Good afternoon, everybody. Welcome today to our DRIVE. Volkswagen Group Forum here in Berlin. My name is Helen Beckermann. I am the Group Head of Investor Relations. It is actually very fitting that we are doing this event today because outside there are hundreds and thousands of people demonstrating with Fridays for Future, which really you can see the movement and the importance of ESG. Building the bridge to our company and our organization, ESG is really, really growing in importance and it has became fully integrated in all our decision-making. We are very happy today to have key speakers here who will give you an update on our focus areas. We have plenty of time for Q&A, so we really would be very open to a good dialogue and plenty of Q&A. I would like to also welcome the people in our webcast who are listening in today.
I will briefly take you through the agenda to give you a guideline of how this event will look. My opening will be short and then Hiltrud Werner will speak about her areas of integrity and compliance. She is a board member of the Group for that topic. We will have a break after that, and then Ralf Pfitzner, who is our Vice President and Head of Sustainability, will look more on the environmental side, the S side of ESG. Then we will follow up with Silke Bagschik, who is our Head of Communication for the e-mobility, and she will look at the electromobility and the ID.3, so a bit of product towards the end of the conference. I will now pass over to Ms. Werner and hope you enjoy the event.
Someone said to me I have to wait until the disclaimer has been shown for at least a number of seconds. I saw already a lot of known faces. When you do something for the first time, it is exciting. When you do something for a second time, then it is a repetition. When you do something for the third time, it becomes a tradition. This is the second time. Let us see how it goes. Thank you very much for inviting me again.
I am very pleased to be here in Berlin today and I would like to use the opportunity today to speak a little bit about the success we have made in the last year in my area of responsibility in the board and especially also around the monitorship that we discussed not so much in detail the last time and also some other areas of compliance and integrity. As you might know, I just immediately jump into it so that you have more time for your questions. As you might know, the three-year monitorship was divided in three phases, so to say. In the first year when the monitor team arrived at Volkswagen, of course we had to give them time to understand our organization also to make the first suggestions of focus areas. We started also development, redesign, and adaptation in numerous processes of systems and structures.
Some of the areas that had the highest priority, of course, were outlined in the consent decrees and in the plea agreement directly. In the second year, we started with the rollout of these new processes around different brands and companies. Of course, we are continuously working through the settlement obligations with the U.S. authorities in this matter, taking also into account the advice of the monitor team, which is recorded in numerous reports, notes and recommendations. We have also started to further align and redefine all these processes and started to make them even more robust and also improve the appropriate reporting systems.
In the third year of the monitorship, which is now ahead of us and has just begun, that will be marked by, so to say, getting into routine of new processes and also to demonstrate to the monitor operational effectiveness on processes in compliance, in risk management, but also in the broader product safety and Product Emergence Processes, et cetera. The next chart shows that the monitor has just delivered his second annual report. Some of you might have seen that in the press. We discussed it together with Larry Thompson, together also with some representatives from internal German and international media. We were very pleased that in this report which you would see here in the agenda, which was a little bit different to the first one, there were no new violations recorded.
The monitor had two violations against the company and against the breach of the obligations from the consent decree a year ago. Now I think we have improved over that. We got a number of additional new recommendations. In the first report, there were seven. For two of them, we got a follow-up recommendation, which was the second and the fifth, and also some additional recommendations. That meant for us that we have built on the implementation status, and we have also further gotten specifications for requirements from the internal compliance auditor, which is Larry Thompson's role. What we see here was that he was still giving guidance on implementation of the Golden Rules. The Golden Rules document is something that we introduced to the company in February 2016, so very shortly after the diesel scandal.
It comprises of 13 different areas, where we looked into segregation of duty, for example, into security of processes, so that something like the diesel scandal can never happen again. Of course, also process reliability of the whistleblower system is also an area we are still working on. The recommendation 5.1, which is here on the list, is also more designed by the monitor to help us to further improve, not something that meant that what we did so far was not operationally effective. Then we had three new recommendations, numbers 8- 10. They concern further improvement to our reporting system, also the methodological formalization of the process deviations and the evaluation of the risk reporting. This concerns preparing analysis to determine whether measures already implemented are also taking effect.
The improvements that we have to do on that are primarily documentation obligations and standardization across various group companies. Some of you have asked me over lunch, how do you manage in such a large group? Yes, of course, there are very good examples of good processes, in different areas of the company. What we always have to find out, which one is the best one, which should be the standard. Do we have a benefit of standardization? Because that helps us also, that processes keep stable, independent from individual people, and it also enables us to improve our system, when job rotation or other things take place. That is why this focus on, distinction between doing everything in a standardized way that the customer doesn't see, give a lot more freedom to the groups when it comes to product and customer-related processes.
I think that was the learning that we have undergone in the last two to three years, in many areas. Let me show you also some indicators that document how Volkswagen has become in general a better company. In line with the size and complexity of our company, the changes that we are doing needed a long-term strategy and needed an overarching program or project. We call this T4I or Together for Integrity. This means by 2025, we want to reach all parts of the company, all 650,000 employees. Until the end of this year, we will already have reached with our program, 200 of our biggest entities. Until 2025, this number will increase to 685 brand and other daughter companies. To date, we have reached around 390,000 employees. What does it mean?
T4I is, we call it a master toolbox of best practice examples, which we then explain to a company, and then we see where are the individual gaps in each company, and we work on them to bring all to a benchmark in environmental compliance and integrity processes. Direct feedback from over 3,000 employees provided us with valuable information in this initial phase, and also how to address the people in different cultures in order to reach them with our message. My team is too small to manage that. Our network with around 600 so-called integrity ambassadors, plays a decisive role here. Integrity ambassadors are people who voluntarily take our methods and topics into the workforce. These are non-management grade people.
That helps us to create some sort of snowball effect by having well-trained people sitting in the organization on-site and speaking the language of their colleagues, but having this additional knowledge of our program. Change management, risk management, in-depth knowledge of the Code of Conduct and things like that, so that they can help to consult. These changes, of course, are also visible in the HR area. 29 different processes alone have been redesigned to take also behavioral criteria into account, as well as performance criteria. Now, when we talk about promotion or when we talk about job rotation, when we talk about recruiting in each and every HR process now, we also evaluate whether this is the right character for the job and not only did he have the best results in the past. Our core values are the corporate principles, the so-called Volkswagen Group Essentials.
You may have heard about it. We published it also on the internet. They describe what all employees of the Volkswagen Group worldwide stand for a trustworthy company that assumes social responsibility and keeps its word. You see, number one is already, we take on responsibility for the environment and society. We say not only our shareholders, our stakeholders, our employees and the society are also stakeholders that we have to care and where we have to look how we manage our business in the best interest for these other stakeholders. in this ongoing transformation of our corporate culture, the management board and managers also have an important role to play. They must not only carry out these relevant messages into the team, they also must practice the change themselves and be a role model. We support this systematically and have developed many formats also.
For example, the role model program, where management board and top management promote measures to dismantle power distances in the company and practice a new open culture of criticism. In 2018, around 400 board members and top managers, accounting for 98% of all top executives of 63 companies, took part in this role model program. By that, they were in direct dialogue with their programs with more than 150,000 employees. This is being continued, and it is also expanded this year, our role model program 2.0. So to say, every manager is obliged to use at least 2/ 15 different measures that you can choose from. They are all designed along these seven Volkswagen Group Essentials. This helps us to promote a cultural change and a new appreciative speak-up culture.
In the first half of 2019 alone, there were more than 6,400 relevant activities in more than 60 of our largest companies. What I see when I speak with certain members of the management is that some of the managers say, now of course, my job has not become more easy. My team gives me far more often feedback, and they want an answer on the why question, why are we doing that? Not only what do we have to do and when. I get a lot of feedback from management where they say, "I think my job is now enriched. I like what I do now." They are appreciating that it is also easier to lead a team when it is not just power driven, but also consensus in the team is reached that this is the right thing to do.
Here you get a few impressions what we are doing in this field. It is a wide mixture of different events that I put on the slide. We also have something that we call [Kultur]. [Kultur] meant in terms of touring. It is a tour of our plants, where the Group Board of Management members, especially Gunnar Kilian, as a Board Member for Human Resources, myself, but also Ralf Brandstätter as Head of the Volkswagen Academy, responsible for training and professional development, or Dr. Kurt Michels, my Chief Compliance Officer, and many more participate and engage in discussions. The [Kultur] is also actively supported by employee representatives such as Bernd Osterloh, the Chairman of the Group Works Council. Not only does this mean that we are entering into a direct dialogue with the workforce, we also demonstrate that this important cultural change is a joint effort of all.
Ladies and gentlemen, I also would like to tell you just a little bit about our progress in compliance, one of our major focuses. Over the past two years, we have greatly increased the compliance staffing, not only in the central group compliance here in Wolfsburg, where we now have around about 140 employees, but also in brands and regions around the globe. What we have for the first time is a uniform group-wide qualification profile for our compliance specialists, which is important. Also uniform hiring and remuneration rules for these specialists. They are also supported by new IT tools. At the same time, compliance has come closer to the specialist departments and has been recognized and reorganized in the group to have a louder voice. Let me give you one example.
In the area of technical development, we have introduced three additional milestones in the Product Emergence Process, in the PEP. They exclusively concern product compliance. This process, the PEP, is one of the most important processes in vehicle development in every OEM because it controls and tracks the development of new vehicles from the product decision to the design freeze and right up to the SOP to the start of production. The new milestones also serve to check in good time whether the planned new models fulfill all type approval requirements from crash to standard, to exhaust emission standards in all planned sales areas. If there is still a problem here, then in the worst case, this will lead to delays because a lot of these milestone decisions need to be made [anonymously].
That means that the voice of the compliance experts is as loud as the voice of the business unit. That helps a lot. Needless to say that this requires, of course, a totally new skill level in my department, and also new skills at the business units. We have developed numerous trainings, also for a lot of detailed questions around compliance, for different legal fields. They are all actively used by the management. This has noticeably increased the awareness already. Just one more word. In 2017, we have adopted the group-wide Code of Conduct. It is available across the group. It is standard for all 650,000 employees. Over the past two years, we have trained 136,000 employees in classroom-based training and online training with that Code of Conduct.
Just over the past 14 months, we have also conducted more than 1,500 business partner due diligences because for us it was very important that compliance doesn't stop at the border of the legal entity, so to say, but that our standards are also known to our business partners in sales or from procurement. So we are checking existing and potential partners on a risk-based approach. The first 1,500, as I said, we have already done. In the event of negative or any questionable results, we do not enter into cooperation and compliance has already quite often, I would say, stretched the muscles and has said no, and it was accepted by the business. The strong growth and demand experienced by group compliance also shows that compliance issues are now increasingly becoming part of business decisions at all levels. Just one recap also from last year.
I showed you the whistleblower system. Last year I reported that we have opened a new online reporting channel. Now we have worked also on a 24/7 hotline that is now available in 17 languages, which covers more than 95% of our workforce so that they can report any potential misconduct in their own language, which is a very good achievement for us. Any misconduct that is established or is proven is sanctioned consistently and appropriately. For example, members of management are now obliged also to report any evidence of serious breach of regulations because a failure to report also constitutes a serious breach of regulations. Of course, you know that in the past, at Volkswagen, there have also already been consequences, including immediate dismissal. But, it was not communicated transparently as a rule. This was only communicated in the direct working environment of the person.
