00:00I know you've cut the margin guidance, a new envelope, you've got 4.5 to 5, looks like that's based on tariffs plus some factors when it comes to building EVs. How should I read this now? Just give me some guidance on how you're going to achieve that margin, given the fact that you don't know what tariffs look like at the moment.
00:18Yeah, first of all, good morning and thank you for coming to our factory. Look, let me take one second and explain where we stand and from there it's much better to explain where we want to hit.
00:30If you look at the first half here, you see a mixed picture. First, you see tremendous success of our cars, both combustion engine and electric vehicles.
00:40And by the way, normally this factory is closed in summer, so that shows our success. And we made good progress on restructuring the company.
00:49But on the other hand, if you look at the margin, the margin was down 30 percent. And that is mainly due to the ramp up of the BVs. So the BVs are currently margin diluted.
01:00And we saw huge one-offs. First and foremost about tariffs and restructuring. And these two effects combined were about 2 billion euro in the first half.
01:10So I shouldn't read this margin cut that you delivered today as a tariff hit. I should read it as an ED ramp up. Hey, is that the correct way of looking at it?
01:18Well, before the tariff and before restructuring, we would have stayed exactly in our margin range. Just to give you an indication before, the margin was 5.5 to 6.5 percent.
01:30And we always said very precisely, this is before tariffs. And then now we included two tariff scenarios. One tariff scenario would be a 25 percent, so basically 27.5 percent.
01:43And the second scenario would be a 10 percent. And so the new outlook basically reflects this scenario. The margin losing effect of the ramp up of the BVs was already affected in the old range.
01:59Okay, so this is tariff. The reason you have guidance today is because of tariff.
02:05This is a tariff. To give you an indication, on a 12-month basis, 27.5 percent would be 200 basis points weighing on our margin.
02:18In terms of what you expect to get, Toyota got 15 percent. Is that a kind of number that you think you can get here at Volkswagen? Can you live with 15 percent?
02:27Give me the margin hit at 15 percent.
02:31Okay. Obviously, I cannot really comment on a specific number. That's clear.
02:36What I can say, 50 percent would be in the middle of the range, what we just gave.
02:41And what I can also say, I mean, look at our industry. We made 6 to 8 percent margin.
02:47And currently, we are faced with 25 percent tariffs.
02:50So this is clear we need a good solution.
02:52A solution that fits both the needs of the American administration, but also the European automakers.
02:59And by the way, not only the European automakers, also our customers and dealers in the U.S.
03:04If you just one number, in June, our sales were down 25 percent.
03:09And that has a huge effect also for our dealers and their families.
03:12We deal with 15 percent.
03:13That's it. We need a good compromise and we gave a range between 10 and 25 percent.
03:23Once you get the number, will you be able to give a much more accurate figure when it comes to the margin?
03:30I mean, will you reissue guidance when you get the figure?
03:34We were very transparent and we gave you the number for 25 percent.
03:42That's 200 basis points.
03:45And for 10 percent, it's 60 basis points.
03:49So you can do the mass.
03:51Whatever tariff, you get the burden and you can compare that to our guidance.
03:55So we are very transparent on that.
03:57Are you going to have to make more investments in the United States?
03:59Is that now on the table in terms of what you're going to have to do as part of any package that is likely to come from the White House?
04:08We are a key market leader in Europe.
04:10We have a compact plan in China, but we want to grow in the U.S.
04:13And that was true before and that is still true.
04:16Look, we invested a lot in the U.S. already, 12 billion.
04:19We operate the factory chair in Huga, but we have only 4 percent market share.
04:23So U.S. is still our and will be in the future our growth market.
04:28And we also invested in a very exciting product.
04:31I don't know whether you know the Scout project.
04:33Yes, I've seen the Scout project.
04:34It's really fascinating.
04:36I've seen one.
04:36You've got one just kind of over the road.
04:38It looks very nice.
04:39But you've also invested in Rivian as well.
04:41Yes.
04:43There would have appeared to be some logic at the moment of going, why not just buy Rivian and take the factory you were going to use for the Scout, for instance,
04:52use that for the Audi brand, which is struggling in the United States because of the tariffs, because you make them here, you don't make them there,
05:00and actually start to maybe reorganize as a result of a, let's call it a 15 percent tariff number.
05:06But isn't this the moment to rethink some of the plans in the United States?
05:11The U.S. administration is making it hard to build electric vehicles in the United States.
