Operator: Good day, ladies and gentlemen, and welcome to the Volkswagen AG Live Audio Webcast and Conference Call on the First Half Year Financial Results 2020. For your information, today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Helen Beckermann, Head of Group Investor Relations for Volkswagen AG. Please go ahead.

Helen Beckermann: Ladies and gentlemen, welcome to Volkswagen's Conference Call for Investors and Analysts on the Results for the Period January to June 2020 based on the half year report we published early this morning. For today's conference call, I'm delighted to be joined by Frank Witter, Member of the Board of Management, Volkswagen AG, responsible for Finance and IT; and also Interim Board Member for Group Components and Purchasing and also Director of Group Sales, Dr. Christian Dahlheim. Most of you will have followed the webcast from this morning's press conference. Our focus now is to cover your specific needs as investors and analysts.

Following the presentations, we look forward, as always, to take in your questions. So let me now hand you over to Frank.

Frank Witter: Thank you, Helen, and a warm welcome to all participants on this call. First and foremost, we sincerely hope that you and your families are remaining healthy during these ongoing unprecedented times. We have now all had a couple of more month’s experience in dialing -- dealing with COVID.

As you can see from our H1 performance, it was a different -- a difficult second quarter, but we are seeing definite signs of recovery and normalization. We have spoken quite a bit with you guys during the last quarter, and I mentioned ugly in our meetings. Q2 was difficult, but it did come in somewhat better than originally anticipated as month-by-month the recovery progressed. In parallel, we have pushed the organization to its limit. I'm personally quite happy with our crisis management and the outcome achieved so far.

We provide for a safe working environment. And in areas like working capital management and fixed cost reduction, we have moved the needle significantly. Before we dive into the details of H1, I feel it necessary to address past. I would like to talk about the recent management developments and organizational changes. I'm probably the first one to admit that the structure within our organization is quite complex compared to most of our peers.

It is never easy to balance the interest of all stakeholders, especially when you keep in mind the magnitude of change and the consequences involved in such a transformation like the one the entire industry is going through. Of course, it is unacceptable that so much internal information is leaking outside since this clearly does not help our progress. I've said on many occasions that rumblings and smoke coming from Volkswagen is a clear sign of necessary and somewhat difficult negotiations. The most important message is that the Board of Management and the Supervisory Board are aligned in what we need to accomplish together. Herbert Diess is in the driver's seat in order to execute our strategy.

Believe me, there has been no change in his level of ambition and push for improvement. In relation to the recent changes we've made in several key positions within the group. In an organization, the size of ours, from time to time, it becomes necessary to make those management changes. As our strategy evolves, focus areas shift, certain roles develop further, different competencies are required. With the new management team, we are confident that we will deliver what's required.

At the very same time, we would like to thank the colleagues who left their positions, and we are very grateful for their lasting contribution. I would now like to talk about dividend. You have already seen our press release from this morning. We have announced that the AGM will take place on September 30 as a virtual meeting. We have also communicated a revised proposal for the dividend payout relating to the business year 2019.

I would like to shed some light on this, in our view, very balanced decision. This decision has not been driven by any lack of financial robustness. Over the last 2 years, we have focused on delivering consistent results and improving our performance. However, this year, we are still operating in an unprecedented situation, and no one can argue that COVID has disappeared. It is still extremely difficult to make reliable forecasts or really predict the severity and duration of the crisis and the subsequent levels of sustainable recovery.

The now proposed €4.80 per ordinary share and the €4.86 per preference share corresponds to the same absolute level as the payout last year and equates to a dividend payout of slightly over 18%. We also proposed to the AGM that the remaining retained profits of €855 million will be carried forward to the new account. Without any doubt, ladies and gentlemen, we still remain fully committed to our strategic target of at least 30% payout ratio as soon as this becomes feasible. Now let's shift our focus back to the H1 performance. As you are well aware, customer demand was heavily impacted in Q2.

Our deliveries to customers saw severe declines in all regions and were, in total, down around 1.5 million units year-on-year. The knock-on effect caused revenue to decline by over 23% year-on-year to slightly above €96 billion. The operating result before special items came in at minus €0.8 billion. Impacts from the measurement of fair values of derivatives and exchange rate effects are included within this figure. For the first half of the year, the fair value of commodity derivatives had a negative impact of €0.7 billion and currency translation also burdens the result by further €0.2 billion.

On the other hand, a one-off windfall profit of around €0.8 billion relating to the Ford Argo transaction was booked. This was due to the fact that the transaction value of AID at closing, which was incorporated into the joint venture, was significantly higher than the book value. In Q2, it was necessary to book special items of negative €0.7 billion, the entire amount being related to the diesel issue and related legal risks. Debt equity result for the 6 months period, mainly relating to our Chinese joint ventures, was €1.2 billion, reflecting the proportionate operating profit of €1.4 billion. For the 6 months period, profit before tax came in at negative €1.4 billion.

The reported automotive net cash flow came in at negative €4.8 billion. Clean net cash flow was negative €2.3 billion, taking €1.6 billion diesel outflows and around €0.9 billion cash out for M&A activities into account. Automotive net liquidity amounted to a very robust €18.7 billion. I will take you through the details in a very few minutes. Before that, let's take a closer look at the sales side, so I hand you over to Christian.

Christian Dahlheim: Ladies and gentlemen, I would also like to extend a warm welcome to this conference call and present to you the sales results of the first half of this year. The corona outbreak surely left its mark on the whole automotive industry and negatively impacted our brand's delivery results in both quarters. However, we saw a clear positive trend in Q2. As a result, the Volkswagen Group delivered a total of 3.9 million vehicles to customers worldwide in the first half of this year, a minus of around 27% compared to last year. Our premium and especially luxury brands were less affected than our volume brands in the truck and bus division.

The Volkswagen brand delivered nearly 2.2 million cars worldwide, a drop of around 27% compared to the prior year. The deviation is mainly due to corona-related declines in China in the first quarter and the further spread of the virus in other core regions. The gradual recovery in China as well as the successful market launch of the Jetta brand, partially compensated the declines. ŠKODA delivered nearly 427,000 vehicles to customers, 31% down versus last year. This decrease is impacted both by the collapse of the Chinese market in Q1 and the European markets as of March.

SEAT deliveries fell by 38% to a total of 193,000 vehicles. SEAT suffered from high declines in the core European markets with the domestic market in Spain as well as Germany accounting for particularly large share. Volkswagen Commercial Vehicles delivered around 164,000 vehicles to customers, minus of 37%. Around 80% of the decrease were also caused by the European corona crisis. The rest came from Algeria and South America.

