall to EUR 7.7 billion in the first quarter.
This corresponds to an 11.2% of the automotive sales revenue, which is slightly below our forecasted range, mostly due to the reduction in R&D costs. Reduced investment spend of EUR 165 billion for the 2025-2029 planning round period is confirmed while we continue our efforts to improve investment efficiency. Moving on to the performance of our China joint ventures in a highly competitive market environment, we continue to balance profitability and market share. Deliveries in China fell by 7% to about 644,000 vehicles. The proportionate operative result of our joint ventures activities in China came in at EUR 272 million in the first quarter of 2025, about a third below prior year period. Based on a solid start to the year, we regard the upper end of our guidance range of EUR 0.5 billion-EUR 1 billion in proportionate operating profit as a realistic target.
This brings me to the financial outlook for 2025 financial year and the key results drivers. We continue to expect a tailwind from our revamped model portfolio in a slightly positive volume trend and the markets outside China. We expect regular increasing benefits from the execution of our performance programs and restructuring initiatives. The significant expansion of BEV volumes, particularly in Europe, as well as the ramp-up cost of numerous new models and related to the new business fields, are expected to burden earnings in 2025, but at a slower pace than in the first quarter. In summary, we confirm the financial outlook for the year 2025. We continue to expect the Volkswagen Group to increase sales revenue by up to 5%. The operating return on sales is expected to be in the range of 5.5%-6.5%.
This outlook is based on the tariff situation as per end of February and thus does not include potential additional effects from the introduction or adjustment of trade tariffs, as the effects and their interactions cannot be conclusively assessed at present. The investment ratio in the automotive division is expected to be in the range of 12%-13%. Automotive net cash flow should be in the range of EUR 2 billion-EUR 5 billion. This includes cash out of around EUR 2 billion in connection with the implementation of restructuring measures. We continue to expect net liquidity to be in the range of EUR 34 billion-EUR 37 billion.
Taking into account the most recent announcement of Porsche HE related to the adjustment of their full-year outlook, we currently expect group return on sales, as well as automotive net cash flow and net liquidity to trend towards the lower end of the presented guidance ranges. Ladies and gentlemen, our start to the year was mixed. We continue to make significant progress in the implementation of our strategy, for example, in China, as presented last week at the Shanghai Auto Show. Our product offensive is starting to pay off, as evidenced by the strong momentum in the order intake and our top-line performance. On the other hand, we cannot be satisfied with our results in the first quarter and the financial outlook for the full year. An operating margin of around 4% in the first quarter clearly shows that there is a considerable amount of work lying ahead of us.
Given the current volatile global political situation, it's even more important to focus on the levers within our control. This means driving our strategic initiatives with full force and complementing our great product range with a competitive cost base so we can ensure to succeed also in a rapidly changing global market environment. With that, I hand back to Rolf.
Thank you very much, Arno. We are now starting the Q&A session. Give you a little bit of time. In order to register a question, you have to press star one. If you want to retrieve your question, you have to press star two. We see the Q&A rolling up, and the first question comes from José Asumendi from JPMorgan . José, please go ahead.
Good morning. It's José from JPMorgan . Thank you, Rolf. Thank you, Arno, for all the comments.
I get the first question, please, on tariffs and obviously the most recent announcements by the administration. I would love to hear a little bit your take with regards to the latest announcements and what can Volkswagen do in the U.S. to improve the level of localization of vehicles or components and whether you're thinking about what could be the potential impact of the tariffs in your financial guidance. That would be the first one. Second, Arno, I'd love to hear a bit more about also China. We saw the update you provided also in the past weeks and the product launches. Maybe more on a positive note, we'd like to hear which product launches you think are going to be more meaningful in 2026, and how do you think this will impact the P&L of your operations in the region? Thank you.
Yeah, see, first on the tariff side, on the quantitative side, as I said before, since the full impact of the tariffs going forward could not comprehensively be assessed by us, we guide before tariffs because it's highly difficult to give a concrete projection for the full year. On the side, what we can do, I mean, what I can say, we have already a strong presence in the U.S. We are localized in Chattanooga. We run a factory there. We have a huge operation in the U.S. with a lot of dealers. We are ramping up Scout, and we are strong in North America. Obviously, we look on various scenarios to localize more group models, too early to say. What I can say, we stand ready to work with policymakers to find solutions to support the U.S. industry while preserving our opportunities and opportunities for workers.
This is what I can say where we stand currently. Yeah, rest assured, we work on that topic.
On China?
On China, yeah, we are quite excited about the update we were able to give in China because basically we said we work on several topics. First, on the product offensive, second, on technology, and third, on cost. I was very pleased with the performance our team presented in China on all three dimensions. They're really delivering, and they're delivering fast. They are not only delivering in time, but partly even overexceed the targets, both in terms of SOP, number of months or years, how long it takes to develop the cars. I don't know whether your colleagues had the opportunity to drive the ArdasTech, which is currently developed with Horizon. It's a great stack. It drives really great.
We made good progress on the work on cost down. Our target was 40%, including obviously battery, where we moved from NMC to LFP. The team also achieved the 40%. All of that should really lead to the situation that we achieve our targets in what we communicated in 2027 with the EUR 2 billion net operating proportion operative result. You asked obviously for 2026. Let me jump back to 2025. The second good message is we currently expect to be more on the upper end of the guidance range between EUR 500 million and EUR 1 billion, which you could see. We had a good quarter, EUR 272 million, so a good compromise between pricing and volume.
In 2026, basically the most important models from Volkswagen kick in, the EVO, the AURA, and the ERA, three great models, one on the XPeng platform, one on China's main platform, and an SUV developed together with SAIC. Audi is bringing some very interesting models. They kick only in 2026, so it is too early to give you a concrete guidance for the 2026 operative proportion operative result. Rest assured, with the kicking in of these models and knowing the current P&L of these models, we are on a very good track to achieve the targets for 2027. Thank you, Arno.
Thanks, José. We continue with Horst Schneider from Bank of America. Horst, please go ahead.
Yeah, thank you. Good morning, everyone.
The first question that I have, of course, that relates to tariff, and I understand that you cannot comment that much on that because negotiations are running. Coming back to this interview that also Oliver Blume gave in the Manager Magazine, he was saying that Volkswagen is negotiating directly with the U.S. I know you can't comment on that, but is it possible that we see basically a firm-based exemption on the tariffs? Any comment on that would be helpful. I know also you do not want to quantify tariffs right now, but Porsche did that for April and May. Maybe you can just give some hint what is the potential impact. The other question that I had that relates to volumes, S&P lowered recently substantially the Volkswagen volume outlook. I know they're always wrong.
