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Bayerische Motoren Werke AG  (OTC:BAMXF)
Q4 2019 Earnings Call
March 19, 2020, 4:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Good morning, ladies and gentlemen. Welcome to our Analyst and Investor Conference. This year, some things are different. First of all, due to the coronavirus, we are meeting online only. Second, we will not have a printed edition of our Annual Report. It will be available on our website. And third, our new Chairman, Oliver Zipse, is here for the very first time. I would now like to welcome Oliver Zipse, Chairman of the Board of Management of BMW AG. And I would also like to welcome Nicolas Peter, Board Member for Finance.

About today's agenda, we will start with a short statement by Oliver about the coronavirus. Then, Nicolas will inform you about our financial performance in 2019 and the outlook for 2020. Afterwards, Oliver will explain how we address current and future challenges. This will be followed by a Q&A. After Oliver and Nicolas have spoken, you will be able to ask your questions via telephone as you know from our quarterly calls.

Ladies and gentlemen, before we start, please note that this conference is subject to the disclaimer regarding forward-looking statements. You will find this in the investor presentation material referred to in this conference. Please also refer to the report on risks and opportunities which you will find in our most recent Annual Report. The BMW Group does not assume any obligation to update these forward-looking statements or the information.

And now, ladies and gentlemen, I would like to hand over to Oliver.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Good morning, ladies and gentlemen. In times like these, we need responsible behavior in society. We find ourselves in highly unusual times. All of us are personally affected. Medical experts and scientists are giving clear directions as to what we need to do to slow and contain the spread of the coronavirus pandemic. The next few weeks will be very critical. Many countries have taken drastic measures which we support. In this situation, as a company, we have diverse responsibilities to protect our employees and their families as best as we can, to support our society in its fight against the virus, and at the same time to maintain our operational capabilities and prepare for what comes after the virus.

We have made far reaching decisions affecting our daily business. Many people are focusing on their health and well-being. And what is most essential right now, in light of this, many dealerships in Europe have already closed. Demand for cars like many other goods will decrease significantly. Our production is geared toward sales development forecasts and we are adjusting our production volumes flexibly in line with demand. Starting yesterday we began to shut down our European and Rosslyn Automotive plants which will close by the end of this week. The interruption of production for these plants is currently planned for four weeks until April 19. The BMW crew has highly flexible and effective work time instruments.

This applies to both direct areas like production, but also in indirect areas such as administration. Now, we will reap the benefits of this. We will continue to ensure our ability to operate as a company. At the same time, we want to reduce the risk of infection for our employees. We have, therefore, put a comprehensive package of measures into effect. The BMW Group knows how to handle difficult situations. We've proven this many, many times in the past. Even in the current situation, we remain cautiously confident. There will be a time during the coronavirus, and there will be a time after the coronavirus. That is why we have decided today to give you an outlook of everything we have planned.

But now, Nicolas Peter will present the figures for the financial year 2019 as well our forecasts for the current year 2020, which we have adjusted at short notice to the current situation. Peter, please.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Ladies and gentlemen, good morning. As Oliver already mentioned, we find ourselves in a highly unusual situation. Although we are well under way in many operational aspects, the measures regarding the coronavirus will impact our business significantly in the current year. Short term, we are focusing especially on stabilizing liquidity and our result. I will say more about this in the forecast at the end of my speech. Basically, the following applies; we are highly adaptable. Our fast and consistent actions make us stand out. Our strategic long-term goals for a stable business environment have not changed. We are targeting an EBIT margin of between 8% and 10% in the Automotive segment and a free cash flow of more than EUR3 billion.

Let's take a look at the previous business year. In a challenging business environment, the BMW group is actively driving the transformation of the industry. In the financial year 2019, we demonstrated once again that we can deliver a strong performance. With new important models, we improved from quarter-to-quarter as promised. As planned, we significantly expanded our market share in the Luxury segment. This gives us a sound financial basis for funding our electro offensive. At the same time, we continue to set all levers in motion as we strive to meet our ambitious long-term profitability targets. Our steadily improving performance during the financial year 2019 shows we are on the right track. As expected, the first quarter of 2019 was stronger than the third quarter.

In fact, in terms of revenues, it was the strongest quarter in our history. In the Automotive segment, we continue to improve both our operating result and our profitability. Several factors contributed to this. First, vehicle sales posted another increase. Second, targeted expansion of our portfolio in the Luxury segment significantly improved our vehicle mix. Our young and very attractive product portfolio is also reflected in better pricing. And finally, our continuous efficiency improvements are also having a significant impact. Despite continuing high expenses for research and development as well as an increased manufacturing cost due to regulatory requirements, the EBIT margin in the Automotive segment was 6.8%. Ladies and gentlemen, as previously announced, we steadily improved our performance after a first half year that was challenging as expected.

Group revenues climbed 7.6% in 2019 to more than EUR104 billion and exceeded EUR100 billion for the first time. This increase was driven in particular by improvements in volumes, mix, and pricing. Adjusted for currency translation effects revenues increased by 6.1%. As previously announced, earnings before tax were significantly lower than the previous year at EUR7.12 billion. In April, the European Commission provided us with a statement of objections relating to its antitrust allegations. In accordance with IFRS standards, we recognized a provision of almost EUR1.4 billion in connection with the proceedings in the first quarter of the year. This had a significant negative impact on earnings. Consequently the EBT margin for the financial year 2019 was 6.8%.

As expected, the financial result also saw a significant decrease. The earnings contribution of our Chinese joint venture, BBA, rose significantly by almost EUR180 million to EUR918 million. This was offset by the earnings of the YOUR NOW companies, value adjustments in connections with their realignment and a net interest result that was around EUR330 million lower due to positive one-time effects in the previous year. In 2018, the acquisition of DriveNow shares from Sixt had a positive effect of EUR209 million. The acquisition of DriveNow shares from Sixt had a positive effect of EUR209 million. Net profit of the BMW Group for 2019 totaled EUR5.02 billion.

Ladies and gentlemen, capital expenditure, mainly for property, plant, and equipment rose to EUR5.65 billion in 2019. This reflects the recognition of right-of-use assets in the balance sheet for the first time according to IFRS 16. The overall capex ratio for the financial year 2019 was 5.4%. This was slightly higher year-on-year. Our research and development spending is also clearly focused on gearing the BMW Group toward the future. For us, the transformation hasn't just begun. We are already in the middle of it. In 2019, R&D costs according to IFRS increased by around EUR630 million to almost EUR6 billion, due, in particular, to higher amortization and a lower ratio of capitalized development cost. The R&D ratio, according to the German Commercial Code was 6.2%.

