Hello and welcome to our Fourth Quarter and Full Year Financial Results for 2024. While we are coming to you from our headquarters in Gothenburg right now, those visuals that you just saw comes from the North of Sweden, where more than 100 media from around the world are, at this moment in time, testing out our cars, including the EX90 in pretty rough conditions. We are calling it The Great Winter Escape. My name is Ron Banerjee, and as always, for this earnings call, I'm joined by our Chief Executive, Jim Rowan; and our Chief Financial Officer, Johan Ekdahl. During the Q&A round, we'll also be joined by Anders Bell, our Chief Engineering and Technology Officer. We wanted to offer everyone on this call an opportunity to hear directly from him on the technologies underpinning our cars and the progress we've been making around that. He, along with Jim and Johan are here to take all your questions. But I'll come back with more information as to how you can join the call. But for now, let me invite Jim to walk us through our performance. Jim?

Thanks, Ron. Good morning and welcome to our fourth quarter full financial results for 2024. It's been another solid year of performance, a very challenging environment. Let me walk you through some of the highlights from last year. We delivered over 763,000 cars to our customers in 2024, the highest ever, and a reported growth of almost 8%, meeting our sales guidance for the year. Our performance was particularly strong in Europe, where our market share reached 2.6% with 12 European markets recording all-time high sales figures. Our electrified cars represented 46% of our total sales, with the share of fully electric cars at 23%. This share was the highest amongst our legacy premium peers. We also lowered our CO2 footprint per car by 26%, up from 20% in 2023 when measured against our baseline of 2018, giving us a surplus of carbon credits last year. And now on to the financials. We reported record revenues of SEK400 billion. Our gross margin for the year increased to 19.8% from 19.4% in 2023, thereby validating that you can both increase BEV sales and improve gross margins at the same time. We delivered a record core EBIT of SEK27 billion, up from SEK25.6 billion in 2023, an increase of 6%. We also delivered a positive cash flow of SEK1.1 billion for the year, exceeding our guidance. Johan will walk us through the financials in a lot more detail shortly. 2024 was another strong year in terms of our products and our technology road map. We ramped up production of the EX30 and took a leadership position in BEVs in Europe. We also started production of our first software-defined vehicle, the EX90 at our Charleston plant in the USA, making us the first European car company to have successfully harnessed core compute technology. This also helped us win the Software-Defined Innovators Award at CES recently. And we also entered the premium electric segment and the MPV with the start of the production and delivery of the EM90 in China. Last year, our customers also got behind the wheels of the new updated version of our iconic XC90 Hybrid SUV. It's a long-standing stalwart of our portfolio, and we've sold over 1 million of those cars since it launched. It remains a crucial part of our lineup. In 2024, we also adjusted our business ambitions for longer term, outgrow the premium car market, generate 7% to 8% core EBIT margins with strong free cash flows from 2026 onwards. I'll come back to this again during our presentation, but these adjustments ensure that we remain ambitious in our plans while staying pragmatic in a very volatile environment. And finally, in 2024, we also took a few important strategic operational decisions. We made some notable divestments to provide strategic clarity around the company structure. We distributed 63% of our shares in Polestar and now hold an 18% stake. We also announced the decision to divest our entire stockholding in Lynk & Co, which is up for shareholder approval later today. And we took financial control from an accounting perspective of our NOVO joint venture. Operationally, we continue to optimize our organizational structure, designed to increase simplicity, collaboration and most importantly, speed. We flattened our structure in the commercial part of our business by removing an entire management layer, thereby enhancing the responsibilities of the regions. We also merged manufacturing and supply chain into one organization, providing end-to-end view of our total value chain, increasing flexibility, which will be a crucial currency in today's environment. We remain very disciplined in our cash management and actively adapted sales and production plans to ensure reductions in inventory, especially during the second half of the year. And with almost SEK14 billion of cash flows being generated in the fourth quarter alone, the result is a free positive cash flow for the whole year. And we also took a focused cost action streamlined approach to a fixed cost and variable cost line in relation to our revenues. This will remain a priority for us in the years ahead. Overall, we made significant strides across our entire business in 2024, which has laid strong foundations for the years ahead. We've been making strategic investments in electrification for many years. Last year alone, almost half of our sales came from electrified cars, consisting of fully electric plug-in hybrids and full EVs. Shares of the fully electric cars reached 23%, the highest amongst our legacy premium competitors. Our electrified performance was particularly strong in Europe with the EX30 emerged as the third best-selling BEV in Europe, while the XC60 remained the best-selling PHEV. This strong performance and our growing share in this space, it comes at a time when growth in the overall EV sales has slowed down. And it demonstrates that our customers in the premium segment are willing to embrace the transition to electrification and we're in a leadership position in that regard. Even if 2025 will not grow at the same pace as previous years, our strong BEV and PHEV lineup positions us well in the market when it picks up again. With that, let me hand over to Johan, who will walk us through in more detail the financials. I'll be back shortly to go through the outlook and our game plan for 2025 and the future. Johan?