I think they use Volkswagen as a kind of cushion to the rest of the market. Therefore, I do not pay too much attention to that. They say Volkswagen sales globally, I think something like -5%, -6%. You still guide for this 5% revenue growth. There is a China element also included, of course, in this unit sales number of S&P. Can you explain again why you remain optimistic on volume growth, and particularly in which region, and what do you see in Europe? Why is Europe for you at the moment increasing in terms of demand? Thank you.
Thank you for the question. Some of the answers you gave already, rightly commenting that obviously we cannot comment on current discussions for oBEVious reasons. Also, in quantifying, look, we really do not want to add to the speculation.
What I said before, we're ready to work with policymakers to find solutions that support also the U.S. industry. This is where we stand today. What I can say, I really don't want to quantify, but as you know, our deliveries to customers in the U.S. are about 730,000. About 200,000 of them are produced in the U.S., including international. About 290,000 come from Mexico, and some 240,000 come from Europe. I think knowing the size of the mechanism of the tariffs, I mean, everybody could do a little bit of a math. In terms of volume, yeah, we stick to our volume outlook, both in terms of deliveries and in terms of sales. In terms of sales, we are even a little bit more confident. Why? Because the deliverance outlook in total includes a positive trajectory in Europe, U.S., and also specifically South America.
While China, we expect another, I would say, loss of about a percentage point or even a little bit more. I would not call it loss. We deliver it, they give up another point of share until the great new models hit the market in China. Just to remind you of some of them, ID. EVO, it is on the XPeng platform, and the ID. ERA together with SAIC and AURA with FRW. These are really great cars hitting the market in China, but only in 2026. For 2025, we want to be a little bit cautious. That means in order to achieve our deliverance outlook, we expect a growth in the areas which are basically in our books. As you know, the Chinese deliveries are not in our books. They are only accounted for at equity result.
We are quite confident that we have a good trajectory there. There are obviously two elements. First is total market. Yes, total markets are mooted currently. Specifically, there might be an effect from the tariffs. Who knows? On the other hand, we have really encouraging order intake. We gained some share in Europe, even on a high level. Even our BEV share now increased our share in the total market. Cars are very well received. We see a very strong order intake. There are more great cars to come. What we see in terms of our momentum, we stick to our current outlook of up to 5% sales for the remainder of the year.
Arno, just quick follow-ups then. What is then your visibility in Europe given this order book?
Is that already something like two quarters or one and a half quarters? What would you say?
We achieved a million cars. I'm not sure whether I can say that, but April would even see a little bit higher figures than the million. The momentum continues in April. This reaches well until the Q3 in Europe.
Okay. Interesting. Thank you.
Thank you, Horst. We continue with Tim Rokossa from Deutsche Bank.
Yeah, thank you, Rolf and Arno. I also have two questions, please. The first one is sticking with this order intake that you just talked about, Arno, obviously quite positive in Western Europe, probably the most positive news, at least I think today for ICE and BEV. We already know a couple of moving parts for Q2. We know that Porsche takes a really big hit, almost EUR 1 billion in one-offs.
There's maybe some charges at Audi that I was going to ask about for their restructuring processes. How should we think about Q2 with this order visibility in mind that you have right now? Do you think you can be within the full year guidance range? When we think about one of the burdens that you had in Q1, it was clearly coming from the BEV with a very high BEV share now that you already have. How should we think about the headwind from here? Is that getting lower, staying on about the same amount? I'll try again on the tariffs. I mean, there's all sorts of analyst estimates out there. We all try to do the math. It's multiple billion EUR, potentially low single-digit EUR billion at the low end.
Is there anything that you can at least vaguely confirm with respect to the tariff impact on that side? Thank you.
Yeah. Order intake, as you said, ICE and BEV, we discussed in Q2. There are several effects, but to start with the conclusion, even with these effects, we expect to be in the guidance range in Q2. What are the plus and minus? We continue to expect product momentum and sales momentum to continue. We will see and plan for an even higher increase of BEV share, obviously, because you saw the burden of EUR 600 million in Q1. From today's perspective, now quarter-by-quarter, we will increase the BEV share, yes. If you do the math, last year we also had an increase on BEV share quarter-for-quarter. Let's call it the distance. In the first quarter, it was about 10 percentage points.
We had to compensate on the cost side for 10 percentage points in the first quarter. This basically difference between the target BEV share we need to achieve versus last year narrows quarter over quarter. The burden is there, but the burden narrows quarter over quarter. On the other hand, hopefully you saw also the progress we made on reducing the headcount, 2,000 people already left in one quarter. Brand Volkswagen is doing progress in the plans. Just to give you an indication there, they were managed to manage the factory cost down significantly, not to the target. The target was ambitious. They made good progress, but more progress to come. We put a lot of pressure on that topic. The wage piece is implemented already.
For example, from Brand Volkswagen, you could expect now a decreasing burden from the ramp-up of BEV share and an increasing support from our cost measures. This should give you an indication of where we want to hit at the end of the year. You rightly mentioned the one-off Porsche communicated yesterday or two days ago, and you rightly mentioned that we could expect some restructuring measures at Audi. They are still calculating the measures, they are still deciding on the measures, and negotiating the measures. This is why we could not and had not to book for them for the time being. Both topics taken into account, we expect to be in the guidance range for the second quarter.
Just to confirm that this would still be pre-tariffs, right, within the guidance range?
Yeah, obviously. All the—that is very important.
All the forward-looking statements I make today is obviously pre-tariffs. We are aware that some other automakers, they refuse to do a guidance at all. Currently, we must say the effects we cannot conclusively assess. What we decided on, we want to do the math. We want to stick to all of our guidance to be consistent. All of the forward-looking measures discussion today is pre-tariffs.
Thank you. I'm happy to contribute to your BEV share in Q2. I just got my Audi Q2 and quarter over last week.
Oh, excellent. Congrats.
Thank you. Thank you, guys.
Thank you, Tim. We continue with a question we got online. To be fair, it's from Stuart Pearson from Exxon B&P. He was sending me the email on rank three or four, better said. This is why I read it now to you, Arno. His first question is, could you update us on the competitive environment in China, given comments regarding reaching the upper end of the guidance range and also noting a slightly better performance from GM in China reported this week too? Could we start to see some stabilization in the market pricing dynamic there? How does it differ between the premium and the mass market? The second question would be, how is the pricing dynamic developing in Europe? Renault, when they released revenue results just a couple of weeks ago, has mentioned the phase of price stabilization. Is that something you're also seeing? How does the EUR -0.3 billion pricing in the first quarter bridge break down between the regions? Just to amend this, I think Renault largely referred with price stabilization to the European market.
