Thank you for joining us for the Q2 2026 investor and analyst Q&A session following the speeches this morning. My name is Stefan Richmann, and I'm Senior Vice President, Group Treasury and Investor Relations. With me, are our CEO, Milan Nedeljković, as well as our CFO, Walter Mertl, and we're happy to take your questions. I kindly ask you to stick to the usual number of two questions per person. We will jump straight in once the operator has provided the necessary technical instructions. Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen, or if you have dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask a question. If you would like to withdraw your question, please lower your hand using the raise hand function in the Zoom app or via telephone, press star nine. Thank you, and please stay tuned for our first question. The first question is from Patrick Hummel at UBS. Please unmute yourself and begin with your question. Yeah. Good morning. It's Patrick from UBS. Thank you for taking my question. I would like to start with one more strategic one for Milan, please. You're starting the CEO job with a big restructuring task. I guess there are nicer ways to begin, but nonetheless, what needs to be done needs to be done. I'm curious, can you elaborate a little bit on the other key priorities, key issues you've identified in the last couple of months since you took over, and maybe the ones that matter the most in terms of the earnings impact, the strategic action you're planning to take? If I may, more specifically also on China, we hear a lot from OEMs how to fix China with new product. That's kind of the normal narrative. But the reality shows that you can't really fix China just with new product. Everybody tries to do that. I'm curious what else you're thinking needs to be done in China to stabilize the business over there. My second question goes to Walter, please. In terms of the restructuring announced, the 8,000 headcount cuts, sounds like mostly overhead or white-collar jobs. Can you give us a rough idea about the magnitude of the savings you expect on a run rate basis? Is it fair to say it's going to be a mid or high three-digit million euro amount once fully implemented? And also the timeline. Will we see all of that in 2028 already materializing fully in the bottom line? Thank you. Good morning, Patrick, thank you very much for your questions. I would indeed follow exactly how you suggested in handing the first one to Milan about restructuring. You asked whether there were any additional strategic directions taken apart from what was also communicated yesterday. The second one I would hand to Walter afterwards with regards to the magnitude of savings. Milan, please, you go ahead with the first question. Good morning, Patrick, and thanks for your questions. Concerning the restructuring, first of all, I would like to emphasize that the basic strategic direction of the BMW Group is not fundamentally changing. We have the open technology approach to our powertrains, which is one of our strengths and which brings us also into the future. We have a global footprint, very strong product momentum with the Neue Klasse and all that is the backwind we have for the next years. On top of that, of course, and that's the issue we are talking, is the cost structure of our company, which we need to improve. It's not only our company in itself. Of course, we will get some benefits through the restructuring, through reducing people numbers in our own organization. The significant saving comes through the way of developing and purchasing parts and the overall way we approach the market on the sales side. That's why the restructuring program is based on four pillars, starting with the customer level and the sales organization. With direct sales, we see a very good opportunity for us to stabilize our pricing on the market and improve our earnings on that side. The organizational bits will primarily focus on reducing complexity inside our own organization and reducing the time we need, time to market for our products. On the purchasing side, we want to work more on partnership levels with our suppliers and by creating long-term contracts also, leveraging some potentials on the value creation worldwide, the global footprint we have on that side. Last but not least, the way we develop our products must be changed more towards industrial standards, not meaning that we are giving up any performance of BMWs or any specifications we usually have in BMWs, but we have to realize that the supplier o ffer has increased over time, and there are industrial standards on the market which are convincing, and it would be wrong not to use them. Based on these four pillars, the whole restructuring is set up. It's more about the way we work than about specific savings in specific activities. Hello, Patrick. With respect to all these topics Milan Nedeljković mentioned, it is a process to be adjusted. The attitude, how we work together and what we do, of course, also utilizing all digital aspects, is taken into account. This program we agreed quite quick and fast and in silence with our working council, especially here in Germany. That is one building block of all the measures. Of course, all measures and all building blocks will end up on our way back to 8%-10% of the EBIT margin, our strategic target, which we also refer to in our speech. I think that is the most relevant thing. Of course, linking to