Ladies and gentlemen, welcome to the Volkswagen AG Investor Analyst and Media Call, half-year Q2 2025 conference call. I'm Moritz, the call's call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Sebastian Rudolph, Vice President, Global Group Communications. Please go ahead, sir.
Thank you, Moritz, and warm welcome. Good morning to the half-year 2025 results call of Volkswagen Group. With me is Rolf Woller, our Head of Group Treasury and IR, because this is a joint call, media and investors and analysts. Our main actors are with us as well: Oliver Blume, our CEO, and Arno Antlitz, our CFO and Chief Operating Officer. A few more remarks before we start. 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 received these documents, please give us a call or drop us an email, and we will take care. With this, Rolf, I hand over to you and you guide us through the next time.
Thank you, Sebastian. Very good morning to everyone on the call, also from my side, and thanks for joining us today. Let's have a look at our agenda. Oliver will present the key developments of the first half-year, and Arno will then take you through the financial results and the updated full-year outlook. This time, not an easy task, but this is why we have him, and he is super prepared, so we are looking very much forward to the explanations. Following the presentation, we will first host the Q&A session for the investor and analyst community, moderated by myself. After this session and a short break, we will continue with the media Q&A, which is then hosted by Sebastian. Since our call will include forward-looking statements, the safe harbor language and other cautionary statements on the slide will govern today's presentation.
I encourage you, as always, to read the disclaimer carefully, as all forward-looking statements are qualified by this language. In the interest of time, I will not read it out loud. With that, I hand it over to Oliver. Oliver, go ahead, please.
Yeah, thank you, Rolf. Thank you, Sebastian. Oliver Blume is speaking. Good morning to everyone. Let me start by highlighting the key developments in the first half of the year before Arno walks you through our financial results. After that, Arno and I look forward to your questions and a lively discussion. The first half of 2025 was marked by major challenges, challenges that were not foreseeable at the beginning of the year. First and foremost, the sharp increase in U.S. import tariffs and the associated trade policy uncertainties. Despite these challenges, we continued to consistently implement our strategic initiatives. Our model offensive is making great progress, and we are successfully launching new models in our markets. This year, we are placing particular emphasis on our cost reduction and the execution of our group-wide performance programs. The results show that our measures are beginning to take effect.
At the same time, they are initially causing high expenses. All these factors have had a significant impact on our operating results. With overall stable sales, the Volkswagen Group generated sales revenue of EUR 158 billion in the first half of the year. This was on par with the previous year. The operating result declined by about a third to EUR 6.7 billion, mainly due to the aforementioned effects. The operating return on sales was 4.2%. Excluding the effects of increased tariffs and restructuring costs, the return on sales was 5.6% in the first half of the year. The second quarter, it was even slightly higher at 6.8%. This means that we are within the forecast range communicated at the beginning of the year. Given the challenges and in the face of extensive restructuring, this is a respectable result.
It also makes one thing clear: Volkswagen must consistently pursue the performance programs it has embarked upon. We need to shift our cost efforts into high gear and accelerate implementation. After all, we cannot assume that the tariff situation is only temporary. The changed import tariffs in the US resulted in expenses of around EUR 1.3 billion in the first half of the year. If the current import tariffs remain in place, the burden would increase to several billion. We, therefore, have had to adjust our forecast for the full year. Our plea to the negotiation partners is therefore clear. We are counting on the EU Commission and the US government to reach a balanced outcome on the tariff issue, an outcome that continues to ensure rule-based trade, open markets, and stable trade relations. This is a basis for a competitive economy on both sides of the Atlantic.
North America and the US market in particular are strategic growth markets for the Volkswagen Group. Investments of over $14 billion to date in local production partnerships and cutting-edge technologies are clear evidence of our strong commitment to local investment and value creation. Added to this are our significant investments in the construction of the new Scout plant in South Carolina. You can read on the picture. Our partnership with Rivian. We intend to continue on this path. In 2025, we are continuing the most extensive product offensive in the group history with increasing success. We increased deliveries by 1% to 4.4 million units in the first six months of 2025. By region, growth was driven by strong performance in Europe and South America. Here, our brand achieved an increase of 2% and 18%, respectively. This was offset by a slight decline of 2% in China.
Deliveries to North America customers fell significantly by 7% due to the tariff situation. In the second quarter alone, the decline amounted to 16%. The overall positive development was driven by numerous new model launches across all brands, from Volkswagen and Audi to ŠKODA and Cupra to Porsche. These market launches underscore our consistent focus on innovation, customer orientation, and sustainable mobility in all market segments. Each new model strengthens our global competitiveness and reinforces our commitment to leading the industry's transformation towards electrification and digitalization. Deliveries of battery electric vehicles recorded particular strong growth. They reached 465,000 units, representing 11% of group deliveries and an increase of 47%. In addition, there were almost 200,000 plug-in hybrids, 40% more than in the same period last year. Our BEV share in Western Europe grew even more strongly. It doubled compared with the previous year to around 20% of our sales.
We have succeeded in further expanding our leading position in electric vehicles in Europe. We now have a market share of around 28%. Four of the six best-selling BEVs in Europe this year come from the Volkswagen Group. We also increased our share in North America to 8%. In China, however, it declined to 4.5%. This is part of our value over volume approach. We are preparing for the market launch of our new models, starting in the fourth quarter of this year. Our new models are well received by customers. We are receiving very positive feedback on the design, technical performance, software, and features offered. New vehicles across all brands and drivetypes are in high demand, including the VW ID.7 Tourer, Cupra Terramar, ŠKODA Elroq, Audi Q6 e-tron, and Porsche 911, to name just a few.
This is clearly reflected in our order intake, which has developed very positively in Western Europe with an increase of 19% compared to the previous year. BEV orders are developing particularly dynamically, rising by 62%. The order backlog in Western Europe grew to around 925,000 vehicles by the end of June and extends well into the fourth quarter. BEVs account for over 22% of this figure. With numerous new models coming to the market in the next month, we expect additional momentum. This shows our strategy is working, and we are implementing it consistently. Our model offensive will also kick off in China in the fourth quarter with a new generation of intelligent connected vehicles that have been developed entirely in China for China and that are tailored precisely to the wishes of our customers.
