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Transcript Summary

BMW’s 2026 investor call, featuring CEO Oliver Zipse and CFO Walter Mertl, detailed a strategic transition led by the 'Neue Klasse' product offensive and a philosophy of 'anti-fragility.' For 2026, BMW guides for an Automotive EBIT margin of 4-6%, factoring in a 1.25% tariff burden. The company’s outlook relies on projected geopolitical easing in the second half of the year, particularly regarding EU-China and USMCA trade relations. Despite a reduction in R&D capitalization to 30%, management remains confident in their technological momentum. In China, management reported transaction price stabilization and stable volume expectations despite a saturated market. They emphasized the importance of high local content and tech partnerships. BMW is also rolling out 'The New Retail' direct-sales model in Europe to improve price stability and inventory efficiency. CEO Zipse criticized EU regulations for lacking technology neutrality, warning they could hamper global competitiveness. Financially, BMW maintains its 30-40% dividend payout ratio and continues share buybacks. The company’s core message was one of flexibility; by remaining drivetrain-neutral and globally diversified, BMW aims to capture market share and maintain profitability even as the automotive industry faces significant regulatory and macroeconomic shifts.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Full Earnings Call Transcript — Q4 • 2026-03-12

Stefan Richmann: Good morning, ladies and gentlemen. Welcome to the 2026 BMW Group Annual Conference Analyst and Investor Call. My name is Stefan Richmann. I'm the Head of Treasury and Investor Relations at the BMW Group. It is my pleasure to host today's Investor and Analyst Q&A with Oliver and Walter. As Oliver mentioned earlier, we continue to leverage our global business model and the advantages of our technology-neutral strategy, meeting demand for both combustion engine vehicles and electrified vehicles. With the successful rollout of the Neue Klasse iX3, we have kicked off a major product offensive that will provide the BMW brand with crucial momentum for the future. Walter has shared with you how we have navigated 2025 and delivered on major KPIs in our operational business despite the tariff impacts, developments on currency markets and the intense market situation in China. Disciplined and consistent cost reduction underpinned our performance. We have also provided comprehensive and reliable guidance for 2026, factoring in all known and decided aspects against an uncertain geopolitical backdrop and tariffs. With that, I will turn the floor over to you, and we are happy to take your questions.
Stefan Richmann: Our first caller will be Patrick Hummel from UBS. Patrick, I can see you on the screen. Welcome this morning, and please, the stage is yours.
Patrick Hummel: So Oliver, first of all, your tenure is coming to an end soon. And you've not been shy to be anti-consensual on many of the key topics that we have discussed with you over the years. But your way of doing things or the BMW way of doing things has worked out pretty well compared to competition. So I'm curious when you soon hand over to Milan, what's actually your high-level advice to him? And what have been your key learnings over your tenure that you think are going to be most valuable for your successor and the entire company in the future? And the second one for Walter. I have to dive a little bit deeper into the 2026 guidance, if you don't mind. You take certain assumptions for tariffs that some people this morning called quite optimistic, such as the EU lowering the tariff to 0 later in the year, also some sort of USMCA agreement that would improve the current situation. So to better understand and quantify what you've baked in versus the status quo, can you just give us the 105 basis points of tariff impact alternatively, what would be the right number in a no-deal scenario? Would it be 175 basis points, 150, whatever, that would be helpful. And if you don't mind elaborating a little bit on the other key building blocks in the EBIT bridge for 2026, the usual volume, price mix, costs, D&A, all of these?
Stefan Richmann: Thank you very much, Patrick, for your questions and also for being so kind to directly allocating them to Oliver and Walter. That, of course, makes my job easier. So first, the question to Oliver from your side with regards to his tenure as it comes to an end after more than 3 decades with the BMW Group and regarding high-level advice for Milan. Over to you, Oliver.
Oliver Zipse: Patrick, I regard being anti-consensual as a complement. We are living in a competitive environment and to be consensual is probably the first mistake you're about to do if you want to compete in a pretty high-level competition in our industry. What drives us, if I give one word to what we -- it's not me, it's we, including Milan, of course, what we have been doing for the past years is to become anti-fragile, if I might use that word. And anti-fragile means we are profiting from a highly volatile world. And there are 3 components to it, and we built on that competitive strength for the past 10 years. To be a global company helps you. Like you have seen, we have been shrinking in China, but we have overcompensated with growth in Europe and rest of the world and the United States. To be technology neutral or technology open, however you want to phrase that, helps you to quickly respond to market needs and requirements. And you have very fast-growing electrifying countries and you have countries who hit the brakes. And to assume that would never be the case is the first mistake you do. This is a highly fluctuating world. And under the assumption, which every year holds true, the number of cars being sold in the world as new cars is increasing, not decreasing. So the world market is there. And the third component is, of course, that you are -- that you offer cars in all segments with all drivetrains. So it starts with  the MINI, then goes over to the lower segments at BMW all the way up to 7 Series and now very soon ALPINA plus Rolls-Royce, of course. So all these 3 elements built an entire fragile environment. And then all you have to do, you have to train your muscle to react quickly. And that is what we have done through all supply chain crisis. We might have had corona crisis, energy, whatever you call crisis, it helps you to train that muscle of maximum flexibility. In Milan, you won't even -- probably you won't even feel that there is a change in top leadership because he has been with us all along, and there's good reason that he becomes my successor. So individual people do not make a big difference in our strategy because our strategy is built up of a close negotiation and devising a strategy with top leadership and top leadership at BMW is 65 vice presidents and 7 Board members. It's not -- and it's not -- therefore, not a top-down issue. So there will be some very, very stable elements in our strategy.