our message we have given at the Ad hoc session on June 16th, we assume, of course, whatever happens, a return which is faster than two years. Based that we have agreed to start our discussions with people from Q4 onwards, we could assume, as we also mentioned already at the Ad hoc in June, that we will have hardly any cash outs in this year 2026, but rather in 2027. The run rate of savings would then be in the high three-digit million euro range from 2028 onwards. Is that a fair assumption? Well, that is an assumption, but we won't commit to this assumption, and maybe you get more clarity at the CMD end of September. I'll hold my breath then. Thank you both. The next question is from Jose Asumendi at JP Morgan. Please unmute yourself and begin with your question. Good morning, Milan, Walter, and Stefan. Two questions, please. The first one relates to improving the competitive footprint in Germany. Which measures are you implementing in Germany across your German plants to make the footprint more competitive? Second, how do you plan to balance this production footprint between higher labor cost countries and lower labor cost countries in Europe? A second question on China. Should we expect another capacity cut in China, or is the current capacity that you have in China adequate for the current sales development? Thank you. Good morning, Jose. Thank you for your two questions. I would actually hand both of them to Milan. Your first, you asked about the competitive footprint, whether we would be improving that, especially with regards to plants. The second one then, you addressed capacity overall in China with your question whether it is adequate. Milan also having run production, I think it's appropriate to hand these two questions to you. Well, concerning the improvement of the competitive footprint, as I mentioned, with the program, we are tackling different directions, starting from sales with production, purchasing, and the way we develop parts. The biggest contribution in Europe will, of course, be the supplier network, and how we integrate the competence of the supplier into our own organization. How do we localize more parts close to our new plant in Debrecen, and how do we gain benefits from a long-term contract, which gives more stability to us and the supplier? Based on that three approaches, we do see significant potentials which will improve our cost position in Europe. The production footprint is, in our case, quite balanced and well-loaded, especially looking onto Europe. Our plants in Europe and the U.S. are well-balanced, also in South Africa. The only market which gave us a surprise was China. As you know, we did implement a new plant in China a couple of years ago, which we did not ramp up yet to full capacity. Even we have installed capacity, we don't have a surplus of people in the amount which would hit our business, and we have high flexibility in the contracts we have. For us, the volume we have now in China is adequate to the number of associates we have there, and it gives us the potential to grow, but w e don't see a need to reduce installed facilities. Hi, Jose. Maybe I add another aspect on the cost side, right? We installed Preston and have buildings, but it is not fully established with the capacity possible, hence there is no cost. Even on the buildings, you also are fully aware of that the cost position is a total different one than outside China, hence depreciation is also a total different level than outside China. We mentioned already that we have taken already actions last year and further this year with respect to all cost elements in China. We are reducing these ones already. That is contributing, but not compensating anything on the contribution margin side, which we achieve in China, of course. Thank you. The next question is from Tim Rokossa at Deutsche Bank. Please unmute yourself and begin with your question. Thank you very much, Milan, Walter, and Stefan. I have two questions, but can I clarify something first that you just said, Walter, before I start with my two, and that is the strategic margin target of 8%-10%, that's still intact, right? Regardless of what we're going to hear new at the CMD. My two questions is, obviously, there's quite a few things that you're kicking off at the same time here. There's the efficiency program, new ways to run the business. What shall we expect from the CMD? Perhaps, Milan, to you. Is this where you're going to reveal the master plan, so to say? Or is this more of a longer process that we need to adapt to and learn about? Secondly, on China, Mercedes has obviously taken the write-down. I get that you are de-risking your case through the PPA consistently, given how different the business is developing versus your own expectations, can you help us understand why you have not to take more strategic actions there, thinking about writing off some of the stake and so on, so forth? Thank you. Good morning, Tim. Good morning to Frankfurt. I would first, before we come to your two questions, briefly hand the word to Walter with regards to your, let's call it, the pre-question, with regards to the strategic target corridor, 8%-10%. Walter, would you like to make a brief statement on that topic first? Yeah, brief and clear. Hello, Tim. As we mentioned already, we intensify and speed up our structure and efficiency measures to end up with our strategic corridor of 8%-10%. That's confirmed. Of course, with