Volkswagen AG

Yes. Thank you.

Ladies and gentlemen, welcome to today's conference call on the results of a strong first quarter. When we look at the figures today, you can still see why we entered 2022 with optimism.

The global corona pandemic seemed to be over after 2 years. The supply situation for semiconductors improving from months to months.

On February 24, the war in Ukraine started, which is now 10 long weeks ago. In Europe, we were short of wiring harnesses from 1 day to the next.

Around the world, prices for key raw materials have soared due to the inflationary environment. I will come to the impact on our business in a second.

At the same time, there are new tough COVID lockdowns in China, which have put a lot of pressure on our supply chains. In Q1, we were able to mitigate these extremes.

In comparison to the first quarter of 2021, we kept sales revenue stable and slightly increased the operating margin. Even so we delivered 340,000 [ fuel ] vehicles, a strong quarter.

This is true even if you factor out the effects resulting from our successful hedging against price increases for raw materials. Arno will give you more details on this in a moment.

Regarding our deliveries, our e-cars are sold out for this year and are still very much in demand. The order backlog in Western Europe alone are around 300,000 vehicles.

We just presented the ID. Buzz to the public with outstanding response.

Despite supply bottlenecks for semiconductors and cable harnesses, we delivered almost 100,000 EVs. You can see that our group has shown resilience.

As a global company, we have extensive production capacities and the relevant growth in sales markets worldwide. Volkswagen's global setup helps us to mitigate many of the adverse effects we are currently seeing.

Operating globally in open markets is essential for us as a global company. Therefore, the midterm strategy for us is clear.

Our setup will be even more global. Particularly with regards to the U.S., we will implement an ambitious growth plan.

In China, Volkswagen will maintain a high pace accelerating digitalization and electrification. America is our chance for strong strategic growth.

Our BEV market share is already twice as high as our ICE market share. In Chattanooga, we are to launch the locally assembled ID.4 this year.

Because of our successful e-mobility ramp-up, we are considering to expand our production capacities there. We have committed $7.1 billion to boost Volkswagen's product lineup, R&D and manufacturing in North America and we are sourcing and producing 95% of all cars for the region in the region.

This makes us fast, flexible and resilient in our supply base. In China, we delivered almost 30,000 EVs in Q1, more than 4x as many as in the first quarter of last year.

This represents almost 1/3 of the group's worldwide BEV deliveries. With Audi-FAW, we agreed in January to build electric premium cars in Changchun from 2024.

And we are expanding our location in Anhui into a hub for e-mobility with a new development center. From now on, we produce software in China for China.

To better tailor the user experience of the group's software to the needs of Chinese customers, CARIAD has just started operations in Beijing, with already 600 employees. We adopted to the dynamic market environment with immediate action.

First, we were first -- we were fast in finding solutions for a pressing problem, the lack of wiring harnesses. The taskforce team started to work on February 26, only 2 days after the beginning of the war.

Second, our hedging mechanisms against raw material prices have taken effect. The extent of the risks we have been able to reduce, at least in part, can be seen on our balance sheet.

Third, we focused on higher-margin products to help offset overall production decline. And lastly, we used our position as a truly global company to balance production across our markets and relieve pressure where there were supply issues and product shortages.

For example, when we had to cut back production in Europe due to a lack of wiring harnesses and, in some cases, we had to shut down plants, we sent the semiconductors we didn't need to the other regions. In this difficult market environment, we are continuing to drive our new auto strategy.

We are evolving from a classic OEM into a vertically integrated mobility company. To reduce complexity, we have organized our brands in brand groups, Premium, Volume, Sport and reported our first quarter earnings for the first time based on the new structure.

Going forward, operational decisions will be taken on brand group level, while the group will focus on overall strategy ending at synergies. Within the Volume Brand Group, for the first time, we have defined clear customer segments for the brands.

And in the new setup, we will further leverage synergies across the group. We're also strengthening our 4 tech platforms to ensure we can maximize synergies.

In Q1, we have reached milestones in these platforms. With regards to our Mechatronics platform, we have expanded our e-mobility partnership with Ford for plants to produce another electric model for the European market based on the MEB platform.

They will also double its plant MEB volume to 1.2 million units over a 6-year timeframe. We are making good progress with our software.

The Travel Assist has caught up to our competitor systems, beginning the feeling of autonomous driving closer than ever before. CARIAD took over IP from Bosch to accelerate the development of autonomous driving.

And we bought Intenta to increase our in-house skills of image processing. We announced Valencia as a dedicated location for our third battery cell factory.

Within the application to the Spanish PERTE program, we want to help turn Spain into an e-mobility hub -- all plans are still subject to final approvals for most of the PERTE submission. In our charging business, we have harmonized our European price model, one card gives you now access to a network of over 300,000 charging points.

We also presented the next step in the development of autonomous shuttle services as a new source of revenue. From now on, the ID.

Buzz equipped with Argo AI technology drives autonomously, no longer on the test site but on public roads in the center of Munich. And we completed the next steps to take over Europcar as a base for building a leading mobility platform for our customers.

We are confident to close the deal in Q2. Finally, we further accelerated our decarbonization efforts and raised our ambition level for our own production facilities.

We are now planning to reduce CO2 emissions by 50% until 2030 compared with of 2018. As a result, the Science Based Targets Initiative confirmed that Volkswagen's climate targets in production are now in line with the 1.5-degree target.

These are rather uncertain times. We cannot predict the long-term effects of the Ukraine war on the -- or the ongoing COVID-19 pandemic on our business yet, nor the effects on the global economy and growth in the industry in fiscal year '22.

But our global setup, our risk management and our capabilities to act fast when facing new challenges gives us confidence for the months ahead. And with that, I would like to hand over to Arno.

Herbert, thanks very much. Hello, and welcome, everyone, to our First Quarter Investors and Analyst Call in 2022 also from my side.

As already mentioned by Herbert, the war in Ukraine has been going on now for more than 2 months. We are greatly concerned that the daily news about the war and continue to hope for a hold of hostilities and the return to diplomacy.

Nevertheless, today, we would like to provide you with the full picture of the quarter, adding to our prerelease announcement from April 14. In short, solid operating result again showed the robustness of our business model in a challenging environment.

On top, we benefited significantly from the positive fair value measurement of our commodity hedge portfolio. We continue to focus on cost and mix and margin, and we improved our cost base further, but made no compromise on future investments to accelerate our transformation towards electric and digital.