Year-to-date, Audi delivered 707,000 cars, a decline of 22%. Again, the pandemic impacted deliveries in China in quarter 1 and as for March in all other core regions. However, in China, the brand showed a noteworthy recovery delivering the strongest-ever results for May and June. In South Korea, deliveries rose significantly compared to the prior year, which was affected by temporary sales stops. As a result, Audi almost returned to the prior year's level in the Asia Pacific region.

Porsche's deliveries shrank by around 12% to 117,000 vehicles. After significant declines due to corona in February in China, sales were then hit especially in North America and Western Europe for March onwards. In the month of April, almost all Porsche centers were closed in these markets. Thanks to very positive development in the Asia Pacific region, deliveries almost reached the prior year's level on a year-to-date basis, partially compensating for the corona-related losses elsewhere. With 4,900 cars, Bentley recorded a plus of around 3%.

The worldwide introduction of the new Flying Spur led to a positive performance in Q1. While deliveries in the second quarter could be maintained at the prior year's level despite the corona crisis, thanks to good results in North America and China. The first half year, the truck and bus division recorded a total of around 708,000 vehicles, decline of 37%. Europe alone accounted for 80% and South America for around 14% of this decline. In a difficult market environment, Scania's delivery fell by around 41% and MAN's by 34%.

Let us now take a look at the performance of our deliveries to customers on a regional basis with a focus on the year-on-year development throughout the last months. The North American regional deliveries fell by around 26% along with the market. After Q1 delivery performance turned negative in March, the coronavirus led to a total decrease of 38% in the second quarter, with April marking the lowest point in the region. However, May and June witnessed a rebound of customer demand as lockdown measures have been eased and operations and production dealer sites have been resumed successively. In the U.S., our year-on-year performance climbed from minus 43% in April, to minus 19% in June, with Porsche nearly reaching last year's results.

In Canada, June sales almost reached the prior year's levels. Western Europe passenger car deliveries recorded a minus of 38%, while the total market dropped by 40%. In Norway, the tense environment, all main markets were hit by corona as for March. Slumping demand and strict lockdowns affected deliveries of Q2 strongly, especially in the month of April, which alone was down by around 80%. Again, with the beginning of reopenings and relaxations of regulations, our delivery performance improved in May and June, albeit on a low level and varying by market.

In June, our total deliveries were down by 30% and more than 70% better than May despite shifting effects in Germany due to the announced VAT cut and incentives, and that exceeded our expectations. In Central and Eastern Europe, deliveries declined by 26% along with the market. All markets were affected by COVID-19-related lockdowns. Additionally, Russia faced a significant decline in oil production. After a positive Q1 performance, Russian deliveries dropped by around 60% in April and May, but have seen a strong rebound in June with only minus 13% below last year's figure.

Year-to-date, we have increased market share in the region's most important market. Deliveries in other core countries such as Poland and the Czech Republic showed similar recovery progress during June as borders were reopened and restrictions were lifted further. The South American region deliveries decreased by 34%, while the market recorded a fall of 41%. After a slightly positive Q1 performance in Brazil, sales dropped by around 60% in Q2. April and May deliveries were strongly affected as the coronavirus spread and lockdowns were implemented.

June deliveries showed an upward trend as restrictions on economic activities and social life were loosened. 80% of our dealerships have reopened under limitations. In Argentina, delivery shrank by 34% year-to-date with a rebound above prior year's levels in the month of June, albeit at a low base. By mid-June, more than 80% of Volkswagen dealers were already opened. In the Asia Pacific region, our deliveries shrank around 17% year-to-date while the total market declined even more.

Despite the impact of COVID-19 in China leading to a negative Q1, we saw a steady trend of recovery while dealerships were reopened and production went back to normal levels. Thus, in April and May, we were able to grow our deliveries significantly. In June, deliveries were only slightly down, around 4% versus prior year. This was expected due to higher sales in June 2019 related to the change of emission standards. Therefore, we do not see this as a sign of a slowdown.

We ended Q2 with a positive year-on-year growth of nearly 1%. Our core brands showed great resilience despite the pandemic effects, and especially Audi, Porsche and our new Jetta brand delivered an excellent performance. Moreover, our SUV strategy has remained a key area of success with a 9% growth. Our Volkswagen brand consolidated its #1 position. Therefore, we gained market share of more than 1 percentage point in the first half of the year, and we plan to maintain this market share gain.

In summary, we see a recovery trend on a month-by-month basis coming from the record low in April with different speed and degree in each region. The recovery is led by China with growth since April. Europe showed a very positive trend in June. We have outperformed the market each month of Q2. However, as we all know, the speed and degree of further recovery depends largely on the further extent of the outbreak or containment of the virus and its effect on the global economy.

Individual market financial strength, the state of the health care system and appropriate governmental countermeasures play an important role in this. Any projections on market and sales development, therefore, remain highly volatile. Several markets were hit harder than previously anticipated, affecting mainly the economic situation in short- to medium-term demand. Yet steadily progressing relaxation of corona measures and subsidy programs in the markets give cause for further optimism. The demand will continue to increase from July onwards.

As of today, we expect the global market decrease in a range of 15% to 20% for the year 2020. Our forecast for our deliveries to customers should be slightly better than the total market development. This is based on our strength in China and a strong and new product portfolio with a noticeable increase in SUV share, broadening range of new electric vehicles and many fully renewed models. The worldwide recovery momentum and market share gains confirm this. In Western Europe, we see a positive trend in incoming orders that have already reached the previous year's level in a single month of June with orders in Germany already climbing noticeably above June 2019.

As delivery figures for July are now starting to crystallize, it looks like it could be possible to reach a single-digit deviation versus the prior year and this month. Moreover, we can count on a strong and agile dealer network with enlarged online sales capabilities. I cannot and do not want to end without mentioning the launch of the ID.3. We're entering a new era of electromobility. The ID family will be a game-changer.

The launch will be in September, and consumer interest is high. The ID.3 first edition will be delivered firstly to prebookers and is now also available to order since last week. This is the first half of our new dedicated MEB platform, which will be subsequently rolled out worldwide and which will play a crucial role in achieving our goal of 5% to 6% per share in EU28 this year. We will follow our MEB-based product offensives with the ID.4, the Audi Q4 e-tron and the ŠKODA Enyaq. Now back to you, Frank.

Frank Witter: Thank you, Christian. Now moving on to the analysis of operating profit. Firstly, to give you the bigger picture. Since mid-March, we have been in full-blown task force mode and are utilizing any countermeasures we have to stabilize our business. Nevertheless, the crisis has also been a trigger to enable us to dig deeper and to challenge the organization even more.