Thank you, Jim, and good morning. Let's start with the key financial highlights from the fourth quarter. We saw an increase in retail sales volumes for the quarter, in line with our previous guidance. We also had a corresponding increase in revenue for the quarter with contributions from contract manufacturing being more or less flat year-on-year. In core EBIT, excluding JVs and associates, we reported a 5.6% margin or SEK6.3 billion in absolute EBIT, a slight decline compared to the same period last year and I will come back with more details on this in the following slides. Our EBIT, including JVs and associates came in at SEK3.9 billion or 3.4% for the quarter. And the result from JVs and associates in Q4 was affected by a one-time non-cash impairment charge related to the NOVO joint venture ahead of the acquisition and I will share more details on this just shortly. A highlight for the quarter is really our cash flow, which came in at around SEK14 billion compared to SEK6 billion last year, which is really a result of our emphasis on focused cash flow actions. This led to our full year positive cash flow despite the somewhat lower EBIT in the second half of the year. So if we look at the revenues for the quarter in detail, contribution from contract manufacturing, as I said, was essentially flat. So focusing on revenues, excluding contract manufacturing, volume effects were fairly flat, while sales mix and pricing was slightly negative and that's due to a sequential increase in pricing competition in the market towards the end of the year. And in this walk now, we have combined deferred revenues and used cars. Previously, we had deferred revenue as an explanatory item period-over-period. But during the second half of '24, that revenue mainly from rental channels has normalized on a year-over-year basis. And since our rental sales have increased, we also have more used cars coming back, which increases sale of used cars. And combined, both these factors in the fourth quarter contributed positively to the revenue. Others is mainly defined by two things. Revenue from parts and accessories sales and also sale of subscription cars to external financing partners as part of our cash management effort. Both contributed positively towards taking our revenue to SEK109.1 billion for the quarter, excluding contract manufacturing. Moving to the EBIT for the quarter. Excluding JVs and associates, volume effects were slightly negative and that is despite the fact that we slightly increased our sales volumes. And this is mainly due to effects from deferred revenues and that evens out over time. Sales mix and pricing was slightly negative due to illustrating the increased challenging market equation, but also due to that the volumes of EX30 in 2024 being a smaller car at the lower price point comes with a slightly lower absolute profit. Coming to other, this is a very low net number, but may be worth mentioning here. This includes on the positive side, used cars and accessories business and also income from emission credits. We also had a positive effect in the form of a negative goodwill in connection with the acquisition of the NOVO joint venture. On the negative side, this includes sequentially increased depreciation and amortization during the quarter and also a number of non-recurring items such as certain costs for the wind down of the subscription car operations and change of financing solutions related to that as well as some changes in provisions. And on a total net basis, the effects from non-recurring items offset each other and that's why our EBIT of SEK6.3 billion or 5.6% is a fair reflection of the underlying operational performance of the company during the quarter. I would also like to point out that gross margin for the quarter has been affected by both the sale of subscription cars, grossing up revenue and cost of sales as well as the large decrease of inventory with costs previously absorbed in stock. Both being part of our cash management efforts during the quarter and as such, gross margin in the quarter is somewhat lower than the current operational run rate. If you look at EBIT, including JVs and associates, it was impacted by SEK2.5 billion during the quarter. This is due to a few non-recurring items, of which the largest being a negative impairment of certain assets related to the NOVO joint venture that was made before the acquisition and the write-down was driven by the fact that we will no longer continue the operations together with Northvolt. We also had two other one-offs for the quarter, one from Lynk & Co as well as a catch-up effect from previous periods related to Polestar. Both are non-recurring in nature. And regarding Polestar, for clarity, this one-off effect does not change the fact that we no longer recognize any operational results from Polestar since this effect refers to adjustments from previous periods. And these non-recurring transactions negatively impacted our group EBIT, which came in at SEK3.9 billion or 3.4% for the quarter. So looking at the full year, we saw an 8% increase in volumes, clearly outgrowing the premium market. This took our yearly revenues to above SEK400 billion for the first time in the company's history despite the fact that the contract manufacturing business actually decreased somewhat year-over-year. On core EBIT, which was at 6.8% or SEK27 billion was also the highest ever recorded in the history of this company. And if you look at cash, we previously guided on single-digit negative for the full year. However, due to successful and focused cash actions taken during the quarter, driving a very strong free cash flow for the fourth quarter, we managed to deliver positive free cash flows for the year of around SEK1 billion. This reflected a SEK10 billion improvement year-over-year and demonstrating our ability to manage cash flows in a very good way under also increasing challenges in the market. So if you look at the total revenue for the year in detail, excluding contract manufacturing, which has decreased quite a bit year-over-year, we see a big contribution from increased volumes. There's also negative effect from mix and pricing, which impacted revenues. And this is also due to the fact that significant portion of the growth in 2024 was driven by the EX30, which is a lower priced car, and therefore, you do not get a 1