Or it was a little bit in the grapevine. Now this is transparent as part of our company communication tools and, of course, in strict compliance with personal rights and data protection regulations. We have created full transparency, and it helps a lot for the company to show that we take it very serious with our Code of Conduct. We now report on these disciplinary measures on a quarterly basis via in-house brand media, which is called 360° Volkswagen App . We create also a high degree of transparency, and that creates trust in the system of whistleblowing. It also shows that we take it very serious to protect whistleblowers from any retaliation. 51 companies, each with more than 1,000 employees, took part in this process of reporting the misconduct in the first quarter of this year. During this period, a considerable number of disciplinary measures were taken.
As you can see here, 903 warnings, a total of 204 dismissals. Also statistically, the reasons are made transparent. For us, it is also important that any violation that has to do with external legal obligations and especially environmental law are also a separate category, and we would report that if we have something in this area. I'm very convinced that since the last conference on the last year's audit that we had with Larry Thompson, we have made significant progress. This applies to almost all business areas, but especially to human resources, compliance, risk management, procurement, environmental protection, and product conformity. None of these successes achieved would probably be so quick and in such a short time without some of the support and advice from Larry Thompson and the commitment of thousands of employees in this change process.
I hope I have been able to show that we made great investments in this area and that we promote integrity and compliance consistently, and that we drive forward our transformation towards a more open, non-hierarchical and HR company and that from my point of view, this is not only a subjective impression. A large study, with excellent response rates, commissioned by Larry Thompson, also was conducted last December. In the U.S., there is the ECI, the Ethics & Compliance Initiative. They have designed by businesses the so-called Blue Ribbon Commission Report, and Larry Thompson did a survey which was answered by more than 24,000 employees. This study showed that around 95% of the workforce are familiar with at least several of our instruments, such as the Code of Conduct, the goals from the Together for Integrity program, our group values, but also the possibilities of the whistleblower hotline.
This means that our communication on these topics had been successful and has already penetrated the company. Almost 75% of respondents to this survey said that they were familiar with the Code of Conduct and that it is helpful for them to make decisions in the day-to-day work. More than 3/4 of all respondents also said that both of their direct superiors and top management regularly talk to them about questions relating to compliance and integrity. 73% said that they are also experiencing that their direct superiors, having integrity, integrated in their day-to-day work so that they walk the talk. This is already a positive result. We are still working on bringing these numbers up, of course, and I hope that with that, I have also been able to share with you some interesting new facts about our work, and I am now looking forward to your questions.
Thank you, Hiltrud Werner.
You see my speech is paperless.
[George], please go ahead.
Thank you. Good morning. Right here. It's [George], ODDO BHF. Two questions. First of all, regarding the monitorship, could you confirm the information that was on the press just a few weeks ago, regarding an agreement that you have reportedly signed with the U.S. regulators for another three-year monitorship, past, once this three-year period is over. The second question is a much wider question on how the whole thing works, with regard to the group. How do you see co-determination playing into the whole topic? Do you see this as an instrument for change or limiting factor in your transformation process?
Okay, let me start with the EPA auditor that you referred to. First of all, let me say that from the company's perspective, this is a very positive result of ongoing negotiations over the last two years with the U.S. government. Of course, when you had such a huge scandal, all government institutions are obliged to assess whether you would be suspended or debarred from government contracts. Volkswagen was able to reach a settlement or an administrative agreement, as it's called, which will not suspend or debar the company in the U.S.
As part of that administrative agreement, we have of course, a number of reporting obligations, and on behalf of all other institutions in the U.S., these reporting obligations will be supervised by the EPA, and for that, we have the EPA auditor, helping us for the next three years also to assess the quality of the report and whether what we say is what we do. So he is more, I would say more like an external auditor evaluates the balance sheet, the EPA auditor evaluates our reports to the EPA on the matter of the administrative agreement. That has nothing to do with the monitorship, it cannot be compared by it, and it is, as I say, the result of a very positive outcome of a negotiation with the EPA. The other question was co-determination. Sorry for, have not forgotten it.
I see in this process of transformation, the co-determination model that we have in Germany more as a positive thing than as a negative thing because it helps us to show that the goals that we are setting are driven by the whole supervisory board. 50% in the supervisory board, 50% of the seats are representatives from the workforce. You have seen that this has also empowered the company to produce a so-called Zukunftspakt, which agreed to reduce 30,000 job cards along the democratic curve in the company. So it shows that this is not something that restricts us in our ability to steer the company, but in fact it helps us to find very good solutions that are then are also implemented and supported by the whole supervisory board members. From my point of view, this works at the moment very well at Volkswagen.
We had a question from Harald over here.
[inaudible]
Yes.
Hi. Harald Hendrikse from Morgan Stanley. Thank you very much for your presentation. It is clear that you have made a huge amount of progress internally on the policy. In fact, it felt a little bit like some of the training sessions that we have at the bank over the last years.
Here it is for free.
Very similar processes and stuff. Now, two questions regarding this. Firstly, does it go far enough? Lawyers have a tendency to meet the code, meet the policies. I am not entirely always sure that I interpret the policies the same way the lawyers do, but that is what they do. So, your new policies are meeting the sort of German standards that are expected of you. All of the processes you have put in place in the last three years have undoubtedly improved the overall decision-making processes at Volkswagen. Yet, we have a room full of investors here, and we have got a significant increase in the number of investors that want to talk to us about ESG, SRI type issues.
A very large proportion of those are still not investing in Volkswagen, partly because of the lack of independent representatives at the board levels, maybe some of the other ESG issues that are maybe a bit wider than what we have talked about this morning. How much awareness is there in the company that this is actually driving a real cost to you? People do not invest, your share price is lower than it would be. People do not invest in the bonds, the cost of capital is significantly higher. You borrow a huge amount of money from the bond market. So the annual cost to the company is hundreds of millions of EUR. My first question really is, are you going far enough? Because I am sure you are meeting what you need to meet. My question is, do you need to go further to really get those investors back on board?
Thank you very much for your question. Yes, of course, we have a certain shareholder model or ownership structure. That is not something that the board can change. It has also proven to be more a plus than a minus to the company in many instances in the past. We should not forget that. On the environmental, social, and governments front, you are talking about the G. I think we are, in terms of environmental and social responsibility and how we take that on board, we are doing far more than required by German law. We have really seen the diesel scandal as something, in German you would say [Non-English content]. In English, probably you would say a catalyst of some kind that drives this transformation in a much higher speed than in many other companies. So this was a wake-up call for the company.
It helps us to be focused, to be focused also on the E and the S in the ESG. Our long-term strategy, TOGETHER 2025 +, has incorporated a lot of targets that have nothing to do with just fulfilling the law. I just wanted to make that clear.
Okay. Hopefully, you understand where I'm coming from. As an employee in a large bank, that's a situation that comes up a lot. Second question, actually, you've really kind of already started to answer it. Investors and therefore analysts are very focused on the CO2 targets you have for 2021, 2025, and 2030. The German companies are some way away from those targets today. You have the strategy and I'm not taking an issue with your strategy. I think your strategy is pretty aggressive. At the same time, I don't think any of the companies have gotten ahead of those curves. Really what I want us to understand is in the context. Today, how far do you think you can actually move the culture to actually try and get ahead of the curve because the company knows it's the right thing to do?
It can be expensive at times, but it doesn't feel like anybody in the sector, and maybe you're going further than some others, but I'm not 100% sure you've gone as far as you could have done to do the right thing, specifically on emissions. Dieselgate obviously woke you up, but there's still a long way to go. Would you not agree?
Well, you quite rightly pointed out 2021. 2021 is really the most important year, and our ultimate target is that we do not want to pay fines in 2021. This is our ultimate target. We will do the utmost to change our products to help, also with all the other targets. We changed our production line up, and this is our ultimate goal. Yes. We also see what our competitors do. Probably 7/1 0 car makers will have to pay some fines in 2021. A lot will recover in 2022/ 2023. We see ourselves well-equipped with the MEB. We also believe that we have the great benefit of scaling. We can use our battery electric platform for models in four or five different brands.
We will also be able to lower the price on battery electric vehicles, to get to the number of sales figures that we need to meet the targets. That's our ultimate goal.
Victoria.
Hi there. Victoria Barron from Newton Investment Management, but I am actually asking questions on behalf of my colleagues at [EBTN] in the Netherlands. Perhaps for the next session, if you could have the ability to ask questions from those online, that would be really helpful. I am doing on this behalf. So two questions. How are the Volkswagen Group Essentials or attempts to make the Group less hierarchical and promote speak up culture integrated in the remuneration policy? How are the Volkswagen Group Essentials and attempts to make the Group less hierarchical and promote a speak up culture, which is then integrated into the remuneration policy of both management and employees? Then the second question is, how do you make sure that there is sufficient diversity in opinions, in relation to there being a more open culture?
Particularly if perhaps management hasn't really changed and the people who are managers haven't changed at all.
Let me start with the Volkswagen Group Essentials. I am not sure whether we can go back in this, so that everyone knows what we talk about. I got it. Thanks. One of the Volkswagen Group Essentials, the second one that you see here, says, "We are honest and speak up when something is wrong." The way we implement that is clearly that we say, the right thing to do means not the most powerful person in the room determines what the decision will be. But the discussion has to be open, independent from ranks of people towards the right, until the right thing really wins. We explain a lot about this. We have for each of these Volkswagen Group Essentials, we have also produced movies that we put in our intranet that we make available to our workforce.
We have regular something what we call integrity workshops or where we discuss about it. I think the most important thing was really to implement that measure because when we talk about the Volkswagen Group Essentials and we say this is values and beliefs and a lot you have learned already from your parents in the past, then of course people say, "Yes, but I have also learned in school, "You should not speak up and say something wrong about someone else."" To make everyone understand that this is in the best interest of the company, if we establish a culture where it is essential that bad news travel fast and that bad news reach as early as possible, someone that can do actually something about it, can solve the problem, can get the help, can free the resources.
That this will make sure that the problem that occurs in the company will not turn into a scandal. There will be problems in the future. That is for certain, but we have to treat them early in the right way with the right methods, then no problem will turn into a scandal. That is our philosophy. You see the fourth Volkswagen Group Essential, we live diversity. I think that addresses also some part of your question. Yes. When you have a homogeneous management team, decision-making is easier than when you have a diverse or inclusive management team. We have to allow for this additional time in reaching decisions. That is a process. It is difficult. Every board member has individual targets also on diversity. When we talk about diversity, we do not only talk about number of females.
We also talk about a diversity that reflects our customer groups. We talk about young and old. We talk about a high variety in the employment biographies of the people, so that they do not all come via the same stream with the same executive MBA from the same school and things like that. So for us, diversity and inclusion is something that at the beginning makes you maybe a little bit slower, but in the long run, it will help improve the quality of decision-making. That's our philosophy on that.
That's very helpful. Are any of these metrics being integrated into remuneration?
Yes.
Yes.
Clear yes. Even in mine.
Joost, over there.
