Ladies and gentlemen, welcome to the Volkswagen Group investor, analyst, and media nine-month 2025 conference call. I'm Vicky, the call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star, then zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Pietro Zollino, Head of Corporate Communications. Please go ahead.
Yes, good morning everyone, and welcome to the third quarter 2025 results call of Volkswagen Group. This is, as usual, a call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Treasury and Investor Relations, and myself, Pietro Zollino, Head of Corporate Communications. With us today is Arno Antlitz, CFO and COO of Volkswagen Group. Good morning, Arno. You should have received the press release, the interim financial report, and all other related materials, which were published this morning already. If you do not have them yet, you can find all documents on our Volkswagen Group website. In case of any issues, give us a call or drop us an email. Now, let me hand over to my colleague Rolf, who will give you a brief run-through of the next about one and a half hours. Rolf, please.
Thank you, Pietro, and good morning to everyone on the call. Thanks for joining us this morning. Let us have a look at our agenda. Arno will first present the key developments of the third quarter, and after that, we will take a closer look at the financial results and the full-year outlook for 2025. Following the presentation, we will first host a Q&A session for the investor and the analyst community, moderated by myself. After the session, we will have a short break before continuing with the media Q&A, which is then hosted by Pietro. Since today's call includes forward-looking statements, the safe harbor language and other cautionary statements on the slide will govern today's presentation. I encourage you to read the disclaimer carefully as all forward-looking statements are qualified by this language. In the interest of time, as always, I will not read it out to you loud.
With that, I hand over to Arno. Arno, please go ahead.
Yeah, thank you, Rolf. Ladies and gentlemen, our nine-month results continue to tell a story of two sides. On the one hand, there's a huge success of our products, combustion engine and electric vehicles. The positive momentum in order intake in Western Europe persists and is reflecting the strong support from our customers. Our global BEV share increased to 11%. In Europe, every fourth electric vehicle is delivered from the Volkswagen Group. We make further progress in implementing our strategy and in the restructuring of our business. However, operating result in Q3 was negative at -EUR 1.3 billion. Two main reasons for that. First, the successful ramp-up of electric vehicles continues to dilute the operative margin.
On top, results were significantly impacted by headwinds of EUR 5.3 billion in the third quarter, mainly by costs related to a realignment of Porsche product strategy and the goodwill impairment of our stake in Porsche in the combined magnitude of EUR 4.7 billion and the increased U.S. tariffs of about EUR 800 million. Including these effects, including these impacts, we achieved a 5% margin in Q3, which we consider to be a decent performance in the current economic environment. I really want to thank you, say thank you to our teams worldwide for the efforts and the dedication and their commitment. However, we expect the tariffs to stay before special effects, but including tariffs, we stand at 4.5% margin after nine months and a net cash flow of EUR 1.8 billion.
These figures clearly show that we need to step up our efforts to reduce costs and increase productivity in all brands and units to strengthen the resilience of the Volkswagen Group. With that, let us dive straight into the presentation with the key developments in the quarter before we continue with the financial results in more detail. As said, we continue to see strong product momentum as highlighted at the IAA in Munich. Here, Brand Group Corp presented the new urban BEV family complementing the BEV product lineup with very attractive entry-level offering from autumn 2026 onwards. Audi unveiled its Concept C, which exemplifies the brand's new design philosophy and spirit. The third quarter also saw the launches of two key models: the all-new T-Roc, one of Volkswagen brand's bestsellers, hitting the markets with enhanced design and state-of-the-art technologies.
The new E5 Sportback from Audi's China-exclusive four-letter brand has just been launched. The Audi A5 Sportback has been well received by the market, and first deliveries to customers have been made. Back to the financial results and starting with volumes. Global deliveries to customers in the first nine months increased to 6.6 million vehicles, 1% above the prior year period. Order intake in Western Europe continued its strong trajectory, both on the combustion engine vehicle side and on the BEVs, reflecting the positive reception of our upgraded model portfolio by our customers. Order book in Western Europe stands at 885,000 vehicles at the end of September. This is about 4% above the level at the end of the year 2024. BEV order intake increased by 64%, and electric vehicles account now for 25% of the total order book.
We recorded strong delivery growth of 9% in Europe in the third quarter, thus accelerating the positive trend seen in the first half of the year. Year to date, we stand at plus 4%. South America achieved even double-digit growth in the quarter and year to date. In contrast, North America recorded a decline of minus 10% in Q3. This is largely the result of trade uncertainties and the implementation of measures to mitigate effects from increased tariffs. Year to date, we stand at minus 8%. In China, we recorded a decline of 7% in the quarter and 4% year to date, in line with our planning. Despite lower BEV sales in China, global deliveries of battery electric vehicles improved by 42% year to date to 718,000 units. The share in group deliveries increased to 11% versus 8% one year ago. This was particular due to strong growth in Europe.
Our BEV share in Western Europe almost doubled in the first nine months of 2025 to more than 20%. With that, let's move on to the financial and operating performance of the Volkswagen Group in the first nine months of 2025. On the back of rising vehicle sales, group sales revenue increased by 1% to EUR 239 billion. The operating result came in at EUR 5.4 billion. This is 60% or EUR 7.4 billion below the prior year. Accordingly, the operating return on sales stood at 2.3%. The result after nine months includes special effects in a magnitude of EUR 7.5 billion, mainly increased U.S. tariffs in a magnitude of EUR 2.1 billion, EUR 2.7 billion from goodwill impairment Porsche, and EUR 2 billion related to the Porsche realignment as announced on the 19th of September.
Excluding these effects, the margin of the nine months stands at 5.4%, which we consider a decent performance in the current environment. However, as said before, we expect the tariffs to stay. Excluding the non-recurring effects, but including costs related to the U.S. tariffs, the group operating margin would have amounted to 4.5%. These figures clearly show that we need to intensify our cost reduction efforts, must advance or pull forward parts of the efficiency programs, and find new ideas. Profit before tax largely followed the development of the operating results with higher income from participations and valuation effects outweighing the more negative interest results. Profit after tax declined by 61% to EUR 3.4 billion as a result of a higher tax rate. Worth noting that the goodwill impairment is not tax deductible. Net cash flow in the automotive division totaled to EUR 1.8 billion in the first nine months.
Here, a significantly improved cash flow from working capital management and low investment spend more than compensated for the lower operating profit. Operating cash flow includes cash out of EUR 1.9 billion for U.S. tariffs and about EUR 1 billion related to restructuring measures. Not to forget the about EUR 0.9 billion we had to spend in the second quarter for the acquisition of additional shares in Rivian. Automotive net liquidity in the first nine months declined by EUR 3.4 billion compared to year end 2024. Further to the operating cash flow, major factors for the development of the net liquidity year to date were dividends and interest payments to hybrid bond holders of in total EUR 4.4 billion and M&A expenditures of EUR 1.5 billion. This was partly compensated by operating cash flow. The other bucket includes negative EUR 1.2 billion effects from changes in lease liabilities.