In Q1, our supply chain faced a threefold challenge. The war in Ukraine that started on February 24, impacting the global supply chains; the continued undersupply of semiconductors; and last but not least, the resurgence of COVID-19 pandemic in China, affecting us at the end of March.

First and foremost, let me thank our employees who managed the situation so greatly. Now I give you a brief update on where we stand off today.

In the Ukraine, we took countermeasures to stabilize the supply chain. I want to express our great respect to the people in the Ukraine doing everything possible to keep production of key parts running.

Currently, we are back to more than 70% of wiring harness availability. On top, we started the duplication of production lines in other countries as a fallback option.

We are still losing some production due to the shortage of semiconductors. This situation is expected to improve in the second half of the year.

COVID in China restarted in March again. Production slowed down, with temporary production stops towards end of the quarter at suppliers and our joint ventures.

By now production has resumed, however, at lower levels. Although predictability of the situation is limited, we will try to make up for the loss of production in the course of the year as much as possible.

On the backdrop of these challenging developments, we delivered a set of decent results during the first quarter. Vehicle sales for Volkswagen Group came in at around 2 million units in the first quarter 2022, 340 units less than in Q1 2021.

Despite lower sales, sales revenue came in at EUR 62.7 billion, on par with prior year. Loss volume has been partly offset by the first time consolidation of Navistar revenues, ongoing high demand for well equipped vehicles and favorable pricing.

The operating result before special items came in at EUR 8.5 billion. The operating margin is 13.5%.

This result contains a significant positive impact from positive fair value measurements on hedging instruments outside hedge accounting. In total, EUR 3.5 billion, resulting especially from derivates on commodities and currencies, as stated in our press release.

Even excluding these fair value effects and underlying operating profit of around EUR 5 billion lies significantly above previous year and underlines the robustness of our business. Our financial result came in at around plus EUR 600 million, benefiting mainly from slightly higher at equity contributions from our Chinese joint ventures and improvement of our interest results and the absence of a negative valuation effect in the other financial result.

Clean net cash flow in Q1 2022 amounted to EUR 2.2 billion and reported net cash flow was EUR 1.5 billion. This compares well to Q1 2019, both driven by our strong operating business, but burdened by higher inventories due to the supply chain disturbances mentioned earlier.

Net liquidity in Automotive Division amounted to around EUR 31 billion. It includes the repayment of a hybrid bond of EUR 1.1 billion in March 2022, and the successful placement of a new hybrid bond issued in the same month for EUR 2.25 billion.

This again underlines our continued excellent access to financial/capital markets. We continue our focus on cash flow generation.

However, Q1 results showed a strong gross cash flow burdened by a negative change in working capital due to supply chain disruptions due to the war and limited supply of semiconductors. Now coming to the performance of our divisions.

Passenger cars delivered EUR 6.5 billion, operating result of 15.5% margin before special items. Drivers were especially the strong performance of the premium and luxury brands and, of course, the effect of fair value measurements we already discussed.

Also, our commercial vehicles came in higher than last year. The operating result of EUR 330 million now includes Navistar, around plus EUR 80 million in Q1.

MAN production was negatively impacted by Ukraine in Q1 this year, and the prior year was burdened by EUR 356 million restructuring expenses at MAN. The Financial Services division again had a very strong start to the year with an operating result of EUR 1.5 billion.

Positive effects were the continued high used car demand at higher prices, a favorable development of residual value risk and a solid credit risk situation. Moving to our EBIT Bridge.

The strong [ before special items ] of EUR 6.5 billion for the Passenger Cars business was driven by a positive mix effect from well-equipped cars and favorable pricing. This more than offsetted the negative impact from lower volumes.

The block exchange rate and derivatives came in at a positive EUR 2.4 billion versus last year. This was mainly driven by the fair value measurement of commodities, derivatives and positive foreign effects.

Product cost deteriorated by EUR 0.6 billion due to the increase in raw material costs, for example, for steel and other price increases. The position fixed costs and others had a positive effect of EUR 300 million.

Cost discipline in our indirect areas continued as we keep delivering on overhead cost programs. After special items, the result came in at EUR 6.4 billion, including around EUR 120 million for diesel.

Let's have a brief look at our newly established brand group reporting. Volume Brand Group, which consists out of Volkswagen brands, SKODA, SEAT, Volkswagen Commercial Vehicles, and our component business.

Due to the disruptions in the supply chain, sales at brand group level was around 280,000 cars lower versus last year, especially for [ V ] Brand and SEAT. Volume Brand Group had the biggest exposure to COVID, semis and the Ukraine.

Despite that, the group showed a decent start into the year-end initiated countermeasures to catch up. However, the margin of 3.6% clearly shows room and necessity for improvement.

The Volume group has upside in terms of capturing synergies and increasing productivity. Coming to Premium Brand Group despite 16% lower sales, sales revenue are on par with last year and demand for well-equipped premium vehicles were high and continued.

The operating profit as well as the operating margin are up significantly. Main drivers are strong pricing as well as the effect of fair value of commodity hedges.

Porsche sold 66,000 units in Q1, slightly down versus last year. However, sales revenue was up as well as operating profit.

Porsche showed an impressive margin at 18.6%. Let me spend a few words on fair value hedges and fair values on commodities, how they are reflected in the results within the brand groups.

Historically, within the Volume group, the majority of fair values are included in the other line or group level; whereas at Audi, it's included in the operating result. Porsche currently has no commodity hedging in place.

We are currently in the process of building up a group-wide [indiscernible] system for hedge accounting in order to separate effects from fair values. And from 2024 onwards, these effects will be shown in our balance sheet instead of the P&L.

A deep dive into the Volume group shows encouraging news. All brands in the Volume group saw an increase in average sales price even though unit sales declined in part by double-digit percentages.

For [ V ] brands sales and commercial vehicles saw an increase in margin, only SKODA saw a decline as they are consolidating our Russian business and ramping up the factory and our business in India. Our Financial Services is benefiting especially from growing used car business and demand as well as lower risk cost.

Operating profit margin improved to 13.3%. Our joint ventures in China had a decent start to the year.

In total, 754,000 vehicles have been delivered to Chinese customers thereof 29,000 BEV units. The proportionate operating profit in Q1 came in at around EUR 820 million, up by 25% year-on-year, and [indiscernible] way on par with previous year, SAIC Volkswagen improved.

Both the Volume and the Premium brands contributed to the success. Without the resurgence of COVID-19, the situation would have been even better.

SAIC Audi started to deliver its first vehicles in the first quarter. The chip shortage caused last year's significant negative effect.

