Mercedes-Benz Group (Daimler) Stock

Good morning, ladies and gentlemen. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you all, both on the telephone and online to our Q3 results conference call. I'm very pleased to have with me today Ola Kallenius, our CEO; and Harald Wilhelm, our CFO.

To allow more time for your questions, Ola will give a brief introduction, and Harald will walk you through the financials as usual. We will then move directly into our Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website and can also be accessed via the webcast in the web interface.

With that, I will hand over to Ola.

Thank you, Christina, and welcome, everybody. As Christina said, Harald will go through the Q3 results in a minute. And of course, we're happy to answer your questions. But I would like to start by giving you a bit of context what's going on in the industry, what's going on in our company and what do we see on the horizon. The big topic that is on everybody's mind, of course, is China. And you could say that, that challenge is twofold. On the one hand, there's a cyclical downturn. The Chinese car market has contracted more than 20% this year. And the premium market in China has actually been declining for more than 3 years in a row. The top end segment has been hit particularly hard, and we're seeing the same trend across other luxury goods as wealthy consumers and entrepreneurs hold back on spending. That's tough for us because this is one of our most profitable parts of our business.

But maybe even more important is the structural challenge. More than 100 players are competing fiercely, and that's driving down prices and profitability across the market. And that competition is not staying in China. It's spilling over into many other markets as manufacturers boost exports to get away from the fierce competition at home. So how are we at Mercedes responding to this? First of all, we are thoughtfully managing our operating point. We're looking very carefully at the ASP and have the highest average selling price amongst our competitors and have been able to keep it relatively stable in this market compared to some others. But the result is lower sales volume.

But to manage this operating point, you look at that and you look at the dealer profitability. We're, of course, watching dealer profitability as well to protect it. And we have moved very quickly to adjust our production capacity to deal with this market condition. And needless to say, we're adapting our fixed cost structures in China also very swiftly. Even more important, the variable cost drive that we have initiated is starting to pay off, but it will take some time. We're moving away from a hybrid business model that we have used for the better part of the past 20 years. And instead, we will source almost everything in China for our Chinese production. And the first vehicle that is under this new strategy is the electric E-Class that we will launch in the second half of 2027 and then continue like that beyond '27.

But even today, we're seeing early signs of stronger demand for BEVs. The electric GLC that we launched here in the late summer, early fall, is attracting healthy orders at our chosen price point. At the moment, we have the top model only in our offering. And the upcoming 6-seater and further variants will allow the GLC to position itself more favorably in the competitive set. We're looking carefully at our fan base, our customer base and our brand positioning with focus on safety, customer-centric innovation, quality and design continues to appeal strongly to Chinese customers. That's a good foundation. And our major push into intelligent vehicles is starting to strengthen our reputation in China, both for BEV and ICE mind you. And customers know that Mercedes-Benz is a brand they can trust.

The second topic that's attracting a lot of public attention is competitiveness in Germany. Why does this matter so much and so much to us? Germany accounts for roughly 15% of our sales, but 2/3 of our employees and our structures are based here. And to reduce our fixed cost further, we have decided to restart the severance program in Germany in December. But this isn't just about Mercedes, it's about Germany as a place to do business. That is why we've also launched a comprehensive productivity initiative in Germany. Discussions with the labor side are still ongoing, so I can't announce anything today. But I want to reinforce the core message. Germany must make a major leap forward to safeguard its industrial footprint and jobs. And further investment in Germany depends on a significant gain in productivity.

On the other hand, Eastern Europe offers opportunities to lower our average costs across Europe. We already have a strong presence in Hungary, and we can take further steps. The third topic to watch is our product offensive, and it's picking up pace. It's fantastic to see such a positive response to our new cars. In fact, our products have won more than 180 awards and accolades since 2025, more than ever before in such a short period. And here, I want to give kudos to the whole team that have been working hard for years making this happen. It's even more gratifying that they're also resonating with customers. If you look outside China, car sales increased every quarter in 2026, and we expect full year sales outside China to reach their highest level since 2019. Orders for our electric cars in Europe have doubled since the beginning of the year, and that's only the beginning. More than 20 new models have made their world debut this year. The latest example is the AMG GT SUV, the most powerful electric SUV ever and an absolute technological marvel.

Speaking of technology, together with NVIDIA, we will bring point-to-point automated driving to Germany by the end of the year. We are the first OEM to offer such a system in Germany in addition to what we have already launched in China and the U.S. The technology gives our customers a new level of safety, intelligence and confidence behind the wheel, you have to try this, and it underscores our determination to play a leading role in automated and assisted driving. As you can see, we've been building product momentum for quite some time, and we'll keep working on our vehicles' variable cost and pull every lever at our disposal to turn that momentum into higher profitability.

If we look further ahead, there has been some external speculation about our strategic moves for 2030 and beyond. Now it's not the time to discuss the details of that. We will provide a more comprehensive update next year. But I can promise you this, we'll make bold and exciting decisions on technology, products and how we organize our operations in our enterprise. We announced one major step just a few days ago. With the help of AI, we'll speed up product development at Mercedes-Benz by up to 30%. I think that gives you a sense of how ambitious we are about transforming our company. I don't want to miss the opportunity to acknowledge the performance of Mercedes-Benz Vans. Yet again, we delivered strong results in a challenging environment. I want to thank the entire Van team for what they have done, not just this year, but over the last years.

Europe is our anchor in this business, and it acts a bit like a hedge to passenger cars in the current macro situation. And we're just at the beginning of the biggest product and investment cycle in the last 25 years. Three weeks ago, Thomas Klein, who runs Vans, and I gave key customers a preview of our future product portfolio, very big corporate customers, and the response was overwhelmingly positive. So we feel confident that we're on to something here. And in the case of Mercedes-Benz Vans, I think it holds a unique position in the Van market going forward for midsized and large Vans. We will have a 100% lineup of BEV variants. But we will also have a 100% lineup of high-tech electrified ICE. And every one of these vehicles, 100%, will be software-defined. So each customer will have a perfect choice for their specific use case. And in the heterogeneous use cases that you have in light commercial vehicles, this is crucial for market penetration, as I said, a unique position.

Last but not least, Financial Services. And of course, I will let Harald elaborate on this, but I want to highlight the strong results driven by effective margin management and cost discipline. Last year, we decided to bring all customer-facing functions together in one unit, and the goal was to create a seamless customer experience. That decision led to one of our largest restructuring efforts in decades, and now it's starting to pay off. Once again, thank you to the entire team. You did a tremendous job.

With that, I'll hand over to Harald, who will take you through our Q3 results in detail. Thank you.

Thanks, Ola, and hello, everybody. So let's have a look at the group numbers. Group revenue came in slightly below prior year. EBIT and EPS are both significantly up, as last year, was mainly impacted by restructuring charges and legal proceedings. While if you look on the chart, you've also seen that the return on sales at the group level was 5.8%. So you see Mercedes is more than cars, and it demonstrates the resilience overall. Free cash flow was positive, but soft at EUR 0.2 billion, including M&A proceeds. The net industrial liquidity remains healthy at EUR 31 billion after returning more than EUR 5 billion to shareholders year-to-date. In September, we started a further share buyback program of up to EUR 1 billion.

Let's have a look at the Mercedes sales, car sales. So total sales are down 8% to 407,000 units, mainly reflecting the challenging market environment in China. Sales, excluding China, grew by 1%, driven by continued growth in Europe, 5% up; and the U.S., 6% up. With this, our China sales exposure decreased to around 20%. Top-end sales came in lower as a function of weaker Chinese market as well as the current model transitioning, including the new GLE, AMG, GLS and S-Class together with the Maybach and AMG variants. In the U.S., we only started supplying the new models to the dealers towards the end of quarter 3, while in China, the market introduction of the new S-Class is expected early 2027. Top end share reached 13%, in line with our expectations for quarter 3.

Our BEV sales increased by around 60% year-on-year, setting a new quarterly BEV sales record in the third quarter. The development continues to be firmly driven by Europe, where BEV sales increased by almost 80%, while GLC BEV sales more than tripled compared to quarter 2. Our xEV share reached 25%, also demonstrating good progress here. In Europe, almost every second vehicle sold was electrified. Looking at Cars financials. Sales I just explained before. The revenue development is slightly better than sales as it has been supported by growth outside China. The ASP is lower than the prior year, driven by net pricing, mix and unfavorable FX. So let's go to the EBIT walk on the next page.

In quarter 3, Cars delivered an EBIT adjusted of EUR 560 million and an adjusted return on sales of 2.5%. The volume structure net pricing bucket reflects mainly softer volume driven by lower China imports, a softer market mix and net pricing, higher cost for product life cycle measures as well as lower contributions from parts supplies to our Chinese joint venture and aftersales. The FX bucket was mainly driven by Turkish lira and Chinese yuan. Against -- again, industrial performance was clearly positive and provided strong support to earnings. While raw mats turned negative, total material costs were positive, driven by efficiencies. Efficiencies in production cost provided further support and lower cost for product-related measures. The selling expenses reflect efficiencies but were more than offset by the phasing of direct selling expenses as well as effects for the rollout of our direct sales model in Korea. R&D reflects further efficiencies following our funding peak in 2025. The other bucket is negative, driven by lower BBAC at-equity result. I will come back to the adjustments later at the group level.

Turning to cash for Cars came in at minus EUR 200 million. So as you can see on the chart, that was driven by the working capital. We did see higher inventory driven by a heavier inventory mix in the third quarter with a higher share of top ends and BEVs as well as inventory buildup ahead of the quarter 4 product momentum, and that one more than offset the favorable trade payables phasing. Investments came down following the funding peak, while depreciation increased as a function of recent product launches. Year-to-date, investments came down by 11% versus previous year, equaling around EUR 900 million investment reduction year-to-date. The increase in other cash flow effects was mainly driven by favorable movements in tariff-related refunds and higher accrued tax liabilities. Again, adjustments we cover on the group level.

Turning to Vans. Vans performance, as pointed out by Ola already before, delivered a very solid quarter with sales stable around 84,000 units. Outside China, sales increased by 6% year-on-year, driven by growing customer demand in North America and strong growth in the rest of the world. We continue to see a softer consumer demand for midsized Vans in China. The eVans remained an important growth driver, up 12% year-on-year, lifting the global xEV share to 11%. Revenue slightly up at EUR 4.2 billion. Adjusted EBIT stands at around EUR 400 million. We look at more details on the next page.

On the cash flow side, it developed in line with our expectations and continues to reflect our investments into the new van architecture. As anticipated, investments are expected to peak this year at Vans, laying the foundation for the future of our van business. With the all-new electric VLE now in series production, the next step will be the expansion of our lineup with the upcoming VLS and VLS Maybach.

Turning to the Van EBIT bridge, EUR 400 million, high single digit at return on sales adjusted of 9.4%. What are the key drivers? Volume was up, especially in China -- especially ex-China, sorry. Mix was overall flattish, while net pricing was negative, in addition, no repeat of a prior year effect. The FX bucket was positive, mainly due to the U.S. dollar. The industrial performance was supported by lower expenses for product-related measures, while ongoing ramp-up costs for the new van architecture were a headwind. Additionally, selling expenses and R&D costs were higher due to the launch of a new Van architecture and the reclass effect from selling expenses into industrial performance in quarter 3 last year.

Turning to Financial Services. With the Athlon sale and the divestment of Blacklane in quarter 3, we further streamlined our portfolio and sharpened our focus on our core Financial Services business. A significant increase in the penetration rate largely offset lower car sales and the absence of the Athlon Group since the end of July, resulting in broadly flat new business. Mainly driven by the Athlon sale, the portfolio declined compared to quarter 2 2026. On the profitability side, Financial Services delivered a strong performance in quarter 3 with an adjusted EBIT increasing by 42% to around EUR 450 million. How did we get there on the EBIT walk? We have the portfolio margin, which contributed positively and then improved. The cost of credit risk also improved, supported by better product -- by better portfolio quality. And additionally, we saw further efficiencies crystallizing compared with last year. With this, the return on equity adjusted is at 13.8%.

On the group EBIT, besides Cars, Vans, and Financial Services provided strong contribution to the group EBIT. In addition, the recon contributed positively. What's behind it is the Daimler at equity result and the gains from further Daimler Truck disposals. This resulted in an adjusted group EBIT of EUR 1.8 billion. The adjustments offset each other. The main drivers were restructuring charges related to personnel cost measures, M&A transactions, mainly the Athlon sale, the divestment of Blacklane and the ongoing sale of our own retail footprint in Germany and the valuation adjustment related to our equity participations. As a result, reported group EBIT also came in at EUR 1.8 billion.

On the cash flow side, Cars and Vans, I explained already. The income taxes paid were at EUR 330 million, interest paid also due to seasonality of bond coupon payments. So the largest contribution comes this quarter from the further monetization of the Daimler Truck stake, adding EUR 620 million. Overall, this results in a positive cash generation in terms of the industrial free cash flow of around EUR 170 million in the quarter.

Looking at the net industrial liquidity. Overall, we generated over EUR 3.1 billion in the first 9 months of the year. As explained earlier, cash generation in quarter 3 was soft. In September, we started a new share buyback. The program of up to EUR 1 billion will continue until our AGM next year. As we speak, we bought back shares in the amount of roughly EUR 280 million. In total, we have returned EUR 5.2 billion of cash to shareholders in the first 9 months of the year. The other bucket recorded a cash inflow from the sale of Athlon. The total group cash proceeds are approximately EUR 1 billion from that transaction. EUR 450 million of that was recognized as a cash inflow in the net industrial liquidity in quarter 3. The net industrial liquidity remains at a healthy level above EUR 30 billion.

Now on the guidance, first on the divisional guidance for 2026. Please refer to the disclaimer regarding forward-looking statements at the end of this presentation in relation to the outlook. I want to emphasize, in particular, the ongoing conflict in the Middle East is adding to existing uncertainties, particularly around commodity and energy prices, inflation and unit sales, while our outlook assumes no sharp further escalation during the remainder of the year.

Now turning to the Car side on the sales guidance, we retain our view for the remainder of the year and continue to target volume growth ex China. Q4 sales are expected above quarter 3, driven by increased global ramp-up of our new products, but below previous year due to China. In Europe, we expect to build on recent momentum and continue the positive sales development spearheaded by the improved GLC availability. Likewise, we expect the positive development in the U.S. to continue, driven by the increased availability of new models as the new -- such as the new S-Class GLS and GLE.

The Chinese market became even more challenging over the summer, and we expect this to continue in quarter 4. With the positive developments in Europe and the U.S., we are confirming our current sales guidance and continue to expect full year 2026 sales to be slightly below 2025 levels. Our xEV share stands at 22% for the first 9 months. With increasing BEV momentum, we expect to finish the full year well within our xEV guidance of 23% to 25%.

Now on the profitability side, Cars achieved an adjusted return on sales of 3.5% in the first 9 months of the year. Looking into quarter 4, what to expect versus the first 9 months. We expect a positive top line contribution and a small pricing tailwind from our product momentum, mainly driven by higher volumes and an improved mix, also partly offset by a higher BEV share. On the cost side, we now expect the vast majority of the material onetime charges to crystallize in quarter 4. This reflects a shift from quarter 3 to quarter 4, not a change in absolute terms for the year.

Additionally, raw mats and higher depreciation are expected to step up. And following the inventory buildup in quarter 3 to prepare for quarter 4, we expect a material burden from capitalized fixed cost in quarter 4. Taking all of this together and also reflecting the phasing of costs, we expect quarter 4 profitability to be below quarter 3. With this, we lower and narrow our full year guidance for the adjusted return on sales to 2% to 3%.

Now if you ask me what has changed since summer, where we guided H2 around 3%, I would highlight 2 major changes. Number one, the vast, and I really mean the vast majority of adjustment is due to further deterioration of the Chinese market. And second, higher material costs from raw mats and product life cycle measures were the trigger for the change. In terms of the guidance on investments, R&D is unchanged, while investments in PPE are now seen significantly below prior year.

With this, the adjusted cash conversion rate has been raised to 1.2 to 1.4. On the Van side, sales. As usual, we expect quarter 4 to be the strongest sales quarter of the year. However, due to softer consumer demand for the V-Class, I mean in China, the ramp down of small-sized Vans and the first VLE deliveries in 2026, but with a more meaningful volume contribution expected in 2027, we now see sales at prior year level for the full year. xEV share is unchanged.

On the return on sales adjusted, the first 9 months of the year, Vans achieved a strong 9.9% return on sales adjusted at the upper end of the guidance range. Against the year-to-date run rate, we expect for quarter 4, positive effects from higher volume, headwinds from cost seasonality, higher depreciation and costs due to the ramp-up of VLE and factories. With this, we confirm the full year guidance range of 8% to 10% for Vans and expect the full year to finish in the upper half of the range. No change to PPE, R&D and CCR.

On Financial Services, with an adjusted return on equity of 14% for the first 9 months, we continue to navigate a volatile geopolitical and macroeconomic environment in quarter 4, including volatility around interest rates and credit risk. Against this backdrop, we confirm our guidance and expect a full year adjusted return on equity in the upper half of the 12% to 14% range.

And now to the group guidance. Obviously, that follows the same premises as the segment guidance. Revenue unchanged, slightly below previous year due to the lower profitability at Cars, we now see the group EBIT at prior year level. And looking at -- that refers obviously to the EBIT reported. Looking at the free cash flow on the industrial side, following the adjustments at Cars, we now see an increased likelihood of the free cash flow industrial crossing the threshold of slightly below, which sits at EUR 4.1 billion. With this, we adjust the FCF guidance for the full year to significantly below prior year. This includes the cash flow in the first 3 quarters of EUR 3.1 billion, including the EUR 1 billion monetization of Daimler Truck shares, but also EUR 1.1 billion of restructuring cash outs. And this outlook includes a positive cash generation in quarter 4, including M&A.

The guidance considers a smaller amount of disposals of Daimler Truck completed in October, but no further potential disposals going forward. And I think that brings me to the wrap-up in terms of the way forward. Well, as Ola pointed out, the road ahead is bumpy, but that requires disciplined execution and bold decisions. So what are we doing? First, we will leverage the strength of our product and technology portfolio. Our focus is on ramping up and rolling out new models, expanding ADAS functionalities and translating our strong product substance into sales momentum.

Second, we will enhance productivity and competitiveness. We will continue to address cost structures and capacity, including measures to improve the competitiveness of our German footprint, ramping up production in Hungary and continuing our voluntary redundancy program. We're also driving efficiencies through the broad use of Agentic AI.

And third, we will further enhance the resilience of the group. Mercedes-Benz is more than Cars with strong Vans and Financial Services business. Our healthy balance sheet and Daimler Truck stake gives us means to invest into the future, including adjacent business opportunities. Early next year, we will provide an update at capital market update alongside our annual results conference, including our outlook for 2027 and beyond.

And with this, let's move to the Q&A now. Thank you.

Thank you, Ola. Thank you, Harald. We will now move on to the Q&A, you know the drill. I will identify each questioner by name. Please before asking your questions state your name and the name of the organization that you represent. As usual, please ask your question in English. And for reasons of fairness, please try and limit yourselves to a maximum of 2 questions. Before we begin, the operator will explain the procedure once again.

[Operator Instructions]

Okay. We will start and the first question goes to Tim Rokossa from Deutsche Bank.

First of all, Ola, as a German citizen and a car analyst for 18 years, thank you for making these very strong intro statements. I think you guys are spot on. Germany really needs to get the act together. Now to my 2 questions, when we think about China, Ola, obviously, we discussed this before, but as you say, it is on everyone's mind, right? We have seen this death by actually pretty big thousands of cuts over the last 2, 3 years where you just continue to moderate your expectations sometimes during the year, not just at the beginning. So maybe more strategically, what will China ultimately be? Let's say, we see a bit of a recovery. Is this going to be one of the 3 major regions for you still? Or is this something where you're going to sell a lot of test maybe going forward, but it's somewhat of a more niche market ultimately in your thinking?

And then secondly, Harald, obviously, lots of moving parts on profitability. Some seem to go away, some you might still negotiate and some will likely also stay next year like China, for example. Can you help us understand what your thinking is there to stay and what's not, especially when we think about a run rate for 2027? Is this rather a Q4 number like we see it right now? Is it rather an H2 number? Should we think about something totally different?

Of course, in a market condition like we're experiencing in China right now, and deteriorating beyond what we had thought would happen this year, certainly what we thought at the beginning of the year. But even you can see now in the second half, the weakness of that market, the even stronger weakness on the upper end, where we are the dominant brand, that is affecting us. In a situation like that and reflecting on the last 3 years, you called it death by 1,000 cuts or whatever, at least there have been some cuts. You do a 360-degree inventory and you look at every single aspect of your business, brand, brand relevance, product portfolio, go-to-market strategy, production strategy, sourcing strategy, technology, the whole thing. And we have already put a whole series of measures place to deal with this situation.

But your question is what does the target picture look like? I don't want to sit here in this Q3 call and give a comprehensive description of what that is going to be because we don't have -- this is not the time or the forum to do it. But you can rest assured, Tim, we will do that. So we will come back with a thorough assessment and the role it's going to play. But I can say this upfront. We are not looking at China as something, oh, that's going away, and let's focus on the other things. It will remain a very important part of our business.

And the automotive ecosystem that you have there, being the biggest market in the world still and having an innovative sectors of tech partners that we are working with and China not staying in China, China going into the world as well. If you're a global car company like Mercedes, there is not a play where you put China aside. It has to be one of the pillars of your strategy and will remain to be for us. But bear with me for a comprehensive operating point and strategic play for the longer-term picture, and we will present that to you in the near future.

And Tim, on your second question, well, I do understand lots of moving parts and a bit difficult to grab what it is. So let me help to clarify maybe and simplify. First, in terms of the run rate, I mean, how could we think about the run rate? Definitely, I would say it's not a quarter 4, which is a run rate as I mean, usually, you have the cost phasing, which is more backloaded. You have this fixed cost capitalization, which is in particular pronounced this year. So I would rather suggest maybe to look at, I mean, the run rate right now is a function of the H2 run rate and taking into account the guidance update we made yesterday and explained here today. So you depart from that one, how to think about 2027. And obviously, this is not the point here today to give any guidance for 2027. But what we're driving, what we're trying to do in 2027, departing from that, call it, run rate. Clearly, we want to leverage and capitalize on the product momentum, which we see in part in 2026, but should definitely have more momentum from it in 2027.

Second, we'll continue to drive the variable cost hard. And definitely, the target, the objective is to bring variable cost further down. The same applies to fixed cost and the same applies to funding. In the 9 months, you can already see quite encouraging investment down, and we continue to take that approach also for 2027. So I think, I mean, these are somehow, I would say, the building blocks, which are somehow under our control. Obviously, that leaves the market side. I don't want to speculate too much about it. But as we see that favorable customer feedback, I mean, on the new products, including the BEVs, I would say, clearly, the target is to continue growth momentum in U.S. and Europe and all other parts of the world ex China leaves, I think, I mean, uncertainty in terms of where China is going. And I think we should not speculate about this one as of today here in this call, but rather look at it when we're coming together in February.

I'll hand over the next question to José Asumendi from JPMorgan.

Two questions, please. Ola. Can you speak a bit more about the topic of China? And you mentioned the new E-Class, which changes have you done to the car to improve the overall competitiveness? Which vehicles will follow up on this new E-Class, which I think will set a new standard, a new benchmark for you in China in terms of cost competitiveness? And do you think you need to do further capacity adjustments in the region? And then question 2 will be for Harald. Can you speak please about the working capital and your level of confidence of turning around that working capital in the fourth quarter?

Whereas we will, of course, invite you to the world premiere of the new E-Class, which will happen next year. So I don't want to give too much technical details about the vehicle. But I can tell you the approach that we took when we started the journey of developing this car about maybe 3 years ago. So it was really more or less a white sheet of paper. So you will see a dedicated battery electric vehicle that in all its features, technology, styling, space, but also the traditional values of Mercedes that are more important than ever, I have to say, especially in China, safety, quality, the ride and drive, those things that make Mercedes-Benz, a Mercedes-Benz. Every one of these things have been taken into account in designing that vehicle. So we think that in the product proposition, we are positioning that vehicle very much right for China and everywhere else for that matter.

But the crucial point is, and that was the point I made in my opening speech is that, that will be the first vehicle in this variable cost, material cost initiative that we started a couple of years ago to switch from what I call the hybrid business model to a new business model in China is that we will get close, not all the way, but close to this full sourcing in China for Chinese production. And that will help us lower the variable cost significantly vis-a-vis the past business model. And we're going to be realistic about the price point. I mean who knows where price point is going to be 12 months from now in this Chinese market environment. I don't think anybody can know. But we will then have water under the keel to adequately price point these vehicles, although we will never take the fire sale market share at all cost approach that many other market participants are choosing to do. That will not be the play for Mercedes.

Jose, on the working capital in the quarter 4, so again, let me remind the quarter 3, so buildup of the inventory to support higher quarter 4 sales, but at the same time, a higher mix in the quarter 3 inventory that burdens the cash flow, as you could see in the quarter 3, but that will unwind in the quarter 4 as we ramp up the sales, including a higher -- a stronger mix, S-Class, GLS, GLE and the like. And if you link it with the outlook on the cash flow, I explained, well sitting at EUR 3.1 billion of the cash flow at the 9 months and guiding for something which is below the EUR 4.1 billion threshold, as I pointed out in the intro, well, that leaves some cash generation also on the organic side in the fourth quarter.

If you think about, I mean the margin, obviously, that is not that strong. So the organic cash generation is supposed to come from the working capital reduction, which means inventory down. But don't forget about the payables, they will go up at the same time as you lower the production in the early days or in the course of December, and that has an impact on the payables. But the net being a working capital contribution that explains, I think, I mean, why we're building up in the third quarter coming down in the fourth quarter and explains the cash flow guidance.

Next question goes to Patrick Hummel from UBS.

My first question, Harald, is a follow-up regarding the puts and takes for 2027. You mentioned that you expect variable cost and fixed cost to be further down now in Q3, you even managed to overcompensate for the rising input costs. And I'm wondering whether that comment you made on the cost side of the EBIT bridge would also again, fully offset the raw mat headwinds that you see today. How big is that raw mat headwind actually if you do a mark-to-market that we should have in mind for next year?

And the second question to Ola, this is really a bigger picture question. You keep lowering your growth expectations basically and China, of course, is the main driver. And I think the idea behind the wider capital allocation framework was probably to have EPS accretion to create value for shareholders, but share buybacks don't really create value if the business is shrinking. So I'm just wondering in the grand scheme of things, how you think about the capital allocation framework today when it comes to growth, when it comes to M&A, does it still make sense to sell down DTG to buy back stock? And maybe more specifically, and that might be one for Harald, how should we think actually about the dividend going forward in that context? Do you still want to keep it flat in absolute terms, which is what you did last year? Or will it be more closer to the target payout ratio of 40%?

Thanks, Patrick. So on building blocks and variable costs, I mean, 2027, definitely what will continue to drive is efficiencies in terms of commercial and technical efficiencies. I think good progress in 2026. We'll continue to do so in 2027. The targets which we outlined as part of our efficiency program, the NLP2, I'd like to remind you, I mean, are before raw mats or ex raw mat movements and also ex life cycle measures. As you can see, 2026 in the 9 months, definitely, we can more than compensate and the full year, I still expect that we can compensate. Again, I don't want to speculate now on the raw mats on the commodities. I mean, for 2027 needs to be watched in particular, if you think about chips and semis, I would say. But what is in our hands, clearly mean that is what we want to drive downwards.

So Patrick, of course, it's our goal to grow. I think we have demonstrated this year that ex China, we have grown, which means that the product defensive is working. But China has more than outweighed that, and that's the point. And as was the question before, where is that sound operating point for China? I think that sound operating point for China, whereas you don't have 100% predictability. It is something that we have to seek and define and say what is our play and then go from there. So we will come back with a more detailed and comprehensive view on China next year. But it's clearly our goal to grow. I think the capital allocation policy so far has worked quite well for us in turbulent times.

And as Harald said, we will finish off the EUR 1 billion that we kicked off by the Annual Shareholders' Meeting next year. What then the best choice of capital allocation is, that decision we will make at a given point in time. But I think this is important for the shareholders. Whatever decision we make, we will make in the interest of the shareholders. So that is how we act. You can see in spite of giving back billions back to shareholders, we still have a very healthy net industrial liquidity. So balance sheet-wise, we're operating in a challenging environment, but from a position of strength.

On the M&A side, shoot from the hip M&A certainly will not be our plan. If there is meaningful addition to our portfolio that strengthens our business or an adjacency that is a logical extension of our business, yes, we have the firepower to look at that. But this is not something that you do in a hectic way to as a reaction to, oh, you have issues that you need to deal with, now you try to escape through M&A. It's not our mindset. M&A has to be a strategic contributor to the core business or a meaningful adjacency. Should there be something there, rest assured you will know.

And would just briefly like to remind you the capital allocation framework, I mean, we can only distribute what we generate. So shareholder returns will be framed sized by the cash generated or expected to be generated in 2027. I will say -- and from that, probably BEV will be served first and all the other, we'll see in Feb.

And the next question goes to Harald Hendrikse from Citi.

My question relates more, I mean, going away from China, if we look at where the financial results stand today and obviously, the disappointing impact in the fourth quarter that we were all hoping that maybe wasn't going to happen. It seems to me that China maybe was even more profitable and all of your peer group than we ever thought before. And in fact, of course, the decline in Chinese profitability is a problem this year. But isn't maybe the real problem that the rest of the world profitability is actually lower than maybe we all thought it was. So we understand that the BEV impact is significant. We understand the tariff impact in the U.S. is significant. Those are not the real problems, but what I really want to understand is when we go to '27 or more importantly, '28, '29, how your business is doing okay, right?

Sales are okay, mix is okay. You've got lots of new products. How can you ensure that the profitability of the non-China business is actually much more rational for a company of this size? I'm sure you would agree that the global business, even ex China should be doing, I don't know, I mean, at least margin. Can you talk about that a little bit more? And if you had the foresight and the knowledge that China would be as difficult as it is now, what would you have done differently in the rest of the world? Or would it have changed the strategic situation in the rest of the world for you? Maybe if you can address that. Sorry, difficult question, I know, but that's what I feel.

If I start, and I will pass on to Harald. Yes, the China business is profitable, and it's now less profitable. So stating the obvious. And the business system is a business system as a whole. So every region contributes to the fixed cost of the overall business and also carries the funding of the overall business. So if one significant piece of that breaks away, the fixed cost digression effect of it is felt. What is the measure you have to take? And also this is obvious, is you have to reduce your fixed cost and you have to reduce your funding. And we have been on a path of doing that over the last few years, quite successfully so. But the fall away of the revenue side of the profitable revenue side of China moved faster downwards than what we had originally anticipated.

I am not the cry over spilled milk type of person and should have done this and should have done that. But going forward, we have to continue on that path so that indeed, the more healthy at the moment business around the world and the growth trajectory that we're starting to get there. In spite of wars and other things, I mean, I could complain about the fact that the very profitable Middle Eastern market for known reasons is not as vibrant this year as it has been for us, and it's an upper end market where we sell a lot of our heavy goods that also make a lot of profit. So there are many things that are working here, but we will continue with determination to adjust the structures of the company to fit the revenue position of the company. And there is an inertia between those 2 if the dynamics on the revenue side have moved ahead in a direction that we did not foresee at that magnitude?

Quickly, I think part of the answer you can see already, I mean, I commented before that basically the exposure, if you want to say, to China sales is down to 20%. Clearly, I mean, that was higher than 1/3 some time ago on the sales side, and we're expanding in the other parts of the world. Rest of world, we're growing, as you can see with the numbers in Europe and the U.S. If you look at that from a profitability point of view, well, I mean we're not separating out the profitability by regions. But I think, I mean, you're right. I mean, the profit pools from China were very important, very material. The decline we absorbed already as we speak, is definitely very material. I can confirm that the quality of the margin in the other regions in the rest of the world has come up is healthy, thanks to the strong product momentum, but also thanks to the cost work.