respect of the current situation, we have to do more than maybe we expected 12 months ago, and we are just in the middle of doing so. With all these elements Milan mentioned beforehand, they should all help. Step by step, we are becoming better, and you will see our execution. Thank you. Now coming back to your questions. The first one with regards to expectations for the CMD, I would hand that to Milan in just a minute. The second one, you commented on Mercedes-Benz having written down assets. We will, of course, not comment on what our friendly competitors in Stuttgart have done. You were asking us why we were not taking more strategic actions there. Walter, I would kindly ask you to answer the second question, but first to you, Milan. Tim, thanks a lot for your question to the CMD, since, as you know, we are putting a lot of emphasis on that meeting. The reason is we are doing now very intensive work on setting up a detailed presentation for you for that meeting. The core element of it is, of course, our transformational program, which I did explain in rough right now. On top of that, of course, we'll have some discussion about technologies and products and derivatives and furthermore. However, the core orientation of our strategy as a group is not changing. We still stick to our global footprints. We still stick to our technology openness. We will come with the Neue Klasse and the technologies. All this remains, it's a robust base for the future orientation. However, in detail, we will have some changes, that's why it will be quite interesting for you, I think. Then with respect to impairment, we have to do impairment tests quarterly, we have to check our assets. Of course, maybe some assets are differently measured if you have an at equity consolidation or a full consolidation. Now, with respect to us, we do have a full consolidation aspect of our joint venture in China. What is that meaning? That we have the whole balance sheet in our group balance sheet integrated and not just one element of financial assets. That's the first difference. You know that. The second one, of course, is that with the takeover of the further 25%, we had to add value on our asset risk based on all the balance sheet side. On this immaterial element, we are depreciating the purchase price allocation, this will end mid 2028. There is the second element of the goodwill, which we can't depreciate over time, and that is stated and disclosed of roughly EUR 1 billion. That one, of course, also has to do always this impairment test, and we don't fail the impairment test. Hence, there is no write-off, but just the ordinary depreciation. Not a write-off, it's an ordinary depreciation of our purchase price allocation since February 2022, and this is ending May 2028. That's the different situation between these ones having to check out at equity or we having done the full consolidation. Hope that helps. The next question is from Stephen Reitman at Bernstein. Please unmute yourself by pressing star six and begin with your question. We will move on to Mike Tyndall at HSBC. Please unmute yourself and begin with your question. Hello. Hopefully, you can hear me. Couple of questions, if I may. Just the first one, sorry to stick on China, but can we talk a little bit about cost flexibility, because I guess this is a key difference between China and the rest of the world. I'm curious, given the volume decline you saw in Q2, did China stay profitable? Did the joint venture stay profitable in Q2? If so, can you tell us how you managed that? How flexible is that versus North America, versus Germany? Then the second question, I noticed in the other, in the walk, that there was a more favorable positioning on warranty, which has been a bit of a trend. I'm just wondering whether or not with the increase in recall rate that we've seen in the U.S., is that warranty tailwind likely to continue or potentially reverse in the second half? Thanks. Good morning, Mike. Yes, we were able to hear you. Thank you. Both questions will be going to Walter. Your first with regards to available flexibility in China. You ask how we were actually managing that and whether we remain profitable in China itself. The question then, one item under others, warranty, whether there was any correlation between the improvements we see there and also recall rates in the U.S. Walter, please, if you don't mind. Hello, Mike. China flexibility is all based on cost, first of all, and that we started our homework already a year before last year. We have positive effects year-on-year on the cost side for the production, like we just mentioned beforehand. With respect to the joint venture profitability, we are still profitable in the joint venture. It's positive. Not as positive as it was a year ago, but it's still positive, contributing to our group profit. I think that is a fundamental message. With respect to the warranty side, we are running worldwide our warranty costs, and even you see increased recall rates in the U.S., it's always the question, one recall is not costing the same. We are still recognizing that we have a good run rate, a positive run compared year-on-year. I can't see any reverse actions in the second half year you are asking for. Thank you. Brilliant. Thank you. We will now go back to Stephen Reitman at Bernstein. Please unmute yourself pressing star six and begin with your question. Yes, good morning. Stephen Reitman from Bernstein. I