Stefan Richmann: Thank you very much, Oliver. And now turning to your second question, Patrick. It was about the 2026 guidance and providing some additional detail, specifically on tariff assumptions, and you were asking about individual building blocks within the EBIT bridge. And for that, of course, I would like to hand over to you, Walter.
Walter Mertl: Patrick. So first, I thank you with respect to the tariffs assumption. Why is that? Because everyone is raising this question, of course. So eventually, we start with 2025, first of all, to have a base. In 2025, we had a lot of ups and downs. You remember, in Q1, we had more or less 3/4 of an EBIT margin hit because of China cars coming into Europe, and we started with the U.S. then in Q2, then we had 2.0% in Q2 and 1.75 percentage EBIT hit in Q3 as well as in Q4. And you do know, I'm not specifying it, whether it is 1.4%, and I will still speak about 1.5% or whether it's 1.6%, I would also classify it as 1.5%. So there is a variance in already. Now going forward, we assume and we wrote about it on Page 263 for everyone in this call, it's Page 263 on the tariffs. It's about in the second half year, we assume that we are -- we will see changes to the better. We assume EU and the U.S. will come to the final agreement, and we still assume it is nil from the second half year onwards, meaning July, whatever July really means then. And ultimately, we also assume that there will be a better negotiation between the U.S. with Mexico and Canada and some other countries. And with that, we assume that we are not having a 1 [indiscernible] quarter burden in the first half year, but lower. And overall, in the year '26, we shall see [ 1 in 1 ] quarter, 1.25 EBIT points burden in the EBIT margin. It's not on top. It is instead of the 1.5% EBIT burden in 2025. So instead, not on top. I think that's the key element number one. And then you asked for some further details, which we wrote on Page 264 for everyone. I'm happy to highlight these once again. So we are working on all cost elements. Whether we speak about CapEx, we will reduce CapEx. We will reduce also R&D further on the German commercial law side. And we will reduce also the fixed cost, that means sales and general cost, SG&A. So on all elements. But we shouldn't forget about the depreciation, which we see based on the start of the Neue Klasse. You saw some already in Q4, but just a bit. And with the restart of production, we see, of course, the depreciation starting across the year. And with that, there's a burden. And on top of that, with the start of the Neue Klasse, you remember that our activation on development costs is finished 6 months after start of production. And we focused heavily on all elements of the Neue Klasse, all our tech clusters are getting activated and 6 months after start, not anymore. Hence, our activation ratio is going down in the second half year latest, but you shall see already some elements in the first half year. Ending before the next question is coming, that we assume an activation ratio, a capitalization ratio of R&D costs of around 30%. You saw that in '25, we had 41% capitalization ratio of R&D, and we assume it is around 30%. That gives you also a burden on top of that. And of course, we also wrote about the product measures we described and discussed even in China. On the other side, I have to say, currently, in the first 2 months, we see transaction price stabilization even to the better. So that works out all these product measures we did starting in November and now one month after the other, we are shifting something behind. And also the dealer network is stabilizing themselves. So that should help a bit at least. Now if you take all these elements together, still the headwind is bigger than the tailwind, which we're working on. And that ended up in the assumption that we'd rather guide for the segment Automobile 4% to 6% instead of 5% to 7% last year. And with that burden, we come also to the conclusion for the group that we have a moderate decline. A moderate decline is between 10% and 15% minus the previous years, which I think I would like to underpin last year was a very good group profit of the year as guided, and we are better than EUR 10 billion profit. So that is a very high position to start with in this current environment, especially if I look around some others. Hope that helps, Patrick.
Stefan Richmann: Thank you very much, Walter, for this detailed explanation. We have the next caller up, and I hope we will see him on screen in just a second. That will be right here we see, Jose Asumendi from JPMorgan.
Jose Asumendi: Two questions, please. Oliver, I would love to hear your thoughts, please. When you look at the Chinese market over the next, let's say, 3 years, what do you think are the biggest challenges BMW will have to confront in the region? And then looking back then at the work you've done in the last 3, 5 years, how are you leaving the group in terms of the manufacturing and the product offensive to be able to compete and obviously take further market share? And then Walter, I'd love to also get some thoughts, please. What drives the lower end and the upper end of the margin range? You provided already a very detailed reply to this, but a bit more thoughts as to the lower end and the upper end of the margin range for the Automotive division and whether we should expect some -- potentially some pricing relief in 2026 in China as, hopefully, you will have to support less the dealers in China in '26 in comparison to 2025.