Our technology is state-of-the-art with our newly developed electric and electronic architecture and advanced safe level two plus, level 2++ ADAS systems. We cover the entire NEV spectrum with flexible drivetrain solutions, including BEVs, PHEVs, and EREVs. We will bring 30 new models to the road by 2027 and 50 by 2030. Thanks to consistent cost management and a structured fixed cost program, we have already reduced the material cost of our compact main platform by 40%. We have set ourselves a further target of 10%. This puts us on par with leading competitors in the Chinese market in terms of cost. This is our approach: local, customer-focused, cost-optimized, and technologically leading. We are making great strides in the automotive driving, even outside China. With the ID.Buzz 8D, we are putting Volkswagen Group's first fully autonomous series production vehicle on the road.
It has been consistently designed for use in mobility services. MOIA's turnkey platform gives cities and operators access to safe, scalable, and intelligent ride-pooling solutions, initially in Hamburg and from 2026 also in the U.S.. MOIA's comprehensive solution combines all components to turn an autonomous vehicle into a ready-to-use mobility system. Our software meets key regulatory requirements for level four vehicles according to the SAE standard. The ID.Buzz 8D brings future technology to the market. This is an important step on our journey to become a global automotive tech leader in the industry. We have also achieved significant milestones in the implementation of our group-wide earning improvement programs. This includes, in particular, the future Volkswagen Agreement reached at the end of 2024. This agreement lays the foundation for the economically successful future of Volkswagen and our German locations.
Besides labor cost reductions, we will achieve $1 billion a year, actually, and more than 4,000 employees have left the company since the end of the year. Further 20,000 departures have been contractually agreed and are already certain. In the medium term, we are expecting an annual savings of over EUR 4 billion. Competitive personnel and plant structures linked to the company agreements to accelerate implementation. We have agreed on similar approaches in Germany at CARIAD, Porsche, and also at Audi. In June, the brand group Progressive around Audi reached agreements with employee representatives on specific measures to reduce the workforce by around 7,500 positions, primarily in indirect areas. Performance-related pay will also be adjusted. In the medium term, Audi expects annual savings of more than $1 billion. These measures are part of a clear plan. We are shaping change responsibly, proactively, and in dialogue with others.
Future-ready products and technologies will also be the focus of our presentation at the IAA Motor Show in Munich in September. We are taking this opportunity to invite you, our investors and analysts, to a product and technology update on the Volkswagen Group and its brand groups on September 9th in Munich. My colleagues on the Board of Management and I look forward to providing you with key insights to our product strategy and the convergence of our platform software, battery technology, electric electronic architecture, and other key innovations. Of course, we would also like to take this opportunity to engage in a personal dialogue and answer your questions. Our Investor Relations team looks forward to receiving your registrations. Let us now take a closer look at the financial performance in the first half of the year. I will hand over now to Arno. Thank you very much.
Yeah, thank you, Oliver, and good morning also from my side, colleagues. Our half-year result continues to tell a story with two sides. On the one hand, there is tremendous success of our products, combustion engine and electric vehicles. In Europe, every fourth vehicle comes from the Volkswagen Group, and we are making good progress in restructuring our company. On the other hand, operating results are down by 30% year on year. This is due to the continued margin dilution effect of the ramp-up of our electric vehicles. On top of that, US tariffs and restructuring have left their marks. In the first half of the year, the burden from increased US import tariffs amounted to EUR 1.3 billion. Restructuring added a cost of EUR 0.7 billion. Excluding these effects, results in the second quarter came in at 6.8%, which is at the high end of our expectations.
This gives us the confidence that we are on the right track, both strategically and financially. Ultimately, it's only the cash in our bank account that counts. This is clear, and that's why it's necessary to decisively implement the ongoing programs and, in some areas, take even further measures. With that, let's move to the details of the financial result. Vehicle sales totaled 4.4 million in the first six months, a slight increase of 1% compared with the prior year. The Group sales revenue remained stable at EUR 158 billion. The operating result totaled EUR 6.7 billion, - 33% versus H1 2024. The operating return on sales stood at 4.2%. In the first half of 2025, our business was marked by intense competition, high expenses related to US import tariffs and restructuring costs, as mentioned.
US import tariffs and restructuring costs had a total negative impact of EUR 2.2 billion in the first half of the year, EUR 1.7 billion in the second quarter alone. A look at the corresponding key figures before these effects shows that the product momentum of exciting vehicles and our restructuring efforts are gradually paying off. Restructuring expenses will help us to achieve leaner cost structures in the future. However, tariffs are likely to remain a permanent burden, and we must increase our efforts to offset this effect. The development of profit before tax, after tax, and earnings per share follows largely the operating result, with a positive effect from income from participations and a negative effect from interest results. Net cash flow in the automotive sector amounted to EUR 1.4 billion in the first half of the year.
The year-on-year decline in operating profit was largely offset by a lower cash flow, cash outflow from working capital, and lower CapEx and R&D expenditures. On top of that, cash flow development was affected by cash out related to US import tariffs of around EUR 0.7 billion and payments of around EUR 0.7 billion for restructuring measures. In addition, EUR 0.9 billion was spent on the acquisition of additional Rivian shares, which was triggered as planned by Rivian reaching financial milestones. Net liquidity in the automotive business decreased by around EUR 6 billion compared with the end of 2024. In addition to the operating performance, the following factors explain this development: M&A expenditures of EUR 1.4 billion, dividend payments of around EUR 3.8 billion in the second quarter, interest payments to hybrid bond holders in the magnitude of EUR 0.4 billion.
Overall, net liquidity remained at a solid level of EUR 28.4 billion at the end of the second quarter of 2025. Let's move to the performance of the divisions. Passenger cars generated an operating result of EUR 4.4 billion in the first half of 2025, down 40% versus the prior year. This corresponds to an operating return on sales of 3.7%. Commercial vehicles recorded a decline of operating profit to EUR 1.2 billion, and the margins stood at 5.9%. The financial services division performed well with an operating result of EUR 1.9 billion. Let's now take a look at the drivers of earnings development in the passenger car segment. Volume had a positive impact of EUR 0.8 billion compared with the same period last year. Price mix had a negative impact of around EUR 2 billion.
This was mainly due to the significant increase in PV share and a negative product mix and brand mix. PO2 provisions had a cumulative negative effect of around EUR 0.5 billion on earnings in Europe and the US, and Forex had a negative effect of EUR 1.1 billion, mainly due to the valuation effect of balance sheet items in foreign currencies. The development of product cost and fixed cost had a positive effect, the latter improving by EUR 0.1 billion despite continued restructuring efforts and the ramp-up of new businesses. Looking at the development of our overhead costs, the automotive division was able to keep overhead costs stable. Overhead cost ratio improved slightly, specifically in the second quarter. An increase at TRATON and Brand Group Progressive, as well as a ramp-up of our new businesses, were fully compensated by positive effects from restructuring measures throughout the group.