This involves stringently reducing costs further and cutting budgets back in all areas like external consultancy or marketing. At the very same time, we make no compromises on costs for safety or legal requirements or critical investments to secure our future. Of course, we continue to push for synergies throughout all the brand efficiency programs with even stricter steering of the brands and continued discipline with our platform rollout. We are making strong progress on several new initiatives like lead engineering. This focuses on bundling responsibilities from several brands into 1 lead brand with the aim of reducing complexity and variances.

A further area of focus is 0-based budgeting, where we have implemented challenged boards throughout the highest levels of the brands that make hard decisions. Any spending must be justified and do-nothing scenarios are going through. Now digging into the detail of the bridge analysis. Not surprisingly, COVID-19 had the biggest negative impact on volume mix price as we sold 1.2 million, excluding China in trading units less than the comparable prior year period. Pricing was clearly positive in the range of €1.6 billion, with mix on a similar level to the prior year.

Exchange rates and derivatives in total at the end of the first half of the year came in at negative €1.5 billion. The main drivers were the fair value measurements of derivatives, especially for commodities and negative exchange rate effects. Product costs are also slightly negative with minus €0.4 billion as lower volumes were produced versus last year. Fixed costs were positive at €2.1 billion, driven by the counter measures already described. Please note that the one-off profit relating to the transfer of AID into the Argo joint venture of around €0.8 billion is also included in this block.

I will cover Commercial Vehicles, Power Engineering and Financial Services in a moment while discussing the individual brand's performance. The Volkswagen Passenger Cars brand closed the half year with an operating loss of €1.5 billion. The reduction in fixed costs could not compensate for the 40 -- for the some 40% lower sales and the subsequent revenue decline of 35%. The NAR region and especially the Latin American region were painfully hit by COVID, while the Mexican factory was closed the longest with the knock-on effect on the U.S. market.

Certainly, we expect the brand's operating profit for the full calendar year to be positive. Audi also had a tough first half and came in with a predominantly volume-driven loss of around €0.6 billion This was despite booking a triple-digit portion of the windfall from the transfer of the Audi subsidiary AID to Argo. For the first half of the year, negative impacts from the fair value of derivatives and currency effects amounted to in total €0.6 billion. Whilst premium demand recovered better than volume, issues like the extended closure of the Mexican factory, which prevented deliveries of the high-margin Q5, burdened the result. With the arrival of Markus Duesmann, Audi is reinventing Vorsprung durch Technik.

However, translating this into premium margins will not happen overnight. Audi is going to push hard starting with the second half of the year. For this calendar year, we assume that the current operating loss in H1 be turned into a profit for the full calendar year. ŠKODA came in with a positive result of €0.2 billion. The solid of level volume recovery, especially in June, softened the COVID impact.

SEAT could not avoid the loss of around €0.3 billion in the first half of the year. The severe volume loss, especially in Spain and other relevant European markets, were the cause. Bentley was also in the loss zone at around €0.1 billion. Please take note that costs for restructuring, including headcount measures, of around €45 million were booked in the second quarter. Porsche delivered a strong double-digit margin of 10.2% as super premium performed significantly better than the other segments.

Solid volumes, positive mix and the good recovery in China were the main performance drivers. Volkswagen Commercial Vehicles operating result declined substantially to around minus €0.3 billion as revenues declined by 35%. Volume losses and higher CO2-related costs were the drivers. Scania was still positive at around €0.2 billion in the first half. Reductions in fixed cost and the resilient service business helped to compensate for the volume decline.

MAN Commercial Vehicles declined to a loss of €0.4 billion largely on account of the reduced volumes. As you are aware, we have recently announced significant restructuring measures that will involve a severe headcount reduction. The result of Power Engineering was more or less half to €21 million, a relatively stable revenue stream and mix helped stabilize the performance. Due to the current framework conditions, the sale of Energy Solutions is currently no longer feasible. Instead, we are striving for a significant restructuring program that will also involve the reduction of a couple of thousand in headcount.

The ever-volatile other line came in only at around minus €0.3 billion mainly driven by less elimination of intercompany profits as inventories were significantly lower, also from fair value measurements and the remaining part of the AID transition. Financial Services booked 17% less contracts in the period. However, the quality portfolio kept operating earnings at a solid €1.2 billion, not far off the prior year level. Provisions for COVID-driven residual value and credit risks increased in the first 6 months by roughly €0.5 billion. We continue to monitor the situation very closely.

Unfortunately, COVID-19 didn't just hit EBIT, it also left its mark on cash. The reported net cash flow for the first half came in at around minus €4.8 billion. As you may recall, we already had a negative reported net cash flow of minus €2.5 billion in Q1. In Q2, we reported a further minus €2.3 billion, which is not too bad considering the much more severe volume loss in Q2. On a positive note, the impact was much less than feared a few weeks ago.

The rebound of sales, especially in June, combined with strict cost and investment discipline helped to avoid a more severe cash burn. Furthermore, discipline in working capital management was also crucial to preserve cash. We reacted quickly by putting the brakes on production in mid-March. After the lockdown, we curbed production so that less vehicles were produced and delivered in the period as we focused on build-to-order in most factories in Europe. This meant that we could significantly reduce inventories to avoid overstocking.

The brands also -- are also pushing to below ideal stock levels for year-end, and our national sales companies are optimizing lead times. This should ensure that we should see a further decrease in absolute inventory level by year-end. With the staggered restart of production, payables began to rise in Q2, also driving the working capital improvement. We do expect payables to normalize as the year moves on. It's quite difficult to forecast the dynamics of receivables and payables since we are operating in quite unusual cycles.

To build the bridge to clean cash flow, diesel payment of around €1.6 billion in the first half need to be considered. The outflow related mainly to settlements with customers in Germany and other legal costs. The M&A activities amounted to about €0.9 billion covering, amongst others, investments in diconium, Northvolt and Ford Argo. So all in all, cash management went quite well. And it is now on us to work as hard as possible to deliver an underlying positive clean net cash flow for the full year as promised.

Moving on to CapEx and R&D. CapEx at €4.1 billion corresponds to a CapEx ratio of 5.4% in the first half, which is above the 4.9% as of last year. However, please bear in mind that the ratio increase was only driven by lower sales revenues. In absolute terms, CapEx is over €1 billion below last year. This clearly demonstrates our investment discipline.

Also, total research and development costs, or as we call it cash spend, came in at €0.3 billion below prior year at €6.7 billion. Nevertheless, we have not compromised on our e-strategy, digitalization or software development, which are necessary to safeguard our future. Capitalized development costs came in at around €3 billion versus €2.3 billion last year, mainly reflecting the progress in our e-strategy offensive. We are continuing to prioritize all projects and canceling or postponing where possible. Since we still have limited visibility in the coming months and knock-on effects of COVID in the next years, our CapEx and R&D discipline will continue with full force.