Yeah, in China, I mean, it's generally that the market stays very competitive, and it stays a very competitive pricing environment. This is why we decided to, again, in 2025, take deliberate actions not to participate to full extent in that. Let's not call it price war. Let's call it challenging pricing environment. This is why we make, yeah, deliberate decisions between pricing and volume. There is some, I would call, stabilization over the last months, but it's really too early to say. There are also talks about new stimulus. We concentrate on us for the time being. This year, we deliberately make a choice to give another percentage points or so. On the other hand, we want to stay relevant in China. We can't fall too far below.
We want to have a good starting position in 2026 when all the new models from Volkswagen and Audi kick in. I do not want to reiterate all the models. Some of you have been at the auto show, really great models. We are really excited about both the customer receptions of the models at Volkswagen, at Audi, Audi with the four rings and Audi. We set the ground for re-engaging in this environment in 2026 with a much, much better cost base. This is our way forward. Yeah, pricing in terms of our bridge, I do not want to bother you too much, but technically, I must give you one example or one information you know already. We have in the pricing and the mixed bridge, we have the, I would say, the typical countries, the big regions.
The higher inflation countries' pricing, for example, Argentina or others, we do not even show in pricing. We balance this pricing we do in China, sorry, we do in Argentina in exchange rate others. Obviously, the exchange rate hit in Argentina, Brazil, and these countries is much higher. In this, we basically assess it more in dollar terms. The pricing we do in this region, it is not in the price volume mix. The pricing you see there is basically the big regions, Europe, U.S. Pricing is by minus three. This is basically given the current situation and given the situation that the BEVs and the BEV ramp-up is obviously in that line, including, to be honest, high incentives we currently still give for the BEVs. We are quite pleased because what we originally guided for, that volume price mix should be stable.
We already almost achieved volume price mix stable. Taking into account what I said some minutes ago, that the gap between the BEV share we had last year and the BEV share we are targeting for is narrowing over time, the buckets volume price mix should have even a small chance going out throughout the rest of the year.
Very good. Thank you, Stuart, for those questions. We continue now with the telephone line. The next one would be Patrick Hummel from UBS. Patrick, please go ahead.
Thank you, Rolf, and good morning, Arno. My question is a bit more on the CapEx and free cash flow side of things. I would assume your conversations with the U.S. administration are about local investments.
Even taking the tariff debate aside, I think it's fair to say that Volkswagen Group, amongst the premium OEMs, is least naturally hedged, so to say, in North America with Audi and Porsche brand. If we think high level, are you going to make additional North American investment commitments that could undermine your efforts to become a more efficient and more cash-generative company for the next few years? Are there any high-level thoughts you can share how you're going to approach this? Is that something, be it on the powertrain or component side or final vehicle assembly, is that something that could become a significant headwind to your free cash generation in the next few years?
Yeah, Patrick, as always, I have to say it's too early to give you details.
What I can say, there are a lot of significant initiatives in the U.S. already factored in in the current figures, obviously. Ramp-up Scout, joint venture with Rivian, and ramp-up of R&D in a joint venture with Rivian and the stake in Rivian. Yes, we are currently evaluating options to localize more in the U.S. This is what I can say. On the other hand, what we also always said, going forward year over year, we are basically in a phase that the combustion engine investments, although there are some more investments in drivetrains, for example, like hybrids or range extenders, the major investments in ICE running out and the double investments run out. For example, look, there are still investments in the Q7 and Q8, combustion engine and equivalent electric cars, but moving a year ahead or two years ahead.
The burden or the peak is basically also behind us. This is how you should think of our investment in R&D CapEx going forward. Obviously, it's too early to say. Currently, we stick to the EUR 165 billion. Let me put it like that. To that EUR 165 billion, there are clearly chances in what I just mentioned and some chances in the other direction, what we could do more in the U.S.
Arno, if you allow me that follow-up, I know Scout is your baby also, but it feels from a group perspective, protecting the cash cows of your portfolio should have a higher priority than a new EV-centric brand that comes at a time to the North American market when EVs are maybe not that much in favor of the administration and of the consumers.
Is there any flexibility to repurpose the $2 billion spending on Scout, maybe as also some capacity for the existing brand portfolio?
Patrick, first and foremost, as Volkswagen Group, we are not driving forward Scout because it's my baby. That's very important. We are driving Scout forward because it's the really biggest single promising segment, automotive segment in the industry. See, pickup and B-racket SUVs in the U.S. is, from a profit pool perspective, really the most attractive segment. This is why we are driving forward. Second, I would understand completely your question, and I still understand it, but I would understand it if we would stick to 100% BEV strategy for Scout.
Having a really convincing concept introduced with a range extender, with an engine coming locally from Mexico for 500 mi of range, really positive customer feedback on that topic, and basically 80% take rate for the pre-orders moving to that range extender, we are much more optimistic that we can hit the plant volumes first. Second, yes, there are also chances to include other activities in the factory in South Carolina. We also look into that as well.
Thank you, Arno. Thank you, Patrick. Before we continue with Mike, I was reminded by Tim that we have not really answered the question on the tariffs and the impact. Arno said it, yeah, it is currently too early to make a conclusive judgment.
However, I think what we can see and read is obviously the analyst reports with the numbers provided, the 700,000 and the breakdown, Mexico imports and the U.S. We can clearly comprehend how most of the analysts come to their conclusions with a potential burden of $2 billion-$4 billion and just wanted to confirm that that's not our estimate, but this is something we can comprehend. Let's continue now in the line here with Mike Tyndall from HSBC. Mike.
Yeah, thank you, Mike from HSBC. Appreciate you giving me a chance to ask a couple of questions if I can. Arno, can we talk about BEV profitability? You flagged that it's significantly below ICE.
I'm just wondering what the moving parts are there because it feels like you're being quite aggressive on pricing, which I wonder if that's the bigger headwind because from what we can see from a cost perspective, I would assume the cost position of those vehicles is improving. The second one, again, focusing on costs, just the savings that are coming through, can you give us a sense of what the cadence is? Does it accelerate from here considerably? Is there a point where that fixed cost other component in the EBIT walk might actually turn positive? If so, when? Thanks.
Yeah, Mike, in terms of BEV profitability, look, to be very honest, I was talking about margin parity some days ago, and we did some really major improvement, first on raw materials. Look at lithium, look at other raw material prices.