This was lower than the previous year's high as already announced. Ladies and gentlemen, despite numerous headwinds and the lower financial result, the BMW Group still posted very solid earnings for 2019. The board of management and supervisory board will therefore propose a dividend of EUR2.50 per share of common stock and EUR2.52 per share of preferred stock. This represents a payout ratio of 32.8%, which is higher than last year and remains within our target range of 30% to 40%. Subject to the approval of the Annual General Meeting, the dividend payout will total EUR1.65 billion. Let's turn now to developments in the individual segments starting with the Automotive segment. Segment revenues climbed 6.8% to EUR91.68 billion benefiting from positive model mix effects and strong business in China. Deliveries to customers topped 2.5 million vehicles for the first time.

As expected, the operating result decreased to just under EUR4.5 billion mainly due to the provision referred to. The EBIT margin of 4.9% was within our adjusted target range. Without the effect of the provision, the margin would be 6.4%. Let's take a look at the EBIT bridge from the previous years. The greatly improved product mix had a positive impact in 2019 specifically the new X7 and X8 series and the updated X5 are proving very popular with customers. We were also able to improve pricing slightly in key markets. Research and development expenses were over EUR600 million higher than the previous year. Higher manufacturing costs resulting from regulatory requirements also dampened earnings as did the planned increase in depreciation and amortization.

We also experienced headwinds as expected from the negative development of around EUR650 million in currency and commodity prices. We were able to offset much of these headwinds with ongoing efficiency measures and optimization of our sales activities. However, this was counteracted by the provision for antitrust allegations included in other operating income and expenses. Ladies and gentlemen, we have once again set clear targets for 2020. Profitability and free cash flow are high priorities for steering the company. All measures and initiatives under our ongoing Performance NEXT program are geared in this direction. On the sales side, in material costs and indirect purchasing, we will continue to work all levers.

As far as personnel costs are concerned, we have successfully taken measures early and in recent months have agreed on the long-term package of measures with the Works Council and additional tailwind resulted from changes to the pension scheme for employees in the U.S. With regard to free cash flow, we are specifically concentrating on capital expenditure and consistent management of all aspects of working capital. Ladies and gentlemen, despite the continued high level of investments in future technologies and lower net profit, free cash flow in the Automotive segment remains at a solid level, almost on a par with last year at EUR2.57 billion. Our liquidity also developed very favorably in 2019. Adequate liquidity reserves ensure we are always able to take action and safeguard our independence as a company. At the end of the year, our liquidity totaled EUR17.4 billion euros. This sends a clear message to our investors and lays strong foundation for further growth in our Financial Services business.

Ladies and gentlemen, let's move on to the Financial Services segment. Pre-tax earnings reflected the positive business development and rose 6% to reach a new all-time high of EUR2.27 billion. The return on equity of 15% was on a par with last year at forecast, and once again exceeded our minimum requirement of at least 14%. Despite sustained political and economic uncertainty, the risk situation in the segment stayed stable throughout the past year. We make comprehensive provisions for our main business risks on an ongoing basis. The current developments regarding the coronavirus, within our estimation, likely impact the risk situation in 2020. Based on current assessments, we continue to be appropriately hedged against residual value and credit risks.

Ladies and gentlemen, let's turn now to the Motorcycle segment. Deliveries saw solid growth as planned with over 175,000 units sold. This was our ninth consecutive sales record. Pre-tax segment earnings totaled EUR187 million, an increase of EUR18 million compared with the previous year. The EBIT margin was 8.2% and once again within our target range of 8% to 10%. Finally, let's look at earnings in the Other Entities segment and intersegment eliminations. The combined result was around EUR146 million lower than the previous year. This development is partly the result of fluctuations in the market value of the interest rate derivatives we used to hedge our Financial Services portfolio. Intersegment eliminations were also affected by the growth in our new leasing business.

Ladies and gentlemen, through continuous optimization of our core business, we are systematically solidifying our financial strengths. We are growing in the right segments, setting clear priorities and funding the continuing ramp-up of emission-free mobility. In 2020, we will again make high upfront investments in further development of e-mobility, autonomous driving, and vehicle connectivity. We are also implementing the measures needed to meet European CO2 regulations. The current uncertainty surrounding future worldwide developments impacted by the coronavirus makes it very difficult to provide an accurate forecast for 2020. According to the latest developments, our guidance for the full year assumes that the sales situation will deteriorate in all major markets.

Here is the assumption that the sales situation in all markets will begin to normalize again after a few weeks. Possible long-term impacts as a consequence of the spreading of the coronavirus and the resulting volatility of financial markets cannot currently be estimated and are, therefore, not included in our forecast. Ladies and gentlemen, let's take a look at the forecast for the individual KPIs. With our very young attractive model line-up, we are in an excellent position for 2020. Our ongoing efforts to improve both on the cost and the performance side will make an important contribution to earnings. As the prior year was burdened by the antitrust provision, there will be a positive effect this year in comparison 2019.

Before the coronavirus, we expected group earnings before tax to increase significantly. However, due to the impact of the worldwide spreading of the virus, we now expect group earnings before tax to decrease significantly. The number of employees will remain on par with 2019 for the current year. From reporting year 2020, only core employees and employees with limited contract will be included in the figures reported. Due to the availability of new models like the 8 Series, the X5, the X6, X7, the new 3 Series, and the new 1 Series, we originally expected deliveries to customers in the Automotive segment to increase slightly over last year. However, the spreading of the coronavirus has stopped growth in vehicle sales worldwide.

As the number of infected people continue to rise in all world regions especially in Europe and North America at the moment, we now expect our worldwide deliveries to decrease significantly from last year. Our original planning called for an EBIT margin of between 6% and 8% in the Automotive segment for 2020. Due to the deterioration in the sales situation in China and an already visible similar development in other world regions, we anticipate a debiting effect especially in the first half year. This will, therefore, impact the EBIT margin for the full year by about 4 percentage points. As a result, in our current planning, we now expect the EBIT margin to be in the range of 2% to 4%. The revised earnings expectations will also have an effect on free cash flow in the current year.

Originally, we expected a free cash flow of more than EUR3 billion. Our current assessment for 2020 indicates a positive free cash flow generation. A possible cash outflow in connection with the antitrust allegations by the European Commission is not included in this assessment. In the Motorcycle segment, we are planning for a slight decrease in deliveries. We expect the EBIT margin to be in the range of 6% to 8%. In the Financial Services segment, we now expect a slight decrease in return on equity, mainly due to higher risk provision.

Ladies and gentlemen, we are monitoring the situation regarding the coronavirus very closely and we will continue to update you on the precise impact on our business, in particular in light of the challenges I talked about. We will continue to focus on profitability and strict working capital management. Both are key to being able to invest independently in new technologies and opportunities. I would have really enjoyed meeting all of you today in person so we could discuss everything face-to-face. However in these times, it is not possible. But I'm really looking forward to further discuss over the phone later on.