Hello, this is Joost Slabbekoorn, APG Asset Management. You showed us some figures today about the underlying consequences of the whistleblower policy, which I thought was very helpful because it gives us some sense of what is below the headline number. I believe in the annual report, currently only an aggregate number is quoted. My question was the fact that you showed us some more detailed figures today, does that imply that you are committed to more detailed disclosure going forward around whistleblower policy?
I cannot say exactly which of the numbers will go into the next annual report, but we will continue with that increased level of transparency at all levels. Yes.
One more follow-up question, a little bit also tied to the previous question. You were talking about integrity being integrated in HR processes, and I was wondering whether that also has had consequences for management, in terms of turnover. Again, the question was raised that essentially on the very top, the same people were there, and you are talking about a big cultural change. Is that not an inherent conflict? I was hoping that you could comment on that.
Sometimes. Sorry that I smile when I hear that the same people are there. Just look at the picture from the board of management from 2014 and look at the picture from the board of management from 2019. I think no one was in the job already other than Mr. Renschler. Of course, in the truck and bus industry, we do have some stability. So don't underestimate the changes we have already undergone. You would see the same in the first and the second line below the board. Lots of changes of people and processes and systems we have already undergone. I just have to say this because I don't think it's fair to say these are all still the same people. Second part, yes.
If there is an open investigation against a manager or an investigation that has led to sanctioning, then this person is exempted from promotion. There is financial consequence. We also have included in the new contracts of all managers backwards clawback clause that we can also get the incentive from the last two years back. So there's a lot from the existing and the previous years. So there's a lot that makes clear that we will walk the talk, that we mean what we say, and there are already a number of examples where this has hit the floor.
Victoria. Oh, sorry. We will change now for [Catherine] over there in the middle row, please. First time? Yeah. You're next.
Hello. I have three questions, some of them building a little bit on what was said already. First one is, in terms of the ESG factors you may consider incorporating into remuneration, would some of those be aligned with the Task Force on Climate-related Financial Disclosures? That would be the first one. The second one is, as you look forward into broadening the lens in ESG compliance, are you also thinking of a potential position in terms of your participation in industry associations or other similar activities that would be aligned with your forward push? The final is a little bit different. Have there been any discussions lately with the presidium in terms of board-level independence and what might be some of the outlook there?
Oh.
Sorry about that one.
Yeah. Can you just repeat the first question again?
Yes. Any TCFD-aligned ESG remuneration factors to be integrated.
The first and the second question, Ralf Pfitzner will answer later on, after his session. He just volunteered. I think for the third question, it would not be easy for me to say. I think this is a supervisory board matter. But I see wherever we have an influence also to incorporate ESG factors, including, for example, the diversity and other factors. We are doing that. You can see this also, for example, at Audi AG, that we now also, for the first time in the history of this company, have a woman in the board, and we are continuing our efforts also to bring more diversity in all the different sub-brand boards where we have an influence as board members of the group.
Thank you very much.
Back to Victoria, please.
Hi there. Apologies if I missed this, but you said that you are getting feedback from 390,000 employees. There is the potential for that. That is a lot of people. Who is seeing this information? How is it being absorbed? I guess to use the point, can you give us more insight into that? Because that seems like a lot of numbers, which is very impressive, but how on earth do you handle all of that data and make sure it is distributed across the business too? The second question is, you mentioned that 98% of the executives and board members are taking part in a role model program. What does being a role model mean?
Yes. How do we incorporate the feedback of so many people into the program? It is a line-up of different events that we take at the different sites. It starts with a perception workshop. We call it perception workshop, where we also discuss with a broader group, where they see the current weaknesses in the culture and where the culture needs to improve. This is incorporated then into the tailor-made program of every legal entity where we do this. Then, of course, we have our so-called Stimmungsbarometer, which we do once a year, which is our employee survey, where we have integrated additional questions then also to get feedback.
For the first time also this year, we have built up a big group of coaches or mentors that go directly into those teams that had shown the worst results on cultural issues or when they say, "No, I don't trust my manager," or, "I don't think I can work with integrity every day in my area of responsibility." So that all these voices are not going unheard. The role model program, that means there is a list of different tools like in the toolbox, for example, something that's called Book Your Boss, and then the boss has for one day to do your work, or something that we call a culture breakfast, where in the boardroom, people can volunteer to come for a pizza lunch or a breakfast to the boss and then discuss very openly, free of boundaries of any hierarchy, different issues.
Or we have one program in the board, a role model program, where the boss has to record a little short video just with the smartphone camera on a regular basis and report to his employees about events that he has taken or decisions he has made and explain them so that we are using also new media to be more present. A lot of people that work in the shop floor don't have a lot of opportunities to see a board member. In fact, last summer, I was in Chattanooga. I worked at the production line and built Atlas and Teramont together with the people just to discuss with them some matters of integrity and legal affair.
As part of the role model program, I have my integrity bus that I used already in Braunschweig and Ingolstadt and Hanover, and often in Wolfsburg, where people can buy a ticket, and then we discuss with 25 to 40 people for one hour driving through the plant, different matters. And it's called [Non-English content]. So drive with us and talk with us. No one can go out, the bus is moving, so you can't leave it. So I have to answer every question that comes up. So we have a lot of different formats, and every manager has to see what fits my personality, where do I also come authentically in discourse and discussion with my people. I think we have only one more time. One more question. Two more minutes and then
[Heike], please.
Thank you. [Heike Köster] from Acadian Asset Management. Thank you for describing all these different activities. Sounds like really a firework of different approaches, and I appreciate you start trying to get everyone along. Nevertheless, it is hard for us to get tangibles out of this. What does it mean? Can you perhaps, if it is not numbers or figures, some qualitative prescribe and where is your biggest challenges and out of? Perhaps the Eos. What are results where you are still working on and maybe over the course of the last two years have improved or something like this?
Well, maybe, because the time is up, I cut it short. Where are the tangibles? I think a company can only change and work towards environmental, social, and governance issues if the workforce supports it, if they want it. 650,000 employees, this is a huge stakeholder for us as well. So what we do with all these programs, and that is this tangible asset. We move them from you have to do it to we want to do it. With every little program that we do, may it be changing the water treatment in the plants or changing that plastic bottles are more in the meeting rooms or whatever, everything is designed to make sure that everyone in the workforce supports what we do. Of course, there is a lot of fear in the workforce also.
Will my job disappear because of digitalization, or will it disappear because of the electrification? We cannot go through this transformation without the support of our workforce, that they are on board with this transformation. That is why we engage them as much as we do. The signals we are getting after now constantly putting a drop into this glass is that they say, "Yes, we understand where the company is going. We understand that short term there might be difficulties, but in the long run, this is the right thing to do." I think that is worth keeping going. Thank you very much. My time is up.
Great. Thank you for your questions. We have a little break until 2:00 P.M. Thank you.
Sorry, just to say, Ralf will be the next one speaking on the whole topic of sustainability, and I think Harald then will get to ask more about CO2 compliance, and we have a lot of information that will come. Great. Enjoy the break and have good conversations.
[Break]
Ready. So welcome back, everybody, and I'd like to introduce Ralf Pfitzner, who will take us through sustainability and what the progress has been so far in the organization. Thank you.
All right. Thank you, Helen. Good afternoon, ladies and gentlemen. Happy to be here. Similar to Hiltrud Werner, who mentioned, well, after at least the third time, it's going to be a tradition. It's also my second round with ESG investors this year. Last year at the event, we were talking about a number of ideas, concepts, and things Volkswagen has done in the past. Now things, I think, have changed since we're now ready to execute things, and I'd like to take you through our, let's say, sustainability journey this afternoon with a brief presentation. Probably skipping some slides because you all have them as a download on the website, and rather spend some time on really discussing topics and allowing you to ask questions and hopefully having the right answers for you.
Similar to the previous presentation, let's have that on screen for a few seconds and basically says, well, it might be nonsense what I'm going to talk about, so you might believe me or not, but don't hold us liable. However, I prefer still if you take that what I'm going to talk about as serious and really down to earth and credible. When talking about sustainability and ESG, so let's say our internal wording is rather sustainability to cover all ESG topics. On the other hand, ESG is like this language of the investment sphere. It's really broad topic, and sometimes you can say, well, sustainability is all or nothing because at the end of the day, it's about good company management.
One of our tasks, and that's also part of my role, is really to focus on those things that matter, focus on those things that are material for us, for our investors and for other stakeholders. Therefore, we are right now in the phase also of redoing our materiality assessment to create stronger focus and one of the focus areas will also be core of my presentation, which is decarbonization, because this is crystal clear in terms of sustainability and strategy. Decarbonization is climate change, and we do have the Fridays for Future manifestations still going on outside. This is the most important topic for us. The motivation why it's such an important topic is this chart to remind us. Transport sector accounting for 14% of global carbon emissions. If you look at the EU figures, the only sector which didn't manage to decrease CO2 emissions since 1990.
One of the reasons, the big success of the sector, because Eastern Europe catching up after the peaceful revolution and people owning more cars than before, driving longer mileages. Same as in the logistics sector with globalization, heavy increase of global transport. Overall, basically the output increased in terms of mileages and thus also CO2 emissions still increased because all efficiency gains were eaten up by the sector's growth. We do have a challenge and having the triple bottom line in mind, and we could also talk about social impact of transforming the workforce to e-mobility, impact of digitalization, but probably will be part of the Q&A, and I'd like to focus on what's happening on the environmental side right now.
Because, and this is one of the probably changes also compared to previous presentations, we do have a significant role being one of the big players in the mobility and transport sector. If you make the math, our passenger car business over its life cycle with all the 10.6 million cars sold a year, the impact is roughly 1% of global carbon emissions. We do have a responsibility, and we also acknowledge that we do have this responsibility and now we're going to act on this. In line with that, we see increasing stakeholder expectations and last but not least, we truly believe decarbonization climate change action delivers business value. Internally, in terms of energy efficiency, but also in order to be prepared for future requirements coming from legislators, regulatory bodies, as well as in terms of future market demand. Moving on.
The goal was set out for the first time, I think, last year in December that Volkswagen intends to become a carbon neutral company by 2050. Which is way into the future, but this is what is required in order to be Paris Agreement compliant. The ramp up of technologies in the different markets will be a bit differentiated by region. Europe is a frontrunner, China very much driven from governmental policies. As of today, we would say, well, large parts of the U.S. might be rather laggards. But everywhere it's going to change. If you want to be a carbon neutral company by 2050, it basically means we have to stop selling ICEs around 2040 or only selling ICEs that then are fueled by carbon neutral e-fuels. That's not too far away if you have in mind the cycles of developing new platforms and developing new cars.
The other thing is 2050 is some way to go, and I'm most likely going to be retired by then, hopefully still alive, and all our managing board members are going to be retired at that point in time too. What we have done, earlier this year, we really made the math. If we convert that Paris Agreement goal into not only something for 2050 but for 2025, what does it mean? This comes down really to the numbers and the actions we have to pursue now. What you see on this slide is the average life cycle carbon emissions of an average Volkswagen passenger car across all brands. It's a mix of Porsche, Audi, SEAT, Volkswagen, and so forth. Life cycle emissions over 200,000 kilometers come up to roughly 44 tons. 2/3 of this is the use phase.