In the meantime, the COVID-related lockdowns are causing additional challenges, which started at the end of March. We strive to catch up as much as we can during the remainder of the year, but due to the rising uncertainties, we are well advised to stay cautious.

Now let's come to the outlook for 2022. And to make it short, we confirm our outlook for [ March 15 ].

We continue to expect deliveries to customers of the Volkswagen Group in 2022 to be 5% to 10%, up on prior year level, based on sequential improvement of semiconductors during the second half of the year and our massive order bank. We expect sales revenue of the Volkswagen Group in 2022 to be 8% to 13% higher.

In terms of operating result for the group, we continue to forecast an operating return on sales in the range of 7% to 8.5%. Reported net cash flow is expected to stay on the same level as in 2021 and 2022.

Net liquidity in the Automotive Division is anticipated to be up 15% higher than prior year figure. This again underlines our self-funding capabilities.

Due to the development of positive fair value measurements on hedging instruments in Q1, and here especially the contribution of commodity hedges, there is now a cushion in our guidance for fiscal year 2022. If raw material prices remain on the level of the first quarter, we would have an upside.

However, nobody can predict with certainty whether these raw material prices will come in at the end of the year and if the values booked in 2020 -- in Q1 2022 still holds true. Given all the uncertainties and given that it's still early in the year, we think we are well advised to stay cautious, especially knowing the developments in the war of the Ukraine or the COVID pandemic cannot be predicted with certainty.

Ladies and gentlemen, in financially steering the transformation, there are 2 very clear strategic goals: allocating and shifting of resources and capital towards electrification, digitalization and mobility services; our second goal is to safeguard and further strengthen our financial foundation. To achieve these twofold goals, we defined 6 major topics: product transformation towards electric, digitalization and developing further our software stack, capturing group-wide synergies between the brands during group-wide cost and efficiency programs to finance the transformation, strengthening brand positioning and pricing and everything we do, we will base on our integrity and values.

Let me give you a brief glance of where we stand on these topics. Volkswagen Group BEV sales in Q1 2022 achieved almost 100,000 BEVs.

Despite Semi bottlenecks and wiring harness shortage, we achieved 99,000 BEV sales and they were delivered to the customer, up 65% year-on-year. The sales figure could have been much higher, as we said, especially in Western Europe on a huge order bank.

However, some production disruptions also impacted our BEV production. From where we are now, we anticipate a constantly growing BEV volume and share in every quarter of 2022 the ramp-up of our retool plants in Chattanooga will drive scale up, global production footprint will help and new exciting models will be launched, ID.

Buzz was launched already and ID.5 started in May in Europe, as Herbert mentioned already. We will continue to increase our BEV sales this year and aim for a BEV share of 7% to 8% in 2022.

And before the announcement in March, we will gain additional economies of scale to improve the profitability of our BEVs even further. Coming to CARIAD, we are progressing in ramping up CARIAD with almost 5,000 employees and continuation of M&A activities.

We also implemented a stand-alone reporting of CARIAD to improve transparency and accountability. But also on the product side CARIAD made progress.

The ID. software 3.0 was updated and offers now a latest Travel Assist system, greater charging capacity and voice control performance on premium level.

With the new setup and transfer of IP rights from the brands to CARIAD in the first quarter, CARIAD further sharpened its strategic focus. To finance our ambitious transformation towards electrification and digitalization, we have initiated in 2021, our overhead cost program.

We achieved our 2023 target of minus 10% cut in overhead costs already in 2021. So far, we are working to stay on level achieved and to compensate for inflation, as well as to mitigate the first-time consolidation impact of Navistar.

Capital deployment and synergies across brands is another important area for us to stay focused on. The majority of investments are geared towards production plants, upcoming product launches, electrification, digitalization as well as our modular platform.

In the first quarter 2022, within Automotive Division, the R&D expenditures increased by 10% to EUR 4.4 billion due to significant development activities for future BEV models and technologies in the Brand and especially within CARIAD. At the same time, the group reduces its CapEx expenditures by 11.5% to EUR 1.7 billion.

This brought the CapEx ratio down to 3.3%. And despite the rolling MEB -- retooling of MEB in our Emden plant and Chattanooga.

This year, Emden and Chattanooga will start the ramp-up of MEB models. Local production in 3 core regions to provide the basis to drive scale, [ effects ] and lay ground for the sequential increase in BEV sales in the coming quarters.

This shows clearly our focus to compensate for higher R&D with even higher synergies on CapEx. Ladies and gentlemen, we have a solid financial basis.

This provides us with the opportunity to continue our transformation also in difficult times. We continue to strive to be a leader in the transformation of our industry.

We will preserve our natural resources and we will achieve this with integrity and based on our values. Thank you for taking the time and listening so far.

And now we are happy to look forward to answering your questions.

Thank you Arno and Herbert. [Operator Instructions] And I can already see that we have a queue now of 10 people.

And let us start with Tim from Deutsche Bank. Tim, please raise your questions.

I have 2 questions, please. The first one, I'm not sure if it's to you, Herbert, or to Arno.

It's good to see that you continue to optimize your portfolio. You had TRATON, now you think about Porsche.

A question we spoke about a couple of times is splitting your EV and your ICE business. Now in the past, you always rule that out.

You said again this morning on the press call that you wouldn't like to do this. The question is, why don't you think that this makes sense?

And I'm not just talking from a pure valuation perspective, I'm actually talking operationally. One business needs to be run for efficiency, the other one for growth.

Your competitors on BEVs are certainly very growth focused. You guys might miss a chance here to really just pump up your product a lot faster, roll out a lot faster, and frankly, also having a better product potentially because you may break free from a lot of the constraints that you still have in this combined group, that Herbert you also criticized many times.

Why don't you feel that standing -- that a stand-alone BEV business is actually the better choice here? And secondly, Herbert, this probably goes to you.

10% market share in North America. That has long been a problem child for you when it comes to profitability in that market.

Now you target 10% share. We were finally happy to see that you were breakeven there.

I think your shareholders had actually appreciated that you stepped away from an overriding volume ambition, but focused on value instead. Why do you feel now you need to chase a certain market share again?

Yes. So probably, we start with -- last one, Tim?

Yes, we fully agree. And we will remain focused on margins instead of volume.

And no, I think we haven't heard this word of that we would like to become the world volume leader since long. And it's actually -- it's not our ambition.

But for America, you need at least if you want to participate in the volume segment, you need, I would say, at least an 8-odd % market share to be competitive there because you have to compete also on the cost side. The America is a cost-sensitive market.