With that, let me handover to our Chairman of the Board, Oliver, the stage is yours. Thank you.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Ladies and gentlemen, the topic of the coronavirus is currently dominating all areas of our lives. However, we must also think ahead to the time that comes afterwards. The BMW Group is a company that thinks long-term and acts responsibly. And I firmly believe that the far-reaching technological transformation and the social changes currently taking place will actually strengthen our business model. Despite the coronavirus, our ambition is clear to emerge as a winner and driver of this transformation. Profitability remains essential for capitalizing on future opportunities. And this is what we aim to do. We will invest more than EUR30 billion in research and development by 2025. We firmly believe we can continue to drive transformation and offer appropriate solutions for our customers.

I took over as Chairman of the Board of Management seven month ago. I have spoken with a lot of people since then, associates, peers and colleagues within the industry, journalists, political representatives and of course with you, investors and financial analysts. Many people are uncertain about the future prospects of our industry and in actual fact, the challenges are immense. For one thing because each of these challenges is immense in itself and also because a wide range of different demands must be managed well at the same time. But being successful is not just about mastering individual technologies perfectly. The most important aspect that is crucial to long-term success at the highest level on top of everything else is our focus cannot be on a singular approach.

We need to meet diverse and very complex requirements at the same time under constantly changing conditions. This, if you like, is the central management challenge of the 21st century. A good example of this is how we determine our strategy. On the one hand, our business environment is shaped by stable trends, for example, the growth forecast for the Global Premium segment up to 2030 or faster uptake of e-mobility and other historically important drivers for car ownership like household size, income and location. And on the other hand there's uncertain developments in the world, which require a swift and quick response such as trade conflicts, Brexit or now the impact of the coronavirus. Defining our strategy is a constant and ongoing task for us every day, every week.

The Board of Management has geared the BMW Group strategy toward the relevant areas of future significance and adjusted some core elements already. We have defined a clear position for ourselves. What does the BMW Group stand for? We take on business and environmental and societal challenges at the same time. At the BMW Group, we continue to chart our own course. We do things the way we think they should be done based on our own conclusions, and we tackle challenges early on because we believe in delivering instead of just talking. What are the most dominant questions facing our industry and what sets exactly the BMW Group apart? How can we continue to lead in a fiercely competitive car market?

Our vehicles are more in demand than ever. In 2019, not long ago, we posted record sales for the ninth consecutive year with new all-time highs for our BMW Rolls-Royce and BMW Motorrad brands. But how can we meet strict CO2 targets specifically in Europe? Today, we are one of the world's leading car companies in the fields of electrification. In 2019, we delivered more than 146,000 electric vehicles and plug-in hybrids to our customers. By the end of the year, we had more than 0.5 million electrified vehicles on the road already. And now, we are winning over customers with attractive new models. For example, the MINI Cooper SE was released just a few days ago. We've already received more than 8,000 orders. Most of the people who placed these orders did not previously drive a MINI. How can we manage the co-existence of different technology in an efficient and intelligent manner?

We are installing modular, scalable, and intelligent architectures in our plants. And because of this, we're able to scale production quickly and flexibly to meet demand. We currently build electrified vehicles at 11 of our plants already. Customers will always get a true BMW or MINI whichever drivetrain they choose. What is the right way to steer employee numbers through this transformation? We will keep employee numbers stable. We are qualifying staff for our new tasks on an ongoing basis. One in three employees has been trained in e-mobility. That adds up to more than 46,000. Where can we find IT talents and software know-how? The BMW is one of the biggest IT employers in Germany. Some 7,200 employees work in IT and software alone, and another 5,600 employees at the company were trained in data analytics. In 2018, we established the joint venture Critical TechWorks in Portugal with more than 600 employees to secure exactly these skills.

How do we maintain long-term profitability? We launched the program Performance>NEXT back in 2017, almost three years ago. This will leverage at least EUR12 billion in efficiency potential by the end of 2022. The BMW Group still has the best long-term ratings of any European car company. How can we offset regional fluctuations and stay efficient? Our production network of 31 locations in 15 countries is highly flexible. We are located close to customers and can take therefore advantage of potential for growth in these markets at short notice. Where do we get better results from and how do we secure the raw materials needed for e-mobility?

We have long-term supply contracts with CATL and Samsung SDI. Starting this year, we will be sourcing the key raw materials, mainly cobalt and lithium, ourselves and making them available to our suppliers. In a nutshell, we are about delivering long-term viable solutions. We know what we are doing and why we are doing it. I believe the decisive factor in securing our future business is being able to further develop the highly complex and digitally connected car to benefit customers and meet changing society demands. We call this system integration. Here's a short film to tell you more.

Well, the car is the most complex technical overall system you can buy as a customer today. Today's vehicle manufacturing is less about bending sheet metal, but more about integrating hard and software to create a harmonious overall driving experience. To achieve this, we integrate market requirements, regulations, and customer requests and technologies. First, we industrialize and then we scale. All this capability must fit together smoothly and precisely to the point. And the complexity just keeps on growing. The transformation in the Automotive industry is taking place amid growing and concurrent requirements. We have the expertise and experience it takes to master this rising complexity. We see this as a definite competitive advantage for us. And all of this, of course, will benefit our customers.

The car enables individual mobility and allows for a sphere of privacy like no other mode of transport, very important today. Customers' mobility demands vary increasingly between different regions of the world, and different countries, and also between urban and rural areas. Different drive technologies will co-exist alongside one another into the long term. Therefore, we are firmly convinced of this. We don't want to tell our customers what to do. We want to truly convince them about our approach. And this is what we call the power of choice, and this is what it's all about. The popular BMW X3 is a very good example for this. Starting this year, it will be able with -- it will be available with four different drivetrain variants, efficient diesel and petrol, plug-in hybrid, and also as the pure electric iX3. We are producing the iX3 in China and exporting it from there.

We will also offer future model series with different drivetrains. And I can tell you officially today that our BMW 7 Series flagship will be one of them. The next-generation 7 Series will be also available as petrol, diesel, plug-in hybrid, and as full electric. All drivetrains will be based on a single architecture. And on top, the top most powerful 7 Series will be also fully electric. The BMW i14 concept car, which you see here is right here on stage. I can confirm again today the design is very close to the production model we will release onto the market next year already. The i4 will be built at our plant here in Munich. The fully electric i4 and the conventionally powered BMW 4 Series Gran Coupe will come off the same production line.

The i4 demonstrates that you cannot divide our industry into electric cars and cars with conventional engines. Both of them have their place. The i4 is powered by the fifth generation of our electric drivetrain, which is a completely new unit we developed ourselves. Our electric engines no longer need rare earth. The i4 is just a taste of what is to come. In 2021, we will launch the iNEXT, which will be built at our plant in Dingolfing here at Bavaria. And it is the next milestone, fully electric and at the same time enabled for highly automated driving with Level 3 functions for motorways. You're already familiar with our roadmap. We aim to have a quarter of our European new vehicle fleet electrified in 2021, a third in 2025, and half in 2030. BMW clearly leads the market for electrified vehicles in Germany with a share of 21%.