So what's the plan, therefore, I mean, get less dependent on the profit pools from China, absolutely. Are we at the point where we're completely independent in terms of the profit pool from China? Not maybe in brackets yet. But clearly, I think given the uncertainties, that's what we have to drive for. And I think we see the building blocks, I mean, with the product traction in the other markets. We'll take, I mean, the variable cost further down, the fixed cost of funding as elaborated before. And we also work on how do we kind of ring-fence China that itself sustainable and therefore, make the entire value proposition more resilient and less exposed to China. That is definitely the plan and probably February is a good moment to talk about that in a bit more detail.

I will hand my next question over to Henning Cosman from Barclays.

Sorry, just to come back to China, actually, I'm sorry to labor this, but Ola, you said your ambition is to -- certainly to grow regardless of what your new target picture for China will be. So I appreciate you'll talk more about in February, but it's a while until February. And I'm just wondering about the framework how to think about the setup between now and then. So I just wanted to make clear we're sure we're on the right page. So when you say you want to grow regardless of what the new China picture will be, I suppose, compared to 2025, we're tracking about 150,000 units down. Do I understand you correctly there that if the current run rate remains or it declines even further, growing means overcompensating that in other markets. I just wanted to clarify that if you can grow even if China remains or declines in your new target picture?

And then the second question, much more for Harald, on the free cash flow, please, Harald, just to clarify a few things around free cash flow. Firstly, if you could just say how much the Daimler Truck stake sale was in October. You said it's small, if you could quantify it, please. But more generally, if I look at your free cash flow in the 9 months, you had a pretty big outflow for these operating leases. I understand that the costs on operating leases were up a lot year-over-year, but it makes a big difference to the operating free cash flow. So if you could touch on that specifically.

But just overall, the statement on the underlying free cash flow, there's a very large contribution from payables versus receivables. I think the cash tax looks pretty low relative to the P&L tax. There is obviously the DTG stake sale of over EUR 1 billion in there now. So if you could just make a statement about the structural underlying free cash flow without help from working capital where you say there's going to be a bit more even in Q4. How do you assess the structural health of the underlying free cash flow, excluding working capital, excluding sales on a stable cash tax run rate?

Henning, perhaps I was not precise enough in my answer, but I will restate it, and I will kind of quote Harald. For the remainder of this year, I repeat what Harald said, Q4 will be higher than Q3, but Q4 will be lower than previous year. We intend to grow world ex China in Q4, but we expect China to be down in Q4. So the net of all of those is what Harald said, below previous year. That does not mean that we don't have the general ambition for the business as such, and maybe that's why I was not so precise that over time, we want to grow the business.

But I also appreciate, and I think that's your question, where is that landing point for China and where is the platform from which you then rebuild, so to speak, that we are going to have to deliver to you, but we don't want to shoot from the hip doing that here today. We have started a whole host of actions that we could discuss for hours to strengthen and secure our position in China, but the market behavior has been difficult to grasp, I would say that putting it mildly. So we're going to come back to you as early as possible in the new year and give you a full assessment of where we think that operating point for China makes sense for us, and then we'll take it from there. I hope that answers your question.

And Henning on the cash flow side, well, maybe we can clarify the operating lease sideline. But I mean, we don't see a major tick up. I mean the take-up on the operating lease. And so the -- I mean the industrial free cash flow is anyhow X in any of the financing stuff. So -- but I mean, if that requires clarification, we can take that offline. In terms of how to think about cash flow generation and levers, I mean let me point out, I mean, number one, obviously is driven by the margin of the business on the industrial side, so Cars and Vans. We cannot disconnect the cash flow from the margin evolution. I think I'm stating a bit the very obvious. But then what we're doing in terms of working capital management. And here, I think we need to look beyond the quarter and rather look on full year. Clearly, I mean, we want to do continuous working capital improvement and thereby basically absorbing also impacts like the direct sales model.

If you look over a couple of years now, I mean, we took quite some billions of inventory on the balance sheet from the direct sales model, but you don't see a take-up I mean, in inventory as such, which means we have been doing improvements on working capital. But for this, I think you really need to take a full year picture. And again, once we have completed 2026, we can have a look at that, which means basically working capital should be either, I mean, neutral or maybe provide a bit of an upside potential. Point number two definitely is the investment side. Depreciation will go up with the new models being launched having passed the start of production. Investments is coming down. I mentioned EUR 900 million in the 9 months, I mean, year-to-date, and that number will be even bigger on the full year.

So in other words, investments versus depreciation is going to be supportive, accretive to cash conversion ratio. So on a pretax basis, therefore, I would say we should see on Cars, I mean, cash conversion at least at 1 moving forward. And on Vans, I think it will come up progressively. The investment peak is in 2026, not jump to 1 right away. But over maybe 2 years or so, we will come back to 1 and then has a great potential, I think, to exceed 1 in the midterm. And on the tax side, yes, cash taxes are running lower than P&L taxes. I mean, as in some countries, we are in tax loss situation. I guess where the tariffs, for example, end up in Germany. And that makes it to mean that the cash taxes are significantly lower than the P&L charges you see over there. I hope that helps.

Can you share the number for the DTG stake sale in October?

Apologies. So that was a small -- very small 3-digit million number.

I will move on to the next question, and that one goes to Horst Schneider from Bank of America.

I have got a few still. I try to constrain myself to 2. You made a lot of statements, Harald, on Q4, but I'm not sure if you quantified now if Q4 could slip into losses or not. So if I take your new guidance range, the midpoint of the range implies something like around breakeven in Q4. Maybe you can say what's your ambition for the fourth quarter, stay in positive territory and achieve upper end of your new guidance range? Or should you really work with the midpoint? And maybe you can clarify again what are then the precise drivers? I think you have not yet said what could be the magnitude of supplier compensation, for example?

And then the second question, that's for Ola. Ola, when I was on the Paris Auto Show, one of the most shocking things for me were that the Chinese OEMs, they try to -- seem to try to push more into the premium space, maybe also related to the fact that their tariffs are increasing now. But don't you think that this could be into '27 and thereafter, a bigger threat to your business also in Europe that they finally take more share just because their vehicles are priced a lot lower than those of all the German premium brands.

Yes. So first question on quarter 4. I think if you apply it mechanically, it goes somewhere from what, minus 1% to, call it, plus 1% or so. So I would say, call it a breakeven quarter. And well, as -- I mean, we're sailing with not a lot of water under the keel here, obviously, I think any movement on a particular item and an adjustment kind of a nonrecurring mean goes straight in one or the other direction. So that's I think why we should not exaggerate, I think, the level of granularity we're chasing here. But call it a breakeven quarter. I mean that's what I would say for Cars in quarter 4. Let me be clear on the supplier compensation. One of the reasons for the guidance adjustment next to China is higher raw mat cost and life cycle measures. It's not higher supplier compensation.

This one is a phasing, so which means supplier compensation has moved to the right into the fourth quarter, but has not been stepped up. And I want to make that extremely clear. There's not a single cent more for suppliers in terms of compensation. It's just a matter of fact that I mean that has been -- that moved to the quarter 4, which makes the phasing a bit unfortunate. I really want to be absolutely clear, I mean, about that. And moving forward, I don't want to prejudice what Jörg is doing on the purchasing side, but I think the times in terms of supplier compensation, I think in the challenges we are facing in the industry in terms of the uncertainty and the volatility, I think the times of supplier compensation for volume are gone.

So if we talk about China also in the context of Chinese going into the world, as I said in my opening statement, this is part of our calculation. It's part of the equation. And every market is different here. But when we develop our product technology and pricing strategy, it's actually to deal with both. And yes, many Chinese manufacturers are seeking their luck in Europe as well. You can see that there's also been a regulatory response to that with the recent trip of Commissioner of Šefcovic to China to actually introduce quotas now as well as one tool on top of the battery electric vehicle anti-subsidy study that was put in place a couple of years from now to maybe create a little bit more level playing field on the pricing side and on the ability to flood a market with certain vehicles. But you can't rely on that. You got to rely on your own strengths. And your own strength is ultimately your product and your pricing play.

If we look at what's going on in Europe right now, I'll take the German market as an example because it's a good bellwether, and it's by far and away the biggest market in Europe. For, I think, the third month in a row now, Mercedes-Benz is the clear premium leader for battery electric vehicles. And the most selling vehicle, I think, in this month is probably the electric GLC. So it's not just a matter of looking at how do you deal with new Chinese competition. It's also a matter of looking at how do you deal with the competition that was there in the first place. And here, I think our product defensive will carry momentum for us. Not that, that should be the only thing, but it's also an important thing in the play.

So we will continue to roll out one car after the other with fantastic technology. It's not a coincidence that Mercedes-Benz is the first car company with Level 2++ now being launched in Germany and then ability to proliferate throughout other countries. We will power play on that next-gen technology and be at the forefront. And not every non-European manufacturer that comes into the market masters that digital environment as well as we do it right off the bat. As it took us a little bit of time to get our hands around that in China. But if you look at the digital play now in China, we're at the frontier. We're at the technological frontier. Our automated driving systems are as good, if not the best. Our new smart cockpit, and we launched yet another version, significant upgrade in the fall now is as good, if not in some aspects, the best. So we're not going to stand still and just watch this happening to us. We're going to take the bull by the horns and play our play.

Thank you very much, Horst. Thank you very much, Ola and Harald for answering all of the questions. I see a few more people in the line. Unfortunately, we're running out of time as well. We will reach out to you. And of course, from an Investor Relations standpoint, we remain at your disposal for any further questions that you may have. Now to all of you, have a great morning, have a great afternoon and a great evening, depending on where you are in the world. Thank you very much.

[Audio Gap] Mercedes-Benz. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be followed directly by a Q&A session. [Operator Instructions] I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results documents. Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events.

Such statements are subject to various risks and uncertainties. If any of the assumptions underlying these statements prove to be incorrect, actual results may differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made. With that, I would now like to hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Good morning, ladies and gentlemen. This is Christina speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q2 results conference call. I'm very pleased to have with me today, Ola Kallenius, our CEO and Harald Wilhelm, our CFO. To allow more time for your questions, Ola will give a brief introduction and Harald will walk you through our financials. We will then move directly into our Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website and can also be accessed via the webcast in the web interface. And with that, I will now hand over to Ola.

Thank you, Christina, and good morning, everybody. Welcome. We delivered solid results in the second quarter in spite of a dynamic business environment from macro and geopolitical headwinds to softer consumer sentiment and intense competition in China. You can see this reflected in the financial results. Nevertheless, we remained on track in the first half of the year. And I think all in all, we have shown the ability to adapt, execute and succeed as a team. We will definitely carry this mindset into the second half of the year. Let's have a quick look at what happened in Q2.

Our product and technology launch program is gaining momentum. The latest premieres that we have shown to the world was the AMG GT 4-Door Coupe as well as the GLS Maybach. We have started the sales of the C-Class battery electric vehicle, the GLE, the GLS, the one-of-a-kind VLE and also that AMG GT has now also started sales. And if we look at the feedback and response so far, very positive, not only from product media experts, dealers, but primarily in the community and amongst Mercedes fans. And if you read test results from comparison tests on products, most of those in the established product media are won by Mercedes.

And we want to seize also next to our automotive business, some opportunities in the defense sector. If you look at the technology that is underpinning this launch offensive, I want to highlight 3 things. To start with on the powertrain side. We have now started the production of the new axial flux motor that really redefines BEV performance. It is a USP that no other manufacturer in the world possesses. We're also the ones that ventured out developing a -- from the ground up, brand-new V8, high-tech electrified V8 EU 7 ready that will take that technology to the next level. So on the powertrain side, we're well positioned for both BEV growth and maintain our strong position on ICE.

MB.OS is coming to fruition. The beauty of MB.OS, it is a platform. We can roll it out in all our vehicles, not just on the BEV side, I think that's what people expect. But I believe that the new S-Class that we have also just brought into the market is the first fully software-defined vehicle on the high-tech ICE side. So MB.OS will be in every single Mercedes going forward. One highlight of that MB.OS is ADAS. We already last year introduced our AI-based point-to-point assisted driving in China. We then continued with the U.S. and are rolling out step-by-step in the U.S. And we believe that by the end of this year, beginning of next year, we can bring this point-to-point technology also within the new European legislation.

So here, in terms of a global play on ADAS, we are at the forefront of what's happening on the technological side. If we switch to the industrial side, at the same time, we're strengthening our resilience and our competitiveness. We have launched a global productivity initiative with a special focus on Germany. We want to significantly speed up processes, streamline structures and improve the competitive cost position. One good example of that is the opening of our expanded plant in Kecskemet in Hungary, which we did only a couple of weeks ago, doubling the capacity of that plant. And that allows us to shift products to this attractive site, new electric C-Class, new electric GLC and also the upcoming compact G. It is our goal to make the production network more resilient, efficient and competitive.

Moving over to the numbers for the group, revenue slightly below last year at EUR 32 billion. And an EBIT as booked, and Harald will get into the financials in more detail here in a minute, at EUR 1.5 billion, which is 22% above last year. I want to highlight that in spite of the dynamic challenging environment that I described, we generated EUR 1.1 billion in free cash flow, which is a combination of the operating activities as well as M&A. And in spite of giving shareholders EUR 5 billion in return as a combination of dividend and share buybacks, the net industrial liquidity is still sitting at a healthy EUR 30 billion.

If we drill down a little bit on the sales side, I think it's a tale of 2 worlds. On the one hand, we saw the Chinese market as a whole drop by about 20%, which is, of course, a significant reset in the world's biggest market. This affected us. So in China, we had a significant reduction of our sales in the period. But we could, in the first half of the year in all markets without China, increase our sales by 2%, which certainly wasn't a given considering the business environment. And in relative terms, I think we're doing well there. You can see a clear sign here in these numbers of the second-generation battery electric vehicles, which were up 51%, driven by Europe, up 87%. We have an extremely strong order intake, particularly in Europe on this side and are looking forward to ramping those BEVs in the second half of the year.

And with that, I'm going to hand over to Harald, who will dig deeper into the financials. Over to you, Harald.

Thank you, Ola, and hello, everybody. So let's continue now with the car financials. Ola explained the sales already before. The revenue developed slightly better than the sales that was supported by growth outside China. On the ASP, we see a lower than prior year quarter. That's driven by net pricing and unfavorable FX. Return on sales adjusted at 4%, and we will go into that in more detail on the next page. On the EBIT bridge, in the quarter 2, Cars delivered an adjusted EBIT of around EUR 900 million and an adjusted return on sales of 4% within our full year guidance range of 3% to 5%.

Globally, the volume effect was fairly neutral. And the main headwinds within the top line bucket were the following: in order of magnitude, net pricing, higher cost for product life cycle measures, lower part supplies to our joint venture in China. So basically, you can see that the majority of the items are related to the development in China in the second quarter. On the other side, you can see on the chart very well, the industrial performance was clearly positive as we continue to see operational efficiencies in purchasing and manufacturing, while raw mats were fairly neutral.

The selling expenses reflect effects from the rollout of our direct sales model in Korea as well as campaigns in line with our ongoing product launches. The R&D contributed positively following our funding peak in 2025. The other bucket includes a risk provision related to shareholder commitments and a lower BBAC at equity result. And on the sizable adjustments on the page here, they mainly reflect valuation adjustments related to our investments in China in line with the market development we could observe in the second quarter. The remainder of the adjustment refers to the update on legal restructuring and M&A transactions.

Looking at the cash flow, following a strong quarter 1, Cars achieved an adjusted CFBIT of EUR 0.5 billion. Net working capital was a headwind. That was a result of heavier inventory, as we're equipping our sales network with recently launched products such as the S-Class. So it's basically the structure within the inventory, which went up. On the other side, payables benefited from the production ramp-up of the new products. Investments and depreciations are rather balanced. And then on the other bucket, you can see that besides the BBAC dividend, the other bucket includes the reversal of the BBAC at equity result and the valuation adjustments I just mentioned before as well as cash outs for bonus payments.

Looking on the Vans side, sales developed, I mean, rather stable at around 94,000 units. The overall market environment remained competitive and volatile in quarter 2 with continued softer consumer demand for midsized vans in China. These headwinds were largely offset by strong sales development across our core regions with a healthy growth in Europe and a strong momentum in North America, particularly the U.S. The eVans remained a key growth factor, up 46% year-on-year, lifting the global xEV share to 11%. Revenue is slightly up at EUR 4.5 billion. EBIT adjusted stands at around EUR 450 million. We go into that as well in the bridge on the next page.

On the cash flow side, we see the adjusted cash flow developed in line with our expectation and continues to reflect our planned investments into the new van architecture. As anticipated, investments are expected to peak this year, strategically preparing the business for the future. With this, we are currently executing the largest product investment program in the history of our Vans business. A key milestone in that respect was the start of series production of the all-new electric VLE in Vitoria in June. The VLE is now available for order in selected markets and marks the beginning of a new generation of vans. Looking ahead, we will further expand the lineup with the VLS and the VLS Maybach along a broad range of private and commercial derivatives built on this highly flexible architecture.

Now coming to the EBIT bridge for Vans. So the EBIT adjusted at EUR 450 million, once again, a benchmark double-digit return on sales of 10.2%. Let me guide you briefly through the buckets. So volume structural pricing is a function of higher ex-China sales and the positive contribution from aftersales as well as positive effects from the leasing portfolio. That was partially offset by a lighter product mix driven by the end-of-life-cycle sales for Citan and T-Class as well as a strong eSprinter sales and the lower V-Class volumes.

In the bucket, we also have a softer net pricing. On the industrial performance, we can see ramp-up cost for the new van architecture and product-related measures. Positive effects come from R&D, driven by further efficiencies and optimized spending for our existing model range. Looking at Financial Services. First, I would like to say the new setup with one integrated customer unit on the sales side has been in place since the beginning of the year and is proving to work really well. As a result, we saw new business flat year-on-year as a higher penetration rate offset lower car sales. The portfolio remained rather stable. Profit-wise, MBFS delivered a strong result with adjusted EBIT increasing 70% to close to EUR 500 million and adjusted return on sales of 15.3%. This was driven by a continued positive development in the portfolio margin, lower cost of credit risk supported by a stronger portfolio quality and further efficiency gains from the integrated setup and our personnel cost program.

If we look now on the group side, let's bring the divisional results and the group together in terms of the group EBIT. So Cars, Vans, Financial Services, I explained already before. So what's inside the recon, that's positively driven by the Daimler Truck at equity gains and positive effects from the first disposals, which we did in quarter 2. This results in a solid EBIT adjusted of EUR 2.3 billion. And then we had some major adjustments in the second quarter. I mentioned already the valuation adjustments related to our China investments. On top of that, we had further adjustments for some restructuring charges associated with our personnel cost reduction program as well as legal proceedings.

As well on the M&A side, we had some adjustments mainly related to the sale of our own operations in Germany and Athlon following its reclassification as asset held for sale. And that makes the group EBIT at EUR 1.5 billion reported. Looking on the cash flow, Cars and Vans were explained already before. Income taxes at EUR 170 million. Interest contribution, EUR 350 million. So the other recon is positive, and that mainly reflects the first monetization of Daimler Truck stake contributing EUR 417 million as well as the Daimler Truck DV of EUR 338 million after tax. And with that, we have a free cash flow at a solid EUR 1.1 billion in that quarter.

Looking at the balance sheet. Overall, I mean, solid cash generation in the first half of EUR 3 billion. Following the AGM in April, we paid the dividend of EUR 3.3 billion. In June, we completed the share buyback with approximately EUR 1.7 billion in H1, there of EUR 1.3 billion in the second quarter. And with that, the total cash return to shareholders sits at EUR 5 billion for H1. And even after that, the NIL is healthy at EUR 30 billion. Now looking forward, we start with the divisional guidances for 2026. Please refer to the disclaimer regarding forward-looking statements at the end of this presentation in relation to the outlook.

The conflict in the Middle East continues to add uncertainty to an already highly uncertain global economic and automotive market environment. With respect to potential impacts on material, raw material and energy prices, inflation and market demand, the outlook assumes that the conflict will not fully reescalate in the second half of the year. Assumptions are based on today's regulatory framework regarding tariffs. Now on the Cars outlook. First, on the sales guidance. For 2026, we retain our constructive view with targeted growth ex-China. Our product launch program is progressing well with most of the order intake realized in Europe so far.

We continue to expect further momentum, as production of our new model ramp-ups and additional markets are launched. While we took a cautious view on China at the beginning of the year, market conditions have proved more challenging than expected. Despite the year-on-year growth ex-China in the first half, total sales declined by 7%, including China. As a result, we are lowering our sales guidance and now expect full year 2026 sales to be slightly below 2025 levels. Reflecting the strong momentum of our BEV portfolio, we are raising our full year xEV share guidance to 23% to 25%. On the profitability side, in H1, Cars achieved an adjusted return on sales of 4%. For H2, we continue to expect further benefits, so tailwinds coming from product momentum, lower product-related expenses.

On the downside, so in terms of headwinds, we expect cost increases such as energy and freight, increasing cost pressures from raw materials and cost seasonality such as fixed cost capitalization and higher depreciation following the numerous product launches. In addition, the higher than previously expected, I mean, BEV share pays some toll, but that's included in what I said, I mean, above, as well as some normalization of the tariff in H2 versus H1. With this, we confirm our full year adjusted return on sales guidance of 3% to 5%, while expecting to be in the lower half of the range for the full year. PPE, R&D and CCR remain unchanged.

Now on the Vans division, sales guidance is unchanged. As usual, we see a stronger H2 versus H1, xEV share unchanged. In terms of profitability in H1, Vans achieved a healthy 10.1%, double-digit return on sales adjusted at the upper end of the guidance range. For H2, we see the following effects compared to H1, positive effects from higher volume and a better mix, higher costs, however, due to the ramp-up of the new VLE and factories and also headwinds from the raw materials. With this, we see H1 below -- H2 below H1. For the full year, we continue to see the return on sales adjusted between 8% to 10%. No change to PPE, R&D and CCR.

On the Financial Services side, we had an adjusted return on equity of 14.4% in H1, mainly driven by a higher portfolio margin. We see some headwinds in H2, mainly through the volatile geo and macro environment, reflecting in a potentially higher cost of credit risk. Based on the strong H1, we are, however, raising our full year guidance now to 12% to 14%. And with that, I turn to the group guidance. That obviously follows the same premises as the segment guidance. Following the adjustments on the divisional guidance, we now see revenue slightly below previous year due to softer sales developments at Cars.

We continue to see group EBIT significantly above the previous year. Looking at the cash flow side, we confirm the free cash flow in industrial guidance and continue to see the full year slightly below prior year. This -- let me give you a bit more color on that. This includes for the H1 cash flow of EUR 3 billion after restructuring cash outs of EUR 1.1 billion. And the outlook includes for the H2, some M&A next to the organic cash flow. Let me give a bit more color on the M&A side. In July, we materialized already another EUR 600 million from divestments of Daimler Truck shares. In the guidance, we do not include any further potential truck disposals. In addition, however, we intend to close the Athlon transaction in H2, which is technically not included in the free cash flow industrial, but will have a positive impact on net cash and on the basis of capital allocation.

And on that back -- on the back of that cash generation, which has been achieved in H1 and which is expected in H2, we continue our share buyback activity of up to EUR 1 billion to be completed prior to the AGM 2027. And with this, I hand back to you, Ola.

Thank you, Harald. As you can see, we're navigating through a challenging business environment with discipline and a clear plan. We will retain our realistic view of the challenges and opportunities ahead, and we will maintain this approach. At the same time, we're preparing for a successful future. Our focus is on 2 priorities: our product and tech plan and our performance. We believe that strong products is the best answer in any market environment, and that's why we continue to build on our strong momentum.

Next up is the premiere of the new GLA tomorrow. And in the fall, we will unveil our electric AMG SUV. Our focus is on ensuring smooth ramp-ups and successful market introductions worldwide. For example, our S-Class, the GLE and GLS will be available worldwide by the end of this year. All the new products will carry the next generation of Mercedes technology, and there's much more to come. So please stay tuned. We remain confident in the strength of our product pipeline. The full impact will unfold beyond 2026, and we want to capitalize on this great potential. And at the same time, we're fully committed to optimizing our productivity resilience and competitiveness.

We have taken important steps over the past years with tangible effects. Now we're launching a productivity initiative, particularly for Germany. We must continue to work flat out to reduce costs so that we can remain competitive on the prices of our products. Our plans for our global footprints are equally ambitious. In Europe, we will continue to ramp up our Kecskemet plant. In China, we're taking on competition with tailored models and deeper localization. And in the U.S., over time, we're expanding local production and strengthening partnerships. Our direction is clear, outstanding products, strong performance and disciplined execution. The Mercedes team is fully committed to keeping the pace high. Thank you.

Thank you, Ola. Ladies and gentlemen, we will now move on to our Q&A session. Before asking your question, please also state your name and the organization you represent. A few practical points, as usual, please ask your question in English. And for reasons of fairness, please limit yourselves to a maximum of 2 questions. Before we begin, the operator will now briefly explain the procedure once again.

[Operator Instructions]

Thank you. We will start the Q&A. And our first question goes to Philippe Houchois from Jefferies.

If I ask 2, if possible. The first one, you've taken a charge on the China valuation. Does it mean there's -- is the cost done? Or is the measures -- the actual measure of downsizing or reducing capacity, et cetera, already done in the China operations is my first question. And the second one, maybe more strategically, you're clearly rebalancing your footprint more globally. What's missing in North America is more content. At one point, does it make sense to actually localize engines in North America to try to be USMCA compliant? Or is that too much of a restructuring or change in the organization of the group?

Thanks, Philippe. Maybe I take the first one on the charges related to the China ventures. Well, I mean, that these charges, I mean, are a function of, obviously, impairment testing. I mean, we have to do it each and every quarter. And basically, that takes into account all elements within the scope of the various joint ventures which we have, which is obviously market development, cost development. So it includes, I mean, basically forward-looking perspective. And given the market dynamics, which we could see on the basis of the scope of the joint venture and the existing terms, these adjustments had to be recorded. So it indicates a lower profit contribution of these joint ventures in the future compared to the assumptions and the visibility and the perspectives that we had on these ventures so far.

With regard to localization in the United States, the option of localizing engines as well in the United States is not something that we have decided at this point. It's certainly something that we will look at when we also see how USMCA rules develop. We always have to weigh, of course, the scale effects of the investments that you have already made versus the benefits of going local on any one component, and that goes for engines as well. So no decision made at this time, and we will see how things unfold.

Thanks, Philippe. I'll move on to the next question, and this one goes to Tim Rokossa from Deutsche Bank.

I have 2 questions as well. The first one also goes to the China impairment in the market, is perhaps to both of you actually. I gathered from your previous answer, Harald, that you probably don't want to give us much more details, but I'll try anyway. Is this really like a reset for the strategic ambition in the Chinese market? Or is this just something that, I mean, with this market development, it's pretty clear that it didn't go in line with your expectations. That was just something that you just had to do at this point. It doesn't really strategically change anything. And is there any way that this can become cash relevant? Harald, it's at equity, so I assume not, but just to ask for that for the group, obviously, in the statements.

And Ola, related to that, your current view on China. Will this come back? Are there more drastic actions needed? What are you discussing with Oliver Thone, who you just recently sent there basically with this very difficult task? Second question on the DTG placement and cash return. Great to see that you continue to cash return. I think that's very much appreciated. Harald, do you intend to do this through what we've seen so far, i.e., smaller sales and actually pretty big sales, as you just said in July through the market, no big ABBs, rather opportunistically at any given point in time? And should we see the EUR 1 billion as a maximum? Or is this just a commitment to your continuation, which once again is very much appreciated?

Tim, thanks. Maybe I take, I mean, the DT first and then I come back to the China-related questions. So on the DT stake, yes, I think we had a pretty good run by dribbling, I mean, in quarter 2, in actually April and June to be a bit more precise and most recently, I mean, in July. And so even if you didn't see the one transaction from an ABB that is a sizable amount of EUR 1 billion divestment materialized. So I would say at this juncture, given also the favorable evolution on the DT side, which you could see recently, assuming that is going to hold for later in the year. I think I would not exclude the distinct possibility that we would continue, but we definitely reserve all options in terms of how we're going to do that. I mean, is that via dribbling or via is it ABB?

Market conditions will tell such as also competitive environment when it comes to discounting. So you see we take benefit of the full tool set. Maybe I respond shortly on the more technical side of the China situation. And Ola, I mean, you want to take the more strategic side of things. I think definitely, these adjustments are not a function of change of strategy. They are just a function of the commercial environment, as I just pointed out before, which we have to recognize and taking into account all elements. And that is a noncash charge. I mean that is very clear. But I cannot exclude saying that obviously, it also demonstrates that there is a lower profit contribution expected from these ventures in China compared to the assumptions we took before. I would also like to emphasize, however, that these adjustments are not representative of the entire profit pool we are having in China. And over to you for the strategic dimension.

Tim, we remain strategically fully committed to China. Everybody can see the intensity of the competition there at the moment as well as the domestic market development. But it is and remains the biggest car market in the world. It is an ecosystem that you need to be in. And China is not just a game in China for China. China is also going into the world. So if you want to be a global player, you got to be in that space. How do you do it? Tech products, localization, partnerships, of course, adjusting your cost structures to the market environment and what's going on there and making sure that you find those places in the market to compete that are most beneficial to you. And we're committed to all of those.

We have strengthened our partnerships in China, especially on the tech side. We work very well together with our joint venture partner and make decisions together on how to tackle this. And we have also strengthened our R&D footprint in China, which works hand-in-hand with mission control over here in Germany. So you got to take the long view on China, not just focus on today or tomorrow. Maybe it's also the day after tomorrow that you have to have in mind. And we have the strength and resilience as a company to see through this phase. So that is why China very much remains one of the strategic pillars of our play. And the rest Harald answered.

Thank you, Tim. I will move on to the next question, and that goes to Jose Asumendi from JPMorgan.

Two questions, please. Ola, can you comment please on the task to improve the profitability at the German plant? And which big actions are you considering in Germany? Which ones have you already announced or you are in discussions, please, with the unions, if you could give us some insights? And then also, how do you plan to leverage the cost efficiency of the plant in Hungary?

And then second for Harald, can you comment, Harald, a bit more with regards to the profitability for Mercedes-Benz Cars in the second half, a little bit the seasonality second versus the first half and some of the positives and negatives revolving the profitability in H2?

If we look at the expansion in Hungary, what does it allow us to do by weighting more of our overall European volume in a more cost-attractive production setup, of course, lowers that weighted average of our production cost for the whole portfolio. So this is not something that we have just started now. Of course, we have worked in Eastern Europe for many years. Hungary is a prominent example. We have powertrain activities in Romania. And as you know, we're in the process right now of converting one of our ICE power plants in Poland to a future production site for our vans. So it is a strategic imperative to take the production cost down.

And we need to use these cost-attractive locations to get that weighted average further down. But we cannot leave Germany alone. That is why we started an initiative some weeks ago that we call productivity initiative for Germany, It Starts With Us. We chose that title consciously because we believe that Germany as an economy to improve its competitiveness as a whole. We have unbelievable strengths in terms of our ingenuity, innovation power, engineers and the people working in our factories. But if you look at the net working hours vis-a-vis the cost, I think it was one of the politicians that said the costs are now starting to become higher than we're better.

And if you're in that position, you absolutely have to tackle your relative cost position. You're not going to turn Germany into Eastern Germany -- to Eastern Europe and certainly not into China. But compared to ourselves, we can make a step forward. This is happening on 3 levels. What we can do inside Mercedes? That we're doing anyway. I commented on it in my presentation. Streamlining processes, doubling down on efficiency measures and looking at every single bit of your operations and making it more both effective and efficient. But there is also a general union and political level to this where we have announced that we think it's time for Germany to rethink some of its positions, whether it's working time or other things.

We are in negotiations with the appropriate people on this. The outcome, we cannot know at this stage. But we're fully committed to pushing hard and making sure that we all in Germany realize that the global competition has become tougher, especially in light of the Chinese and the Chinese going global. And we're hopeful, but not certain that those parties on the other side will pick up on that in the negotiations.

Jose, on the H2 profitability, let me give you a bit more color maybe in detail. Clearly, on the volume structure pricing side, we see a tailwind in H2 as a function of the new models coming into the market, probably it's more centered on the fourth quarter than the third quarter, I would say. So that is, I think, clearly, not only the expectation, but that's supported also by a lot of the market demand, as we can see in the order intake for the new vehicles. So that is basically, I mean, on the tailwind side.