1 effect from the volume growth. For the full year, we also saw a negative effect from deferred revenue and used cars combined, mostly from the first half of the year. As we saw for Q4, this effect is now normalizing and the net is positive. But for the full year, it's still a negative item from a year-over-year comparison. Then on other, essentially the same as in the fourth quarter, mainly driven by parts and accessories as well as sales of subscription cars during the fourth quarter as one important part of our focus on balance sheet and cash management. If you look at the full year EBIT, excluding JVs and associates, we had some positive effects on sales volumes. Of course, with volumes driven by the EX30, we do not get a 1

1 increase in the absolute EBIT. And also for the full year, we have an effect from deferred revenues and profit and those effects evens out over time. Sales mix and pricing negatively impacted due to increased share of EX30, as previously mentioned, but also due to a sequential increase in price competition in the market, especially during the second half of the year. FX effects for the full year was essentially flat on EBIT. For other, it's more or less the same story as in the fourth quarter. It's used cars, it's parts and accessories and some emission credits that contributed positively along with some effects from the acquisition of NOVO, and that's offset then by increase in depreciation and amortization as well as other non-recurring items as described for the fourth quarter. So on a net basis, the positive other factors essentially consist of used cars and parts and accessories. On the EBIT, including JVs and associates, it was in line with the fourth quarter with the addition of the negative results mainly coming from Polestar during the first half of the year. So looking at liquidity, we are coming out of the year with a very strong liquidity position. We have SEK89 billion in liquidity and SEK56 billion in gross cash. And this was really boosted by the strong cash flow of SEK14 billion during the fourth quarter and that's taken us to positive free cash flow for the full year. And in addition, we have also strengthened our liquidity position by increasing our undrawn facilities with the new RCF signed during the fourth quarter. And that takes us to a solid liquidity position and a strong balance sheet going into 2025. And with that I'll hand it over to Jim to conclude this presentation. Thank you.