In 2019, the average share of battery electric vehicles and plug-in hybrids in the EU plus Norway was 3%. The BMW Group figure was more than twice as high in Europe. By the end of 2019, we had delivered a total of more than 330,000 plug-in hybrids to customers. And these will now be joined by more new BMW models, the X1, X2, and 3 Series Touring to follow the 3 Series Sedan. And we're making it easier for our customers to use them effectively. BMW eDrive Zones went live on 12th of March, just last week, in the first six countries with more cities and countries to be added over the course of this year. Our new plug-in hybrids automatically switch to electric mode whenever they drive into a green or blue zone of a city center.

We have programmed around 80 cities for the start including all major cities with green zones here in Germany but also cities in the Netherlands, Belgium, France, Austria, or Switzerland. E-mobility continues to gain ground. However, the conventional engine remains the best drivetrain choice for a lot of people's mobility needs in many regions of the world. That is why it makes still a lot of sense to continue improving our combustion engines' efficiency. We're driving climate protection in all vehicle segments and with all drivetrains. This is how we are defining responsibility. We're now stepping up electrification by introducing an additional component.

We will be systematically rolling out our 48-volt mild hybrid system throughout our combustion engine fleet. We are deliberately starting with our highest volume engine variants. This saves up to 0.4 liters per 100 kilometers, which has -- to up to nine grams less CO2 per kilometer depending on the vehicle and engine variant. And all these measures show that we take climate protection seriously. That is why we are already able to say we want to meet Europe's CO2 targets for 2020 and also 2021. And in simple terms, this is how we want to meet the 2020 CO2 fleet target, with conventional vehicle measures contributing one-third and two-thirds coming from e-mobility. Climate protection has the biggest impact when it is actually implemented and swiftly and quickly, and also, when customers want it and use the technologies on offer. And our understanding of responsibility has always been about the entire value chain.

This is nothing new for us. We've already achieved nearly all the sustainability goals for 2020 we set ourselves back in 2012. We continue to be clearly committed to the Paris Climate Agreement. Currently, we're discussing next steps in the board of management and our thinking is clearly headed in this direction. We will get much more involved in upstream supply chains and take a very close look at our tendering processes in terms of sustainability. Of course, we will continue to work together in partnership with our suppliers around the world in a fair manner. The same applies to our sustainability strategy as to our IT strategy. Both are anchored in our corporate strategy framework.

This means sustainable actions and IT are automatically channeled into all areas of the company very quickly and already today, the BMW Group is a digital company. We put all our employees from the worker on the assembly line to our board of management members in a position to make data-driven decisions in the interest of our customers and the company. Services enhance our mobility offer. Our mobility powerhouse YOUR NOW was created last year in 2019. In collaboration with the Daimler Group, we want to play a major role in this highly dynamic market. And we remain fully convinced of the potential of YOUR NOW. That is why we are making investments to expand our product and service offering in the field of mobility services.

Your Now is therefore open to other partners and investors so we can continuously successfully expand this business. Ladies and gentlemen, the BMW group is a strong innovative company. The customer is the focus of everything we do. We've updated nearly all Series over the last two years. They will be joined this year by new models like the BMW 2 Series Gran Coupe, highly profitable BMW M models, new plug-in hybrids, and of course, electric models. There's something for every customer. And we are challenging the competition in every single segment. At the moment though, for all of us, our first priority as a society and as a company is to overcome the corona pandemic and then to find our way back to normal life.

I sincerely wish that you and your families stay healthy. Thank you very much.

Questions and Answers:

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Oliver and Nicolas. Ladies and gentlemen, this year, your questions will be taken here in the room via telephone. We are streaming around the world. And so, please understand if there are minor technical delays. We don't expect this to happen. However, should the connection break up, you can also send your questions per email, ir@bmwgroup.com. And now, ladies and gentlemen, the line is open for your question.

Operator

[Operator Instructions] And the first question is from Dorothee Cresswell, Barclays. Your line is now open. Please go ahead.

Dorothee Cresswell -- Barclays -- Analyst

Hi, there, and thank you for taking my question. My first question is around capex and R&D in 2020. I think yesterday, you mentioned that capex and R&D would for now prioritize investments in the technologies of the future. So I wondered whether you could help us to quantify that a bit. How much could you cut those two items back this year to protect your free cash flow?

And my second question is around China. It seems that the auto market is coming back up for air. Could you tell us to what extent production has reramped for BMW? How many shifts are you operating? And also, how much of the production did you lost in February? Can you make up later in the year if you add extra shift? And perhaps you could tell us what you will see on the demand side in China.

And then finally, I wondered are you expecting any government support measures in Europe? It sounds like you're less convinced that we'll see a relaxation of the 2020 CO2 targets. But could you comment on the potential for a scrappage scheme. Thank you so much.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Dorothee. The right question for the starting point for Nicolas. We start with the first part of the question with Nicolas and then Oliver. Nicolas, please.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Okay. As I -- Dorothee, as I said, capex was planned to go down below the target of 5% in 2020. And as you can imagine, in a very specific unusual situation as we are in today, what do we do? We review our plans, and I would say we have more or less three categories. We will maintain certain elements. We will, of course, check whether we can postpone the one or the other item, or maybe, as I said, even something we simply will discontinue. So this is definitely what I would call now daily prioritization and monitoring of the situation. And this is extremely relevant and important exactly for the reason you've mentioned, to protect our free cash flow. So on free cash flow, we have a very vigorous implementation of the relevant performance measures. They are already implemented. We are working, and you've seen this already in the fourth quarter with a strong free cash flow of around EUR1.5 billion in the fourth quarter, working capital going down in the fourth quarter. And of course, we will -- in this light, we view the investment requirements as described.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Dorothee, if I may continue on China, we monitor the situation in China very closely because it could be a blueprint for what could happen in the rest of the world. What happened in China that we saw an abrupt downturn of the market, end of January, early February. That of course diminished the sales volume to -- down to 10% of what the market volume was normally. In March, it already improved substantially. We are currently about 60% of the normal volume. And we expect currently that by the end of April, we could see a normalization of the market.

I think what is very important to understand is, it is not market demand so much which led to the lowering of the market. It was almost exclusively the forced shutdown of all sales outlets. And that is important to understand, also for the rest of the world, what is forced closures and what is actual market demand. The market demand is fairly robust, also in Europe, by the way. So, that's -- I think that's to frame that, of course, with that market downturn, we also extended the closure of our plants in Shenyang, two plants running up there, and extended the Chinese New Year break two, three weeks. The plants are currently running quite normally with a slightly reduced volume, but they are all running. And we don't currently have, in the structure, not a single corona case among our employees. So it's quite stable up there.