A key factor in this development is the consistent implementation of efficiency programs, particularly at Volkswagen AG. Future Volkswagen is having an increasingly positive impact, partly due to progress in realigning the workforce. The new collective agreement, which has now come into full force, is also having an effect. In the six months of the year, the number of active employees at Volkswagen AG was again reduced by 4,300. Since the end of 2023, the reduction has amounted to almost 9,000. Where the programs are being developed and implemented at Audi, Porsche, and CARIAD, and the programs have been extended to all units, entities, and regions of the group. As a result, the number of employees at group level has been reduced by a net total of 10,600 in the last six months.
The corresponding positive effects on our cost structures will be reflected in our accounts in the subsequent quarters. Let's move on to the development of the brand groups, platforms, and financial services. Within the passenger cars, the Brand Group Core achieved overall a solid result, with sales revenue up 5% in the first half of the year, operating profit amounted to EUR 3.5 billion, and the margin stood at 4.8%, in line with the previous year. Brand Group Progressive also achieved a 5% increase in sales revenue, driven primarily by the continued product offensive. Positive volume effects were offset by ramp-up costs for new models. US import tariffs and the provisioning connection with the agreement on the future of Audi burdened the results with approximately EUR 750 million. All in all, the brand group achieved an operating profit of EUR 1.1 billion. The margin stood at 3.3%.
Excluding the effects of restructuring and US tariffs, the margin would have stood at 6.1% at Brand Group Progressive. Porsche vehicle sales declined by 11% to approximately 135,000 units, with the Macan emerging as the best-selling model, 25,000 of which were fully electric. Sales revenue dropped by 9% to EUR 16.1 billion. Operating result fell to EUR 2.8 billion, primarily due to the external charges driven by battery-related activities, US tariffs, and strategic alignment measures, totaling about EUR 1.1 billion in the first half of the year, according to Porsche AG. Porsche AG will report on its half-year results at July the 30th. Let me outline some effects of Brand Group Core. ŠKODA impressively demonstrated that exceptional performance is possible even in a difficult market environment, with first-class products on Volkswagen Group platforms combined with a competitive cost base.
ŠKODA achieved the best quarterly results in its history, with around EUR 740 million. The operating margin of 9%, even 9.5%, in the second quarter speaks for itself. Volkswagen Passenger Cars recorded stable sales development. Nevertheless, the brand increased its reported operating margin by 30 basis points to 2.5% and achieved an operating result of EUR 1.1 billion, 20% above prior year. The efforts are starting to pay off. The consistent implementation of measures agreed at the end of last year is beginning to have first positive effects on the cost structures of Volkswagen brand and our component business. On top of that, an advance booking from our China business, which had actually been expected for the second half of the year, had a positive effect. Leaving aside all non-operational effects, the operational performance was even slightly stronger.
US import tariffs and further expenses in connection with restructuring activities and the diesel issue had a negative impact. Excluding these effects, brand Volkswagen operating margin after six months stood at 4.2%, in line with the target set for the full year. Brand group core achieved almost 6% margin before restructuring and tariffs. One word of caution here: restructuring expenses burden the result now but help us to achieve leaner cost structures in the future. However, we need to prepare for a scenario where tariffs are to stay at a certain level as part of our operating business. This clearly means the restructuring work has to continue, and we even need to speed up the measures. Carriers reported rising license revenue, supported by higher volumes on software platforms 1.1 and 1.2. Revenue rose by 32% to around EUR 0.6 billion.
The operating result was -EUR 1.2 billion, roughly on par with the previous year. PowerCo is making good progress in ramping up battery production in St. Gether, which is scheduled to start production at the end of the year. The company reported an operating loss of EUR 0.6 billion, around EUR 400 million more than in the first half of 2024, mainly related to the ramp-up activities for battery production at St. Gether, at Valencia, and at Ontario, Canada sites. The region recorded a decline in sales in the first half of the year due to weaker demand in Europe and customer restraint in North America. As a result, revenue fell by 7% to around EUR 21 billion. The lower volume, higher fixed costs combined with the impact of exchange rate fluctuation led to a significant decline in operating profit of 39% to EUR 1.2 billion.
TRATON results have been released this morning. The financial services business developed positively in the reported period. This was due to an increase in contract volume by roughly 10%, particularly in Europe. The credit loss ratio was broadly stable, and the operating profit rose by 35% to EUR 1.9 billion. Investment and expenditures on R&D in the automotive business declined by around 6% to EUR 16.3 billion in the first half of the year. This corresponds to 11.4% of automotive sales revenue and is slightly below our forecasted range for the full year. However, the magnitude overall reflects the high upfront investments from the transformation and the ramp-up of future businesses such as batteries and autonomous driving. We intend to and will bring down investments by leveraging group synergies even more consistently and reducing complexity beyond the level of today's range.
Let's move on to the performance of our joint ventures in China. In a market environment that remained highly competitive and characterized by intense price pressure, deliveries declined by 2% to around 1.3 million vehicles in the first half of the year. The proportionate operating profit of our joint venture activities in China amounted to EUR 506 million in the first half of 2025. Based on the current sales and earnings development, we are reiterating our expectation of reaching the upper end of the forecasted range of EUR 0.5-EUR 1 billion for the full year. This brings me to the full-year outlook. The continuation of model offensive and the renewed product portfolio of exciting vehicles across all brands support mixed effects in the second half of the year. We also expect to see increasingly positive effects from the consistent implementation of our cost programs and ongoing restructuring measures.
At the same time, we expect the increase in the share of battery electric vehicles to continue to have a negative impact on the margins. Furthermore, we anticipate negative effects from the increased import tariffs, with a chance resulting from potential mitigation measures. As promised in the Q1 call, we have now factored all these effects into our outlook for 2025. Our adjusted annual forecast is based on two scenarios. The lower end of the range for the operating margin assumes that the current US import tariffs of 27.5% on imports from Europe and Mexico to the U.S. will remain in place. On a 12-month basis, a tariff at this level would impact us by around 200 basis points before any mitigation measures.
At the upper end of the operating margin, we assume a scenario for much of the second half of the year in which the current tariffs are reduced to 10% for both deliveries from Europe to the U.S. and from Mexico to the US. With these tariffs, the impact would be around 60 basis points on an annual basis before any mitigation. As a result, we now expect revenues at the previous year's level. Based on the US tariff scenarios just outlined, the operating return on sales is now expected to be in the range between 4%-5%. The CapEx ratio in the automotive division is expected to remain between 12%-13%. We expect automotive net cash flow to be in the range of EUR 1 billion-EUR 3 billion.