Stefan Richmann: Thank you very much for your three questions, Jose. And the first two, I will then hand on to Oliver. The third one, obviously, to Walter. First question being from your side, what is our expectation on the Chinese market over the next 3 years, whether we see any big challenges and what are those? Oliver, please go ahead.
Oliver Zipse: When you look at the Chinese market, then the first thing you must recognize, this is by far the largest car market in the world. And all along, it was clear the largest car market in the world will be highly competitive, highly innovative and of course, dominated by the largest local players. So what happened and is still happening in this market is not a surprise. It's normalizing. So when you say normalizing, that means there is competition in a saturated market like we have in Europe and the United States. To survive in such an environment of saturated market, of course, you have to safeguard your profitability. And you cannot expect that you have higher profitability as somewhere else in the world, which is not a big disaster and not a surprise. Now with the Neue Klasse coming up, and we already received very high resonance from the Neue Klasse, the iX3, which will also be available very soon in the Chinese market in the long version. The feedbacks we get are as positive as we have them here in Europe. There is no difference, underlining that we are highly competitive. Why are we highly competitive? The car in China is very much made in China for China. We are collaborating, of course, with local supply chains. We are collaborating with leading China tech players like Alibaba, Huawei, Momenta. We have a local production at the Shenyang plant, and we will present the car at the Beijing Auto Show next month. So this car is underlining exactly what the next 3 years, and that is your question, what is important in China? High local content, super innovative and highly competitive. And all 3 elements is inside the iX3 for the Chinese market. So there is a very positive outlook. And as we said before, this is not a car, this is a technology platform with technology clusters. And all cars which are being launched after that, for example, the local X5 will bear all these technologies. So we have a positive outlook into that market, especially with the launch of the car. And the main fundament, if you want to compete in the Chinese market in the future, the Chinese content will be ever higher, and that's exactly what we do.
Stefan Richmann: Thank you, Oliver, for this look into the future regarding the Chinese market. And following up with Jose's second question, what have we done in the last 3 to 5 years, specifically with regards to manufacturing and our product offensive?
Oliver Zipse: I mean what you see in our production and product, that always comes together kind of -- production comes from product. And what we see with all these technology clusters, which you will see in more than 40 cars until end of 2027, you will see exactly the same thing in the production areas. And you will see that in productivity, the throughput with AI applications, as high in the manufacturing area as it's in the product area and which help -- will increase productivity as well as the quality and the output of the cars. So new technologies are at the forefront of BMW. And this process of optimization will never end. There's never an end. Every year, we have pretty tough targets for productivity improvement. So every year, this production system becomes more expensive. And there's a good reason why Milan becomes my successor because he has done that very, very successfully in the manufacturing area. And of course, you will see that at the end, you will see it bottom line. And production is well on track worldwide. The Munich plant here in Munich will start very soon with the i3. It has been completely rebuilt. In Spartanburg, the new X5 starts very soon and next year, the new X7. In Leipzig and Regensburg, they're both working 3 shifts because of the high demand for the cars in these factories. And the new plant in Debrecen also works well. So all plants are full speed ahead for the product offensive we are undertaking now.
Stefan Richmann: Thank you very much, Oliver. And now moving to Jose's third question. I would like to pass that on to Walter. And I think it goes pretty well hand-in-hand with Patrick's question on guidance 2026. So Jose is asking how the lower and the upper end of the margin corridor in the Auto segment could be driven. Walter, over to you.
Walter Mertl: Yes. Well, a corridor is a corridor, right? So that's the reason why it's 4% to 6%. And of course, as we are in the beginning of this year, everything could happen. As we remember in '25, 12 months ago, over the course of following 8 to 9 months, also a lot of things have changed on the cost side, on the pricing side, across the geopolitics and the regions. So luckily, we are a global player. And hence, in '25, we have been able to shift margins also between China with the success, especially in Europe and the U.S. And you can only do that as a global player, and we're happy to do that. Other than that, of course, it's about pricing, it's about cost targets, how we achieve them. And I think in '25, we saw that we executed very good in my eyes. And of course, it's about the tariffs, whether our assumptions are right or not. On the other side, there's always risk and there's always a chance. And we try to organize them from a portfolio aspect and we managed that one in the same year this year as we did it last year. And usually, you see that driving cost down is always a good thing because that is in our own hand. All the rest, we have to organize flexibly with the markets on the pricing side. But so far, I think 4% to 6% is a very good prediction and guidance.
Stefan Richmann: Thank you very much, Walter, for this answer. And we will now move on to the next caller. We should be seeing Tim Rokossa from Deutsche Bank, and we see him right here already on screen. Tim, the stage is yours. Please go ahead with your questions. Tim, we are not hearing you, and I'm wondering whether there's technically on our side or whether it is on yours.
Tim Rokossa: Sorry, I was not unmuted by the host yet.
Stefan Richmann: I can't believe how happy I am that it was on your side.