Overall, at EUR 31 billion at the end of September, net liquidity is at a solid level. Moving on to the performance of the divisions. Passenger cars recorded an operating result of EUR 2.2 billion in the first nine months of 2025, 74% below prior year period. Commercial vehicles saw a decline of 46% to EUR 1.7 billion, and this corresponds to an operating margin of 5.4%. The financial services division strongly improved the operating result by 40% to EUR 3.1 billion. Let's have a look on the drivers of the operating result in the passenger car segment. Volume had a positive impact of EUR 1.3 billion. Price mix was combined negative at EUR 3.0 billion. This was mainly the result of the dilutive effect from the higher BEV share and unfavorable regional and brand mix effects.
It's worth noting that volume price mix in Q3 was almost a wash and in line with what we guided for at the beginning of the year. Provisions related to European and U.S. emissions regulations had a negative net impact of EUR 0.4 billion after nine months. Exchange rate movements posed a headwind mainly driven by negative valuation effects of balance sheet positions in foreign exchange rates. Product costs improved by EUR 1.3 billion. Last but not least, fixed costs had a negative effect of EUR 2.5 billion. However, when excluding the impact from Porsche realignment and the goodwill impairment of in total EUR 4.7 billion, fixed costs improved compared to the prior year period. This is also visible when taking a more detailed look at the overhead cost development. In the first nine months of the year, overhead costs in the automotive division are reduced by EUR 1 billion.
Accordingly, the overhead cost ratio improved by 60 basis points with positive momentum in the second and third quarter in particular. Increases at Traton and the ramp-up of new businesses like Battery and Scout are more than compensated for by improvements specifically Brand Group Core and Brand Group Sport Luxury. The good news to our teams worldwide is the efforts to reduce cost base and increase robustness are paying off, with more to come over the course of the following months and years. For brand Volkswagen as well as the group in total, the stringent implementation of the performance program is key to achieve a sustainable reduction of overhead costs. As you can see on the left side of the chart, the program to Volkswagen is delivering tangible results.
In the first nine months of 2025, Volkswagen reduced the number of active employees at its Chairman's sites by around 6,000 or 6%. Overall, since the end of 2023, headcount was reduced by approximately 11,000. In addition, Audi, Porsche, and Carrier, in particular, are pushing ahead with their respective programs. As a result, headcount in Germany on group level has been reduced by a total of 7,000 in the first nine months. Let's now move on to the development of the brand groups, the platforms, and the financial services business. Every business starts with the customer and the top line. Here, Brand Group Core recorded solid levels of revenue growth of 5% year on year. The operating result amounted to EUR 4.7 billion. The margin stood at 4.4%, broadly in line with the prior year figure despite tariffs and restructuring costs incurred totaling almost EUR 1 billion.
The momentum at Audi is increasingly paying off. Brand Group Progressive recorded sales revenue significantly above last year with a plus of 5% driven by growth in unit sales. Despite the strong top line, operating result came in 26% lower year on year at EUR 1.6 billion, corresponding to a margin of 3.2%. Positive effects from volume growth were compensated for, in particular, by restructuring, increased U.S. tariffs, and the strong increase in the BEV share. The underlying margin calculated based, like we said before, Brand Group Progressive stands at 5.7% after nine months. Operating results of Porsche automotive business came in at minus EUR 0.2 billion. The loss is largely due to costs incurred related to a realignment of the product strategy, totaling EUR 1.8 billion in the third quarter. In addition, headwinds resulted from a significantly lower sales volume, in particular in China, U.S.
tariffs, as well as extraordinary charges recorded in the first half related to further strategic realignment measures and for battery-related activities. Let's have a short look at the Brand Group Core. Volkswagen Passenger Cars improved profitability by 30 basis points to 2.3% despite significant headwinds from U.S. tariffs. Škoda impressively continued their exceptional performance in a difficult market environment. First-class products on Volkswagen Group platforms combined with a competitive cost base. Škoda's margin continued to stay strong at 8%. It strongly improved unit sales and sales revenue. The slight decline in the margin of 30 basis points versus the prior year period is a result of significantly higher BEV sales, namely driven by the success of the Elroq. Leaving the non-operational effects aside for a moment, the performance of the Brand Group Core and Volkswagen brand specifically was pretty solid. The increased U.S.
tariffs and costs incurred for restructuring activities negatively impacted profitability. Excluding these effects, Volkswagen Passenger Cars recorded a margin of 4%, which is the target the brand has set itself in the beginning of the year. One word of caution here again, restructuring expenses burden the result now, but help us to achieve a leaner cost structure in the future. However, we need to prepare for a scenario where tariffs are to stay as part of the operating business. This clearly means the restructuring work must continue, and we even need to speed up our measures. Carriot continues to increase license revenue backed by increased sales volume on the 1.1 and the 1.2. Sales revenue rose accordingly to around EUR 1 billion in the first nine months. Operating loss was reduced to EUR 1.5 billion, mainly as a result of the implementation of the announced restructuring measures.
At PowerCo, the ongoing ramp-up of the Salzgitter plant, intensifying construction works at the Valencia and the St. Thomas plants, and the build-up of the organization are continuing. As a result, PowerCo recorded a significant expansion of the operating loss to EUR 1.1 billion year to date. Traton recorded a decline of 9% both in vehicle sales and sales revenue. Truck sales were weak in particular in Latin America and North America. Sales revenue in Europe was stable. As a result of the lower sales volume, increases in fixed costs, and exchange rates, the operating profit declined by 46% to EUR 1.7 billion. Our financial services business continued to perform well in the period under review, supported by improved contract volume, plus 5% specifically in Europe, and an expansion of the portfolio margin.
In addition, the used car business benefited from still positive remarketing results, while the normalization of used car prices continued in the quarter. The credit loss ratio continues to be on a solid level. As a result, operating profit increased to a strong EUR 3.1 billion. Investment spend for CapEx and R&D in the automotive division declined by EUR 2 billion- EUR 24.3 billion in the first nine months of the year compared to the prior year period. We remain fully committed to sustainably reducing investment spend in the years to come, despite significant investments required for the transformation of the portfolio and the development of new business. The initiatives to reduce complexity and actively manage our portfolio participations continue with full force as we speak. Moving on to the performance of our joint ventures in China, the market environment remains highly competitive with pressure specifically in the premium segment.
Pricing and incentives levels, however, seem to have stabilized sequentially, but on a subdued level. Unit sales were 1% lower year on year at 1.9 million vehicles, driven by declines in premium and BEVs. In contrast, ICE volumes held up very well. As a result, the proportion operating result of our joint ventures in China came in at EUR 744 million in the first three quarters of 2025. This is about one-third below the prior year basis, but well in line with our target of up to EUR 1 billion for the full year. This brings me to the full-year outlook. Building on what we have achieved year to date, we factor in the following key assumptions for the final quarter. The current U.S. tariff situation is expected to pose headwinds in terms of cost, cash out, and volumes.