The average sales prices are lower, that is okay for premium. Premium imports for the, let's say, mostly German premium brands, that works fine when having a 1% or 2% market share.

But for a volume producer, you have to be local and you have to -- you need necessary economies of scale to be competitive and to get the margins you need to be sustainable. And now I think we have -- and we did a lot on improving our margins.

There's still a lot to come because the SUV business in the U.S. is still ramping up.

We're leveraging the economies of scale between Latin America and the U.S. because we have shared platforms there.

So we're doing all to compete even out of a niche position and getting the right market share, and you see that on our accounts. Now we are profitable even at a 3% market share, which is quite an achievement in volume segment in the U.S.

And which also, let's say, motivates us to get to more. You have now a new set of rules coming in when it comes to economies of scale because the economies of scale for EVs are new ones.

And also you have to be in the right economies of scale for EVs to be competitive, and we are. We're already -- when we only launched the import of the ID.4, we were at about 8% market share in the EV segment.

which is probably already good enough to be competitive. And we will now, with the launch of the ID.4 to get the right economies of scale, to be locally competitive for the American EV market.

And what we basically want to do is to use that transition from ICE into EVs and building up the necessary economies of scale to be long-term competitive in the American EV market, and this is why we have to further invest. It won't be possible with a 2% market share.

this is basically the rationale behind. Is it then 8 or 10 or 12?

It's not in all. That will not be the target.

The target will be that it's profitable and sustainable.

And Tim, to your first question, we are aware that the competitors are doing that split. Let me first and foremost say, we are fully committed to ramp up our BEV business profitably across brands.

We are committed to ramp up volume wise, margin-wise. We also watch closely the margins on BEVs.

We gave, I think, as one of the first guidance where we will see the margin priority. And on the other hand, we are transforming this company.

So plant by plant, we are transforming the -- our ICE business to electric, like [indiscernible] first, now Emden, Chattanooga. And we also significantly reduced ICE models and ramp up our BEVs.

So what is our way forward in terms of financial steering?, Since we are a multi-brand company which focuses on synergies, we found a different approach. We think it's best suited for the strengths we have.

We found it now 3 brand groups, Volume, Premium and Sport. And within the brand groups, we found synergies and address customers.

And for the major synergy drivers in the electric world, we define 4 critical platforms and it's PV hardware; it's CARIAD, it's basically software; it's -- the third platform is battery energy charging; and the fourth platform is mobility. So this, if you want to say metrics, is the way for us to steer forward to steer the transformation and also to gain the best out of like basically addressing customers and achieving synergies throughout the group and then basically driving and financially steering the transformation.

I think...

Herbert just mentioned that, of course, we can look at the disclosing of more like EV, KPIs, but this -- we can look at in the future. But again, our financial steering model in the 3 brand groups and the 4 industry-leading platforms, we think it's really best suited for us to steer the transformation.

.

We started to give a bit more transparency already at the end of the year here with the EU Taxonomy conform -- yes, exactly. And then for the future, yes, reporting potentially the revenue is actually we do with the battery electric vehicles is definitely an option.

Thank you, Tim. I hope this answered your question.

And we will continue with Patrick. Patrick Hummel from UBS.

Patrick from UBS. My first question goes to CARIAD, so for Herbert probably, and thanks for giving all the additional financial transparency in the business.

Can you just provide an update on how things are going at CARIAD? There have been quite a few media articles.

It feels like the organization is very busy with itself and things are slipping. And if you can comment specifically on the E3 1.2 architecture that's needed for the PPE platform.

There have also been some reports about delays. So it would be great to get an update.

And if you can comment in light of the latest headlines about your deal or potential deal with Qualcomm for the AV system on chip. Are you still targeting the 60% in-house software share?

Or have you changed your mind here and you go for lower in-house software stack? That would be my first question.

Second one, very briefly, what actually happens to the batteries that you currently can't use in the EVs because you're constrained in production on the Semi side, wire harness or production shutdowns like in Shanghai? What does happen to these batteries?

Do you store them? Are the suppliers selling them to somebody else?

Or yes, will you be able to take those volumes later on? And very lastly, a simple question, assuming that those EUR 3.5 billion of hedging tailwinds that you had in the first quarter would completely reverse over the coming quarters, would the guidance still hold even with 0 net hedging gains this year?

Will you start with the last one, Arno?

Yes, perhaps I'll start with the second and last one. Yes, we store most of the batteries, you can see that also in our balance sheet.

Although our waiting times are long, and our inventories for finished goods are really down, we saw a slight increase in inventories and that's specifically in raw materials. And one of that basically increase in raw materials is due to the storage at least to a certain extent of batteries.

Because we expect that, specifically in the second half of the year, Q3, Q4, the availability of semis also for our BEVs will increase and then we want to use these batteries and the more semi to also catch up on our ramp-up plans for BEVs. And in terms of hedging, our forecast would even hold if the hedging would reverse, but we need a little bit of caution that also might go into the other direction.

So if we talk more about, I would say, EBIT bridge, it's a better concept, yes? That EUR 3.5 billion translates into a EUR 2.4 billion positive on the EBIT bridge in the first quarter.

So we don't foresee a positive in terms of EBIT bridge for the full year. That doesn't necessarily mean that there's not a positive in our balance sheet still in this line item.

But I think the better concept is that we don't foresee a positive on exchange rate and derivatives in the full year versus -- 2021 versus 2022.

Okay. Patrick, on software, probably starting a little bit more general.

First of all, I'm just -- I came here with driving an ID. Buzz, which was extremely positive because -- and we have been discussing that also with [indiscernible] before with Arno.

The -- what we see now on the 1.1 is exactly what we wanted to see. This is kind of a modern electrical/electronics architecture which is hugely updatable and upgradable, and we are experiencing already now the benefits on our MEB platform on the electric cars.

We just - we are working on the third software update which is coming, it's called 3.0. And it's not only upgrading the look and feel of some screens or so, this is really substantial.

We are improving our driver assistance function with, let's say, automating the overtaking functionality, which is quite unique in the Volume segment, and only very few competitors can do that. Now you will see now a continuous upgrade in the functionality of the car and already launching the ID.

Buzz, we got extremely positive feedback regarding the speech voice control, regarding the response time. So this is where we wanted to be and where we wanted to get some 5 years ago when we basically started the project between Arno and myself.

So that makes me very happy. And you already can see how it works now.

In the past, there was a big challenge with the launches. I wouldn't expect any launch problems caused by software anymore now with the ID.