Then in terms of what is on the headwind side, the parts by parts business with all of the elements attached and associated to it. So the supply of parts as well as the equity result coming from the JV, that is a headwind in the second half compared to H1. We further have a bit of normalization of the tariffs. As in the quarter 1, we had the IEEPA refund included. Number 4 is definitely raw materials, which we see as a headwind in the second half of the year as well as higher level of depreciation following the start of production of numerous new models. And we're trying to mitigate that by stepping up the efficiency in the second half of the year, even over and above, I mean, what we could accomplish in H1, as you could see in the bridge on the quarter 2, that was not maybe too bad.

But clearly, I mean, we have the ambition to go the extra mile. And with that, we target to bring in an H2, which allows to stay within the guidance corridor of 3% to 5%, but H2 is expected to be below H1. And that is on the back of what I said. I mean, it should be in the lower half on the full year in terms of ROS adjusted for Cars. I hope that helps.

Thank you, Jose. I will move on to the next question, and it goes to Christian Frenes from Goldman Sachs.

I have 2 questions. First of all, on the industrial performance in Cars. I think you just mentioned that H2 would be bigger than H1. Could you just elaborate on that where the industrial performance metric measures are coming from? And second of all, on China, just to clarify and provide some more context. Can you update us on the GLE production shift to China and how that might impact profitability as well as your dealer restructuring efforts? Where are we with that effort right now? And lastly, any thoughts you have on the ASP average selling price outlook in China?

Maybe I go on the first one, Christian, in terms of the efficiency in H2, it's not limited to the industrial performance. It applies, I mean, to all buckets basically, on which we want to stretch, I mean, beyond. That is on variable cost, which falls into industrial performance, material cost, production cost, but it also is on the fixed cost, which is in the operational areas, but as well on the enterprise side on the G&A functions and also some acceleration in terms of invested down in the second half of the year. So it's really, I mean, each and every bucket on which we're trying to go the extra mile to compensate for some of the headwinds. I mean, I pointed out in terms of energy, logistic cost, raw materials and the like.

With regard to the GLE, we will start the production of the China-specific GLE in the month of August. We have made adjustments to that product, most prominently increased the wheel base and put even more focus in the rear seat of that vehicle, and we'll then start ramping that throughout the fall. So that gives us much more ability to react quicker to the market, as we're then on the ground and partially move the cost structure on the parts side to China. So it's another benefit. So that's certainly one of the segments, not just now, but if I look into the future years, that will be interesting and attractive to us, and it is one of the biggest segments in China.

With regard to ASPs, if you look at the overall market with the 20% drop roughly that we had, there has been a price pressure in China also in the more premium segments. In the relative competitive set, though, Mercedes remains the clear leader in terms of ASP vis-a-vis its peers. But it's fair to say that the competitive intensity in that market has never been higher.

Thank you, Christian. And I would give the next question to Patrick Hummel from UBS.

I would have 2 questions for you, Ola. My first one, in terms of the competitive environment in Europe, do you see any kind of impact at this point that the growing presence of the Chinese OEMs in Europe has on your business? Is that for the time being, predominantly a mass market phenomenon? Or would you say there are segments where you have a certain overlap that are already seeing additional amount of pricing pressure, especially in the last few months?

And the second question, just on your defense strategic initiative. I mean, in June, you announced this partnership with TYTAN for anti-drone devices using your vehicles, but I think your role in that partnership is very much limited to the supply of the vehicle. So the wording you're using sounds like it's more strategic generally what you want to do in defense. So if you could just give us an update how you think about that business? Is it always going to be a sideshow and limited to the vehicles that you do anyways? Or are you thinking about growing this business more and also going deeper into the non-vehicle part?

Patrick, starting with the Chinese footprint in Europe, at this stage in the game, the phenomenon is more on the volume market side and more concentrated to specific markets. But that is not a reason to sit back and be relaxed even if you have a very strong position like Mercedes-Benz. I mentioned that in Europe, in particular, the new generation electric vehicles are literally flying off the shelf and the order entry is tremendously strong. So we have certainly hit the nerve there, a positive nerve with some of these vehicles coming along.

So at the moment, we are strengthening our competitive position in Europe. But I think the Chinese ambition to broaden their footprint in Europe has only started. Hence, everything else that we're talking about, productivity offensive in Germany, et cetera, et cetera, now is the time to use football language to increase the training units and prepare yourself for future competition. So we're not taking this for granted. But so far, we have seen very limited, if any, impact on our business so far.

With regard to defense business, yes, if you run, I don't know, EUR 130 billion company at the moment, that defense side with what we're doing on the G-Class and also transport vehicles on our van side is a niche, and it is small, but it can grow, and we think that it can profitably grow. The first port of call is obvious. You take the technology that you have and you expand through partnership, the use of that technology. So that's on the vehicle side. Whether we will venture into adjacent technologies or not has not yet been decided. But what we have said is where we have industrial capabilities, engineering capabilities, should those be valuable to a partner that is looking for industrial scaling expansion, we're open for discussions. We have not put some mind restrictions on where we can go here, but there is nothing concrete to announce at this time.

Thanks, Patrick. And I will give the next question to Stephen Reitman from Bernstein.

A question again back on China. You've now launched the GLC electric in China. And obviously, we have the pricing on that as well. GLC, obviously, as an ICE vehicle is one of your most important vehicles. I mean I'm watching so the current generation at peak has been doing 15,000 units a month. And even this year, you've been getting close to 12,000 units a month, again, which underscores your very strong position in the premium ICE segment. Could you talk about what would you consider to be -- how will you consider the ramp of the GLC BEV to develop?

What the reactions have been? What you're seeing in terms of generating interest? How are you distinguishing yourself from the crowd? And because obviously, the difficulty, as we know, is there is less support for premium and the premium BEVs among Chinese consumers. And -- or have attitudes changed as well given the price of the gasoline price? And are you seeing any changes there? We've obviously seen much greater interest because of -- for BEVs because of high gasoline prices since the conflict started. But what you're seeing on this premium space, please?

So Stephen, let's dig into that. Let's start with the reception of the vehicle and the positioning of the vehicle. What we have chosen, obviously, and I know you have familiarized yourself with the electric GLC. We made a quintessential Mercedes. So everything that makes a Mercedes and Mercedes is in that vehicle from the looks of it to the safety, how it rides and drives, the quality, all of those things, the appearance of the interior and on and on. All of that has been extremely well received in a market where if you walk up to 20 different SUVs by mostly local brands and you would take the brand off, you would not recognize a single one of those from each other.

So doubling down on being quintessentially Mercedes is important, and we received positive feedback from our dealers and the customers for this. But we have married that with an extremely efficient and competitive electric powertrain. And the Chinese adapted MB.OS, I would argue, is the farthest established manufacturer in terms of its capabilities on ADAS and smart cockpit in comparison to the new Chinese attackers. That has also been well received. And the fact that we're going to turn it into a 6-seater, which is very important in the Chinese market.

You know we have a long wheel base. We're launching the 6-seater a little bit later this fall, but that is also feedback that we're getting from our customers. So what would we consider success to look like? And you know we don't forward guide individually on models, volumes. And here, we're going to choose an operating point that makes sense because at the same time, as we're launching this, we're in this unbelievably intense competition -- price competition, and we don't want to buy market share at the expense of burning cash.

It is very easy to do that. Very many companies in the market do it, and you see it every single quarter, the next one goes up and then 6 months later, it goes down, then the next one goes up, 6 months later, it goes down. We will try to, as best possible, avoid that yo-yo effect and that price war. That will come at the expense of some volume. So a measured approach towards volume is what I would say at this stage.

Thank you very much, Stephen. And my next question goes to Michael Tyndall from HSBC.

Just a couple of questions, if I may. First one, I don't really want to ask, but I think it has to be asked. Can we talk at all about the Connected Vehicle Act in the U.S. and where you are positioned in that regard? What are the options available? What are you hearing? And then on a more positive note, can we talk about L2++ in Europe and the U.S. and China? Can you talk about how much you are charging customers for that service, if you are? And what sort of penetration we're looking at? Because I guess this is a future revenue stream that is worth bringing into the discussion.

Yes, Mike, of course, we're watching very closely what's happening in that legislative arena. And on the ground, we're deeply involved in the conversations surrounding this. I would just remind everybody about our current setup. It is true that we have 2 Chinese shareholders. The nature of those are very different. They are by no means acting in consort, nor are they represented on the Board. And for those who watch our annual shareholders' meetings over the many years where they have been part of the shareholding group, every single time they have voted with the majority on those shareholder meetings.

How did that start? We decided some many years ago to take a stake in the parent company of our joint venture partner in China. So it was initiative by Daimler at the time to do this. And to demonstrate strength of that relationship, they reciprocated. So that is how that shareholding started. And the other is a private entrepreneurs, who invests in many different ventures and sees the future of automotive business in Mercedes, which generally should be regarded as a positive thing. Now we are not naive about the geopolitical environment and the current competition between the United States and China.

So we will see how things develop, what the ultimate wording and interpretation of such acts will be in case they get decided, which is also unknown at this state. If we need to make adjustments to comply with anything, we will make sure that we protect our presence and our business in the U.S. Now on Level 2++, I would love to show it to you again. My colleague on the Board, Jorg Burzer, just came back from San Francisco and drove the latest version of it in the Greater Bay Area. And our colleague in China, Oliver Thone, drove the latest version, and we're kind of updating like every 3 months in China, in the rain in Shanghai at night on Level 2++. And it was bloody amazing, excuse my French.

In terms of the pricing, well, you can see it right now in our pricing. Just go into the configurator and order the most sophisticated option that you can buy on the CLA or the GLC or whatever. So it's different pricing for different classes. And the great news is we will -- as we prepare for Level 2++ and then one day pretty much all markets, but now China, then the U.S., then Europe is we will have the sensor set, the compute power and of course, the access to the AI-based software stack. It's built in. So even if you don't turn it on at the point of sale, you can turn it on at a later point in time. Or if you're not that person, maybe you want to be your own Kimi Antonelli and drive yourself. When you sell the car 3 years later, your next customer can turn it on.

So that's the beauty of this platform. We're incredibly excited about it, and we're pushing forward in a very swift manner of the established manufacturers, I would go as far as to say that we are the leading company. And on the start-ups and attacker side, it's a neck-to-neck race.

Thank you very much. Thanks, Mike. We do 2 quick ones. Horst, one question for you. Horst Schneider from Bank of America.

Just a last one on the bridge, Harald, that you explained. You said you expect the tailwind from volume structure net pricing in H2. Could you maybe clarify if that comes more from volumes or you also expect a positive price mix? And is that also tied to the view that the China sales go up again in H2, which would result into higher royalty payments also for you? I think you showed that always in price/mix. And also on raw materials, you said negative impact in H2. If I reconcile that with your statements in Q1, does that imply minus 1% raw mat effect in H2 on margin?

Horst, in the interest of time quickly, so the favorable impact on volume structure pricing is on the CBU side in the second half of the year. I think I mentioned centered more on the quarter 4 than the quarter 3. And I think that is a function of the product launch initiative on which we talked, I mean, since a long time. Now we expect that to happen in the second half of the year. And I think that is, therefore, I mean, fairly balance shared, I mean, between volume structure and pricing. You could see quarter 2 mix, in terms of top end, was a bit softer.

Definitely, the top end in the fourth quarter and the second half, I mean, should be stronger as well as the pricing with the new vehicles coming in. So that is supporting that tailwind. And in terms of the raw mat, I mean, headwind, I think the order of magnitude you have in mind is, I think, roughly okay.

Thank you, Horst. Then we have time for one more quick question from Henning Cosman, Barclays.

Perhaps I can just come back to the shareholder return quickly, one final time. Harald, I appreciate all the -- I think you tried to be quite forthcoming with your statements there, but perhaps I can just ask in a different way. If you compare it to the original expectation, EUR 4 billion underlying free cash flow, EUR 2 billion M&A plus X, I think, was what most people understood at the Q1 stage. So I'm just wondering if anything at all has changed or you're now saying up to EUR 1 more billion and by April 2027. So I suppose that implies that the maximum is EUR 6 billion.

I think you also said in one comment, you don't exclude the distinct possibility to sell more DTG in the market. If we could just -- if you could just clarify what we're actually thinking in terms of how much could be returned this year? Has anything changed compared to what we were saying at Q1? And if anything has changed, what's changed?

Yes. Thanks, Henning. So again, let's try to make it simple. At the beginning of the year, we said we see the potential of EUR 6 billion cash generation, EUR 4 billion in organic cash and M&A, EUR 2 billion. That includes Athlon. I mentioned before, technically, that's not in the FCF piece. But obviously, it's cash to be generated. If we look at it, I mean, from today's point of view, I would say, I mean, EUR 6 billion is feasible -- is possible to be achieved on the full year basis. The composition maybe is a bit more in favor of the M&A side, so a bit less than EUR 4 billion on the organic side, therefore, a stronger contribution on the M&A side. And that supports the capital -- the shareholder return, EUR 5 billion accomplished. And on the back of that, you heard the announcement of the new EUR 1 billion SBB to be launched in third quarter to be completed in a rather short period of time ahead of the AGM, which basically means end of first quarter. So a pretty short period of time on which we should be in the market.

Thank you, ladies and gentlemen, for your questions and for being with us this morning. Also, thank you very much to Ola and Harald for answering all of the questions. As usual, Investor Relations remains at your disposal to answer any further questions you may have. And now to all of you, have a great morning, a great afternoon and a great evening. Thank you, and goodbye.

Welcome to the analyst conference call of Mercedes-Benz. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. [Operator Instructions] I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results documents.

Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties. If any of the assumptions underlying these statements prove to be incorrect, actual results might differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made.

With that, I would now like to hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you.

Good morning, ladies and gentlemen. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q1 results conference call.

I'm very pleased to have with me today Harald Wilhelm, our CFO. To allow more time for your questions, Harald will give a brief introduction and walk you through our financials. We will then move directly into the Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website. And with that, I will now hand over to Harald.

Thanks a lot, Christina, and welcome, everyone. So very happy to take you through the highlights of the first quarter, which was another eventful quarter geopolitically and for us as well.

Let me get started with the execution of our strategy before I move then to the financials and the outlook. Our product ramp-up is gaining momentum. As outlined, we're executing the most comprehensive renewal and expansion of our product portfolio. The new S-Class, you certainly didn't miss this one, remains a cornerstone of our top-end strategy. And we didn't stop there. We also unveiled the new Mercedes Maybach S-Class in China, particularly important and very successful in the Chinese market.

In 2025, every second S-Class sold in China was a Maybach. This was complemented by the new EQS, now offering an 800-volt system with fast charging capabilities, more than 900 kilometers of range and steered by-wire technology, which is really cool. We continued the S-Class story on the SUV side, presenting the new GLS in the U.S. alongside the GLE and the GLE Coupé.

Last week, the all-new electric C-Class premiered in Seoul following the GLC, which has seen very strong demand. It is the second vehicle on our MB.EA architecture and our first electric C-Class. And frankly, it looks pretty stunning.

On the van side, the all-new VLE had its world premiere. Built on our new highly flexible van architecture, it marks the beginning of a new era for the Vans division. And we will take this even further. Besides the upcoming VLS, we announced the Mercedes Maybach VLS offering true luxury and expanding our top-end portfolio further. And by the way, all of these vehicles come with MB.OS, our own operating system, featuring the latest entertainment stack, point-to-point assisted driving and much more.

By the way, talking about MB.OS, as previously emphasized, MB.OS enables us to partner globally with the leading tech companies. Level 2++ is already on the road in China and is coming to the U.S. later this year. And we also go beyond as we work with robotaxi companies on robotaxis with partners.

We are further strengthening also our local-for-local strategy. In China, the all-new GLC long wheel based with China-specific entertainment and Level 2++ was unveiled at Auto China. GLC is closing the BEV white spot in our portfolio. And in the U.S., alongside the presentation of the new key products for this market, we announced investments of more than $7 billion until 2030. The U.S. is a strategic growth market for us where we are further strengthening our footprint.

And with this, I would now turn to the financials on Page 4. Looking at the group KPIs. First, the group revenue developed broadly in line with the sales development at cars in the first quarter. The EBIT came in at a solid EUR 1.9 billion. EPS stands at EUR 1.49. Free cash flow, healthy at EUR 1.9 billion. That brings us to a strong net industrial liquidity of almost EUR 34 billion before obviously paying the EUR 3.3 billion divi, which we did earlier this month. Looking at the car sales, we ended the quarter with 419 units, in line with expectation. The sales development was impacted by China.

If you look ex China, total sales increased by 5%. And top end sales, particularly were resilient in China, maintaining a global sales share of 15% Core and Entry were lower due to China, while growing by 7% ex China. And the global BEV sales developed well, up 9%. In Europe alone, we recorded a growth of 34%. This is largely driven by the CLA and obviously, the remainder of the portfolio is currently ramping up with more yet to come.

Looking at the car financials, the sales I explained already. The ASP in the first quarter was lower, but slightly up compared to quarter 4. This also drives the revenue development. The EBIT adjusted is at EUR 900 million as expected, and the CFBIT adjusted stands at EUR 3.4 billion.

Now let's have a look at the EBIT evolution, the EBIT bridge on the Page 7 a bit more in detail. In the quarter 1, Cars delivered an EBIT adjusted of around EUR 900 million and a return on sales adjusted of 4.1%, well within our full year guidance range of 3% to 5%. What are the main puts and takes on the walk? The volume structure and the net pricing is actually slightly negative. However, the bucket is lower overall, mainly due to the tariffs, product enhancements, lower China contribution and a lower fixed cost capitalization. The FX, I think, is self-explanatory on the chart.

On the industrial performance side, the underlying industrial performance is positive, driven by continued efficiency improvements. That more than offset headwinds from raw mats and higher depreciation following our numerous product launches. However, on top, Q1 was impacted by several one-timers with negative items in the industrial performance on product-related measures and positive items largely in the other bucket.

Overall, one-timers, however, were a wash in Q1. Then on the SG&A and the R&D side, you see they were positive, reflecting our further efficiencies and having left the funding peak behind us.

Turning to the cash. Cars achieved a strong adjusted EBIT of EUR 3.4 billion. How did we get there from the EUR 800 million of the EBIT? We generated significant working capital tailwind that reflects our continued effort to improve the working capital, including a favorable inventory structure and improved payables mainly related to the production ramp-up. A part of this should unwind over the course of 2026. We further see proceeds from net financial investments. That's mainly due to the continued sale of our retail outlets in Germany. Depreciation exceeded investments as we have passed the investment peak. Total investments are lower, in line with our plan as flagged in February.

Overall, the level reflects our continued focus on investing in technology and competitive products on the R&D side while also demonstrating a highly disciplined total CapEx approach. These positive effects were partly offset by a negative other bucket with cash outs related to restructuring charges of around EUR 800 million, dealer provisions as well as the adjustment for the BBAC at equity result. As a result, we recorded a EBIT of EUR 2.6 billion. Adjusting for the special items, it's at EUR 3.4 billion.

Looking on the van side, Sales volume came in at 80,000 units. In China, we saw a softer consumer demand for midsized vans. Excluding China, vans were able to grow year-on-year despite a particularly competitive environment in the U.S. and Europe. e-vans sales increased by almost 30%, lifting the global EV share to 8%. Revenue development is broadly flat. And on the EBIT, we have a look on the next page before quickly on the cash flow.

The main driver of this were the planned investments into the new van architecture. Investments are expected to peak this year, strategically preparing vans for the future. This I think is a good moment to remind you that this represents the largest product investment program in the history of our Vans business. It underpins a highly attractive and scalable product pipeline, including the all-new VLE, VLS and VLS Maybach, alongside a broad range of private and commercial derivatives built on a highly flexible modular architecture.

At the same time, we are completely remodeling our global production footprint with investments in Victoria, Charleston and Jawor to enhance flexibility, efficiency and competitiveness. Working capital was a headwind driven by temporarily higher inventories as well as a higher value of stock from e-vans.

Now looking on the EBIT walk for Vans. Vans achieved an EBIT adjusted of EUR 450 million and once again delivered a benchmark double-digit return on sales of 10.1%. Let me guide you through the buckets, the volume structure pricing is lower, reflecting a lighter product and market mix, negative net pricing, partly offset by positive effects from an increased leasing portfolio. FX is a headwind, mainly driven by the Turkish lira, which was largely offset through pricing. Industrial performance is flattish, SG&A, R&D and others are a wash.

Looking on the Financial Services side, we have migrated to the new setup, which is working well and is enhancing our competitive offering in the market, which is also reflected in a higher penetration rate in the first quarter. At the same time, we continue to sharpen our focus on the core financial services business as evidenced by the signing of the Athlon agreement and the divestment from Blacklane, both expected to complete later this year.

New business volume declined by 4% to EUR 13.1 billion, reflecting sales development and adverse FX effects. The portfolio stood at EUR 130 billion at the end of Q1, broadly unchanged versus year-end 2025. Financial Services delivered a strong performance in Q1 with a return on equity of 13.3%. EBIT adjusted increased by 44%, supported by continued positive trend in portfolio margin, improved cost efficiency, while at the same time, the cost of credit risk remained elevated, reflecting a weaker global economic outlook.

Let's have a look at the group numbers. On the EBIT side, Carl Van Financial Services, I explained already. This results in a solid adjusted group EBIT of EUR 1.8 billion. We had some adjustments in the first quarter, additional restructuring charges of EUR 175 million for our NLPP personnel cost reduction program and M&A adjustments mainly related to Athlon following its reclassification as assets held for sale. With this, the group EBIT booked sits at EUR 1.9 billion.

On the cash flow, cars and vans, I covered already. Tax -- cash taxes are positive due to refund related to 2025. Interest paid is negative due to seasonality of coupon payments and higher interest environment. Interest income was positive with more than EUR 100 million. And on the free cash flow -- on the industrial side, altogether, this is at EUR 1.9 billion. The adjusted figure is significantly higher at EUR 2.8 billion, mainly due to the NLP cash out of almost EUR 1 billion in the first quarter.

On the NIL bridge, Page 14, by the end of first quarter, the nil increased to close to EUR 34 billion. That is a pretty comfortable level. Of this nail, we paid EUR 3.3 billion as a divi to our shareholders last week. What's the status on our share buyback program, our EUR 2 billion program. It's in full execution. In Q1, share buybacks totaled EUR 470 million. In total, as of today, as we speak, we have bought back shares worth more than EUR 1 billion since inception of the program following the AGM, the share buyback has accelerated significantly. And with regard to the DT stake, we continue to monitor market development and capitalize on opportunities as they emerge.

Now turning to the outlook and the guidance, getting started with the divisional guidance for 2025. Please consider the disclaimer regarding forward-looking statements at the end of this presentation in the relation to the outlook. Important to note, the war in the Middle East adds further uncertainty to an already high level of uncertainty in the global economic environment and automotive markets. The outlook assumes no prolonged conflict with respect to potential impacts on material, raw material and energy prices, inflation and sales trend. Assumptions are based on today's regulatory framework and on the U.S. EU tariff rate expected to be reduced to 0 now effective August 2026.

On the car side, the sales guidance for 2026, we retain an overall constructive view with targeted growth ex China. Global sales volume is expected to remain at prior year level. Product transitioning is impacting the sales volume as expected, with sales in Q1 being the lowest and building momentum in H2. xEV share is unchanged. And with quarter 1 well within the guidance range, we continue to see adjusted return on sales between 3% to 5% as guided. Equally, PPE, R&D and CCR remain unchanged.

On the van side, I can also make it pretty short. Sales guidance and the xEV share are unchanged. We continue to see adjusted return on sales as guided between 8% and 10%, no change to PPE, R&D and CCR. And also on the Financial Services side, short and sweet, given the current interest rate volatility, we continue to see the full year guidance unchanged in the range of 10% to 12%.

Looking at the group guidance, Page 16. It follows obviously the same premises as the segment guidance, in line with the unchanged divisional guidance. A group guidance remain unchanged. Equally on the free cash flow, industrial guidance, this remains unchanged before additional proceeds from major M&A activity.

And now turning a bit more to the outlook for the remainder of the year, what's ahead. Well, the 2026 ramp-up is in full motion. We see strong demand for all new electric models. In Europe, that order intake has more than doubled compared to prior year's quarter, up by 107%. New models resonate well with our customers. The order books for the new CLA, the GLB and the GLC are filled well into the second half of the year. CLA and GLC production are running at 3 shifts and additionally, an additional Saturday shifts for the GLC.

The S-Class is now available to order in Europe. First deliveries are starting in second quarter in U.S. and China. This will follow in quarter 3. So we also reskinned completely our large SUV portfolio with the GLS, the GLE, the GLE Coupé, including AMG versions and the order books on these ones will open soon. On the VLE, the order book is open in Germany. The rest of Europe will follow soon. And with this, we are confident that we can build on that momentum as our model ramp-up continues in quarter 2 with momentum being built in H2.

And last page, Page 18, well, one of my personal highlights, the all-new Mercedes AMG GT 4-door Coupé, which will be introduced in Los Angeles on May 19. You should really block this in your calendar. It will be our first model on AMG's electric high-performance architecture, AMG EA. This car will set new benchmarks and embody true AMG DNA. So very much looking forward to that one. Thank you for now.

And with this, I hand back to Christina christina.

Thank you very much, Harald. Ladies and gentlemen, we will now move on to the Q&A session. [Operator Instructions].

[Operator Instructions].

And the first question goes to Tim, Deutsche Bank.

Two questions, please. The first one, Harald, given there was quite a bit going on just for modeling and contextualizing your full year guidance, how should we think about one-timers going forward? Is there anything material that you already have in your agenda that we should already think about in our modeling in the coming quarters with respect to cash and earnings?

I'm also thinking about your restructuring program, lots of outflows in Q1. Obviously, some performance improvements impacts that you already see in Q1 as well on the P&L. Where do we stand on that side?

And then secondly, you already quickly touched on this, but it is a big topic, obviously. How should we think about raw material inflation in the second half of the year? Is there anything that you're planning already? You said you start to see it a bit, but it's a bit uncertain. How should we think about this?

Yes. Thanks a lot, Tim. So with regard to one-timer, as you mentioned them, number one, I would like to reemphasize that globally in the first quarter, I mean, they are a wash, as I outlined when going through the EBIT bridge, I mean, a bit before. When I look at the full year in terms of the outlook, obviously, as we guide also at the group level on an EBIT reported basis, everything which we have in mind, which we know is included in there. Y.

Ou could see a step-up in the restructuring provision for our personnel cost reduction program in the first quarter. I do not expect any further material addition in the restructuring provisioning on the EBIT side nor any other material restructuring elements. Otherwise, I mean, we would have included them, obviously, in the group guidance outlook.

On the cash side, I think put it clear in the outlook as well on the free cash flow reported for the group that this is before material M&A. So what is in our mind here. What is included in the guidance at this stage are minor M&A activities, smaller divestments in terms of our own retail divestments, larger ones to come to the extent they close in 2026, obviously, would further support cash generation.

What else comes to mind, Athlon closing is expected in 2026. However, that will not sit in free cash flow, but certainly will enhance the net cash position, and we would consider that, obviously, also in capital allocation. And your favorite ones on DT, no material divestment is assumed in the number. That's why this guidance is before material M&A cash flow.

So in other words, I mean, if you take that guidance on the free cash flow, as outlined before, in terms of total cash generation, I would say there are some distinct opportunities to enhance cash generation further, and you know the capital allocation framework, what we are supposed to do with it.

On the second question, on the raw mats, well, you can see in the first quarter bridge already in the industrial performance that we face some raw mats headwinds, and we do expect raw mats to step up further in the remainder of the year, higher than what we anticipated at the beginning of the year, also driven by the Middle East crisis and the global macro situation. That is included, however, I mean, in the outlook for the full year in line with the 3% to 5% guidance, which we confirm here today.

Thank you, Tim. We move on to the next question, and it goes to Mike Tyndall from HSBC.

It's Mike Tyndall from HSBC. I guess first question just around products, the new products specifically. And if I think about your -- the Capital Markets Day and the plan in terms of product cost savings, it feels like the big step is to come forward. And is that what we're going to see as these new products ramp? I'm just trying to think about very strong order intake. How does that translate in terms of EBIT?

And then I guess the second question, I guess, in some ways, it is self-explanatory, but Q1 is arguably the toughest quarter in terms of FX and tariffs, and you've hit the middle of the range. Is the reason we haven't seen an upgrade simply because it's a pretty uncertain world out there? Because it does feel like you're well set up for the rest of the year now.

Thanks, Mike. So number one, yes, on new products, we are very pleased to see the momentum. The order intake numbers going up. I mentioned the best numbers in terms of order intake in Europe, 107% up. Obviously, you don't see that in sales yet, but it's a good indicator for what is to come. That's what we have been working for so hard. That's what you have been waiting for so patiently. That's what we want to bring to fruition in the course of 2026 and obviously, beyond that.

At the same time, we do know that, I mean, the EV vehicles carry higher variable cost than the brothers and sisters on the ICE side. That's why we engage into significant cost savings. I mean, over time, and that should help to improve the margins on these EV vehicles, I mean, over time, '27, '28. And during the CMD, we outlined that we see the possibility to go to breakeven margin breakeven between ICE and EVs towards the end of the decade, all costs, including CO2 being included.

So we're exactly, I think, I mean, on that path. This is also a bit of an answer to your second question is, obviously, as we're ramping up, BEV in the second half of the year, the volume goes up, but there's a bit of a dilution coming along with it. Then no, quarter 1 is not the worst in terms of the tariffs.

Actually, quarter 1 on tariffs is slightly mitigated due to the IEEPA refund claim, which we included in the books and the records. So actually, in the quarter 1 tariff impact is around 100 bps, whereas we expect for the full year still 150 bps. So we'll have some headwind coming from the tariff side in the remainder of the year from higher raw mats, as I answered Tim's question before.

And the third, I would say, is the BEV dilution I just mentioned before. And then obviously, the depreciation, which kicks in with the new models coming off the production line. So that's why in terms of the remainder of the year, despite the momentum and some volume growth in H2, we see the guidance in the 3% to 5% corridor for now.

Thank you, Mike. We would move on to the next question, and it goes to José Asumendi from JPMorgan.

José, I'm sorry, we cannot hear you. We will try again. Then let's move on to the next one, and I will hand over to Stephen Reitman from Bernstein.

Two questions, please. First of all, on China, can you give us some idea of the timetable of the launch of the GLC Electric in terms of when you're going to be announcing the pricing on that vehicle? And obviously, it's very early days since the full unveil of the base version in China. But can you talk a little bit about the reaction you're seeing from your dealers and from any other relevant sources you can talk about?

And secondly, on BEV demand, are you noticing any impact? Are you seeing more feedback you're getting from the dealers about customer interest maybe moving more towards BEV because of high fuel prices?

Thanks, Stephen. Yes, on the timetable, the GLC long wheel-based is expected to hit China market in quarter 3 at the turn probably quarter 3, quarter 4, if my memory is correct. And we will set the pricing at the right moment of time, I would say, not too early, not too late.

And I think as you could see also, I mean, on other products, we'll have a view that this is competitive. However, obviously, protecting the brand and the product premium. The reaction, the feedback from dealers on the GLC, on the EV product line on what is to come this year, but also, I mean, as you know, from time to time, you show a bit the jeweleries, which are yet to come also beyond the 2026 is very encouraging.

The tech motion, which we kicked off with the CLA in terms of MB.OS, in terms of Level 2++ now, CLA on the road in China with Level 2++ I think, is gaining a good momentum in support of the entire product lineup, I mean, to come. And that's why we are hopeful that the GLC long wheel based, which was revealed last week during the auto show will pick up momentum once it's going to be launched in the China market.

Your second question in terms of the EV demand, I would say, for Europe, definitely, we see that very recently with the Middle East crisis, the fuel price spike, the dependencies, I mean, on fuel, there is definitely a favorable momentum picking up.

Well, I mean, I cannot tell you how sustainable that is going to be in case the contract settles. But clearly, the product in itself, I think, are considered as very attractive through Mercedes. And that is supported, I would say, by the current macro and geopolitical circumstances.

Okay. I'll try one more time with Jose. Jose, are you online? Not the case, then let's move on to Christian Frenes from Goldman Sachs.