These figures include expected cash outs of around EUR 2 billion in connection with the implementation of restructuring measures, of which EUR 1.3 billion will be in the second half of the year. We now expect net liquidity to be in the range of EUR 31 billion-EUR 33 billion. One more comment on the outlook: we have taken note of TRATON's mandatory announcement from last night. We will be able to reflect the new range for the operating result of the industrial business of TRATON within our existing range of 4%-5% return on sales for the Volkswagen Group. For the new forecast of net cash flow from TRATON, that means that we will end at the lower end of the range for the net cash flow. From here, we will increase in our efforts to work our way back towards the midpoint of our guidance.
Ladies and gentlemen, our model offensive is proving successful for both combustion engines and electric vehicles. In Europe, one of our vehicles now comes from the Volkswagen Group. Our cost reduction measures are beginning to take effect. At the same time, we are pushing ahead with the implementation of our strategy by continuing our extensive product offensive. In China, we are working towards the model launches of new, locally developed, and highly competitive models. In the U.S., we ramp up activities for Scout and the renewed model lineup for the Volkswagen brand. In view of the renewed challenges, we must increase our efforts and accelerate the implementation of our performance programs and continue absolute cost discipline so that we are well prepared and on a stable footprint for the future. Thank you very much. With that, I hand back to Rolf. Thank you, Arno.
With this, we conclude the prepared remarks. Let us now enter into the Q&A session. To ask a question, please press star one. If the question has been answered, you can remove your question by pressing star two. We give it a little time in order to see the Q&A row piling up. We would start the Q&A session with the first question coming from Tim Rokossa from Deutsche Bank. Tim, please unmute yourself and go ahead.
Thank you very much, Wolf. It's Tim from Deutsche. Arno and Oli, probably to both of you, firstly, thank you for giving us the tariff sensitivity. I think that's very useful to work with. Now, the Japan-US deal seems to be the most likely scenario also for an EU-US deal at the moment with a 15% tariff. Can you quantify what impact that would have on you regarding EBIT and free cash flow?
Also to that, Oli, maybe probably more you, do you also think that a 15% tariff is now the most likely outcome, not anything that involves investment credits or export credits that the industry was actually pushing for? Secondly, probably again to both of you, or maybe more, Oli. To understand the underlying business, all of this obviously very material tariff noise. In contrast to Stellantis and Murano, your mass market business seems to do very well in Europe. Do you feel like you have cut the corner when it comes to restructuring and product improvements on the mass market business? Are we going to see further strength from here? Likewise, are we now also pretty much there for Audi? Is Audi going to improve from here? Thank you.
Yeah, Tim, thanks for your question. Yeah, look, we promised to give transparency now in the second quarter.
We gave you all the scenarios. It's a lot of math we need to do. To start with the tariffs of potentially 15%. Look, the 25% on top and now the 27% we have today is 25% on top. The 15% would basically be 12.5% on top, and that's exactly 100 basis points. Mathematically, you would roughly end in the middle of our guidance if we would end at the Chapman deal. I must make sure that this is completely understood. That has to be applied for Mexico then and for Europe both because the combined figures we gave are always for Mexico and for Europe. We have a significant import from Mexico to the US as well. To give you a rough idea, it's more like 60%-65% from Europe.
That means you can also do the math then if there would be a deal from Europe and not from Mexico later on. A second word of caution, obviously, we are already in July. The longer we go into the second half of the year, the longer we tend to the lower end of the guidance. That's clear as well.
Yeah, Tim, good morning. From my point of view, one of the ways we hope that it will come to a well-balanced deal between the U.S. and the EU, which allows fair trade between the regions. We are expecting a deal around 15%. For us, it's important being able to continue with a specific additional deal for Volkswagen. We have a very attractive investment package we will do there. We are acting with eight brands in the U.S..
In between these eight brands, also two American brands, the Scout and International. I think that this package is very attractive for the US government. We have been already in good discussions with them. We need then the opportunity after the EU deal to enter with a specific deal. Coming to your second question, we see a positive trend, especially in the EU. When we look to our market share, we were able to improve to over 25% overall market share in electromobility. We are by far market leader now with 20%-28%. What's positive for the future is a very promising order intake. Overall, drivetrains 20% and electric vehicles 60% better than last year. The positive momentum is that there are a lot more products to come. Our huge investments of the past are paying off with improved design, improved technologies, and also the quality aspect.
What we have mentioned also in the second quarter is a positive momentum on our product costs. Finally, our restructuring programs in all brands are step by step the way to pay off. There is a positive momentum on the EU market, and we will use also this momentum for the rest of the world. Talking about Audi. Our expectation is that we will touch the bottom this year at Audi. As you know, at Audi, we implemented a huge restructuring process on the organization, but especially also for the product strategy. We developed a completely new design language. The first glimpse we will show at the IAA, but also the technological concept. We are facing now a huge product momentum. On the other side, also Audi is working heavily on restructuring the company and reducing the costs.
I would give you an additional point because Audi and Porsche are also discussed right now. At Porsche, the situation is a bit different. Porsche has got a very positive substance, and in spite of a complete new product lineup, this year is very weak. Why? Porsche is in a sandwich position because of 100% export to the US and China. China and the US are by far the biggest single markets of Porsche. At Porsche, we have had the need to restructure also the company in terms of cost to adapting this to this new situation. We adapted also the product strategy in terms of the development of electromobility in the different regions of the world. Porsche is strong in electromobility. For example, the electric cars in Europe count already on 60% volume share in between Porsche. From this 60%, 36% are BEVs.
Electromobility is working for Porsche, but the market is still very, very small. We decided to adapt the product strategy to even more taking investments for more flexibility in between the different model lines. On the other side, as you have mentioned also from the media, we kicked off a structuring program in Porsche to reduce labor cost, to adapt the employees. We will enter in a second package in the second half of the year. For both companies, Audi and Porsche, we are expecting that we will touch the bottom this year with positive momentum from 2026 onwards. Very clear.
Thank you both.
Thank you, Oli, for the comprehensive answer. The next one in line is José from JP Morgan. José, please go ahead.
Thank you. Wolf, morning, Oli, and Arno. Great to see the progress done so far in the year.