Continued support from the model offensive, a further increase in the BEV share with respective effects on price and mix, increasing contributions from the implementation of our performance programs has sequentially improved financial performance of the premium brands. At the same time, our forecast is based on the assumption that there will be no supply bottlenecks for semiconductors. On that basis, we confirm the operating return on sales safely in the range of 2- 3%. Given the financial performance year to date, there's even a chance to close the year in the upper half of the range. The investment ratio in the automotive division is expected to be in the range of 12- 13%.
We also confirm our expectations for the automotive net cash flow at around zero, with a good chance to end positive depending on the operating performance and working capital movements in the first quarter in the fourth quarter. Ladies and gentlemen, we continue to make progress in the implementation of our strategy. Our product offensive is increasingly paying off, as evidenced by the positive order intake and top-line performance. We delivered a decent financial performance in the first nine months before considerable headwinds from special effects. However, reported numbers matter, and the operating margins stand at 2.3% after nine months. Even before non-recurring effects, our margin amounted to only 4.5%. This is not sustainable for our business model, in particular in light of the ongoing volatile geopolitical situation and market environment.
It underlines that we must stay fully focused on driving our strategic initiatives, improving the cost base with full force, and continue our initiatives to reduce complexity and increase execution speed. With that, I hand it back to Rolf.
Thank you, Arno, for that comprehensive overview over our nine-month results in the third quarter. Before we move on to the Q&A, let me provide you with a financial calendar 2026. The next group event will be the release of our full-year results on March 10th. I think this was for the sake of completeness because this was a missing item. Let us now enter into our Q&A session, starting with our analysts and investors. I think actually it's star one in order to ask a question. We give it a couple of seconds before we see the first question on the screen. Here we go.
The first one is from Patrick Hummel from UBS Investment Bank. Patrick, please go ahead.
Yeah, thank you, Rolf. Good morning, Arno. Thanks for taking my questions. I would like to ask first about the free cash flow. Obviously, Q3 was solid, working capital driven. You sound confident that it's going to be above zero also for the full year. I'm just wondering, looking a little bit further ahead, what's really the deal here with free cash flow? We've read stories in the media about a big gap in your cash flow planning for 2026. We talked about investments that might be required in response to the tariffs. I know the planning round hasn't been finished, but can you just help us to get a clearer picture how we should think about the free cash generation of the business in 2026 and the investments? Are they going to be stable? Are they going to come down? Any call you can give, highly appreciated.
My second question relates to Brand Group Progressive or Audi specifically. Q3 run rate would not even closely get us to where the company wants to be on a full-year basis. Either we're going to get a very strong fourth quarter or Audi is not going to make the goals. What's your latest take here? Should we expect such a steep increase driven by the product cycle at Audi in the fourth quarter? What happens if they don't deliver? Does your group guidance already account for Audi delivering outside of their guidance corridor or at least at the very low end of it? How should we think about the trajectory in the coming couple of quarters at Audi? Thank you.
Yeah, Patrick, thanks very much for your questions. For obvious reasons, I don't want to comment on the press speculation for the planning round for next year. Let me put a little bit in perspective what happened. Look, when we talked about the current planning round, we saw the transformation in the industry, supplier margins under pressure, competition in China. We countered that with a huge program for Volkswagen Zukunft, Audi Zukunft. That was basically part of the planning round last year. We decided on a viable planning round. Since then, two factors have changed. First, the implementation of tariffs, which is a burden of about $5 billion on an annual basis of direct tariffs to be paid. We lost some volume due to realignment effects. Since then, the situation in China, specifically in the premium brands, has also changed, which is reflected in the new guidance of Porsche.
They had like 15%- 70% guidance. Now they are at 10%- 15%. This, we have to factor in into the new planning round. This is where we stand. This is what we work against and we work against countermeasures because we are fully committed to come up with a plan that makes the Volkswagen brand even robust. This is where we stand. In terms of free cash flow next year, obviously, it's too early to give you an indication. We are committed to ramp down the investment. We have an investment spend of $165 billion. That spend, we always said it's front-loaded. Year- over- year, the investment goes now down in absolute terms. This should increase the free cash flow and cash conversion rate. This is still intact. I also guided for that. The plan is $165 billion. If we decided on a factory in the U.S.
for Audi, which we are actually looking for, then we would compensate that within $165 billion. This is even a chance. That means like on an operative basis, we are further reducing R&D and CapEx and find more synergies in order to compensate for a potential factory in the U.S. This is where we stand. We have the consensus for next year in sight. We will give you an indication next year. Brand Group and Brand Group Progressive, yeah, they need a strong fourth quarter. This is clear. Main factors should be product momentum. They have the full availability of the Q5, which was not the case so far. They have new Audi electric vehicles, Q6 e-tron, E6. With these great cars, they should be able to meet their targets for the fourth quarter.
Okay, thank you very much, Arno.
Thank you, Patrick. We continue with José Asumendi from JPMorgan . José, please go ahead.
Thank you, Rolf. Thank you very much. Morning, Arno. Three questions, just very, very quick ones. On tariffs, can you speak about some of the mitigation measures you're taking to offset tariffs in the U.S. or any measures you've taken recently? Second, there is strong free cash generation of Volkswagen, right, underlying, but there are exceptional one-offs. Are there any of these one-offs that we're seeing on Rivian, Champagne, Scout? Do you see any of these one-offs reversing next year when it comes to CapEx? I hear you in your CapEx planning that you have for 2026, but I think 2025 CapEx has been hit and 2024 by exceptional one-offs in terms of CapEx. Do you see some of these elements unwinding next year?
Three, we'd love to hear about your market share in Europe, where you're maintaining very strong market share despite, I think, strong disruption from Chinese OEMs entering the European market. How do you think about your market share in the context of all the product launches you have? Thank you.
Yeah. José, thanks for these questions. In terms of tariffs, I gave you a very broad figure, up to $5 billion on a full-year basis. This includes basically the direct payment we have to do. This includes some countermeasures in terms of pricing. It also includes some measures where we lose margin. Why is that the case? Look, an entry-level Jetta, an entry-level Taos from Mexico shipped to the U.S. in a tariff regime of 27.5% is not feasible. If you look at our sales in the U.S. or North America in the first nine months, we were originally planning to increase the sales. You see basically an 8% decrease. We were planning for a 10% increase. It's always difficult to say what are the reasons, but part of the tariff burden you also see in the, let's call it, lost sales in Europe, in the U.S.
This adds up to the up to $5 billion. Of course, we look into countermeasures as said before. The biggest countermeasure will be they have to compensate for that on the cost side. We also said that we look at more localization specifically on the Audi side. This is too early to give you an indication. In terms of CapEx, it's not really one-offs. It's more like a continuous ramp down to the targets we gave you in terms of R&D CapEx combined. We have the effect that we basically, in the year now 2024, 2025, slightly 2026, we have that double investment in terms of keeping our combustion engine cars competitive and a ramp-up of our BEVs. That effect will slightly go down. We gave you a target of 10% for 2027 R&D CapEx combined. We are still in line with that target.