BUZZ being launched or the next Aero being launched, because software is ready. Software is ready for the platform, and it's improving every 12 weeks or so when we update the car.

So -- and by the way, it's the first time that we have to talk to our customers, are you ready for the update? And we use that contact with our customers to get a feedback and probably, over time, sell some more features and even additional services.

So that makes me really happy because it demonstrates that we are absolutely on the right way. And yes, it's very, very motivational for me.

Then you have been touching on 1.2. Now at the time when we launched Volkswagen 1.1, a little bit later started Audi with 1.2, which is a more sophisticated platform.

And yes, it is challenging to launch because it's hugely complex. It's between Audi and Porsche, CARIAD is helping.

And it's more complex than 1.1 was, far more complex. But I can tell you that the teams are really focused on the launches, and we are confident that we can launch the cars as planned next year.

And the teams are working hard. But we have to see, it will be enhanced functionality, it will be much more complex on the premium side, and this is how the team is working.

Knowing that now, CARIAD has especially the task to go beyond 1.1, 1.2 and make -- define the platform for the 2.0 software/hardware architecture, which we are working on. And now coming to your point, Qualcomm, we assigned or we rewarded Qualcomm with the semiconductor piece of our driver assistance function.

And finally, Level 3, Level 4 autonomous drive trend. And this was also a major step because we still -- we considered various options and you're probably aware of those possible options.

We decided for Qualcomm because there's huge commitment, technical capability, its leading-edge semiconductor design. It doesn't require a water-cooled processing power, and processing power is now really evolving for us with Qualcomm.

Qualcomm now dedicating a lot of resources onto this bit of driving platform for the cars. They call it chassis, Snapdragon chassis platform, which we think is a good choice.

It will be also probably industry-leading, and there will be more of our peers joining that platform because it is the right hardware platform. This comes together now with all the activities you have been learning about in the past couple of months.

PACE, this partnership where we bought for about EUR 300 million IP from Bosch, where we joined the teams between Bosch and Volkswagen to form a competitive team for autonomous driving functions for the next generation, will take this hardware platform and all the other bits and pieces we bought in. So picture recognition, then the wireless capabilities to update software continuously in the car.

All those comes together, we are now fully set up in this delivery chain for the next level of driver assistance systems, reaching from NCAP functions to Level 3 and Level 4. And now the work starts for the launches towards '26 Trinity here in Volkswagen and Artemis also out in English.

This is why this was a major step now for us. The teams can work now.

Teams are set up and geared up and will work for already the next generation of hardware/software platform, the so-called 2.0, which will then be the group-wide one and only software platform of the future. 1.2 still will be a challenge within the next months, but teams are set up, geared up.

And with all the resources bundled between Audi, Porsche and CARIAD, they will master this task. You mentioned also the level of, let's say, in-sourcing or, let's say, the level of proprietary software, all in all, we have to say, SA OEM and all OEMs will have to undergo this exercise if they want to be future-proof.

We have to be able to update the core functionalities of our cars. And that means that we have to build up software skills which, so far, only had our first years or we are really distributed in the industry.

Though this is an in-sourcing process, which will probably take, I would say, 2 life cycles. So also, by the way, our big American competitor, it took him 3 product launches to really get ready for this kind of in-sourcing.

And we are gradually in-sourcing. So 1.1, we probably had about 10% in-house content.

1.2 will probably be around 30%, probably a little bit below. And with 2.0, we will get up to probably close to 60%, including a few acquisitions, which we still have in mind.

Now without those acquisitions, we would end up probably between 35% and 40%.

Thanks, Patrick. And the next question would come from José Asumendi from JPMorgan.

José, please go ahead.

It's José from JPMorgan. Three quick questions, please.

First, on China, there's a clear step-up in earnings momentum in Q1. Can you comment a little bit, please, Arno, if this run rate of earnings is the right level we need to think about for the coming quarters?

And also, if there were any one-offs last year within SAIC that maybe are non-repeat for 2022? That would be very helpful, please.

Second, can you comment a little bit around the earnings momentum of the group into Q2, excluding the impact of derivatives, et cetera? Is the earnings momentum for the group slowing down?

Or is it still at a relatively good level versus Q1? And then three, please.

Herbert, can you please comment on CARIAD a little bit as we think about the top line growth of this division for the coming years? How do you think about the revenue projection maybe on a 3-, 5-year term to cover the fixed costs that you are putting -- that you're investing now obviously within CARIAD?

Yes, Jose, thanks for your comment. Yes, we said that we will come back in China, and the teams work on it specifically at SAIC.

SAIC really did a good job in turning the business around. They increased slightly sales.

Sales revenue was up, specifically margin. Good pricing, less incentives.

And they also worked on the fixed costs. They optimized fixed costs by 18%, which is quite significant.

So -- and they were like on the way to, not 100%, but almost a double-digit margin again, which was really a great run. And as 3 -- I would say, 4 weeks ago, we would have expected, as we discussed before, that the whole China operative proportional profits from the JVs could achieve a level of 2020 again.

But then you're very well aware that like 2 to 3 weeks ago, the COVID situation hit, yes, specifically end of March. If not, the situation would have been even better.

Please have a little bit of understanding, with the current situation and the visibility, it's really difficult to really precisely forecast whether that, I would say, outlook of operative result versus 2020 still holds. What I can say at least for today's perspective, the Chinese joint ventures are still planning to catch up throughout the remainder of the year, and that it would still be positive, that would still be possible.

But of course, it depends on the course of the pandemic in the next weeks to come. But as I said before, for the time being, we are planning to catch up throughout the year as good as possible based on the high flexibility Chinese joint ventures have and more availability of semiconductor, specifically in the second half of the year.

Yes, in terms of earnings momentum in Q2, from today's perspective, yes, there will be a challenge from the wiring harness and also from semiconductor still in Q2, but we expect the margin well within the corridor we gave for the full year. The effect should stay the same.

Pricing, strong. Incentive, disciplined.

Volume, perhaps even a little bit more positive than in the first quarter, but we will -- we should expect a more difficult April. And then perhaps then until May, June, we catch up.

And then the fixed cost side, we want to keep the discipline, and there will be a further headwind in terms of raw material prices in terms of product cost. And that headwind, quarter-by-quarter, might even increase a little bit.

I think we showed an EBIT bridge, EUR 0.6 billion, and that might even increase like now quarter-by-quarter slightly. And we shouldn't be very surprised if that total year figure exceeds EUR 3 billion.

But as I said before, all our levers are in place, pricing, cost discipline, specifically CapEx discipline. So we still stick to the guidance for the full year, and that should be also true for Q2.