Arno, I have one question on cash flow. I'm looking at all the exceptionals you have this year and last year, right, in terms of cash outflows, investments in Xpeng, Rivian, exceptional restructuring cash outflows, battery investments, etc. The question is, beyond the quarter, when you look at the year and you look at your free cash flow guidance, if you exclude the exceptional restructuring cash outflows and M&A, etc., what is the underlying free cash generation of the group? I think this is very important because obviously, if you can go back again to that EUR6 billion-EUR8 billion or more than EUR8 billion free cash flow for the group in 2026, this will be definitely, I think, a game changer for Volkswagen. Second, Oli, on robotaxi and level four and five autonomous driving.
I think, look, we'd love to get your comments in the light of the strong progress done by Tesla and Waymo deploying robotaxis in the U.S. What is Volkswagen doing about this technology? And do you think this is vital for VW to be present in this field to ultimately ensure the competitiveness of the group? Thank you.
Yeah, José, thanks for your question. Look. Perhaps you could see it quite nicely on the exhibit we provided for the first half. We report the net cash flow and then also the clean cash flow. And the clean cash flow is before M&A and diesel. Obviously, there the revenue transaction is not included. If you look then at the two boxes, the info in the box we provided, it's basically EUR0.7 billion related to restructuring and EUR0.7 billion related to U.S. tariffs.
If you want then basically, kind of underlying, take out from the clean net cash flow, the EUR1.4 billion, we end up roughly on the cash flow from previous year. This is the current cash flow performance in the first half. José, muy buenos días. Coming to robotaxis. There, the expectation, especially for the 2030s, is a huge, huge market of around $400 billion yearly. We worked heavily on this field, making good progress. We were happy to present during the last weeks our concept with the ID.Buzz autonomous driving. There we feel, also comparing this competition, as you mentioned, Waymo or, for example, Tesla, we are in a good position. We have a kind of turnkey solution. We have everything in our hands. We have a very advanced technology. That's nothing for the 2030s. We will be in the market already in 2026, still with a driver.
Our aim is to be able in 2027 driving driverless. Making good progress in our test fields in Germany, in Hamburg, and Munich, and in Austin in the U.S. We have the car in our own hands. That gives us the opportunity for scale effects, also beside a very attractive car with the ID.Buzz. That makes us special, we have a platform for the whole fleet management. We have the platform for the customer management already implemented with MOIA. For us, it's very promising. We have a lot of interest of many cities in Europe and the Middle East, for example, who want to implement our solution. We have the first external customer with Uber starting in 2026 in Los Angeles. We are ready to compete. You know, around 50% of the market cap of Tesla is counting on this.
I think there's still also a potential for Volkswagen Group with the market cap for Volkswagen. We will speed up the process. This could be an interesting business field for Volkswagen Group. Muchas gracias. Thank you.
Thank you, José. Muchas gracias. The next, I'm sorry, the next one in line is Patrick Hummel from UBS. Patrick.
Danke, Wolf. Good morning, everybody. Hi, Arno. Hi, Oli. First question maybe for you, Oli, regarding your US investment strategy. To which extent are these US investments going to be dependent on a Volkswagen-specific tariff deal post a potential 15% EU-US deal? More specifically, as far as the Scout brand is concerned, and I know we shouldn't think in presidential election terms, but right now, it's definitely not a great environment to launch electric or range-extended rugged SUVs or pickup trucks.
You do have cash cows in the US that, even after a tariff deal, would still face a significant tariff. I'm talking about the Audi and Porsche vehicles. I'm wondering to which extent you've got flexibility here to maybe come to a very efficient use of your investment or existing footprint even, rather than spending several billions more to deal with a US tariff environment. My second question, Arno, that's probably for you regarding the cash flow. To which extent do you factor in significant working capital tailwind for the second half? It seems you can only get to that free cash flow guide number if you do get such a tailwind because your investments tend to be skewed towards the second half or specifically for Q. Does that free cash flow guide now include any further disposals?
There was just an article, I think, yesterday in Manager Magazine talking about a series of smaller assets that could be up for disposal. Any comment on that would be appreciated.
Thank you. Yeah, good morning, Patrick. Thanks for your questions. We will intend to discount the tariffs as far as possible. We will make a clear calculation behind what would it mean for investments. We have a scalable program. We could offer there all of these projects connected with a clear positive business case and linked to our growth strategy. You're right. We have very, very strong products still, especially in the ICE and plug-in hybrid segment. You mentioned Porsche and Audi. For Porsche, the US were able to achieve historic deliveries in the first half of this year. Our product momentum is very, very strong. We are counting on a better tariff situation. At Audi, the same.
Also, we can think about localizing Audi products there. Besides Porsche, Audi, also for Volkswagen, we see opportunities. We have successful cars and making them even more American is our intention. Besides this investment, on the one hand side, we focus on American brands like Scout and International, like school buses and heavy trucks. On the other side, technology. As you know, of our partnership with Rivian, which started very well, and we see more opportunities there. That is a whole package there, and everything linked with a clear business case and then entering into the discussions with the government.
Yeah, Patrick, concerning the cash flow, we expect a tailwind in the second half of the year that has two effects. First and foremost, it is like a typical effect on the industry.
Towards the end of the year, towards Christmas, pipelines are basically lowered, factories are shut down, and then in January, you start up the business, you fill the pipelines. We expect, by and large, inventory of working capital on the level of last year. This is easily said. What we did two to three years ago, we started really an extensive working capital management project. We look at inventories, on deliveries, on other effects. In terms of percentage of sales, this team did so far a very good job. Also, going forward, our target is to, by and large, keep inventories on the current level while growing the business slightly. That would mean that also going forward, we expect a positive effect from the teamwork, finance, production, sales, on our net liquidity going forward. This is the situation on that side.
Yes, positive effect, but typically in the industry and not a one-off for this year. In terms of disposal, on our capital markets day in, I think, yeah, Hockenheim, we said we look into our non-controlled shareholdings. We gave you a number of that. There is a team in place. We extensively work on that. For obvious reasons, we cannot go into details there. We do not expect major cash inflows today for this year, for the second half. Rest assured, we work on that topic, and you could expect some, I would say, success stories from this team as well going forward.
Very clear. Thanks, Arno and Oli.
Thank you, Patrick. We move on to the next question, which is coming from Horst Schneider from Bank of America. Horst, welcome.
Yeah, thank you and good morning.
First of all, I want to give you my congratulations for these numbers, especially in the Brand Group Core. Not too long ago, I think you were taking Stellantis as a benchmark, and now you are maybe benchmarked for Stellantis and also for Renault. Just a title note from my side. In that context, we have seen warnings from these two peers. Renault talked about increasing commercial pressure, particularly in Europe. Can you give any comment on what you see in the European market? I think your order intake also lately came a little bit down. Is the outlook still good? Is it concentrated on certain segments, markets? In that context, also to Oli. Oli, you mentioned all the time that you are value over volume. I think Stellantis is the proof that this does not really work.