Another 13% comes from the upstream chain of generating diesel and gasoline, refinery and extraction, and so forth. The same amount is all materials which are contained in the car. Metals such as steel, aluminum, plastic, rubber, and so forth. Manufacturing what happens in Wolfsburg and in many other places in the world, now 123 manufacturing plants, is only 2% of the life cycle. That is what happens in-house. Everything else does not happen in-house. But we decided to take that life cycle perspective because we have an influence on this by having more or less efficient cars. We also have all our suppliers, which we want to convince to become more carbon efficient than before.
If you convert that Paris Agreement into a carbon budget, and the methodology is out there, which is summarized by the Science Based Targets initiative, then it means by 2025 already, we have to reduce those 2015 baseline emissions over the life cycle by 30% in total. That is really ambitious. 30% over life cycles, so roughly, what is it? 12 tons per car is a lot. To a certain extent, this is driven by portfolio changes, selling more battery electric vehicles, selling more hybrids, selling less ICEs because over the life cycle, the battery electric vehicle is less carbon intensive than an ICE vehicle. But that is, let us say, unfortunately, not enough in order to arrive at those 30%. Roughly half of the 30% goal will be achieved by portfolio changes.
What we still have to do, go through the life cycle, every single stage, and look what can be done there in order to further decrease carbon emissions. In order to do that, we also defined a tier hierarchy, how are we going to tackle this? This is much about business cases, and this is also about credibility to customers, to NGO stakeholders, to investors, and also to employees. We decided first really to reduce carbon emissions by, for example, increasing energy efficiency wherever we can. So energy efficiency in manufacturing still has even economically very interesting potentials. The second one is convert whenever we use energy. The energy generation means towards low carbon, more renewable sources. Then we will still have some remaining emissions.
To a certain extent, we said, "Let us invest into carbon sequestration, carbon things, reforestation, forest protection, and so forth, and compensate non-avoidable emissions." That is the hierarchy. Then if we go into the value chain again, supply chain, in-house manufacturing, fuel supply, and so forth, you see what can be done and what we are right now exploring in more detail, which measure brings which level of carbon reduction over the life cycle. It is already quite clear working closely with the suppliers is helpful. When we did that announcement of the program in March, we already got a number of requests and invitations from our suppliers that say, "Okay, Volkswagen is on a journey. How can we support?" I personally had a couple of invitations to suppliers to speak to them even at management conferences and say, "Well, this is what we are going to pursue.
How can you help us?" There are some even basic technology changes in the midterm to be expected. Another thing which ends up at multiple places is the issue of renewable energies. Because it's important for our own manufacturing, it's important for our suppliers, and especially when we're talking battery electric vehicles, it's very important for the use case. Probably renewable energies overall is the single biggest and also cheapest lever to decarbonize the transport value chain. That's what we are tackling right now. Going back for a moment to technology, Silke Bagschik later on will also explain a bit how these ideas materialize in a specific car and a new model, the ID.3, which just was launched a week ago during the IAA. We often get the question, well, what about hydrogen? What about fuel cells? What about alternative e-fuels, biofuels, XYZ?
Why is Volkswagen so much focusing on battery electric vehicles? This chart basically explains the reason why. In terms of primary energy efficiency along the entire value chain, the conversion chain, battery electric vehicles as of today and in the foreseeable future are the most energy efficient way of driving XYZ kilometers or miles. That's why we're focusing on this. Because all other technologies, unless you have unlimited renewable energy sources which come at a very cheap cost, the most efficient thing still is electric vehicles. You don't need to produce hydrogen with wind power in an electrolyzer, then store it in a car, and then reconvert the hydrogen again, to electricity and then power a car. Along that way, you see it here on the chart. [inaudible]. Even the fuel cell has higher emissions than the battery electric vehicles.
That's basically the reason why we have so much focus on battery electric vehicles. One example, Silke will show you the real nice pictures and tell the story around this, the ID.3, which was just launched in Frankfurt at the auto fair at IAA. This is the first showcase where we really worked on many things. On the one hand, in terms of really going towards a carbon neutral production in-house, having the Zwickau plant fueled by green electricity. Also then compensating non-avoidable emissions, plus where we do have on the customer side, after the handover, then a number of offerings that the customer at the end of the day might be able to really drive emission free if he or she buys a renewable energy contract.
A few words about diesel versus gasoline versus biogas, CNG, and battery electric vehicles, because there is so many myth and truth around on e-mobility and studies have been published and criticized heavily. Some have shown, well, the diesel is still much better than an electric vehicle. This is the result of a life cycle assessment study, which is, as far as I know, the only one which is really peer-reviewed and externally certified, that compares different propulsion technologies. If you take the EU electricity mix already today, in 24 / 28, or probably in the future, 27 EU member states, the electric vehicle is the most CO2 efficient one. That's what we're talking about when talking a kind of Golf class car.
Still, it's not a given that the e-mobility uptake is happening overnight, and once we have all the technologies in the market, customers say, "Wow, that's cool. I'm going to buy it," and the infrastructure comes overnight and all these things. From our perspective, it's also very important to prepare the customers as well as the markets and really closely engage and collaborate with a number of stakeholders on all these things. We are going to, on the one hand, deliver technologies. We transform our portfolio. We do develop the cars. But it's important that we work also on this customer readiness, public awareness, train our dealers, bring out facts, and educate people. What is the change and, well, what about the supply chains and all these things. This requires also new forms of collaborations with stakeholders.
To summarize on the decarbonization side, from our perspective, it's not only the car itself, it's really about an ecosystem which consists of energy generation. We're right now converting our power plant in Wolfsburg from coal, which is outdated, so to say, to a highly efficient combined cycle gas turbines, which is going to save the environment roughly 1.5 million tons of CO2 a year. We are working on all these technologies, not only on the electric side, to become more energy efficient, and thus more CO2 efficient. We are working on the ecosystem in terms of charging solutions in Germany, Europe, by IONITY, a joint venture with other OEMs as well as Volkswagen Elli for private users in the U.S., Electrify America. Last but not least, in the future, we know that people not always want to own a car themselves.
It's also about new mobility solutions and not sure how long you have spent time here in Berlin, but if you look around, you see a lot of Volkswagen e-Golfs from our subsidiary. WeShare as a new car-sharing, full electric solution here. Apart from decarbonization, I'd like to highlight two more topics here for you and will probably make you want to ask more questions than on the other ones as well. One is supply chain. Because what we see, supply chains always have been complex. We have roughly 40,000 suppliers. We already have got for years a couple of questions on, well, what about tantalum, conflict minerals. What about platinum in catalysts. What about constituents of paint and all these things. But with e-mobility, this discussion is ever increasing because the product itself is quite sustainable.
Also, carbon emissions are very low and people then ask, well, what about the raw materials. We have the discussion around cobalt, lithium, and others. What our supply chain colleagues are doing in a big team is really focusing on basically three things in the supply chain. First thing is how can they support decarbonization with our suppliers. First thing I've already been talking about. For example, the ID.3, the battery supplier produces the cells with green electricity. So we contracted that. Second thing is, for those materials, which are, let's say, high risk in terms of reputational issues, in terms of potential interruptions of the supply chain, critical supply, and so forth, we mapped them. It's roughly a dozen materials. Here we are really going much deeper in order to create transparency along all the value chain.
So going way beyond our tier one suppliers, which we purchase those things from. Last but not least, a very important prerequisite is one thing that all suppliers have to sign our Code of Conduct for suppliers, which consists of ESG criteria. Second thing is that we, after a pilot at Audi last year, we now full-fledged introduced the so-called supplier S-Rating or sustainability rating, where we really evaluate suppliers' performance in terms of prohibiting child labor, having environmental management systems in place, and being compliant also in terms of anti-corruption and so forth. The S-Rating is right now brand new, rolled out in order to also support performance increase of our suppliers in this way. It goes along basically management cycle, creating transparency. I mentioned this already. We are focusing or covering compliance as well as social and environmental criteria.
In the core, there is a so-called management cycle. This often does not go alone because we are large, but we are not owning complete supply chains, and therefore it is important to join forces. We do that, for example, in the World Economic Forum's Global Battery Alliance, creating transparency along the battery value chain, where also mining companies are part of. There is the Responsible Minerals Initiative, also dealing with conflict minerals and things like that to create transparency. Drive Sustainability by CSR Europe is increasing standards along the value chain, and there is also an Aluminium Stewardship Initiative, which we are part of, which helps us to close loops and increase performance. So that is about the supply chain. My last topic is only a few words. For us, when Hiltrud Werner talked about cultural change and changes within the company.
Following the diesel crisis, we also believe it is ever more important to have a proper stakeholder engagement and really stakeholder engagement process in place, stakeholder events, and that is what we have reintroduced, so to say, with one big event, with our sustainability council earlier this year in February and Volkswagen-owned stakeholder dialogue in June. It was very well perceived by those roughly 50 different stakeholders we had that Volkswagen now again is willing to listen to their question and also listening to the nasty questions and then trying to have answers and openly discuss and also have public debate on areas where we agree to disagree and so forth.
The other thing is what we really like in this context, that there is also strong support from many stakeholders because they noticed with our electrification strategy, we are really moving now ahead and go at the forefront of electrification and decarbonization, and also those NGOs somehow need alliances and allies to drive the change that they are pursuing, and so at least temporarily, alliances from our perspective are feasible. Last but not least, we do have some external advice which helps us very much. Our sustainability council, number of really renowned people, Professor Edenhofer, one of the famous climate change scientists here in Berlin. Connie Hedegaard, former EU Climate Commissioner. We have the President of the International Federation of the Red Cross also I see here in the middle of this picture, supporting us also in the social transformation and having the global perspective in mind.
Georg Kell, Founder and Director of UN Global Compact and many others. These are really, meanwhile, lively discussions. Every meeting they do have twice a year is a three hours workshop with the entire managing board. It is really an intensive engagement here on this level as well. Okay. In order not to lose too much time, I would like to conclude with a few words. As you have seen, decarbonization right now is the most important sustainability priority for Volkswagen. We are really having an ambitious plan. We are executing this also with massive investments on the portfolio side. Supply chain sustainability and transparency is key for us to have resilient supply chains, but also to ensure credibility and customer acceptance of e-mobility. Stakeholder engagement is really important to have that sound feedback process with a number of societal groups. Thank you and up for questions.
Christian, over there.
Thank you. Christian Ludwig from Bankhaus Lampe. You had a couple of slides that I would like to ask some questions. First of all, on your target to decarbonize the footprint of your car by 30%, could you give us an idea where you are currently? Are you on the way to meet that 2025 goal? The second question would be on your comparisons, where you put up the different cars with the different fuel types. What is your baseline assumption for the power going into a BEV? Is that 100% green, or is that taking the current European mix going into it? That would be interesting. Thank you.
Okay. First one on the 2025 goals. We had that board agreement on the program in February. We launched the program in March. Right now, our brands are working on their individual roadmaps with which measures they are going to achieve the 2025 targets. To be honest, it is a bit too early to say, okay, we are definitely going to make that voluntary one, because what we have laid out is a very ambitious target way beyond legal obligations. It is right now creating a huge momentum in the organization, and measures will be figured out, evaluated also regarding their avoidance cost. We have a very high chance to achieve it, because within green electricity and green offerings also for the use phase to the customers, there is huge potential.