think the technology's working now. I have two questions, please. First of all, Milan, about using changes in the supplier structures and how that's moved on in terms of them offering technology solutions. Obviously, we think about particularly in China, in terms of China, but could you also talk about the potential also in your other European operations as well? Secondly, again, looking at your European footprint, are you happy with a mix of high-cost and low-cost locations? I'm also saying that in context of your competitor, that's recently doubled its capacity in Hungary, obviously. Obviously, you have your Debrecen plant, which I believe is capacitized about 150,000 units. Thank you very much. Good morning, Stephen. Yes, this time around, we were able to hear you, and we took note of both questions. I will actually hand both of them to Milan due to his most recent responsibility within the company before becoming our CEO. With regards to the changes in supplier structures, you were wondering whether there are any potentials in other European operations beyond a specific China supply chains. The second one then, whether we were happy with our mix regionally in the European region. Milan, please. Stephen, thank you very much for these questions. Concerning the supplier structures, it's not only the structuring of the supply base, it's about the way we work together. In general, there are two core aspects if we talk about the supply chain. One is, how do we create the contracts with them? If the contracts are more based on long-term partnerships, there is high potential for finding common standards which allow us to optimize for both of the partners, the manufacturing costs of these components. The basis would allow us to significantly reduce the cost level, irrespective where the supplier is located. The second, of course, inside Europe, we have a different price level in different countries. Since we have a new plant in Debrecen, our approach will of course, be to localize more suppliers in that area and to optimize the cost base of this new settlements. That again would allow us to get a good supply also for the European and the German plants out of that location. These are the core elements of the idea, and it doesn't change the complete structure of the supply chain, but it does change the significant elements which give us the high potential for cost saving. If we come to the European footprint, yes, this element I just said is one of the elements where we want to utilize in a better way the different low-cost locations of Europe. Looking onto our own manufacturing network and our plants in Germany, our approach is in the last decade already to highly optimize and improve the efficiency of our plants. That's why, for instance, in Regensburg and Dingolfing, we did reduce the cost per unit by 25% over the last five years. That's a significant improvement, which again shows how much potential we have in getting it right in Germany. We don't plan to change our footprint dramatically. Our way forward is more to utilize the equipment we have in a better way. When you say reducing cost per unit, are you talking about the factor cost per unit? The cost per unit in our case is the complete expenditure we have, or expense we have for one plant. It's including the cost of people, the cost of energy, the cost of supplies, depreciation, all in. Cost for a plant divided through volume produced in a plant, and that's the basis. It's all in. Understood. Thank you very much. The next question is from Christian Frenes at Goldman Sachs. Please unmute yourself and begin with your question. Yes. Hello. Can you hear me? We can hear you well, Christian. Perfect. Thank you. I've got two questions, one on restructuring and stabilization of the P&L, and the second on China. My first question, if I understood the media call this morning correctly, your full year restructuring is expected to be about 125 basis points of auto sales. I don't think there was anything in Q2. I assume it applies roughly 250 basis points of restructuring activity in H2, and using company compiled consensus that it would imply an underlying automotive operating margin of 3.4%, which is somewhat close to the 3.6% reported in H1. I'm just wondering two things. Is the 250 restructuring basis points correct in H2? Is that assumption correct? Would you, as you look into 2027, expect a stabilization of the P&L? Is that something that we could assume? My second question very briefly on China. Obviously we've seen the Chinese ICE market collapse post Iran conflict. I'm just curious what your thoughts are on the Chinese ICE market as we move into 2027, and what proportion of your China offering will actually be BEV or EV based in 2027? Thank you. Thank you, Christian, for your questions. I would hand both to Walter. However, with a caveat, Christian, since we are talking half year 2026, we would like to focus on 2026. Your question about balance sheet and P&L in 2027, we would not answer at this moment in time. Also, what are our specific thoughts on China in 2027, since we will come to guidance at a later point in time. Obviously the first question you had with the overall amount for 2026 and how that plays into our expectation for the second half of 2026, Walter will be answering that. Hello, Christian. Just to clarify our disclosure we did on Note 22, we have an EBIT impact of up to 1.25%, and this is a year's number, but