How do you look at this value over volume approach for the Volkswagen mass market business? Is it really a good strategy? The last one on that Brand Group Core, the great EBIT margin we have seen in Q2. Was that now peak? Will that come down? Why will it come down? Thank you.
Yeah, first of all, thank you very much for your comment. That is really very motivating for us to continue on that path. Look, if you look at the EBIT bridge, the pricing is - EUR 0.5 billion. This is largely due to the ramp-up of PVs. We see a pretty stable pricing environment on our combustion engine cars. This might be also due to the great product substance. If you look at our cars, brand new Tiguan, brand new Passat, a Golf, and also from Audi, the cars are doing very well in the market.
On top, we have the ramp-up of the electric vehicles, which are massively loaded in the price segment. There is obviously a positive pricing effect from last year and an incentive burden from this year from the BVs. All in all, the EUR 0.5 billion is even slightly better than we originally thought. There is also some effect in the mix. The mix is obviously also diluted by the electric vehicles and some brand mix, obviously. Yeah. On that side, you remembered, you mentioned the great success or the great steps of our volume brands, specifically brand Volkswagen and the Brand Group. Before, I also referred to ŠKODA, almost 10% in the second quarter shows basically what can be done in this environment with good product substance combined with a good cost structure. Volkswagen brand is on the way to achieve that cost structure. It will take some quarters.
Obviously, we gave you the outlook that we reduce the headcount by 35,000 in Volkswagen HE, but that takes some years. This is also the reason why for the full year brand Volkswagen guides for roughly 4%. That is also the answer to the question. Q2 will be, from the single quarter, will be peak with basically two reasons. First, from a seasonality point of view, it is always the best season. Q3 will be burdened by summer shutdowns. This is one effect. The other effect, we had a slightly positive effect from China. This will not repeat in the magnitude, but we are on a very good way to achieve basically the 4%. One word of caution, excluding the effects we had. This is, I think, very clear. The last word, at the end of the day, we have to achieve.
4% and more than also in a situation where tariffs are here to stay. This is why I said we have to anticipate and speed up some of the measures and increase our efforts so that we are able at Brand Group eventually to deliver also the 4% and the 6.5% in a potential scenario with tariffs.
Let me come to your point, value over volume, which still is our orientation. I would like to answer coming from our product focus. That was one of the main points, restructuring Volkswagen Group, bringing in order software, improving design, improving quality, improving technologies. When you are able to deliver exciting products to the market, which are convincing the customers, it has got an impact also on discounts and incentives. This is bringing us step by step in a stronger position. The product momentum is just to start. That is the positive aspect.
On the other side, we have to differentiate when it comes to BEVs because there we need to fulfill the CO2 regulations. We were happy to come to averaging between 25% and 27%. Beside of this, we need to fulfill the targets. Therefore, we are leveraging sometimes in between putting incentives into. The positive feedback we are getting from the market in terms of order intake allows us to be more restrictive with discounts and incentives. Everything is driven by the product we are bringing to the market right now. That is core. There we will focus in the future as well.
Just quick follow-up. You do not see a deterioration of the market in terms of volume or pricing at the moment in Europe?
Yeah, look, when you look to the European market, the European market decreased during the last five years of over 15%.
We have in many segments three times more products in the market. We do not expect any more effects. For Volkswagen, we are stable. That is a clear message. Everything is driven by the strong product momentum. That gives us more space than others. Even more for the future, what we see right now.
Okay. Thank you.
Thank you, Horst. We are moving on to Adrian. Adrian from Redburn. Good to have you back, Adrian.
Morning, Rolf, and morning, everybody. Thanks for taking my questions. Just a couple from me. I was curious to know a little bit more in the Q2 earnings bridge, some of the benefits from both the product costs and the fixed costs in Q2 were impressive, almost a couple of billion between the two. Could you give us a little bit more color on the sources of some of those?
I guess also, importantly, the outlook into H2. That is kind of my first one. I guess the second one is a little bit more tactical. The tariff costs were a little over EUR 1 billion in terms of the P&L, a little bit less than that in the free cash flow. Clearly some timing mismatch. Just curious your thoughts on how that plays out through the rest of the year as well in terms of the mismatch. Thanks.
Adrian, thanks. Yeah, Q2. If you put the months and deducted, there was actually a really strong element from product cost. The other first positive designs, I would say, from fixed cost. I start with the fixed cost. We see really a positive design, signs in the fixed cost, in the overhead cost. That is despite the ramp-up of new businesses like Scout, like Battery, and others.
In this quarter, the first time, and of course, we want to continue on that path. We want to lower the overhead cost despite the ramp-up of these new businesses. We need to do that, and we want to do that in order to compensate for the margin dilution effect of the BEVs. If you look at just the reduction overhead of the 4,300, we are on a good path there. Just to remind you, several programs are underway at Audi and Porsche, like Oliver mentioned. Audi communicated reduction of 7,000. They are slightly behind in terms of schedule, and they will kick in also in the next quarters. In terms of product cost, to understand that, the majority, of course, is the material cost. There were some burdens last year that we do not see this year again. We saw some first improvements of product.
There is also, I do not know what is in English, status plenitia. There is a first small sign on the product cost. Also, the cost of our factory cost, so productivity, and first signs of productivity improvements are also now seen in the product cost, specifically in the German plants. They make really good progress in Emden, in Wolfsburg. In terms of factory costs, not in the magnitude as planned, but significant progress. This is also seen under the product cost improvement in the second quarter.
Giving you additional information about product costs, and to reduce product costs does not happen from alone. I mentioned the reduction we have done in China, for example, with 40% of our product cost. It is a very detailed hard work we are doing there. Thousands of measures.
We implemented over all our model lines product events where every area has come together and fighting for every cent. That is an ongoing process. Now we have a structured process like we implemented it with the performance programs in all brands. Also with our executive board members, we are watching on this process regularly.
Thank you, Yanos, actually, for your questions. With the green shoots, we are moving on to Philippe Houchois from Jefferies. Philippe.
Thank you. Good morning. Got a couple of questions. The first one is, to be clear, on the reduction in the revenue guidance from up to 5% to flat. Is it right to assume most of that is demand destruction in the U.S. as a result of tariffs? To what extent are you also factoring the fact that so far, I do not think you have increased prices in the U.S. to compensate?