Last question, José, was top line effect of CARIAD, what can we expect? When can we expect?

I would say the CARIAD is really mission-critical for this transition into new AUTO. And let me try to explain how we see that going to happen and how do we see the mechanics.

First of all, with this additional functions in the car, you get pricing potential, because people would prefer a car, which is capable of taking over more tasks in parking, Level 3 driving and in certain weather conditions. So you have a pricing potential there for more functionality.

And the functionality you get because of the hardware installed in the car, your level of software matureness and the fleet size, because you need to gain new experiences and gather data that the whole swarm of your fleet becomes just more intelligent, more, at the end, desirable and more premium than, let's say, one of your peers, that is why we are investing heavily. Then we have, for sure, through CARIAD, access to additional services we can sell, direct customer contact.

So you would sell functions, services, charging. You would sell energy through those functions.

And once again, they are CARIAD with the right apps design, with the right access for the customer and the desirability is the key access factor to this revenue pool. And then last but not least, probably most important, we see the big step change and breakthrough really with autonomous driving.

Whenever the car -- whenever the passenger or the customer is being driven by us in the car, then there's huge value created, because you get 1 hour or 2 hours, or in the case of probably some people working in the car, even more hours of free time additional productivity, which is hugely valuable, which then you can use for working, playing and other services for consuming the car. So the question is when you can take over which tasks in the car and when you can over -- when you will take -- be able to alleviate the driver from this driving task?

We see that as a process. There will be not a year '25 or '26 when the cars are driving autonomously.

No. We will see that change coming into a gradual process.

First in, let's say, normal road conditions, German motorways, nice and sunny weather, up to 130 kilometers per hour. Next step, probably more severe weather conditions, country roads.

Next step, you can enter city centers and parking. So this will be a process over a long period of time, where cars are becoming better and better, and you can -- and cars would be able to cover more so-called audits, more complex audits over time and so allow for more free time, more service, more convenience.

Also, cars will differentiate in the way of the -- how smooth is the service, how safe is probably the most important criteria. And this is really why we are investing so much money and put so much effort into this bit of autonomous driving, and why we think it's so mission critical that we are driving that process and we can take over this responsibility as soon as possible for our fleet and for our cars.

And this is probably then the big step change and breakthrough if you then, yes, allow our customers to use and spend this time and us assuming responsibility of driving the car. So there are 3, I would say, influences or potentials for top line improvement.

And this is why we are investing so strongly in CARIAD in the whole, let's say, process chain to make autonomous driving happy. I think we have a good setup.

We have a very competent team. We are bundling resources, push ourselves.

We are in-sourcing all necessary IP. We are building up the tool change for it.

And this is why we think we are well set up for the race. And the decisions we just recently make, now make more and more -- become more and more transparent, why we did what.

And last decision now with Qualcomm is an important step. And then we are focusing towards '26 to launch this first piece, most important bit of software we are developing.

José, was that -- this was probably a bit lengthy, but hopefully we gave you some insight, yes.

Thanks. So a brief rep, SAIC being the driver of the improvement we are currently seeing clearly on the proportionate earnings in China, then good earnings momentum into Q2.

But however, being aware of all the volatility we still have in the market, the ongoing war and the COVID situation in China and others being the game changer for CARIAD revenues in the future. With that, I hand over to the next question, which will come from Dorothee from Exane.

Dorothee from Exane. The first one is around BEV sales momentum.

So you've obviously reiterated the guidance for the 7% to 8% BEV mix globally for 2022. Could you just share your thoughts on how many BEVs you can sell specifically in China this year?

I think in the past, you indicated you had a target of at least 170,000 or 180,000 BEV sales in the region, I'm just wondering if that's still achievable. And then this morning, I think you said that your BEVs are actually sold out for the full year.

Does that also apply to China? Or is it just the case in Europe and the U.S.?

And my second question is a slightly longer-term one. How quickly do you think you might be able to deploy LFP battery technology, given we're seeing these higher costs and potential supply issues with nickel and cobalt?

So when might we see that technology and in what VW product?

Yes. Regarding BEV sales, we are basically sold out.

Also, it's also, let's say, for the main markets, I have to say, in Europe and in the United States. And in China, we are aiming at between, I would say, 160,000, 170,000 EV sales for this year.

And LFP batteries, yes, we already -- this was one of the main motivators to buy a -- to buy into Gotion. Gotion is very skillful and one of the biggest manufacturer of LFP batteries.

And I would say, with the launch of the small BEVs by '25, '26, we also should have LFP batteries in our range. We think that they are hugely important also for our light commercial vehicles because they have better cyclability.

They can do more cycles and they are more robust batteries, with a little bit constraints in range. So LFP is part of our battery strategy, not only for light commercial vehicles but also for passenger cars.

Okay. Dorothee, I hope that was clear.

The next question comes from George from Goldman Sachs.

Yes. I just wanted to follow up on CARIAD on the revenue side.

I was wondering if you could give us some insight into what you anticipate to be the average revenue per vehicle from the software services by 2030. And over time, as the features improve and the content available increases, do you expect the average revenue from software and licenses per vehicle to actually grow?

And if yes, is this revenue going to be substitutional for other components or costs within the vehicle? Or do you expect consumers to spend a higher proportion of their disposable income on cars than they have done in the past?

I would say probably we share between Arno and myself. So yes, to your last point, we think that consumers will spend more.

This is also why we have so many new entries in our sector because long term, I would say -- and this is also probably part of your evaluation about the sector, that long term, we see a huge increase in revenue and also in profit potential in the sector because of this development, because of people spending more time in their car. Infrastructure is not improving.

So we can assume that people would spend more time in the car, but they would use the time differently, for playing, family, communicating, working. So this makes, I think, our sector so attractive in the future, and this is why we are also investing.

I think we're not able and prepared to really disclose the plan now year-by-year. I don't know.

Arno, would you comment?

No. Yes, we would like to do in-depth analysis on the Capital Markets Day.

I think Rolf will discuss on that in a minute when we share in-depth, our revenue model for the whole topic of software and also for mobility services. And to add on what Herbert said here, yes, we think that there will be a third revenue pool in the industry today basically based on ICEs.

And then 2030, we see ICE and BEV, half and half. And then there will be the third revenue pool and that will consist out of basically Level 4, Level 5 autonomous driving mass task.

But also on software-based revenues, which will increase the total turnover and revenue in the industry. And this is why, as Herbert said, we will increase our investment and focus on that topic.