When you read in the press or when we communicate that we look into some measures to even improve the combustion engine side stronger with adding additional models, adding PHEVs, plug-in hybrids, adding a HEV, for example, for the U.S., we will compensate that on the ramp-up of electrification. To give you one example, we originally had a plan at the very beginning of our journey of $15 billion CapEx for PowerCo over five years. We reduced that to $12 billion, then we reduced it to $10 billion. Now we are significantly lower than $10 billion over the last five years because we just react in terms of adding capacity to the ramp-up of electrification in the market. This is where we stand. We absolutely commit to the 10% target for 2027. In terms of market share in Europe, we are very pleased with the current development.
The BEV share goes up, but the market share in ICE holds very nicely. We see that, for example, in the middle models. We are very pleased with the order intake of ID.7, and still, we are pleased with the performance of the Passat. This is where we stand. This is very good feedback for us and more great models to come. For example, the T-Roc, a very important model for Brand Volkswagen, and then the new small urban family. Going forward for our financial planning, we don't plan for an increase of market share. We plan for a stable market in Europe on the current basis, and we plan for a stable market share, perhaps a small increase. That, for me, given the current product substance, is more a chance than a risk.
Thank you, José. We continue the line with Horst Schneider from Bank of America.
Yes, good morning, and thank you for taking my questions. I want to follow up to Patrick's question. I know that you cannot give at this point a guidance for 2026. I think we all not expect that. When I look also for your EBIT bridge Q3, nine months, what we see is that the EVs continue to dilute the mix. The EV sales increase, that's good. You hold up versus new market entrants, etc. That's great. Nevertheless, they dilute the mix. For me, it's hard to imagine that this gets any better because the number of BEV sales need to improve, of course. Also, pricing, it's constantly a little bit negative. Therefore, if I spin this thought further, it means that this burden will not go away. In that context, can you remind us again of the cost savings that you expect for 2026, 2027?
Would be good to have this view on a net basis. Can they compensate basically these negative price mix effects which should persist? Therefore, in a nutshell, the question is what I asked also at the IAA already, is 2026, maybe even 2027, another year of transition, or is the ambition clearly to increase the earnings already next year? That's number one. Number two is on this Nexperia issue where you also probably do not have great visibility. You say you are covered until next week. Next week is not a long time. Therefore, I just want to get a feeling if any production cut can be avoided or what needs to happen that the production cut can be avoided. I think it's just up to the politicians that they get this away. What is happening in the background? Any color would be appreciated. Thank you.
Yeah, thanks very much for the question. As always, in the Q3 call, I start answering it with obviously, I can't give you full guidance for 2026, but I understand where you're coming from. Look, if I want to give a little bit of color on the exhibit 11, I deliberately decided to give you basically three margins. The one is the reported margin, 2.3%. The 5.4% margin is like if you take all the out of the one-offs, it shows a little bit of our performance and shows also that although all these headwinds, we would have been still in the corridor that we gave you at the beginning of the year. Then we gave you a figure of 4.5%, which is kind of an underlying margin because it includes tariffs, but it excludes the one-offs.
If I were you, I would say, look, this is roughly a normalized performance. It's a little bit improved because there's only two quarters of tariffs in, not three, but let's assume this is basically the run rate of our current business, including tariffs. This should be the base for doing like then the math and the calculation for next year. From that 4.5%, I wouldn't expect too much from global markets. Europe flat, U.S. perhaps a little bit under pressure, China very small growth. I talked about the market share. It's really on the cost and on the revenue side. What are headwinds? Yes, we ramp up BEVs further. That will be an additional headwind.
The headwind will be a little bit less proportionally because the ID.2 family, let's call it, I think we call it new urban new electric urban family, the margins are closer to the combustion engine margins. They will have an LFP battery. They will be built in Spain. They will have a more integrated electrical engine. The margin dilution effect continues, but for these cars, it's much lower because they have already 80% of the contribution margin of the combustion engine cars. Still, margin dilutive. I said it's a little bit then we add one quarter of tariffs, but let's not forget product momentum. Let's not forget the huge momentum we have on our cost programs. I think you follow us for quite a while. Look, we were able to reduce overhead costs by $1 billion despite inflation.
We were able to reduce the workforce by basically 11,000 over the last one and a half years. That continues. If you and this will continue next year. Margin losing effects, performance programs, and then that's some positives and negatives, smaller ones on the P&L.
Can you just tell us a number, how much you want to cut the costs? I mean, that was announced already, but it's hard to keep the overview. Just repeat that maybe again. What do you expect in terms of cost savings for the next two years?
EUR 4 billion of the Volkswagen AG, which includes brand and component business. If you add all the other programs, Audi Zukunft, Porsche, it's Carriot, it's then up to EUR 6 billion until 2030.
2030. All right. Until 2027, no number has been communicated, right?
No, but it's, look, if you look at the major effect, it comes from the wage, dampening the wage logic. That is EUR 1 billion this year and another EUR 500 million next year continuing. It's basically at the end of 2026, we had EUR 1.5 billion, which should continue. The reduction of workforce, as you see, it's rather linear: 5,000 in 2023, 5,000 in 2024, sorry, 2024, 2025. That should continue more or less linear. The capacity reduction kicks in 2028. This is more like a step down.
Okay. That's great. Just Nexperia would be great if you could answer that as well.
Look, perhaps it doesn't feel like it if you read the press, but I'm really proud of the team this is working on. This team is steeled by, I don't know whether this is the right word in English, but I would say in German, this team is steeled by the experience they made during the chip crisis. We have tremendous visibility between us and our suppliers. We know which semiconductors are going into which part, and there's great transparency. They also try to find additional sources, obviously. What we can say, we are safe until the end of next week. I must also be very honest to you, we look at that topic week by week. We try to stabilize week by week. Now we are safe at the end of next week.
As you said before, the solution should be on the political side because it's not like a technical shortfall or a capacity shortfall. It's really induced by obviously political discussions. This is where we hope that all the relevant parties sit together and find solutions.
These political discussions, is that Europe or U.S.? It has to be done by the U.S. or by Europe is your feeling?
I don't want to speculate. I'm not sure whether I have the answer to you.
Okay. All right. That's fine. Thank you so much.
What I can say is what we are doing, and I will say the transparency we have now per car, per piece, is way better than we had when we started the chip crisis.
Okay. That's great, Arno. Thank you.
Thank you, Horst.
Thank you, Horst. We move over to Tim. Tim from Deutsche Bank, please go ahead.
Thank you, Rolf and Arno. Arno, the fight for better free cash flow generation and conversion has kind of been one of your biggest professional fights as a CFO at Volkswagen AG over the last few years. We know that Volkswagen AG only changes under tremendous pressure, usually really for the better. We've seen this multiple times with the restructuring, diesel scandal, and so on and so forth. Do you feel like your colleague understands now a little bit better why you pick up that fight and why you want to drive free cash flow generation now that we see that Porsche is not generating as much anymore and it's also problematic on all sorts of other items? Do you still feel it's as difficult as it was?