One moment. Sorry. Here's the operator speaking, Jose, we can hear you, but not really well. Unfortunately, we can understand you. So maybe you could try dialing in one more time, and then we will -- unfortunately, we cannot understand you. We are very sorry. Something seems wrong with your line. We cannot understand you at all. We are very sorry. Please try dialing in again.

Yes. Let's move on to Christian.

Okay. Can you hear me now?

Yes.

Okay. Great. I don't know what happened there. But it's Christian Frenes, Goldman Sachs. Two quick questions, please. Harald, you mentioned the tariff had a 100 basis point headwind in Q1. And I think you mentioned 150 basis points headwind for the full year. So just the cadence of this, I suppose, should Q2 be the peak tariff headwind then and then with the reduction in the second half, could you just clarify, please?

And then the second question in your cars profit bridge, you -- there seems to be -- the other was obviously a benefit. You called that out. You said it was a wash. It looks like your other operating income and expense talks about a EUR 350 million gain from a settlement from claims against suppliers. Could you just elaborate what that's about, please?

Yes. Thanks, Christian. So I would say probably the quarters to come should run at around 150 bps dilution from the tariffs. Well, I mean, obviously, it depends a bit on the sales from the imports into the U.S. But globally, I would say, take it as a kind of 150 bps per quarter to come, I would say. And that gives you not exactly maybe 150 bps for the full year, but in the vicinity of -- to your second question, I mean, in the bridge, as I explained, I mean, in the other bucket, we have some support in the industrial performance.

We have some negatives. So all in all, I mean, they are a wash. So what is in the other bucket? Yes, we have included in the quarter 1 profit, the claim towards suppliers, which we have been discussing and settling, but you will understand that I will not outline any particular supplier relationships. So please understand.

Thank you, Christian. We will then move on to Patrick Hummel from UBS.

I'd like to first ask about China. I mean your sales performance, obviously, in Q1 wasn't great, but listening to you, it sounds like it was more in line with your plans because you were not pushing too hard. Is it fair to say that Q1, according to your playbook at least, is going to be the weakest quarter for China, and we should see not just sales picking up.

And bearing in mind, we're talking about also EV sales picking up in the second half. Is it still fair to assume that also the profitability should improve despite the dilutive impact of EVs versus ICE cars, just to get a better handle on what you expect from China for the remainder of this year? And my second question you booked this book gain on Athlon, about EUR 300 million. That asset in itself is worth more than EUR 1 billion, I think, then you marked EUR 2 billion worth of DTG shares as held for sale. That gets me to EUR 3 billion M&A or potentially even more.

And in the plan you presented with the full year, you talked about EUR 2 billion. I just wonder whether if you execute all the transactions, if that has any impact on cash returns or you would stick to basically the framework you presented and any further proceeds would just give you some buffer maybe for 2027 or so?

Yes. Thanks, Patrick. First question on China and China sales, I would say, yes, China sales first quarter evolution, I mean, was roughly in line with what we did expect. We said at the beginning of the year in the full year outlook, as you remember, that we do expect China sales to be lower in '26 versus '25. What was, in the year-on-year as well, I mean elements. Remember that the banking commissions have come down significantly. That has a particular impact, I mean also on our side.

You could also see that, I mean, we adjusted in terms of go-to-market strategy. We did adjustment on MSRP. We did negotiate and discuss and settle with dealers in the first quarter. So that I mean had some temporary impact in the first quarter, but consciously, as we were trying to protect as well profitability at our end as well as profitability I mean on the dealer side. And that time, I mean, at the expense of volume, but consciously this is, I think, the important point.

Now as you say, exactly, I mean, as we're building the momentum for H2 with all of the products, I mean, to come, once I mean, I emphasize, I mean, the S-Class, S-Class Maybach, GLS, the GLE localized. So really cool product, the GLC, GLC I mean, electric, the C-Class to come. I think there is a fair expectation this to create volume momentum. Therefore, from today's point of view, I would say quarter 1, I mean, should be at the lowest in terms of the sales.

Well, I mean, we're not outlining, I would say, the profit by region. But globally, I would say that should also have a supportive effect in terms of margin generation in the second half of the year on China. However, as you can see also in the first quarter in terms of China contribution applies to China, BBC result. It's a tough competitive market environment. And that's why next to the product momentum, we're taking a lot of actions in terms of localization, in terms of sourcing, in terms of cost effort to mitigate the market situation. The second question in terms of M&A.

Well, I mean, on the Athlon side, you referred to the EBIT side of things, I would say. I mean, the gain included at the group level of EUR 300 million. That is basically as we moved Athlon as an asset held for sale. The intercompany margin, which has been stored at the group level during the period we hold Athlon gets now released as the asset gets divested. So that's a bit more, I would say, a mechanical side of things, accounting side of things, I mean, on the EBIT.

I think your question refers more to the cash side. Well, I mean, is there a potential to do more of EUR 2 billion of cash generation from M&A? I would say, yes. I think you could count Athlon in for maybe up to EUR 1 billion or so. However, it will not hit free cash flow on the industrial side as it sits on financial services. But clearly, it adds to the net cash position.

And I said it before, I confirm and we would consider, obviously, this amount also in the capital allocation framework, i.e., consider as cash generated next to the other assets, in the own retail as well as any potential move on DT stake. So yes, next to the underlying industrial free cash flow, which we confirmed as per the guidance today, I think there is a decent cash upside from M&A.

Thank you, Patrick. We will try one more time to connect Jose. Jose, can you hear us. Okay. It doesn't work, unfortunately. Okay. Then we move on to Horst Schneider, Bank of America.

The first question that I have relates to EBIT bridge in cars for 2026. I really liked the details you provided when you released the full year '25 results and to what extent the various drivers will impact results in '26. I want to come back on that. Could you maybe repeat again what drives now EBIT in cars in '26?

I have here in my notes minus 0.5% from structured pricing, minus 1% FX, minus 0.5% raw material effect, plus 2% efficiency gains. I think you said already that the raw material is going to have a more negative effect. Maybe you can update us on these drivers for 2026. That's number one.

Number two, I was surprised in Q1 that you had such a positive impact from the trade payables, while inventories were also moving down. So I wonder why that was? And should we expect going forward some reversal of this trade payable effect? And I'm also not aware if you have provided the guidance for working capital for the full year because I'm thinking, as you rightly say, you're going to increase sales in H2, should lead to an increase of inventories, but also trade payables. I'm not sure about the trade-off. To what extent working capital will be a positive driver in 2026 or not?

Now it's on. So thanks also to remind us the EBIT walk '25, '26, as outlined during the ARC and the I think you picked up on most of the elements, but for the benefit of everybody, I mean, if you depart from 2025, we said at the point in time, tariffs and FX is a minus 1. structure and pricing is a minus 0.5%. raw mats is a minus 0.5%. Efficiency is at 2% and the depreciation is 0.7%. Well, that's pretty precise now.

Looking at it from a Q1 perspective, i.e., based on the quarter 1 performance, I mean, I will not make an update of each and every item, I would say. But globally, I mean, I would say tariffs maybe is a bit better. I mean, as we included the IEEPA refund in the quarter 1, as commented a bit earlier. Structure and pricing I would roughly see in the same vicinity. Raw mats, maybe a bit more headwind, I mean, to come. Efficiencies, I think, I mean, we are on track. We're also on track in the first quarter. I hope the explanation I gave you in terms of reading material for the bridge helped. What sits inside is in sync with the 2% for the full year.

And the depreciation is also, I think, in the same order of magnitude as outlined during the ARC. So which means all in all, let's say, probably, a bit more raw mats headwind, a bit less of a headwind on the tariffs and then some puts and takes. But that's why all in all, we confirm the 3% to 5%.

Point number two, on the trade payables, I mean, in the first quarter, I mean, on working capital, what is in there. In the first quarter, we increased inventory from the end of the year 2025, which is usually the low point in terms of inventory. You get ready, obviously, to support the product ramp-up, the new products coming. So that's why, I mean, inventory went up in the first quarter. However, the inventories on the structure on the mix lighter is improved.

Also, I mean, the cost efficiencies have an impact on the inventory. That's why you don't see in the cash flow chart, I mean, such a burden on the inventory side. So it's rather in light or a wash, whereas on the trade payables, you see, I mean, a more important amount. I mean that is a function of the production ramp-up, which is favorable on the payable side. But obviously, then, I mean, if you move throughout the year, you then will deliver these vehicles as per the sales expectation and then come back down again in terms of the inventory towards the year-end towards our inventory targets.

We did not set out any specific guidance on working capital. That's all included in the free cash flow guidances and the CCRs of the division and the cash flow of the group. But clearly, I mean, we have, I mean, very tight and stringent working capital targets for all of the 3 elements. I mean, the DIO, the DSO and the DPO. But next to it, I mean, we are also working on further improvements on all of the elements. In particular, here, you see a benefit kicking in the first quarter on the payables side, which should also last and be, therefore, permanent. So in a nutshell, a part of the payables will be temporary, a part will be permanent. So I hope that helps.

No, that helps a lot. Just a small follow-up on raw materials. Is the increase in raw materials not impacting also your suppliers so that it will be more difficult to cut the material costs as much as you want? I think it's an industry phenomenon. It's not just affects you, but your view on that would be interesting.

Well, we have different contractual arrangements, some are fixed prices, obviously. And on some, I mean you have more floating. That's all in all, I mean, we included risk assessment in terms of raw material evolution for 2026. And that is included in the outlook, as I pointed out before.

Thank you, Horst. We will now move on to Henning Cosman from Barclays.

I wanted to come back on the operating free cash flow. I know we talked about the working capital, but I think we're bouncing around a little bit that there could be upside to the operating free cash flow guidance. I understand there's upside from the M&A piece. If we think of the above EUR 4 billion and some of the payable effect in Q1 being sustainable now and the momentum that you hope to generate in the second half, would you be prepared to maybe statement if there's a bit of upside above EUR 4 billion. So obviously all landed anyway, but any sort of additional color if you could would be great.

And a related sort of question also ultimately, free cash flow, I suppose you called out quite prominently the investment in the U.S. in the press release at least, perhaps not so much in your prepared remarks now. But I'm just wondering if there's anything incremental there? Anything at all to do with continued hope for more favorable tariff treatment eventually, if there's still anything ongoing in terms of lateral conversations with the U.S. administration. But separately from that, even is there anything incremental in terms of the CapEx or investment plan that you're calling out for the U.S. today?

Thanks, Henning. I had some difficulties, frankly, to understand some elements of your question. But from voice over. But first one, if I get it right, was on the free cash flow side of things, the operational free cash flow side, the M&A side of things I commented already before, I would say. I think on the operational free cash flow has a good start of the year, as outlined before, supported by working capital payables, yes, some element will reverse, I mean, in the course of the year. O.

N the other side, well, I mean, you have EUR 1 billion of NLP cash out sitting in the first quarter, which should not repeat in the remainder of the year. So was a large chunk of cash out on the restructuring program, I mean, that is behind us. So obviously, that will help the cash generation in the remainder of the year. And then, I mean, we'll focus on all of the other levers, I mean, in terms of efficiencies anyhow, but also then on the attempt to manage the inventory to target, which is always a bit more towards the year-end. So I mean in quarter 2, quarter 3, we are in the ramp-up mode, I mean, for the new products.

So you will see some seasonality, obviously, here in the cash generation, as you can see also in previous years, but probably more emphasized, more supported, I mean, given the high number of product launches, I mean, we're doing. But yes, I mean, I would say, based on the quarter 1 cash flow, therefore, with the elements I outlined on working capital, on NLPP, I think that we feel good with the guidance of slightly below and you know what the corridor is of slightly below compared to the EUR 5.4 billion, which we printed in 2025.

Your second question in terms of further investments in the U.S. and impact -- I mean, favorable impact on tariffs or deals. Well, I mean, we think we had an important event with the GLS and the GLE reveal in the U.S. in Tuscaloosa, Alabama in March. We celebrated at that moment in time, the 50 million vehicle coming off the line. in the U.S. I think we could witness, I mean, with a lot of stakeholders being present during that event that we are considered as a very good corporate citizen, I mean, over there.

We continue to entertain, I think, therefore, constructive dialogue, but I would not speculate about, I mean, any link between the investment and the tariffs at this juncture. We are committed to continue to invest in the U.S. as outlined with the EUR 7 billion investment.

For 2026, I don't think -- I mean there is any particular thing, I mean, to mention. That is a more mid- to long-term strategic statement. I mean we've been doing. And very clearly, I mean, we see the potential for further localization in the U.S., in particular, in the SUV core segment. But that is not -- I think for 2026, that is a bit more in the midterm. I hope that answered the questions to the extent I got them.

No, that's great. And just to confirm, no more NLP payout this year in the cash, but probably around another EUR 1 billion or so in 2027?

I mean we did already in 2025 from memory, a couple of hundred million, EUR 300 million or so, I think, in 2025 cash outs and then now EUR 1 billion in 2026 first quarter. We will still have some cash out I mean, in 2026, the remainder, but obviously much lower than the EUR 1 billion in the first quarter. And then from today's point of view, we should be done with that.

And obviously, the benefit kicking in, in terms of -- I mean, the people have come off the payroll to a large extent. by the end of the year, I mean throughout quarter 1. And obviously, that will create, run rate benefit moving forward. I mean that's why we did invest into it.

Thank you very much, Henning. We'll move on to Stuart Pearson from Oxcap Analytics.

Yes. Stuart Pearson from Oxcap Analytics. So just following up just very quickly to check my understanding was right on the IEEPA refund. Just from what you said, I guess it sounds like you're suggesting that was around 50 basis point support in cars in the quarter. So just to check that that's correct and where that would sit in the bridge, I guess, in structure, but maybe just clarify on that.

And then the second one, just slightly bigger picture. I guess coming back to the U.S. but more on the demand side. I know coming into this year, as a market you talked about growth, and I think the target to grow there to 400,000 retails by the end of the decade, but I think retail is a bit tough on that in Q1. So just wondering what you're thinking on the U.S. opportunity. I guess you'll have a bit more supply from both GLE and maybe that core SUV a little bit later on. So is that still a significant growth market that you're excited about? What are you seeing in April there? That would be interesting.

And then the third one, just on Financial Services. Obviously, a very strong quarter. I noticed credit losses came down there a little bit. Is there also a bit of help from residual values improving a little bit in the U.S. just coming out of the end of that normalization process? So just any color on that strong financial services performance would be great.

Yes. Thanks, Stuart. So yes, I mean, in the first quarter, I mean, that refund following the Supreme Court ruling and has been included in the first quarter results and that mitigated the tariff impact that sits in cars, but it sits also in vans that makes basically, as I commented, the cars dilution limited to 100 basis points, I mean, in the first quarter. I think we don't spell out the detailed amounts please understand. In terms of the U.S. market, very clearly, we see that as a very important market. We see that also as a market with good growth opportunities.

And when I say that, I mean I'm not assuming the entire U.S. auto market to grow massively. But clearly, we have an attack plan to grab share in areas where we're in particular strong, such as, I mean, the top end. U.S. market, we enjoy a top end vehicle share of 30%, 30. And if you look at the product pipeline, I mean, to come with the new S-Class, with the GLS now, the new GLS and the GLE, which we revealed and many more products, AMG I guess, why we're doing the AMG event in Los Angeles in May. I think we can really create, I mean, a good buzz, and that's what we want to do despite the tariff challenge. So this is a distinct decision that I mean, we're not holding back. We are in a tech mode, I mean, for the U.S. market, but based on great products, which are in the pipeline.

And the third point on financial services, yes, I think a good quarter. But I would say it should also be decent quarters ahead. What's driving the improvement towards the 13% in the fourth quarter, definitely, it is the interest margin improvement. We talked about the acquisition margin improvement in the last numerous quarters and said, I mean, it will come through. So you need to be a bit patient. I mean, here you go. So that is definitely the biggest lever in the profitability improvement.

Number two, the efficiencies, which we continue to drive. The new structure also has significant cost savings and efficiencies, which we are able to pull off. Third, on cost of credit risk, we stepped up given the macro challenges. So it's a headwind, but that has been nicely digested in the quarter 1 as we update, obviously, that model based on the macro parameter each and every closing. And your point on the residual values, that sits on the industrial side, so that doesn't impact the financial services.

Thank you very much, Stuart. Looking at the time, I think we are at the end of our call. Thank you all very much for your questions and for being with us today. And thank you very much, of course, to Harald for answering all of the questions.

Now Investor Relations remains at your disposal to answer any further questions you may have. And to all of you, have a great morning, a great afternoon and a great evening. Thank you, and goodbye.

Welcome to the Q&A session. At our customers' request, this conference will be recorded. The replay of the conference will also be available as an on-demand video webcast in the Investor Relations section of the Mercedes-Benz website. [Operator Instructions] I would like to remind you that this conference is governed by the safe harbor wording that you will find in our published results documents.

Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

May I now hand over to Christina Schenck, Head of Investor Relations, Digital and Communications at Mercedes-Benz; and Willem Spelten, Head of Corporate Communications at Mercedes-Benz. Thank you very much.

Welcome back here in the room, and welcome back online for our more interactive part now, the Q&A session. I have with me Harald, Ola, Oliver and Mathias for our Q&A. And we have roughly 1 hour time, which we will dedicate the first 30 minutes to the analysts and the investor questions and the last 30 minutes to journalists.

And once we've wrapped up the questions from the analysts, we will change to the media Q&A. So we start with analysts, go then to the media. The media part will be held in German. We're starting in English. Second part will be in German. If you're bilingual, we kindly ask you to post your question in whatever language you prefer, English or German, and we will answer in the same language you chose.

Simultaneous interpretation is available for all participants. German is on channel 1, English is on channel 2 and Chinese is on channel 3.

So let's now begin with the analyst and the investor questions. As usual, please bear with me for some instructions. I see your hands already. For the participants online, the operator will explain the procedure for registering your questions on the phone line again shortly.

For participants here in the room, please raise your hand, and we'll call you up. [Operator Instructions] Our conference call will end around 11:45. Please take your questions and ask them slowly and clearly so that the translators can do their job well. Thank you.

And now I hand back to the operator.

[Operator Instructions] I will now hand back to Christina Schenck.

So let's start with the questions in the room. I go for Horst Schneider. Horst, over to you.

Yes. No, you can hear me. When I -- I mean, first of all, it's great detail that you provided in these midterm targets and how they can be achieved. I got it that you target now 7% revenue growth and you target we said also positive price mix. Positive price mix, especially mix does not mean that also this positive mix arrives at the bottom line.

So maybe can you outline the details when you expect this price/mix line to improve, which is still on price, minus 0.5% in 2026. So you assume that to continue this level of negative price or this pricing on earnings then also flips positive or neutral. Some details on that would be appreciated.

The second question that I have is on China. because I looked recently at the sales figures of the CLA, which is very attractively priced in China. I think it's a great car. But I was disappointed how low the unit sales are. You target also for the upcoming EVs and unit sales growth in China. My impression on the back of that, it's not the product. It's basically that the Chinese customer has got prejudices against foreign EVs.

So my impression is that the price needs to be lower than the Chinese car before the Chinese buy then. So therefore, what is your confidence that you take that you can really succeed with the EVs in China?

Yes. Maybe I'll kick it off with the first question, Horst, in terms of the margin profile? I mean, I would suggest, I mean, let's depart from the outlook, the guidance to 2026, so the 3% to 5%. I mean for the sake of the argument, if you want to take in the midpoint as a departure point from there.

When I said before, it's a minus 1% on FX and hedging on tariffs. It's 1.5% plus on volume, price, mix, BEV and it is a 4% on the efficiency. So basically, obviously, 1.5% going from around 1.8% to 2-ish with a stronger top end sounds rather like a lower number. But clearly, I mean, you can see in that plan, therefore, I mean, we are not over ambitious when it comes to the margin from the growth, but more ambitious when it comes to the margin from the cost. I think that's number one, what you can read in there.

Number two, at the beginning of the ramp-up of the EVs, obviously, you still have an EV margin, which is lower than ICE and therefore, I mean, an EV dilution sitting in there. So that is, I mean, a net number of all of the levers, volume favorable, pricing, mix and EV. How should you think about the profiling maybe of that without giving each and every detail now in terms of fiscal year or even quarter in 2027. But clearly, I mean, you heard it, 2026 is a ramp-up year in H2.

So I think that suggests that in 2027, we should see some meaningful contribution from the top line, so from that volume and mix in 2027 already. I hope that helps.

Then coming back to CLA, first of all, I agree to your assessment. It's a great product. And that's why we also -- our customers feedback these activation rates, usage rates on the technology given. If you look closely at that segment, you see the CLA is a touch more niche in China than it is here because cars and everything have gotten so much bigger in China. So we deliberately position it a touch more niche. Secondly, you have seen the vast pricing pressure, especially in Q4 on BEVs in light of the incentives and the fadeout of incentives, there was extreme measures in the market.

We did not participate in those measures because we believe that the substance of the product will require a certain amount of time for -- by customers to be fully understood and fully appreciated. If we now deliberately very fast go into this more aggressive positioning. I believe the attractive positioning is the right one. The overly aggressive entails further risks.

And you have also seen apart from the list price, if you look at the financial offerings, which many of the peer group offer, you see quite a deterioration in the net pricing. Year over, some of the subsidies were dialed back. And I believe this will, in the foreseeable future, also help that there's going to be a slight rebound in pricing and then the relative attractiveness of the CLA will increase.

And since the plan for China is stabilized profitability or increase profitability again?

Yes. And you will see with the next coming launches, especially the electric GLC, it is coming as a significantly larger vehicle, a bit more sweet spot, a bit less of this niche, like the CLA sedans is something where the whole market has shifted a bit.

So we will always have it. But for us, the CLA is the anchor car for this tech stack to show its capability. That's why we opted for a fixed pricing approach. And also together with Momenta, we can offer roughly 10 cities right now, and we constantly roll it out. So the next cars coming will enjoy the fully deployed tech stack.

On that journey, just to add to that, I agree with everything Oli said, look at the profile of our portfolio and also the average transaction price of our portfolio, you mentioned it, where we sit above the relevant peer group. the most important action for us on NEV starts with the electric DLC. And needless to say, then E-Class next year and so on are going to be very important.

Okay. Thanks very much. Raise of hands. Tim, over here.

Yes. Oliver, if I can maybe follow up on that in China. What's the mid- to long term here? Should we expect you guys to have the same market share with BEV as you used to have on the ICE side? Or will we have to get used to simply a smaller market with perhaps to Horst's question, a stabilized profitability?

I believe some segments in the Chinese market have shifted and going to remain shifted. If you jump into the pre-COVID era, the 2019, then the whole entry segment looked completely different to what it looks today. If you just scale back in time and look when did we deploy a long wheelbase A-Class in 2019, what kind of vehicles are now in those segments?

Secondly, in China, the half of the market, half of the car market is now NEV. If you look at and dissect the market by price segments, especially below RMB 300,000, below RMB 200,000, that share even increases. So I would say, in that segment, we will offer a few cars, but no longer this full lineup as we have seen 2019 or if you scale back further.

So I do foresee, like deployed and I explained, the growth perspective, but it is to a lesser extent on the entry vehicles. But as of today, we cannot offer in midsized SUVs and electric alternative, right? So we are happily enjoying great sales for our combustion GLC. It leads the pack. However, for the 50% seeking NEVs, it will be by mid of this year that we come with a long wheel GLC.

Okay. And don't forget that Oli mentioned in his presentation, a segment where we have enjoyed a very nice business for many years has been the CBU imports of the GLE, one of our core vehicles in our portfolio worldwide. That turns local this year. with a specific China version of that vehicle. So those segments become even more important. And in light of the tariff situation that Harald described, well, there was a slight shift in tariffs between the United States and China in 2025, which is not supporting export business in the same way that it did before. So it's crucially important to now localize such a core vehicle in our portfolio, and we think that will build momentum in that segment.

And 2 more follow-up questions, please, to what was said. Maybe with you, Ola or Harald, because you also very much stand for this. I don't think I've heard the word growth as often from you guys as today over the last 4 years ever since Monaco, certainly scared a few people, judging from my inbox on the investor side. is value over volume over with this announcement?

Do you now say 2 million units is what we need to achieve. We need the fixed cost coverage? Or do you still very much prioritize margins? And if we then think about margins, Harald, 2 to 4 percentage points, sounds very ambitious with all the front-loading you do on ADAS, as we discussed about yesterday, Ola, the cost going up on DRAM, all the other inflation. What makes you confident that we don't stand here next year and you're telling me, yes, we achieved 4%, but actually, the costs went up. So the net number is more like 2% or 3%. How should we think about that?

So on the first one, if we go all the way back to that original presentation, Pillar 2 is called profitable growth. It's not called profit or growth, it's profitable growth. And listening carefully to what Mathias said in his presentation, it is still profitable growth, but it's not profit without growth.

And we do think that it matters that if you invest into such a comprehensive innovation, technology and product portfolio, you must have the ambition that you have success in the market with those products. When you go into a few segments where you literally have a white spot at the moment, electric GLC or electric C-Class, and we know that, that is the bulk of the premium electric volume in Europe and you have no offering today, you must have an ambition to grow. So profitable growth, and I believe that is the word we used, profitable growth remains the mantra.

And maybe a bit of switch of gears, as you can see with the back or the support of the efficiency measures now and also moving forward. we believe we can generate and create ourselves, more headroom in terms of stepping up competitiveness without forgiving value, but stepping up the competitiveness also on the commercial side of things.

To your other question in terms of what makes us confident that the net number, I mean, shouldn't look different than the one I'm telling you today here. I make one caveat on the slide, please pay attention to it. It was on the raw mats and all of the bridges I think I gave, I mean, consciously separated the raw mat effect from the efficiency effect.

Obviously, we are exposed to risk, but also to opportunities in this respect. I think, I mean, other measures, I mean, a chiefly behind us. as we think about, I mean, regulatory stuff. I mean you mentioned the EU 7 engines. Obviously, that's quite a lot of content coming to the vehicles, but I think we know what it is. And I mean that is included and calibrated in the entire envelope I gave earlier today.

So moving on. Christian, over to you.

Yes. So first of all, could you detail the product mix dynamics within the top-end vehicle space in 2026, but also 2027. So the impact of AMG versus the refreshed S-Class. That's my first question. I can ask -- and then I have 2 more, which is -- second question would be the net tariff headwinds.

You detailed it for 2026, but please, if you could elaborate on post-production localization measures, what is the net impact? And also, how should we think about the net tariff impact as we head into 2027? And then lastly, just something specific to your China dealer restructuring efforts. What is the impact in 2026 on those for the P&L and for cash?

Yes, I'll start with the first one to break it down more detail for you on AMG. So if you look at the current portfolio, the entry point to the AMG brand are the entry vehicles on the current MFA2 architecture. So like an A35. And then you have the full performance version with A45. As we go into MMA and electrification, we're going all in on electric performance, which means that, that entry sliver of the AMG sales sun downs in this year. That is why that affects the headline number to start with. But I want to emphasize that, that is the lowest level of the AMG portfolio.

What happens now on AMG is a very comprehensive product offensive in the next couple of years. On the combustion side, led by the brand-new 6 cylinder, further developed 6 cylinder, you could see that they came out with a statement now that it starts in the middle of this year with the GLC 53, which is one of the most important segments. The brand-new V8 that has gone into this car There's, of course, an AMG version of that, and that will find itself into product next year and stay tuned for how far that can go in terms of performance. There is some very exciting developments in the pipeline there.

On the electric side, we're now going to reinvent performance electric vehicles. Some of you have had the chances to get some initial sneak previews, but it will be mind-boggling performance where we try to pair it with the emotion for the ones that still have petrol in their veins. And the signature flagship product in that offensive is, of course, the AMG GT that we will show in May as a world premiere, and it comes in the second half of this year. But that technology that superior performance and that emotion is then rolled out into the whole portfolio.

So you will have MMA versions of that. You will have MBE versions of that, et cetera, et cetera. So this run out and then run-up for AMG in particular, 2026 is a runout and then to prepare for a run-up. So I think we're going to then see a runout and then into 2027, very, very good momentum on AMG. That's what's going on.

And on the other 2 questions, Christian.

Just on the S-Class, you didn't mention the S-Class, the new...

Yes, S-Class -- well, S-Class, the production starts in a couple of months from now. Here it is. You saw the Maybach version of it yesterday. And then with the lead times, I don't know, we hit China in September-ish, United States in the summer. We will then be in Europe in roughly May-ish time frame. So of course, you first go down and then you start going up. Full firepower of the S-Class is 2027 and forward.

So when we think about the mix of the top-end vehicle space, is there a significant shift with the S-Class and the AMG?

'27 growth, changeover year '26.

So your second question, I think, was on the tariff impact and any localization. So we'll have, I mean, the run rate impact of the tariffs in 2026, as I outlined earlier, stepping up from 110 basis points in '25 to, call it, 150 is obviously in '25 in the first quarter, there weren't, I mean, any incremental tariffs. So I think that explains the 2026 number.

Then in that number, you already have the localization of the GLE in the U.S. -- in China, sorry. But I mean the vast majority of the incremental tariff headwind is anyhow the U.S. tariffs, which impact the imports into the U.S. So as we have a target to grow in the U.S. towards the 400, as Mathias pointed out, that has, I mean, a tariff impact going along with it. That's why in the midterm, I said that could go up from 150 to 200 basis points.

Yes, in the longer midterm or I mean, towards the end of the decade, I think I mentioned it in the localization section, there is clearly an opportunity with next-generation GLC to come. That could be a significant mitigant to that tariff, but I think that is probably a bit outside the midterm territory we were using in the financial guidance outlook. Then on the dealer section, Oli, I mean, you want to take it or...

Maybe I can take it. So first of all, the dealers in China, they are more than just part of the process. There is a very close and intensive partnership. So we work the whole strategy for China hand-in-hand with our dealer partners. That is important because we deploy new formats to acquire customers. We're going to bring something for the top-end vehicles, which I think is attractive in the customer journey.

We complement it with the uplifted digital journey. Now this is hand-in-hand because also this kind of recalibration of the density of the network is at the benefit of our dealer partners because it is on the aftersales revenue and general on the profitability for the network an uplift.

So I would say we are well on track with the figures Harald presented to proceed.

I take one more question in the room, and then I'll give people online the chance to also ask a question. Henning, over to you.

Yes. To Harald, please. thanks for being so forthcoming with your bridges. I just have a clarification, please, because I think when you spoke about '26 to the midterm, I think you mentioned the 1 percentage point headwind from tariff and FX again. And I just wanted to make sure you actually meant that. Or is it from the starting point of 4%? Is it just the efficiency and 1.5% volume structure price?

Yes. To clarify, so the starting point, 26 so the 3% to 5%, again, take the midpoint as a reference, minus 1% from tariffs and FX, incremental tariffs and FX. And then the 1.5%, I mean we talked in terms of top line volume mix, pricing and BEV and around 4% on the efficiencies.

Okay. So another 1% from -- for the period from...

Another 1%. Tariffs and FX.

Yes. And -- sorry, and that's mainly related to hedges rolling off, yes, the delayed effect of the FX coming through.

In '26, I think we're still well covered also at pretty good rates when it comes to the U.S. dollar and also on the renminbi. So I mean, if current spot and more kind of, call it, towards 120 kicks in. And the other currencies, interesting enough, I mean, only the euro is strong and continue where they are, obviously, that creates some further headwind for the years post '26.

And the second question is on China, please, and the profitability there. I think at the CMD, we talked about trying to protect a double-digit margin. I think you were coming from still 15% or so in 2024. I don't think you probably deliberately didn't give a pinpoint update today. But if we could just talk conceptually, is that going lower before it's starting to go higher? And if you could give any color for profitability between imports and local, if that's a good way to just explore it a little bit further.

We made a slide, which we called we deliver on the targets we promised here. And in 2025, we still delivered a double-digit margin in the joint venture. 2026, as characterized by all the ramp-ups, it is going to be down year-over-year. Then we will have pretty much second half of 2026 and then transitioning into '27, the benefit of like a vehicle like the GLE long wheel base providing additional profitability.

At the same time, we see the facelift cycle for GLCC class, which also get their combustion side. What is definitely a topic of intensive work is the profitability in China for the electric vehicles. So this will slightly weigh on the profitability in the BBAC. But that is why we embark on this mission of a deep localization there, taking out cost, which is increasing the resilience on the combustion side as well as improving the resilience on the electric vehicles. So yes, year-over-year, first, delivered on target for '25. Second, '26, slightly down. '27, we will do our best to return to where we were.