Tim Rokossa: I have 2.5 questions, please. The first one goes to you, Oliver. When we think about the support from the EU, it feels like the regulator has finally understood how important this industry is and wants to help, but whatever they come out with seems oddly complex and difficult and probably beyond the point. I wrote for Oliver Blume yesterday, and obviously, there was also a lot of investor questions about what he thinks the industry or the EU should do for the industry, some very specific points about EU made BEVs, for example, getting support for them. Do you feel like the EU has finally understood that they need to help this industry and want to help them? And what would be your view of what they should do to do that? And then secondly, Stefan, I'm allocating the questions here as well, but obviously, please feel free to reallocate them. When we think about China, maybe Walter here, what do you say to people that just feel like they have a bit of a deja vu moment at this point in time compared to last year, where you also were very optimistic on the Chinese development. You also guided for some improvements from what we see right now. I understand that transaction prices have stabilized, but it still really feels like something that might be a bit awakening in the summer. And the final point probably also to you, Walter, why do you decide to bake in the tariff easing in the rest of the year? When we look at someone like Daimler Truck this morning, for example, they don't. I think there's reasons to believe that you should rather show what is the reality today rather than taking a view on when this would be signed.
Stefan Richmann: Thank you very much for your questions, Tim. The first one will be going to Oliver, the other two then obviously, to Walter. And the first one with regards to the EU, support from the EU, has the regulator really understood. Oliver, over to you. And since the question already came up this morning in media, maybe the concise brief version on that question.
Oliver Zipse: I try to make it brief. Tim, it's great that you're participating. You seem to be part of the inventory of this meeting. I cannot remember the last year that you have not been here. So good morning to you specifically. I will try to make it very short. Very clearly, the EU is making things not complicated. Complicated is not the problem. We can control complexity. That's not the problem. But they're working against the industry. In the news proposal, which came out in December, they tried to put even more topics in where markets are restrained from developing themselves. One portion is, yes, they go from 100% to 90% CO2. But how to achieve that? In the small print, it actually works against technology openness. The second element, and that was not in the legislation before, they try to put European content in such a way that export models and the German car industry is very much export orientated is neglected. So all the European content, which comes out of export is simply not taken into account, which is a very dangerous thing, I think, because this creates a lot of job and a lot of value. And to only favor smaller cars, which are [ 4.20 meters ] longer, you can do that. We don't mind giving incentives. But how it's written, it creates 2 classes of cars. And that, of course, reduces the competitiveness of the whole industry. So the small print behind it is still very much technology unopen, too much focus on electric-only and not enough focus on real CO2 reduction. And I end with the question, what happens to a regulation where the markets will -- in the electric arena also with our products grows to 50% market share and then it stalls. If that regulation is implemented and that is happening in the market, you will shrink this industry. And I think this is a dangerous path to go to. And with that, I stop. I was supposed to be short. Thank you.
Stefan Richmann: Thank you very much, Oliver, but I think the message came across. A second question over to you, Walter, was with regards to the guidance 2026, our provision on the Chinese market, its development, whether it might be too optimistic. Please, over to you.
Walter Mertl: Too optimistic. We rather like risks to incorporate them as Chairman, don't we? No, we do not. We have to see chances and risks. And with respect to China, if you really compare the last 6 months and you see month after month or you eventually rather quarter-by-quarter, you will see that the dealer network and all these measures we have taken in place are starting to get more grasp and starting to be more effective and stabilizing the dealer network. That's the first of all, because in the Chinese environment on all dealers, not just BMW, the whole industry, there's still a lot of irritation, let's say, with all these new rules also come in place, right? That price has to be finally over cost, which I really appreciate from SAMR, the new rules, which they also double check. So I'm really highly appreciating those. So that's already a positive sign with respect to the transaction price. And we see that in December, in January, in February, and they are stabilizing and even rising. So they are becoming better, positive for us. Second, we also did a lot of product measures. In November, we started the first tranche. In February, the second one and the next one will come. So we are enhancing product attractivity and increasing transaction prices for those products, and it works. And the third one, which is, well, take it optimistic or realistic, whatever, if you see the run rate of our sales in China, if it moves on like that, we can achieve previous year. Of course, if everything is crashing, then we have a different scenario, but our run rate is stable. And don't mix up the Chinese New Year. There's always a difference between January and February that has always to be a year-to-date February number. Otherwise, you would fail yourself. So taking all this into consideration, we see the chance and we wrote in our guideline -- guidance that we can achieve previous year. We didn't say that we want to achieve the previous year. Of course, we also aim for profitable growth and stabilization, always the thing. But given all the facts and given what we did in the network, we can achieve previous year. Even if you compare the numbers year-to-date February, once you saw them already from CAAM, you see that we are still on a very good track compared with all other competitors, whether they are Chinese or traditional ones. From that perspective, I still think what we wrote is absolutely spot on and correct. And with respect to the tariffs, why I am baking them in already. Well, I think we have to mention that, one, what our assumption is, plus 1/4 of an EBIT margin, yes, that is also a lot of money, but we will also find some assumptions and some measures in order to compensate should we fail in our assumption. And you saw that last year. 12 months ago, we've been the only ones mentioning that we bake in 1% extra cost for tariffs. And ultimately, they have become 1.5%. And we found measures to try to compensate this 0.5% point. So now we speak about a difference of 0.25%, and we still have 9.5 months to go. On the other side, we really hope that tariffs will be lowered across the world because free trade would be best for everyone. So that is also a communication from us to everyone. I hope that helps.