I understand you don't want to give us a number, but if I give you a number and say, hey, let's say you generate a little bit of free cash flow this year, actually, because there's a lot of CapEx that you now have to spend in Q4, really. If you sell Everlands, that would be counted as free cash flow as well. We suddenly talk about $5 billion to $7 billion positive next year and not the $7 billion negative media speculation, right? What would you say to that? Secondly, when we think about restructuring and improvements of the business, we see the result already within Volkswagen Passenger Cars Brand and Core Group. Is this implied strong result of Audi in Q4 also partly a result of the ongoing restructuring efforts already, or is that still to come next year as a support? Thank you.
Yeah, Tim. First and foremost, I think we had the opportunity to meet the whole, not the whole board, but we had a presentation on the, and I think you realized that we really act as a team, and we find really good answers. I think everybody knows where we stand. Again, look, as I said before, the speculation in the press, you have to see where we stand. We had a planning round. We agreed on a viable planning round, and now all of a sudden, there's an additional headwind of $5 billion tariffs, an additional headwind of China, and we are committed to compensate for that as well. We look at measures, and I said it even in the interview this morning. We had programs brand by brand, and these programs are really focusing not only on EBIT, but also on cash flow.
The teams work much closer together in terms of production, sales. If you look at our working capital of our inventories, much stronger than in the past in terms of percentage of sales. There's a second level, I would say. It's the field we also talk long about, it's group synergies. This is what I specifically highlighted. Now we have real programs brand by brand, and the next level where we could compensate and do even better and make more out of the current cash flow and R&D is even more group synergies, both in CapEx and R&D, on software, on combining brands, production to brands. I'll make one example. The ID.2 family, all the cars from the same platform, from different brands, should be in the future on one line or even one factory. This gives us the positive.
As I said before, Tim, I cannot give you a free cash flow guidance today because we are not done so far, and that would be not professional if I give you guidance. Although we are not done, I said we have the consensus for next year in sight on cash flow. Perhaps we should leave it like that, and we know what we need to deliver as a group in order to be able to pay dividends and interest rates to shareholders. This is where we stand. This is what we work on, and we are fully committed as a team. Hopefully, you have an understanding that I cannot be more specific right now. Then Audi, let's not forget Audi restructured already. They closed down the Brussels plant. They agreed on Audi Zukunft, and they will reduce the headcount by 7,000.
New products are coming, and the continuous effect on the closure of the Brussels plant also comes in, obviously, then in the fourth quarter and next year. Yes, part of the improved figures in Q4 and going on for next year already is also from their restructuring.
Thank you, Arno. Looking forward to the free cash flow guide early next year.
Thank you, Tim. The next one in line would be Michael Tyndall from HSBC Global Investment Research. Difficult to ask now an additional question on 2026 and the free cash flow, but Michael, please go ahead.
Thanks, Rolf. Just a couple for me. I guess given we're talking about cash flow, I'm not going to ask about 2026, but I wonder if you've got any thoughts around the dividend. You know, we've seen a lot of one-offs this year. Some of them will be included, some of them won't. Cash flow effectively on the guide is neutral. Any thoughts you could offer in terms of dividend would be super helpful. The second one, you know, on the tariff piece, it feels like we've seen movement on most regions with the exception of Mexico. I just wonder if you can talk about what are you seeing and hearing on what might be happening on Mexico. While I'm at it, you know, there was some discussion about potentially getting credit for investment. You talked about potential Audi factory in the U.S. Is that conversation ongoing?
I just wonder if you could give us a bit more feel for it's $5 billion, but is there a potential downside opportunity on that tariff number? Thanks.
Yeah, Mike, thanks for your question. On the dividends, I think I can give you two indications. First and foremost, I said we stick to the 30% payout ratio, at least 30% payout ratio. What we also communicated when we laid out the ad hoc is that we won't take the non-cash impairment charge of the Porsche goodwill in the magnitude of EUR 2.7 billion as a basis when calculating the basis for the dividend for 2025, which we propose. This is what I can give you on a dividend, which would help you to determine where we could stand on that.
If I can just come back just one second on that, which is I just wonder with the planning round going on and the emphasis on, you know, generating free cash flow, you know, how does that conflict potentially with paying money out?
I mean, look, what I said before, it's not conflicting. It's actually the other way around. We have to come up with a planning round that is robust for the Volkswagen Group going forward. Robust means also being able to pay the dividends we promised to the capital market, to our shareholders. This is where it stands. It's not conflicting. It's actually the other way around. This is part of the robustness. We have a net liquidity of more than $30 billion. We are committed on cash flow generation. The cash conversion rate should go up. It's not conflicting. It's actually the other way around. It's part of the, when I describe robustness, it's part of the ability to also let our shareholders participate in the success of the Volkswagen Group. Tariffs, yeah. Look, the $5 billion, I said up to $5 billion. That's very roughly.
Don't cite me, but very roughly, it's about $4 billion, $4 point something billion we have to pay from the current basis on the regimes we see, between $4 and $4.5 billion payout. The rest of the $5 billion is basically, I would say, lost margin due to some measures we took in order to mitigate the effect. There are two levers to optimize the $5 billion. First and foremost, additional measures like pricing and others, obviously. On the other hand, there are some talks about, look, from Mexico to the U.S., you have 27.5%. There are some ideas, I think, to exclude some of the parts that go from Mexico to the U.S., which would obviously bring down the up to $5 billion to a smaller number. In terms of the factory, we don't have new information. We are still in discussions with the administration in the U.S.
We still look into the topic. We calculate. I cannot share new information on the topic of a potential industrialization and localization, let's call it that way, of the Audi brand in the U.S. We don't have new information which I can share.
Thank you very much. Appreciate it.
Thank you, Mike. The next question comes from Sam. Sam Perry from Exane BNP Paribas . Please go ahead.
Hi, there. Thanks for taking my questions. There were a few media stories in the quarter around issues with the Rivian software rollout and Carrier sort of moving to be a coordinator of these technologies. Can you give any color on exactly what's going on here and whether or not that could result in any one-off charges going into next year? With regards to Porsche's change in strategy back to ICE and given the shared platforms with Audi and the $300 million impairment that Audi took, does that have any implications for Audi's future model rollout or investment requirements that you could share? Thanks.
It was difficult to understand. I hear about the Rivian software. What I can say, the Rivian software, which we developed together in the JV for the electric vehicles, is on plan. We look into the next milestone, which would be the winter test for the model. It's even the other way around. When you remember back then, we agreed on the software. We set up a certain model range of the first step of cars or the first tranche of cars that will get the software. For example, electric SUV from Audi, for example, Scout and others. We even included in the course of the joint venture, the ID.1. The ID.1 will be an additional model that will get the Rivian JV-based software in the MEB. This doesn't feel like delayed.
It's even like we increased basically the speed in terms of we added a different model, which is also very good news for the ID.1 because it's a very capable and per car cost-effective software. This is where we stand at the Rivian software. Yeah.