Thanks, Johan. So we had a pretty solid performance in 2024, but 2025 will be a very challenging year for the industry as a whole and also for Volvo Cars. The global car industry faces multiple uncertainties. The automotive industry is a cyclical industry and we are currently experiencing a cyclical downturn and this is expected to have weak demand due to the continued macroeconomic challenges that we face. We're also seeing a major structural reorientation of China with a very competitive car industry as many domestic brands increase their market share at the expense of some of the global brands. And this dynamic of hyper-competition in China will continue to play out globally as well. Geopolitical headwinds are expected to further create uncertainties for the industry in 2025. Trade tariffs, regulatory headwinds and reduced incentives are all likely to weigh in on both demand and the conditions under which companies need to operate. At the same time, when demand remains soft, there's also a transformational challenge that the industry has to contend with. The investments in BEV and also the transition to a software-related vehicle for many of the OEMs. Now we're ahead of our competitors when it comes to harnessing relevant technology for the future and our progress on BEV is well-known. And this positions us well for the future. Nevertheless, 2025 will be a challenging year. But we're coming into 2025 with good momentum. In terms of sales, we've delivered two consecutive years of all-time high sales volume, aided by strong performance of our balanced lineup of cars, as well as a strong order book. We've also continued to improve our gross margin year-over-year. On profitability, we've delivered two record years of absolute core profits despite the rapidly weakening demand across the market. And this performance demonstrates that we're steering the company with diligence and with firm hands in a very uncertain environment and that our core operational structure of the business is continuing to improve. So looking ahead, 2025 will be a challenging year and it will be a transitional year for us towards our long-term ambitions. We do not expect the market to grow at the rate of previous years, coupled with high likelihood of higher discounts across the industry due to increased competition. As a result, it will be challenging to reach the volumes and the profitability levels that we achieved in 2024. In addition, we also see the effects of profitability from higher amortization as we continue to ramp up our new models and technology. But we will continue to increase our focus on cash preservation. And now we anticipate that we can deliver a positive free cash flow for the full year of '25 compared to previous guidance of cash flow neutral. However, any of this will be affected by additional tariffs and will add additional challenges as we look to the year ahead. So given all of this, the focus in 2025 will be on execution. So let me give you an execution road map for Volvo Cars for the year ahead. In terms of profits, we will launch five new or refreshed products to strengthen our balanced portfolio. We will expand our EX30 lineup with a cross-country variant. We're gearing up to launch the fully electric ES90, and this will be one of our flagship models and once again will demonstrate Volvo Cars technology capabilities. We'll introduce a new long-range PHEV dedicated for the China market. And at the same time, we'll also continue to update our existing lineup of cars with meaningful upgrades and we'll do this for two additional cars in the lineup this year. In terms of technology, the ES90 will be our second car built on our Superset tech stack. And this car will further establish Volvo's position and our reputation as the only legacy OEM to offer multiple products with core compute technology. Our Chief Engineering and Technology Officer, Anders Bell, will join us shortly to talk more about this. In 2025, around 2.5 million Volvo customers around the world will receive a free over-the-air update through our next-generation user experience on cars built as early as 2020. We'll also start producing the EX30 at our Ghent factory in Belgium for the first half of this year and will reach full production by the second half. This will reduce costs and it will help maintain our competitive position in this core space within the industry. At the same time, we're ramping up the production of our EX90 at our Charleston facility and we'll also start the production of that car in our Chengdu facility in China. The same goes for our new XC90 where the first customers are already behind the wheel. As I said earlier, the whole automotive industry will be severely tested this year. But we, Volvo Cars, we must keep our eyes firmly on the road ahead and not sacrifice the future on the altar of the present. Therefore, we will continue to work at speed towards our SPA3 launch, which will unlock further cost efficiencies and improve performance. And I'm happy to share that we have already built and driven the first car of the EX60 on SPA3, and we'll be gearing up to bring this to the world in 2026. We've made great progress on this car and Anders will speak more about this and why this will be a game-changer for Volvo. Finally, we're also doubling down on our internal cost actions with efficiency continued from our efforts in 2024 and we'll continue that through '25 and beyond. While we are sharpening our execution engine, we will soon come off of our peak investment cycle. Remember, these key investments have gone into new technology, to manufacturing, as well as the technology and the platforms for the cars for the years ahead. Some of these cars are already now on the road and there will be more to come in '25 and '26. And this means that by the end of '25, we'll have already laid the foundations for profitable growth without the need to maintain the pace of investments of the past. And this is why from '26 onwards, these high levels will significantly reduce both in terms of absolute investments in CapEx and engineering and even more so related to our revenues as we grow the company. We have done so much of the hard work that allows us to reap these benefits. And, yes, there is some heavy lifting that remains ahead, but we're aware of these challenges. The depth and the variety of our balanced product portfolio is one of our greatest assets in today's turbulent world. We will expand our lineup of fully electric plug-in hybrids and mild hybrid cars and continue to offer world-class products in all segments, SUVs, sedans, wagons in terms of size 30, 40, 60, 90. And we'll do this in over 80 countries around the world. The global car industry is going through fundamental change and it stands on the precipice of this profound future. 2025 is a very challenging year. But as I said, we will never sacrifice the future on the altar of the present. So while we navigate the challenges and unpredictability of the environment today, we will continue to invest in tomorrow. We have all the tools to strike the right balance between our long-term strategic goals and our short-term tactical adjustments and we are determined to emerge as winners in next-generation mobility. This is what gives us the confidence in our ability to meet our ambitions as outlined in our Capital Markets Day last September, outgrow the premium car market on a CAGR basis from 2023 to 2026 with 7% to 8% core EBIT margins in 2026 and generate strong free cash flows from '26 onwards. So with that I'll hand back to Ron.