And of course, I think that's also something to learn. It's not about closing the plants. It's about providing a workplace which is safe to get infected with a corona case. So we try to create very safe places and with a lot of measures we've taken there. After April, what could happen? Since we see that the market demand is fairly stable, we could -- but that's too early to say -- we could even think about an increased market demand to compensate what we lost in February and March, but that remains to be seen. So, I think China is a good blueprint what could happen. And currently, the supply chains for our plants in China, as far as we can see it, are stable.

Your next question, Dorothee, was about CO2 targets, government support. I think this is not on the table right now because, first of all, what is happening with the coronavirus is -- needs our full attention of what we need to do. And I think, our commitment to 2050 to create a new environment in Europe with the Green Deal and our commitment to do everything possible to support that, that is unchanged. And so, currently, we are not -- we will not request any postponement of any CO2 requirements we have agreed to.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Dorothee, if I may add on the last topic, we've seen our xEV, so our electric and plug-in hybrid, sales in the first two months going up by around 26% in the year-on-year comparison.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Good. Thank you very much, Dorothee. Next question, please.

Operator

The next question is from Tim Rokossa, Deutsche Bank. Your line is now open. Please go ahead.

Tim Rokossa -- Deutsche Bank -- Analyst

Yes, good morning, everyone. Thank you for taking my questions. I'm afraid, given all the world has changed, they will also be primarily about the corona impact. First of all, thank you for quantifying what you think will be the impact for the full year. Not many companies feel in a position to do so. Can you help us understand how you get to that number? Specifically, how should we think about the quarterly development in your planning right now? Could Q2 be even loss making with all the sudden shutdowns? And also, what happens when you do shut down a plant? What happens with your cash cost and working capital situation? Is there any way that you can help us understand that a bit?

And then secondly, when we think about liquidity, we obviously have the numbers from the annual report. Have those changed materially year-to-date? How much gross cash do you have, how much in credit lines, and why wouldn't this year be a reasonable time to think about not paying a dividend that you have suggested yesterday? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Tim, for your comments. Thank you very much, and we start with Nicolas.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Tim, so what do you do as a company in such type of situation? You work in scenarios in order to quantify the impact of the coronavirus. So what did we do? We've developed -- we used China, as Oliver said, as a blueprint. The situation in China started mid of December to slightly deteriorate. We had a very strong January in a declining market in China. February, already, yeah, down by between 80% and 90%. However, in March, we are back to two-third of our regular volume. And this -- using this as a blueprint, we've identified three different scenarios: one, what I would call an optimistic best possible scenario; one, then, very pessimistic; and the middle one, as you can imagine and what I would call a likely scenario. And this scenario, of course, not only includes volume impact, it includes what could happen on the service side, parts business, what about used car prices, residual values and so on. And this was then developed for all three major regions, Asia, Europe and of course the US.

If we look at our cash situation, as I said, we have around EUR17.4 [Phonetic] billion liquidity at the end of 2019. This has not specifically changed. It even slightly improved in 2019 despite the EUR2.3 billion dividend payout last year. And of course, as you can imagine, we've discussed what to do with the dividend payment, but we are confident that with our very strict liquidity management on the one hand side, with the measures we have already implemented in all parts of the organization that we will be able to manage this situation without cutting or paying no dividend in 2020.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

So I think, Oliver, you would like to add something?

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Tim, when you shut down a plant, I think it's crucial that your cost curve follows the lowering demand curve on the volume side. And that, of course, means that you're -- that everything, where you have a cash outflow, you must manage. And that is mainly, you have to manage very closely your stock levels, that you don't over produce. And that is why we already said today that we quickly ramped down our European plants and Rosslyn and stay in that mode for the next four weeks. I think that was important that we swiftly made that decision.

Second big cash outflow is salary payments. And I think with our flexibility measures we have in our European plants, work home [Phonetic] accounts, we will demand from most of our employees to take a vacation and so on. So we keep that cost factor under control. And then, if you ramp up and down, it is adamant that you keep our supply chains under control that the obsolescence which is created by this up and down is minimized. And I think we have a lot of practice in ramping up and down due to our individualized product structure.

And lastly, I think we will use that time. The plants won't stay idle during that time, but we will use these four weeks to do everything possible to rebuild the factories for e-mobility. Some of it, it has been planned during that period anyway. But we will pull something forward. Things we have planned for summer, we will do now. Those -- I think with these four measures, we will minimize the effect on our cash flow.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Oliver. Now, we have a very interesting discussion. Nicolas, I think, you would like to add also something.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Tim, I think I missed one part of your question you've asked. What is the impact quarter-by-quarter? On one hand side, of course, you know, we are not guiding quarter by quarter. However, as you can imagine, looking at our guidance, 2% to 5% [Phonetic] for the full year, we will see an impact -- in particular, an impact in the first half of the year. China already happened. Europe is impacting now March and, of course, very much April. And we forecast in our guidance a stronger second half year of 2020.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

So, thank you very much, Tim. Next question, please.

Operator

The next question is from our Horst Schneider, Bank of America. Your line is now open. Please go ahead.

Horst Schneider -- Bank of America -- Analyst

Yes, hello, and thanks for taking also my questions. I hope you can hear me. I have got two ones, please. And the first one is, maybe you can tell us what was your unit sales growth in January and February on a global basis. It would be good to know since you don't report your monthly gross anymore. And maybe also you can tell us what is the likely number for March.

Then second question that I have is, what is a good assumption regarding fixed cost per car, just a rough number? Is it more toward 20% or more toward 30%? And last one that I have is, now since everything is coming under pressure and you still have got a great net liquidity, do you think it's now come the time to look finally for some M&A opportunities? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Horst. This question will be answered by Nicolas.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Horst, you rightly said, we are not communicating monthly sales. However, what I am very happy to share is, if you exclude China, we are [Indecipherable] in January and February on a really good way in all other sales regions. China, as I already mentioned, was significantly down in February. And as a guidance for the full year, as I said, is that we will be significantly down compared to the previous year.

Net liquidity, clear focus, Horst, is on our core business. We are, as an organization, probably in one of the strongest position in our industry. Why, because on one hand side, we are leading in terms of technology and we have a very, very flexible -- and which proves exactly in those days to be a key element, we have a very flexible production network.