At the end of the day, following this life cycle approach, it will depend a bit on the take rates by customers. We have to work on how we convince our customers to power their vehicles with green electricity. Which offerings are we going to do on our own, where do we partner with others and so forth. That's one of the big levers. It's a bit too early to say, yes, we are easily going to make it, because it's also bigger investments behind in the measures. Which leads to the second question in that-
Before you continue, just real quickly then. Does that mean, because your base was 2015-
Where do you stand 2019? Are you still at the same level? Has it become worse?
I think it's more or less the same level, if I have them correctly in mind. Because on the one hand, there's increasing efficiency, certainly. On the other hand, there's some changes with the diesel gasoline mix. There's also trends towards bigger vehicles, SUVs. We have efficiency gains, and then we have growth on the other side. In 2017 or 2018, we did not see many battery electric vehicles, which will really make the difference. That's coming next year. Second one, the slide I've shown, whether, let's say, e-Golf is beneficial. This was the EU electricity mix, so it's roughly 600 g CO2 per kilometer. If you would transform it into a different equation, the break even for battery electric vehicles over life cycle would be between, I would say, 70,000 and 100,000 km or 60,000 and 100,000 km.
If you drive it with green electricity, it is not directly from the start, but it immediately pays off.
Thank you.
Valentin, over here.
Yes. Hello. Valentin Pernet from ODDO BHF. I have three questions. I am going to rebound on the previous one. Greenpeace published a report last week, and they estimated your life cycle emissions at around 53.8 tons. Do you think that their methodology is wrong if you think that your life cycle emissions are around the same level as 2015? The second question is about carbon neutrality. I have the feeling that the biggest polluters in Europe want to be carbon neutral, but how do you define really the carbon neutrality? My last question is more about life cycle emissions methodology, especially on green batteries. With life cycle emissions, you can say what you want to say, but do not you see that you display the problem of CO2?
If we take the example of lithium mining in Chile, there is a lack of water, so we build some desalination plants that use a lot of energy. We display the kind of CO2 problems elsewhere. What is your vision on this?
All right. With the 55 tons by Greenpeace, I do not believe this is true for the passenger cars because that 44 tons is more or less as of today on the same level. I do not have the details of the background of the Greenpeace numbers, but this one is really based on sound LCA methodologies. I am pretty sure our numbers are more accurate and the numbers are lower. Not sure what Greenpeace has calculated because I have not talked about Traton trucks business. If Greenpeace somehow put into the average trucks, if you would mix passenger cars and trucks, the number would look definitely different because trucks have a completely different footprint over life cycle. On neutrality, yes, it is a very good question. What does carbon neutral at the end of the day mean? That is why I have that slide on the hierarchy.
First reduce, then convert, and then compensate the rest. The ID.3, which was published and launched last week, we say, well, this comes to the customer as a net carbon neutral car because we know there are still emissions coming from the value chain. Well, lithium mining, whatever you name them, smelting steel and so forth. There are emissions and we are going to compensate them, and this means neutrality for us. It is not, let us say, overall zero, not yet. Ideally in a couple of years from now, we would really have all these upstream emissions reduced, but it is not feasible for now. Last one with the life cycle. Did I misunderstand your question? While this life cycle approach really lists all the emissions which occur during mining, during manufacturing of the materials, what happens in-house.
It creates transparency, and it also acknowledges, based on the product, the responsibility. If we would say, and a couple of other competitors, and peers also on the. Let me check if we can move backwards to this. Couple of companies say, "Well, we are becoming carbon neutral." Yeah. Here we go. Some of our competitor friends say, "Well, we are going to become carbon neutral by pointing to those 2% of the life cycle, because we buy green electricity for a few of our plants and compensate the remaining emissions." That is a very easy one. I do not want to name competitors' names. It is also important to do that, but if you say, "Well, this is our sole responsibility, and yeah, we are carbon neutral." That is, I think, from the perspective of the product and from the end customer and from the systems perspective, not the right approach. Good.
We still have the TCFD question. I have not forgotten that one. I might briefly answer on that and the incentives. Because what we have done right now, we did a kind of TCFD readiness check in our reporting so we know what is expected. We did not publish in the last year sustainability report, also the TCFD, let us say, methodology or answer to that one. We intend to do that either with the 2019 report, which comes out early next year or latest in the 2021. Linking it to incentives is an important question, and when I joined the company, this was also one of the first questions asked, how is ESG and sustainability linked to incentives?
To be honest, as of now, it is not linked, and the remuneration system on board level, which now trickles down to senior management, was just converted into also certain shares-based long-term incentives. So at least not only rewarding past performance, but also going into the future. It is a discussion which we are right now having internally how to change that we also bring into management incentives more of the ESG factors inside. That is on the remuneration side. The other thing is that the overall employee evaluation system is undergoing a change more towards, let us say, softer issues, how people behave, cultural topics, team building, to really reflect these things Hiltrud Werner was talking about. That it is not only something nice to have, but your evaluation is also based on these behavioral topics. Your second question was policies in the industry associations.
With a couple of investors, we recently also had calls on these topics in terms of lobbying and, do we support any kind of lobbying or industry association which, I do not know, neglects that climate change exists and so forth? What we do is we do not support any climate change deniers. That is the first thing. Second thing is that we are having very open conversations within industry associations, and as you have observed, the debate in Germany. There was a number of controversies within VDA around how to support e-mobility, and is really e-mobility the way forward. There was also our CEO had some very clear words in terms of positioning in the company and agreeing not to disagree with some industry associations positions. A lot of these things might not be visible to you because they happen behind the scenes.
Overall, we believe industry associations are important, are relevant. If you are talking, for example, joining forces on trade policy with the EU, U.S., China trade conflicts, taxation of cars in the U.S., and all these things. It is really important for us to have these associations. Simply leaving them is not an option, but driving the change within the industry association is an important one. One example where we have taken really a proactive role with only a few other car makers is the recent deal in the U.S. with the CARB on the Californian emission reduction goals, which support California's position to create certainty also within other U.S. states. Let us say, not supporting the D.C. administration laggard position, so to say. There was some really proactive acting in association-related topics.
Good. Harald.
Can I go slightly back to the question we had earlier, and actually with your first slide, I think one of your first slides on the transport. Transport CO2 has gone up. Obviously, ownership has gone up, mileage gone up. That is not the only thing. The fact is, people bought big SUVs, people bought more expensive engines, which has obviously had a big impact on the CO2, but has also been very profitable.
The sort of slightly obvious question is, and it slightly was my question before. I was not asking whether you would meet the 2021. I understand the business case why you need to. But when you say to me business value for actually reducing CO2, is that enough to actually change your products? When you have a decision to make to significantly reduce your CO2 and actually be ahead of the curve, as some of the things you are talking about today, would you do that at the expense of margin?
Well, I am not the, let us say, CFO of this company nor the Senior Product Planner. What is important to notice in this context, and first thing, all senior management, the board is convinced that e-mobility is the right way forward. That is why we are putting heavy investments, those EUR 30 billion until 2023, on e-mobility, all the new models and so forth. In the beginning, they might be a bit less profitable than big margin SUVs. That is correct. They are still profitable, and basically, these are the prerequisites to make profitable business in the future. We also will see with Euro 7 coming up that ICE vehicles are becoming more expensive, and so demand will change. We do have in the bigger picture, if you look at the, let us say, non-Chinese markets, e-mobility offers a relatively easy access to markets for new entrants.
There is a couple of Chinese competitors waiting to start in Europe. The question is, where do you compete in the future? That again, brings, at least from my perception, it to the point that there's no way out of heavily investing in e-mobility, despite the fact that at the beginning it might be a bit less profitable. Having this transformation curve, yes, let's say the more expensive a car is, typically the higher the profit margin is, because the willingness to pay in some segments is higher and profitability as well. But on the other hand, with the MEB, with the scalability, we do expect also having significant margins in the future.
Nicolai over here. Middle row. Yep.
Hi. Nicolai Kempf from Deutsche Bank. Thanks for touching on the supply chain. My question is on raw materials, and maybe start with the one of cobalt, which more than half is located in Congo. You mentioned that you have agreements of supplier to meet certain criteria. But you know from how many times they have a subcontractor and a subcontractor who's maybe not agreed to the standards. So how do you make sure in practice that your standards are met? Are you going to fly down there and have a look or someone from your IR team? I don't know.
This is one among many measures. In fact, people have done. So one thing on the transparency in the cobalt supply chain, I think it's meanwhile a bit more than a year ago that our supply chain team invited not only our tier one suppliers, battery cell manufacturers, but mining companies, intermediates, smelters, and so forth. We're doing an extensive mapping, which I can't show you for confidentiality reasons, but really digging deeper, well, who's supplying what to whom. So we create transparency. Second thing is we do have our standards, well, in the first instance for the tier one suppliers, but also motivate them to drive them forward. Third thing is joining alliances with the Global Battery Alliance and others. Fourth thing, in fact, is that also one of my colleagues from the supply chain last year was in the DRC.
Because the challenging topic there is, while there is large-scale mining and then there is so-called artisanal mining, where approximately, according to estimates, 100,000 people work there. And there are the standards because sometimes it is even illegal, sometimes it is child labor and not meeting social standards associated with that. That is really a challenge. All the big mining companies and also the smelters, they basically exclude those forces from their supply chain. Still, it exists because, if people are not educated and if they do not have work, they start digging holes and getting the ore out of the ground and they will go finding someone to sell it. So it exists. We exclude it legally. The question we are asking ourselves, what is the best way to approach this? And initially, we even thought, well, let us do some pilot projects with NGOs, with GIZ, and others on the ground.
But status of last year was that there was no site where this artisan mining is happening in a legally way. While we definitely must not break any law to change something to the better, which still is illegal. That was the situation of last year. We are constantly looking at that, and that is why the colleagues have been down to D.R.C. and exploring also with NGOs and with the alliances what can be done best in order to secure a clean supply chain. Repeating again, transparency is key. Similar within, let us say, compliance integrity, you have to have appropriate management systems in place to detect things which go wrong. But it is really challenging to have certainty over many years that everything is completely clean. That is the challenge which we do have.
Which by the way, and I do not want to say things elsewhere are worse, but would you have asked the question on ICE and what is the mineral oil and gas industry? What are working conditions? What are environmental conditions if you do oil exploration in Siberia? What about gas flaring in the Middle East? What about exploration of oil and gas in the Niger Delta? The interesting thing is that with e-mobility, the focus changes. The challenges, I would say, have been out there with all the other supply chain elements in the past as well, but not too closely looked at. Our way is really to drive things forward.
I think we have got one more question. [Pierre], over there.
Maybe two questions if I have time. First one on the hydrogen. I would like to know why Volkswagen is so ambitious in the expansion of battery electric vehicle going forward. Knowing the amount of investment in battery electric vehicle and energy or system or process, do you believe that hydrogen would offer more, cleaner energy? Not in the next decade, I mean 2030, like most of experts are saying now, but could be back to 2020, to this decade with such high investment Volkswagen is investing now in battery electric vehicles. This is my first question. Second question is about the partnership with Ford.