For the full year, we expect the absolute amounts for both to be significantly lower than 2019, albeit the ratios were somewhat distorted since turnover for the full year were significantly below 2019. Moving on to automotive net liquidity, which came in at €18.7 billion at the end of the first half. This number was even higher than at the end of Q1 where we recorded €17.8 billion. With a priority on safeguarding liquidity and protecting our credit ratings, we issued a hybrid bond of €3 billion in Q2. We also received Chinese dividends of €1.5 billion in Q2 with about €1.5 billion more to come in the second half of the year.

And finally, moving on to our full year outlook. We are sticking to the guidance which we gave at Q1. The situation is still very fluid and giving ranges would give you a false sense of accuracy. Even though we have a more positive view on further recovery and normalization, no one can rule out a second wave of COVID or reliably forecast the developments to come all over the world. The pace and extent of recurve is still an unknown and significant risk still remain relating to consumer behavior and economical developments.

We should also keep in mind that there's a significant amount of volatility in Europe, for example, since a hard Brexit is looking inevitable. As already mentioned, the North American region will be difficult and who knows how election campaigns will influence the economy there. Furthermore, Latin America looks to be the biggest challenge, and it seems to be heading in a direction that will result in a slower recovery than the rest of the world. On the other hand, the China rebound certainly continues to prove what can be possible. Importantly, you can see significant progress on our capital allocation, and we are stepping up on various restructuring programs that will give us a stronger structural base.

To finish up for now, rest assured, we have not written off 2020 in any way, and we will fight for the best possible results. We will continue to focus hard on more improvements regarding CapEx and R&D and in all cost categories as already demonstrated in H1. Please keep in mind that I have to phrase things a little different in a press call like this morning. Now let me hand back to Helen for our Q&A round.

Helen Beckermann: Thank you, Frank.

Thank you, Christian. We will now take questions from investors and analysts. Operator, I'll hand back to you.

Operator: [Operator Instructions]. We take now our first question from George Galliers from Goldman Sachs.

Oh, my apologies. We now take our first question from Dorothee Cresswell from Exane BNP Paribas.

Dorothee Cresswell: It's Dorothee from Exane. My first question is just around China. It sounds like demand has come back really nicely there.

But I'm wondering, is that just pent-up demand? Or do you think it's a bit more sustainable than that? And maybe you could differentiate a bit between your impressions from the premium side of the market and also the volume or mass market side of the market? And then my second question is around labor cost. We've seen some of the other auto players and suppliers were recently negotiating a temporary reduction in working hours with wages adjusted accordingly. And I'm just wondering whether that's something that you might consider in VW as well?

Christian Dahlheim: Yes. Thanks for your question. Let me take the question on China first.

First part of the question is that are we building up stock, that's what you're essentially asking. Now we think there's a structural demand that is strong and healthy after lockdown. There is increasing consumer confidence, so we see that as sustainable recovery. And I think that can be best explained if you look as you're asking both for premium and volume. Let me start with premium.

I mean obviously, the typical buyers of our premium brands, are certainly less affected by the economic consequences of the recovery. So that is just a stable demand we see there. And if you look at the volume side, I think it's interesting to observe the excellent performance of the Jetta brand. As you know, due to the COVID crisis, of course, people have a larger interest into owning their own vehicle. And in China, still about 60% of our buyers of the Jetta brand are first-time buyers.

So these people, I think, take the step to actually buy a new car, and the COVID crisis certainly facilitate that process because everyone has an interest to be able to own their own vehicle. That helps on the volume side.

Frank Witter: Dorothy, yes, first of all, we obviously closely watch what the others are doing. We have very flexible working schemes available with time account. But this was obviously also a question this morning.

Maybe it didn't get to everybody's attention on the side. We reduced headcount on the group level by 6,500 people versus December 2019. I think that's definitely a sign that the programs, which we agreed upon quite a while ago, just to name 2 brands, Volkswagen Passenger Cars with the future [indiscernible] where we agreed-upon that over time, on a net basis, roughly 14,000 people would leave the company. And the road map for digital transformation is another indirect labor in the range of 4,000 people. We have similar programs for Audi with the Audi transformation plan and Audi future -- or the future, I think, is accounting for roughly 9,500 employees until 2025 to be reduced.

So I also mentioned the upcoming restructuring negotiations, which are certainly very difficult and sensitive for MAN truck and bus and MAN Energy Solutions. Both of them will mean significant absolute headcount reductions. They will cost money, but we have not finalized the negotiations. But that's the reason why I'm a bit shy and sensitive in the way we address those questions because I can very well imagine how different answers this morning would have related to certain headlines, which would have meant pouring oil into the fire. And we will continue to push hard also on those levers.

We have flexibility in instruments. We have pre-agreed-upon transition plans and headcount reduction plans. So for the very moment, we feel delivering on site agreements, and commitments is the first priority, and obviously, getting those restructuring programs signed and sealed in the second half of the calendar year.

Operator: [Operator Instructions]. We now take our next question from George Galliers from Goldman Sachs.

George Galliers: I know you said during your speech that it's very difficult to predict the dynamic between payables and receivables. Sort of the €3.8 billion negative working capital that you saw in the first half, do you have any insight into what that might look like on a full year basis? Could it be a 4-digit negative number? Will it be closer to breakeven? Could it even be positive is my first question?

Frank Witter: Yes. That is an extremely difficult one. Obviously, we have the details, and you've seen the changes -- I mean, when I talk about difficulties in terms of predicting, we have changes. We have significant lower buildup in payables, for example, mainly volume-driven.

Also, the receivables were heavily impacted by the sales volume. I think certainly, the more we normalize in the predictability going forward, Christian was obviously indicating that we're quite hopeful to get closer to sales and delivery numbers in the second half comparable to the previous calendar year and the second half. I'm definitely much more capable of predicting inventories, but the normalization of liabilities is something we need to see in the next 2, 3 months. I'm pretty sure that in Q3, I'll have a much better handle on the full year because these normalization periods after lockdown and then obviously ramping up production, that is always something which, to a certain extent, distorts the numbers at a cutoff date, and we need to see how it's shaking out. But as I said, quite comfortable as it relates, in particular, to inventories.

George Galliers: Okay. And the second question is -- and as a follow-up. If I look at your underlying free cash flow in the first half, it was minus €2.3 billion. If we add back the working capital, it would suggest that your underlying free cash flow ex working capital was a positive €1.5 billion in the first half. Particularly in light of your commentary around profitability of the Volkswagen brand in the second half relative to the first half, is it fair to say that the underlying free cash flow, ex working capital in the second half, should be materially higher than the €1.5 billion that you did in the first half?