So let's move on to the telephone line. We have questions there, and I will start with Patrick Hummel.

It's Patrick from UBS. My first one would be a clarification about cash returns and DTG specifically. Hard, thanks for all the color on that specific slide. You highlighted EUR 2 billion of M&A inflows. I was just wondering, Athlon, there were some media articles suggesting that could be worth about EUR 1 billion.

Some additional German distribution outlets, I guess that's also a few hundred million. So that would leave a relatively small amount for DTG if the total M&A bucket is about EUR 2 billion. Should we read it that way? Or could it just well be if you execute all of these transactions, DTG, Athlon and the distribution networks that the M&A-related inflows would exceed EUR 2 billion?

And would that also directly translate into additional cash return to shareholders? Or would you say it's the EUR 6 billion that we've talked about, EUR 5.1 billion is the dividend and the EUR 1.7 billion remaining from the existing buyback. So whatever happens on the disposal front, the cash return this year won't exceed EUR 6 billion. Am I misreading that?

I have a second question then.

Thanks, Patrick. Well spotted. I think the numbers, I mean, you reminded us, I think, are correct in terms of Athlon, in terms of the own retail divestment potential. And I think the EUR 2 billion you put on the chart, I mean, should not be seen as a cap in terms of cash generation from M&A, maybe a bit of a prudent approximization await the financial statements coming out early March.

As I said earlier, you will see assets held for sale. I think that rather gives an indication in terms of the size of the order of magnitude we have in mind on DT. So does it mean, therefore, M&A cash proceeds could be above EUR 2 billion? That could be a distinct possibility. Let's talk about it when we're getting there. I think the message here is a solid underlying cash flow of more than EUR 4 billion on the industrial side, including a significant cash out from the restructuring program.

So in terms of underlying cash generation, I think that's a pretty reasonable number. And then this potential of cash generation on top of it. So I think, the message here in terms of potential for shareholder return and our commitment on shareholder return, I think that should be attractive for investors. And I think that should also be a bridge to look through somehow 2026 while we expand the margin in '27 forward.

My second question, I guess, is for Mathias or Ola. The next-generation A-Class or whatever it's going to be called. When we think back at the Monaco CMD, you basically painted a picture that suggested that the very low end of your entry segment is not very attractive, neither from a margin standpoint, maybe also not from a CO2 compliance standpoint.

So I'm just wondering what changed your mind? Why do you think you need this model? And what can you do to avoid margin dilution? Is it maybe just that the cost structures in Rastatt are what they are and you have to have a certain capacity utilization there?

Or I mean, I get the point about young buyers getting sort of attracted to the brand, but the financial impact, at least in the history of that model range has been rather dilutive? And if you can just share a bit more beyond your thought process why you bring this model back or bring a successor.

Patrick, good to hear from you. I'll do the financial mechanics and let Mathias do the market. Now we have the MMA architecture fully industrialized and all the technologies available. And when we looked at this equation, again, weighing in what it means for the overall market presence in Europe, and it's really about Europe for a very reasonable investment amount, very reasonable.

And with the variable cost projection that Harald was alluding to, the sum of those financial mechanics said this can meet our lower end threshold, I would say, Harald. But it does play a role in the market, and I want to let Mathias reflect upon that.

Absolutely. I mean, Europe, as I pointed out in my presentation as well, is extremely important for us. It's a market where this segment is being well served. And the A-Class as it is today, is a vehicle where the average age of our customers is 7 years younger than for all other Mercedes-Benz products on average. So that means we have the early opportunity getting younger customers into our vehicles, plus, and I mentioned the topic of our new unit.

We have very attractive downstream business combined with it. So we believe that it absolutely makes sense in Europe to have this product available, including the downstream effect, it will definitely be a profitable case and very important for us to get customers acquainted with our brand at the very early beginning.

And the designers did present us something in 2025 when I saw it, I just thought to myself, it's hot as hell. I want that. That's the irrational part of the equation.

Your new company content.

Okay. We do want -- Sorry, Patrick. We do one last question in the room. I'll take a look for hands up, Stephen?

Stephen Reitman from Bernstein in London. A question on China again. Obviously, you talk about the potential of filling the white spaces with the new BEV platforms that you're coming out with new models like GLC, electric and such like.

Could you just comment on the research you're doing on the Chinese customers? To what extent the customers have gone away? How much do you expect them to come back? What is the dealers' confidence in the product portfolio, which obviously you've shown to them during your journey?

Most certainly. Let's talk about the Chinese customer and obviously, maybe one of the most demanding customers in the world. So on average, for Mercedes, 37%, S-Class 39%. I think Maybach just sits directly on 40%. If you do a poll on what does Mercedes-Benz still mean for customer groups, it is still for 65%, an icon of success, and they aspire to own such a car.

What is today one of the biggest detractor, if you will, and that is, I guess, where your question is aiming to. The detractor could be intelligence. Can Mercedes offer the same level of ADAS infotainment updatability as they have seen by other competitors. And that is what we have shown today that with the tech stack we have developed, we close that, so to say, gap where you have it. Specific vehicles in our portfolio like the E-Class they massively contribute to the highest average TAP in the market.

They outsell any competitor because they already have a Level 2+ system. They don't have the point-to-point navigation. That is why we cascade this tech stack now into each and every segment, returning back to those customers. We have more than 7 million and still growing customer base. And we have also, due to the combination with financial service, now the opportunity to strive with a new offering, which were maybe on the fence waiting, can you take away this detractor reason?

So overall, the ambition to own a Mercedes-Benz is not fading. The attractivity to buy one is elevated and is going to be elevated with each and every model we are offering. So therefore, we are pretty confident on it, but still realistically also showing where have we lost customer, what were the reasons and how to get them back. That was on my slide, 100% China fit.

We have to offer more comfort. We have to offer more space, especially on the SUV side, you have seen this additional raise of space and larger vehicles at lower price points. So that is something where all our product decisions for the next 24 months kick in to cater for that.

So basically, you're saying the Chinese customers haven't been spoiled by these very cheap offerings of -- with a lot of high tech at very low price points.

Especially on the lower segments, especially on the lower segments. And if they are in an all-out price war against each other, that is when we chose to be a little bit more cautious, as Oli mentioned before.

And how do you convince them also -- I mean -- or is it very clear to them the key characteristics of the Mercedes and the legacy brands about the long-term value of the vehicle, the residual value, which clearly among the cheapest Chinese cars doesn't seem to be consideration. People think these almost like throwaway products after 4, 5 years.

Exactly, sir. And that is what kind of a product are you willing to throw away? The more pricey the vehicle gets, the more you are willing to also look after your residual value. A lot of the equation is also uncertain to that extent, I personally visited the used car market south of Beijing to take a look how are actually some of the other cars returning after 2 years, 3 years? What's about their longevity?

What's about their substance quality over time? I think there is something what is sometimes questioned that is safety. It is only questioned until something happens. And those are the moments when I would say, our continuation in these core values, our communication to the strength and to the attributes of the brand, they then yield results. Obviously, we cannot put this at the absolute forefront at every point in time, but it is seen, perceived and then obviously convincing when others might have cut a corner here or there.

So yes, for -- and it alludes to the entry segment question and probably an A class has to be completely differently assessed in China. Therefore, it is a European and not a China. That's due to size, expectations of vehicle formats. But our more comfort, more space, more intelligence should take away those detractor reasons, which might be existing right now.

So thank you very much for your interest and all of your questions. I would be handing over to Willem now to leave some time for questions from media.

Yes. So we are now switching to German. There's, of course, translation available for everybody who's not fluent in German.

[Interpreted] Okay. Let us now start with the journalist part. We still have half an hour for questions. We also start here with questions from the room, and we'll also check for questions that online participants might have. Who would like to start with the first question?

[Interpreted] I'd be interested in what -- how you define medium term? Does it mean 2027, '28, '29? Or does it mean, let's just wait and see, but we're not really sure. What is midterm?

[Interpreted] Well, thank you very much for the question. Well, this is something that is just -- was left undefined. Well, it's not '27. Otherwise, we would have said it's '27. However, why is this important? Why do we call this midterm? Well, we live in a time where we are faced with volatilities in securities and the like.

So even though we are confident in the plan, as such, we are not in a position to say which quarter this will materialize in basically. But it's not 2027, but it's also not the end of the decade. This doesn't leave so much room of maneuver for speculation as to which year this might refer to. So I would not just lead this substray, so after '27, but before the end of the decade.

Next question, please.

[Interpreted] Okay. So let's just ask another question. I have an additional question on the U.S. tariffs and the impact on your profit. You told me this in margins and points. Can you tell me this in absolute numbers. So what was the impact of U.S. tariffs in '25? And what do you expect the impact to be in '26 in absolute numbers?

And then also a question on China. I heard a little bit about -- well, Mr. Blume of Volkswagen saying that in China, he's looking at an 80% decline in the luxury business, and he's not -- he doesn't believe that it's going to recover anytime soon. So I'd be interested in finding out what your stand on that is. How do you think the luxury segment is going to develop in China in '26?

[Interpreted] Well, the first question is, if you just take the passenger car revenue in 2025 and with the outlook look that we gave for '26.

So the passenger car revenue figures should remain the same, around EUR 100 billion. That's the ballpark we're talking about. And then times 1.1% for '25. So EUR 1 billion was the impact that we saw in the tariff impact in '25, and it's going to go up in '26 because we'll have a full year impact. So it's going to be a significant number. So thank you very much for asking the question because very often, you look at the percentage points and you're like, well, it sounds so little, but it's actually a lot of money.

[Interpreted] About China, I don't think it's a secret that consumption, especially in the upper price bandwidth is a bit subdued. So the consumer mood is a bit gloomy -- and this also includes things like coffee that people buy at a discount of, for example, there is a certain degree of price attrition. And it is definitely a problem that we still have the real estate issue, and there is certainly a correlation to be seen when it comes to being willing to spend on luxury goods.

[Interpreted] The problems mentioned by our colleagues from other car manufacturers, I don't see for us. We have lost 19% in our segment. The total market went down by 15%, which means for 2026. However, products, as Ola said, like the S-Class, GLS, S-Class and have gone past the first half of their life cycle. So they are going to be refreshed, including the intelligence that we build into these vehicles. And I think this will give us a chance to see a stimulation in sales of these vehicles.

[Interpreted] Okay. Mr. [indiscernible], please. Two questions. First of all, Kecskem�t will be the biggest plant in Europe in the future. Why do you invest so much into the -- I mean, you mentioned the cost of energy of labor.

Are these the only reasons or the framework conditions, regulatory conditions, also a reason is everything easier there. And the other thing is exports from China, not to the U.S., not to the EU. But do you expect exports from China or could push out exports from Europe and other regions of the world? Or do you want to tap into new consumer groups? Or do you see a pushout effect already? Or do you expect such an effect? And if so, how big would it be?

[Interpreted] On your first question, if we had just some sort of industrial plan, well, like the automotive industry, all dimensions in Eastern Europe are more attractive if you want to invest. And this applies to us as well. It's more attractive to invest in Eastern Europe, but we have a long-standing tradition in Kecskem�t. It's a fantastic team there, just like in Germany.

And I would like to thank all the employees and workers who are listening right now. We have a very modular strategy. So Kecskem�t really suggests itself for using this. And then we have greenfield sites, and we have a new brownfield site. So we really have the chance to perfection all the processes in addition and on top of what you can do in an existing plant. And on top of that, we can remain CO2 neutral right from the start. So we are really at the spearhead when it comes to decarbonizing our production in Kecskem�t.

As regards the streams of goods around the globe. Well, the glass is not always in everywhere half empty, even though 2025 was really a challenging year for global trade. But adopting a middle or long-term view, there are some signals, free trade agreement, I'm thinking of Mercer.

And I assume that at the end of the day, the European Parliament will finally reach a conclusion. And I think they want to have some kind of preliminary approval and then the formal approval. But also the signal that comes from the free trade agreement with India. When it comes to global trade, there are also certain impulses that induce us to believe that the situation might improve.

And I don't know if it was you or Mathias who said when Thailand does a deal with China and suddenly, there are no tariffs imposed. I mean, it's obvious that they use the production structures that you have in China. So we also have such tactical changes to bear in mind. Thank you.

[Interpreted] My first question is about the decline in sales in China. Can you give us a figure for 2026? And do you plan to adjust prices because of that? And another question regarding the push ahead in Europe. What do you think of local content measures? Do you think these make sense?

[Interpreted] Maybe first Oli, and then Ola.

[Interpreted] Well, we said that in '26, sales will remain below '25. This is our expectation. I believe that we showed that our product campaign that will really have a bigger effect in the second half of '26, we will be able to improve our situation. But in some total, sales will remain below '25. But you also said that on the prior year level as regards to the total sales expectation, we, of course, want to make sure that we can compensate elsewhere in the world to make up for that.

Number two, price adjustments or price adaptations. You referred to that in the market, there is a gap between the list price and the transaction price. So we have done a few strategic price adaptations already earlier that year, but they don't have any effect on the transaction price of the vehicle on the market. Rather, there are one component in a plethora of components of what we do in order to optimize our cash flow and our dealers are involved, too.

We want to sell at attractive but not overly attractive prices. European content and everyone is waiting for a positioning of the European Commission in this field, which is expected to come at the end of the month. I'll try to give you a balanced answer. In addition to my job as CEO of Mercedes, I am also the President of ACA. And we are intensely discussing this issue among the manufacturers, but also with our suppliers.

Let me tell you this. We all agree on CO2. And we can see some movements here, but the small print still requires a lot of improvement. And the industry more or less has closed banks, both manufacturers and suppliers, the many thousands of suppliers. When we talk about European content, the situation is more complex because the profile of the companies is very, very different.

German manufacturers are global entrepreneurs, especially premium manufacturers. Their business model has been built over the last 70-plus years, and they sell goods in all directions. So we are also big exporters also from other regions, the U.S. being the best example. in this case, like another premium manufacturer, we are the biggest exporters from the U.S. If you have such a profile.

Of course, it is quite obvious and logical that you're in favor of open trade and open markets and against protectionism. If you're a manufacturer that has a regional footprint and you strike it lucky in one of the big economic regions of the world, it may be tempting to think.

[Interpreted] Well, whatever other economies do out there, this is not my level playing field. Let us raise the bars a bit or the obstacles. I can follow that. I can relate to that, and I can understand this. So there is no one single exact position across the industry regarding this question. But I think everyone agrees that the supply networks. They are not supply chains, they are supply networks that have been built over decades that have been perfection.

They are the invisible hand of the market and the high-tech vehicles, for example, this S-Class really features components from all 5 continents. I think that protectionism and its unintended consequences, fast, we shouldn't change this drastically, and we all have this common denominator across the industry. If you do that and as a market player, I'm in favor of a level playing field.

So whenever you do regulate, you should really use a very, very fine saw, not the chain saw and make sure that no unintended consequences will ensue, especially after concluding a free trade agreement with EUR 1.4 billion there and several hundred million people there. Well, I expect, in this case, the most intense debate in the course of the year '26.

[Interpreted] One more question from the room, and then we go online. Mr. [indiscernible] from DPA.

[Interpreted] One question with regard to the plant in Kecskem�t. Did I get it right that this year, you will increase the units from 200,000 units to 400,000 units or double the units. This is the first question. Second question, if Hungary is the biggest production plant of Mercedes in Europe, I ask myself, is that only the beginning maybe for cost reasons? Of course, it would be quite natural to transfer even more capacities to that site. why shouldn't you do that?

[Interpreted] This was the capacity potential that Harald showed in the slide. So it won't happen overnight all of a sudden. This is the capacity potential. Having said that, this is a clear message also to the colleagues here in Germany. We, of course, stand behind Germany. We have seen robust 2-digit billion amounts being invested in factories, tools, machines.

The accounting, Harald, of course, is not done on a nation level, but I think it's fair to say that more than 50% of this investment is spent for Germany. So we do a lot of upgrading here in the plants here in Sindelfingen, for instance, we did a lot in Rad to prepare for the launch of the MMA. So we did that last year. This is also very important.

So considering that, our worldwide sales in Germany compared to the rest of the world is 12%, 13%, 14%, but investment is more than 50% and more than 60% of the employees work here. So I mean, this is a clear commitment to Germany. If this is no commitment, I don't know what kind of commitment I can give you, and you will hardly find any other company with such a commitment.

Having said that, Germany must increase competitiveness. We have had many years where we compensated higher costs with intelligence. But if everything happens at a time, higher energy prices because of the horrible war in Ukraine, because of the higher labor costs compared to other economic regions, then the slowliness, then the control level, et cetera, et cetera.

Then you reach a point where competitiveness as such, is put into question. This trend has to be turned around because capital chooses the risk-oriented return. There's no preferred nation of capital. This is the reason why we, in this union together with many other industry sectors, we ask Brussels and Germany, please, let's increase the competitiveness, the competitiveness of Europe. That's the best protection for economic growth, labor, innovation, et cetera.

[Interpreted] Now let's take an online question from AFP and [indiscernible].

[Interpreted] Just first of all, on Maiden Europe, the Saudi are warned this week that such a strategy could invite countermeasures, protectionist measures from other markets. To what extent do you share those fears? And why?

And my second question would be the cars return on sales next year, you guide to -- this year, in fact, 2026, you guide 3% to 5%, I think. Could you please elaborate a little bit what kind of factors might drag you down close to 3%? What might push you up towards 5%?

[Interpreted] So I'm not 100% sure if you heard my German answer to almost the same question before. I'm not going to repeat most of that. But I can say this, if you as an economic actor act against another economic region with protectionistic measures, it would be naive to believe that, that other economic actor just sits back and says, whatever. It's more likely that, that other economic actor would devise a countermeasure.

And the most prominent recent example of this is the EU anti-subsidy study on BEV vehicles, which I understand the reasoning behind it. And it was about level playing field, which I understand and I have understanding for. But the Chinese side, not obviously with the same measure, has already acted and it affects businesses, European businesses in that market.

That is why I say handle with care from the headline that might sound good in a campaign, go European, and I'm as European loving citizen as you can find, we live in a global economic network. And certainly, the auto industry is one of the most global ones. So when you devise policy on that, do it with precision. and not with rough measures.

[Interpreted] On your second question, I think I explained the walk from '25 to '26. So I'm not going to repeat that. But I mean, if I think about your question in terms of what could either bring us closer to the 3% or the 5% within the guidance corridor, and I would probably say some potential on commodities and maybe on FX, be it on the raw mat side, it could take us to a higher level.

What could take us to a lower level. I mean China is always, I think, unforeseeable in terms of the intensity of the competitive environment that could be an element, which could bring us further down. Right now, I would rather say it's a calibrated approach, which we take for 2026, thinking about the 3% to 5%.

[Interpreted] So back to the room here.

Again, in English, it's Stephen [indiscernible] from The Wall Street Journal. On the U.S. growth ambition, when do you expect to get to that 600 -- sorry, 400,000 target? Is that again middle midterm ambition? It wasn't totally clear whether that was the same time frame. And what's the path towards that?

Is it selling -- is it the localization of the GLC, which will make a big difference? Is it selling all of the local vehicles? Or are you -- it sounds like from your tariff guidance, you're also counting on more imported sedan -- sorry, selling more imported vehicles to. It would just good to get some color on that growth ambition.

So on the 4000, we stay consistent to midterm. That's true. We finished last year roughly 300,000 units, and we believe we can grow that midterm to 400,000 units. If we look at our original past market shares in the market, having a comparable product portfolio to our competitors, I think it's a reasonable assumption to believe that we can grow and win back market share with the brand we have, with the brand-new products we have, with the technology we have presented today with a further increase in localization and with the partnering up with global partners like Microsoft, Google, NVIDIA, et cetera, to get closer to the customer demands in the United States.

So these 5 elements I just pointed out, we believe make us very confident that that's an ambition, and it's a tough ambition, but that's an ambition, not unrealistic.

[Interpreted] So this brings us to the end. Mr. [indiscernible], you showed a hand.

[Interpreted] Yes, I have one more question with regard to the top end area. You've mentioned the medium-term targets, 14% to 15% or an increase to 15%. So this is really modest. You used to have very ambitious targets. You also had a share of 16%. I mean, can you explain why in this segment, it will be so challenging in the years to come?

[Interpreted] I already gave you part of the answer on that in that we take the entry AMG offer, that's a 35% offer. So we'll discontinue that. So it's a great volume element, but not a great earnings element. And if you take that out and if you look at the other products that are coming, you will be looking at quite a substantial growth, so greater than 15% in the midterm and then a share in the overall sales of 15% or greater.

Now if you look at what Mathias said, then some of the growth will happen in the core, in particular, with the electric core product. So this element also will grow. It might seem superfluse because you're saying, okay, well, you're coming from 10%, 11%, you're already present in that segment. Yes, we build up a great position. Yes, we're leading worldwide in that segment. But it is still a more balanced and ambitious journey in the next 2 to 3 years. In particular, with the entry AMG, that is not mathematically part of that.

Last question, Mr. Well, do you believe that you'll be able to compensate for the tariff effect in the U.S. by price increases? Or is that something that's hopeless? We're not making this assumption.

[Interpreted] Last question, Mr. [indiscernible].

[Interpreted] Well, do you believe that you'll be able to compensate for the tariff effect in the U.S. by price increases? Or is that something that's hopeless? We're not making this assumption.

[Interpreted] No.

[Interpreted] Okay. That was a short question and a short answer. So let us come to the end of this media Q&A, and I'm going to be switching to English.

Today, both here in person and online via the live streams. We truly appreciate all your questions today and your attendance. This concludes the event. It was wonderful to have all of you with us you next year in an even brighter future. Take care. Bye-bye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, ladies and gentlemen, and welcome to the Annual Results Conference 2025 of Mercedes-Benz. We welcome our guests here on site with us in indigen and those of you joining us via the live stream. My name is Cristina Schenk, and I'm responsible for Investor Relations, digital and communications.

Good morning, everybody, also from my side. My name is Willem Spelten, I'm heading Corporate Communications at Mercedes-Benz. Thank you very much for joining us today for this event to reflect on the past year as well as to take an outlook on the years to come here on site [indiscernible] as well as on the live stream. We have a 4-hour program ahead of us, divided into 3 parts: the annual results conference at capital market update and of course, a Q&A. [Operator Instructions]

And we will now start with the first part, the actual annual results conference and our CEO, Ola Kallenius.

Good morning, everybody, and welcome to this 2026 annual results conference. We're looking forward to sharing with you today our numbers and what happened at Mercedes-Benz in 2025. But right after this first presentation, more importantly, what's our game plan? What are we doing? And how do we see the next year for Mercedes-Benz develop?

But if we start by reflecting a bit on 2025, yes, it is true that the auto industry and our company, we're in a once in 100 years transformation going towards zero emission, going towards fully digitalized intelligent products like this S-Class that is standing right next to me here. But it's happening in an environment that is dynamic, more dynamic than we have experienced in many, many years, maybe the main topic that the debate centered around in 2025 was tariffs and trade relationships, but it's not the only thing that is going on in the environment, which means flexibility and agility is key to master this transformation in the current circumstances.

So what did we focus on in 2025? First and foremost, innovation, technology and preparing the biggest product launch offensive in the history of the company where we launched the first of 40 models that are coming in the space of 3 years. Why was this so important for Mercedes-Benz in 2025? We have been working for 4 or 5 years to build technology platforms. And we're going to dig deeper into this in the strategy update that follows right after this annual results conference. And it is about a comprehensive next-generation powertrain portfolio, needless to say, on the electrical side, but also on the electrified high-tech combustion side.

But maybe the bigger revolution on technology is to replace the brain and the central nervous system of the vehicle with what we call the Mercedes-Benz operating system. And within a very short period of time, we're going to proliferate this technology throughout our whole portfolio.

And we started launching with the CLA that one car of the year was safest car tested by Euro NCAP in 2025. Of the established manufacturers, either we were the first or at least one of the first to launch a software-defined vehicle. While all of that is going on, of course, in the market conditions that we're operating in, we're managing the go-to-market thoughtfully and keep an eye on the ball when it comes to cost efficiencies and capital return to our shareholders. Harald will get into that in more detail.

But if you look at the numbers, what is the effect, within adjusted EBIT of EUR 8.2 billion for the group, as you can see, these market conditions are reflected in our results. We also took the opportunity in 2025 to make the organization leaner and more streamlined and also not just rejuvenate our management with next-gen talent but also make the management team smaller, leaner, flatter and more impactful, which is what is mainly reflected in the difference between the adjusted number and the reported number.

I want to highlight two numbers on this chart. On the one hand, the EUR 5.4 billion free cash flow. For many years in a row, we have been a very solid producer of free cash flow, and we have returned free cash flow to our shareholders in those years at an amount, which is unprecedented in the history of this company.

And even if you look around the industry, in this eventful 2025, that EUR 5.4 billion stands out as one of the most solid numbers on cash flow production of any car company. And in spite of handing the cash back to the shareholders, after we have done everything else, funded our incredible product launch and technology and innovation plan; our net industrial liquidity remains above $30 billion. So we have a rock solid balance sheet, a rock-solid balance sheet to take on the next phase of transformation, which will be intense in the next few years. But we can do that from a position of strength.

If you look on the sales side, the reduction in sales is mainly down to managing the fierce competition in China. So that is where you will find the major part of that reduction. Where we don't go for market share at all costs. And our Head of China, Oliver Thone, will talk more about that in the capital markets update after this presentation.

And yes, because these are wholesale figures, we made some, I would call it, tactical management of our wholesale numbers in the United States in 2025. I don't think it's surprising with a tariff level that was a different numbers throughout the year. If you would put on the retail numbers here, of course, it will be a little bit better picture. But I think we managed that in the smartest possible way.

On the top-end vehicle side, a very solid 15% share of overall sales, banner year for the G record with a very solid sales across the world. And also the electric G, if you look at an electric vehicle in that price class, the most sold electric vehicle by a wide margin in that price class around the world. So for the fans that have taken the step into the next gen, they're blown away by what that vehicle can do.

Solid Maybach year. AMG is readying an enormous production of -- product defensive that is coming in the next years, mainly unfolding in '27 and forward, we'll get to that later. And yes, S-Class and GLS, they are now at the end of this stage of the life cycle. This car that we presented only a couple of years ago at our 104th year anniversary is like a whole new S-class. Technically speaking, it is a refresh during the life cycle. But if you update more than half of the cars of the car, 2,700 parts, it is a new car. And the same happens to the GLS this year as well. So we have a run-out scenario and then a run-up scenario of those very important vehicle in the top end portfolio.

With regard to electrified vehicles, even though every single combustion vehicle in our portfolio is also electrified with a potent 48-volt system, mild hybrid, we stayed at roughly the 20% xEV. Not surprisingly, we have ambitious growth plans for this coming with the main focus being on BEV.

More about that later. But now I would like to hand over to Harald to give us a deeper dive into the numbers. Harald, please.

Yes. Thank you, Ola, and hello, everybody. Very happy to take you. So yes, quite a lot of numbers, but I think very important to understand what's happening, I mean, behind that. Well, Ola talked already through the sales numbers for cars. So if we look on the revenue side of things, obviously, that follows the sales evolution.

If you look a bit on the ASP evolution, you can see obviously that 2025 was a market environment, a very competitive market environment, but also an environment with adverse FX effects. That's what you can see reflected in the revenue evolution.

If you look on the profit side, EUR 4.8 billion adjusted EBIT on cars and EUR 5.5 million on cash flow. Let's dig into that a bit more in depth what is behind it.

So looking on this chart, well, what can you see in summary, I would say, quite a lot of macro and market headwinds in 2025, but significantly mitigated by efficiency work. Let's go a bit more in detail into the bridge, but I try to simplify it a bit. If you look at what is behind that evolution of 8% from 2024 to 5% in 2025, 2.5% RoS dilution coming from tariffs and FX, volume structure, pricing and product-related measures had an impact of minus 4%. Raw mats favorable by 0.5%, efficiencies more than 3% -- 3.3% efficiencies in 1 year for material operations, SG&A and all other cost elements, and the BBAC headwind of 0.3%.

What does it mean altogether? If you look at the sum of cost measures and improvements, they fully compensate the market evolution, and it leaves us with the FX and the tariffs basically with a 2.5% down. So that's what happened in 2025.

A word that maybe on the Q4, some of you already reverse calculate and look at the fourth quarter and might wonder [indiscernible] what happened over there? Yes, you see a 2.6% return on sales adjusted for cars. The fourth quarter came in, in line with the expectations, slightly higher deliveries, sales, cost phasing, ramping up towards the end of the year, a bit traditional, but also some supplier one-time included fixed cost capitalization as we reduced the stock level.

But then on top, in the fourth quarter, we had to accrue for warranty-related measure which is a 3-digit million number sitting in that 2.6%, which probably you cannot take as a run rate moving forward. So please, important to note in this respect.

Now let's have a look at the cash flow for cars in 2025. And we had a favorable support from working capital mean here lower inventories but also lower receivables due to a lower sales volume. But then let me emphasize the investment side of things, which you see here, clearly, 2025 marks the peak of investments for cars. And that's why the net investments exceed the depreciation, as you can see here on the chart. All in all, the investments, if you take the PPE and the R&D, are at EUR 12.7 billion in 2025 compared to EUR 12.1 billion in 2024. So yes, we went up, but probably a bit less than what we said at the beginning of the year. But clearly, this is the peak. And from now on, that will decline more on that a bit later.

Then on the other line, I think you have the stuff you know, the BBAC and equity dividend reversal and the non-cash effects related to the NLPs, the personnel cost reduction measures, dealer provision and the like.

So now let's have a look at the van side of things. Before I go into the numbers, maybe some of the business highlights. It started -- we started the year in vans by the divestment of the vans operations in Argentina, adjusting the industrial footprint, I mean over there. Well, very happy. Some of you could see a very intense year to prepare for the van. The new van architecture coming up, the van VLE and the van VLS. And I think I was super excited to reveal that in a not-too-distant future, so this ushers into a new era on the van side, and that was a very important year to progress in that direction.

Looking on the business evolution on the van side, 359,000 units in a competitive market environment in Europe, especially, I mean, in the fleet business and also in the U.S. The electric vans increased by 46% to an 8% xEV share with improved availability of vehicles on the EV van side.

Revenues are in line with the sales on the EBIT and the cash flow side. Let's have a look into that. I mean, as I think these are quite respectable numbers in -- given these market circumstances. In other words, $1.8 billion of EBIT adjusted on the van side, which is a 10.2 percent return on sales, I mean, adjusted, which is to my understanding and knowledge is a benchmark number for that type of business in that type of market circumstances.

How did we get there? Volume structure, pricing net was a 4% minus in 2025, with sales and pricing negative but the mix being favorable. Then we had FX headwinds as well on the van side, but basically we compensated by industrial performance.

Let's have a look at the cash flow side in the vans. Here, clearly, what I said before, the emphasis, the investment into the new Van platform marks, I think, the highlight of that chart. So a significant level of invest into that platform on the EV side, but also on the combustion side.

And it means nothing else as at the same time, we're ready the industrial side of things with a ramp-up in Vitoria, but then also in Eastern Europe in our [ Yabaplan ] that with nothing else than preparing the van business for the next decade to come with that type of investment.

So on the cash flow side -- or back on the cash flow side here, a bit of working capital support as well as in the other bucket, a bit similar like the provisioning I mentioned on the car side.

Then let's turn to Financial Services. So in 2025, we reshaped Mercedes-Benz mobility. And basically, we took the customer front end of Mercedes-Benz mobility and merged and combined it with the cars sales organization into one customer unit. [indiscernible] is going to talk about that a bit more in depth later. And that became effective Jan 1, 2026.

With that, we create an even more seamless customer journey and/or at the same time, also create efficiencies and synergies. Important, I think, for the financial community, the capital structure and the segment reporting does not change as a function of that structural change.

At the same time, in 2025, we focused on the core business in financial services. If you remember, the divestment from our ride-hailing FreeNow at the beginning of the year and at the end of the year, the announcement that we're going to divest from Athlon.

Now looking on the business evolution side, we had a higher penetration rate in mobility in 2025. However, when it comes to the business volume, the portfolio, that follows the evolution on the sales side on cars and vans. Furthermore, the portfolio is impacted also by FX effects.

