Bayerische Motoren Werke AG
XETRA:BMW
Bayerische Motoren Werke AG
Bayerische Motoren Werke AG, or BMW, traces its storied roots back to 1916 in Munich, Germany. Originally conceived as an engine manufacturing company for airplanes during World War I, BMW soon evolved into a pioneering force in the automotive industry. Its journey from aircraft engines to luxury automobiles typifies innovation and resilience, qualities that have become synonymous with its brand. BMW's hallmark lies in its ability to blend performance with luxury, creating vehicles that appeal to driving enthusiasts who value both engineering excellence and style. The company has expanded its product line over the years to include BMW-branded luxury cars, motorcycles, as well as the Mini and Rolls-Royce brands, thereby capturing diverse market segments across the globe.
The backbone of BMW's business model is its focus on premium-priced vehicles that emphasize quality and innovation, rather than competing primarily on price, thereby generating substantial profit margins. The company places a significant emphasis on research and development, ensuring its vehicles incorporate cutting-edge technologies, such as electric and hybrid systems, autonomous driving, and advanced connectivity features. Through strategic investments and partnerships, BMW is transitioning towards sustainable mobility solutions while maintaining its reputation for creating distinct driving experiences. Customer loyalty is bolstered by a strong brand identity, a robust distribution network, and personalized service programs, all of which drive revenue not only through the sales of vehicles but also through financial services, after-sales services, and brand licensing. This multifaceted approach anchors BMW as a formidable player in the global automotive landscape.
Earnings Calls
In the third quarter, BMW Group reported lower revenues of EUR 32.4 billion and an EBIT of EUR 1.7 billion, hampered by delivery stops and weak demand in China. However, electric vehicle sales surged by 19% year-to-date, comprising 16.8% of total deliveries. Looking ahead, BMW expects stronger Q4 volumes and a significant recovery in revenue, projecting an EBIT margin between 6% and 7% and free cash flow of over EUR 4 billion for the year. The company remains committed to long-term projects like the Neue Klasse, aiming for all-electric vehicles to account for over 50% of sales by 2030.
Management
Walter Mertl is an executive at Bayerische Motoren Werke AG (BMW AG), a prominent automotive company based in Germany. As of 2023, he serves as the Chief Financial Officer (CFO) of BMW AG. In this role, Mertl is responsible for overseeing the financial operations of the company, which include financial planning, risk management, record-keeping, and financial reporting. His role is crucial in ensuring the company's financial stability and supporting its strategic objectives. Mertl has been with BMW for many years, having initially joined the company in 1998. Over the course of his career at BMW, he has held various leadership positions, each of which has contributed to his deep understanding of the automotive industry and BMW's operations. Prior to becoming the CFO, Mertl gained extensive experience within the company's finance division, where he showcased his expertise in financial management and strategic planning. His long tenure at BMW reflects his significant contributions to the company's growth and financial health.
Jochen Goller is a prominent figure in the automotive industry, particularly known for his significant contributions at Bayerische Motoren Werke AG (BMW). He has held various leadership roles at BMW over the years, demonstrating expertise in marketing, strategic management, and international operations. Goller has been instrumental in expanding BMW's presence and enhancing its brand value in key markets around the world. He served notably as the President and CEO of BMW Group Region China, one of the most critical markets for the company. In this role, he was responsible for overseeing the company's operations, sales, and marketing strategies in China. Under his leadership, BMW experienced substantial growth in the region, strengthening its position in the competitive luxury automotive market. Before his role in China, Jochen Goller worked in several strategic positions within the company. He has been involved in global marketing strategies and has played a vital role in aligning BMW's global brand initiatives with local market needs. Goller's leadership style is marked by a deep understanding of cultural nuances and market dynamics, enabling BMW to tailor its approach effectively in diverse regions. His career at BMW reflects a commitment to innovation, customer focus, and sustainable growth.
Ilka Horstmeier is a prominent executive at Bayerische Motoren Werke AG (BMW AG), known for her leadership and extensive experience within the company. She joined BMW in 1995 and has held various roles with increasing responsibility. Horstmeier was appointed to the BMW AG Board of Management in November 2018 and is responsible for the Human Resources and Labor Relations divisions. Her background in engineering, alongside her proficiency in human resource management, has been instrumental in orchestrating workforce strategies that align with BMW's innovation and sustainability goals. Horstmeier plays a critical role in shaping the corporate culture and driving initiatives related to workforce diversity and digital transformation.