To be honest, on the pricing side, there's still a lot of support necessary for the BEVs. I mean, you look at the internet site, you know our offers. There is some support necessary. This is where we stand today. We shouldn't give up because with the ID.2 family, 2026, they kick off, basically kick in for the Volkswagen Group, and then also available in other Volkswagen brand models and at least volume models, a total new chemistry, LFP with a significant cost improvement, and also a new battery type. It is a much more integrated type. We do not operate on modules anymore. We talk about what we call then cell-to-pack, which is positive. We have a next-generation electrical engine with much more integration of parts. Although I chatted engineering, I am missing the word for it in Germany, you say Bauteilintegration.
Converters and all these kind of topics are then integrated into one electrical engine, which makes really a step forward in terms of cost on electrical engine. More of these cost innovations kick in with the ID.2 family and then will be rolled out. This is why we are also confident together with the scale and the site, the ID.2 family will be built in Martorell, very cost-effective from today's perspective, low labor cost. This will be the first car which could really reach margin parity with the equivalent, which would be a T-Cross. For the time being, as I said before and as I am communicating externally and internally, we have to compensate for the margin dilution effect of the ramp-up of BEVs on the cost side. We have the chance for that. You rightly mentioned the overhead cost.
Our clear goal is that throughout the year 2025, there is a margin contribution. We guided for that as well. If you take out Traton and Porsche, the relative burden on overhead cost is already positive in brand group core. It was not high enough to compensate for the ramp-up of BEVs. As I said before, the compensational effect on the fixed cost versus the burden on the margin dilution of the BEV over the year should really turn that the margin dilution effect relatively versus prior year should decrease. The compensational effect of the cost side should increase with a clear target of showing a positive overhead cost contribution in the EBIT bridge throughout the year.
Got it. Thank you.
Thank you, Mike. We continue here in the line. We have three still questions or questionnaires. Harald Hendriksen from Citigroup. Harald, please go ahead.
Yeah, thanks, Rolf. Thanks, Arno, for taking my question. Interesting. Coming back from China, it feels to me like the local for local strategy in China has worked incredibly well. In this sort of global changing environment, tariffs in the States and all that sort of stuff, what other learnings can we take from China? I'm talking specifically the technology decisions over there seem to be much, much faster. The model decisions seem to be incredibly quickly. You're talking about ID.2, things like LFP, integrated motor, and stuff like that, technology that China has obviously been working with for some time. How much can you take from China to think strategically about your regional businesses, including obviously the U.S.? I know you've been trying to answer, but what I'm really thinking, what can you take away?
What can you learn from there to make yourself, A, much more competitive, and B, longer term, even more resilient?
Thank you. This is a great question. This is also the impulse what we internally obviously also use. Try to learn from China. There are a lot of elements you mentioned already. Look at the tech. In China, we work together in a cooperation with XPeng to work on our backend. It is a solar architecture. The same we do with Rivian in the rest of the world. We move from the current software to a solar architecture, state of the art, much more cost competitive as well. If you look at LFP batteries, in the rest of the world, you have normally NMC batteries, rather expensive. Yes, a better range, but expensive. China is basically working on LFP.
What we are doing, we bring the LFP battery 2027 to the ID.2 family and then roll that out. We even want to combine it with our strengths. In ID.2, you can order an LFP battery for more affordable cost, but some compromise on range. You can basically order then an NMC battery with much better range. We look on other topics like ADAS and also on speed of development. Obviously, we see that China is able to speed up product development. We have a close look on that. We have a good understanding of that. Some topics we really can basically learn from. Other topics, it is more in our DNA, how many winter tests, how many summer tests you do. This is more like Volkswagen brand and group is really deeply rooted in safeguarding and making sure everything is basically perfect.
This is what we look at. On the other topics, to be very honest, in terms of speed, it's not only great technology. Sometimes China people are just working harder, to be honest. They work like 10 hours a day, six days a week, and in two shifts in R&D department. We look on a two-shift system, perhaps here in Europe, or we basically try to copy a two-shift system, develop things in Wolfsburg, and then push it in the evening to our development headquarters in Mexico and Brazil and use the time there and get it back the next morning. There are a lot of things we look at. You could expect also learnings to evolve in Wolfsburg from these topics.
Great. Thank you.
Thank you, Harald. We continue with Stephen Reitman from Bernstein. Stephen, please go ahead. Yes, good morning.
I have some questions, please. Obviously, the situation is shifting very fast. What can you tell me your current understanding of the status of your plants in Mexico, in particular your engine plant? You are one of the only Germans that actually have manufacturing on the North American continent for engines. I understand that obviously you're supplying the Volkswagens, but not Audi produced in Mexico. How are those engines being treated? Are they fully USMCA compliant? Do you believe that the engines come in tariff-free into the United States? Can they be used in Audi products? That's the first question. The second question is on the progressive margin. Obviously, I understand the underlying margin was 5.9%. Even still, how do you feel that is compared to where you think it should be?
Obviously, we know that last year was burdened by the significant problems you had with the starter belt generators, which meant you couldn't supply the V6 and the V8s. Given the dynamic situation, you're talking about the European market, it seems still a little bit on the low side. Finally, you mentioned about the profitability of the BEVs. Obviously, you've had a surge in BEV sales. Given the fact that the phase-in could come in, it obviously still has to be approved by the parliament. Does that make some sense for you to maybe ease back on some of these incentives, the EUR 3,500 starting you're doing on the ID.3? As I said, you're very much more confident about some of your new products coming in 2026 and 2027, which will make it much easier then to make your average CO2 requirement over the three-year average. Thank you.
Yeah, Stephen, thanks for these three questions. Of course, we have a plant in Mexico, an engine plant. What I just mentioned is, for example, we call it 211 in English. In German, we call it 12. This plant is basically producing the engines for Volkswagen. They go into the Volkswagen cars. This would be also the potential engine for the range extender for the Scout. Not a turbocharged version, naturally aspirated, but this is so we still use that. Let me also remind of another topic we decided long before the tariff discussion. In the course of the Tupperburg's pact, we will allocate the current Golf to Mexico in the run-out to make space here for great new models on the SSP. We call it a game-changer project.
Most of the Golfs we build then in Mexico will be basically for the European market anyway. There will be a future for the plant in Puebla and also for the engine plant, also in whatever setup you could think of in the future. Audi is currently not producing under USMCA. This is why the reason they have even a higher tariff. As I said before, we look at various options to improve the situation. We had the question on the BEV sales and the change of the legislatory regime. To make that very clear, even if the regime changes and we have three years' time to fulfill the target, that would not put any pressure away from us or from other OEMs.