With this, the -- however, the EBIT is up by 12%. Let's have a look how we got to that one. So it means a 1.3 billion EBIT adjusted on the mobility or the financial services side with a return on equity of 9.7% adjusted.

How did we get there? Well, in the portfolio, we now see the margin improvement, the interest margin improvement coming through, which we did follow already since a while and successfully been locked in on the acquisition side and that is now going into the portfolio margin. That is point number one.

But also on the efficiency side, mobility, our financial services delivered, I think, a pretty remarkable job with of 10% OpEx saving in 1 year to help the profitability recovery that has been slightly offset or reduced by a higher cost of credit risk. And with this, I think, a pretty solid year in 2025 with a positive development trajectory throughout the year.

Now let's turn to the group. I explained the division side of things. So what's left is obviously the recon here, I mean you can see the -- at equity contribution from our Daimler Truck stake. All in all, that means the EBIT adjusted at the group level is at EUR 8.2 billion.

Then on the adjustments, the most important one refers to our NLP personnel cost reduction program, where all in all, we accrued EUR 1.6 billion in 2025. Many of the colleagues, I mean, will come off the payroll end '25, beginning '26, and therefore, you will see a rather faster payback of that EUR 1.6 billion charge moving forward.

The other one charge in the adjustments refers to the legal proceedings in the U.K. related to discretionary commission models in the past, unchanged compared to the third quarter. And the third element is on the van side, the adjustments in the context of the divestment in Argentina. I mentioned before.

With that, I mean we are the EBIT -- at the group level, on the book side, EBIT booked at EUR 5.8 billion.

Now over to the cash flow. We talked already about cars and vans in terms of their contribution at the group level, I mean lower taxes, significantly lower taxes in 2025 compared to previous year, a favorable contribution from the interest result at the EUR 500 million, the truck divi is sitting inside here, and that means all in all, I think, a healthy EUR 5.4 billion cash generation.

On the fourth quarter, I mean, the cash flow was slightly negative. I'm sure you observed that, but that is a function of a bit of working capital volatility in the last quarter, which is, I think, not uncommon. If you look on the adjustment side on the cash flow, you will find the cash outs -- the first cash outs, but a minor one on the NLPP program I referred to before legal proceedings and a bit on the M&A side. This one is related to the divestment of our own retail in Germany.

On the net cash side, well, I explained the cash flow evolution in 2025 already. So from the beginning of the year, what else we paid the divi of EUR 4.1 billion in the course of 2025. We launched a new share buyback program in fall. Actually, we got started, I mean, with it on November 1. So EUR 2 billion program over 12 months. In the remaining months of the year 2025, we already did around EUR 300 million, which leaves us with EUR 1.7 billion to go in 2026. And with that, I think you can observe a very, very comfortable and healthy net cash position at the end of 2025 of EUR 32 billion.

Now let's close the chapter on 2025 and that look forward on 2026. So what is ahead, I mean, here? Whenever we talk about the forward-looking statements, for sure, it's important to look at the details, the footnote, so please have a careful look at that. At the disclaimer section in the document here, one point I'd like to emphasize is, obviously, all of that deck is based on today's assumptions, also referring to the regulatory framework.

If you think about the tariffs, obviously, and what we also assume in these numbers with regard to tariffs, is that the U.S.-EU tariff agreement will come into effect, i.e., it will be -- will come down to zero effective April 2026. That is the assumption, which is built into here.

Now let's have a look into the division guidance. So obviously, we'll start with cars. First, on the sales side. Overall, we have a constructive view for 2025 when it comes into sales. And clearly, we target growth in all of the markets ex-China for 2026.

So what does it mean? In Europe, I mean, we see on the back of the very strong product launches to come, growth momentum, growth possibility in Europe, same in the U.S. with the product momentum with a very strong position in the top end segment with a 30% share of top end in the U.S. I think, with the products to come, it's a legitimate, I mean, to go for it as well as in the overseas and in the other markets.

With regard to China, we also believe that in the second half of the year, the products coming will generate main favorable momentum. But overall, I mean, in that very dynamic environment in China, we retain a more cautious view. And that means that for China, for 2026, we expect sales to be lower than 2025 in China. Globally, however, we believe that, therefore, we can keep the sales level, I mean, at about the level of 2025.

Important to note in that is we have a year of product ramp-ups that the first quarter probably will be rather, I mean, lower in terms of or the lowest in terms of the sales numbers and then building the momentum throughout the year in H2.

With regard to the mix on the top end side, we do expect a mix of 14% to 15%. You might wonder after 15% in 2025, where should it come down if all of these products are coming in? There's a more technical reason for that, if you -- when I have a deeper look into it and that refers to the AMG side and the entry positions where the AMG entry models mean transition from the current ones, I mean, into the new ones. And that has an impact in 2026 on the entire -- on the total top end share.

On the xEV side of things, we target 21% to 23% in terms of the xEV share, clearly driven by higher BEV volumes in 2026 with the products to come into market. Whereas, I mean, on the entry side, from the predecessor of the MMA, we migrate probably from the plug-ins into the BEV. So that has an impact on the plug-in. All in all, that means the 21% to 23% xEV share for 2026.

Now obviously, the stuff you're may be most interested in this part of the section before we turn a bit to the longer-term perspective, meaning the section to come and thereafter; the profit guidance for cars for 2026. So if we depart from the 5% in 2025, what are the key building blocks 2026? And I think that's important to understand.

So in 2026, we faced a headwind from the full-year run rate, I mean, on the tariffs and the full year run rate on the adverse FX side, and that is a 1% down compared to 2025.

Then, with the structure and the competitive pricing environment, we see a slight headwind of 0.5% in 2026. Raw mats, probably reversing, if I look at current trends, also probably 0.5% a headwind. But the efficiencies kicking in again, maybe not at the full force of the 3% in 2025, but call it, I mean, roughly, I mean, 2% of efficiencies net in 2026 again.

And then the depreciation associated to all of the new products, I mean, coming into the market where technically the depreciation of what has been capitalized starts at the start of production, has a headwind of 0.7 negative.

All in all, that leads to a 3% to 5% return on sales, I mean, adjusted. But a bit similar, if you allow me to compare with the bridge between '24, '25, where I told you basically all the market elements have been mitigated by efficiency measures. If you look on the bridge now '25, '26, it means that the market evolution is completely absorbed by further efficiency measures, and it actually leaves you, you want to really make it simple with a headwind from the tariffs and the FX '25 to 2026.

Then on the investment side, I emphasized before that 2025, we did see the peak of the investments with the 12.7% in terms of PPE and R&D. So clearly, now for 2026, we therefore see the PPE to come slightly down and the R&D to come significantly down compared to 2025. And well, obviously, I mean, if that investment comes down, the depreciation accelerates. That is favorable in terms of cash conversion. So hence, you see a cash conversion rate at 1 to 1.2 on cars.

Let's have a look on the van side of things. First, in terms of the sales side, we do expect some slight sales growth despite headwinds expected, I mean, in China and the U.S. on the back of the product strengths. We see the xEV share between 8% to 10%, so expanding even further with the full availability end of the products. And then in particular, with the VLE ramp-up to come later in the course of the year.

What does it mean in terms of the profit evolution on Vans? Here, we maintain the guidance of 8% to 10% as we had it in 2025. So coming from the 10% in 2025, what are the building blocks in the Van bridge. The FX is also negative here, but a bit less so with an 0.4%, the volume and the mix should be positive, a bit less than 2%. The pricing is expected to remain stable. And then obviously, we have to prepare for the VLE ramp-up in the sites and the products that comes along with some cost, which is probably in the vicinity also over 2%. That's how we're getting to, I think, a pretty clean 8% to 10% on the vans for 2026.

Looking on the investment side and the cash flow for vans, I talked about cars, the investment peak being 2025 for the vans, the investment peak is 2026. Well, obviously, with the VLE and then later on, the VLS coming to market. It means on the R&D side, we will be slightly above previous-year level.

On the PPE side, as the emphasis now goes on the industrial side of things, it's going to be significantly above. And that is pretty clear that this weighed on the cash conversion ratio. Therefore, that sits at a rather low number of 0.1 to 0.3 in 2026, But I would say that if 2025 was investment peak for cars, 2026 is the investment peak for vans, and then it starts to decline also on the van side.

Looking on financial services for 2026, we do expect a pretty solid return on sale -- on equity adjusted of 10% to 12%. For 2026, what are the building blocks here? Favorable effect from the portfolio margin, expanding further. We continue on the cost savings, and we do expect some flattish cost of credit risk.

With that, I mean, I would suggest we have a look at the group guidance. Obviously, that follows the same assumptions as on the segment, on the division guidances. The -- all of the comments, I mean, I made, I mean, before, obviously, apply also here. And it means, first, on the revenue side, we expect that at prior-year level, so roughly in the EUR 130 billion territory. On the EBIT side, we see that significantly above prior-year level. That is a reported EBIT. Remember, we had in 2025, the restructuring charge for the NLPP, which we don't expect to repeat in 2026.

And then on the cash flow side, we do expect that the cash flow for 2026 to be slightly below prior year. Please remember that, that will include a significant cash out for the NLPP program. So the underlying cash flow, I think, with that, I mean, looks to be rather solid and strong. If you think about the bandwidth of that guidance range, slightly lower compared to 2025. You should rather think about the lower-end side of that band. That's important maybe to note as well. As well, I think important to note that, that cash flow guidance does not include any further cash ins from M&A or divestments.

And with this, I think, I mean, we covered 2025 and the guidance for 2026. And now I'm handing over back to Willem.

Yes. Thank you very much. Harald. Thank you very much, Ola, for looking back at 2025 on our results. After a short break, we will focus on the future of Mercedes-Benz, Little teaser, it's a bright future. We will be back on stage in 15 minutes at 9:00 AM sharp. So until then we will pause the live stream, but please make sure to redial in or to reactivate at 9:00 AM.

[Break]

Thank you, Ola. Thank you, Harald, for providing us with a review on 2025 results. We're now shifting from 2025 to the future of our company. Ola Kallenius, Mathias Geisen, Oliver Thone and Harald Wilhelm will provide us with an update on where we stand in terms of implementing our strategy, the progress achieved, the momentum behind the initiatives and the next steps on our path forward.

Please welcome back on stage, Ola.

Thank you, Christina, and welcome back to this strategy update for Mercedes-Benz, and we will focus in this strategy update on Mercedes-Benz cars. For those of you who are Formula One fans, you know that the 2026 season is the start of a new regulation. Actually, a fundamental rule change, both on the powertrain side, more electrification to negotiate the lab, but also a reworked car a little bit smaller, a little bit lighter. I would consider it one of the biggest rule changes in the history of Formula One. And we're now testing in Bahrain as we speak with George Russell and Kimi Antonelli.

Why do I say this? Because this feels a little bit like what's going on in the auto industry as well. The rules are changing. And as the rules are changing, market environments are changing, even the macro environment is changing. The technology is a transformation once in 100 years. You have to also, as a company, be able to be agile and flexible and make the adjustments that are necessary to take on these new rules.

And that is what we want to show you in this presentation today, what is Mercedes game plan going forward here in the next years? I'm just going to start with some headline numbers to give you a feeling for the destination.

We want to grow. Absolutely clear priority in the midterm is to grow and come back to at least roughly a 2 million number for the car side. Mathias Geisen will talk more about that in his go-to-market presentation right after me.

Of the historic product launch offensive at Mercedes-Benz, we're putting a lot of emphasis on models in what we call the top end vehicle segment. So in this same time frame, we want to grow our top end vehicle sales quite significantly. And as we're in transformation on a journey towards zero emission, we want to double our xEVs in the same period with a very strong emphasis on BEVs in some cases. Harald mentioned it in the results conference just a few minutes ago that, for instance, on MMA, the new entry architecture for Mercedes-Benz, we have gracefully retired the plug-in hybrid and are focusing on BEV and the regular mild hybrid powertrains.

But if that is the destination and that destination should also lead to solid profitability and return to our shareholders, Harald will talk about that mainly in his section, what is more important is what is the journey? How are we going to get there? What have we done in the last years to prepare ourselves for this? And what are the strengths that we can play to?

And that can be summarized with these five chapters. And it starts with technology and product, of course, the go-to-market strategy that Matthias will cover. China is on everybody's mind, the most competitively intense but also the largest car market in the world. Oliver Thone is joining us here this morning, our Head of China, to give you a drill down on what our game plan specifically for China looks like.

But next, this whole revolution that is going on technologically and on the market side, we are fundamentally reinventing the company, the people, the organization, the tools, leveraging artificial intelligence, but also introducing robotics into our manufacturing environment.

And last but not least, for all of you who are investors in this company, large or small, we always have you on our mind and we want to continue our very solid track record of returns to our shareholders.

Now I'll go a little bit deeper and see what this means. Over the last 4 years, we have, starting with the electrical side, changed everything. The new generation of electric vehicles that are entering into the market for Mercedes-Benz, starting with the CLA that we launched last year and CLA Shooting Brake, GLB, GLC electric and all those vehicles that are now in the pipeline; they come with a fundamentally, from the ground up, newly developed electric powertrain platform that we can scale in every single segment of Mercedes, completely flexibly in production from range toppers using the most sophisticated NMC technology to also models more in the entry offering per model with LFP inside the same energy box fully flexibly across plants and across models.

If you look carefully at the details of the numbers of, for instance, the CLA or the GLC electric, when you look at the size of those vehicles, what they contain and what they actually consume in terms of kilowatt hours per hundred kilometers, it's almost like you get to an impossible equation. They are fully loaded, fully Mercedes, technology or bells and whistles that you can dream of, but at the same time, class-leading inefficiency -- class-leading inefficiency that didn't -- that wasn't possible in the old paradigm on combustion cars. It's like bigger cars, more fuel consumption.

Here, we beat even entry offerings of some of the volume competitors in terms of efficiency. How is that even possible? Technology. Technology and innovation, scalable across the whole portfolio. And to make a splash and also make a statement, that is why we built this AMG GT XX concept car and drove "around the world in less than 8 days," smashed 25 records for any electric vehicle in the world with this orange beauty down here.

Was that a PR exercise? No, it was not. Technically speaking, it was a test drive. And in only a few months' time, we will have the world premiere of the production car of this and it will go into the market in the second half of this year.

So here, we also demonstrate the absolute frontier of what electric drivetrain can do. And maybe on powertrain, I could end my presentation right there and said, "Yes, let's go." But as I mentioned, we live in a heterogeneous world. Adoption towards electrification in the 150-plus markets that we serve around the world is not the same everywhere. And it is clear to us that for the foreseeable future, minimum the next 10 years, probably a little bit longer; it will be in all of the above scenario. It will be an all-of-the-above scenario. So a little more than 2 years ago, that is how we have adapted to the rules coming back to the Formula One car analogy.

And we have in this calendar year 2026 ready to go, 4 cylinder petrol and diesel, 6 cylinder petrol and diesel, brand new V8 and the high-performance AMG versions of these powertrains. EU 7 ready. For those of you who are combustion -- hobby combustion engineers, if you study the EU 7 rules closely, you have to run Lambda 1 and you cannot run rich at the top end of your revving curve, which you need for peak performance. Maybe you don't use it every day in traffic. I understand that, maybe on the Autobahn.

To solve that equation without sacrificing performance is very difficult. But just to demonstrate how comprehensive the update of the electrified high-tech powertrain portfolio is, for this S Class and here is where it starts. I think it's the first car in the world with that generation powertrain with that level of technology ready to go, more performance, most stringent emissions rules.

So for every meaningful product portfolio position and certainly, also in the Performance segment for AMG, we're ready to go, and we will roll out this across the portfolio in the next couple of years.

That in itself as a technology platform, is a big deal, and it sets us up to go for it. An even bigger deal is the work that we have done on the Mercedes-Benz operating system in the last 4 to 5 years. When we launched the CLA in the summer of last year, I believe we were the first, shall I call it, established manufacturer, not new entrant, established manufacturer that launched a fully software-defined vehicle with top-of-the-line compute, top-of-the-line sensing and a fully comprehensive holistic software stack based upon both the traditional AI and end-to-end Gen AI.

Others are working on that, too, some of which work on it for their electric cars and do something else on the combustion car. In the case of Mercedes-Benz, MB.OS is now coming to the complete lineup, all electric cars, all combustion cars.

Here is the S Class. I mentioned it in the presentation before. We have changed more than half the car 2,700 parts. The most significant change is actually what's beneath the sheet metal. It is a complete replacement of the brain and the central nervous system of the car. So every single Mercedes will be on this platform.

It is also a flexible platform. We can launch a top-notch feature with a tech partner in the West. And at the same time, on the same foundation, do they except same thing in China with a completely different tech partner and add whatever we like, whenever we like. The car digitally doesn't grow old. It stays fresh and will stay at the forefront of what's technologically possible from now on and forever. It's like a river that flows, and it never stops because this also fundamentally change how you produce cars. You fill up the software now in the final assembly as opposed to get it from a supplier inside some kind of an ECU, the old paradigm.

In your aftersales organization, anything, any analysis that you want to do on consumer behavior mind you with anonymized data, of course, data protection or any other issue that the customer has, you can now go in with full OTA capability in 100% of the car. We have had OTA capability for years, but now it's the whole vehicle that is reachable.

It is incredibly powerful and I think the biggest technological change that we have experienced in this company in decades. And we are one of the leading, if not the leading, established OEM that have made this happen.

What's the feature that we talk a lot about? Assisted driving, automated driving. Every single Mercedes now comes with an NVIDIA supercomputer in it. 27 sensors around the car in this vehicle here, I'm thinking to myself, where are they? Yes, kudos to the design colleagues that they can mask that quite beautifully. And a combination between a rule-based AI stack and an end-to-end Gen AI stack that we launched together with NVIDIA at the CES at the beginning of the year.

So Level 2++ literally is built into every car everywhere. Yes, we have launched it first in China because it's allowed. We're launching it now in the United States because it's also allowed. In Europe, you can have a debate, but we're going to have a positive discussion with regulators in Europe to demonstrate how sophisticated this technology is and hope that we can also bring it to our customers in Europe soon.

Next-gen L3, much higher speeds, much less restrictions based upon, of course, that foundation. In development, is coming. And we have made the S-Class and here, we deliberately chose our flagship L4-ready with all the redundancies that you need for L4, redundant steering, redundant braking, redundant power supply, redundant compute, et cetera.

And we are launching this year the first pilots together with our partners, Uber, NVIDIA and Momenta. And it will not just stay at one location, it will go to several locations here over the next couple of years. So the new S Class is L4-ready as well.

We have talked about this product offensive. Yes, it's very large. I looked at this chart and I was thinking to myself, I actually have a pretty good memory, Christina and asked I feel that it looked different than the slide that I showed last year.

Sometimes, Mercedes is more sophisticated than it should be. And I'm sure we have a PhD-level department that does nothing about count nomenclature and models. So I can say this, if you pull out the chart from last year, it's actually the same chart, but they didn't show all the AMG models here, and then they added the long wheel base. Whatever, it is the same product offensive that we talked about last year. Some have now been uncovered. The biggest launch here is the one that we have now, and it's going to be really, really big. And it happens both on the electrical side and on the high-tech combustion side. So stay tuned for a very busy 2026.

In these next 3 months alone, the new VLE, which is the successor of what we call the V class today, the Maybach S-Class, the new GLE, the new GLE Coupe, the new GLS, the new electric C-Class, the new AMG GT. Inside 3 months, 7 world premieres, I've never experienced anything like that. So for those of you who are in product media, and I see a few here in the room today, just stay with us for the next 3 months, we will keep you busy.

Yes, I mentioned, and I think Matthias will talk more about it, there's a lot of emphasis on the top end to make sure that in our traditional stronghold, where we are the largest manufacturer in the world that we build upon that position, defend where necessary and increase where there are opportunities. And we will do that, both from Maybach, particularly for AMG and also in the G.

G is one of those things. It's a scarcest product. Everybody wants to have it. Many people dream about it. When we announced last year that we were going to do a G convertible that we will launch in the second half of next year, I didn't know that I have that many friends. Suddenly, I got WhatsApp messages from people I haven't spoken to in a long, long time. So we will, of course, make sure that it stays precious, but we have growth potential here, as I mentioned in the beginning.

In terms of the markets, Matthias, I don't want to steal your thunder, and we are looking at growth already in this year in the United States, in Europe and in overseas. And some people with a specific focus on Europe and a specific focus on Germany, they come to me and say, "What is it now? What is your portfolio strategy? And what is your go-to-market strategy?" Build, protect our home turf of top-end vehicles. It's where we have the origins of the Mercedes-Benz brand, and it's also the main part of our profitability.

Grow with core. And especially now that we're entering the electric vehicles on core, we have a chance to really make a dent there, and we will do that, but also stay in entry and manage the entry volume, that is the position where I don't know, the 28-year-old version of yourself, where you get to know the Mercedes brand first and when you step in.

And for those of you who were particularly nervous about the entry offering in Europe, yes, we did make a decision last year that we will have a very exciting, hot as hell successor to what is currently the A-Class. And no, we're not going to show it to you today because the current generation A-Class is running for this year until the end of next year. But rest assured, for the European market, we will have an adequate, very attractive entry point into the Mercedes-Benz brand. Stay tuned.

You can spend 2 hours talking about China. I'm going to spend 2 seconds because I'm going to hand that whole chapter over to Oliver Thone, who will explain in all dimensions, what is our plan to tackle this most fiercely competitive environment in the automotive industry today. And that leads me to the transformation of the company. We're a product company. We're a technology company. The [ orients ] of this company is all about innovation and so on. And I admit it. We talk from morning till evening about cars and technology. That is what we do. But you should not waste this opportunity of a once in 100 years transformation to not at the same time, look at your enterprise.

So kind of a quiet revolution in the background that is going on at Mercedes-Benz in many dimensions, I'm only looking at 4 here, is that we are reinventing the enterprise as well at the same time. It starts with people. And the people that carry the most responsibility in the company is, of course, the management. We have significantly changed the management structure. We have significantly elevated next-generation talent into prominent positions in the company, not only on the Board. If you look at the Level 1 below the Board, it's almost like half of the team is new.

And the people that carry the torch for a long, long time that are now going into retirement, and that deserve maybe a little bit time for themselves as well, there is a hungry, young generation of management on the top level, but on all levels, ready to take over and also in a much slimmer, flatter optimized structure.

And this winning attitude, we want to carry into the whole team at Mercedes-Benz and we're working on that across the whole company, across all levels, kind of that Formula One spirit, you go for it. It's all about shaving some lap time off of the sectors and ultimately win the race.

This is also powered by technology. The revolution is not only happening on the product side. We have dozens, if not hundreds of AI-driven projects going on in the company that is going to change how we work. It's going to fundamentally change how we work happen in every industry.

And what's going on in advanced pilots with robotics, it feels a little bit like, I don't know, the Hollywood movie iRobot many years ago that felt like science fiction. It's not science fiction anymore, we are close, we're doing pilots now. We are invested in one of the leading companies in the United States that is in the process of creating a next-generation humanoid-style robots and also other applications of it called Apptronik. I saw another car company, the market cap went up a lot, maybe, Harald, we undersold that bit.

But nevertheless, we're going to use robotics to also in the next years, not decades, years also revolutionized productivity and how we make things.

Last but not least, but I'll leave it to you, Harald. For every shareholder that is listening, we know who we're working for, we're working for you, and we are very, very, very focused that everything that I just mentioned also leads to a healthy return to you.

And with that, the first 140 years, they were exciting, we're looking forward to the next 140 years. Thank you very much.

[Presentation]

Good morning, ladies and gentlemen. What you've seen in this film is our recipe for success. It's about engineering, excellence and superior customer experience. So that's what we call Welcome Home, and also to you, welcome home to Mercedes-Benz.

Ladies and gentlemen, the last time I was in front of this audience was roughly 3 years ago when I was still responsible for our van unit. Times have changed meanwhile. And today, I'm happy to share with you our go-to-market strategy and how we want to reach the 2 million, Ola mentioned earlier on.

We want to reach those 2 million in a profitable and sustainable way. This is why we will further grow our top-end vehicle share and we will massively grow the share of our xEVs in addition to that as well. Because we have to strategically focus on electric mobility as well. How do we want to achieve it? With a great brand, great products and great customer experience. Is it easy to achieve? Definitely not easy, but we are well positioned to get it done. So let me tell you how.

But first thing first, 140 years and 2 weeks Carl Benz invented the automobile. And we had a big celebration. And still today, we are a highly respected and leading automotive brand. That's the reason why we didn't only celebrate with partners. If you look at this slide, we received congratulations from lots of our competitors around the world and that shows what strong brand Mercedes-Benz still is.

But what's the reason for it? Well, we are still #1, the most valuable luxury automotive brand in the world. But what I believe is even more impressive, if you look at all the brands in the world across industry, and I would say there are plenty, we are amongst the top 10. So that shows the strength of our brand. We performed with 3 very important sub-brands like T-Class, Maybach, and AMG, and we have high customer satisfaction. So we are in good shape with a very strong brand, which is definitely a competitive advantage in disruptive times with a technological transformation going on as well as major geopolitical challenges around the world.

But if you have such a strong brand, it's not good enough only to invest in your products, you also have to invest in your brands. When we talk to our customers around the globe, they all like being in contact with us digitally, but what they want is more physical touch points to our brands. This is why we decided end of last year to increase our sponsoring activities. We are the new premium sponsor of the WTA Female Tennis Tour to get close contact to our customers on-site to fans and to potential customers.

Second topic, we don't want to wait for the customers to come to our showrooms because if you do that, you normally already intend to buy a vehicle. We want to get closer to where the customers are. So we build brand studios around the world, launching 10 of them this year in metropolitan areas. And we even go beyond automotive with branded real estate. That's a license system here, and we work with luxury real estate developers and will build 14,000 apartments around the globe, where customers get direct access to the Mercedes-Benz design and our overall market setup. So that's why we believe, from a brand perspective, we are well set up for another 140 years.

But now let's look at the products. And let me say one thing upfront. Before I did run the van unit, I was Head of Corporate Strategy. And 5 years ago, we definitely, totally overestimated the speed with which customers would be willing to switch over to electric mobility. And we also overestimated their desire for having a completely differentiated design for their electric vehicle. So what were the guiding principles for our new launch campaign of the more than 40 models Ola mentioned? The duality of the drivetrains available as combustion and as electric, all share the same iconic design independent from the drive trend we apply and partnering up with companies, technological players in parts of the world to make sure we can cater the needs and especially the regional needs of customers better.

The front on as you see here, CLA, GLC, GLB. The CLA was the first one, and it shows the potential of our launch campaign, having been awarded car of the year 2026, having been awarded across segments, the safest tested vehicle by Euro NCAP last year. That really shows the DNA we have for our new products to come. Order intake is extremely strong, beat for the CLA or for the GLC, which has not even seen the showrooms yet. So we are in very good shape, but there is much more to come.

And when Ola talked about the 40 -- or more than 40 vehicles, it is important to mention, it's not about the sheer amount of products. It's about their strategic relevance. I said that we want to profitably grow to 2 million. 15% of our sales today are top-end, but 30% of the products we will be launching take place in the top-end segment. That shows that strategically, this is a vital business for us. But it's also true to say in markets like Europe where entry and core are predominantly important. We also have to make sure that we address those customers. And that's what we will do with the model we will launch below the CLA as an entry model into our brand to make sure we cover both bookends of the overall rollout.

So now I've talked about the brand, I've talked about the products. But I said earlier on, it's about customer experience because this combination is what really drives loyalty. So let's start with the retail network. We have a new retail concept, offering modern in-store experience. We have rolled it out already to more than 50% of the dealerships around the world and we will grow this number in the next 3 years to roughly 85%.

Second topic, customer service. The numbers still look great. We have a car park of 28 million. We have a service retention of 90% for the younger products, but that's no reason to lean back. So we still have to invest in innovative service concepts. That's why we are in the middle of rolling out mobile service to make sure that we come to the customer if he wants his vehicle to be serviced at home.

And we also increased our activities when it comes to customer events. We launched last year our so-called Silver Arrows Program for top-end customers, where we really offer money-can-buy experiences to get closer contact and more fascination for the brand as well. So having talked about the brand, having talked about the product and customer experience, the question is now, how do we orchestrate all of that? 1 year ago, we decided to merge all activities in marketing, sales and financial services into one area of responsibility to make sure that all the customer-facing offers are managed out of one hand. So we can manage the complete life cycle as one integrated profit pool.

That's pretty unique to the industry, that's also pretty new to us. We've started first of January with this concept that we believe that we can increase retention even further, especially given that we already have 70% of our customers having a service, a finance or a leasing contract. We believe we can increase this number even further and drive retention to make it overall a profitable overall result. So that's new.

Now I talked a lot about the global approach. Now let's look into the regions. Let's start with Europe. Europe has a slightly above average top-end share, 50% entry and behind China with 40%, the biggest region when it comes to battery electric and plug-in hybrid vehicles. For us, it is the biggest -- was the biggest sales region last year. So what do we want to do? First, we will close the white spots. Right now, there is no electric C-class. There is no electric TLC.

Second, we will continue offering EU-specific products like the CLA Shooting Brake or, as I just mentioned, the entry model below the CLA. We will also apply an optimized channel mix to make sure that we best balance volume and profitability. And we will further roll out the agency model, already covering 50% of our European sales. This number will go up for the years to come because we are in the midst of rolling it out to other markets as well.

If we look into the U.S. market, that's a different market, extremely high top-end share, 30%. 75% of the customers decide to go for an SUV or an SUC, and they have a combustion engine share of 85%. So what do we do here? Of course, we fully leverage the U.S. tailored SUVs we already built in the United States. We will offer high-performance and highly efficient combustion engines, including a brand-new V8. But we will also work on the other hand and not only launch our battery electric vehicles, but especially also focusing on the introduction of high-performance battery electric vehicles like AMG.EA, Ola referred to it earlier on.

We will also benefit from our corporations. We have onsite with Microsoft, Google and NVIDIA. And of course, we clearly intend to increase our localization activities. As you know, right now, in the United States, we built the EQ SUVs, but as well and with the majority the GLE and the GLS. In addition to that, we intend to also produce the GLC in United States in the next years. So that's our approach for the United States. But if you want to increase the resilience of the business system only looking at the United States and at Europe, it's not good enough. You also have to look at all the other regions. And they are very heterogeneous. We've grown nicely last year in those regions, they are very heterogeneous, and there is not the one-size-fits-all approach for all of them. So we apply flexible strategies tailored for each market.

If I say they are so heterogeneous, what do I mean? Let me give you an example when it comes to the products. There are markets in Asia where customers formally having driven luxurious sedans, now tend towards grand limousines, MPVs, et cetera. That's a segment we can definitely attack with our VLE and VLS. We can also perfectly leverage our production network with CKD, SKD and CBU, but also for the countries where we have free trade agreements with export from China.

And we will fully utilize the free trade agreements now in place, for example, for India. In India, we are already the #1 player of the premium brands, and we'll definitely build on that and increase our activities here going forward. So let me sum it up. We have a great brand backed by measurable customer satisfaction. We are ahead of the biggest launch and technology campaign we ever had and we have regionally specific strategies to tackle profitable growth around the globe. Will it be easy to reach 2 million? Definitely not, but we have the right ingredients to get that done.

Before I hand over to Oliver Thone to give you insights on how that looks in China, I would like to finish with a kind of sneak preview. It's our new commercial for GLC. And from our perspective, it perfectly embodies what the future holds. It's about performance, emotion and customer excitement.

Ladies and gentlemen, thanks for your attention.

China, you have heard it probably 50 times, and it's on the top of all automotive thoughts right now. My name is Oliver Thone. I'm living in China since 1 year. I'm leading the China business of Mercedes-Benz since 1 year, and it's my privilege to give you an update of what is the situation and most importantly, what is the outlook.

When we talk about the market in China, it's unmistakenly the most dynamic market in the world. We see pricing pressure, we see new competitors and entrants in nearly every segment and thus, heavy shifts in what used to be the structure of the market.

Yes, Mercedes-Benz sales in China were down, but I invite you to look behind the figures. The overall segment for premium vehicles was down 15%, if you make a cut above RMB 400,000. In that segment, Mercedes-Benz retained it's #1 position. We are also leading in luxury sedans and our customers enjoy among the highest residual values. And compared to our peers, we realize the highest transaction prices. How is that possible?