Frank Weber is a prominent automotive industry executive known for his role at Bayerische Motoren Werke AG, commonly known as BMW. He is a member of the Board of Management of BMW AG, where he is responsible for Development. Weber has played a significant role in advancing BMW’s agenda in innovation and technology, focusing on the development of electric vehicles and the integration of digital and sustainable solutions in automotive design. With a background in mechanical engineering, Weber has spent a significant portion of his career working on pioneering technologies in the automotive sector. Before joining BMW, he held various leadership positions in the industry, including significant contributions to product development and strategic planning. His expertise lies in driving advancements in automotive engineering, particularly concerning future mobility solutions and sustainability. At BMW, Frank Weber continues to lead efforts in transforming the company’s vehicle lineup to meet future challenges, ensuring the integration of cutting-edge technology and driving concepts that align with global environmental and technological trends. His leadership is critical in BMW's strategy to maintain its competitive edge in the ever-evolving automotive landscape.
Dr. Joachim Post is a member of the Board of Management of BMW AG, where he serves as the head of the Purchasing and Supplier Network. He assumed this role in January 2022. Dr. Post began his career with BMW in 2002, holding various significant roles within the company that include positions in development, strategy, and product management. His comprehensive expertise in the automotive industry, combined with his leadership skills, have been instrumental in shaping BMW’s strategic partnerships and supply chain logistics. Dr. Post focuses on fostering innovation, ensuring sustainability, and driving efficiency within BMW’s global supply chain operations. Dr. Post holds a doctorate in engineering, which underscores his strong technical foundation and understanding of the automotive industry's complex demands. His leadership continues to support BMW's commitment to quality, sustainability, and technological advancement as the company navigates the evolving landscape of the automotive market.
Dr. Andreas Liepe is an executive at Bayerische Motoren Werke AG (BMW), a renowned global automotive manufacturer headquartered in Munich, Germany. He plays a significant role in steering the company's strategic direction, particularly in areas that intersect with technological innovation and business development. Dr. Liepe's extensive background in engineering and management has equipped him with the skills necessary to drive BMW's ambitious goals in sustainability and digital transformation. At BMW, Dr. Liepe has been involved in various leadership positions, contributing to the company’s growth and adaptation in an ever-evolving automotive industry. His focus has been on leveraging new technologies to enhance BMW's product offerings and improve operational efficiencies across the board. Under his guidance, BMW has taken substantial steps toward electrification, autonomous driving, and intelligent mobility solutions, aligning with global trends and consumer demands. Dr. Liepe is known for his forward-thinking approach, which emphasizes innovation, quality, and sustainability. His impact is evident in BMW's enhanced focus on creating environmentally friendly vehicle options and integrating cutting-edge technology into their cars, ensuring BMW remains at the forefront of the luxury automotive market. Educationally, Dr. Liepe holds advanced degrees in engineering or a related field, which has provided him with a robust foundation for his work in the industry. His career is marked by a blend of technical expertise and strategic acumen, making him a valuable asset to BMW’s leadership team. Through his contributions, Dr. Andreas Liepe continues to help steer BMW through the challenges and opportunities of the modern automotive landscape, ensuring the company maintains its competitive edge while setting new standards in the industry.
Alexander Bilgeri is known for his role as a senior executive at Bayerische Motoren Werke AG (BMW Group), where he previously held significant responsibilities in corporate communications. As a seasoned professional in the automotive industry, Bilgeri has played a critical role in managing and executing BMW's communication strategies on a global scale. His expertise includes media relations, branding, and strategic messaging, which have been vital in maintaining the company's reputation as a leading manufacturer of luxury vehicles. Throughout his tenure, Bilgeri has been instrumental in navigating the complexities of automotive communications, especially during times of industry transition and innovation.