Well, thanks very much for that, Jim. So we are all now set to start the Q&A session.

[Operator Instructions] So with that, apart from Jim and Johan, as I said at the top of the call, our Chief Engineering and Technology Officer, Anders Bell, also joins us. Welcome, Anders.

Thank you.

As one of the few companies in the world to have successfully harnessed the core compute technology and the only one in Europe, we want to offer everyone on this call an opportunity to hear directly from him and us on our tech preparedness. So while we get our callers and some of the questions coming in, maybe I can kick start this Q&A session. Maybe I'll start with you, Anders. You and Jim outlined during our Capital Markets Day, our tech vision, our tech road map. Since then, we hear so many companies talking about software and cars, software-defined cars, core computing, there's a lot of noise in the industry. Make it simple for us. What makes Volvo Cars tech approach particularly unique?

Yes, of course. And we name our approach, the Superset tech stack, as we talked about in the Capital Markets Day. And let me kind of unpack that tongue twister for you a bit. So it's a comprehensive approach to the software-defined vehicle, which goes way beyond software. It's a software-defined battery electric vehicle for the future. And essentially, you can break it down in five main elements, right? So we still do vehicle architecture. So previously, we've done vehicle platforms, which has served us extremely well, where we can efficiently develop multiple top hats of cars on the same technology base. And we still do vehicle architecture. So SPA2 to SPA3, for instance, we talk a lot about these two is essentially a vehicle architecture evolution. So the step from SPA2, which was only ever meant to do a few flagship products now as we're launching SPA3, which is designed from the ground-up to scale across the entire bandwidth of Volvo Cars products, even going kind of north and south of the current bookends to provide optionality for the company. This is a huge step in terms of manufacturing efficiency, cost efficiency and making some really great products coming out of that. That's the first element. And that would be progressing. At some point in time, we'll be talking about SPA4, I'm sure. The second element is the propulsion and energy road map, which is drive units, power electronics, battery technology. These are shared between -- inside the tech stack between the vehicle architecture. So essentially, we have the same plug-and-play road map for drive units across all architectures. So one drive unit family goes into all the battery electric vehicle products, which is now we are essentially bringing designing in-house and manufacturing in-house to unlock the next level of efficiency. Third element is the compute and electronics road map. Same here. It's the same compute and electronics road map across SPA2, SPA3, the entire tech stack. And this is also an evolutionary development. So with EX90, first generation out, we're launching and then we will continuously evolve and refine, upgrade the pieces, but it essentially stays the same across SPA2 and SPA3. The fourth element, which is the profound change for us really becoming not only a car company, becoming a software company, probably one of Scandinavia's biggest software companies at this point in time. That's the profound change to everything because all this needs to be run on one software master, one track software. As a tech company, et cetera, we need to have one tech stack. The level of investment effort we put into software means we need to have one. That's a natural conclusion. And this changes everything to us. So SPA2, SPA3 cars, EX90, ES90, Polestar 3, upcoming EX60 are essentially all built from the same software master that we will keep on evolving over time, refining. And the beauty of this is this development is accumulative, right? So every piece of work we do, every function we develop, every bug we fix is done. It's done for all cars going forward. So it will just keep on growing in capabilities and adding more value to both customers and the company. Fifth element is this the entire approach is built ground-up and born digital. So the whole integration of this organ is into cloud and beyond is the fifth element. And this is really what opens up the whole integration into customers' life, into our enterprise data structure, into the app and into the general society. And obviously, this data infrastructure, combined with our federated data model provides the underpinning together with the data we get from the car and pretty much every industrial element, supply chain, customers, builds the underpinning in a ground truth real-time, well-controlled data environment on which top of which we can start doing AI and ML applications, et cetera. So this is kind of the whole comprehensive approach to technology and super happy now when getting the EX90 out as the proof points. End of the day, the only thing that matters is rubbers on the road, right, for customers, and that's also a proof point for the rest of the world of progress because anything else is just talk. But now we have a wide range of cars coming out on this tech stack.