We have a still growing customer base in China, more than 7 million, and they are as digital savvy as you hear it. It's a very specific way of living and our customers, everybody spends up to 6 hours per day on their devices. The device has a special role. You can do anything online. Obviously, food and buying clothes is no surprise. But in China, you buy everything online, including cars.

To cater for that demand, Mercedes-Benz has created a very specific app with a local flavor. We have 2.4 million active users every month and interact in a direct-to-customer channel. Again, we also achieved customer satisfaction #1 for a second consecutive year.

Looking at '25, '25 was no year of growth, but it was a year where we calibrated our operations, we invested into the future, and we shape the company for future success. 575,000 units were the result of deliberate sales steering to assure the highest possible net revenue quality.

We do that by upgrading vast parts of our portfolio and thus providing good reasons for customers in investing in Mercedes-Benz. Also, intelligence is updated with the update functionality Ola described, and I'll dig deeper into it in a moment. Our customers in China are among the youngest in the world. In fact, 37 is the average age. And when acquiring an S-Class, it's 39.

That customer base is of huge importance. And to grow and access the younger customer base, we signed the world's best table tennis player Wang Chuqin last year to become brand ambassador. But behind the scenes, we have always been investing into the future because we believe in the future of China. Now we were amongst the first to invest into Momenta. That Momenta, which has partnered now with many OEMs, we were the first in 2017 to invest into it.

We have deepened our partnership with ByteDance. You will see results in a moment. But we also ventured out to invest into a new company, Afari. Afari is an AI start-up, which is heading out to change AI in the cabin. Now in such a year, it's utmost important to work on cost. One year ago, you have been promised cost targets, and the team is working day and night to deliver on these, and we are well on track.

Now you are most interested in what is the future looking like. Now China will remain the single most important market for Mercedes-Benz. It is also fair to say competition won't go away. Pricing pressure in the foreseeable future won't go away. That is why we defined a clear strategy around technology and products, a deeper localization, customer centricity and everything underpinned by operational excellence.

And we follow through with a focused implementation. We talked about the values, which make a Mercedes or a Mercedes-Benz, and you know them. It is safety, design, comfort, quality and intelligence. But this intelligence in China, it requires to have a local flavor, like the user interface I spoke on the app. You have to cater for the specifics of that market. Ola described how Level 2++ point-to-point navigation is actually something which is becoming ever more standard in China and the rest of the world is now catching up.

This journey, you have to be part of this industry. And to do that, we teamed up with the best. That is the advantage of MB.OS. It is partnership agnostic. We are able to deliver a tailor-make UI, a deep integration with local software and other technology players. This might sound a bit abstract. Let me dissect it into 2 elements: one, intelligent cabin; second, advanced driving.

And to not just talk about it, let's have a look what is possible. We do this. We integrate the Doubao intelligence and speech recognition systems with local software partners to have the best performance. Why is that complex? The system, and you know, has -- there's not one Chinese spoken. There's Mandarin, there's Cantonese, and there are very many specific local variants. And my Western tongue is adding another addition to Mandarin. But the system needs to understand that, and that is possible with the power of AI. So we took the CLA together with an engineer on a ride from Beijing to Shanghai, and let's take you on that ride.

[Presentation]

What you have seen the system understands my weak Chinese, it understands his, the local dialect, you can throw in a second command while I have just thrown in my command to have a massage. That is possible with the compute and the power of AI. Now it is cool to show it here. But what is more important to us, 97% of our customers activated this feature just this January.

They love it. They post about it, and that is the first part. Now let's look at the second part, ADAS. For ADAS, it is a very specific situation in each and every city in China. And we teamed therefore up with Momenta to bring Mercedes-Benz safety-proven intelligence in developing these systems, but team it up with an expert on the specifics for the market. Now allow me to narrate a video, which we have filmed. It is our Chief Software Engineer in China, [ Wang Xin ] and the CEO of Momenta, Xudong , who sit in this car.

Let's have another look.

You see here, they drive through the city. You have the hands off and just -- the possibility of this car to identify complex traffic situations. You have the smooth human-like role to the car in front of you. You kind of do not interrupt the driving attractivity by harshness, and you can manage these systems and situations by the car automatically.

You identify traffic lights and the car comes to a standstill and it will accelerate. You see the cutting of a vehicle and passenger crossing. This is automotive safety Level D implemented by us together with Momenta. And what is unique about it, we call it cooperative steering. The machine and the driver interact. They don't fight each other. No one else in the industry can offer that level. Why is that crucial?

Today, to have that level of intelligence, you were forced to buy a new energy vehicle. That is why Mercedes-Benz is going to launch a lot of new energy vehicles. But this unconditional intelligence we will bring into the whole combustion lineup, we will be the first one to offer uncompromised intelligence and no question of drivetrain choice. How will this journey start? We will launch the electric GLC extended wheelbase, locally adapted vehicle with a lot of local supply chain ingredients.

It will extend today's imported GLE will be by the mid of the year a fully localized extended GLE, including all the intelligence I have described. And of course, in the fourth quarter of this year, we will also have the S-Class. Now you saw the software stack in the CLA in action. This software stack is constantly evolving. So the GLC and the S-Class will have even updated iterations in the market.

By that, and by 7 China exclusive models, we are setting and laying the foundation for growth in China. All of our cars will offer more space, more comfort and more intelligence. How is that possible? We have the so-called dual engine. We have 2,000 engineers working, one part in Beijing directly at the TCC next to our BBAC manufacturing and in Shanghai. That is absolutely crucial to live and breathe the pace of the Chinese automotive industry.

We deeply integrate with the local supply chain, and we can iterate plus leverage the cost base, which is advantageous. At the same time, the Shanghai engine will continue to deliver software. And still this month, our customers will get the first OTA even for the MBOS in the market, just launched late last year. Sometimes, these results transfer to the world and the rear seat entertainment in the S-Class was, in fact, done in China for the world.

The second part is production. And I know right now, there's no factory picture without a robot, but you're well invited to visit our factory in China, you will actually see a robot, including a humanoid if you wait until March. More than 6 million vehicles have been produced and 20 localized models. We are constantly improving material cost position. And at the same time, the BBAC is the first zero carbon plant certified in China. That is a testament to our green manufacturing promise.

This market requires absolute resilience in all parts of the operation. Therefore, we have strategic pricing competitive but not utterly aggressive. We work with our dealer partners, which are of strategic importance. They are the direct interface to our end customers, and we enhance that by building up the aforementioned digital channels.

So we have a seamless digital and physical interface to our customers; new retail formats, which were announced by Matthias; we will also have those rolling out in the second half of 2026 to more than 3 cities. As said before, delivering on cost targets is more than just a promise. We are well on track to not only achieve but to exceed the targets defined here 1 year ago, and we will continue to do though, including adjustments wherever necessary in our operations.

Now the big question is when will this growth kick in? 2026 is going to be a year of ramp-ups. We will have in the first half a lot of changeover in the factory. And later on, we will have in the second half ever more launches kicking in. The environment we foresee to remain competitive, but we are absolutely committed to turn every opportunity into growth.

7 dedicated models for the Chinese market and each of them 100% China fit. This will assure the highest net revenue quality and at the same time capitalize on local cost. Now talking about net revenue quality, talking about cost, I think, Harald, that is a good bridge to our CFO. Thank you very much.

Yes. Thanks, Ollie. No pressure on -- Wonderful. Well, in that section, obviously, I mean, we're going to wrap up what you heard before. I want to give you an update on our cost efficiency measures where we are compared to what we said a year ago here. And then, yes, maybe have a glimpse on what it means in terms of margin, cash generation moving forward and return for our investors.

So before doing that, just one slide, I mean, to outline what are the assumptions on which we make these forward-looking statements, I will not try to entertain you or educate you on the macro and the market assumptions in detail, you know them much better than I do. But all in all, I mean, you see what is the assumptions we take on the macro side of the things and then what we derive from there is our market expectations.

This is not sales expectations, it is market expectations. So in essence, what you see, we see constructive, good momentum for the U.S., we see in terms of macro and hence, also in terms of market evolution, a more moderate or stable development in Europe. I think we are realistic about the dynamic, very competitive market environment in China. Hence, we take a cautious view on China in terms of the market, and we see good grounds for the overseas to build momentum.

On top of that, we all know lots of volatilities, lots of challenges and risks. You see some on the slide, but maybe also the other of the opportunities, which you also see on the slide. But let's not dig deeper, I would say, on this one. Let's now really go to the real stuff. So real stuff, I mean, you heard it loud and clear in terms of the plan of attack.

So in 2025, starting from the 1.8 million, we explained, I mean, why 2026 is a ramp-up year more -- I mean with a low start, I mean, in the Q1, and building momentum in the H2. But clearly, with that unprecedented product firework kicking in, we will build momentum post 2026 into 2027. And very, very clearly, we have that target of back to 2 million units in mind. Where does it mean we want to do it? Definitely in the U.S., in Europe, also in the overseas on the back of the products with a very strong position in the top end in the core.

And clearly, I think there's a message, Matthias, we want to attack and gain back market share. What does it mean for China? Well, you heard before that for 2026 we take a bit of a cautious view, which was in the guidance section where I said, I mean, it's slightly down compared to 2025. But clearly, here again, with the products coming, we want to hold the line in China and call that 500,000 to 600,000 units in China.

Is that realistic? Is it unrealistic? We think this is realistic. Why so? We have many products coming to the market. If you think about the GLC electric, if you think about the electric C-Class, if you think about, I mean, the C-Class, I said, electric e-cars, obviously, to come, these are products covering EV white spot, I mean, we're having today. So I think it's perfectly legitimate to go for that level of ambition in China.

So that's, I mean, how we want to come up with the 2 million units on a worldwide basis. Looking at the mix, well, on the top end, we clearly have a target of more than 15% top end share in the midterm. You might say 2025, you had, I mean, 15% already. Now you're telling me something about 2026 is 14% to 15%. That doesn't sound, I mean, super ambitious. Well, I would suggest you keep in mind that at the same time, we grow the core pretty substantially.

So if you look in absolute numbers, I mean, that more than 15% in the midterm means nothing less than more than 300,000 units in the top end, which I think is in terms of ambition, but also in terms of absolute size, clearly, a leading position today, but also in the future and that is a growth of around 15% of unit sales in the top-end segment, obviously supported by beautiful products, I mean, like the S-Class, the GLS, I mean, to come, a super strong AMG product lineup in ICE, in EVs, in particular, in the midsized segment and obviously, on the top of the crown with the AMG.EA to come.

On the xEV side '26, 21% to 23%. I think I explained it before in terms of the BEV share growing, maybe the plug-in in the entry segment migrating into the EV segment. That's why in 2026, you don't see that step up in the absolute number in terms of xEV share yet. But clearly, moving forward, we have a 40% xEV share in mind.

And again, here, what does that mean? That means around 800,000 units in terms of xEV vehicles, and that means nothing else than doubling it compared to today. If we talk about pricing environment, let me say very clearly, we command a price premium, thanks to the very strong brand and the products today, and we will continue to do so also in the future.

However, as part of our tech and as part of our game plan, we clearly defined that we want to step up and we did already so the competitiveness in terms of the pricing. So we adjusted to market realities. We are ready to do so wherever needed. And with the efficiency work we concluded and we continue to do, we create the flexibility, the headroom to do so.

But again, we are protecting and we are optimizing value, but we are opening opportunities for volume. And that is the key recipe why we also, next to the products, believe we can come back to the 2 million units in the midterm. Over the midterm, that should then also stabilize pricing, and it should also enable ASP to grow over the midterm. If then you think about the revenue side of things, 2026, I commented before, I mean, should be probably rather flattish.

If you look beyond that, clearly, the product firework, the sales will generate also revenue momentum. If you then think about the top end evolution I mentioned just before the mix evolution, but also the very strong growth potential in the core segment, you can expect in the revenue side on top of the sales volume effect also a favorable mix effect. I mean with this, we target a CAGR starting from 2026 of approximately 7% on revenues.

Now let's switch gears a bit in terms of -- from the market, what does it mean in terms of the industrial base and how do we adjust the industrial base. First, last year, we mentioned already, we're coming from 2.8 million units some time ago. In 2024, we brought it down to 2.5 million units, max production capacity. So what is the target? I mean in conjunction, I mean, with the sales target, I just talking about before, obviously, you keep some flexibility. That's why we set basically target for 2.2 million by 2028.

What did we accomplish in 2025? Well, we did adjust capacity in Europe and Germany by roughly 100,000 units. We did adjust the capacity in China by around 120 units. What are additional activities we are doing moving forward in 2026, 2027. The GLB will end the production in Mexico and then we'll move to Kecskem�t. So that is approximately 100,000 units. We'll shift and gear up the Kecskem�t facility and thereby it will become the largest production site in Europe after the full ramp-up.

On top, we still have optionality in remote location, and we also have flexibility depending on market evolution to adjust further in China in case need be. At the same time, that is a very flexible production network, which can accommodate the entire product portfolio and changes on the demand side. And as you know, we also can run the EVs and the ICE from the same production lines and that's a fundamental principle we're having today, which we retain also in the future.

Well, overall, let's have a look on the localization where we are and where we're heading to. Globally, we target to ramp it up further from the 60% to 70%. As Ola pointed out, it's always a good principle, I mean, to serve the markets from local. Even more so, however, I mean, under the geopolitical framework we are facing in these days. What does it mean by the key regions?

If you see the U.S. on the left-hand side of the chart here, clearly, we have a target to serve more than 50% of the demand in the U.S. by local production. And yes, clearly, I mean, there is the potential to extend the production capacity further and what other product could be better suited to do so than next-generation GLC to do so, which means U.S. is and will be the home of mid- and large-sized SUVs serving the local markets, but then also serving Europe and the overseas markets in terms of the SUVs.

We think about, I mean, Europe, I mean, majority of the European demand is being served already today, I mean, from local production. So Europe, I would say, remains the home of the top end of the sedans. This is where the craftsmanship is at home. This serves the demand in Europe, the GLB shift I mentioned already, which is coming from Mexico to Europe. But clearly, it is the home of the top ends and the sedans, which get exported from Europe on a global scale.

And then looking at China, so clearly, more than 80% in terms of local supply from the local production. This year, by the mid of 2026, we will localize the GLE long wheelbase in China, next to the market presence. It offers strong cost advantages. And it means that the imports are basically limited to the top-end products coming to China. And at this stage, we do not foresee to export from China to Europe or the U.S.

Switching gears more to the cost side. Production cost being first chapter in here. So what did we accomplish? Well, in the last years between 2022, 2024, we did achieve already 10% production cost down. We didn't stop there. Last year, we said we want to go for another 10% between 2024 and 2027 in terms of production costs measured as cost per unit. And I'm happy to report here that in 2025, 4% out of this 10% have been accomplished already, obviously, sitting in the numbers we were looking at before in the first section. So what are remaining levers for '26 and beyond to get to this 10%? Well, it is the adjustment of capacities is to work on the efficiencies on the HPVs in the factories, but also in the logistics, just to work on the labor cost. So all levers are being pulled across the entire production network, to step up the efficiency level.

The other key one, obviously, is the switching gears, the moving east and the Kecskem�t facility offers significant factor cost advantages in the vicinity of 70%. So we are leveraging these and by stepping up the production capacity over there, it means the low-cost share in Europe will double from 15% to 30% by 2027.

Very, very important [ chapter ], obviously, given the size of the bill of material is the material cost and the material cost reduction. What did we say last year we want to reduce material cost by 8% between '24 and 2027. Well, I think good news. In 2025, we did already 2%. And we all know that supply chain is in a tough situation, obviously, as well. So being able to pull off, 2% here, I think, was a very good achievement. So we clearly have this 8% in mind for 2027.

But we now -- what we added given the competitive environment and also to create ourselves even more headroom in this competitive market environment is to step up that effort beyond 2027 and to go from the 8% to an even higher number, i.e., 10% post 2027. So this is, I mean, what we embedded now into our plans, how do we attack that? Well, leverage even more the global footprint, extend the best cost country sourcing.

Clearly, China opens up sourcing opportunities for China, but also for the rest of the world. And now we have a clear game plan how to pull off these potentials. We add new participants into the supply base, adding new partners with fresh ideas and fresh mindset. But not only obviously working on the supply chain side also we're working internally, and that means also to challenge the design and the specification we are doing, pull forward more standardization and design to cost initiatives internally, but also jointly with the suppliers.

The other chapter, I think you're very interested is how about this famous BEV margin and this question of BEV and ICE margin parity. Maybe I think some update in this respect and news to share here. We now look into the products entering into the markets such as the CLA, but now I mean let me pick the GLC as an example. So we now know the bill of material of that vehicle coming to market.

We made substantial progress on the battery cost, on the drivetrain cost. We know what it is at the start of the production. And I think good news to report that on the battery side, we are 30% down compared to predecessor products with a lot of efficiencies, economies of scale, LFP at work, so the entire tool set.

But also the entire vehicle as such comes with a lower variable cost bill of material compared to predecessor products. But we don't stop there at start of production. And I think that is the new element, if you bear in mind what I just said before on the material cost. So we'll continue the journey in terms of fundamental cost saving as we go through the life cycle of the product. And if I factor that into account and I factor also all costs, including the CO2 benefit, created by the EV vehicles, which I think is a legitimate thing to do. By the way, others are doing it as well, I would say.

Clearly, we do see a path now to get to margin parity. If I take a GLC electric and compare it with the GLC combustion, if I take a C-Class electric and I compare it with the C-Class combustion, if I take the electric E-Class coming with the current E-Class combustion, we see a path to margin parity towards the end of the decade between BEV and ICE.

Investments. Well, I think I talked already earlier today about cars achieving investment peak in 2025. You see it here on the chart, EUR 12.7 billion. I think with a very disciplined investment approach, I mean, in particular on the PPE side, really enabling this tech stack on the R&D side. So EUR 12.7 billion is clearly the peak. You see the profiling down '26 and '27. And what I think is a very important message here, we readied that tech stack.

And we now can bring it, we can now proliferate it into the entire product portfolio. It's not only about the CLA or it is not only about the GLA. No, it also goes into the S-Class, I mean into the GLE, into the GLS to come. So entire product portfolio will benefit from that leading tech stack moving forward. So that's message number one. Message number two, you can also see here on the chart that looking at the vehicle architectures, the peak also on the architecture side in terms of ICE and EVs is behind us in terms of the investment peak.

So that gives us a lot of comfort that we can command that investment coming down at the same time retaining a focus and the top end emphasis in terms of investment and the core, which you see on the bottom of the chart here clearly, which illustrates we're investing in top end and core, obviously, where the higher level of margin sits.

And then fixed cost, well, 2019 to 2024, you know 19% accomplished already. We didn't rest there. We set ourselves another 10% between 2024 and 2027. Good news, I would say, 2025, we achieved already 7%. Well, we could say, well, that's not that much to go anymore. But obviously, the last mile is always getting more difficult. But we have a clear plan. I mean how to do that? A very, very strict use of attrition, so not replacing people leaving as a function of attrition. Then the NLPP personnel cost reduction program we talked earlier today, will kick in with the benefits in '26 and then 2027.

We address also structural issues when you think about the management positions in terms of spend and layers and dual roles. We have a pretty massive outsourcing ongoing to best cost countries or even hand over the activities to external service providers. Another example is the divestment of the own retail in Germany. We talked about the integration of the financial services customer front end with the sales and customer organization unit.

And obviously, each and every area is working hard on standardization, digitalization and extensive use of AI across the entire business. So what does it mean in terms of margin perspective and trajectory? Clearly, a year ago, I think when we're standing here, we said we target in 2027 following a double-digit margin. Did that ambition change? No. Why?

As when we said that last year, we were pretty explicit that this is pre-tariffs. And we all know where we ended up, I mean, on the tariff side of things. Since then, I think a significant evolution in terms of the furthering of the competitive nature in the market. And so we are here confirming an 8% to 10% margin target in the midterm, including 150 to 200 basis points dilution from tariffs and the adverse FX effects we were talking about earlier today.

So how can we come from a 3% to 5% in 2026, where I think in the break, I already got quite a lot of questions, what it means and the like. So let me take you -- as I took you from the '24 to the '25 and the '25 to the '26, let me take you from that '26 guidance 3% to 5% to how is it possible to get to 8% to 10% in the midterm. Well, let's start first with some headwinds again.

The more -- I mean we grow, we also grow the ambition in the U.S. It means the tariff impact will go up a bit further, 150 basis points, '26, so going more towards the 200 over time. The FX, from the assumptions that I shared with you a bit earlier, we don't see it going away. So all in all, FX and tariffs, basically, constitute another headwind of around 1%. The entire volume structure, pricing, EV ramp-up is a super important lever, obviously.

So going back to the 2 million units. But you might be surprised that maybe in this entire equation, it is probably something around 1.5%. So where is the rest coming from? It is the efficiencies at work. This is the efficiencies of roughly 4% which will not only bring us up to that level, but also will make the company even more resilient and waterproof.

So what does it mean? Clearly, we believe in the products and the plan to attack the markets, I mean, to go to the 2 million units. But in terms of -- I mean, what's underpinning that margin expansion, it is clearly the efficiencies at work, proven so far. And I think on the back of that, we are confident that we can deliver on that moving forward. If you look on the margin side in terms of this profile, clearly ramping up. What does it mean on the cash generation?

Well, you could see the chart on the investment side, the investment coming down, depreciation going up. It means cash conversion turns favorable moving forward and not only at cars, but over time also at -- on the van side. So let's have a look what that means. Well, maybe another short recap before doing so in terms of cash generation track record, if you go back to 2019 until 2025, it's more than EUR 50 billion of cash generated, free cash flow generated. We returned more than EUR 30 billion to you via divi and share buyback. On top, you've got the Daimler Truck shares from the spin-off.

That basically yields a total shareholder return of more than 130%. And if you look at 2025 that is a TSR of around 20%. I use this example, I stressed last year, so if you invested in 2019, EUR 100 into Daimler shares at the point in time. And if you count everything, the divi, the share buyback, the Daimler Truck shares and all of the cash streams coming to you, that is equivalent of EUR 230 today.

So I think it's a reasonable IRR. And if you think at the same time that the net industrial liquidity stepped up from EUR 11 billion to more than EUR 30 billion, EUR 32 billion, I think you might read from the chart that cash generation matters to us. Now what to do, I mean, with cash generation and cash returns? Clearly, we have the capital allocation framework in place. We are committed to that framework. We are committed to the shareholder returns.

But this capital allocation framework and the application of it, I'm going to take you through that in a minute, is not a demonstration of the commitment to that framework only. It is also, I mean, a signal in terms of our confidence into the business, into the operational, into the financial profile we're talking about in this chapter before. So very clearly, the cash generated, I mean the free cash flow generated and the cash proceeds generated will serve the divi, will serve the share buybacks.

And in the cash generation, obviously, also M&A starts to matter. Before I talk about that, I mean, let me share a word on the divi as we didn't do that before. You could see, I think, from the press release that we propose to the AGM a dividend of EUR 3.50 for 2025. How do we think about that? How do we come up with this proposal? Clearly, on the one side, the divi should express the business profile and the business evolution, which we analyzed in the section earlier today. That's why the divi for 2025 needs to sit below the one of 2024, which was EUR 4.30.

But at the same time, we do understand and we do know that the sustainability of dividend also matters to you as a shareholder a lot. And there is a third dimension, as we talk about '26 as a ramp-up year as we lay out a very clear plan how we move forward, in terms of top line expansion, come back to 2 million units, come back to margin expansion, come back to higher cash flow generation moving forward. That is also a message in terms of the divi of EUR 3.50.

Please read this footnote in conjunction with the divi proposal of EUR 3.50. Now a bit more in detail for 2026 in terms of cash generation and cash return. What can you expect? Well, if you read my lips, a bit careful from the guidance section, you can see an industrial free cash flow for 2026 in excess of EUR 4 billion.

Very clearly, we have the potentials on the M&A side. I talked about Athlon. We have the own retail in Germany, where we are ramping up the wave of the divestments in 2026. And then we clearly have another little asset, which is called Daimler Truck [ stake ]. And happy to report here at this stage that a share of that has been reclassified in the financial statements to come out latest when you see them early March in assets held for sale. That means nothing else, our firm determination to be in market in 2026. So if you size these opportunities, I would say, give it at EUR 2 billion. So cash generation altogether, I mean, could be around EUR 6 billion. What to do with it? Divi of EUR 3.50 translates into cash out of EUR 3.4 billion.

I explained to you earlier that the share buyback launched in 2025, we did already EUR 300 million in 2025. So that leaves us with EUR 1.7 billion to go in 2026. And on the back of the cash generation strength, I think that fuels the perspective to launch a successor to the 2025 SPB program also in 2026. Just for the sake of the argument, assume same order of magnitude, then obviously, it will come after the first one after the EUR 1.7 billion. So give that on the chart, you see a EUR 1 billion to EUR 2 billion. That means basically around EUR 6 billion of cash generated from the industrial business and M&A. And approximately the potential of EUR 6 billion return to shareholders in 2026. At current share price and market cap, I think that would constitute a double-digit return at the same time, retaining a very, very healthy balance sheet of EUR 32 billion.

So I think it's time to wrap it up. I think you got the details of the attack plan on which we are moving full speed ahead. We are confident about that plan. Why are we confident? It's the leading tech stack, which now gets proliferated into the entire product portfolio. We have these incredible vehicles coming to market with an unprecedented launch campaign, '26, '27, creating momentum.

You heard loud and clear how we pull all levers to leverage the brand and the products in the market to conquer the markets with a target, a clear target back to 2 million. You heard a comprehensive game plan how to add Tech China in terms of what the customers expect from us, in terms of the tech stack, in terms of the products, in terms of the cost base and also how we leverage the local capabilities, intelligence in terms of the R&D.

You heard as well a fully engaged and motivated team from the shop floor to the boardroom with a determination to win. You heard about discipline when it comes to cost and investment supporting higher level margin and cash generation, which should come back as cash returns to you. That is the reason why we are confident, and we welcome you to join us in that confidence. Thank you very much.

Yes. Thank you very much, everybody. This was the presentation part of the day. Thank you for joining us here in person in Sindelfingen and all of you on the screens for joining us digitally. Thank you, Ola, Harald, Matthias, Olli for your presentations. We will see all 4 Board members back on stage for a Q&A session in roughly 12 minutes at 10:45 sharp. This is still a public Q&A, so it will be broadcasted. However, only registered analysts, investors and journalists will be able to ask questions. So see you back in 30 minutes.

Welcome to the global conference call of Mercedes-Benz. At our customers' request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be directly followed by a Q&A session. [Operator Instructions]

I would like to remind you that this telephone conference is governed by the safe harbor wording that you find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

May I now hand over to Christina Schenck, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Good morning, ladies and gentlemen. This is Christina Schenck speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and the Internet to our Q3 results conference call. I'm very happy to have with me today Ola Kallenius, our CEO; and Harald Wilhelm, our CFO. To give you more time for your questions, Ola will provide a brief introduction, followed by Harald, who will detail our financials as usual. After that, we will move directly into the Q&A session. The respective presentation can be found on the Mercedes-Benz IR website.

Before Ola kicks off his presentation, let's relive our IAA highlights 1 more time.

[Presentation]

Welcome, everybody. This morning, we published our third quarter results. And I guess you've already skimmed through the numbers. So we'll be happy to give you a little context now. We're managing, as you know, a highly dynamic business environment from tariffs and political disruptions to intense competition in China and to heterogeneous BEV adoption around the world. And as you can see in our results, we're navigating through it with prudence and a plan.

From the beginning of the year, we took a realistic view about the challenges and opportunities ahead, and we will maintain this approach. So our first message is this, Q3 is in line with our 2025 guidance. All Q3 key performance indicators match full year expectations. Yes, the current challenges need a lot of management attention. And while we're a 100% focused preparing for the future, we will most definitely take our long-term goals into account. And the best answer in any market environment is customer orientation and product substance. And recently, we made a lot of progress.

With the CLA, we kicked off our biggest ever product launch program. The CLA is elevating its segment. It's our first software-defined car and the first Mercedes to run on MBOS and its efficiency is unparalleled. That's not just what I'm saying. Maybe you saw it a couple of days ago, one of Germany's most renowned car magazines basically wrote, it's the best car we have ever tested. And I mean, they've been evaluating cars for almost 80 years, and the CLA has just raised the bar.

We now see this great feedback translating into customer orders. The CLA is gaining traction in the European market, and we're just at the beginning of a global rollout.

We have also launched the new CLA Shooting Brake. It offers the same product substance as the CLA and adds even more room and its very popular model amongst fleet customers, important for Europe. Both these cars also now in the next weeks start production of the hybridized ICE version.

We met many of you guys in Munich in September. You saw the new electric GLC with your own eyes. It supports the new face of the Mercedes-Benz brand combining iconic Mercedes elements with the latest technology, and that car can be ordered as of today. I'm sure the new GLC is about to continue the success story of our best seller in the electric era. With the new VLE and VLS models, we're expanding and elevating our range of grand limousines. We began pre-series production of the VLE in the third quarter. The next steps will follow soon. I recently drove 1 of those prototypes, watch this space.

In that context, let me say a few things about our product strategy at this point. As announced, all added up, we plan to launch more than 40 new models by the end of 2027. And we want to spark desire wherever we choose to play. This includes a significant expansion in the top end segment over the next 2 years. That's where Mercedes comes from. That's what we do best. And that's also what fuels our financial firepower. So the focus on the top end segment remains a cornerstone of our strategy. In addition, the core segment is where most of our volume is. It's the backbone of our business. Here, we'll complete our offering across all powertrains BEV, plug-in hybrid and ICE. The electric GLC marks the start and the C class and more will follow. In the entry segment, you will witness a complete reskinning of our offering. Soon, the new CLA and CLA Shooting Brake will be followed by 2 SUVs. As you can see, we make sure to keep providing an accessible entry point into the world of Mercedes-Benz. This is particularly important for the European market. So we have this in mind.

All these new products will carry the next generation of exceptional Mercedes technologies. So we're keeping up the pace. In electric drives, we showcased a new dimension of performance with the concept AMG GT XX. The car has shattered a whole series of records. It traveled around the world in less than 8 days, covering over 40,000 kilometers. Some might say that was a nice PR stunt. But in reality, it was the most demanding test drive of all time because the very technology that made this possible is going into series production already next year. This includes axial flux motors and directly cooled batteries. Regarding software, we have entered the era of software-defined cars with MBOS. We'll roll out MBOS across our entire portfolio, BEV and ICE and see constant evolution, thanks to over-the-air updates. Our advancements in ADAS are elevating customer experience and increasing safety, will launch our point-to-point assisted driving system for urban traffic next week in China, so I'll call it Level 2++.

I'll be happy to talk a little bit more about our way forward in a minute. But first, Harald will guide you through the numbers and give you our financial outlook. Harald, please?

Thank you, Ola, and hello, everybody. Let's continue with the group financials on the Page 6. Revenues are at EUR 32 billion due to lower sales volume. However, partially offset by a better structure. The EBIT adjusted sits at EUR 2.1 billion. Obviously, we'll dive into that a bit more in detail. If you look at the EBIT book, that's significantly lower due to 2 effects: the restructuring program, the NLP, as we call it, and the legal proceedings at [ NBM ], also more on that a bit later. EPS is at EUR 1.22. Also, we will give a bit more color on that in the section a bit later.

In the third quarter, you might have noticed that we had a healthy cash generation with EUR 1.4 billion in the quarter, yielding a total year-to-date of EUR 5.6 billion free cash flow and that brings us to a comfortable net industrial liquidity of EUR 32 billion by the end of the Q3.

Looking on the car sales, Page 7, in July, we expected H2 sales in the vicinity of H1 with Q3 slightly lower and Q4 slightly higher. And I would say this is exactly what happened for quarter 3, if you look at the 441,000 units sold. Overall, sales were influenced by the market environment in China and continued diligent stock management to mitigate U.S. tariffs and adjust the dealer inventory.

Also worthwhile to notice, I would say, top end actually increased year-over-year by 10%, driven by G-Class, S-Class, AMGs, and all in all, I mean, that leads to a higher tax share of 15.4% in the quarter. Also interesting to see in China, the top end sales increased by 13% year-over-year.