I would like to know if this partnership with Ford will deliver the expansion of battery electric vehicle in the U.S. market and will increase the sales of Volkswagen in the U.S., knowing that the sales are mainly now between Europe and splitted between Europe and China. Thank you.
To try to do it in brief. Hydrogen is a technology we are looking at, but we have a clear focus on electrification, battery electric vehicles. Hydrogen is interesting in mid-term and also for heavier vehicles and for commercial vehicles. We don't believe that hydrogen is cleaner because in a sustainable energy system, hydrogen has to be produced from green electricity. Then you're again to the question which I had here on the slide, what about the primary energy? Hydrogen currently is made from natural gas, and this is not sustainable overall. On the Ford one, I know that part of the collaboration is also to license the MEB platform to Ford. To be honest, I'm not aware whether those vehicles are basically going to be sold, if it's U.S. or Europe. Not sure Helen is or Alex, you have.
Mainly for Europe.
Yeah. Good.
One more very, very, very quick question.
I'll be around until, let's say, 3:05 P.M. , so probably in the break you can have two or more questions.
Okay. I think I would just go back to the point of cobalt and disclosing your auditing and to what level. Renault and Daimler have actually been able to go all the way down to the cobalt smelters and have named them. I think it's really important for that transparency because it's very. The cobalt supply chain is incredibly complicated, and so it's easy for us to sit here and go, "Oh, you've got to disclose everything." In actual fact, it is much harder and it's a very dispersed supply chain. That's where corruption kicks in, and that's where bribery kicks in, and that's where child labor kicks in. I think if you follow suit to your European peers, that'd be really great. I've forgotten my other points. I'll hand over to someone else.
Thanks for the recommendations.
That is it now for this Q&A session. We have a half-hour break, so I am sure there is a bit of time for small talk during this time. See you in about half an hour.
Thank you.
[Break]
Okay. Hello. We have got everybody back in the room, I think, for our last session. I would like to welcome Silke Bagschik, who is our Head of Sales and Marketing for the ID. family. This is the exciting portion where we get to talk about the product that will deliver our ESG strategy. Okay. Thank you, Silke.
Thank you very much. All right, you can hear me okay? You had some coffee. For me, it's the first time. Thanks for having me here. I've been with the project since the beginning, so it's very dear to me. I remember very clearly, the diesel crisis and what we were all thinking. There are many people who just honestly work and love the brand, as you might imagine. Then we were all being struck and hit. Then over Christmas, I was thinking, "Oh, my God, what am I going to do? We need to do something. This can't be true." Then a little after Christmas, I went to Christian Senger's office, who was recently then hired just one week in office for e-mobility. I'm like, "I'm your sales and marketing responsible. Let's just do it. I know this will work.
This is the right time, and I think it's great what we're going to do." Since 2016, I'm with the team. Since the very beginning, discussed how are we going to do this MEB? How are we going to derive the volume for this? You can't look into the past to predict the future. No way. Are we going to go purely electric? Do we do multi-traction? Then we went, as you know, for purely electric, not multi-traction, worldwide, big scale, and the full monty. Now we're here. We just had the world premiere just about two weeks ago at the IAA of the car. I will go a little more into that to show you what we've done, what the first product looks like, the founder of the ID class, and how we're going to continue with that. So stay tuned.
I hope you had some coffee, and enjoy some product news. Oh, I was supposed to stay here a while. I don't think this text has changed. I suppose you read it, and I will not read it for you. Everybody nodding? Okay, so I can All right. There we go. Then Ralf has you see where There's Ralf, I know him. Yeah. We're very good colleagues. Ralf has already explained to you how we're going to orchestrate the change. You can imagine that this is also a lot of change, not just for everybody working at Volkswagen, but also for all of our dealers who we often consider to be part of the brand, of course. They're in our brand and our system, very dear to us, independent entrepreneurs out there.
They know now that there will be a time when we will not launch new combustion engine cars. We're actually doing a backwards planning. We're doing backwards planning and development and everything. This means a massive reshifting of resources, retraining, reorientation, and also a big opportunity to speed up change because it's easier also to change mentally if you change the way you work. So all of that is fueling each other a little bit. I think Hiltrud Werner has it easier almost because we're going, doing such a massive change also content-wise. Yeah. We're becoming a CO2 neutral company. We're on the way to emission-free mobility. You see and you know probably, this should be no news for you. We've been very upfront about this for a long time because we want to give some orientation to all of our partners out there.
This is why we've been talking about this so much and so openly, so early, how much we're going to invest, and this investment is happening. We're building cars in Zwickau now already, pre-serious cars where we're turning around the factories. All of this is actually happening. It's not just a plan, we're doing it. Don't have to go through the number. They are quite gigantic. But we do want to stay grounded because a lot of responsibility comes with being the biggest, and that's also a nice thing to know that you have responsibility and that you're actually able to show that it can be done and become maybe a little bit of a role model again. That's something we all would like to do, but nicely with our feet on the ground.
Investing that, having the force of China behind us, the scale of China, having the scale of the complete group, we were able to pull this off. You will see later on, you know already that we're also willing to share this with others who might not have the strength for this investment to make an even bigger impact to industry. Emission-free mobility of all, that's the idea that we had when we started designing the ID family, spending hours and hours at design, testing with customers. The first cars looked a bit like UFOs. They were too far away, but they looked cool. But you need to be so that it looks like future, but you like it today, and people want to have it now. That's the aim of the design. In the end, we found characters there and faces and personalities.
That's what I like about the MEB family. You can see that they all follow sort of the same DNA. I come to that later. We also invest massively in communication, sort of as waking everybody up and saying, "Listen." The first time we do massive brand communication with show cars, by the way. It looks like the cars are ready. They're not, but it shows where we're heading to. We're not just doing one model, we're doing a complete family. We said we're going to do it so that there are no excuses not to drive electric anymore. We do it, that we give it in all the body styles that people want today. There are body styles like in hatch, there are practical SUVs. I have two kids.
It's practical to have an SUV where to put your kids, then you don't have to bend down. It's just practical. Women and mothers like SUVs, period. We're going to do SUVs, but carbon neutral. We're going to do coupés. We're going to do the bus, which many people look forward to also, a family car. Just we don't go into niche products. We go and we dare to put a pure electric product into all of our most important product lines. Where people buy the most cars today, this is where we're going to offer emission-free mobility. That's the plan. This is why we had. I brought this campaign, maybe you've seen this on TV even, invested massively in communication. If not, then let it sink in again, because that's basically showing how it's going to look like.
[Presentation]
It worked. The pre-bookers are, basically, we have the EUR 30,000. We have much more than that now. We encourage people to keep on booking because there might be change in the waiting line. Also, if they keep on booking, they get after the first edition car. If you want to be fast, then keep on pre-booking, we say, and we are quite happy that people keep on doing this. Signed the first contracts as well. There is no camouflage on the car anymore. To show you a little bit what this is about. We want to be scalable. We believe in scalable batteries. There will be segments of people who discover for me the smaller battery with 330 km is enough, and I am totally fine with that. The more people drive electric, the more they will realize that this is probably enough. Because you do change your lifestyle.
Like with your smartphone, you start your day charged up, and it become the habit. If you do not mind that habit, if you can charge at home, for many, many people, the small one will be enough. That is why we offer also a small one. Then there is the medium size, that is basically the one-fits-all, where we expect the most volume. That is also where we started with our first edition. We did not take the most expensive top model. We said we go there where most people wanted the car. Medium-sized is 430 km range, so way enough for whatever you want to do, including weekend trips for your family. Then we just wanted to show that we can do a little more than everybody else, and that is the 550 km version.
Of course, that is more expensive, but that is for all the ones that say, "I just want to have that. I just want to have that luxury of not having to charge for weeks." Because then basically, there is no excuse anymore to not be electric, even if you cannot charge at home. That is why we have these scalable batteries. I think we made them quite nice-looking. I hope you agree. All of them follow the same design DNA. We wanted to show that electric cars can be super attractive, and they stand out a little, and our customers want that, too. It is also good to get innovators in. I will show you a little more what our first customers are, and we like that a lot. Then we created the car to perfectly fit our Volkswagen We ecosystem . They communicate with each other.
It's also a new way of doing business. We're doing systems thinking. With electric cars, you have to think system, you have to think charging system. You have to think even bigger energy system, which we're doing in close work with many governmental institutions and the energy providers. Founded a company, Elli, as you know, so we're getting a lot into that business as well. In the end, it's the aim to become a mobility provider. We will move away much more from hardware, much more into we give mobility. The revenues from software and offering services that are not just software, but services around mobility, will be more and more over time. The cars are designed to do just that. We have a complete new electric architecture.
We have hardware, then we have basically the operating system on there, and then there's more software stacks on top that can be changed over time or updated over time, more easy than we were used to. It's a big paradigm shift. We're also going away from too much complexity out in the field. You can configure an ID in 10 clicks, and you're done. You don't need to have an hour or an hour to do, like we used to in some German cars. It's not just more fun, but it enables us to handle the complexity out in the field when you get software updates during the life cycle of a car. That's the idea behind it. Also, we need to, and we're starting to think different about software and embrace agile methods.
Agile methods means, it's not just a waterfall thing where everything is foreseeable. People come back together in huge scrum meetings, like huge, hundreds of people, and they say, "We have targets. We have goals. We want to achieve something. There's a vision, what we want to achieve for the customer." Then they work out the customer experience and how you can support that with software and services. Everybody cross-department comes together in these scrums. Then they have a result, and from there they go to the next. It's not totally predictable what comes out in four years, which makes it unusual for people who are not used to working that way. Also it brings out upsides, which you don't ever get if you work in a waterfall system. That's also a huge shift in culture that we're learning there.
Becoming a software company in itself makes a huge shift in culture there. There's some more specs for the car in case you haven't pre-ordered one yet personally. The founder of the ID class, the first one. The nice thing is, you can only achieve such things if you really do car development from scratch. We started in 2016 with an absolute blank sheet of paper, and then we were able to manage and say, this car has a footprint of a Golf. In the interior, it's like a mid-size car. We have lots of room. If you drive it, that's when you notice it.
I ask all the test engineers, "What's the coolest thing about the car when you drive that now every day?" They're like, "It's so agile because we have a turning circle that's below Polo, it's almost an Up." For cities, it is just fun to drive. It has huge wheels, size wheels, but turning circle like an Up. Only that you get if you start new with a platform. At the end of an S-curve, there's no such jump you can ever achieve. We take all these benefits. I think it's a great package. Get the punch of the GTI at a traffic light. That's fun every time you go. We designed the car so that there's no rational reason left anymore to not buy it. That's what we did.
Everybody who wants to discuss it with me, please, you're welcome. Price below EUR 30,000. Then you can deduct governmental incentives in many countries from there. We're there where we promised to be. It's where we sell the most cars and the most Golfs at this price line. The range is scalable and goes up to ranges that you wouldn't have thought are possible in compact cars, goes up to the 550 km. We will deliver the car CO2 neutral, as Ralf has explained. We do that for a reason, also for a reason for our customers. I come to that later. The maintenance costs are super low with these cars, and this is something that's not yet really known and thought through by many customers. I think it will be over time.