Thanks. I don't know if my second question was heard, but just on Porsche's change in strategy back to ICE, the implications for Audi.
Look, what I would propose, I think Audi has their call next week, Rolf, on next Monday. Yes, there are some implications, but minor ones in terms of financial impact. I think they had a burden of $200 million. I would really propose that next week's call is, I think, on Monday. Here you can discuss in detail the Audi product strategy with Jürgen Rösberger.
Thanks.
If that's okay for you.
Thank you.
Thanks.
The next question comes from Michael Götzel from DZ Bank. Michael, please go ahead.
Yes, Michael Götzel . Good morning. I have two questions. First one is, can you explain a bit in more detail what's happened this year as a financial result because we saw a huge swing year- over- year in Q3? The second one is, can you give us any kind of guidance what we should expect on special items or restructuring charges and so on in Q4, please? Thanks.
Yeah, on the other financial result, there were some basically new evaluations of, for example, convertibles we have, and, for example, other participations, which are positive. For the fourth quarter, we don't expect major one-offs. The restructuring is going on. There's, I think, a double-digit million, up to a small three-digit million more restructuring to expect from the Brand Group Corp, but not major ones. What I would like to remind you in terms of restructuring, just for the understanding, the major effect of restructuring of our program at Volkswagen Zukunft is the so-called Altersteilzeit, early retirement program. The accruals for that early retirement program, we do contract by contract and person by person. That flows in over the course of the year. Just to give you an understanding, it's a magnitude of $400 million a year.
This $400 million is factored in our outlook and is factored in the bridge. The true performance of our Volkswagen brand and Brand Group Corp performance would even be better if you deduct that $400 million per year as well, which we don't do.
Okay. Thank you.
Thank you, Michael. We have the last question in today's session coming from Henning Cosman from Barclays. Henning, please.
Oh, yeah. Good morning. Thank you for squeezing me in. I apologize in advance. I need to come back to this free cash flow thing for 2026. Arno, I just want to clarify because I think it's important. Appreciate the sort of color that you're striving for consensus. The clarification is just that's excluding any potential asset sales, right? Because that could, of course, be a big factor. If you could just confirm that we're talking about underlying free cash flow from the operating business. The second question is, please, thanks for reminding us about the $4 billion and $6 billion cost savings through to 2030. Could you just talk about whether that's growth or net of inflation that's happening in the meantime in terms of cost evolution?
Also, if that's in any way double counting, for example, with the expected Audi earnings recovery, Porsche earnings recovery from a low base? Or is that really a number that we should basically stick on top of whatever the underlying result is currently without any netting offsets? Thank you so much.
Yeah, Henning. No, the free cash flow bridge for 2026 is we talk about really operating free cash flow. Bear in mind, we have some, yeah, also M&A activities planned for 2026, smaller ones. There might be some basically compensation for that, smaller sales of participations. In that free cash flow guidance, we gave you for the color, let's call it color for 2026. We said before that we look into options, strategic options for our Everlands participation. This Everlands participation, if it works out and we agree on certain options and execute on them, is not included in the color I just gave you in that huge magnitude. I don't rule out that smaller M&A activities in the plus and minus business is then included.
Perfect. That's very clear. Thank you.
Yeah. Yeah. And the $4- $6 billion net of inflation. Look, you can't put that on top because when Brand Group Corp said last year, we try to achieve a target of 6.5% or we aim for a target of 6.5% in 2029. Of course, the $4 billion are included in that figure. Also, the $2 billion for the rest of the group are included in the EBIT guidance. You can't put that on top to the guidance. It's basically, this is the effect of the programs I just mentioned. For example, the $4 billion net reduction is basically $1.5 billion of dampening of wage increase, and the rest comes from productivity and ramp-down of the workforce. This is basically included in the guidance of the brands.
Great, thank you very much.
Very good. That was the last one, actually, in our Q&A round. Thanks very much, yeah, for all the very good discussion. We are now continuing with a small break before we continue then with the Q&A of the media colleagues. Thank you very much and talk soon.
Ladies and gentlemen, please hold the line. The conference will continue shortly. Thank you. Ladies and gentlemen, we will now begin the question and answer session for media. To ask a question, please, as a reminder, press star and one on your telephone.
Yes. Hello, everyone. Let's kick off the Q&A. We have a couple of colleagues already lined up. As I can see in the list, Sebastian. Sebastian Ash from Financial Times, you're the first one. Please, go ahead.
Yeah. Hi, Arno, and thank you for taking my question. I was wondering if you could just run us through those tariff numbers one more time. It's a $2.1 billion impact in terms of the tariffs paid year to date. What would that be over the full year in 2025? If I understand, you see that rising to $4 billion next year. How does that fit in within the $5 billion figure? Perhaps you can bring a little clarity there for me. My second sort of addition there would be that with other major OEMs, especially those with a bigger manufacturing presence in the U.S., we've seen that the recent adjustments have led to a fairly significant reduction in the anticipated tariff burden. How do you evaluate that disparity between Volkswagen and those other OEMs? How do you think it affects your competitive position in North America?
Yeah, the question. Thanks for the question. Look, yeah, as you said, $2.1 billion for two quarters. Very roughly, if you double that, you are roughly at $4 billion, perhaps slightly less. This is what the tariff we pay. Why did I say up to $5 billion? The $5 billion we calculated at the beginning of that tariff journey. Back then, we were planning for, let's say, 10% more sales in the U.S. Now we are faced with, in North America, now we are faced with 8% less. Obviously, there is a swing in our sales, partly and mostly due to tariffs. That swing is due to also measures we took specifically from Mexico to, yes. For cars, it's 27.5%. Based on that tariff situation, some cars are just not profitable. Of course, we have our customers inside. Of course, we look on the dealers and their business.
On that basis, it's just like we took some measures also on the cars we delivered. That leads then, what I said, up to $5 billion. That obviously can be optimized, but this is where we stand today.
For the full year 2025, would that be about $2.8 billion on the current run rate? What would that be?
This is a good estimate, up to three, yeah, on tariff paid.
Yes, understood.
Yeah.
Okay. Thanks. As I can see, next in line is Rachel More from Thomson Reuters. Rachel, can you hear us?
Hi. Yes, can you hear me?
Very good. Loud and clear.
Morning. I wanted to ask about the Porsche costs because we see that they were a bit less than guided last month at EUR 4.7 billion. Can you say why that was? What helped here? I also have a question on the recent agreement between the U.S. and China on trade. Do you expect that to fix the Rare Earths problem in terms of possible supply problems there? Thank you.
Can you repeat the first question, please?
Yes. The first question, sorry, was on Porsche costs. They were lower than guided. What helped there? I think we had EUR 5.1 billion last month, and it turned out today there was a EUR 4.7 billion hit from the strategy change.