Frank Witter: I wouldn't rule it out.

Operator: We will now take our next question from Stephen Reitman from Societe Generale.

Stephen Reitman: I have two questions. Returning to the cash flow questions, which I think is probably on most people's minds. You mentioned in your presentation, Frank, that the strong sales in June had a significant impact in reducing the cash burn you reported for the period. When did you start generating cash again in the second quarter? And how bad were you expecting the cash flow to be originally? And if you could give us some quantum of the improvement, that would certainly be helpful to get an idea going forward.

And my second question relates to China and the Volkswagen brand specifically. There's quite a clear difference in performance of the 2 joint ventures, excluding the impact of Jetta within FAW. Clearly, Shanghai Volkswagen is doing worse than FAW Volkswagen of the Volkswagen brand. So when do you expect the product momentum to improve Shanghai Volkswagen, which would have a big impact, I think, on your overall Volkswagen brand sales in China?

Christian Dahlheim: Yes. Stephen, let me take your second question first on China.

Yes, your observation is correct. We clearly have a difference in performance between our North and South joint ventures. Very satisfied and happy, about the positive performance in North. And you also mentioned the Jetta brand. We're certainly not happy with the performance in the South.

Yes. I would say it's a bit of a crystal ball, but we would expect that to improve in the second half, although we don't expect the gap between the two performances to decrease. So we'll probably look into 2021 when the product momentum kicks in, and then we expect to -- the South to eventually catch up.

Frank Witter: I think the cash development was in line with what we described to be the improvements on the sales side. So May, June was the first time after a painful April that we started to generate cash, clean cash.

Operator: We will now take our next question from Patrick Hummel from UBS.

Patrick Hummel: Patrick from UBS here. I'd like to touch on the ID.3. Christian, you briefly said that demand was initially strong or something along the line. I mean you called the vehicle a game-changer, and I would argue it's probably the most important to your investment case in the foreseeable future.

So come on, give us a bit more. Are you now sold-out for the anticipated production of 60,000, 70,000 units for this year? If I order a vehicle today, will I still get it in 2020? Or until when do I have to wait for it? And if I can just ask as far as the ID.4 is concerned. Would you confirm that the first deliveries to customers of the ID.4 will still happen before year-end? And I have another one then for Frank.

Christian Dahlheim: Yes. Patrick, thanks for your questions.

So first question, yes, we agree with you, it's probably the most important launch in a lot of years. Yes, if you order your car right after this call, you will still get it delivered this year. So we're not completely sold out, so you can still put orders in. But the order entry is coming at a reasonable nice level. So to give you an indication, about 60% of current orders are based due to the prebookers that we have already in the books.

We have a good conversion rate on these prebookers, as you know, who will get priority access on the first edition. We're confident if we look at the curve to reach the desired sales volumes. So I would say order entries waiting time would be about 8 weeks. But if you order today, you will still get sales by the end of the year. And the second part, the ID.4, we're cautiously optimistic we might get a few cars end of the year, but probably you would have to look at January.

We probably prioritize the ID.3 in order to keep the production lines running and then get that car out of the door until December.

Patrick Hummel: Okay. And my second question to Frank, as far as the cost topic is concerned, just to confirm, first of all, out of those €2.1 billion cost contribution in H1 in the bridge, you said €800 million needs to be deducted for the booking you had. But out of the remaining €1.3 billion, what is really sticky? What's really sustainable fixed cost reduction? What is of temporary nature? And the B part to my question would be, and it's sort of following up to what you already mentioned. If we assume that the new normal in 2021, at least in the Western world markets, looks, top line-wise, meaningfully below what we saw in 2019.

It feels like now is the time to accelerate cost-cutting efforts. You probably saw the announcements by Daimler. There's a lot of talk about them cutting up to 10% of their workforce, et cetera. We haven't heard much from your volume brands, particularly in that regard. I appreciate you need to focus on executing on the existing programs.

But do you think with a market scenario for 2021, that could be, I don't know, maybe 10% below 2019 or so that the existing measures and the things that get brought underway in the next few months will be sufficient to offset that volume decline?

Frank Witter: Yes. Patrick, I hopefully made it abundantly clear that cost cutting is a top priority for us, too. I think I mentioned earlier the program initiatives. I described in my speech that we're obviously bringing all cost control measures to the next level. Top Management Board level is involved in challenge board.

Certainly, the opportunity, which I described, is the restructuring of the 2 MAN entities, which is overdue and necessary. And we certainly would like to accelerate on agreed upon -- even with the volume brands, agreed-upon plans. But rather than speculating and steering up the fire in public, I can confirm that we have a close eye on headcount. We obviously have a freeze for nonessential positions. And if there are opportunities, we will certainly address them internally.

But you know about the sensitivity by putting the wrong headlines out that would rather slow us down than expedite as we deem it to be necessary. So yes, a crisis is also a window of opportunity, and we are aware of the fact. I also mentioned the progress we made since December 31 in terms of group absolute headcount even though we obviously, in some areas, in parallel, staffing up for the electrification, like the Zwickau Factory and Porsche for the Taycan. So there's obviously more headcount reduction in other areas to balance the act. From the fixed cost improvement, certainly, the assumption and the focus is to make a very relevant part of it to be sustainable and lasting.

Operator: Our next question comes from Tom Narayan from RBC.

Gautam Narayan: Tom Narayan, RBC. I just wanted to focus on Q2 for a minute on VW brand specifically. It seems as though the operating income ex specials was a lot softer than what I was expecting. And then when I do the math on Q2 deliveries for VW brand ex China, it was below market.

I know you mentioned Latin America weakness in your comments. Presumably, VW brand may have seen some softness in Q2 in Europe as well. Wondering if that was also below market. And if so, if that was in part due to maybe consumers waiting on stimulus in Germany, let's say, coming in July? And also on VW brand, I know there's some other items that drive the sales there, nondelivery-type items as well. Just wondering if that contributed to operating income at VW brand as well in Q2?

Christian Dahlheim: Yes.

Maybe quickly commenting on the performance of the VW brand in Europe. My two observations. Generally speaking, we've performed roughly in line with the market in Europe. Obviously, all of this is slightly influenced by our regional mix. And you're right, there has been some reluctance, in particular, in Germany, which was quite an extremely important market for us, particularly in May, while we had the intensive discussions on government incentives, yes or no.