I mean it's an excellent example of how complex this is and why we're one of the very few companies that's managed to do it because of the sheer complexity and the attitude and the mindset that you need to go into this in order to get it right. And it's taken time. But as Anders said, we've got two, soon to be three, cars on the road with Superset tech stack, and that's meaningful. And I think that gets lost some time when people try and dumb this down. You can't dumb it down. You need to spend the time and attention to understand the profound change that's happening. You imagine that every three years, Apple decided that they were going to have a brand-new OS, a brand-new application layer rather than building continuously on what they've built for the last 10 or 15 years. That's a profound change.

And when you're speaking about sort of removing complexity from the system as a result of this also, can you quantify that in terms of costs? What is, let's say, SPA3 versus SPA2, for example?

So several aspects of cost, right. Essentially, my job is to do great cars with great margins, right? So having competitive cost is built into a super important aspect. Also the operational cost, right. This convergence allows us to channel all our resources and efforts and obsessively continuously evolving the product and the tech stack, to Jim's point, right? We will never really start from a blank piece of paper again. So as an efficiency, combined with an 8x8 launch cadence, we're building a very, very efficient product to again deliver and cater for the needs of having fresh cars out in the market in a very steady flow. On the bill of material cost side, we see, depending on what you compare to, 15% to 20% BOM cost reduction on SPA3 relative SPA2 and CMA cars on battery electric vehicle and very much meaningfully closing a large part of the gap or not over the lifetime, the full gap of cost parity to ICE.

15% to 20% we're talking about?

Yes. And that's the first time we've really talked about that, the profoundness of that cost reduction. I think it's important that we just highlight that. That's meaningful. There's very few things you can do within the vehicle architecture of an automobile that can take out 15% to 20% and improve the performance at the same time. And that's where the magic happens, I think, in any product company, when you can offer better functionality at a lower cost and especially if you can do that at a lower cost to your competitors with better functionality, then it positions you in a really good spot. And that's what the future. I know today, we're going to talk about the Q4 results and we're going to talk about '24 and the short termism of '25, and that's fine, we should absolutely do that. But let's not lose sight to what we're building here at Volvo Cars for the longer term, because this game is not going to be won in '24 or even '25 or even '26. This game is going to be one for those who develop the right software or the right technology for the future that can go on and on and on and on. And that's probably the key message here, I think, today that we'd like to make sure everybody understands.

Let's open it up now. We have a few callers on the line. So let's take the first caller and that's Harry Martin from Bernstein. Good morning, Harry.

Hi. Yes. Good morning, everyone. Thanks very much. A few questions that I have. The first one, just on the guidance. If we take the 2024 commentary to mean that your volumes will be down year-on-year in 2025. What's the market growth rate that you're basing this from? Are you still expecting to outgrow the premium vehicle market or is there anything kind of Volvo specific in 2025 as well that will come on top of that? The second question that I have is on pricing. I mean we know the challenges some of the competitors have had in the US since September. So a very simple question. Are you and your dealers already discounting in the US or is the guidance and the commentary that you've given assuming that, that will increase in the coming months? And then the final question I have just on the cost action on the margin structure. So you talk about the SEK6.3 billion EBIT number being the right number. Even adding back the 150 basis points of gross margin headwind that you disclosed, the gross margin is still down 200 basis points year-over-year. So what is the underlying cost improvement outside of the COGS that you would mean that, that is the right base to start from for next year? Can you outline a little bit in terms of the strategic actions, which is the most meaningful and what carries on into next year? Thank you.