most likely only at the end of the second half year. That one for the clarification. Our guidance, which we confirmed based on our June message in the talk, is 1%-3%, and this includes the one and a quarter EBIT points for our restructuring program. The second one, you got the base feedback for 2027 already from Stefan. With that, I think we go to the next question, right? I would like to add though, Christian, obviously that we put a lot of high hopes into the iX3 starting in China at the end of Q4. That will surely have an effect in 2027, as we've mentioned a couple of times already. The next question is from Stuart Pearson at Oxcap Analytics. Please unmute yourself and begin with your question. Good morning. Thanks for taking the questions. A couple, one more strategic, I guess to start with, and just the capital intensity of the new strategic plan when we get to it and how we should think about that. Just listening to you just talk a little bit about I guess the improved supplier offer, reducing complexity. Historically, premium carmakers seem to have slightly higher R&D spend to a certain degree, CapEx. Is that something that could change going forward? Perhaps we could see even more outsourcing from BMW or and obviously your R&D and CapEx has eased a little bit in recent years. Can that continue or in fact could be a plan where we need to see some more investments, just how to think about capital intensity. And then the second question, just quickly on residual values. Audi flagged some issues there. I wonder if you're seeing anything on residual values that are weak or anywhere that's worth flagging. Also how you think about the residual values that you're offering in leases for the new Neue Klasse EV range, whether you're taking a more conservative stance there until we get some more visibility in the market. Thank you. Good morning, Stuart, thank you very much for your two questions, which I will both hand to Walter. The first one was whether we were fundamentally changing approaches that premium car manufacturers had been doing or have been doing so far with regards to capital intensity. Even you mentioned outsourcing potentially at some point. Walter will be handling that. The second one, you ask about residual values, also specifically there, whether with regards to the Neue Klasse and the iX3 that is on the market already ready, whether we were taking a more conservative approach to residual values. Walter, please. Hello, Stuart. Well, with respect to the CapEx intensity you ask for or the R&D, we are heading long range still the same what we mentioned in July. We will come into our strategic corridors, that means on both elements, less than 5%. We are heading into the strategic corridors, and we will keep that. There is no intention to elevate this 5% again, as we had to do during the course of the Neue Klasse implementation on CapEx as well as on R&D. We are still sticking to our strategic corridor, that means between 4% and 5% for the R&D side and less than 5% on the CapEx side. That is clear. On the residual value side, you also recognize that we mention permanently less positive than previous year, that is still the case. Months and months, we can see that it's less positive. The trend is different in all regions. Let's take a look on the U.S., for example. We assumed EV cars will deteriorate, but you recognize for the last four months that the deterioration is not happening, not in the way we expected it. It is positive from that perspective with respect to our expectation. U.K. market is totally different because the U.K. has a different scenery. You know the ZEV mandates, they are elevating permanently, there's more pressure on the new cars on ICE. Of course, every OEM has to organize its BEV share, otherwise, we pay GBP 15,000 penalty per car, which we are not achieving. Hence, there is an effect on the used car market, that of course, is not so positive. Under the line, we see that it is less positive than previously. With respect to the way we are starting our contracts, maybe there might be some differences in having contracts on the balance sheet, but we always have a base understanding for the year when we receive the car back. Let's say usually we have 36 months, we assume permanently which car has to be evaluated for in 36 months to return, which market rate we assume there. Of course, quarterly, we reevaluate on the total portfolio, ending up with plus or minus, or have to adjust further provisions. Based on our disclosures, it's around EUR 2.25 billion on extra provisions for. All the rest is running on an ordinary depreciation from T zero to T end of contract. I think we are utilizing that not differently across the models, but we evaluate every model independently anyway. Hope that helps and is not confusing. The next question is from Daniel Schwarz at Metzler. Please unmute yourself by pressing star six and begin with your question. Thank you. Yeah, thank you for taking my question. First would be on cash flow to Walter. The other cash flow line that was large part of the free cash flow, you mentioned, I think earlier, that interest received was one factor. Could you maybe provide more details? Is that a factor that could swing negative in the second half? The other one is a follow-up on China. You mentioned JV was profitable, Q2. Including parts, component sales, and imported vehicles, is it fair to assume that profitability in China