Stefan Richmann is an accomplished executive at Bayerische Motoren Werke AG, more commonly known as BMW. His career with BMW showcases extensive experience and leadership within the automotive industry. Prior to his current role, Richmann held numerous significant positions in finance and management within the company, contributing to its financial strategy and operational efficiency. His expertise in financial planning and international market strategy has been instrumental in guiding BMW’s business development across various global markets. Richmann's leadership style is characterized by a strong focus on innovation, sustainability, and operational excellence, aligning with BMW's commitment to pioneering advancements in the automotive sector. Throughout his tenure, he has played a key role in driving growth, enhancing competitive positioning, and ensuring robust financial performance for BMW. His contributions to the company reflect a deep understanding of both the automotive industry and the broader economic landscape, making him a valuable asset to the BMW leadership team.
Adrian van Hooydonk is a prominent figure in the automotive design world, best known for his role at Bayerische Motoren Werke AG (BMW). Born on June 21, 1964, in the Netherlands, Van Hooydonk pursued a career that melded his passion for cars and design. He studied at the Delft University of Technology, focusing on industrial design, and later attended the ArtCenter College of Design in Pasadena, California, which is renowned for its transportation design program. Van Hooydonk joined BMW in 1992, and over the years, he has held various key positions within the company’s design department. One of his early notable roles was as the head of BMW's DesignworksUSA studio. He became Vice President of BMW Group Design in 2009, succeeding Chris Bangle, a significant influence in automotive design. In this capacity, Van Hooydonk oversees the design of BMW, MINI, and Rolls-Royce vehicles, playing a crucial role in shaping the aesthetic and technological direction of BMW’s future cars. His work is characterized by a strong emphasis on blending innovative design with advanced engineering, reflecting BMW’s commitment to luxury, performance, and sustainability. Van Hooydonk has spearheaded the development of several iconic models and concept cars, reflecting a modern, dynamic style while maintaining the brand's heritage. Under his leadership, BMW continues to push the boundaries of automotive design, integrating cutting-edge technology and sustainability into their vehicles. Adrian van Hooydonk is respected for his visionary approach and ability to adapt to the changing landscape of the automotive industry, ensuring that BMW remains at the forefront of design and innovation.
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Dear colleagues, ladies and gentlemen, good morning, and welcome to the telephone conference of the BMW Group for the third quarter.
Today, we have here, as always, Oliver Zipse, Chairman of the Board of Management; and our CFO, Walter Mertl.
First, Walter will take you through our financial results. Oliver, will then give you a general business update for the BMW Group. After a short break, we will then have time for our Q&A session.
So ladies and gentlemen, we start. Walter, please go ahead.
Good morning, ladies and gentlemen. First, I want to make clear that the sales and earnings figures we are releasing today should be viewed in the light of extraordinary challenges.
As you are aware, we revised our guidance for 2024 on September 10. This was mainly due to 2 factors: first, temporary delivery stops and technical measures related to the Integrated Braking System, or IBS, delivered by our supplier; and second, the ongoing muted demand in China.
In the case of IBS, numerous markets have to replace the affected parts before cars can be delivered to customers. This led to temporary delivery stops that impacted sales and earnings and drove up inventory levels.
In the third quarter, we fully recognized the necessary provisions for warranty obligations in the high 3-digit million euro range.
Looking forward, we have already made good progress with the implementation of technical measures worldwide and expect to complete them for most cars held in stock by the end of this year. So in Q4, we will see volumes well above Q3 and an improved product mix.
Let's now take a look into the numbers for the third quarter. At group level, revenues were significantly lower than in the prior year quarter at EUR 32.4 billion. Group EBIT totaled EUR 1.7 billion. The financial result was considerably impacted by negative fair value measurement effects, and consequently, group EBT amounted to EUR 838 million. The group EBT margin came in at 2.6%.
Year-to-date, group EBT totaled almost EUR 8.9 billion, resulting in an EBT margin of 8.4%.
The Automotive EBIT margin was 2.3% for the third quarter and 6.6% for the year to the end of September. Excluding the depreciation resulting from the purchase price allocation of BBA, the Automotive EBIT margin came in at 3.5% for the quarter and 7.7% for the first 9 months.
After 9 months, the BMW Group global sales showed a slight year-on-year decrease of 4.5%.
The balance sheet of the BMW Group has increased by EUR 11 billion since the beginning of the year. Half of this increase is driven by the growth of our Financial Services portfolio and thus represents future profit potential. The remaining increase is mainly related to temporary inventory buildup.