On the electrified vehicles, we could notice a 10% year-on-year increase, driven by our plug-ins. Sequentially, our best sales increased by 22% in the third quarter versus the second quarter driven by first deliveries of the electric CLA in Europe. Overall, we reached an xEV share of 22% in the quarter.

On the cars financial sales I just explained, revenue developed a bit better, thanks to a higher CBU share and top end share. The ASP remained stable. EBIT sits at an adjusted value of $1.1 billion. Cash conversion above 1. Let's look a bit more in detail on the Page 9 on the profit evolution.

In quarter 3, we achieved an EBIT adjusted of EUR 1.1 billion with a return on sales adjusted of EUR 4.8 billion, respectively, 6.3% ex tariffs. On an overall note, if you look on the chart, you'll see that through our work on cost levers, we were able to offset the impacts of a dynamic market environment, including tariffs, the situation in China, and effects from FX.

Let me guide you a bit more in detail through the bars on the chart, volume structure net pricing, what is inside lower unit sales that were nearly offset by a better structure due to a higher CBU and top end share, flat net pricing, lower contributions from China. And overall, the effects from tariffs, which amounted to roughly 150 bps in the quarter, slightly lower due to the stock management and lower U.S. group sales. The largest single part of the FX effect you see on the chart is Turkish lira, which we maintained pricing compensation. The remainder is driven by Korean won and Japanese yen. The industrial performance is meaningfully positive, driven by the material cost savings and efficiencies in our operations. Similarly, we achieved cost savings in the other cost categories, including reduced direct selling expenses and lower noncapitalized R&D cost. Altogether, these buckets contributed to over EUR 1 billion positively in 1 quarter.

Looking on the cash flow for cars. See a bit adjusted at EUR 1.5 billion. So we had some tailwind from the working capital, positive contribution coming from trade receivables due to lower part supplies to BBAC at higher inventories, but also higher payables which offset each other. The net investments in PPE equal almost a depreciation level. And on the others, we have the adjustment for the noncash effect of the NLP charges, not yet cashed out, dealer provisions and the reversal of the BBAC equity result.

Moving to the vans, Page 11. Sales are at 84,000 units due to a competitive market environment. In Europe, we see the competition in the fleet business continuing. At the same time, we could double the xEV share to 10%, thanks to improved availability of our events. In Europe, we achieved a best share of 14%. Revenues reached EUR 4 billion, driven by the sales development and unfavorable mix and a softer net pricing also impacting EBIT. More on that next page, and on the cash flow side, you see reduced stock levels, which had a tailwind in terms of working capital. However, that was more than offset by the investments into our new land architecture and the ramp-up of the respective PPE. With that, we ended with EUR 300 million of EBIT adjusted for vans.

Looking on the vans profitability evolution, Page 12. Volume structure net pricing, I already explained before. Additionally, we saw a lower aftersales business and an impact from provisions for achieving CO2 targets. On the cost side, vans benefited mainly from operational efficiencies, onetime valuation effects and lower SG&A costs, R&D and others are wash. That leaves us with EUR 412 million EBIT adjusted, EUR 10.2 million in a dynamic market environment, which is, I think, a good achievement.

Page 13 on the mobility. The penetration rate increased. The new business volume decreased versus previous year, mainly due to the development of the unit sales and the FX effects. Portfolio remained stable over the quarter. Quarter 3, EBIT adjusted is at EUR 313 million with a return on equity adjusted at 9.6%. The main drivers of the improvement versus previous year are positive development in the portfolio margin, continuously healthy acquisition margin, which are in line with our target returns. The improved cost position for SG&A expenses are also supporting the margin improvement. These positive effects were partially offset by higher cost of credit risk due to a softer global economic outlook.

In the U.K., the FCA recently published a draft redress scheme concerning Motor Finance Commission models. Based on this development, we provisioned a mid-3-digit million euro amount in the third quarter, driving the significantly lower EBIT booked at minus EUR 180 million. We are currently reviewing the FCA's consultation paper and are considering our response to the FCA.

Page 14 on the group EBIT, cars, vans mobility, I explained already. In the recon mainly you have the at equity result of Daimler Truck, EBIT adjusted is therefore at EUR 2.1 billion. The adjustments refer to the restructuring and the legal proceedings at [ NBM ] on the restructuring charges.

Let me give you a bit more color. Please refer to our NLP personnel cost program, cost reduction program. So we had an effect of roughly EUR 1.4 billion in the first 9 months of this year. As you can see that we were making good progress on this topic. Please expect also some further progress in the fourth quarter on the NLP program, however, lower than in quarter 2. Thereby, the group EBIT booked sits at EUR 750 million. The EPS is at EUR 1.22, which includes positive effects from revaluation of deferred taxes due to a lower corporate income tax in Germany starting in 2028.

If you look on the cash flow, we already talked about cars and vans, so you see cash taxes at minus EUR 300 million, significantly lower than in previous years. The rest, I would say, is a wash with that. We achieved a solid EUR 1.4 billion free cash flow with adjustments of EUR 200 million due to the first cash outs for the NLP program.

Page 16, comfortable, healthy net industrial liquidity at EUR 32 billion.

And obviously, that brings us to the Page 17, the stuff you, I think, eagerly expected, anticipated share buyback. You know we have that capital allocation framework in place. You know what it means. So we are, therefore, honoring our commitment to return free cash flow generated to shareholders. We stated earlier this year that we would initiate a new share buyback once we had better visibility on the cash generation. Now we generated EUR 5.6 million in cash in the first 9 months of the year. And we paid out at the same time EUR 4.1 billion of a divi. That means we have generated roughly EUR 1.5 billion year-to-date after the divi and we anticipate further positive cash flow for the remainder of the year. Therefore, we've decided to initiate a new share buyback program with a volume of up to EUR 2 billion plan to start next Monday, 3rd of November, and the program is expected to run for up to 12 months. As we said, we remain committed to our capital allocation framework, and we are pleased to be in a position to execute it now.

With that, I mean I would come to the outlook section, Page 18 on the divisional guidance. I mean first, and please consider the disclaimer regarding forward-looking statements at the end of this presentation in relation to the outlook. On the cars division on the sales guidance with 1.3 million units year-to-date, we continue to see 2025 significantly below 2024, mainly due to China. H2 sales are expected in vicinity of H1, with quarter 4 slightly higher than quarter 3. On the U.S. side, we see underlying customer demand higher in quarter 3 than in Q3 and continue to manage stock levels to target, Q4 group sales are expected slightly higher than quarter 3.

In Europe, we expect solid momentum in the fourth quarter. The customer order intake is on a healthy level, which takes us into 2026. And in China, the market environment remains challenging and the competition intense. Therefore, we expect quarter 4 in the similar ballpark as quarter 3.

On the global test share for the full year, we expect this to be well within the 14% to 15% range. Quarter 4 is expected in the ballpark of quarter 3. The xEV share is at 21% year-to-date. Therefore, we continue to see full year between 20% and 22%. On the return on sales, I mean, adjusted with 5.7%, including tariffs and 6.7% underlying year-to-date with a slightly higher volume in quarter 4, continued dynamic pricing environment, a stable mix, cost seasonality, including fixed cost capitalization as well as higher tariffs, we do confirm the guidance range of 4% to 6% and expect to be well within this range for the full year. With the cash conversion rate year-to-date now at 1.4. We raised our CCR guidance by 1 notch to a range of 0.9% to 1.1%, no change on PPE and R&D.

On the van side, sales usually come in higher in quarter 4, and this is expected to be the strongest sales quarter of the year with the sales development in line with earlier expectations. Consequently, we're keeping the sales and the xEV guidance as unchanged.

On the return on sales adjusted, in the first 9 months, we achieved a healthy 10.7% return on sales adjusted against the year-to-date run rate we expect for the fourth quarter a positive impact from higher volumes. Commercial dynamics to continue, headwinds from seasonality of material cost one-timers and the ramp-up of the transformation of factories for the next generation of vans. We expect the impact from the tariffs to be less than 100 bps on the van side. This aligns well with our previous assumptions. And I mean, therefore, we confirm the full year guidance range of 8% to 10%, including tariffs and expect the full year to finish at the upper end of the range.

With the CCR year-to-date, at 0.9%, we raised the CCR guidance also by 1 notch here.

On the mobility, we are at 9.1% return on equity adjusted year-to-date and we expect the full year unchanged in the range of 8% to 9%, also rather at the upper end.

And leaves me to comment on the group guidance, Page 19, a follows obviously same assumptions as a segment guidance. On top of the divisional guidance, the group EBIT will be impacted by the restructuring and the legal proceedings, as I commented before, and with EUR 5.6 billion of cash generation year-to-date, we are well on track with regard to the cash generation for the full year.

And with this, I hand back to you, Ola.

Thanks, Harald. I think this environment will remain dynamic, and I can say this, we're very aware of the challenges ahead of us. And that's why our fundamental priorities are firm, desirable products, technological leadership, customer focus, profitable growth and, of course, attractive shareholder returns. We have a plan. And I think that the results of the first 3 quarters clearly demonstrate our execution focus. At the same time, we're not afraid to adapt when circumstances change. The animal that is able to adapt is the one that survives and thrives in evolution. So going forward, we'll offer our customers the full range from BEVs and hybrids to high-tech ICE all the way to V8, because customers decide what suits them best and we will continue to listen to the customer.

We can respond to market demand with new products because our architectures allow technologically convincing and cost-efficient solutions. No technical compromises in terms of the packaging of the cars for the customer. We're constantly readjusting our go-to-market strategy because the operating optimum of a business is a moving target, certainly in the market that we're in right now. We're taking on the challenge in the Chinese market with China fit tech and products and a new approach to fundamentally improve product costs because the hyper competition in China is not going away anytime soon. This is certainly a multiyear task.

Looking ahead, we expect the market environment to remain challenging, and we retain a realistic view. But we also remain confident in the strength of our product pipeline and the upcoming ramp-ups, which will have their full impact beyond 2026 and will unfold fully during 2027.

Mercedes is driven by a management team also with new minds, fresh ideas and a lot of energy. We'll jointly press ahead with our product and tech launch program. And of course, we will remain focused on enhancing the customer experience. And we'll continue to drive efficiency across our company, and we're committed to generating attractive returns for our shareholders. We are determined. Thank you.

Thank you very much, Ola and Harald. Ladies and gentlemen, you may now ask your questions. I will identify the questioner by name. However, please also introduce yourself with your name and the name of the organization that you're representing before asking your question. A few practical points. [Operator Instructions]

[Operator Instructions]

We start the Q&A and the first question goes to José Asumendi from JPMorgan.

Jose Asumendi from JPMorgan. Congratulations on the results today. Two questions, please, Ola. The first 1 is maybe to you. I'm seeing very rapid developments on robotaxi and autonomous driving. Jensen at NVIDIA yesterday mentioned Mercedes as one of their key partners in this journey. I was thinking if you could please talk about this top down and bottom up transition when it comes to ADAS. So increasing the level of autonomy and ADAS features on the entry vehicles and then also testing that robotaxi. And then specifically, if you could also speak about the partnership with Momenta.

And then for Harald, if you could maybe speak about the auto division, when we think about the fourth quarter and you talked a bit about the restructuring charges you see in Q4 in the Auto division as well as the impact of tariffs that you have in the budget in Q4 and any mitigation measures you're planning to implement?

So good morning, Jose. With regard to ADAS, you can now very much see the benefits of the platform that MBOS gives us. So we do now have a very, very strong digital foundation to stand on, where we can also integrate and work with different partners. As I mentioned in my speech, and you know this, of course, we're launching L2++ in China now. And in terms of software and also the hardware capability of the cars, in essence, the sky is the limit. If you want to take this beyond level 2++ into level 3 and level 4 territory, then you need to have more redundancy on board. This we have already proven with the current S-Class that we know how to do this. And it goes without saying that this journey will continue.

The push forward by NVIDIA yesterday to announce that they want to take on the full scale L4 challenge is something that we very much welcome. And having worked together with NVIDIA now for more than 4 years, establishing the foundation for this whole tech stack. I mean it's a natural choice that when L4 comes to fruition that Mercedes is part of that game. That doesn't mean that we're now going to turn ourselves into a mobility services company. That's not the message. But we have, I think, the best technical foundation with our vehicles, both hardware and software to do this. We will work as part of this consortium on that task.

In China, we know that China has its own digital ecosystems in many respects. And that is how ADAS is developing in China. That's why I'm very happy that many years ago now in kind of the first seating round or second round when Momenta was even just a small start-up. We spotted them. We were 1 of the very early investors, and we have worked with them ever since and that now has come to fruition with the launch of a whole generation of cars that we're launching here in the next 24, 30 months in China. So with Momenta, we can take this journey as well because that foundation that I mentioned that the MBOS gives us that works in the East, and it works in the West.

Your second question on quarter 4. First, maybe on the tariff side, you can see in the third quarter, we had a tariff impact of 150 basis points in the quarter. commented before that on the quarterly run rate, that was a bit lower due to lower U.S. group sales. As said before, we expect quarter 4 group sales to be at a bit higher level. Therefore, expect a bit of a higher charge on the tariffs in the fourth quarter. I think that also explains the guidance which we're giving here for the full year and the fourth quarter.

On the restructuring program, the NLP program, well, that's 1 -- that's an adjusted element. I think I commented before on the group level, basically, you had EUR 800 million of a charge in the third quarter. That makes it a year-to-date of 1.4%. I said, I expect some more in the fourth quarter, but less than in the second quarter. Second quarter, it was EUR 600 million. So I think you can roughly make the math, what that should be at group level. If you look on the Page 9 of the deck, you will find the car numbers in the third quarter, 666. So I think it gives an idea compared to the EUR 800 million, what the share for cars can be in the fourth quarter. Again, it's adjusted item. But let me emphasize the payback of that, I mean, it's rather spontaneous and fast is that quite a lot of the people will leave until the end of the year or at the beginning of 2026. So that will lead to some significant head count down. And obviously, that will lower the personnel cost charges, in 2026. So we do expect payback of that one in the vicinity of 2 years or less.

Thank you very much, Jose. And my next question goes to Tim Rokossa from Deutsche Bank.

It's Tim from Deutsche Bank. I'd like to reiterate what Jose just said that analysts get marked for saying that, but that was a great quarter. I think you are clearly delivering on what you had promised us, also with the share buyback program, Harald. 2 questions. First one, just very quickly, a follow-up to what you just said. Are there going to be more charges on restructuring next year? Or will you largely be done in '25?

And then my 2 questions. When we think about the cost savings coming in and all sorts of other moving items that we know so far, the implied run rate for [ costs ] of like 4.5% to 5% for H2, is that a good run rate that we should think about as an exit run rate into next year? And what are the moving items on the cash flow side that we already know about today? You have the FCA charge that will be cash out next year. You probably have some cash out for the restructuring at the same time, there's probably some cost savings coming in. What is that you can already share with us?

And secondly, Ola, probably to you, when we think about the supply chain, Nexperia being a very prominent example, do you see any immediate production risk out there at the moment? Or is everything sort of stretched but manageable?

Yes, Tim. So on restructuring, I think, when -- whatever we have in mind that we want to do, I think that's basically considered in the books. Any further evolution in terms of footprint, what is not yet in our minds today would be another item for 2026, but I don't want to speculate on that one. So I would say from today's point of view, everything is either recorded in the books year-to-date or in the outlook for the remainder of the year.

In terms of the cost savings, I think, we made good progress in the third quarter. I'd emphasize, I think, the EUR 1 billion improvement in the third quarter compared to a year ago at the second quarter, where I think we commented that is roughly EUR 800 million. So that makes us think, if you take a year-to-date approach, I think, it's a pretty sizable number. But we will not rest there. I mean, we'll continue as commented just before. The benefits of the NLP program, will kick in, in 2026.

As we know that the market environment is tough, and we assume that to remain challenging. And as we take a realistic view, I think, we are trying to prepare ourselves for that one. So that also in 2026, we can make further progress on cost savings. In terms of cash generation, I think, it's a bit too early to speculate now about 2026. Of course, sure, I mean what is provisioned today should normally lead to a cash out at a later point in time, the majority of the cash charges. We're talking here in the third quarter, SCA as well as NPP and NLP, I mean, will therefore fall into 2026. I mean that is for sure. But I think you might confirm that we have a track record that we'll try to stretch cash generation by all means and we'll approach 2026 with this in mind.

Tim. Let's just take a step back and look at this situation from a distance first. In a modern high-tech car, you have pretty much all 5 continents inside that modern car. And there are many nodes across many components and technologies that provide a large share, in some case, the full share of what modern cars need. Nexperia happens to be 1 of those nodes, albeit with relatively straightforward components, but components that you find in many, many, many subassemblies, ECUs, et cetera.

There is a significant difference between this situation and what we were talking about only a couple of years ago when we were dealing with the chip crisis. This is a politically induced situation, where one of those nodes have been hit, which means that the solution to this or the resolution to this resides in the political space, primarily between the United States and China, in this case with Europe kind of caught in the middle. And I know that there are intense talks going on, on pretty much all levels to see if this can be resolved. It's not the same as we had during the chip crisis. For the short term, we're covered, and it goes without saying that we're scurrying around the world to look for alternatives. But I don't want to make a prediction at this stage how the whole thing plays out. So I'll leave it at that.

Thanks very much, Tim. And the next question goes to Patrick Hummel from UBS.

Patrick from UBS. Well done on the share buyback. Basically, my questions have been asked by Tim, I'll focus on China. Can you talk a little bit about what your expectations are for the market in the next few months, next couple of quarters with all the low visibility that we always have to deal with when it comes to China, you said the market remains challenging. I think there is no fresh product in China for a little while. At the same time, you're working on your dealer network to streamline that. If we put it all together, volume, pricing, dealer compensation, are you reasonably confident that things are not going to deteriorate in the coming quarters? Or is it fair to assume that 2026 will probably see another year of decline in China?

So Patrick, whereas the call today is not the call where we make guidance or projections specifically for 2026. Of course, you know that. Let me just talk about what is affecting the Chinese situation. And that's why I also said in my speech that these fundamental premises that affect the Chinese market are not changing anytime soon. We still have an economy that is trotting along, and where you can see that this cautiousness on behalf of the consumer also in the upper segments, that cautiousness has remained for more than 2 years now, and there's no fundamental change in the immediate future that we think will change this. The hyper competition that we're seeing in China with significantly more than 100 players vying for this market, and the -- what I believe eventual consolidation of that market, it's not something that happens overnight, but it's a process that probably takes several years.

So what do you have to do in that situation? I mean, it always starts with the customer. It's kind of the gist of my speech. The product rollout that we are now starting which, of course, also affects China in the next 24 to 36 months. Every one of those products that we have in the pipeline, we are talking nothing less than almost like a reskinning of our whole portfolio here in 3 years' time. We have very, very carefully thought through what do we think the Chinese customer wants. I mean, beyond the obvious things that you need more space, but a perfect smart cockpit infotainment offering, an ADAS offering that meets the expectation of the market. But next to that, product focus and product offensive that yes, we'll roll out over a couple of years now. It's also about the cost structure and how do we rejig our setup in China. And this is what we have said before, kind of become more Chinese. So eventually, at the end of that process, we are more or less 100% China for China.

Part of that is, of course, looking at your cost structure in the immediate term as well, looking at capacities, making sure that you manage that. Thank goodness, we have a very flexible production system set up there. So we are adjusting. And also the dealer body, focus on the strength -- strong ones, if they're underperforming ones. Now is the time to adjust that. So we are pulling all the levers in China. And I don't want to make a prediction, as I said, for 2026. But it's clear that this is something that is not a short-term issue.

Thank you, Patrick. And the next question goes to Mike Tyndall from HSBC.

It's Mike Tyndall from HSBC. I wonder if we could talk about CLA a little bit. So we've now got that product in the market. You've now probably got a better sense of where production cost is. Should we be thinking about -- this is the book end of all of the refresh. Is it notably more profitable to produce than the predecessor? Are we seeing significant drop in supply compensation because the expectation on BEV is now married to the reality. I wonder if you could talk a bit about that.

And then, Harald, I guess the obvious question is, you've kept the return on sales ranges for the full year, but it certainly looks like you could have tightened them up. Is there something you're seeing that makes you want to say, look, I need that space? Or is it just a question of being conservative?

Yes, Mike, well, if you look on the CLA right now, first, I would say, great market endorsement. Ola mentioned, I think, the test results, but also if we look into the order intake, which I think is another good indicator in terms of market acceptance. So we're very happy with the order book building up. And as we deliver vehicles to customers, we obviously can see what the margin does on the vehicle. And even though it's a bit early days, I would say. If I compare to equivalent products, the CLA didn't have a best predecessor. So it's a bit difficult in terms of a like-for-like. But overall, I think, the margin which is coming up from the vehicles delivered already, definitely has a structural change compared to previous EV model. So I think that is opening a chapter in terms of the next -- the new generation EV vehicles, not only in terms of product, but also in terms of variable cost base and therefore also in terms of margin evolution.

Your question on the fourth quarter. Fourth quarter, I commented before, will carry a bit higher tariffs. It will carry also seasonal cost phasing. It will also carry a step up in terms of some supplier one-off compensation, which we still see at a higher level in fourth quarter than in the third quarter. We keep the guidance range at the 4% to 6%, but to be clear, I think, the options you offered in terms -- is it -- is there something we see, which we didn't share? Or is it more prudence? I would rather hint to the latter one. And for sure there is still uncertainty, I think, on tariffs on a couple of relationships. I think everybody is looking forward to tomorrow when we think about China and the U.S. So I think that just keeps a bit more flex in the space in terms of keeping the guidance at 4% to 6% in terms of the underlying. I think you heard us commenting before that we rather see that at the midpoint. And therefore, I would judge it more as a matter of prudence.

And the next question goes to Philippe Houchois from Jefferies.

Right. I've got two, if I can. The first one is on the U.S. market. We've seen, again, changes in the tariff environment between the inclusion of engines in the potential offsets and the 3.75 production credits being kept for longer. Obviously a benefit to the U.S. car makers. I'm just trying to wonder -- I'm wondering into 2026, last year or this year, you've done mostly destocking in the U.S. How much of a benefit to you is there from the changes in the offset calculation from the White House? And then how much benefit is there from you being able to use your high mix of vehicles and sell more V8 and bigger engines in the U.S.? And should we think of the U.S. as being quite positive next year as you rebuild stock, have a better mix and potentially have a bit of relief on the tariff side?

And then if I can -- second question more specifically on FX, you had a significant headwind on FX in the third quarter. I'm just wondering as we think about 2026, what can you tell us about your hedging policy? And what it means as given the more expensive euro and the cheaper dollar, what it means for your '26 earnings?

Maybe I'll start with the market, but I'll let Harald comment on the financial impact because you mentioned the offset 375, which is for parts. Obviously, I know you know. Yes, it is true that particularly in Q2 and Q3, we made our best efforts to manage wholesale to optimize the financial result. That is the bottom line. And again, I don't want to go into now a specific kind of market guidance for 2026. Of course, it's clear. So I'm going to stay away from that, but I would like to say this is a general statement looking forward. If I take a 5-year view on the U.S. market, how we are set up, the product portfolio that we have, the products that we have in the pipeline, also this fundamental product offensive here in the next 2 to 3 years.

Yes, I do believe that in the next 5 years, that will also benefit us in the United States, and we look at the United States as a growth market and a market where we want to increase our footprint. So that is absolutely clearly part of our strategy. Having said that, the 15%, yes, not 27.5%, but the 15% of a significant part of the vehicles coming into the United States remain. So that has then not gone away, and we will try to manage that as best we can, but maybe details on the financials of that.

Yes, Philippe, you're absolutely right. I mean the extension of the 375 in terms of going for longer and staying at 375 rather than coming down has a supportive impact. I think at earlier stage for the year, we commented that the tariff copy could have a run rate of, I mean, around up to 200 basis point run rate moving forward. You could see in the third quarter, it was 150. I commented before that fourth quarter could be a bit higher. We now take that picture, I mean, into 2026, again, without making predictions now on 2026.

But I would say probably, I mean, the tariff bill comes in rather at 150 to 200 basis points, but not 200 as such. And the 375 credit scheme, I think, is a favorable element in this respect. On the FX side, for 2026, well, I don't want to look into crystal ball here. But if you look on how we are hedged for in terms of the U.S. dollar and the renminbi, I think we're pretty well covered throughout 2026. So probably not too much of an exposure in that respect. If I look at other currencies, well, if we see continued softness in the Korean won and the Japanese yen. That's something where we would be less covered for 2026. Whereas on Turkish lira, we see now for quite some time softness on the currency, however, kind of a natural hedge via pricing. I hope that helps.

Thanks, Philippe. The next question goes to Horst Schneider from Bank of America.

Yes. I want to get back basically to Munich Auto show. When we met there, I had the impression everything was a little bit more subdued. Now I think the environment is a little bit brighter. Can you summarize now what, in the end, is the delta versus Munich Auto Show? What really got better versus your initial expectations? Is it just top end? Is it then price mix and you think this is going to continue also through the coming quarters. So we can expect a little bit better results, mainly on the back of positive price mix.

Then the second question that I have is, again, on industrial performance, cost cutting. You made very good progress here, and you say you continue to cut costs also in 2026, of course. When do we achieve basically the peak of -- in bridge term? So how long can industrial performance basically remain such a strong driver? Or when is the item coming down from a bridge perspective maybe?

So Horst, I have to go back and look at my own speech that I gave there in Munich. But you know that we usually take a sober and matter of fact approach to our communication. So I could not detect a major difference in my tone or style between Munich and now. But what we did say in Munich is we're staying the course and the results today is we're staying the course, and we delivered on the key performance indicators, as had been announced.

What did give me a positive feeling in Munich, though, most definitely was the reaction to the products that we were presenting. I had the opportunity not only to, of course, engage with you guys and press and so on, but with very many dealers, very many customers. And if you had stayed on in Munich, I don't know if you did, you could see that people were standing in line, 20 people behind each other just waiting to just get a glimpse of the GLC. So the message that we did get from Munich was the new face of Mercedes the iconic grill taken into the future seems to have hit the nerve, a product that is technologically very advanced, in many dimensions leading. But combined with the what we call Mercedes-Benz welcome home feeling that everything is thought through. It's a Mercedes through and through. That also seems to have hit the nerve. So if there's anything that we are, I don't know, feeling encouraged by. And now with all the other products that we're going to launch is that the second-gen BEVs, but of course, this carries on to the ICE as well that we're on to something. That is certainly true.

Horst, maybe quickly on the numbers. I do remember that I almost ended up in a negotiation with some of you, whether it is 4.0 or 3.95 for the third quarter in May. I think in terms of sales, it came in line with expectations. Top end share, I think, was stronger. I think that was a favorable tailwind. I think also efficiencies, we made good progress in the third quarter. So in terms of the underlying, I think, yes, we can say that, we did better in the third quarter. And definitely, we want to take that momentum moving forward. You could also see on the cash flow, I think that was supportive, including working capital. And I will not rest here, as commented before, we'll keep going with our performance improvement program, 2026 into 2027.

I'd like to remind you what we outlined in February this year during the CMD in terms of the ambitions we take on us to mitigate for the headwinds and we do know that since we had the CMD in February, the market environment became even more demanding in China on volume and on pricing side, and that means we rather reflect how to take it even to a higher level to make good for the incremental headwind we are facing. But as Ola said before, here and today is probably not the point to talk about 2026 in more detail, but the approach, the spirit we and the team takes is clearly to work rigorously on the performance also in 2026 into 2027.

The next question goes to Henning Cosman from Barclays.

I was just also actually going to ask on the -- Harald just mentioned the February plan, I sometimes find it little bit difficult to keep track of where we stand. I think in February, the target had basically implied 300 basis points more or less just from the cost savings on flattish volume, flattish price/mix. Harald said about a 2-year payback of what's going to be roughly EUR 2 billion of provisions by the end of the year. So I guess that's 2 points. But I'm just wondering a bit about the reference point. Are we still thinking about 300 points improvement potential, but then apply that to the midpoint of the Mercedes-Benz cost margin range. So 5% plus 8%, or have we eaten into the 300-point improvement potential by that EUR 1 billion that we're going to see this year already. So if you can just help me there a little bit as to where we stand and we still think about 300 points from obviously now a lower starting point.

Second question, just a bit of housekeeping. Your main competitor in Munich, obviously, spoke about a bit of a distortion from late refunds from U.S. tariff cash held in escrow, you didn't really comment on that. Is there an opportunity for you to receive that next year to perhaps offset some of the cash out or were you just more aligned all along and had anticipated the timing of the refunds better?

So on the cost savings, so let's wrap up shortly. In February, I think, we outlined what are the savings expectation and targets that we have under different chapters on production costs, on material cost for -- compared to 2024 actuals into 2027, 8% on material cost, 10% on production cost, 10% on fixed cost, 10% on funding. These targets, I think, I mean, are still valid. And if you look into the slides of 2025, I think we're tracking pretty much in line with these maybe even slightly ahead of it. And as I said just before, we don't take it easy and then slow down. We will come back on the initial trajectory. We'll definitely take them as a base and push the savings forward into 2026 and into 2027, and probably rather look at a higher level, on the variable cost challenge compared to the numbers, we gave in the CMD in February.

I think, definitely, when we get to 2026, we'll get -- we will give more color on that in terms of what does it mean, how is the plan moving forward? But I would say for now, these targets remain intact with a bit of, I think, a tailwind we can take from the 2025. On the, what we call, the escrow held on the tariffs and the refunds, yes, I think, there is some refund to be expected. We -- I would say we take a cautious view on that. P&L-wise, I think it's still clear what we did. So the tariffs at 15% from the -- from Europe to the U.S. have been applied and applied retroactively in the P&L. We take a bit more cautious view with regard to, yes, Europe as Brussels seems to be a bit slow and the amounts, therefore, to be recouped from the pre August situation are yet to be cashed in. But at maximum, I think we see that in the 2-digit number, not in the 3-digit.

Harald, well done on the cost.

Thanks very much, Henning. We have time for 1 last question, I would hand that over to Stephen Reitman from Bernstein.

Yes. Two questions, please. First of all, congratulations on the very good reception you've been talking about with the CLA. I know it's again, it's very early days, but can you talk about what you're seeing in terms of -- are you seeing any conquest from other brands? What is the reaction on the vehicle in what you're seeing from around the world as well?

And secondly, on the vans business, still a very high margin and probably a lot better than the commercial margins that some of your competitors are probably seeing -- I mean, I'm talking about particularly in the commercial space rather than your passenger vehicles. Could you comment a bit more about how you see that going on?

So Stephen, I'll start with the CLA. As you know, we have now launched in the European markets and are rolling out quickly and we're launching now in China and in the United States, and then we'll go overseas. I think it's a little bit too early days to say exactly where conquest comes from. But because we didn't have a predecessor electric vehicle in this segment. So for us, it's almost like -- it's a conquest across the board, combined with some people or more people switching from ICE to BEV, but it's too early days to make a more serious analysis of how that's going. What we can say, though, is that we look at early customer feedback and early customer feedback next to the general feedback on the car has been very positive.

And on the vans margins, Stephen. Well, you're right, 10.7% year-to-date, 10.2% in the quarter. We guide 8% to 10%, but you heard it loud and clear, rather towards the upper end of the higher end of the band. That's the target for this year. Again, here is not the point to talk about 2026. But as we commented on cars before, I think, we take a realistic view on the market evolution, which is also more competitive than some time ago. We clearly see that. But the same thing, try to fight it by mix, by structure, by cost improvements. At the same time, ramping up. However, the new van platform in terms of the product, but also in terms of the PPE. That will constitute some headwind in 2026. The ambition of the team is definitely to keep the margin high, but I would not speculate now whether it's a high single digit or whether it is a double digit. Let's work on that, and we'll get back in February on it.

Is there any particular reason why you're doing so much better in Germany than in the rest of Europe?

Germany has always been our best market for our commercial vans. We have unbelievable customer loyalty. We have an unbelievable service network. And by the way, our product is pretty good, too.

Thank you very much, ladies and gentlemen, for your questions and for being with us today. Also, thank you very much to Ola and Harald for answering the questions. I know we had a few more questions in the queue. And as you know, Investor Relations remains at your disposal to answer any further questions that you might have. And now to all of you, have a great morning, a great afternoon and a great evening. Thanks, and goodbye.