Stefan Richmann: Great. Thank you very much, Walter, for your answers. Thank you, Tim. We now have next up in line Horst Schneider from Bank of America.
Horst Schneider: I have got 2, 3 questions, please. The first one is regarding cost versus volumes. What I have got to say is what is really outstanding, Oliver also, what you have achieved over your tenure is basically the level of cost cutting without announcing big major programs and layoffs. Also for 2026, my impression is that a large part of the stability you aim for come from lower costs. That, of course, then raises for me the question, what comes after 2026? And here, I refer more to the midterm guidance. Is now the cost-cutting potential basically exploited after 2026 and needs the margin growth from 2027 onwards to come more from volume growth. And with that, the question would be, do you expect the premium market to grow again? Or do you expect to gain market share? You said today in the media call, Oliver, that you expect not to lose market share to the Chinese OEMs in Europe, I share with you, but you aim to take market share from Chinese OEMs in China or you take more market share from legacy OEMs from your traditional peers as of '27. So what is the trade-off between volume and cost regarding the midterm guidance? The second question that I have is regarding EVs. I was surprised about this great contribution and reconciliation in Q4. So Walter, maybe a question for you since now I think BEV leasing in the U.S. is structurally lower in '26. We're going to see this tailwind throughout '26 that this is a major part basically for the group earnings. And maybe you can remind us how you treat EV residual values in your portfolio? You constantly write down or you write down basically at the end of the contract period, what is now the share of EVs in your leasing portfolio?
Stefan Richmann: Thank you very much for your questions, Horst. And of course, it needs to be pointed out. I didn't notice that as first that you're wearing the right apparel for this call. That's very much appreciated. Thank you for that. And first question then obviously goes to Oliver. You asked about the trade-off between cost and volumes. First of all, the price, how we've handled that in the recent past, but also a midterm guidance and how do we expect the premium market to grow and whether we intend to gain market share also in the Chinese market, but specifically in Europe from Chinese competitors? Oliver, over to you, please.
Oliver Zipse: On the fixed cost side, not on the market, we made substantial progress last year. And we are of the opinion, this is a continuous management task. And you see that -- if you look at our figures, you can see that. We are against programs. We are against publicly announced programs because that kind of reduces the responsibility of management to take that task very seriously. So we don't talk about it. We try to really do it whenever it's necessary. And of course, these things come in waves. There are years where it's easier, where yes, but we every year become more efficient all the way also started last year already with the help of AI. On the market side, the question is wrongly asked, cost versus volume. I know that people love to have that orientation to say, which way should they go. But it's the wrong question because good contribution margin is the sum of both. And flexibility is the most important thing. If an opportunity arises to create positive or super positive contribution margin, you quickly have to react. So flexibility to quickly add is 10x more important than to say we push volume or we only concentrate on the upper segment. It's the completely wrong question because that is a result and not a target. So I will never let people ask you what do we want that, we want good contribution margins. And then, of course, these opportunities with quickly changing markets. The core question is how quickly can we get into all these little niches where opportunity arises. And the good thing is the opportunities change currently very much. That means it's not important that you have a strategy to be in that market that you have the flexibility to react very quickly, and that is what we call anti-fragile that we have in all segments, all drivetrains, we can always very swiftly react, and we are after contribution margin and not after cost or after volume in the first place. Thank you.
Stefan Richmann: Thank you, Oliver. Horst, your second question was on EVs, specifically BEV leasing situation in the U.S. and whether it constitutes a tailwind for 2026 and also the handling of leasing contracts with regards to depreciation and the share of EVs in our leasing portfolio overall and all of these topics at once, I would like to hand over to you, Walter.