Once this has been cleared and decided, even though there was no particular incentive advised, it actually helped to push up demand, which you see in the June numbers. As I've mentioned, June, order entries in Germany are actually above previous year levels, which, of course, you will only see in AAK as of July, August onwards. So performance, Europe, roughly in line with market. Obviously, South America has affected the VW brand numbers-wise. And that, of course, affects VW, in particular, because all other brands do not have significant volumes.

But as I said, positive outlook if you look at the order entry and order bank, which is actually above prior year levels in Europe, also for the VW brand.

Frank Witter: I think when we look into the volume brand like Volkswagen, we always need to take into consideration that the component business is included, after sales business and that we have an international and multi-brand production network. Particularly, brand Volkswagen has also a significant production for other group brands. So that is also obviously affecting the performance. I think I don't want to take too much away from my colleagues from Volkswagen Passenger Cars.

I think tomorrow is their call. And if you don't mind, I would ask you to address those specific questions. But I think the way I described the overall positioning of the brand is also producing quite a significant number of cars for other brands is one of the main levers. I think I also heard the question regarding another stimulus package in July. We don't build our plans on any incremental packages other than the ones which are currently in the market.

Operator: We will now take our next question from Tim Rokossa from Deutsche Bank.

Tim Rokossa: Yes. Frank and Christian, I would have two questions, one slightly longer for you, Frank. You and Herbert Diess care a big deal about the market cap of VW. You improved free cash flow generation to very, very nice levels.

You used complexity, 2 things your shareholders really care about, but your stock is still down 6% to 7% on a day like this. And as you put it, not so bad numbers when the market cap of Tesla versus literally everyone else is just continuing to go through the roof. So the market is clearly allocating capital away from the traditional internal combustion engine carmakers towards just BEVs and maybe some software knowledge. Yesterday, with General Motors, we discussed if they were willing to spin those new activities into a separate business. I don't think that would be reasonable for you guys.

But are you maybe at least willing to consider if there's a way to field and highlight the efforts that you are doing on the EV side, which will be sizable and also maybe on the software side, which will hopefully easily also be very sizable in somewhat of a separate unit, maybe an independent daughter company, for example? And then Christian, just quickly for you. Considering how big the EV incentives are currently in most regional markets, specifically also in Europe and how good they seem to attract customers, is it fair to assume the transaction price you're generating with them can be slightly higher than what you had previously anticipated or feared considering that demand is quite strong and maybe the discounts are not as high?

Frank Witter: Yes. Tim, let me start. I mean it's obviously a remarkable time. Market cap of VW, certainly, by no means, where we think it should be.

I think we obviously on other occasions talked about focusing on core business, core, noncore. So that question has not been forgotten, and Board of Management clearly is continuing to focus on that question. Cash flow is important. Dividend is important, you mentioned that earlier, something which we also continue to have a focus on. I think the EV story, I think -- I mean you know our strategy 3, 4 years ago when we started to define the road to a much higher electrification of our overall fleet.

Some people were very skeptical. I think people have much more comfort that we are able to deliver. Christian described the importance of the MEB platform just being launched and the array of product coming to market one after the other. I think, obviously, the software and the improvements becoming a software-enabled car company, these are elements where we have to prove, and we are getting closer to proof points, particularly on EVs. So I think that will help -- we have built up trust and belief in our capability to deliver at the end of the day within the margin range, which we indicated for 2025.

At the very moment, we have no plan for an independent daughter company. You know that we are, in principle, open to offer our technology to other OEMs like Ford with the MEB. And there might be more to come, we will see. And down the road, we also could imagine that the software stack might be available, but obviously, we are not that far compared to the hardware. So -- but very -- at this very moment, as it pertains to EV and software, no plans.

But I also wanted to make sure between the lines that we still feel that there's opportunity in terms of streamlining our organization.

Christian Dahlheim: Yes. Tim, just taking your questions on incentives. Maybe quickly put in perspective, obviously, you're right that lot of government incentives are packed to stable prices, for example, like the famous [indiscernible] in Germany, so there's some limitations of what you can do on price. But 2 things.

One, correct observations, once governments have increased the incentives across the board, pretty much we are not participating in that increase is paid by governments alone. And secondly, yes, if you look at the key models we currently have out there, the Enyaq has been mentioned this morning, also the ID.3, you can fairly assume that we put 0 additional incentives on these cars over and above the government agreed incentives.

Operator: Our next question comes from José Asumendi from JPMorgan.

José Asumendi: José, JPMorgan. Frank, thank you for the balanced comments on dividend and management changes.

I think they've been very, very helpful. Two questions, please. One, for Frank, as we think about the Volkswagen brand and focusing a bit more towards Q3, I'm hearing or seeing incremental cost-cutting measures coming through. And we're also hearing comments on the very strong order book. So I'm wondering if you could give us some clarity whether you have a chance in the third quarter to at least reduce substantially the losses in Q3 or even hit breakeven, make some money in Q3 with the Volkswagen brand.

I think it's very important to gain more visibility into the momentum, please. The second question for year-end and as we think about the balance sheet and the net cash position. Can you give us some color on how you're thinking about that industrial net cash position? Do you think we should be more or less in the €18 billion to €20 billion bucket? And I guess a lot of investors would agree that a bigger M&A should be -- could be probably postponed for 2021. So as we think about the second half, any comment please on net cash in that bracket that I provided.

Frank Witter: Yes.

Let's start with industrial net cash. I think it's a fair point that also M&A activities should be reviewed and challenged. On the other hand, we discussed at different occasions that if you think about the 2 investments, for example, we are making in China or the investments we're making in battery cell production, there are certain windows, there are certain companies, there are certain opportunities, and you don't want to miss out in terms of protecting your strategic prospects. And sometimes it's tough, but necessary, even in hard times to make those investments. But generally speaking, since there are a lot of rumors about our other M&A activities other than the ones I referred to, fair point, and we're certainly not ignorant to those questions.

I think you -- I heard you saying €17 billion to €18 billion for a year that the -- that's a number we wouldn't mind. I think everything between €15 billion and €20 billion, with the desire to obviously get closer to €20 billion. But from where we are today, I think €17 billion, €18 billion would be a first interim step. And the better we are performing on an operating level, so obviously, the closer we can get to the desired end of the range you indicated. With respect to Volkswagen Passenger Cars, I think the way I would answer, the true breakthrough is probably not taking place before Q2 -- Q4, sorry, sorry, sorry.

José Asumendi: Q4?

Frank Witter: Yes, Q4 is probably the right assumption from today's perspective.

José Asumendi: But Q3, obviously, a very substantial reduction in losses in the light of comments also on the other books [indiscernible]

Frank Witter: That's fair. Otherwise, there wouldn't be a breakthrough through in Q4.