As said before, we will give you an in-depth analysis on that in a more comprehensive picture during our Capital Markets Day.

Thanks, George. Horst, the next question comes from you.

Horst Schneider from Bank of America. I've got a few questions.

The first one relates to the hedging gains that you have reported for Q1. And I still ask myself, what is the midterm consequence of these hedging gains?

I mean, for this year, we say it's largely noncash effect that we should ignore it. But midterm, there seems to be a competitive advancement because there are some carmakers, which do not hedge raw materials at all.

So therefore, I want to understand how Volkswagen wants to make use of this competitive advantage. For example, as of 2023, would you rather aim for a market share strategy where you can offer the cars at a cheaper price?

Or you rather want to maximize this margin to a larger extent as of 2023? And then the other question on EVs is we have learned last year about your price assumptions for batteries that you are aiming for less than EUR 100 per kilowatt hour on the battery price.

It seems to be unrealistic by now. As said, you are hedged.

For the short term, you are fine. But then, I don't know, midterm, long term, it should get a problem, not just for you but for the industry in total.

So do you think that all these projections that industry can fully electrify by 2030 are still realistic? And how can that be compensated now, the cost disadvantage on the battery?

And the last question, sorry for that, is on -- again, on the midterm targets, 2025, and you talked about this 8% to 9% EBIT margin target. Then you never announced or said what underlying volume assumption you have on that.

And now we see that IHS is lowering the volume targets, although the volume projection significantly for the market. So is there a risk that we should put this 8% to 9% margin target in question?

Or you can compensate that just with a higher price?

Yes. Well, thanks for the question.

First, the hedging. I mean the hedging gains, first and foremost, show how within our, I would say, system of making our business robust works.

And -- but as you're very well aware, this hedging gain basically compares all our hedges over the next years, next 4 to 5 years, with our hedging prices versus the actual prices. And so it will basically -- the gains will come if the prices would stay like that, but it's over a rather longer period of time.

It's not only the hedges for 2022, as you are aware. Yes, price assumption, yes, we have to monitor that closely, what it means.

And of course, it depends on -- basically on this lithium, lithium carbonate and hydroxide and nickel. And we have to monitor that on a medium and long-term basis.

There are some hedges, yes. But at the end of the day, in the long run, we have to monitor that.

But still, we think our original, I would say, guidance of margin parity in 2 to 3 years, we still keep that up. First and foremost, we gain scale on a global basis.

We ramp up the MEB in Europe. We ramp up the MEB in Chattanooga.

With Ford, we bring additional volume and scale on our platform, and we ramp up the MEB in China. Customer demand is strong.

People are enthusiastic about our cars. Pricing is strong.

So we still think there is a chance to meet that margin parity. There might be the necessity to price some of the material cost increase in the future.

But we still predict that we can improve -- achieve that margin apparently. Yes, it will be a little bit more difficult.

Yes, there might be a pricing element to that as well. But we are still optimistic for our BEV sales in 2025 and also in 2030.

And last but not least, our EBIT target of 8% to 9%, midterm 2025, 2026 still holds. I mean, if you look at robustness we gained so far, yes, we lost quite some volume unfortunately last year, and we lost also quite some volume unfortunately in the first quarter of this year.

And still we achieved, I would say, an underlying margin of 8% if you take out the hedges. So that gives you a glimpse and that we are really working on resilience.

We are working on the robustness of our business model, and pricing on the cost side at the same time. So we keep our EBIT margin for 2025, 2026 intact and then perhaps there might be even a little bit of upside, but this is too early to say.

Thank you, Horst. And the next question comes from Charles Coldicott from Redburn.

You mentioned how lengthy your order books for electric vehicles is becoming. I mean, in some cases, more than a year.

In light of that, how are you managing the pricing process given the battery cost inflation that we're seeing in lithium, nickel and other materials? Can you raise prices on those orders dynamically?

And perhaps on that note, maybe you can remind us what the profitability of your BEVs is today relative to the combustion engine equivalent models?

Actually, no, we can't. We stick to the prices we sold the cars.

But we have to say we sold them well, because at high margins, we didn't discount any of our cars. There were no sales incentives program.

So we are robust. And once we're already into now in some European markets into '23, and then whenever we have a model year change, we are reconsidering the pricing.

This is going -- this is what you're going to see in the market.

Yes. Charles, as Herbert said rightly, we -- price increase will only come through like later on due to the order book.

But on the other hand, as said before, there are also some of the hedges that are relevant this year, which are also in parallel. So once hedging ratio naturally reduces over time, then the price increase will come through and that will hopefully stabilize the margins.

We don't want to, at least for the time being, disclose margins by car for competitive reasons. I think that's clear.

But hopefully, the indication should be okay that we still stick to our target of margin parity in the next 2 to 3 years. But as said before, there might be the one or the other price step now included in that equation.

But as said before, we stick to our principal target of margin parity.

I think it was also a good sign if the competitors are able to raise prices quite significantly. It should give us a certain umbrella for us also to follow suit.

Thanks, Charles. The next question comes from Harald.

Harald from Morgan Stanley.

Two quick questions. Just staying on the whole BEV and pricing thing.

I'm starting to get a little bit worried about how we get to 50%, 60% penetration when the price of BEVs is so high, right? The price of BEVs in Europe, ASPs are like 50%, 52% above the ASP of normal ICE cars.

I now, on every single conference call, hear CFOs talking about raising prices, raising prices, all costs are going to be reflected in raising prices. As you know, I've done this nearly 20-odd years.

This is not a normal situation in the car market. So I mean, especially Herbert, I'd love to hear your perspective on why consumers are willing to pay these higher prices, both on ICE and then even more so on BEV.

And do you believe, also with your profitability prediction, that people are to continue to pay 50% more for BEVs going forward? It seems that that's a very big ask for consumers who are anyway under enormous pressure right now from inflation from higher rates and all of these things.

I'd love to hear your perspective, please?

Actually, it's not 50% to 60%. And if you make the comparison from the consumer perspective, which we already did in some of the markets, and you would compare now on ID.3 with a, let's say, Tiguan, as a sales option or with Tiguan -- even with Tiguan as in hybrid, you come to the conclusion that the current pricing, in the current energy prices, the BEV already has a running cost advantage per kilometer of around 20%, 30%, depending on the market conditions, on how expensive fuel and energy is.

So there is a pricing potential indeed. In the hands of the customer, the electric car is already cheaper, the leasing rate.

Residual values are higher, at least as a first experience in -- because maintenance cost is lower over time. It's a high demand for the EVs.