Walter Mertl: All in one. Well, let me start with [ BEV ]. In different markets, we have different penetration ratios. And the U.S. has one of the highest leasing penetration ratios, not to forget alone, there is also a loan business there. With respect to BEV leasing, because of IRA and the subsidies more or less coming from the government, leasing was the one and only for BEVs because on loan, you wouldn't have received anything. And that was a very high share. Now with the stop of IRA subsidies from October 1 onwards, that had an impact in the U.S., of course, on BEV sales and on top of that, into our leasing portfolio. So in Q4, leasing penetration came down in the U.S. And with that, you have, of course, effects on the elimination part, which I guess you also raised coincidentally the question. Hence, there was a different impact in our segment consolidation because that is always the contra of the auto business. You do know elimination is mainly for financial services business. So auto sold the car and in the group, nothing happened. So I have to take it out, means minus. If there is less financial services business, there is less minus, and it could appear as positive amount, right? That happened in Q4 dedicatedly. Now you also raised the question with respect to how we treat residual values. Well, we always treat it linked at the start of the contract, thinking about where is the residual value in 36 months if it is a 36-month contract, of course, also 48, 30, you name it. But always once the customer is signing it, we see every quarter, of course, we are doing our total portfolio revaluation, and we do know which prices we have been capable to achieve for the off-lease cars. So that's our prediction model. It's not that easy explained. It's a bit more complex, a lot of math. But that means if you depreciate a car already higher or lower during the course of the contract is already the first topic, right? How big is the depreciation during the contract time. Second, on top of that, with the revaluation, we double check whether we have to adjust across the portfolio. That's what we also do. And that is a permanent approach. Every quarter, we are doing that. And this is ending up in our balance sheet. If you have a look for our residual value provisions, that's the second part. The first part, you can't see because that's our leased out products, you just depreciate. You don't know whether we depreciate it on a straight high level or on a low level. Sorry, I'm not sharing this information. But you see this on top provision. And that is how we deal with that. And that is how we organized with shrinking used car prices since we had this top prices in '22 and '23. That's why we speak about lower residual value profits than we had previous years because we see that it comes down gradually step by step. But it's still positive, but less positive than previous year. And even this effect, you see in 3 segments, you see it in Auto, you see it in Financial Services and you see as a contra in consolidation. That's how we deal with the Financial Services lease business, especially. I hope that helps.
Horst Schneider: Reconciliation is going to be a positive contribution in 2026, significant positive contribution, right?
Walter Mertl: Whatever you classify as significant, but we can assume if we have less leases in the U.S., you will have less negative consolidations that way around. But of course, don't forget, we are not just dealing with leases in the U.S., we have it across the world. U.K. is getting the iX3, for example, now in Europe already. Leases are going there. So there might be contrast might be different. But yes, you're right.
Stefan Richmann: Thank you very much, Walter. Maybe just a quick statement on how we are proceeding so far. We have obviously quite some interest in our figures and the guidance 2026. For the next callers coming up, and we still have several in line, I kindly ask you to limit yourselves to one question each. We have already answered quite a significant amount of topics, and we surely have covered a lot of issues already. So therefore, please limit yourself to one question. Next one up, and we should see him on screen rather soon. There he is Mike Tyndall from HSBC.
Michael Tyndall: I'll stick to one question then. Just one for Walter, please. If I look at the profits from BBAC, we were at around EUR 270 million in '25, down from about EUR 1.4 billion in the prior year. When you talk about China achieving the same sort of number for this year, can you just unpick the difference there? How much of that was one-off? And therefore, how much of a recovery is likely in that profitability of BBAC in 2026?
Stefan Richmann: Question goes to you, Walter, regarding profit from BBA in 2025 and an outlook for 2026 with regards to potential one-off effect in 2025 that may have an effect in 2026. Over to you.
Walter Mertl: Right. Mike. So I hope you have a look for the right disclosure in our 432 page. You see 2 elements where you can see BBA numbers. One is the group consolidated one. There you end up with EUR 227 million, but that is after BBA, after OCIs. So that is a rather consolidated view. In the disclosure where we present all the shares we have on every legal entity, you see the legal entity view. And there, you see more than just EUR 227 million, rather EUR 1.2 billion. So I hope you see the right disclosure. Now with respect to '25 versus '26, all measures in place. We did already a lot of fixed cost cuts in '25 to stabilize the situation. And we have given also a lot of cost targets on the manufacturing cost side, on fixed cost side, which they are driving forward positively. So we assume that we are running more or less stable year-on-year '25, '26 with our assumption that they hit the cost targets and they've organized also the price targets they have. And I'm so far positive, at least with the 2 first months I saw.
Stefan Richmann: Good. Thank you very much, Walter. And we have the next one in line, and we will probably not see him, but only hear him if I understand that correctly. So there we see you, Stephen, very good. So Stephen Reitman from Bernstein.
Stephen Reitman: First of all, again, congratulations, Oliver. I mean, it's been obviously an incredible environment you had to deal with since 2019 and which you've done gracefully, and I think to great effect for BMW. My question actually is for Walter and it's about the cash flow. At the Q3 stage, part of the reason for the reduction in the cash flow guidance last year was the timing mismatch that the refund you were expecting were not going to occur on tariffs in 2025, so it's going to come in '26. So my question really is about the guidance on the cash flow for 2026. How much of that includes the expected refunds you're getting from the U.S. Treasury for the tariff -- for the refunds on tariffs? And can you just generally talk about where you see sort of the refunds from tariffs going forward really?
Stefan Richmann: Thank you very much, Stephen, for your question. Concerning cash flow and focusing on cash flow only. Question being, coming out of the Q3 statement that we made, we had a clear statement there that a reduction of our cash flow expectation for 2025 came out of a postponed tariff refund and whether that now and to what extent it has an impact on the 2026 guidance. And with that, I hand it over to you, Walter. Please go ahead.