Fixed costs, as you can imagine, we've already worked extremely hard and in a consequent manner in the last years to reduce fixed costs in the whole organization. And we will, of course in such type of environment, accelerate those efforts.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Nicolas. Next question, please. I think the Chairman would like to add also.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

I think we missed the M&A question from Horst. He asked whether M&A is important to us. I think to give you a quick response to that, I think we had some M&A experience some years ago. And so, we are of course cautiously with these actions. I think -- and I can only speak for us. There's currently no sense nor any need to do any M&A activities on the top level of the industry, meaning that one company overtakes the other. That doesn't make sense. But below that, where you talk about components, where you talk about competencies, where you talk about parts of the processes, I think that is a continuous -- looking at the current situation and look for cooperations, you know that we are cooperating with Daimler on the autonomous driving components. You know that we have our i Ventures arm, who looks at opportunities on the component and competence level. And of course, that is going on all the time, to either acquire some competencies or to leverage our own competencies with specific partnerships, and that is of course is still going on.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Horst. Next question, please.

Operator

The next question is from Ashlee Ramanathan, Redburn. Your line is now open. Please go ahead.

Ashlee Ramanathan -- Redburn -- Analyst

Good morning, and thank you very much for taking my questions. It's Ashlee here from Redburn. My first question is just on trying to understand and quantify the cash burn that we're seeing in the current corona situation. So what we've seen is you were planning pre-corona to guide to the market of in excess of EUR3 billion of free cash flow. Now, we are speaking of a positive amount. So, if we take the lower end of that, that is roughly EUR3 billion of cash burn from, call it, seven weeks of disruption. So my first question is, are you willing to communicate a minimum level of net cash that you want to hold in your industrial division, maybe EUR10 billion? And secondly, how quickly do we get into a scenario where cash levels become an issue, again, thinking back to the math I just described of a EUR3 billion cash burn from roughly seven weeks of disruption?

And secondly, my question is on restructuring. How will the corona situation impact your restructuring program? Will it hinder it? Will it accelerate the program? And can you remind us of what you had or you currently expect as your EBIT bridge impact in 2020? I think you've previously said a mid-triple-digit figure. You mentioned in your remarks that there are some long-term packages that have been agreed. Maybe you can elaborate on that.

And then very finally, just to add on to Dorothee's question on the China business, are you able to tell us how much inventory of the X5 and X7 currently sit in China or is on its way to China? I'm now thinking as we look to plant shutdowns going West toward the US and the impact that would have on some very high margin sales you have in the region. Thank you very much.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Ashlee. I think we start first of all with Nicolas.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Ashlee, we have -- as I said, we have a very systematic liquidity management, which includes what I would call a liquidity risk concept. And this of course includes and going [Phonetic] concern approach in a crisis. So now, from my perspective, it doesn't make a lot of sense to communicate an absolute minimum level of cash as we are continuously rolling over our planning in such type of environment. We calculate this internally over a defined period a of time. And the fact that we have the second best rating in the industry, the best rating of all European OEMs, I believe is definitely confirming our approach.

Regarding free cash flow development, of course, in our scenario, there will be an impact in the first and second quarter. But our assumption, as we've described, is that markets will pick up afterwards, and this of course and will help to further -- to improve free cash flow again. Clear focus in such type of environment is focusing on working capital management. The organization handled this extremely well back in the financial crisis more than 10 years ago.

And regarding your question about restructuring measures, as you can imagine, we've -- and you know, we have our Performance > NEXT program now running since a little bit more than two years, three years, and we of course will reinforce the program in some areas.

Regarding...

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

You can start with the inventory of the X5, and then, Oliver -- OK, Oliver. Okay.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Ashlee, the character of this corona crisis is that the demand is fairly stable. Meaning, as soon as dealers are reopening, demand is almost continuing as before. And currently, our Spartanburg plant is up and running. It hasn't been stopped, and so currently, the inventory levels over to China is very intact. How long that condition will stay? We don't know. We foresee that at least for another week, we will be able to keep the Spartanburg plant running. And then, it all depends on the political developments in the United States at -- the plant running. South Carolina, where the plants -- and it's not one of the hot spots of the coronavirus currently in the United States. So we will have to see then.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Okay. Next question, please.

Operator

The next question is from Tom Narayan, RBC. Your line is now open. Please go ahead.

Tom Narayan -- RBC Capital Markets -- Analyst

Hi, yeah, Tom Narayan. Thanks for taking the question. Maybe a follow-up on Ashlee's question and ask it in a different way, what happens to working capital in a downturn for you? Maybe you could look at historical precedent, perhaps what happened in 2009. Presumably inventories could be a source of cash, maybe not so much for accounts payable. Just maybe -- just any high-level color on how you see -- how we should think about that for our modeling? And obviously, it's a huge swing factor.

And then a follow-up on the CO2 question, I know you said you're not going to request a postponement. I was just wondering why not. Presumably, we've heard from one of your peers yesterday that battery prices are coming down. Perhaps consumer adoption of EVs -- giving it a little bit more time could be beneficial for you guys, maybe less margin dilutive. Just maybe some more color why not ask for a postponement on C2. We've heard from the German Chancellor, this is the greatest calamity since World War II that's happening to us. Maybe folks are looking at other things besides complying with CO2 this year. Thanks.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Okay. Thank you very much, Tom. I think we start with your question on CO2 again, and Oliver would like to say something about it.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Tom, I think the greatest challenge since World War II is changing by the week. Some four weeks ago, I think the greatest challenge was climate change, and that is still around. And we are convicted that CO2 emissions have to be reduced. That doesn't change even during the corona crisis, and we are prepared. We have business contracts with battery suppliers for the next five years. We have the right cars. For us, there is no need to step out of commitments we made still some four weeks ago. So from us, I think it's not -- because there will be a world after the corona crisis, and we will have the same discussion again. So I think we stick to our commitments, and I think this is the best way for us.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Oliver. The first part of the question was about the working capital in downturn. Nicolas?

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Tom, why are we investing so much money in the flexibility of our plants, exactly to be prepared in situations like today, to react very fast. Our guiding principle is that production follows market demand, and this is why we've very fast reacted now with the plants -- with a shutdown in Europe for five weeks. This is exactly what we did during the financial crisis. Of course, it's extremely difficult today to forecast precisely month by month. But as you can imagine, we've leaned fast in the framework of our Performance > NEXT program, the focus on working capital, and in particular, also supply chain. And we are addressing KPIs like DIO and DSO in a very stringent and systematic way.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Tom. Next question, please.

Operator

The next question is from Patrick Hummel, UBS. Your line is now open. Please go ahead.

Patrick Hummel -- UBS -- Analyst

Hi, good morning. It's Patrick from UBS here. Thanks for taking my questions. Just a very brief one on CO2, very simple. Can you share your CO2 emissions in the EU year-to-date with us?

And second question for Oliver, you emphasized several times that you think demand is not the issue and you see demand is still there. As much as we all I think like to believe in your scenario that we can use China as a blueprint and things will be back to normal everywhere by summer. There are some severe recession risks on the horizon that we can't just completely ignore it.