Operator: The next question comes from Laurie Cote [ph] from Amundi.

Unidentified Analyst: Just a question about potential opportunities of acquisition.

You still have a strong cash position. So I was wondering if you were targeting some businesses? We have heard about rumors on Europcar. So if we can have some comments on that.

Frank Witter: I mean as it pertains to M&A, some of the important decisions we made, for example, Europcar in China relate to the majority in a car producing joint venture, which is an important pillar in the balancing act of our major interest in China. That results -- the activities with Northvolt.

We have, obviously, Goshen. These are 2 important issues. Europcar is a rumor. Obviously, we can't participate in market speculation. And we certainly are cautious.

As I mentioned earlier, we have a relatively strong cash position. But we also know how difficult the overall environment is, and therefore, we are certainly cautious as it relates to automotive net liquidity being important for our investors, but also for rating agencies. So unfortunately, we are not in the position to comment any further.

Operator: We will now take the next question from Horst Schneider from Bank of America.

Horst Schneider: Yes.

I have got two questions basically. Or the most important one I have, that is, first, regarding your next strategic planning round. I know it's probably still too early to go into some more detail. But you have given in the past quite detailed targets for 2020. So will it be in November then the time to give more precise target for 2025? Or you will more focus on a 3-year time frame? And from today's perspective, you would still consider the old targets that you have provided, especially for 2025, as realistic? Then the other -- the second question that I had that referred to some of your recent acquisitions.

So you announced here this acquisition of the stake in JAC, and you take over the majority in the JV. Can you maybe give us some more color what your plans -- what are your plans now in the JV since you have the majority? What kind of volumes can we expect in the next few years? I know the JV focuses on new energy vehicles just so far. Then -- and the other acquisition that I want to have more information on that is on VTEC. And I know you're deconsolidating VTEC and your former joint venture with [indiscernible] so I want to know when you do this deconsolidation? And what is the implication in terms of purchase price? And what kind of revenues and earnings you lose by deconsolidating VTEC?

Frank Witter: Yes. Horst, yes, I think most importantly, we certainly are in the crisis, but we also described that we also assume that there will be recovery from COVID.

So we fully confirm our KPIs, which you are very familiar with for 2025. So that is, I think, probably from a strategic perspective. Most importantly, on 2020, I think I laid out why we don't give at this very moment specific corridors. I certainly would assume that with the next quarterly conference call, I think we have a better handle on the full year outcome. But this is my current estimate, obviously, not assuming a second wave of great magnitude overall.

But 2025, we confirm our targets, and we are working hard to get there. JAC, you're right, this is -- these are entry-level electric vehicles. Obviously, we are in the very early stage of making our plans more concrete. But for the foreseeable future, I think in the range of 300,000, 400,000 units is probably what you should think of without a concrete date yet since we are early. Yes VTEC, I think, quite an accomplishment, given the anxiety related to seed production.

We're very happy that we have agreement in principle with both and that we have a strong partner to develop that line of business further. I think we need to come back on a separate call to give you some more details because I don't have the exact revenue details and that level of detail with me here for VTEC. But it is not significant in the context of the group numbers we are focusing on here today.

Horst Schneider: Yes. Just to follow up on the 2025 targets.

I know you have got this 7% to 8% operating margin target. But for 2020, you provided for example, sales revenue growth, operating profit growth target, earnings per share targets. We're going to -- that's going to be rolled in the next round to 2025? That we get these numbers also for 2025, that's what I was interested in.

Frank Witter: Obviously, we discussed those details when we had the review of our annual planning round. So we obviously will -- with the November call on the new PR planning round for the upcoming 5 years, we will see how much we can provide.

I think we didn't go the whole 9 yard on that level detail. But I think let's see what we can do with the concrete numbers in front of us. But I think it was very much liked and appreciated to guide you for the future.

Operator: We will now take the next question from Henning Cosman from HSBC.

Henning Cosman: I certainly appreciate the indications for profitable full year results at VW Brand and Audi.

I was hoping, Frank, you could maybe discuss a little bit the indications that were given in this transfer document for the Audi squeeze out where a margin of 3.3% for the Audi brand was indicated. So that's the first part of my question. And then the second part of my question is also about the car software op because my understanding is in the second half, this will already be transferred into the others line. So I'm wondering if we need to consider significant cost block to be taken out of the individual brands, and that's playing a role in the margin targets for the full year or certainly the second half? So that's my first question, please.

Frank Witter: I think as it pertains to software development, I think the CSO was already in the other line in H1.

And conceptually, I think we are bundling what was originally in the brand's R&D budgets, the respective portions we are bundling within the car software op. But on the group's level, it's certainly a wash. But in terms of the other line, no change and already part of the way we are treating car software op. I think the Audi detail, I certainly would refer to Arno Antlitz and Markus Duesmann in their respective call tomorrow. But I think the guidance is pretty much comparable to Q1 that deliveries will be significant below prior year level, same with revenues and operating income.

And I think with that, and obviously, the starting point HA1, I think it's clear that significant is obviously way off where we -- from a guidance perspective to see Audi operating in the future. But given the circumstances, it's important that at least we turn the brand back to a relevant profit by year-end and more details to follow up -- to follow tomorrow.

Henning Cosman: And just as a small follow-up to that, in terms of the cost block shifting out of the brands and into the others line for the car software, are we talking a triple-digit million amount? Or is it less than that? Is it at all possible to quantify that for H2, please?

Frank Witter: I think if I just were thinking it through, I think a 3-digit number is probably appropriate to assume.

Henning Cosman: And then I have a second question for Christian, please. So I found it interesting that you reconfirmed the 15% to 20% market decline, which, of course, now probably looks a little bit more likely maybe than at the Q1 stage in terms of being less negative than, for example, what IHS is expecting.

But it's, of course, still a lot more constructive than what a lot of your competitors have said. So with this in mind and seeing you're quite happy to give this -- to give this range for the deliveries, could you maybe try and attribute that to individual regions or segments where you're more constructive than maybe a lot of other companies than IHS? And maybe for both of you, if you could also say how you are sort of comfortable to give a range there, but not quite comfortable to reconcile that to ranges because you don't want to give this false sense of accuracy for financials.

Christian Dahlheim: Yes. Again, relatively confident, again, with all the COVID uncertainties on the 15% to 20% total market. And we confirm, as I said, that we believe and we're very confident that our deliveries will outperform that market decline.

That is based, in particular, of course, of our strong weight in China and our view that China will continue to recover positively. And additionally, we continue to be cautiously optimistic that the upward trend in Europe will continue based on, I think, well, working government measures. And of course, with these 2 regions having a particular high weight in our sales, we believe we can outperform the total market share.