We still need every gram because from today's perspective, we will see still a burden in 2025, perhaps a smaller burden in 2026. From today's perspective, we will be overfilling in 2027. What helps us is that we can put together the three years and can take together the burden in 2025 and basically offset it with the 2027 positive. Just to remind you, in 2026, the ID.2 family kicks in. In 2027, the ID.1, we are very excited about this car. With these two cars kicking in from a price range, EUR 25,000 on ID family, ID.2 family, EUR 20,000 plus, ID.1 family, we are very confident that we can heavily overachieve in 2027. We have the chance to then take the three years in combination.
Coming back to your question, that would not put pressure away from the industry or us for 2025 and 2026. We have to concentrate on improving the costs of the electric cars. It is clear to say not making compromises in the interior on quality, rather on the things I discussed before on the battery chemistry, and to significantly and consequently implement future Volkswagen, which will be the biggest single element to compensate on the cost side for the continuous ramp-up of the BEVs and the margin dilution of the BEVs until 2027. As I said, with the ID.2 family, the margin dilution effect of the BEVs should really then be much smaller than today. Audi, yeah. Audi obviously has basically the same effect. In margin dilution, BEVs, they did also very well on the Q6, E6. Deliveries to customers were up, and they had some special effects.
What you could expect from Audi going forward, the positive restructuring effects from Brussels. They also negotiated now or are in negotiation with the Works Council, also reduction of their workforce, I think in the magnitude of 7,500. These effects give the same positive tailwind as on the Volkswagen side. The margin guidance is 7%-9%.
Thank you.
Thank you, Stephen. We are coming to the last question. Philippe, best for last. Please go ahead.
Thank you very much. Good morning, Philippe Houchois, Jefferies. Two questions. First one is, we talk about guidance, but of course, it is all pre-tariffs, and we know tariffs are going to happen. Against that, you have taken that EUR 600 million provision on CO2 in your Q1 accounts.
I'm just wondering, what is the scope for Volkswagen to reverse that provision, especially on the basis of the banking system that's going to be put in place in the summer, we hope? The second point is, we talk about earnings, but no cash flow. You've given us a guidance. I'm just trying to understand. We had cash burn in Q1 that was expected. I'm just trying to think, what can you tell us about, is the EUR 4 billion kind of M&A still on the cards for 2025? What's the outlook for dividend from China? As it seems like your net cash position comes under some pressure, how do you see the leverage and the funding of the financial services at this stage as an additional source of stress or not?
Thank you. Yeah. Philippe, thanks very much for your questions.
I'm not 100% sure whether I understood the question right. I try to answer it, and I ask you whether it's what we ask for. Look, we provisioned EUR 600 million in the first quarter. If the European Union would change the legislative regime throughout the year, we don't expect that EUR 600 million to significantly increase then for the full year. That would be basically then almost the whole burden we would have provisioned for already then in the first quarter. That is still why I'm a little bit cautious. That obviously depends on your expectations for the next three years.
As you understand how volatile the markets are, and it depends on our ramp-up targets on BEVs in 2026 and 2027, then obviously to calculate that, because we have time to take the ramp-up of BEVs in 2027 into account to make a three-year calculation, which in the nature of the subject is basically volatile. This is why I'm a little bit cautious, but EUR 600 million, perhaps a little bit less, then should be the whole burden for the full year.
Was that your question, Philippe?
Yes, exactly. I was just trying to think, can you reverse? I think your answer is no. It may not increase, but it's not going to reverse. It may not increase.
Perhaps I do not expect that we can reverse significantly, but the first quarter burden would then be already the burden then for the full year, which is also good news for the quarters to come.
Exactly. Okay. Thanks.
On the cash flow, I think we were very precise on the cash flow guidance, EUR 2 billion-EUR 5 billion, more towards the lower end of the range. You mentioned the EUR 4 billion. One is EUR 4 billion. Some M&A we had already. Of course, we look at the topic. On the other hand, we are glad to announce at least the first small step on the trade, increasing fleet float. That works also in a positive direction. I do not rule out that we stand, I do not expect that we stand still there.
We have a look at that, but we also have a small chance over time, of course, not in the next weeks and months. Yeah, this is where we stand. The cash flow that we also guided is significantly burdened by the outflow of cash in the magnitude of EUR 2 billion by restructuring measures we decided on last year. You also have to take into account the dividends from China. As always, we do not exactly guide the dividends from China, but by and large, the proportionate operative result from this year would be the China dividend for next year. Obviously, what you can expect this year is basically strongly related to the Chinese operative result we achieved last year. This is how we think of the net cash flow.
Obviously, given the unsecure and the current geopolitical environment, we are really focused on cash, preserve cash, increase liquidity to have a really strong liquidity base because a strong liquidity base, and we have a strong liquidity base, is the best assurance in a challenging environment.
Yeah, one other topic. You said it, I think it was a dividend. No, it was related to the financial services.
We have a funding pressure.
No, it's even the other way around. We achieved the dividend from the bank. So it's actually the other way around.
Right. Okay. Thank you. Please think about the project Corral, which has been concluded last year. Financial services, I would not see any funding pressure in the current environment.
Of course, we always have to take insight, and we are, of course, very much focused on keeping our strong investment grade rating in proper shape. Because of the cash flow development short term, I do not see any additional funding pressure.
Great. Thank you very much.
Very good. That brings us to the end of the Q&A session. Thank you for all this discussion. We are now at the end of the investor and analyst call. If anything was left unanswered, you know where to find us. You have our telephone numbers, and the RR team in Wolfsburg is very happy to take any additional questions. Our next event will be the Volkswagen Group ESG Conference, which will be held next week on May 7th. We will have the annual general meeting on May 16th. H1 results will be released on July 25th.
We are now doing a short break before we continue with the Q&A session for the journalists, which will start at about 10:25. Pietro, and thanks very much for your numerous participation. Take care. For those who have a long weekend, a good long weekend, and for those in the U.K. who have a bank holiday on Monday, also a long weekend just with a Monday edit. Thank you very much and speak soon.
Thank you also from my side. Thank you for your time.
Hello, everyone. Welcome back to our Q1 call. I just want to remind you that if you want to ask a question, please press star one. If you think the question has been already answered, you can direct the question by pushing star two. I can see one question, Frank Johansen from DPA. Please, Frank, go ahead.