So I'm just wondering what gives you the confidence to say at a time when showrooms in most Western world markets are closed or will be closed to say that demand is still there. And more specifically, can you comment a little bit, as far as Europe is concerned, about how the fleet segment is behaving? Is that going more or less normal because you have the typical three-year leasing contracts that are rolling over or what's going on in fleet versus retail? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Yes, thank you very much, Patrick. Excellent question. We start with Oliver and then, Nicolas. Yes, Oliver, please.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Yes, as we said before, customer demand for electrified vehicles and also new combustion engines in Europe was very stable in January, and also February, it was slightly above our planning premises. And so we are right on track achieving these targets. And I think as you know, we have to achieve at least 104 grams.

I think, overall, we are a little bit ahead of that. But of course, we also want to have a little buffer in there. So all we can say now it's still only mid-March. But I think we shouldn't be at this point in time at least, even if volumes go down, the share of vehicles that pay into our CO2 levels, I think that is not diminishing so far, even if complete volumes go down. So we are right on target with that.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Nicolas?

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Patrick, taking first your question regarding China as a blueprint, as I've tried to describe, we had, on one hand, China as a blueprint, but we've worked of course in different type of scenarios and we didn't use exactly, exactly the same scenario for Europe and the U.S. as we've used form China, but from China we know approximately what could happen.

And is this a 100% confidence that this is exactly going to happen? Of course not, of course not. This is what we believe as of today being the most likely scenario. However, we have included in this scenario more elements than just how is the market developing. We have included -- as I said earlier, we have included impact on Financial Services. We have included impact on our parts business and so on.

Regarding how are the different segments, to your third question, how are the different segments developing in Europe. Of course, as you can imagine, this segment which immediately reacted and we already see in the reaction is the rental business, rental companies. So this is of course something we've integrated in our scenarios.

And the second element is that we assume that it's not black and white in Europe regarding the fleet business. We will have fleet business which will recover faster than some other company. So this is an element we've included as well in our calculation.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

So, thank you very much, Patrick. Next question please.

Operator

The next question is from Stephen Reitman, Societe Generale. Your line is now open. Please go ahead.

Stephen Reitman -- Societe Generale -- Analyst

Yes, good morning. Thank you for taking my questions. I have three. The first one regarding the guidance you've given us. First of all, thank you for giving some precise guidance over the 2 points to 4 points impact. I think you've given some indication that the optimistic scenario of sort of four week shutdown and then kind of return to normality, following the China model, does that suggests that it's like a 2-point margin hit. I'm kind of interested, what is the -- where do you get the 4 points, how far would that stretch in terms of shutdowns and issues in the market?

My second question is about the -- is about electrification and specifically you're a major shareholder in IONITY. IONITY changed its charging structure in January, charging for kilowatt hour, which has led to very high charges. Now I know that obviously is -- if you're a BMW driver, you will be able to subscribe to a discount.

But how do you think the field that fits into the whole ecosystem of charging, which everyone says has to be expanded and made more attractive that putting higher prices on this thing is certainly doesn't aid the case and probably plays to one of total advantages with its supercharging network, which will be at lower prices.

And my third question is about -- also about your car architectures. You are also looking to reduce complexity to your vehicle architectures or to reduce some of the ECUs in your product, when are we going to see the first fruits of this with -- is it going to be iNEXT or it is already king of seeing in vehicles like the iX3? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Stephen. So we start with Nicolas and then Oliver with the second part of the question. Yes, Nicolas, please to the guidance 2020.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Steven, maybe I should be -- try to be more precise, what we've guided is 2% to 4% EBIT margin and the impact being 5% and the 5% are not based on a worldwide optimistic scenario. They are based what we would call a realistic, most likely scenario. And of course, why do -- why do we guide on range? Because we have other elements which we have to include how is FX developing? How are raw material prices developing? What about the share of xEVs and so on which impact plus or minus the profitability of our Automotive segment.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Oliver?

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Yes. Steven, your question was about electrification and charging infrastructure. You know what is happening in the market that product offering from all OEMs and charging infrastructure, they kind of grow together and they're regionally very diverse. And we see currently, there is a lot of charging infrastructure being built up maybe not as fast as everyone anticipated. But it is being built up, because there is an increasing amount of people using that.

And charging infrastructure comes in three -- in three situations, it's public infrastructure, it's private infrastructure in homes, and a third at the workplace. And specifically, at home and at the workplace, there is a lot going on. So very roughly speaking, I think the infrastructure will go up with market demand. I wouldn't be too worried in that because we also invest a lot in that, especially on charging -- high speed charging infrastructure on German highways.

Your next question goes about car architecture. You know what is -- the overarching scheme is, what -- every car we produce independent of which architecture is on, it's built inside of our existing car plans. And it comes with different instances. The first instance is, it's an older architecture and is being built in a normal plant. Like for example, it's the MINI. The MINI is a car which has been in existence and the architecture already in existence, and afterwards, we rebuilt the car and you see it's very successful.

So the architecture is not the dominant thing. Is the brand right? Is the application right? And for a small car like a MINI, no one need 600 kilometers reach, because that induces a lot of cost. That was the first thing to do. The next is, for example, the iX3. The iX3 is the first car being built in China using our new set of the 5th generation of our component strategy for batteries and the electrical engine and so lighter.

So that is another specific case, but again it's built together in line with our normal X3 in China. A third instance you will see with the iNEXT, which is also being built in Dingolfing. But the iNEXT has a similar architecture. It's not a flexible architecture, it's a single architecture based on the specific requirements of that very segment. It's an MKL car in the upper middle segment and of course customers want to have a high reach and this car will have a very high reach and also will have outstanding autonomous driving capabilities.

And the fourth instance you will see with it, for example, with the i4 but also with an X7 Series, these are the fully flexible architectures unlike for example the MINI where we built really EV cars, but based on a flexible architecture. So you see all kinds of instances and the overarching scheme is, it's fully integrated, why?

Because with that approach, we can respond flexibly both for higher demand which we hope, but also in case that might happen for lower market demand and I think by the day we are more and more convinced that this is exactly the right approach for the next decade. Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you, Oliver. One more comment from Nicolas.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Steven, this has also -- this flexible architecture has a positive impact on capex, why? Because we can use the blueprint from one plant for other plants and of course use scale effects in purchasing.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Good. Thank you very much, Stephen. Next question please.

Operator

The next question is from Stuart Pearson, Exane BNP Paribas. Your line is now open. Please go ahead.

Stuart Pearson -- Exane BNP Paribas -- Analyst

Yeah, thank you. Good morning. Just a couple of questions left on my side and I want to come back bit more specifically on liquidity, because if we look at the way at least your stock is trading, it does suggests given that its value now less than your net cash and financial services equity that there are growing fears around liquidity here which given the series [Phonetic] is understandable.

And I guess, as we look at the bonds, the commercial paper, the ABS you had maturing as of the start of this year, during 2020. Did that add up to around EUR25 billion, which is similar to your liquidity plus your credit line. So I guess the first question is how much of that had you already done year-to-date as of the two to three months you've already had?