While the third quarter results were impacted by extraordinary factors, it is important to highlight the positive aspects of our operational performance. Sales of our all-electric vehicles amounted to almost 300,000 vehicles in the first 9 months of the year, a significant increase of 19.1%. BEVs made up 16.8% of our deliveries for the year to the end of September.
Despite the temporary delivery stops and excluding the China market, the BMW branch reported worldwide growth of 4%.
In Europe, the brand achieved sales growth of 7.6%. And our core brand continues to be well positioned in the U.S. and maintained its market share.
Moving to the Automotive segment. In the third quarter, the BMW Group delivered around 541,000 BMW, MINI and Rolls-Royce vehicles to customers worldwide. This represents a decrease of 13% compared to the same quarter of last year.
However, our all-electric vehicles continued to perform well. Over 100,000 units were delivered to customers, 10.1% more than in the same quarter of last year. The share of our all-electric vehicles was 19.1% of total sales. And in fact, more than 1/4 of our total sales came from electrified vehicles, that is BEVs plus plug-in hybrids.
The successful sales development of our electrified vehicles is clear proof that we are well on track to fulfilling our CO2 emission targets in the EU for 2025.
Segment revenues amounted to around EUR 28 billion, which was lower than in the same quarter of 2023. In Q3, revenue per unit continues to be at last year's level.
EBIT for July to the end of September totaled EUR 634 million. The EBIT margin came in at 2.3% for the quarter and 6.6% for the year to the end of September.
That brings me to the next slide with the details of the changes in the operational results. The net balance of currency and raw material positions exceeded the previous year by EUR 200 million. For the full year 2024, the net balance of currency and raw material positions should provide a tailwind of close to EUR 1 billion. We expect this to nearly offset the headwinds from material costs. But we are seeing additional requests for supply chain support.
The net balance of volume, model mix and pricing effects negatively impacted EBIT by EUR 2.1 billion in the third quarter compared to the previous year. All 3 elements trended lower year-on-year. The volume effect reflects the sales decline I mentioned earlier. The mix was also adversely affected since the temporary delivery stops and market conditions in China had a greater impact on vehicles in the upper premium segment. This will turn in Q4 as we need to see an improved product mix. The pricing effect reflects the ongoing challenges of a difficult price environment globally as well as weak consumer sentiment in China.
The health of our dealers' operations is strategically important to us. Therefore, in Q3, we have implemented measures jointly with our Chinese dealers to support both profitability and liquidity.
Research and development expenses increased by about EUR 100 million compared to the prior year quarter. Group expenditure for research and development reached approximately EUR 6.6 billion in the first 9 months.
The R&D ratio according to the German Commercial Code was at 6.3% at the end of September. It is significantly higher than prior year, partly due to higher expenditure, but also compounded by lower revenues.
The capitalization ratio for development costs stood at 35.3% after 9 months, evidence of our ongoing commitment to investing in innovation.
Selling and administrative expenses for the third quarter were on par with the previous year, as planned.
And other cost changes include the high 3-digit million euro warranty expenses related to IBS and some smaller compensating items.
Overall, the negative net effect in this position amounts to EUR 500 million compared to the prior year quarter.
Free cash flow in the Automotive segment totaled negative EUR 2.5 million in the third quarter. Earnings before tax contributed around EUR 400 million.
The change in working capital of EUR 1.9 billion reflects the temporary increase in inventory levels, partially compensated by lower receivables.
The net effect of capital expenditure and depreciation reduced free cash flow by EUR 1.2 billion.
Capital expenditure for July to September totaled EUR 2.2 billion. This represents a CapEx ratio of 6.7% for the third quarter and 5.3% for the 9 months period.
A significant portion of our capital expenditure will accrue in the fourth quarter, as in previous years. As a result, we still expect the CapEx ratio for the full year to be over 6%.
At the end of the first 9 months, free cash flow in the Automotive segment totaled negative EUR 200 million.
In line with our guidance, we expect the free cash flow of over EUR 4 billion for the full year despite the planned peak investments in R&D and CapEx.
On the one hand, we anticipate a significant sequential increase in EBT in the final quarter of the year. On the other hand, we also expect a strong positive contribution from the reduction in working capital.
We are making good progress in replacing the affected IBS components worldwide. In addition, we have taken measures to adjust our production. Given these measures and the projected sales volume increase in Q4, we expect inventory to be on previous year's level by the end of 2024.