Yes. Thanks, Harry. So maybe I'll start with the first two and then Johan can talk a little bit about the gross margin in some detail. Market growth-wise, I mean, what we're seeing is dynamics is very different in different parts of the world. The hyper competitiveness in China is obviously having an effect on some of the growth in the global brands as they lose market share or as the Chinese domestic companies gain market share in Europe, then that's having an impact on the global brands. The other thing I think to unpack there is that, remember, the Chinese market now has got a very pronounced secondhand market. And that means that globally, the total number of cars is probably going to be stifled to some extent as we go forward just because when you're selling, every year, you're selling 25 million, 30 million cars into an open market with very limited secondhand market, that becomes much easier to do than when you've got a very mature secondhand market. So we think the growth will be flat to kind of within the industry, not necessarily talking about Volvo Cars here, but in the industry, depending on what you read will be flat to downwards. That again separates in between mass market and premium market. But I think every report that we read isn't optimistic on the growth potential of the industry for 2025. In terms of discounting, to move on to the discount, again, that is region by region, state by state, country by country. We're seeing it more pronounced in some places than in others, depending on the competitive landscape within those countries. But by and large, I think, we're going to see more discounting in '25 than we saw in '24. So that's how I would frame that in terms of gross margin, I always speak to the gross margin.

Yes. And on your question on cost, what we say is that I think -- and the EBIT in the report is a fair estimate of what the underlying operational EBIT actually is. We have some effects on gross margin, especially as we alluded to, the sale of subscription cars, grossing up revenue and COGS as well as the steep decrease in inventory during the fourth quarter. So that makes sort of the gross margin artificially low. But on your question on year-over-year compared to the first quarter of '24, the fourth quarter of '23, sorry, I think I mean, as Jim alluded to, we have seen sequentially during the second half of '24 an increasing price competition and discounts or incentives that is higher than a year ago, which means that the run rate is higher than what's shown in the report as of '24, but it's lower than it was a year ago. So that's I would say it's a fair summary.

One thing maybe I would just highlight would be that if you look at -- we've grown -- let's take the assumption and for what is the assumption is that the electrical propulsion will become the dominant propulsion technology of the future. How long that takes and how that plays out in different geographies and how quickly that plays out in different geographies, we see is changing. But let's assume for a moment that EV technology is going to be the dominant propulsion technology. Then you need to be able to position yourself to be able to take advantage of that. That's where SPA3 comes in for us because we now have a very, very capable core compute architecture at 15% to 20% lower cost than SPA2. And we can then put that into especially place like the EX60 for us will be the first SPA3 product in a very high-volume sector of that market. So we need to make sure that we position ourselves in that. One thing I would highlight is if you look at 2024, we managed to grow our EV even with today's current pricing to 23%, the highest among all of our premium peers and we managed to do that and increase our gross margin at the same time. So that debunks the myth that you either have high EVs or high margins. And we are moving towards a landscape now with SPA3 that will further protect that and enhance that. That is what I'd like to take out of today when we talk to this community.

Thanks. And hopefully, that answers all your questions, Harry. Let's move on with the next caller, and that's from JPMorgan, and that's Jose Asumendi. Good morning, Jose. Please go ahead with your questions.

Good morning. Thank you very much. A few questions, please. Jim, can you comment on the current situation we're going through on tariffs and particularly around your manufacturing footprint, how flexible it is? And what's the plan to offset any potential tariffs across different regions? Second, Johan, can you speak a bit more around the key actions you're looking to execute in '25 to preserve cash and obtain cost savings, please? And then three, back to Jim, back to Anders. SPA3, what are the biggest components that drive those cost savings that you mentioned? Thank you very much.