Yes, hello. Hello, Frank.
Frank Johansen from DPA here. Just three quick questions. The first one, as you stated on your slides, the figures of the employees with Volkswagen after the Zukon Volkswagen concept. The figures are remarkably below the headcount stated last year during the negotiations on the terrace. Why are these figures so much below it? Is it just because you exclude trainees and/or workers already in the passive part of the Alterstyle side, or were the figures simply too high last year? The second one, you stated that you are looking for options to probably improve production in the U.S. Does it include any plans for producing Audi in the U.S., for example, in Chattanooga or the new Scout plant and probably even Porsche?
The third question, there are often reports on interest of Chinese car makers, for example, Chery, to produce in German Volkswagen plants for the European markets. Can you comment on anything on that? Okay. Thank you.
Yes, Frank, thanks very much for your three questions. You are absolutely right. Look, we have basically two different figures, how we steer the Volkswagen Zukunft. One is basically, and what we communicated, what you could see in the annual report, is the overall number of employees that work in the Volkswagen HE. There are three elements to that. Basically, the biggest one is the active workforce. This is the people who are still on board and who are still in the processes and actively work. The second one is people who are in the passive phase of early retirement program.
The third number of people is apprenticeships and trainees. Exactly as you said, the figures are basically still the same figure. What we report here is the active workforce that are still in the plants and in the factories and in the offices because this is how basically the project team is steering the project. Basically, the figures are communicating, and the reduction is also basically equivalent. Sometimes you have a little bit of difference because only after the people leave after the passive phase of retirement, they basically then are deducted to the overall workforce. They are absolutely going to the same direction. Yeah. On the other two topics, I do not know whether you have been in the analysts and investors call already.
We look into various options, of course, that includes Audi, but it's really too early to say and to comment on specific topics. Sorry for that, Frank. I do not want to disappoint you, but this is where we stand today. Also, on the Chinese competitors or even Chevy partners who are looking for potential sites in Europe, there is also no new decision or no new information I can share on this topic.
Thank you. Next in line, as I can see, is Christina Amann from Thomson Reuters. You want to start, please?
Yes. Good morning, Mr. Antlitz. Good morning, Mr. Zollino. I know that the question has been asked repeatedly on the tariffs, but I cannot kind of come around with that. For one, can you comment on the decision Trump took last night for some relief?
Will you take that as a chance to produce more in the U.S.? What about the ID.4 in the U.S. and electric vehicles who are likely not to be as popular as they were under Biden? Is there any chance or any consideration about a mixed product mix or a change in the product mix in Chattanooga? When will we get some information on the tariffs? We have seen four weeks' tariffs are in now, more are to come. When do you think you can make a comment on how much that would really cost Volkswagen? Porsche yesterday said they are kind of calculating from month to month. Will we see something with Volkswagen as well? Osnabrück, you have said that you have nothing to say on discussions with Chinese joint venture partners. What is with other interested parties in the plant?
Is there anything we can expect soon?
Yeah. Thanks for this question. As you rightly said, I can't really comment on tariffs, and I don't really also want to comment on the communication that had been last night. Of course, we have a look at it. We calculate the impact on our business. As I said before, we concentrate what we have in our hands. We stand ready to work with policymakers to find good solutions for the U.S. This is where we stand. In terms of Chattanooga, don't forget that in Chattanooga, it's not only ID.4, it's also the Atlas Cross Sport. They're really very well received by the customers. They're also very successful in terms of margin. What we do look in is we potentially complement the Atlas and Atlas Cross Sport with a hybrid solution.
There's also no technical decision made so far, but obviously, we look into this topic. Why? Because we see from the overall market that electrification is also picking up in the U.S., but not as fast as everybody thought. We look into various options to add, for example, a hybrid drivetrain for the Atlas Cross Sport and potentially also for the Tiguan. Yeah, when do we communicate on that? Sorry, I don't want to be unpolite, but really our position is as soon as we have more visibility, we will come back to you and to the capital market and basically guide for the tariffs. Currently, we really must say the effects and the interactions cannot be conclusively assessed so far. This is why we guide specifically before tariffs.
Yeah, Osnabrück, that for my topic is a topic that has basically nothing to do with the question with Chinese, but what we can say, we have also no new decision on Osnabrück. As Board of Directors, we feel obliged to find a sustainable and economic future-proof solution for the factory, as always said. Also, I must say, for this, we need the help of all stakeholders involved. This is what I can tell you on Osnabrück. Again, no new decisions on Osnabrück so far.
Okay. Thanks.
Next in line would be Monica. Monica Raymond. Monica, floor is yours.
Wonderful. Thank you so much, Pietro, and thank you so much, Ms. Arno. I just have a few questions. One is a clarification on the import duties that were booked in the first quarter.
I heard you earlier on the analyst call say something about EUR 150 million, but I remember, and I believe in the pre-release, that there was a figure of EUR 300 million. If you could just offer clarity on that. Another question that I had was about the future of the Mexico plant, which you spoke about on the analyst call. You said engines from the Mexican plant are due to be used in Scout vehicles. I was just wondering if you could clarify whether or not those engines are USMCA compliant and whether or not they're also used in the Atlas models that are being built in Chattanooga.
My other question would center on sort of battery strategy. Can you still confirm that the plan is to use batteries from PowerCo in Canada in the future Scout models?
If you could also talk about the battery strategy for EVs on the U.S. market. I know you said that what you're learning from China is that you are going to be more flexible, for example, with the ID.2, that consumers will be able to either buy LFP batteries or NMC batteries depending on what their price preference is. Do you see something similar for the EV market in the United States, and how will you square that with production plans in Canada for batteries there?
Thank you. Yeah, Monica, thanks for your questions. Clarification on the import duties. The EUR 150 million we had to book, and this is not a contradiction to what I said. Our outlook is before tariffs.
This EUR 150 million, we had to adjust basically the cars that were in transit already while the tariffs were introduced second of April, or is that right? Early April. We had to adjust the value of the cars that were in transit, which also referred to the first quarter. This is basically EUR 150 million, but this is obviously something we had to technically do under IFRS. Mexico plant, yeah, what I can say and what I can confirm is that obviously the cars for Volkswagen, where the Mexico engines are part of, in total are USMCA compliant. We have to come back to you later, Monica, whether the single, if you take into account only the engine itself, whether it is USMCA compliant on that level, this is something I do not have in mind. Sorry for that.