Operator: [Operator Instructions]. We will now take our next question from James Temeva from Legal and General [ph].

Unidentified Analyst: A few questions from me. Firstly, just picking up on the earlier question about electric vehicle incentives. Maybe taking a different perspective, we're seeing incentive schemes in Europe geared towards electric vehicles, clearly, with the intention of accelerating electric vehicle take up. Is this something that you're beginning to consider in your plans that there may be a faster decline in diesel and petrol in Europe versus your previous expectations? And what are the potential implication given the relative profitability there? Is that something that's beginning to affect your thinking on margins and cost-cutting plans? Or do you see no change to your outlook for vehicle mix? Second question on SUVs. Previously, you've spoken about the increasing SUV penetration as a margin tailwind.

You mentioned that was a positive in China. Could you just give an update on your overall SUV penetration in H1? And do you expect this tailwind to continue over the coming quarters, both in China and outside China? And then finally, you just mentioned you're cautiously optimistic on Europe. Could you just comment on whether you see the reasons for optimism are evenly split between the retail and corporate sectors in Europe? Maybe just a few comments on what you're seeing there.

Christian Dahlheim: James, I'll start and I'll leave the margin comments to Frank. But on incentives, yes, in all fairness, I think we have adjusted our best shares year-on-year in each of our planning rounds.

We remain confident in our current projections. As you know, Volkswagen has put a high emphasis on our best strategy, so we continue to be -- to see higher shares of bets as some of the institutes like IHS, et cetera. So based on this, we don't see further adjustments, but we probably believe our projections are more accurate than maybe what some more conservative market analysts have seen so far. So we feel well prepared given that the government incentives, as you rightfully point out, will continue to accelerate the transition. Comment on margin, as I said, well, Frank we'll take that.

On the SUV share, as I said, continue to have a strong growth in China. In Europe, we have always given an indication that we're looking at roughly 35% SUV share. That is, of course, a bit higher in the premium segment. And we believe that, that will continue and eventually will probably grow into -- if you take it on a global basis, towards 50% SUV share into 2025. That trend continues as projected in previous calls.

And second question was regarding Europe in more detail. I mean, of course, the corporate demand has helped us through the crisis because that remains stable because corporate customers have continued to return the lease cars and fleet in new lease cars. And luckily, as of May, June, in particular, the used car market has been very strong, so it helped us to maintain that level. Let's say, corporate has been stable all along, and the recovery is now driven by an also upcoming demand on the retail side, both on used and on new.

Frank Witter: Yes.

James, I mean, first of all, the general statement which we are confirming for quite a while, with MEB and Porsche Taycan and all those products, we certainly have profitable product, but not as profitable at the same comparable level of ICEs. In terms of mix and margin, I think it relates to each other because with all the incremental money the governments are pouring on that, certainly, it's a great deal for the customer, but there's a limiting factor. Even if more and more people would start truly considering that, there's only a certain number of bests everybody can build, then battery cells are restricted, and it takes huge investments, and it takes also some time to ramp up battery cell production. And therefore, the overall mix we are assuming is not dramatically changed. And therefore, there's no reason to assume that our overall margin calculation needs to be revised.

Little movements here and there, but the general direction is probably not changed from what we have in the books.

Helen Beckermann: [Operator Instructions].

Operator: Our next question is now from Philippe Houchois from Jefferies.

Philippe Houchois: And I'll stick to one question then for Christian, if possible. I'm just looking at your -- the launch of the ID.3, and I visited the website, and I agree it's a critical product.

Now our industry and your company have talked a lot about reducing complexity as a key driver in the future. I look at the website of the ID.3, I think there are 7 trim levels. I think tier level 3 has 2 trim levels. I'm just wondering from an approach to marketing bets in the future. Is this an opportunity to actually dramatically avoid complexity from the start and grow the industry in a different way? Or are you not taking the risk by introducing complexity from the beginning? Is this just a continuation of the business model which has had some negatives for profitability for the traditional business model? I'm just trying to think is, are you missing a chance to actually remove complexity from get-go, and one of your business models clearly is Tesla, and I think they are doing it.

Christian Dahlheim: Yes, Philippe, we fully agree with you. In particular, MEB, are a unique opportunity to massively reduce complexity, which actually we have done starting with ICE. So if you look at Golf 8 versus Golf 7, we have reduced engine variance, et cetera, by 40% to 50%. If you look at the ID.3, we have gone much further. So the ID.3 essentially has a 3-tier offer structure.

And then if you look at color and trim levels, it's dramatically reduced over a typical ICE level. So if you look at maybe 40% to 50% on an ICE level, the electric engines, we're more looking at 70% reduction in complexity if you compare to previous levels. It's, of course, then a fine balance because, as you know, some complexity also is an opportunity for margin because you want to sell some higher trims to some customers, and it's no secret in our industry that higher trims typically have a higher margin than lower trims. So you need to find that balance. And we believe given the complexity you look at on our current ID.3 websites, it gives us -- I think we found a good balance.

Don't forget to hit the order button once you're done with your website search.

Operator: We will now take our last question from Daniel Schwarz from MainFirst.

Daniel Schwarz: Can you hear me?

Helen Beckermann: Yes, we can hear you clearly, Daniel. Go ahead.

Daniel Schwarz: I have one question to Frank.

You defined €20 billion as good long-term level of net cash to run the business. Does it matter to you at all whether most of that is actually hybrid debt? And what is the level of -- or the maximum level of hybrid debt you would feel comfortable with?

Frank Witter: I think the €20 billion is the next milestone since we obviously came down during the lockdown period, particularly in April, significantly. So the next target would be €20 billion. I think, generally speaking, we described 10% of revenue to be what we are shooting at as a strategic direction. I think we have roughly €15 billion of hybrids outstanding.

And I think for the time being, that is probably the right number everybody feels comfortable with, including rating agencies and ourselves.

Helen Beckermann: Okay. I think that looks like our last question for today. Frank mentioned already, we have further brand conference calls tomorrow. So the first one will be VW AG

at 2:00 p.m.

Central European time, followed by TRATON

at 3:15 p.m. Central European time and ending with Audi

at 5:30 p.m. Central European time. For now then, we'd like to thank you for your participation in our conference call today. And also a big thank you to the IR team and the rest of our internal colleagues for all their support.

We hope you enjoy your summer holidays. I think August is shut down for most of you guys. And we're very looking forward to the second half, hopefully, an exciting half of the year. If you have any further questions or further queries, the IR team is available just from now after the call. Thank you very much, and have a good day.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.