05:16They're going down.
05:17Is now the right moment to do Scout?
05:19So, these were a lot of information.
05:23First and foremost, let me elaborate a little bit on Scout.
05:26So, first and foremost, it is a great brand.
05:29Sure.
05:29We have a great heritage.
05:31Yep.
05:31And it will be not only an electric car.
05:33We will add a range extender.
05:35Yep.
05:35So, Scout will have an electric portion, but it has a range extender, and that gives us a range of 500 miles.
05:42So, we are quite confident that this package, a rather robust design, great interior, with a 500 miles of range, will meet the demands of the American market.
05:53And in terms of synergies, we use synergies for the Scout project.
05:57For example, electric engine that we will use for Audi, and Scout will be also one of the first projects that gets the software from our Rivian JV.
06:06Okay.
06:07But how do you get Audi and Porsche back to double-digit margins if you're not going to build them in the United...
06:15Can you get Audi and Porsche back to double-digit margins if we are going to see, let's call it, 50% tariffs?
06:23I mean, we explained that already.
06:26We look into the opportunity to build Audis also locally, but this is the early toll to give you...
06:33But it is a possibility.
06:35It is on the table.
06:36How much money do you think you're going to have to invest in the United States?
06:39Is it more than you've invested now?
06:40I think Toyota's done more than $60 billion.
06:43You're nowhere near that kind of a number.
06:46Is that number that you've put on the table for the United States going to have to go higher as a result of these tariffs?
06:53We invest in Scout, and this is a big number already.
06:56And, of course, if we would invest into a factory for Audi in the U.S., that number would go up.
07:04That number would go up.
07:05But I've heard the word massive being used.
07:08What does massive mean?
07:10Too early, too.
07:11It's an early guy.
07:12But north of where we are now?
07:14In terms of investment, clearly.
07:16So you think you are going to have to invest more in the United States?
07:19We want to grow in the U.S. It's a growth market. It's a strategic market for us, and we want to continue to invest in the U.S.
07:25But give me an order of magnitude.
07:27Is it much?
07:28Massive would seem to imply that you are going to do a lot more.
07:31You are going to put a lot more money to work in the United States.
07:34You don't have a figure in mind?
07:36Too early to give you a figure.
07:37In terms of what you are going to be doing in terms of the portfolio, there have been some suggestions that you may be offloading some brands, some parts of the business.
07:46How far down the road are we in terms of understanding what that is going to look like, and do you have a timeline?
07:50In terms of maybe rationalizing the portfolio, give me an idea of where you are in terms of your people.
07:59When we talk about rationalizing, we basically talk about restructuring.
08:04And we communicate with the restructuring program, for example, for Europe, for brand Volkswagen, and this is massive.
08:11We adapt our capacity in Europe to the market's needs in Europe, and we reduce our headcount.
08:21And we will also streamline the industry here.
08:26One of the key things with the core brands is its margin parity between ICE and the EVs.
08:32When are we going to get there?
08:34When are we going to start to see those numbers not being a drag in terms of the margin points that businesses are delivering right now?
08:40This is a very important point.
08:42When I talked about the margin, I said the margin was basically also diluted by the ramp-up of BVs.
08:48And we want to ramp-up the BVs in Europe and worldwide, and we need to ramp-up.
08:53So today, the margin of the combustion engine cars are much better than on the electric vehicles.
08:59But in 2026, for example, when the ID.2 is hitting the road, this is the first car where you see margin parity.
09:06It gets an LFP battery.
09:08It gets a next-generation battery pack.
09:10And it will be built in Spain, so in a very competitive factory.
09:17And there, the margin will be significantly closer to the combustion engine margin.
09:21Final quick question.
09:23China.
09:23The message coming from the authorities in Beijing appears to be that competition has gone to you, but there's too much capacity in the market.
09:32Have we passed peak competition, do you think, in China, in terms of the price order we see?
09:38What is your outlook?
09:39We get the same message, but we can only react what we have in our own hands.
09:44And in China, we have a really comprehensive comeback plan.
09:48We work on technology.
09:50We work with partners on technology.
09:53We bring a completely new platform with 40% less cost.
09:59We localize R&D.
10:01We have a local for local approach.
10:03We bring new vehicles on this platform.
10:05Also with product partnerships with Xiaoping and Sight.
10:08And these measures will kick in 2026, second, third quarter of 2026.
10:14And from there on, we will re-engage in the market.
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