We come back to you with the answer for that. Yes, obviously, they go into the Atlas. We have not made any major changes on the PowerCo investment plan so far. What we did change, obviously, but this is, I think, you could have expected. The ramp-up, the speed of the ramp-up of the PowerCo capacity in total, obviously, is adjusted to the speed of the ramp-up of the total capacity we need in terms of batteries. We always said PowerCo is basically providing 50% of the batteries for the Volkswagen Group. Since we took down some of our estimates in terms of ramp-up EVs in Europe slightly, but specifically in the U.S., of course, we adjust also the ramp-up of capacity at the PowerCo unit. That is not a basic systematic change.
It's more like an adjustment to the ramp-up, what you could expect from us. When I talked about Scout, the engine we want to use in Scout, obviously, Scout is an electric car, a fully electric car, future-proof. We will offer it in two versions. One is basically with a big battery, so full electric. There is a so-called range extender technology. It is then a smaller battery. We add an engine, a combustion engine, and this combustion engine charges then the battery, which gives then a total range of 500 mi, which is absolutely competitive in that segment. This engine would come from Mexico. Monica, the contradiction you found between the ad hoc announcement and today's statement with the 150. In the ad hoc announcement, the EUR 0.3 billion were for the diesel topic and the vehicles in transit.
Today, we just presented the vehicles in transit effect isolated, and that was the 150. You can conclude from that that the diesel topic was also around 150.
Thank you. That clarifies things.
Okay. I can see Handelsblatt would be next. Lazar, please ask your questions.
Hi, Arno. This is Lazar speaking from Handelsblatt. I mean, the figures, they were known so far, so they were no surprise. I was wondering what the implications or consequences of the figures are. Do you need to maintain your cost discipline, perhaps even tighten up your existing restructuring programs when I am looking at the core brand's margin of 0.5%? I think this is particularly something that, yeah, everybody in the management should be causing concern or should be a cause of concern for.
Yeah, I was wondering what the consequences of the figures are and where you need to readjust. The second question would be why exactly you are so, maybe you can give some light to why you are so optimistic when it comes to the outlook for 2025. I know that this is pre-tariffs, but nevertheless, there are some headwinds, for example, that you need to write a BEV share and other things that would definitely be headwinds for you. I am wondering where you see that you will be in line with your guidance. My last question is just a clarification from the investors' call. I mean, you were quizzed quite often about the impact from the tariffs.
I think, Rolf, it was then something that you mentioned between the questions that you said, there are assessments between EUR 2 billion and EUR 4 billion when it comes to OP impact on the tariffs. This is not your own conclusion, but this is something that you also comprehend, and I just wanted to reconfirm that I understood that right. Thank you.
Maybe on the Lazar, on the question raised, I think it was Tim. What I wanted to say is that there are many analyst reports out there. Arno gave the breakdown of the 700,000 units we currently sell in the U.S. And the analyst then just simply calculated the current tariffs in discussion, for any parts produced in Mexico and for the imports into the U.S.
What I wanted to say is that they are coming up with calculations of an impact between EUR 2 billion-EUR 4 billion, depending on the assumptions they take. We just said that we can comprehend actually those calculations without confirming that this might be the final impact on Volkswagen.
Right. Okay. Thank you.
My Lazar, I really want to reiterate what I just said. It's really too early to really conclusively assess this effect. I would rather stick to this formulation because it's really too early. As soon as we have a better insight on that topic, we will come up with an assessment. Currently, we cannot conclusively assess it because it might have also volume impact, which nobody knows. It's really too early to say.
Yeah, I really appreciate your questions also because they are to the point of what we have to do now currently. What we did make very clear is that there are some underlying effects that burdened brand Volkswagen, but even with the underlying effect, the margin is only 2.2%. We are absolutely committed to implement the Volkswagen Zukunft program over the course of the year. I would like to remind you on the three topics. First and foremost, that's basically done. It's the implementation of the piece that's on the wages, which is implemented already. We have a relief on the wages that ramps up to EUR 1.5 billion roughly in the course of 2025 and 2026. We make very good progress in becoming leaner. We showed you the figures throughout 2024 and also in the first quarter of 2025, 2,000 people. This is 2,000 workers.
This is a good start on that. I monitor it personally closely, and the team is monitoring closely the improvement measures in the factories, for example, for becoming more productive. The factory costs are reduced, to be very honest, not to the amount we were planning for. They were very ambitious targets, but they made a good first step. We will have a lot of pressure on that topic because we have to make sure that we achieve these targets. The reason why that is what I said before. The BEV targets sharply rose in the brand Volkswagen, even a little bit higher than on average. This is a great good success. In the maximum truth of that, they had to book only EUR 150 million from a EUR 600 million for CO2.
For brand Volkswagen, the same holds true as for the group. The relative burden of the BEV ramp-up will become slower quarter-by-quarter. We are really confident that we can improve the contributions from the Volkswagen Zukunft program quarter-by-quarter. everybody is fully committed in the brand and in the group. All the stakeholders work on it. I am really positive about the momentum we built there. We will have a very close eye on achieving all these targets. From today's perspective, we are not planning additional measures, but we are very committed to 100% increase, implement the measures we decided on. The brand is on a good momentum.
Okay, Lazar, does this suffice your question about why we are so optimistic or still optimistic about 2025?
Maybe you can also add a bit more light. I do not know.
Is it the order bank that makes you so optimistic or the order intake? That's what I was wondering about. Yeah, what is actually the thing that could, yeah, that makes you fulfill your guidance for 2025, always saying that there are not tariffs included?
No, again, thanks for this question as well. As I said before, we are really positive about the customer side. Both the products are very well received. The feedback is great from the customers. And the feedback we can measure not only in feedback from the customers, but also in order intake. Order intake was up significantly, 30%, which is a lot. And specifically, order intake for BEVs were up significantly. These are, and the order bank stands about the million. I said in the analyst call already, this momentum continued in April as well. The order bank is even rising.
This order bank basically helps, is reaching well into the third quarter. We have very good visibility. Let's not forget, more great cars are still to come in our product momentum 2025. Also 2026 with the ID.2 family and other cars from Porsche and Audi. We are confident that we have a very strong tailwind from the customer side. What we need to do is now implement our strategy and work really consistently on the cost side to compensate for the margin dilution, as I said before. I can see The Wall Street Journal, I suppose, from London. I hope the weather is as pleasant as it is here. Stephen, how are you doing?
Good, thank you. Thank you for taking the question. Indeed, the weather is very nice here.