is still clearly above the average for the rest of the group? Thank you. Good morning, Daniel, thank you very much for your questions. Both, obviously, will go to Walter. First one on cash flow, you ask about a specific part of the others bucket. Walter will be elaborating on that. The second one, then you extended a previous question with regards to the joint venture in China, asking about all the other items that we have with regards to our business in China. Walter, please go ahead with Hello. With respect to the free cash flow, you're right. The other bucket with interest and expense accrued could be also a calendarization effect that is positive and negative. It could be different in the second half year. On the other side, we shouldn't forget and underestimate that we are going to unwind our working capital burden, which we see in Q2. That will be unwind based on the direction of sort of year levels. There's the potential, and we shouldn't forget that also CapEx will be lower than the depreciation also in Q3 and also in Q4. These are positive effects on the free cash flow. With respect to the China joint venture, parts and imported vehicles, imported vehicles are not done via the joint venture, but by our national sales company, which is owned 100%. I can also confirm that on parts and imported vehicles, we are also positive and profitable in China, also on group level. Thank you. Thank you. Our final question is from Horst Schneider at Bank of America. Please unmute yourself and begin with your question. Good morning. I hope you can hear me. It's Horst from Bank of America. I have got two questions. One is a follow-up to Walter. It's a follow-up, basically, to Christian Frenes's question. I tried from a different perspective. Could you maybe explain, Walter, what is changing in H2 versus H1? When we see all these bridges, there's always a year-on-year effect, and I sometimes struggle with the base because the base is also changing. Therefore, could you maybe outline what is changing sequentially? It can be on volumes, on price mix, on raw mats, on FX, on other cost changes. That would be helpful for doing the forecast. The number two is a question to Milan. Milan, we discussed with your predecessor, Oliver Zipse, always this growth aspect. Oliver always said growth is most important for BMW, and I would agree. For a car company, what matters the most is how many cars you sell. What are your thoughts on scale? Is it still important for an auto company to have a certain level of scale? You think BMW needs to increase the scale or rather reduce the scale? If you look, for example, at your brands, it looks to me that MINI is loss-making. Is that a brand really that BMW needs long term? Thank you. Good morning, Horst. Thank you very much for your questions today, bringing up the rear of our call. Let me phrase your first question. It sounds like a controlling question to me, actually. A little bit. You were asking whether we could build another bridge just for you, a sequential one, H1 to H2. I think Walter will obviously elaborate on that. The second question, more about growth in general. Just on a personal note, your last comment there about MINI, that surely hurt me personally having owned the MINI brand for a while. I know, Stefan. I apologize for that. I know you're a big MINI fan. Yeah. You will have to make up at some point. My wife drives a MINI. I can say that. My wife drives a MINI. The family is a MINI fan. Please get her a new one. Walter, please, you go ahead. Hello, Horst. It's quite interesting you're asking for this extra bridge for the second half year, which I'm not presenting to you. I give you, of course, an assumption. We always mentioned that on FX and commodities, we still see a headwind in the second half year versus the previous year's second half year, right? We also mentioned less on effects. If you remember in our Ad hoc messages, rather on commodities. The commodity was hardly any impact first half year versus previous year. Based on all the situation and elevated prices on the commodity side, not everything is hedgeable, as you know, and we do do commodity hedging wherever possible. There's still a headwind in the second half year based on that. First of all, on this and the volume and the mix and the price, I will tell you in November. Okay. Thank you. Coming to your question of growth. Growth is important. It's a natural thing. The growing organism is something which is biologically a good thing. However, for us, growth is not the target in itself. It's a result of the business. That's why our target is more to offer a good product range, which is convincing to our customers. With the upcoming 40 derivatives in the market, we do see potential for growth. Of course, we are aware of the headwinds we are facing in the different regions and especially in China. Nevertheless, for us, we do see growth also in future as a core element, but not as a standalone target or the core target of our company. Thank you very much, Milan. I think it was a very suitable question to end our Q&A session. We are at the end of the Q&A session. Thank you to all of you out there for making the time to participate, and also especially my thanks to Milan and Walter for sharing your insights. If you have any further questions, please don't hesitate to reach out to our friendly investor relations team. We wish you a great remainder of the day. All the best from Munich