And how do you think about liquidity from here? Obviously the market is clearly volatile to say the least right now, do you kind of pull ahead and try and raise as much liquidity as possible sooner rather than later or do you wait for those markets to calm down?

And then the second question just on the lease book and residual values. I mentioned it briefly earlier, so apologies if I missed it. But maybe just a quick comment on what you are seeing early days, but anything on used prices. And if you can answer, if we were, just hypothetically see, let's say, a 20% drop in used values around the world, what would that do to your lease book and how much conservatism is there in the account values of those leased assets, and what kind of writedown could we see, if we saw a 20% drop in used values? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much. Also for your question about the liquidity. It's very important in this times. This will be answered by Nicolas.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Stuart, number one, are we happy with our stock? Well you -- of course not, and it's definitely not reflecting the value of our Company. We have access to -- thanks to our strong weighting to the global capital markets compared to the financial crisis, we have even increased a couple of years ago, our backup line from EUR6 billion to EUR8 billion. We have over 40 global banks in this -- included in this, in this backup line. Our Automotive business is self-funded, so everything we do on the capital market in terms of refinancing is for our Financial Services business.

We have to fund approximately plus-minus allowance of EUR40 billion per year and of course this will slightly go down as we forecast and negative development of the market. However, as I've already mentioned, our scenario is that the second -- the second half year of 2020 will show a better development as we've experienced today. We have -- regarding used car prices which is -- and you're absolutely right to put this on the table, it plays an important role, in particular, in markets like U.S., U.K. and Germany.

We have included in our guidance some impact on the -- regarding that the residual values situation and we believe, as I said in my speech that this will be sufficient from today's perspective to cover in a very robust way the today's market situation.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Okay. Thank you very much Stuart. Next question please.

Operator

The next question is from Jose Asumendi, J.P. Morgan. Your line is now open. Please go ahead.

Jose Asumendi -- J.P. Morgan -- Analyst

Thanks very much. Jose, J.P. Morgan. Just a couple of items please. The first one for Oliver. Can you talk about two topics, please? One, the ramp up of the plants in Mexico and Hungary. How important strategically is this for BMW in order to improve the cost competitiveness, especially in Germany and what are your plans to localization of vehicles across both regions?

The second topic for Oliver as well, please. Can you speak a little bit about level 2, level 3 ADAS adoption across the BMW portfolio? And specifically on the BMW X4 whether you think you will be in a position to do over the air updates and what kind of ADAS functionality we should think about.

The third question please for Nicolas, can you talk a bit about the dividends, you get from China. It has been growing, quite extensive, over the past two years. It could be a big cash inflow factor in 2020. I mean, in the light of the earnings, you posted in 2019, there is no reason, I think, not to see an increase in the dividend. Can you comment on that dividend please from China and whether that could be an opportunity on the Safetynet 2020? Thank you.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much Jose. So we start with Oliver.

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Jose, these are very, very important questions. When we decide on manufacturing structure. These are really long-term decisions we made. They're not done by current cost competitiveness only. This is more -- they follow a few that we are a global player where we need structures where we can follow the market demand in these regions more closely.

When you look at our current structure, I think we are building our plants in China, which follow market demand there. I think we have a very robust structure in Western Europe. There is no need for additional capacity there and we added the Mexican plant because -- not only because Mexico has a very competitive labor cost structure, it even more important today is what kind of free trade zones do specific countries have. And that is very favorable for Mexico on top of a very competitive supplier base there.

And the same arguments hold true for Hungary, because we think Hungary is the right location and we just -- we decided on that location some two years ago. That's the perfect addition in our long-term plan strategy. So that's very intact.

Your second question, level 2 or 3 in autonomous driving -- in the autonomous driving area, I think the iNEXT is the cornerstone of our ADAS strategy. It will be the most advanced system BMW will be able to offer, and it will have the capability to offer Level 3 on highways. And then the actual configuration it will provide for the customer will depend very much on the local regulator what we currently see that the United States and China are a tick more progressive in allowing the Level 3 technology we have on the road.

The European regulator is a little bit more conservative, so it will highly depend on local on local requirements on that base, but the car with the iNEXT and then the subsequent cars, like the 7 Series will then have the equal technology. So that's our -- that's our current plan there.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much. Oliver. The third part of the question was about China. The cash inflow factor in 2020. Nicolas, please.

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Jose, two elements are relevant regarding cash inflow from China. First element, we have already in Q1 a positive impact from dividend payment related to 2019, dividend payment 2019 but cash inflow in the first quarter 2020. Regarding dividend 2020, well this is a joint venture, the partners will decide on dividend usually in the second quarter of the year and of course this will depend on the business development and the profit of BBA. I can assure you, there will be no decision at cost of the balance sheet substance of BBA.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Thank you very much, Jose. Next question please.

Operator

The next question is from George Galliers, Goldman Sachs. Your line is now open. Please go ahead.

George Galliers -- Goldman Sachs -- Analyst

Thank you for taking my question. I just wanted to come back to some of the discussion previously around working capital. And I was wondering if you could firstly confirm to us what on average is your kind of average payable days? So typically, how quickly do you pay suppliers?

And following on from that, I wanted to ask, to the extent some of your suppliers were seeing financial distress as a result of the production shutdowns, would you be willing to pay them sooner than you typically do and if we go back to 2008, '09, is that something you actually did to you support your suppliers' liquidity?

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Nicolas?

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

George. Of course this is two very, very important questions. On average, payment terms for supplier is around 40 days. And similar to what we did in the financial crisis, we will decide case by case. There will be no global overall decision. We will decide case by case. And luckily, of course, there are also national support schemes in place by various government schemes, which can be used by suppliers as well.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

So, ladies and gentlemen, thank you very much. It's 11:45, do we have another question? I think.

Operator

Well currently, no further questions.

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

That is not the case. So ladies and gentlemen, thank you for your question and your interest. We hope it is not too long before we see one another again. I wish you a pleasant day. And above all, stay safe. Thank you very much from Munich. Bye-bye.

Duration: 105 minutes

Call participants:

Maximilian Schoberl -- Executive Vice President, Corporate Communications & Governmental Affairs

Oliver Zipse -- Chairman of the Board of Management of BMW AG

Nicolas Peter -- Member of the Board of Management of BMW AG, Finance

Dorothee Cresswell -- Barclays -- Analyst

Tim Rokossa -- Deutsche Bank -- Analyst

Horst Schneider -- Bank of America -- Analyst

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Tom Narayan -- RBC Capital Markets -- Analyst

Patrick Hummel -- UBS -- Analyst

Stephen Reitman -- Societe Generale -- Analyst

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Jose Asumendi -- J.P. Morgan -- Analyst

George Galliers -- Goldman Sachs -- Analyst

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