You've obviously been asked many times about the U.S. production system and production outlook. I think we've exhausted avenues for querying you on that. To ask a slightly different question about the U.S., or two different questions. One is, what are you seeing in terms of demand? Did you see any pre-buy momentum in the first quarter as people anticipated tariffs and price increases? Have you seen any, I mean, has that continued, I guess, in the second quarter? Any color you can give on the shape of U.S. demand, or is it simply kind of as normal? Conversely, have you seen any weakness because of consumer confidence as a result of the tariffs? The U.S. demand picture, as far as you can tell, would be interesting to hear about.
Secondly, also in the U.S., you've talked in the past about increasing sort of local for local vehicle development as well as production. Can you talk a bit about that? What you might be thinking for that? Is that also involved in discussions about with your discussions with the U.S. administration, or is it a different thing on the development side rather than the production side? Finally, can you the strong order intake in Europe is obviously quite striking feature of these results, 29%. Is that, and you've talked a lot about the products, obviously, going down well with customers. Can you, so is this really only a Volkswagen thing? I mean, or is it a market thing? Obviously, you're the market leader by some margin in Europe. One would you're a bellwether for what's going on in the European market.
Can we take it as a sign of, basically, can we take this strong order intake as a sign of a bit of a rebound in consumer confidence and demand for cars more generally, or are you mainly, in your estimation, taking market share from your competitors through a slew of new products? Thank you.
Yeah, thanks for the question. In terms of U.S., there were some in the market that you could hear from some pre-buy momentum, but not significant for the Volkswagen Group. This is what I can say. There were not significant pre-buy momentums here. We had a positive sales momentum in the U.S., but that basically continued throughout 2024 already. It is more the continuation of a very good trajectory the brand Volkswagen had already in 2024. If I remember me right, I think it was 16% up in 2024.
This is a continued positive momentum in the brand. Really, I must say, we talked a lot about the potential effects of tariffs and what our options to localize are. I really can give you more light on that topic so far. What I can say in terms of development, we work together with Rivian already. We founded a joint venture with Rivian. We invest EUR 1 billion in that joint venture and invest in Rivian. This is obviously also a significant amount of R&D, which is done locally for the Volkswagen Group. I would like to remind you that basically all the Western world vehicles of the Volkswagen Group will be based on that architecture that is developed by the joint venture together between Rivian and Volkswagen. There is already a lot of local R&D happening so far. We are ramping up this already.
Just as a reminder, also the ID.1 will be one of the first cars that hit the showrooms in Europe based on that software, which is developed then in the joint venture in the U.S. We are increasing that effort together with Rivian. Your third question, order intake, obviously, we have no visibility on the order intake in Europe on our competitors. We see only our order intake, and our order intake is strong. We were very vocal about that. What we can say in terms of share, if you look at the deliveries, specifically in the BEV market, in the deliveries in the first quarter, we gained significant share, BEV market share in the BEV segment versus last year. This is what we can say, and everybody can measure. The BEV market share is even higher than our overall market share.
That is clearly a strong signal for the market success of our BEV strategy and that the BEV cars are very well received by the customers, private customers, as well as fleets. Arno is absolutely right. Last year, just to give you the precise figure, in the U.S., we were up 15.2% for the Volkswagen brand alone. That amounts to 380,000 vehicles if you compare it to the year 2023.
With that, I see Christian Miskins from FRZ. Christian, you want to take the call?
Thank you very much. It is just the last special question on China. Thinking back about the Shanghai show, I thought about the investments that you make on a global scale. What you actually do is you want to bring down the cost to, I think, like EUR 160 billion on a group level.
My question is, does this also apply to China and to the share of the investments you plan over there? Will investments in the Chinese joint ventures decline by the same amount as the average of the, let's say, global planning round? I hope you understand my question.
Yeah, absolutely fair, this question. In the EUR 165 billion, the China product offensive is included, all the products you saw. I must say, you have to take into account how we account for in China. If the products come, for example, from our own Anhui joint venture, they are basically 100% in our books. It is fully consolidated. If the models are produced and also sold by our joint venture, this is both true for Volkswagen, SAIC, and FAW, and also for Audi.
For these models, the R&D and CapEx, you don't see in our books. You see it in the books from our Chinese joint ventures. We don't have also the revenues and all the other elements of the P&L not in our books. It is really the joint venture business is accounted for at equity. In EUR 165 billion, our own models, but also our technology. As you know, we ramp up 4,000 people in the VCTC. We develop local for local. For example, the joint venture with Horizon Robotics and all these other initiatives that we have in our books, these are part of the EUR 165 billion.
Yes. Let's say on a less technical level, can you say that you keep up the speed with investments in China and you don't take, let's say, the foot from the gas while you brake in the rest of the world, or would that be false to say?
No, absolutely. Thanks for the question. I mean, if you have been in Shanghai or you have basically looked at the Shanghai display, there's absolutely no sign that we take the foot from the gas in China. It's actually the other way around. It's really a model offensive. I think 30 models until 2030 are hitting the market. This is, we are doing both. Yeah. We want to, as I said before, we want to stay strong in Europe, want to defend our strong position in market share.
We want to basically come back in China to all strengths, but we want to significantly grow in the U.S. This is our way forward.
Thank you.
Okay. I can see Monica, you are back in the queue. You want to ask another question for follow-up?
I do. Thank you so much for taking my one last question. With regards to the order books in Europe and how strong they are, 1 million is certainly very impressive. I was wondering if you might be able to speak to the strategy on rebates for electric vehicles in Europe and whether or not that had any impact. I am aware that rebates sort of took effect towards the end of 2024 and that the ones that were implemented in the first quarter were sort of extended through to the end of June.
I know that France, Italy, Germany, Spain have several rebates on the ID family. I was just wondering, do you anticipate that those rebates will be continued on in the further quarters? If so, how do you see that as potentially impacting the margins on the BEV sales? Thank you.
Yeah, Monica, thanks. Obviously, I cannot make forward-looking statements on rebates or pricing in public, as you're aware of. What I said generally is that we have a good momentum. We expect from this perspective that the BEVs will continue to be margin dilutive. We have to compensate for that on the cost side. When 2026 kicks in, a whole new generation of battery comes. Also, obviously, the margin on the BEV side for Audi and Porsche is stronger.
These are the effects on the P&L, which we discussed about this morning.
Okay, thank you.
Good. If I'm not mistaken, I think that was the last question that would conclude our call. I just want to mention, if anything was missed or was unclear, please reach out to us. As I said, the context can be found. Either you know them or you find them on our group website. I'm happy. We are happy to talk to you soon. In the meanwhile, stay safe and take care. Bye.
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