If you realize that this car only has to go to a dealer every second year and with unlimited mileage, which no other car can offer, or if you then realize that your bills are getting smaller and you save every second or third gasoline bill, it really shows in your monthly mobility cost, and then people will appreciate that. Last but not least, we also said there's no reason to not cut the price in half for a wall box. We have a Volkswagen wall box with enormous scale and nobody's getting rich off a wall box anyhow, so let's just show that it can be done and cut the price in half, and show that everybody should just have one at home. Once you have one at home, you're more inclined to buy another ID because it's easy.
I'm quite sure many households, especially if you have a garage, just have an electric car at home, and you will use that in your everyday driving. Then it doesn't matter if the other one is not so electric yet. My personal-- because then you save the CO2 at least while you're driving with that car. Founder of the ID class, that was it for in a nutshell. The scalable batteries I explained. It's possible because we developed the car around the battery case. It's a super simple battery case, absolutely future-proof. We spent lots of time debating how thick it would be because that obviously impacts the design of the car.
We decided to go a little bit thicker because people like sitting up high and because we wanted to be absolutely sure that no matter what happens in the cells in future, we will be able to cope with every technology change in that simple form. Without too much investment, we wanted to have a future-proof platform. That is why we took this chocolate bar, very simple shape for all of the MEBs, and they are all the same. They can be interchanged. All of that works. For the physics of range, it is something that we also talk about quite upfront because the customers need to understand it, everybody needs to understand it. Once you are driving an electric car, it becomes very natural to you.
Since electric cars have the best degree of efficiency of all cars, of course, anything that you change in the way you drive has a huge impact on range. It is just physics because you have the best efficiency of a [Non-English content ] in German. If you are kicking it hard, as everybody knows who has driven electric cars, then your remaining range goes down. Or if you are in extremely cold or extremely warm temperatures. We already changed the driving cycle, which we appreciate very much from NEFZ to WLTP because it is much more customer-oriented in the way the driving cycle works. Before, even the base battery would have been not 330 km, but above 400 km. We are glad to say it is 330 km WLTP for the medium one, the 420 km.
Then we measured 80% of the normal driving of people, where would they actually be, considering that it can be cold or warm, or especially you have the German Autobahn, where you might want to go 120 km constant. Then we came up with a range that we say, "Deduct 30% from that and just calculate with at least 70%, and then you are in the range that really fits the normal driving behavior of most Germans." We even do that country by country, little temperature adjust. We want to be upfront about this so people are not disappointed, and they know what they actually get when they buy the certain battery sizes. We go even more than WLTP and communicate this very openly. It is also already on our website.
You see that for daily use, of course, the first question you always get is, "Oh, what if I drive to Italy with that car?" Yes, it can be done, but will you probably do it? No. But it can be done. The first question everybody asks. Then the normal driving is super easy. Most people drive less than 50 km a day, and so charging every second week is fine. You do not need to charge every day. These times are over. It is really convenient. You do not have to go to gas stations anymore. The weekend trips are also totally fine. Even if you take a longer trip, as you see here, you need to do lunch breaks anyhow. You need to take a break anyhow.
All the EV drivers, and we talk to lots of them, say what they appreciate a lot is that they learn, they come, they arrive and are much more relaxed because it's a different driving. It's more silent, it's more relaxed. You do not play so much with the gas pedal anymore if you're driving long distance. You do that when you're a short distance and you go to work and you want to wake up, but not if you're driving long distance. You stay more relaxed. It's a different lifestyle. But a nice one, as they confirm. It's a bit addictive, as everybody says in Norway, because they do not want to go back once they've driven one, and it's hard to go back. It's like with a totally new house.
Then there's some ideas that I would like to share with you that motivate us very much because I think this is much more than about a car. It's an idea, it's a vision that has impact on many aspects of industry even. [Beyond ID], it's certainly that we're willing and open, and we do this now to share the platform and to reap the full benefits and make that impact on climate even bigger than it could be if only we use it. I think that's a very nice thought that I'm very convinced of the positive climate effect of e-mobility, that we say if we're convinced of that and if we are serious about trying to achieve the maximum impact on climate, then that's something that follows naturally, even though it seems unusual to you.
You know that with Ford, we're doing this, and we're contacted by others as well and discussing this openly and enjoy that a lot. The other one [Beyond ID] for me is the delivery of CO2 neutral, because I do not know if you appreciate that change, but this will impact the way the supply chain works. If a big guy like Volkswagen says, "I only take that battery from you if you're CO2 neutral," then that factory will also deliver, most likely, CO2 neutral batteries to other competitors. Fine, do so. If we do that with a complete supply chain, that gives me goosebumps personally, because that also shows that sometimes it's good to be big, because then you can have impact also in a positive way.
That's what we're trying to do here, trying to help getting the supply chain clean where everybody else can also benefit from that. [Beyond ID]. [Beyond ID] is also, for me, this notion of being able to tell the customer, you're getting this ID now and it's clean. It hasn't done anything bad yet. Please help us to keep it that way. You can have a car that drives the complete lifetime of 12 years or longer, absolutely emission-free and CO2-free if you use green energy. I think that helps as a statement in front of customers to encourage them to do that. We see that in market research that it also helps. It's more encouraging than without saying, we already took, we did the first step, and we made sure the car comes CO2 neutral to you.
That will help us to get people into green energy. We offer green energy ourselves with our Elli daughter in Germany and then rolling out over other countries. We already recommend green energy to all of our customers all over Europe. That is the [Beyond ID] idea of the CO2 neutral delivery. [Beyond ID], for me, is also the proof now that we start to inspire change. We have done a little market research with our pre-bookers quite early in the process. We are the first ones we had so that we know where we are heading, what kind of customers are they. By the way, lots of conquest, much more than we thought. New customers that have not been with the brand yet, which our dealers appreciate and everybody, of course, appreciates there. Quite innovative people.
Also, as you can see, quite environmentally conscious people. In older market researches, this point did not come up that much. You see that there is a movement, as you can tell, right out in Berlin, that people appreciate driving CO2 neutral, that their daughters demand it of their dads. We see that even with our company cars. We just opened the systems to order some more electric. We are quite constrained internally because we have so much demand outside. Now we said, "Okay, let us open up to order," and then in one weekend, everything was scrummed, and there was way too many orders. Now we have to see how to handle it. Even Volkswagen internally, many more people are jumping on this now and saying, "I want to drive electric. There is no reason not to have an electric car." Super good for us. That is [Beyond ID].
We should and we can inspire change, which we enjoy a lot. In the end, it is also something that is a lot of fun to work for. My youngest is four, so he sometimes wakes me up at night, and then, yes, I do tend to work then because it is fun. If you get stuff done, then it is fun. Many people in my team, a very diverse team, the sales and marketing team sitting in the middle of Volkswagen, we decided not to go Berlin or be like a fancy startup somewhere. We said, "Let us be right in the middle of Volkswagen," right next to the engineers, to the designers, finance people there too. Everybody, production people, everybody together.
It is fun to work, to have the why there, and to see that Volkswagen is a very beautiful brand that can take responsibility, that can give freedom to move to people, but in a way that it saves the planet for our children. That is something we strive for, and that makes us very proud. I think there is even a component of motivating and of attracting people that think that way that I think is very important for a company. Because in the end, the most important capital for a company is the human capital. That drives down not just for Volkswagen, but also to dealers where we see now that they are able to hire people that are very motivated and very open and with a different mindset. That is also something [Beyond ID], I think, that makes us proud.
We send the message now out to everyone. Now you can. It is a matter of mindset. There are no excuses not to drive electric anymore. Thank you very much. Open for your questions.
We have a question in the back this time.
Thanks. Phillip Cunningham from Goldman Sachs. I have three quick questions. Firstly, on the MEB platform. I was just curious, what is the difference for you to develop an electric platform against a conventional combustion engine platform in terms of time? How much longer does it take? Second question, the customers, you touched on this earlier, but also going forward, let us say for the ID.3, how many of those customers do you expect to be new Volkswagen buyers who otherwise would have bought another EV? Or how much of those would have otherwise bought another Volkswagen model as like a Golf or a Polo, something else? Third question is on the range and kind of software updates. Are you expecting to be able to use software updates?
I know that has been the case with other EVs historically, to actually improve the performance of your cars, the range, or other technical aspects of the car. Thanks.
Okay. I'm glad I took notes. First with platform. The time it takes also depends on how sure you are about what you're doing and how strongly, close, and motivated the team is. Normally, if you develop a combustion engine platform, there is still a lot of takeover parts. Right now, anything that you do in combustion engine is evolution and development, of course, because there's been long years of research in there. You can do evolutionary steps, but they will not be huge. What we did here is totally from scratch. We have no exhaust system. There's no combustion engine. Of course, so many parts are gone.
We took that instant to say, "Well, if everything's new, then let's just also do the electric architecture new," because we needed to do that anyhow, and you do that best in a completely new model. Normally, I think it would have taken much longer than the time we've done now, but there was a strong commitment from the board, a cross-department team that we put all together in one building that very non-hierarchically worked on this for the past four years almost now, three and a half years. Normally it does take a little longer, but I think we managed in the four years that we had. If that answers question number one. Question number two was how many new and how many Volkswagen. The conquest rate was, in many countries, 70% and above.
For the pre-bookers, I don't think that is something to be taken for the average of what we see later on. We assume conquest, but not that high. Because the people are quite digital natives already. I think it's a different type of customer. We appreciate that very much because it shows what the brand can do. I love these guys and girls sitting in the cars as the first, so that's fun. It will be inspiring to everybody else. They have an important role to help start that change and that movement to show that it can be done, and it's actually cool. If that answers the second question. The third, about software and performance over lifetime. We wouldn't be agile if I could answer that question exactly.
We're thinking about, the architecture is there that we can do many things, and we're planning the first software updates already. I think with us you will see a mixture of doing updates at a dealer or over the air. Both can be done. But for some safety important things, we might prefer to do it at the dealer. We can't answer that exactly yet, because if you do really software development in a more agile world, then you don't know what's coming out years and years in advance. We're working at the first functions, yes. Also electric performance means, for instance, faster charging or some sort of battery care mode and stuff. All of that we're working at, yes.
Thank you. [George], please. You are in the front.
Yes, thank you. Two questions. On the dealer side, how have you embarked, let's say, the dealer network onto this project, and are they incentivized or have you imposed any kind of quotas? Opel is obviously doing this kind of thing, imposing quotas of EV for dealers to be sold. How are you addressing this issue? The second question is on the MEB platform. You talked about the scale benefits, Volkswagen being a large group. My question is more on the risk assessment. All this will be fine if EV demand is there ultimately. What if it is not? What is the real trade-off for you as a group? You have chosen scale, a massive, aggressive approach. Obviously you have dedicated plants. It is a massive investment. What if demand is not there in due course?
You will be faced maybe with the risk of having to take writedowns, et cetera. Have you assessed the balance of the trade-off of having this mass approach, scale benefits, which could be an advantage versus peers, but at the end of the day, could be also a massive accounting or financial risk?
Yeah. First with dealers, we took them along the way. In 2017 already, I started a mission control program, where we played "Ground Control" to Master Tom and then did that on board level with Mr. Stackmann as well, and had all the chief strategy people from sales in there, to make sure we are not disjoint from the complete sales organization. We understand the ID. family to be sort of the North Star of reinventing sales, because it is a huge opportunity for the brand, as you can tell, because we give a reason why now to many people, and that is not just internally, I think it also works externally quite well.