So all in all, it seems to be still, even with the higher battery costs, a good deal for the customer to go into EVs. And considering the stability of the value residuals, probably even more so.

Yes, there is a fear that if EVs can get cheaper, than you can't penetrate certain segments which you would need. Because to aim at 50% EV rate, we have to get into the small car segment, in the, let's call it, Polo, or T-Cross segment, and there will be a hurdle.

But the next generation of platform, we are bringing forward then with LFP batteries, with probably a little bit lower range, once again, are opening up this price comparison. And also there -- those cars will be cheaper in the hands of the customers and the ICE cars.

And at the same time, you have to see that also ICE cars are becoming more expensive because of fuel prices, because of also the precious metals in the -- mostly in the catalytic converters, and we have to spend more for Euro 7. So this close is, even with the high cost for batteries, which we are working on, will get closer.

And in the hands of the customer, the EV is just the better choice. It's better.

I'm not at all fearful. I always was skeptical.

Will we be by 2030 at 100% BEVs? No.

We said 50% to 60%. And I still think that's a very robust plan forward.

I also would see the raw material costs at some stage coming down again because there's a lot of speculation involved now. The production cost of the raw materials is much cheaper.

It's, I would say, 1/3 of the actual prices. So it's a lot of, let's say, capital market influence there.

So I'm convinced that we can achieve 60%. And it makes sense for the customer, it makes sense for us, you hear it also on the margins of some of our peers.

So it's going to work out like we predicted.

Thank you, Harald. We are approaching the end and have 2 additional questions here in the queue.

Tom, you would be the last before the last question.

Tom Narayan, RBC. First, does having your own captive battery supply provide an advantage as battery raw material costs increase?

Or does it help everybody the same? And secondly, there's some news that Stellantis is buying the car-sharing business from Mercedes and BMW.

And it would appear that premium operators are focusing more on maybe private car ownership and away from mobility as a service operations, referring, of course, to ridesharing, car rental in the future to, of course, robotaxis. Maybe you could share how you think about this distinction as it relates to your different brands.

Would they be focused more on your Volume segments? Or would you also adapt them to your Premium and Sports brands as well?

First of all, I have to say we are not yet captive. All our batteries, we are currently using are sourced in, and this is probably until '25, I'd say, the case for 80% or 90% of the batteries.

So we are depending on the major global battery manufacturers. And only then, we are becoming step-by-step more captive.

Yes, we see an opportunity there because we're not only investing in the assembly or in the manufacturing plants for the batteries, we are also deep into the value chain of the batteries, getting down to mines, establishing long-term sourcing contracts, also discussing partnerships for anode materials. And we will try to pick the best big bits and pieces of the value chain to make sure that we are competitive and we can keep high margins and the necessary scale in batteries.

We do that also because it allows us to standardize the batteries, to standardize the battery cells, which we wouldn't be able to do with external suppliers. So we think it's the right strategy towards 2030, but until '25 or '26, it's -- you can't call it captive strategy.

Then Europcar, it's an interesting question, I have to say. We are convinced that Europcar or car rental provides an excellent platform to grow and then consolidate, integrate further new bits and pieces of the mobility business.

I would say, a clear case is sharing, because sharing and rental is very complementary. You can use the same car in both systems.

The car would have once rental option and on the -- probably on the weekends, the sharing options within the week. It's very complementary also when it comes to season, you can just make better use of the car and some of the peers are playing that game.

I wouldn't say this is a Volume or a Premium game because also in the rental or, let's say, shared mobility business, people would ask for a Premium choice, which we also are going to prepare to offer. So we will have branded services from this platform, which might apply to Audi for Audi customers, and which will be tailor-made for Audi customers.

So I wouldn't, let's say, separate between Premium and Volume. It's just becoming a very relevant and important business and combining some of the businesses, sharing rental short-term lease, Arbor model -- [ Arbor ] kind of rental model fleet business is, for us, we see there a huge potential for, let's say, making more usage of the cars and so getting more competitive in comparison to anyone who is doing only rental or only sharing.

And this is why I probably understand also that some of the people -- some of our peers [ deinvest ] because they are not prepared to go the other mile to do the entire bit. This will be consolidated.

So the last question now before we conclude this call, best for last, Michael, the floor is yours.

I have 2 questions. With regard to the EUR 3.5 billion gains on derivatives.

First one is can you give us an indication that this will turn into a burden in your P&L, for example, when you have to pay the higher commodity prices? And the second one is, could you please explain the difference between the EUR 3.5 billion mentioned and the EUR 2.4 billion shown in the EBIT bridge?

Yes. The difference between a EUR 3.5 billion and the EBIT bridge number, there are basically 2 reasons.

The first one is there are also effects year-on-year. And second, not all of the effects on the EUR 3.5 billion are in the EBIT bridge in this bucket.

The majority of that is in there, but not all of them. So basically, if you want like the EUR 3.5 billion then translate in -- with that figure into the EBIT bridge.

And the first question...

The second one was one -- when do the higher raw material prices hit our P&L?

I mean they hit us already with the 0.6%, as I said. And so we expect quarter-by-quarter now to -- that's even a little bit higher.

And this was basically the guidance when I said, we shouldn't expect -- we shouldn't be surprised if that piece exceed the EUR 3 billion for this year. And the hedges, like, of course, they work against that with some of the hedges relevant for this year, a lot of hedges for the following years.

But for competitive reasons, Michael, hopefully, you have understanding for that, we don't want to disclose further details on our hedging. .

And maybe last, not least, we will not stop hedging. So of course, we will -- according to our planning, when we get the new planning rounds, we will, of course, look and safeguard as part of our risk management, also future price risks.

So it's very difficult actually to limit this now down to the EUR 3.5 billion. But as Arno has said, it's the year-over-year effect.

And if you see that we had last year also EUR 600 million positive from that derivatives and then you can make and bridge the gap. I hope, Michael, that answered your question.

So let me wrap today's call up. Thank the 2 gentlemen, yes, and thank also the participants for a very vivid discussion.

Next time, we will hear from each other, as you know, is on the occasion of our half year results. We have informed you that we will postpone the Capital Markets Day because we currently fully concentrate on the potential Porsche IPO.

So George, it will be likely after the summer break when you hear on the new opportunities we have from software revenues per car. And with that, I would like to conclude today's conference call.

If there is any question unanswered, please contact the IR team here in Wolfsburg, and we are very much looking forward to speak to you again before the summer break. Thank you.

Thank you.

Okay. Thank you.