When should we start to see price increases? Again, is that all factored in? What drives the cut in the revenue expectation, or are there any other factors? My second question, if possible, is on this whole discussion we hear in Germany about private-public investment to catch up on infrastructure. Curious to have your views on what you would like to see as investment in Germany to improve your competitiveness and think about the telecommunications and stuff like that that would be worth investing in. To what extent, if you do participate in that effort, how does it impact your ambitions to reduce the investment ratio initially, 12&-13%, and eventually 10%? Would that be a headwind to that ambition? Thank you.
Yeah, Philip, I will take the first question, and I assume the second one Oliver is answering. Yeah. The answer is very clear, yes.
Basically, the reduction in outlook is due to the reduction in sales in the US due to the tariffs. If I have it rightly in mind, I think June, single month, June was 25% down in the U.S.. That makes it even more clear that we need a good compromise and a solution on that topic that both fits the needs of, of course, the American administration and us as a company, but it also has an impact on our local organization and our dealers and their families. It is really, as you can see on the single month of June. Of course, there are mitigation measures. If you look at the industry, there were some first announcements. For obvious reasons, I cannot talk about price increases in public. This is very clear.
In our sensitivity analysis of the impact, when we said, for example, if it stays at 27.5% and the 200 basis points, we clearly indicated this is before mitigation measures. As soon as we have more clarity, we also look at potential mitiga tion. That is very clear.
Let me come to the initiative made for Germany. We have had a kickoff meeting this week together with the German chancellor, which was very positive. 16 companies in Germany. We put together our investments in Germany to an amount of over EUR 630 billion we will invest during the next four years. This initiative is more than investments. It is to bring a positive momentum to the German economy. This one is linked with improving all the framework conditions for investing and for doing business in Germany. That is the main part. In the past.
There have been also a lot of good ideas, but what missed was the execution. Therefore, it's very important. I've had the opportunity also for meeting with the chancellor afterwards to talk about a very professional product and program management with milestones, targets, responsibilities, clear transparency to execute these programs. Therefore, that was a very good kickoff of the initiative. We will follow-up. In terms of Volkswagen, we have a part of this amount of EUR 60 billion-30 billion, over 10%. Everything is included into our planning round. No additional investments. That is what we have planned. The main investments are going to product and our engineering we do have in Germany. Everything is completely in line with our restructuring program we are doing into Germany. We think for Volkswagen Group, we are well prepared. We support to improve the business situation in Germany.
Very clear. Thank you.
Thank you very much, Philip. We are moving on. We still have two questions in line. The next one is Henning Cosman from Barclays. Henning, please go ahead.
Yeah, good morning. Thanks very much for taking my question. I wanted to talk a little bit about the true underlying margin if we can. We have the 6.8% in the second quarter, but we understand that this China license payment pull forward is a little bit inflated, but you haven't really included any of the Porsche restructuring or indeed the EUR 500 million impairment. If we just broadly think that's a wash perhaps between the two, I wanted to ask you to talk about a bit where you see the true underlying on a group level. Is the 6.8% a good number?
Then we can make our own tariff assumption to get to a reported figure, or would you want to highlight any particular puts and takes?
Yeah, Henning. The thing is, we gave some transparency, but of course, it's really now, it's not very easy to dig even deeper into that. We said underlying is basically in the second half was the 6.8%. Sorry, in the second quarter was a 6.8%, in the second half, 5.6%. You're quite right. There was anticipation on brand Volkswagen from China. On the other hand, there are some restructuring on the operative basis not included in that. I think it's a good view to say it's basically a wash. If you look at the second quarter, I talked about seasonality. The second quarter is typically the strongest one.
We are basically proud that we could achieve that significantly on the upper end of our guidance due to what we said before, strong products and restructuring. Now, if you look out on the second year and you take out all the one-offs, you could expect the second quarter, call it underlying, roughly in line. Performance-wise in the first quarter. Due to seasonality, we expect a slightly higher sales. Margin roughly on par. On the first half.
Okay, thank you. That's helpful.
To be very clear, Henning, we meant the second half to be roughly on par underlying with the first half. Yeah, so the EUR 9 billion in the first half underlying, second half to be roughly in line with that.
Okay, thank you. And can I just ask you the second question with respect to the investment?
Sort of a relatively wide range now, still that one percentage point. With the second half, first half was below the corridor. Could you just help us understand what would take you to the top or bottom end of that? Are you hoping to come perhaps in at the bottom end of that, given the disciplined performance in the first half?
Thank you so much. Yeah. First and foremost. As I said before, we have set up a comprehensive program to really increase efficiency on investment, both in CapEx, but specifically R&D, without making compromise on our ramp-up of products and the new businesses like Battery and Scout and others, which will help us in the future. What's very clear, we see the effect of the tariffs, and we have even to compensate some of the effect. That might be a small chance on that.
On the other hand, it's also a significant seasonality in our spending, specifically in R&D. The guidance of 12%-13% is roughly where we expect to end also for the full year 2025. We gave a very specific outlook now for sales, basically on par with prior year, EUR 325 billion. That gives you an indication of what we expect in terms of R&D and CapEx.
Appreciate it. Thank you.
Thank you, Henning. That brings us to the final question here, which is this time best for last, Mike Tyndall, Mike from HSBC. Please go ahead.
Thank you, gentlemen. I've got two very, very quick ones. The first one, just regarding the guide. Am I right in assuming there's very limited mitigation in that? You've talked about 200 basis points on margins for tariffs, and that's ex-mitigation. Is that true in the 4%-5% as well?
The second question is just a little bit of confusion here. In the cash flow walk, you've got EUR 0.7 billion for tariffs, but it was EUR 1.3 billion in the P&L. Is that just a timing issue, or is there something else in there that I've missed? Thanks.
Yeah. You're quite right. We said 200 basis points, that 27.5% tariffs before mitigation. Mitigation is a chance, either for the guidance, for the outlook, or to compensate for potential additional headwinds. This is clear. When we now, it becomes very technically. Look, I make one example why it's different, what we see in the P&L and in the cash flow. And that example makes it hopefully clear.
Expecting tariffs for the future, that means all the accruals we have to do, for example, for warranty, we have to take up because the part for the warranty, which comes from Mexico and which comes from Germany, will in future be more expensive. This is one technical effect why the P&L burden is right now slightly higher than the cash flow burden. I mean, at the end of the day, the two figures will be the same.
Got it. Can I quickly follow-up? If the tariff was then to fall, would you see a possible reversal of those provisions?
Can you say it again?
Sorry. If the tariff was to fall, would you potentially see a reversal of that provision then for the warranty, the higher part cost?