Walter Mertl: Stephen, well, we had to reassess our receivables expected in November as, for example, Europe didn't come in place, and I can't put receivables against the EU at the current stage based on which contracts. So I had to reduce that one, first of all. And hence, I would rather speak about receivables of a mid-3-digit million number rather than this high level. And secondly, also with respect to the U.S. authorities, we have to say that we see in terms of our volumes, in terms of process complexities and also sometimes also effects as a result of shutdowns, numbers came up and down. But ultimately, we are running on. I can say that with respect to the 3.75% discount, we handed into the authorities our claim for April '25 to March '26 already. That is not finally confirmed yet by the authorities, but we handed the claims in already. With respect to this procedure, we assume that we are not getting cash back, but we rather can run more or less our tariffs to be paid as a discount of that one. That's more or less the assumption so that we just pay net rather than getting a gross number to us and the other ones paid by us. That is our current assumption and understanding with the U.S. authorities with respect to going forward. I hope that helps.
Stefan Richmann: Thank you very much, Walter. We have run over the official time already, but we will continue with just one question each. I believe we still have 3 callers in line. First one already on the screen right now, Christian, Christian Frenes from Goldman Sachs.
Christian Frenes: Also for my part, Oliver, thank you and congratulations on your stewardship of the BMW through what has been a really volatile environment from 2019 to 2026. I think the execution has been really impressive and underlines your flexibility strategy. My question is really on TNR, The New Retail strategy. And my question for you, Oliver, would be, what are your thoughts on the strategic importance of shifting to TNR? Why is it so important? And perhaps as part of the same question, just the financial impact of shifting the BMW brand in 2026 to TNR, should there be any financial impact that we should expect? Maybe the last one is a little bit for Walter, but...
Stefan Richmann: Thank you very much, Christian, for your question. Concerning TNR. I will just briefly say the abbreviation stands for The New Retail, which is in Europe, our sales model change to direct sales. And you were asking with regards to its strategic importance for the BMW Group and also financial impact, I would indeed give the question on strategic importance and relevance to you, Oliver, and then an expectation with regards to when BMW will be shifting to TNR and the potential financial impact, Walter will be handing that to you. So Oliver, please start.
Oliver Zipse: TNR, The New Retail, is based on 3 assumptions. First of all, we are in the business of individual mobility. That means each car we sell is owned by an individual with very specific needs. That's the first assumption. And I think you would not -- you would agree that this is a valid assumption. The second assumption is the future of understanding our customers is largely based on AI competence. To know what he has owned in the past, what his lifestyle is, what his expectations are, to make him very individual offers for other products is a central function. And the third one is we are already half down the road because we installed TNR in our European operation of MINI and our learning experiences are quite positive. We're not in a rush to implement that, but we are almost 80% through with the preparation of the IT systems. So it doesn't come at one single point. I think there is no way back. We will introduce that step by step because individual mobility will be closely linked to understanding the customer individually. And that is something you can only do as a retailer and not as a wholesaler. Does that mean that we don't need partners? No, it's exactly the other way around. We need dealers, partners, entrepreneurs just as before, but we need central intelligence of understanding the customer. So strategically, we are unwavering. Are we in a rush? No, we do it step by step just like we have done it with MINI. We introduced it in the first countries in 2022. We're now in 2026. So we will take our time, but there is no way back.
Stefan Richmann: Thank you, Oliver. And Walter, over to you with regards to financial implication.
Walter Mertl: Well, with respect to the financial implication, it's a positive aspect because we create price stability online and offline. There is no haggling around the pricing from dealer A to dealer B to dealer C and the customer is just playing the game. So there is stability for everyone. And not to forget, people are starting to change their habits, not running on Google search machines anymore and on our homepages. They run ChatGPTs and cloud, whatever. And that will search for pricing. Currently, under MSRP under wholesale system, we [ cannot ] advise MSRPs. But ultimately, we deal with independent dealers and the independent dealer is setting their price. Now we have a mixture of offers by different OEMs. Some are already on direct sales. So they have the transaction price on the list. And others like us on BMW side, we are running in wholesale, meaning on our homepage is the MSRP and not the transaction price. Now if ChatGPT or cloud or whatever machine is searching for the best price and best offer, surely, the one who is organizing and presenting the real transaction price is better off than the other. So that is why Oliver Zipse also mentioned, we will run into this direction automatically because that will be the advantage and to get the same price in the country rather than different ones. And from our point of view, we also have done a better chance for upsell procedures online and offline because we can present the products rather than having the discussion at the dealer side about the pure price. It's about the products and all features in it. And finally, the last positive topic on financial impact is stock management because we can do it centrally, like Oliver mentioned, rather than having a dealer individual stock management. And usually, in total, you will have always too much stock in the pipeline, and that creates price pressure again. So once we do it on a central stock management, we do know in which areas and regions we run which cars and sell which cars, we can optimize that one as well, and that saves again further costs. That is our position. So we are looking forward to implement that also for BMW in Europe.