Net financial assets in the Automotive business totaled close to EUR 40 billion as of September. The NFA position was impacted by the development of free cash flow in the third quarter. The strong free cash flow we are targeting in the fourth quarter will increase our NFA accordingly.
Given our strong balance sheet, the BMW Group remains committed to its shareholder return strategy, which includes both dividend payments and share buybacks.
On October 21, we successfully completed tranche 3 of our ongoing share buyback program. We will continue with this program following the completion of a separate buyback of common shares designated for our employee share program. We anticipate that our current program of EUR 2 billion will be finalized by April next year, more than half a year earlier than initially planned.
Additionally, the Board of management of BMW AG plans to propose an agenda item at the upcoming AGM, seeking a new authorization to acquire treasury shares amounting to up to 10% of share capital for the next 5 years.
Let's move on to the Financial Services segment. The positive trend in new business continued in the third quarter for both new and used vehicles. In the first 9 months, more than 1.25 million new leasing and financing contracts were concluded. This represents a significant increase of 12.5% year-on-year.
The volume of new business, including all new financing and leasing contracts, also saw significant growth of 13.6% to EUR 46.5 billion.
The total value of all contracts managed reached almost EUR 144 billion at the end of September.
Segment earnings for the first 9 months were 12.4% lower year-on-year at EUR 2.15 billion. This decrease resulted mainly from lower income from the resale of end-of-lease vehicles as well as measurement effects related to the evaluation of interest rate derivatives.
During the reporting period, the credit loss ratio stood at 0.26% across the entire credit portfolio.
In the Motorcycles segment, the ongoing competitive situation across core markets affected the volume development. Deliveries experienced a slight year-on-year decrease of 3.2% in the third quarter. Through September, they were on previous year's level.
The segment's third quarter EBIT totaled EUR 27 million. The EBIT margin came in at 3.8% for the third quarter and 9.5% for the 9-month period.
Ladies and gentlemen, in the fourth quarter, we expect the usual seasonality of fixed costs and ongoing muted demand in China, but we will also see volumes well above Q3 and an improved product mix as the completion of technical measures progresses.
Therefore, we confirm the adjusted full year guidance we communicated in September for the group and for all segments.
Group earnings before tax will decrease significantly.
In the Automotive segment, we are planning for a slight decrease in deliveries compared to last year. Our share of all-electric vehicles will increase significantly. We expect to see the EBIT margin in a corridor between 6% and 7%. The return on capital employed should come in between 11% and 13%.
Deliveries in the Motorcycles segment are projected to be on last year's level. The EBIT margin is forecast to be in a range between 6% and 7% with a return on capital employed between 14% and 16%.
In the Financial Services segment, return on equity should be between 15% and 18% for the full year.
Our guidance assumes that geopolitical and macroeconomic conditions will not deteriorate significantly.
Ladies and gentlemen, the BMW Group remains fully focused on achieving our short-term results without compromising our long-term strategic objectives. Our flexible approach allows us to calibrate to changing market dynamics and to constantly fine-tune our cost structures across the company.
At the same time, we remain committed to invest in strategic projects that will secure enduring future success.
Our performance in the third quarter was impacted by onetime headwinds as well as ongoing challenges in the Chinese market. However, the sales development of our all-electric vehicles in the third quarter clearly demonstrates the continued success in implementing our electrification strategy.
This year, we are setting a decisive course for the future of our company. To that end, both research and development spending and capital expenditure will peak in 2024 as planned. We expect our R&D ratio for the full year to exceed 5% with a CapEx ratio of more than 6%.
With the Neue Klasse, we will take a significant step forward in design, battery technology, software and tech stack. This ensures that we will capitalize on the full value generation potential as it rolls out across the whole product portfolio starting at the next -- end of next year.
The Neue Klasse class will shape the future of our company and deliver sustained success for the benefit of all stakeholders. Thank you.
Thank you very much, Walter. Now over to our CEO, Oliver Zipse. Oliver, please go ahead.
Ladies and gentlemen, at the BMW Group, we always focus on opportunities in the current market as well as on our long-term success. We ensure this by acting in a flexible, albeit forward-looking manner.