Yeah. Yeah. Yeah. Look, when we communicated our talk to the capital market, we had a rough estimation of $3 billion write-down in the goodwill of our Porsche participation. Obviously, we had not so much time to do an in-depth discussion and calculation. In the course of the detailed calculation, we came up with some different assumptions, specifically on the interest rate. The precise number was then $2.7 billion. That didn't really change materially. It's just like there were assumptions in the calculations which we had over the course of time to make more precise. This was the difference between the $2.7 billion and the $3 billion. Between U.S. trade and China, obviously, a lot of current trade restrictions are based on the relation between the U.S. and China. Obviously, it's very important for us that some of the topics there are solved.
Specifically on the next media, we discussed that before. This is not a physical supply shortage. It's a supply shortage that's based on political decisions and other decisions. This is also the way that topic can be solved. We really look forward to these trade talks. I don't have more information than you have on specifics.
On rare earths, you can't speak to that. Any easing in the problems there?
It's really hard to understand your question.
Apologies. The question on rare earths supply, whether the U.S. and China agreement helps in that regard.
I think it's the same topic, really. We just know what you know out of the news. I think it's, as Arno Antlitz mentioned, it's quite too early to give any estimations, assumptions to what's the outcome of it.
Okay. Thank you.
Okay. You're welcome. Next on the list, Monica Raymunt from Bloomberg. Monica, are you on the line?
I am indeed. Can you hear me all right?
Excellent. Go ahead.
Wonderful. Thanks so much. I just had two questions, one centering not necessarily only on Nexperia, but also on PowerCo. I'm wondering, Mr. Antlitz, how your view of PowerCo has changed in light of what's happened with Nexperia and all of the geopolitical tussling surrounding Rare Earths and Chinese supply of Chinese control of supply chains in general. Does this put additional pressure on PowerCo to ramp up production in South Gitta in order to maintain or to have a more secure supply of batteries? With China flexing its powers on Rare Earths and chips, basically, I'm wondering, how does Volkswagen feel about the security of its supply of batteries? My second question would be on the dividend. You said that Volkswagen is going to stick to the minimum 30% payout ratio.
I was just wondering, do you see that as sort of being the bottom of the barrel in terms of how low dividends could go? Or do you see that as being one of the levers that would need to be changed to keep Volkswagen's operations sort of in the black or keep Volkswagen's operations looking all right for investors?
Yeah, Monica, thank you for your two questions. First and foremost, the basic view on PowerCo has not changed because there were always several reasons why we embarked on that strategy to invest in our own battery capacity. First and foremost, obviously, that we have it in our own hands. We have the technology in our own hands. Then we introduced the unified cell, which is a huge advantage in the competition. Just to remember that within one cell, we can offer LFP and NMC chemistry. It's a huge flexibility. Last but not least, we always said that we invest in PowerCo also to be kind of independent on the political situations. This is why we're not only investing in the capacity, but also in upstream and downstream, specifically in upstream initiatives like securing raw materials, lithium, and cobalt, and other materials.
This was always a part of the strategy, and it becomes even more relevant going forward. On the other hand, what we do, and I was very transparent on that, we adapt the ramp-up of PowerCo to the needs we see in the global market and also with us. This is why I said before, in light of the new expectations about the ramp-up of battery, we basically adjust the ramp-up of the PowerCo. We fully stick to the three sites. We have in Salzgitter, in Spain, and in Ontario, Canada. Of course, we have to adapt to market realities. If the ramp-up of electrification, specifically now in the U.S., is not as fast as expected, we will react with postponing some of the blocks in the sites. That has nothing to do with less commitment to the PowerCo, but rather with adapting to market realities.
The dividend, as I said, our dividend policy is a payout ratio of at least 30%. That's obviously depending on the earnings per share we achieve. The 30% as a relative measure, we have as a policy for years, and we haven't changed that.
Thank you.
Okay. Now we're moving to our home region here in Lower Saxony. It's the DPA, Frank Johansen. Frank, can you hear us?
Yes, I can hear you. Hello?
Yes.
Just a short question to the semiconductor problems and crisis. Could you give us just a short, brief summary of how's the situation and how to solve the problem? I think that's quite a huge problem. If you say your outlook is supposed that there won't be no shortage, that's quite simply not realistic, I think. How's the situation and how to solve the problem?
Yeah. First and foremost, I must reiterate that I'm really proud of the team, how dedicated they work, the transparency. We have really much more transparency than we had back in the semiconductor crisis. We also know that these are not like very complicated semiconductors. It's more like standard semiconductors. The shortage was not caused by an earthquake or something like happened, just like a political, obviously political discussion. This is how it needs also to be solved. I really look forward to the parties sitting together and finding solutions for the German and European and basically the worldwide industry. How it can be solved, as I said before, first and foremost, politically, but we cannot stand still. We have a responsibility. We try to find alternative sources, get it from alternative sources. We achieved that so far. We look on the issue day by day and week by week.
What we can say, until the end of next week, we have enough supply. We continue to try to find alternative sources. The truth is, week by week, we work forward. The good news is, so far, until the end of next week, we can say that we don't lose any cars on that topic.
Okay. I think this is as much as we can say, honestly, at the moment. Next on the list would be Christina Amann. Christina, are you on the line?
Hi, Dan. I hope you can hear me.
Excellent.
Fantastic. I have one question on the Audi plant. Are you still optimistic to take a position this year, or do you think this will drag into next year? Second question on the overall investment. You said that in the current planning round, it's EUR 165 billion. That's going to go down. Do you have any target you can give for the next planning round? Where's your goal? Where do you expect investments to go? The third question would be on divestments. There's the Traton stake, where you have said in the past that you want to reduce. There has been a sale, but is there more to come? Second question on Everlands, which is going on sale. There's been reports lately. Do you have any timeframe or any details on that? The third would be PowerCo, which was going to be investment-ready this year.
Do you have any information on where's that going? Is there any investment of any outside investor to come, or will that be something for even later? Thanks.
Yeah. On the investment side, I said we have the EUR 165 billion now for the next five years inside. We even prepare for less because I said if we decided on a potential plant for Audi, then we will compensate that in the EUR 165 billion. That shows we will work down the EUR 165 billion over time. If we decided on the Audi plant, then that means that we will compensate that. We prepare already for a lower figure. We also gave a guidance of 10% R&D CapEx combined for 2027, which is also significantly lower than today, where we stand at 12% to 13% in terms of sales. Divestments, we were very transparent about that. There are some chances. We look at PowerCo. We look into potential options for Everlands. It's too early to give you more information. We don't have more information on that.
As soon as we make progress or decided on specific steps, we will inform you. Hopefully you understand that it's too early to give you specifics. What I can reiterate is we are committed on that path. We started that path back in Hockenheim in our communication. We make progress on that. The progress is also shown by a first small step on Traton, which we achieved at the beginning of the year.
Active portfolio management.
The last one was the Audi plant. Do you still expect a decision this year?
Yeah. Oliver was very transparent on that. We said we have to decide on the Audi plant this year. This is still what we are looking for.
Good. On the list, I can see the next one in line would be Lazar Backovic from Handelsblatt. Lazar, can you hear us?
Thank you so much.