If there in a world where we find hopefully an agreement that's below the 27.5%, we would see a small improvement because some of the, not all, but some of the accruals would be partially reversed. Brilliant. Thank you very much. Also a word of caution. We always talk about Europe and Mexico, and we must not forget that in order to make that happen, we need basically an improvement on both sides.
Yeah. Got it.
Thank you.
Thank you, Mike. Thank you, gentlemen, for the very comprehensive Q&A session. We are now at the end of the investor and analyst call. As always, if you found anything was left unanswered, please contact the IR team in Wolfsburg. Thank you already in advance for keeping us employed. Our next event will be the Volkswagen Group product and tech update in the context of the IAA in Munich on September 9th.
The nine-month results will be released on October 30th. Thank you very much for attending. We have now a short break, and we'll continue after that, yeah, five minutes about, and we'll continue after that short break with a question-and-answer session for the journalists. Thanks very much again for your numerous participation. We hope you will have a great summer holiday and some time with your families. Take care and speak soon.
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Also in English, if you can also ask questions in English, then press star one to ask a question, then you appear here on the dashboard, and I will put your name on, and then you can ask a question either to Oliver Blume, our CEO, or to Arno Antlitz, our Chief Operating Officer and CFO. With this, I switch to German, [ Foreign language]
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Now I switch to English because we're going to the Wall Street Journal and Stefan Willemot. Stefan, the floor is yours.
Thank you. Can you hear me?
Yes, we can.
Great. Yeah, to just follow-up on that. And apologies if I've missed anything because I've been following in German, but. You talked about this potential quid pro quo deal. If I understand it correctly, following a EU-US deal, there could be a special Volkswagen deal.
Or is this something that would be available also to the other companies? Maybe you can clarify that. Also, you talked, I think, earlier on the analyst call about, or maybe it was earlier on this press call, sorry, about the possibility of exporting Audi, I think you were talking about. Investing in an Audi factory, which could then potentially be used for export. I guess that plays into this idea that you just mentioned of making American products and then perhaps using them for export. Does that mean you're also supporting the idea of duty drawbacks, I think they're called in English, or the kind of compensatory kind of, where you can count exports against imports for duty purposes? Maybe you can clarify those points in the way that you're thinking about how the US situation could work out. Thank you.
Stefan, every company has got a special situation in the U.S., and therefore I think it should be possible to add a specific deal on company level in between U.S. and the automotive companies. There are some companies that are exporting from the U.S., and therefore I think that's also positive to talk about export credits or offsets, how do we call it? The other approach are investments. Our idea is with our growth plan in the U.S., we can offer huge investments and then having the opportunity to discount the tariff level, but also with potential for the future to export cars from the US to other parts of the world. This is a Volkswagen model, and I think it should be open for European companies. That's not only automotive, that's pharmaceutical products or chemistry or whatever. Your deal to make specific deals.
In the past also, when you invest in the region, sometimes you're getting support, local support, because a multiplier is much better than in this case from the one-time effect having tariffs. That is our aim, to come to a win-win situation between the US government and our company with a very attractive package.
We have two more questions on the list. The first is Les Echos, the second AutoCar. We start with Les Echos and Thibaut Madelin. Please.
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The last question for this call goes to AutoCar and Mark Tisshaw. Please, Mark.
Hello, a couple of quick ones for me. Porsche seems particularly hard hit in its markets and its sales at the moment. How does Porsche turn it around? Is it on cost control, or is it in terms of market appeal and products relevant to the market? Just on China. What you presented this morning is really interesting. It kind of seems a bit at odds to what many Europeans who are sort of pulling out of the European OEMs are pulling out of China. Your investment is huge.
What are the risks of a Western OEM in China, or is it having that level of investment with 50 new products to 2030 helps mitigate that risk?
Yeah, Mark, let me start with the Porsche situation. On the one hand side, Porsche invested a lot during the last years for the new product lineup, which is very well received in the market. For example, the record sales in the US is one example that the products are received well. On the other side, Porsche is in a special, I would call it a sandwich positioning in between the development. In China, there, the market segment, and there. Some figures were published in German Handelsblatt this week. That luxury market went down 34% last year and another 50% the first half of this year. Therefore, Porsche lost a lot of volume because of the structural effects in the China market.
On the other side, Porsche is exporting 100% to the U.S. from Europe, and the tariff level is hitting Porsche heavily. Why is Porsche in the sandwich positioning more than other manufacturers? Because China and the US are by far the biggest single markets for Porsche. The second effect is that the ramp-up of electromobility is not as strong as expected. On the one hand side, Porsche is very successful with electric cars. As I mentioned before, in Europe, the volume share of Porsche is already 60% of electrified cars, BEVs and plug-in hybrids, and 36% BEVs only. Porsche there is in the top line of the traditional car manufacturers in terms of electrification. All these effects together put the business model of Porsche under pressure.
We reacted already with the first package in the first half of this year to improve the structural cost of Porsche, continued by a second package. We will negotiate now in the second half of this year. On the other side, to being more flexible in terms of product strategy, we kicked off a huge investment program for more flexibility in the program to having in-between combustion engines and hybrids and electric cars as some kind of hatching, having more offers in each segment. All of this is being done in this year. We are expecting that we are touching the bottom with a very positive perspective for the future because Porsche is counting on a great product lineup and on the other side, a great company structure. We have to adapt it in these framework conditions. The second question was about China.
In China, we are still market leader in combustion engine cars. We are one of only few companies in China still earning money. What we have done around two to three years ago to switch our strategy completely with a clear product assessment, and we changed our product strategy. We changed our philosophy, doing more business in China for China. We ramped up, in the meantime, a new engineering center in Heffe with over 3,000 colleagues working there. We implemented also with partnerships a new electric electronic platform, which will come at the end of the year, and a completely new lineup. We were able to reduce our costs of over 30%.
We speeded up our engineering process by 30%, and now we will enter up to the end of 2027 with 30 new models to the market and up to the end of 2030 with over 50 new models to the market together with our joint venture partners. The first feedback we are getting, we presented the first glimpse of our cars at the Shanghai Auto Show, was very positive. We think that is promising because we are on the level of the competition in terms of technology, what our Chinese customers are expecting. We are in line with our cost positioning, so pricing plays an important role in the market. We have a big advantage because we have 50 million customers in China. We have very strong dealer partners, and we have a service network.
A lot of the new Chinese brands do not have this all-in-one solution we are offering: good products, great customer base, strong partner network and service network, and high quality, what our customers are used to from our brands. We think we need one or two years, and then we will have also a great comeback in terms of volume also in the electric segment.
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Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day.