Stefan Richmann: Thank you, Walter, and thank you, Christian, for this very important question. We're now coming to the second to last in line, and we have him on screen already. Stuart Pearson, Oxcap Analytics.
Stuart Pearson: Just quickly, Walter, just to clarify, did I hear correctly, apologies if I missed it, but based on what you're seeing year-to-date in China, you think profitability there could be flat this year. I wasn't sure if that's what you were trying to say or if you just meant more on volume terms. But my main question was just on mix because you're coming out of a period, I guess, that's been relatively strong in that respect. Obviously, you have the X5 changeover this year, which in previous incarnations would have created some volatility. I think it was down 20% volume-wise in 2018. But it sounds like -- I think you said you're running 3 shifts there already. It sounds like maybe this time there will be minimal disruption from there. So I wonder what you expect from mix for the full year, but also in Q1? And is it right to assume that with some mix disruption, I think you mentioned FX would be tougher in Q1 and tariffs as well that Q1 would be one of the weaker quarters of the year.
Stefan Richmann: Thank you, Stuart. And if you don't mind, I would briefly comment on the first question since we do not guide individually per region. I will leave that up to Walter whether he wants to start guiding on regions now, but that would be my answer at least. And the second one then with regarding to mix, especially with the X5 changeover, Walter, I hand that over to you.
Walter Mertl: Yes. Stuart, so absolutely right. We are not doing country-specific guidance. But the discussion you're referring to was with respect to the legal entity BBA, where I helped Mike to find the right number in our disclosure. So that was the number. And further on, I elaborated that they also have their fixed cost targets and material cost targets and price targets, and that was the [ story long ]. Now with respect to the effects expectations on full year Q1, the expectation on full year is that we are ending up with 4% to 6% in this corridor with segment Automobile, of course. And yes, we also mentioned already in Q3 that we are facing an FX headwind in the first half year and especially in Q1. And why is that? Exchange rates deteriorated, especially end of Q2 '25. That's why we had this big exchange rate effect in the second half year of '25. If everything stays stable, that will move over into the first half year of '26 with an exchange rate burden. And I said rather in Q1. Why is that? Because in Q2, the deterioration started already. Now coming to your strong X5 changeover. We have a good mix. Don't forget that the Neue Klasse starts to kick in, in the second half year, and X5 is still on a very good sale mode and it's not stopping in whenever during this year. So that's quite positive.
Stefan Richmann: Thank you, Walter. And we're just about to end, but we still have Henning Cosman from Barclays joining us.
Henning Cosman: I'll try and be brief. So I'll save my congratulations to Oliver for the Q1 call. My question is on total shareholder return. I'm surprised it hasn't come up yet. So it's probably to Walter. So as a combination of dividend and share buyback, of course, would you say it's fair to assume the moderate decline to your group EBT guidance as a proxy to net profit and ultimately dividend payment as well and draw conclusions to the dividend component of TSR. And then on the share buyback, I suppose if you were to conclude the remainder of the existing envelope, that could be up to EUR 1.3 billion or so. But between the two would imply below EUR 4 billion. And separately, I think unlike last year, you also haven't said explicitly at least that the shareholder return could exceed the Automotive free cash flow. So I was just wondering if you could help us a little bit with the potential magnitude of TSR. Could it exceed the Automotive free cash flow this year? Again, are you prepared to comment on that at this stage? Any more color would be great, I think.
Stefan Richmann: Thank you for your question, Henning. Concerning total shareholder return, some assumptions on your side, whether our current guidance gives an indication with regards to net profit and potentially dividend payments for the year 2026. And also as we already stated for the year 2025, whether we would be willing to exceed the available Automotive cash flow in order to follow up with shareholder return payments. And I would hand that question, of course, over to you, Walter, with regards to 2026.
Walter Mertl: Henning, so in principle, our framework hasn't changed, right? Our framework is 30% to 40% and share buyback. And usually, we also limit that with free cash flow. And as an exception, last year in '25, we said exclusive to free cash flow situation. And that's what we did. So ultimately, in '25, you shall see with our proposed dividend, which has to run through the Annual General Meeting, of course, plus share buyback, we would have achieved EUR 4 billion cash out, and we have achieved an out of free cash flow of EUR 3.2 billion. So we can do statements that we are overrunning the Automotive free cash flow. Usually, I would see that as an exception. But between 30% and 40%, there's a lot of room for maneuver. The suggestion we do to the Annual General Meeting is 36.6% payout. So there is still room for 40% whatever we discuss. And I think that is a discussion for in 11 months rather than now. We just can highlight that we're sticking to our rules and the share buyback we are running currently. The second tranche is going to be ending by August. And we also mentioned that we earmarked already the third tranche. So share buybacks are moving on. I think that is all I can say to this topic currently.
Stefan Richmann: Thank you very much, Walter. Ladies and gentlemen, this brings us to the end of our Q&A for the 2026 BMW Group Annual Conference, Analyst and Investor Call. Thank you all for making the time to join us here today, and we wish you a great rest of your day. Thank you.