After the extraordinary challenges in the third quarter, as explained by Walter Mertl, we're already looking ahead. In the fourth quarter, we are back on track for stronger earnings in order to achieve our annual targets despite planned high upfront expenditures. We continuously adapt to changes in our environment without ever reacting rashly. We continue to see our strategic course into the future while avoiding short-term adjustments that could jeopardize our long-term success.
Our commitment to technology openness has proven its value and is paying off today more than ever. Our global positioning across sales, production and our supplier network secures us access to markets worldwide.
BMW is a global company with a strong presence in all relevant economic regions. I regularly take the time to see this for myself. This doesn't work at a distance, but it's best done when you are on the ground. So over the past 3 months, I visited markets in all of our 4 sales regions in Europe, the Americas, in China and our emerging fourth pillar region, which includes Southeast Asia and the Middle East, among others.
Our global approach has often allowed us to compensate for fluctuating demand in individual markets. Of course, we are monitoring current developments in China very closely. The economic conditions there are challenging and that applies to all market participants.
However, it is our ambition to perform better market than our competitors even in a challenging environment. The key to this lies in our highly attractive product lineup. This enabled the BMW brand to deliver solid sales growth in Europe in the first 9 months of the year.
With sales up by over 7%, we are significantly outperforming the total European market and expanding our market share. There was particularly high demand in the U.K. with an increase of 21%; in Spain, plus 19%; in Italy, up 17%; and in France with a gain of 14%. And the BMW brand is also growing in markets such as South Korea, Australia and India.
Global demand for our high-margin models in the upper vehicle segments remains stable. The high-performance cars of BMW M reported sales growth of 2% in the year to the end of September. And this month also sees the market launch of the latest M model many fans have been waiting for, the BMW M5 Touring.
We're constantly expanding our product range across all price variants in line with customer demand. Our highly flexible production network allows us to tap market potential, and this applies in particular to our all-electric models. In virtually every relevant segment, the BMW Group has at least 1 pure electric vehicle. Across BMW, MINI and Rolls-Royce, customers have a choice of more than 15 different models. This means that the BMW Group has one of the broadest ranges of fully electric vehicles among its competitors.
Sales in the first 9 months of the year underscore the success of the BMW Group's electrification strategy. While other manufacturers, including some of that only produce electric cars, are seeing a significant decrease in sales, battery electric vehicles remain a growth driver for us in 2024. By the end of September, we had sold almost 300,000 BEVs, an increase of more than 19% compared to the same period of last year. In the third quarter, battery electric vehicles already accounted for 19% of the BMW Group's total sales.
The BMW brand's fully electric models performed particularly well in Europe with sales climbing 36% in the first 9 months. And globally, BMW's strong BEV portfolio fed growth in deliveries of more than 22%.
The BMW i4 remains the brand's most popular electric vehicle. It is closely followed by the BMW iX1, which like the BMW i7, record double-digit growth.
The first all-electric BMW iX2 is also on track for success following its market launch.
The new all-electric MINI models led by the MINI Cooper SE are also being very well received. With a sales increase of 54%, MINI BEVs experienced highly dynamic growth in the third quarter. And starting this month, the all-electric MINI Aceman will also be available in Europe.
And for the first time, MINI is also electrifying its John Cooper Works variants. The MINI John Cooper Works Electric and the MINI John Cooper Works Aceman celebrated their premier at the Paris Motor Show. Performance and driving dynamics are the clear focal point in both models. From January 2025 onwards, they will captivate even the most dedicated motor sports fans.
Looking ahead to the next year, we anticipate another significant increase in sales of fully and partially electrified vehicles. And for that reason, we see no need to modify or delay the European Union's stricter CO2 fleet targets for 2025. We have been working intensely to meet these new fleet targets for a very long time. We are therefore confident that we will also meet the stricter requirements for 2025, as we have consistently in the last years.
But nevertheless, we believe that a comprehensive and critical review of CO2 fleet legislation in the EU following 2025 is absolutely essential. And what matters most is every tonne of CO2 we can save today, not sometimes in the future. This is why the use of low-CO2 fuels such as e-fuels, E25 or HVO100 should also be revisited. These fuels could immediately improve the carbon footprint of the more than 250 million vehicles already on the road in the European Union.
By 2030, all-electric vehicles will account for more than 50% of our total sales. The rollout of our all-electric Neue Klasse will play an important part in this. The Neue Klasse is now entering the final straight, and we are keeping this forward-looking project on track. With a new design, the next generation of electric drives and a comprehensive digital experience, the Neue Klasse will set completely new standards.