Very good.
Okay. It's two topics, but four questions with that. Two questions each. First, you had to write off billions because of your adjustments at Porsche regarding your vehicle plans. Can you in any way rule out that this will be repeated within the next months within other brands and that we will continue to see one-offs? That will be the first question. Second question in this context, you are feeling strong pressure, and against this backdrop, are there any considerations to postpone your future platform SSP once again in order to stretch any investments? Regarding Nexperia and chips, maybe you can put a bit of color onto what exactly is missing and how long these stocks will last. I think there is sometimes a mixture. Sometimes they say it's semiconductors, then it's diodes or something else. That will be interesting what exactly is missing.
The last question would be, did I get that right that you do not have any assessment on the deal made between Xi and Trump regarding Rare Earths? Any comment on this would help. Thank you.
Yeah, a lot of questions. Thank you for them. What I said in the call earlier, there might be smaller one-offs here and there, but we don't expect from today's perspective significant one-offs going forward in the magnitude of what we just communicated. In terms of investments on our future platforms, we are committed to ramp up the so-called SSP. What I said before, we look into potentially even more synergies in the group. That more synergies might mean that we combine even more cars from different brands on certain platforms in the course of the SSP and optimize that. This is specifically what we look at, both in terms of software and in terms of hardware. This is currently what we look at.
It's more like an optimization of using the funds we have in the group and using the huge scale and the potentials we have in the group more stringent. Let's not forget, we basically invented the platform strategy. That platform strategy was very successfully implemented over years in terms of R&D. Now the next phase would be that we combine the cars from the same platforms, even more stringent also for production. Look, today, Golf is on the same platform like an Audi and other cars like Leon and Octavia. Every brand today produces the Golf by themselves. Volkswagen produces Golf. Audi produces Audi A4. Škoda produces Octavia. The next, I would say, wave of platform strategy is producing them on the same line in the same factories, which will benefit us and has no impact in terms of the customer.
Customer value is even higher in terms of differentiation in front of the customers. We save synergies in combining these cars. Another example is, for example, the ID.2 family. It's combined in Spain, although there are three brands involved. These are the things we look at. In terms of chips, I think it's more than 2,000 small different chips. Let's call them chips. I cannot really go through them piece by piece. It's really very small, very really cheap semis, not the difficult ones. It makes it also difficult to find alternative solutions because we are not talking about three or five or seven different units, more like thousands. Again, the assessment of the talks between Mr. Trump and Mr. Xi, I don't have any additional information that's on top of what you potentially have. I kind of comment on what we can expect there.
Thank you, Arno.
At least from the outlet, we move away from Germany to The New York Times. Melissa, are you on the call?
Yes, I'm here. Can you hear me?
Yes, excellent. Very good.
Fantastic.
Thank you.
Great. Thanks so much. My first question would be, during the IAA, Oliver Blume spoke very clearly about cutting a deal with the Trump administration, not avoiding tariffs, but given Volkswagen's big investment in the U.S., that there would be some way to carve something out. He said that was expected in the coming weeks. I'm just looking for some guidance on where that is at and what kind of timeline you're looking at. Coming back to Nexperia, what would be the result if you do not find supplies, say, for a week? What goes down first or where would you have to halt production? Thanks.
I think I start with the second question first because I really let's not speculate. What I can say, we secure the production day by day and week by week. We are now safe until the end of next week. The teams continue to work. I don't want to really speculate where and when. For the time being, it's good news that we are safe for another week. This is how we work through that topic, find alternative solutions, and find alternative suppliers of semis together with our first-tier suppliers. I'm very pleased with the performance of the teams, the processes, and the cooperation we see in the whole value chain. In terms of U.S. deal, I think we have no new information on that topic. We are absolutely committed to the U.S. It's one of the biggest and most profitable markets.
More localization would be one measure to increase our footprint there. I kindly ask for your understanding that I cannot share more detail today.
Thanks.
Okay. At least outlet-wise, if the world's a big German, we stay in the U.S. Stephen, even if you are not based there. Go ahead, please.
Can you hear me?
Yes, very good. Loud and clear.
Great. Thank you. Okay. You've covered a lot of the points here. I know you can't say any more on the potential Audi factory, but can you talk to me about the other options you have for reducing this $5 billion tariff bill? Where are you at with price increases, for example? What about making more parts that you use in Mexico, USMCA compliant? If you could talk to me about the other levers you might be able to pull in order to reduce that tariff bill, that would be great. Just second question. On China, it sounds like most people seem to be of the view that things aren't, the price competition isn't getting any easier there. Are you still optimistic that you can turn the business around in the way that you've laid out in your previous guidance? Thank you.
Yeah. In terms of measures, you already, I think you mentioned the most important ones. First and foremost is more localization, bigger footprint in the U.S. We operate a factory there. Let's not forget that we work on the ramp-up of Scout, which is a very promising project. It's a project that's localized in South Carolina. It's in the middle of the most important American segment, C pickup, B rugged SUVs. We invest in the Scout. You talked about pricing. You talked about increasing the localization of parts in the U.S. This is exactly what we look at and what we work on to optimize the situation. Second, China, it's a very challenging pricing environment. Although we see some, I would say, stabilization of the situation, it's still very challenging in terms of pricing.
What makes us confident in our strategy is that we bring a lot of great new cars now on new platforms. Based on the new China main platform, we both significantly reduce the cost base, first and foremost. Second, the product substance increases with new software features. We bring LFP batteries. We bring INCA infotainment, state-of-the-art. We are convinced that even in the current challenging pricing environment, we are much better off in terms of competitiveness with the new cars we bring in both our joint ventures, FRV and SAIC, and also at Anhui. The cars were presented in Shanghai, also Audi. I would say the best news in that challenging pricing environment was that we bring very attractive cars on a very good cost base to compete.
Arno, can I just say on price increases, I appreciate you're working on that. Porsche has made clear that it's increasing prices. What about the other brands? Do you see potential to increase prices to cover the tariff costs, or are you more cautious on the other brands? What's the overall picture?
For certain reasons, I cannot talk publicly about planned price increase. This is very clear. What I can say, it's a principal, a major lever, and we look into that. This is what I can say.
Okay. Thank you.
Arno talked a lot about products that I think for a red car magazine fits perfectly in here. I can see Autocar. Will, are you on the line? I think he can't hear us.
Can you hear me?
Oh, now I can hear you. Yes, go ahead.
Thank you.
Good morning.
Good morning. Hello, Arno. I wonder if you're able to shed any light for me on the talks between Porsche and Mate Rimac about selling Porsche's stake in Bugatti Rimac and what it could mean for the wider Volkswagen Group, please.
I don't want to disappoint you, but unfortunately, I must say I cannot comment on these speculations. Sorry for that.
I expected that answer. That's absolutely fine. Thank you.
Okay. Thanks.
Okay. I think that brings us to the end of this Q&A. Thank you for participating. Thank you for your excellent questions. I can only wish you have a great day and stay safe and talk to you soon. Bye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.