We took on the importers, so the next step, our importers and MECs also very early. We showed them in our Valhalla, so the Holy Grail of where we do design, all of the cars until 2024. It is a complete lineup, so they could understand, even though they were first design models, they could understand what we are out for and why we are doing this, and what the impact of that on the brand. Then you can imagine that is a complete new model lineup, like a new franchise on top of the existing one. Then I invited dealers early this year to Mission: ID, for almost 5,000 dealers came to Wolfsburg, and we showed them also the model lineup, which has not been done before. Normally, we show them right what they get in the next coming months.
We said, "You are all entrepreneurs, and please share the vision with us and think what it means for you." It ignited lots of change with them. It also ignited younger people who said to their dads, "I am ready to take over now." If you give a why and you give a vision, then it does lots of good to the company. We had them with us, and of course, we went through financials. No dealer will make less money off that car than off a combustion engine car, of course. But then it also gives the upsides because there is on-top volume. You are able to turn around the brand. You are able to have a comeback story. You are able to attract good personnel to you. In the end, you are getting a new franchise on top.
Probably we have a bit of an advantage now time-wise versus everybody else. So they are really hungry for this, and they are eager to do this. I started a listening tour now too to the dealers, so I am visiting the biggest ones of them to really see and listen to the entrepreneurs of them. What do you think can be done on top? Where are some more upsides? What do we have to watch out for? So they are super closely integrated and part of our brand system. The customer in the end will appreciate the brand if he can move completely seamless between websites, which everybody does anyhow, and dealer and customer interaction with our 1-800 ID direct phone where everybody is completely informed and aligned. Customer gets a customer ID. It is like having a smartphone or an iPad with an ID.
You connect it with that, and then you connect it to the ecosystem, and it makes it also much better to create a good brand experience for the customer. That answers your first question.
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No. Country by country, we might do some changes. You need to understand this. The question came up before. Do we make much less money on this car? Especially in the first periods, we noticed the first people who want to do this and want to buy this are more innovative and quite tech-oriented and quite well to do. So we have quite high transaction prices in the beginning. I think this will pencil the way that over time, as you go more and more into the masses, then also the penalties of combustion will go up and up, and the cost of combustion goes up and up. That will cross soon. In the beginning, it is not a car where you do not make money on.
We have very good transaction prices, and we say there is no extra push or incentive to sell the IDs, because if you are an entrepreneur, you want to do this. Now we will go much more into customer loyalty. So we will put all of our efforts to bring super good set rates to the customer that already includes service, that bring them back to the dealers. That is what we do jointly. We try to become a mobility provider jointly with our dealers, but there is no extra financial incentives for them. We are thinking the business case anew with the dealers jointly. Second question, risk assessment. Of course, we have done this. Of course. The good thing is lots of our volume goes to China. China is quite predictable in the way the EV sales are set up.
If you look to Europe, there are some countries that are also super predictable, like Norway and others, also Denmark coming up. So, there are many countries where we know we do not run a risk, and we know we probably have undersupply. We balance this a little bit like this. I just got the news from the climate cabinet. I do not know if you have read it yet. So, you want to know? But please read it yourself. I just jotted that down quickly to make sure I do not make a mistake here. So it looks like company cars below EUR 40,000 will get even a taxation of 0.2, so half of that even, so even less. Company cars are one very big volume source that we have been planning on anyhow.
All of that until 2030, the rest of it stays at 0.5 until 2030. Then we heard that the tax exemption stays until at least 2025. The on-top money that you get when you buy an EV will be prolonged. So in 2021, it will be even higher for cars below EUR 40,000, and stay there for the rest of them. Also what's dear to us, it's not so troublesome anymore if you want to have a wall box in your garage or in your home that you share with others, either even if you rent it or if you have a joint ownership of homes in cities, because these are obviously many customers of us. It's not that a single person can basically tell you no anymore. All of that has been changed now.
If you ask me for risk assessment Germany, I think the risk is much less with the support and the understanding of government that it's possible to reach the Paris Climate targets if we think system, just like other countries have done it before, too. For me, quite positive. I had an interview with a fleet magazine, and they were asking me, "Well, will you be able to deliver?" Then I answered them, "I hope not." It's not that we've taken the absolute mask risk number in the way we do volume planning. Our countries have actually ordered more than we deliver now in the beginning. We do a little more than we need for CO2 compliance, but it's not that we're taking the huge risk and putting in an insane number there. I think we have also established structures to review this continually.
I think it's important to be close to dealers, close to importers to do this. This is how we want to manage the risk, but also the upsides that we have in the EVs. That answers the question.
We have [Heike] over here in the middle.
Yeah, maybe a little bit of a different question, but your enthusiasm is really great to see and something I would hope also goes throughout the company and what might enforce it is to see a different car policy or at least get to know a little bit about what does it mean for your workforce and those people who are allowed to choose for a company car, for example.
Yes. We have one. It will come in effect very soon, but I don't know if I'm allowed to talk about it. I would say somebody's shaking their head. So yes, there will be one. Radically different and I think just about agreed, and I think we will disclose it very quickly. And of course, we will go and be a role model and example in ourselves. Yes.
Just to give you a little bit of extra information. We have well over 100,000 people who take a company car as a manager or as rank-and-file employees who have access to leasing vehicles at good prices. So that's a good base to work with. Christian, over here.
Yes. One more question on the margin side. With this generation of car, is there a production number that would enable you to reach the Volkswagen brand margin target of 6%?
It will ramp up over time. The target of 6% is clearly there. Mr. Antlitz enforces that and talks about it every day, and we have a ramp up and a plan on how to get there.
You believe it is possible with this generation of ID to also be at 6%?
I believe it would be possible. But there you have to ask some other experts. We are getting more cars, the next cars that are coming are even stronger in margins. Before we scale down into the below EUR 20,000 segment, which has already started to be developed now, and it will come around 2023/ 2024. The cars that you see now coming to the market basically in less than a year, between the launches, are cars that are quite heavy on margin, heavier than the ID.3. But overall, you would have to see, and that question is complicated to a marketing woman to ask for. But we can find that out for you.
The way you presented it sounded to me like that basically all your initial customers are private customers. But I understood that actually the fleet customers is the more important target, and this is for the first wave. How do you plan to split the volumes you have, which I assume are going to be limited in the beginning between fleet and private customers?
As a general concept, we always said probably we have 50% fleet volume. We developed consulting kits for fleet because there are many questions. In the bigger fleet, you need to have infrastructure, and many people still think you need to have a charging station for each employee, which is totally not true. There is a lot to be done with load balancing, with EVs, all the pooling cars, which will actually reduce the number of cars that you can have if you take our software with it, and then we will have digital keys in cars as well. All of these are huge fleet potentials. We have a consulting group for fleets out there that will also work together with Elli, and Elli can give infrastructure consulting.
We are going out there and talking to many interested customers, and we are looking for having a lot of conversations and going really broad. Not just focusing on a few DAX companies, but going into depth, because we suspect that in the beginning, only few will take hundreds of cars right away. Much more will test with tens and few hundreds and then go bigger. We want to seed that. That is why we, at least as we are being told, we are the only ones out there. We are going out there actively and doing fleet consulting. There is another good benefit for that, because once you do that, then companies realize that they need different types of infrastructure installed, some for company cars and some for visitors, but also some for just regular employees, which then again, are our direct customers. It will fuel the infrastructure base.
The most charging will happen at work and at home. If we have many companies that install infrastructure so people can charge at work, then it does not matter if you cannot charge at home. That is why it is a twofold benefit, and we engaged for more than a year now in fleet consulting, are rolling this out much more heavily now. The pre-bookers also have some big fleet customers already amongst them. We will see how we distribute the volume then. Obviously, with our fleet partners, we can discuss, and we will discuss a little more. Listen, if we have so many privates, then maybe you can wait for the serial production a little more. We do not give you the complete volume, if you do not mind. These discussions will take place, and we are happy about all of them.
Final question, do you know how many non-car users actually applied for an ID?
How many non-what?
Non-car drivers. Somebody who never owned a car before.
No. We didn't ask that question in the survey. Maybe we should have.
Yes. Please, Valentin.
Yes. Again, a question on climate neutrality. Is it externally certified or do you do it yourself? How does it work concretely?
That would be a question to Ralf. We are working at getting it, of course, externally certified. I think all the certificates will be there in spring next year. We will have a larger press conference about that and to explain it to really each and everyone. We want to be absolutely bulletproof. We will overdo a little bit. Anything else? Good. Thank you very. Yeah, go ahead.
Harald.
Slightly on the other side of the debate, it was interesting at Frankfurt. I was asking the same question. Especially at an ESG forum, we want you to sell as many of these as possible, I guess. When I ask the question of Peugeot, what happens if too many customers want your new cars? What are you going to do? They are rather practical about the world and they want to maximize profitability, so they are simply not going to sell them. It does not sound like that is an option that you guys would consider. For me, that is an interesting question, though, right? Even with this first-generation car, even with these higher current ASPs that you are going to have with the first adopters, the car will dilute group margin.
It may be a cheap way to get to the CO2 targets, but the profitability is not necessarily the same. Then, I sit here, your enthusiasm is infectious, but it makes me terrified about the Golf. Thankfully, you do not have to worry about the Golf, but somebody in Volkswagen is going to have to worry about the Golf. I do not know. You might not be, again, the right person to ask about this, but this is something that the Volkswagen Group is clearly going to have to think about, right?
Definitely. The margins, they are not too far off. Of course, governmental programs that are kicking in now to push this are supporting massively. They help all of the OEMs to come to the point to say it is really worth investing. The risks are manageable. Of course, we do strategies. We do also a shadow plan, what if more. We are working on shadow plan what if more. This can be managed. In the end, if you achieve conquest which is good, as you agree, forget about margin if you get conquest. If you can establish the brand, make the brand stronger, that creates a lot of equity right there. In the end, we do this because we believe it is a positive business case. It is also the only way to go and to be future-proof. We thought of that from backwards.
If you think that there will be energy at some point that is clean and it will be there massively in masses and it is quite cheap, then you come very easily to the conclusion that electric mobility is the thing to go for masses. This is what if you do the math. I hope some countries leapfrog completely because it just makes sense. Thank you very much. Appreciate your questions.
Thank you. I think we have one over here. From [Pierre].
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Yeah.
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I think we are coming to the point where we, oh, sorry. We take a break? It is not working. We are coming now to the close of our convention. I think we have proven with our key speakers how serious the topic is and how much progress we have made and how big the commitment is. Thank you firstly to all the speakers. Thank you very much to the participants and also those listening to the conference call. Then a big thank you to our IR team, to both the back office and front office. We have already got the feedback that it was too short. We should have made things longer. We will take that on board.
If there are any open topics that you felt you haven't covered or had covered today, you can contact us with the team, and we'll set up dialogue with our key speakers. I think that's it from our side. Hopefully have a good trip home and have a good weekend. If you're still going to join Fridays for Future, there's plenty doing that all around the world today. Thank you.
Cheers.