In just under a year, the first series production SAV model of the Neue Klasse will roll off the line at our new plant in Debrecen in Hungary. This will soon be followed by a sporty sedan from our main plant in Munich.
Preparations for the launch are progressing well. In early October, we reached an important milestone in Debrecen with the start of pre-series production. At Plant Landshut, pre-series production of electric engine housing for the Neue Klasse has already begun. And in Munich, construction of the new assembly for the Neue Klasse is progressing in parallel with ongoing production.
With the Neue Klasse, we will elevate our entire vehicle portfolio to a whole new level of innovation. This is possible, thanks to our use of technology clusters, which can be integrated into every future vehicle.
In this way, all our products will benefit from the technological leaps we will achieve with the Neue Klasse cluster. This applies not only to our all-electric vehicles, but across all drive technologies. Our continued systematic implementation of technology openness also ensures that we will continue to offer the latest ICE models in the coming years.
In 2028, we will introduce another element to our drivetrain portfolio, the BMW Group's first series-produced fuel cell vehicle. Hydrogen will play an increasingly important role in decarbonization. This makes vehicles with the fuel cell drivetrain a logical complement to established private technologies.
To develop the new generation of fuel cell drivetrains, we are deepening our long-standing cooperation with Toyota. We announced this in September together with Toyota CEO, Koji Sato. This collaboration also shares the goal of expanding infrastructure for hydrogen fueling and electric vehicle charging.
Ladies and gentlemen, the European automotive industry currently faces fundamentally different challenges from those we have faced in the past. We're not dealing with a singular overarching occurrence. Instead, we are facing a tangle of critical influencing factors that keep growing in number.
In such a phase, we do not need short-term incentives that only create a fleeting impact. What global companies truly need is a reliable and technology-open framework for progress and prosperity. It should be up to each company to find the best technological solutions to meet legal requirements and to further reduce CO2 emissions.
Instead, more and more obstacles are constantly being placed in the way of existing successful technologies. As a result, potential for reducing CO2 emissions cannot be utilized. At the same time, decisions are being made that even harm the industry.
The introduction of tariffs on electric vehicles imported into the EU from China is just one example. Import duties do not make European manufacturers any more competitive. On the contrary, they undermine the business models of companies that operate globally. And since these tariffs mainly affect small electric cars built by European manufacturers, they could even impede the growth of e-mobility. Measures like these are also inconsistent with the EU value of free trade. Free movement of goods is a key success factor for economic growth, not just within the European Union, but also on a global level.
Free trade remains a guiding principle for the BMW Group, and we will continue to advocate for it because protectionism always carries the risk that measures will provoke countermeasures, ultimately hurting everyone involved, rather than benefiting any of them.
We operate as a global player, making it all the more important to maintain our strategy of balanced global positioning. This applies as much to our sales and production network as to our selection of suppliers. We continue to systematically expand our "local for local" approach, making our supply chains more resilient and improving our access to different market regions.
And while Germany's future as an industrial location may be questioned by some, we are making investments here. In Irlbach-Straßkirchen in Bavaria, we are building a new assembly plant for the latest generation of high-voltage batteries. They will be used for the first time in the Neue Klasse. In this way, we are already laying the foundation today for successful growth in the future.
Ladies and gentlemen, the past quarter, we faced a series of extraordinary challenges. One of the BMW Group's biggest strength is our ability to consistently find the right solutions and implement the necessary steps swiftly and efficiently.
Our company maintains a robust global presence. Our strategic direction for the future is solid, and we are carefully adapting our approach to changing conditions, if necessary, and planning for a range of scenarios. We continue to be guided by these developments we can realistically expect to see in different regions of the world.
The fourth quarter will demonstrate that our measures, despite all the ongoing challenges, yield positive results. We, therefore, approached the final quarter of the current financial year with a sense of confidence. We are striking a balance between securing short-term earnings and long-term success. This year, we are investing more than ever in new products, technologies and our plants so that we can continue the BMW success story with the Neue Klasse from next year onwards. Thank you.
Thank you very much, Oliver. Ladies and gentlemen, we now have a short break before we move on to the Q&A session. See you in 5 minutes.