Okay. I'll take the first. You can take the second. Anders can take the third. So that's distribution and action. But, okay, So on the auto footprint, as you know, Jose, thanks for the question. But as you know, we have a very balanced portfolio in terms of our manufacturing footprint. We have factories in Asia, Europe and in North America. The trade tariff that have came in so far, we've seen really two big trade tariffs that has affected us. One is the EX30 coming by a way of the increase in tariffs from China EV cars into the European Union. We can circumnavigate that through, obviously, the manufacture that car in our Ghent facility. That's going to take us a little bit of time. And in the first half of this year, we're going to have to absorb the additional cost of that, and because I don't think there's an option to push that price on to the customers based on today's landscape. So and then we get into full production in the second half of the year. So that helps us in the immediate. And that's really the only car that we bring in that would be affected from China in a large scale. Then we go on to the tariffs of batteries. So batteries went from 7.5% to 25% for the US. Again, that takes a bite out of some of the profits that we make for the EX90 is the most affected there. So we're looking to try and find if we can get local battery manufacturer in the US to help us minimize those costs. That's an ongoing project for us right now. The tariffs that were alluded to, but not fully enforced yet in regards to Canada and Mexico don't really affect us because we manufacture in the US anyway. We have a few subassemblies that come in from Mexico, but nothing that would cause us great concern. Really, the big question is what happens if there's tariffs that come in between the US and Europe. Right now, as you know, you can export cars from Europe into the US for 2.5%. It's 10% in the other direction, but it's 2.5%. So that works very much for us right now. If that changes in any dramatic format, then obviously, that's going to be something that we need to deal with at that particular point in time. Now having said that, we actually have capacity in our Charleston facility. And we have a big operation there. So we have enough capacity there that's available right now, we just need to put in production lines and we could have that up and running reasonably quickly. So we have that, I'm going to call that flexibility. Of course, it comes with some costs and it comes with a lag in terms of a certain amount of time, but we actually have the flexibility to increase production in our Charleston facility. Hopefully, that answers that for you, Jose.

And looking into your question on actions, if we start with cash, we guide now on positive free cash flow for 2025. It essentially comes down to three things. One being working capital and especially inventory. We showed now in the fourth quarter that we took down inventory quite dramatically, which is in line with what we have said we should do. And that is, of course, continuous balancing production and sales over the course of 2025 in order to ensure that we have an efficient working capital. Second being investments. We are absolutely protecting the important investments in order to deliver on the future and the future products, but there are always priorities, there are always, you have to be selectful. So that's the second part and that especially going into 2026, investment levels will also come down, but that is the second bucket. And the third being very cost efficient, continuously working on the cost, both on variable costs, which we have done quite successfully during 2024 and continue to do that, but also together with suppliers on the technical side of the products, et cetera, but also on continuously ensure that we have an efficient fixed cost base. So it's essentially those three things to manage the positive free cash flow for '25 and also to, and of course, we also have some proceeds from the sale of Lynk & Co. that we will receive now in the first quarter of '25. But with that said, I guess these are the three main buckets. And to manage EBIT, if you will, it's essentially the same thing being continuously work on cost relentlessly and then also prioritizing spend and on development, et cetera, protecting what's most important, but then being selectful and with harsh prioritizations.

Maybe, Anders, you take the last one.

Yes, absolutely for sure. So making great cars is easy. Making great cars with great margins, it's really hard, right? So it's a valid question, right? So what we've done in SPA3 is having a super clear mission on what we want to create. So we're creating the entire bandwidth of future Volvo Cars, battery electric vehicles from B to F like the whole range and as I said before kind of bit south and north of the bookends as well just to have optionality and executing that with relentlessness and precision and discipline. The advantage is that what we've created in SPA3, it's 100% BEV and 100% Volvo cars. So we have been able to remove all the old constraints of the combustion engine like all of it. There is surprisingly a lot still kind of ancient knowledge around that we actively pursue and search for what do we need to, what can we eliminate, right? Very much a first principles approach to it. On the highest level, it's really the supremely well integration of technology coming together in these products. And again, the relentless as we pursue that. And if you break it down and look at individual elements, we have progress all over the place. So this is the platform we introduced mega casting, for instance, which yields significant saving, not only on BOM cost but logistics and allows us to focus our efforts on CO2 and circularity. We're doing cell to body, which is a massive step both in cost and weight reduction and gives customer advantages and free up space in the cabin. The electrical and compute architecture, we're taking evolutionary steps. So SPA1 being the generation, SPA2 being the Generation 1 zonal core compute architecture, SPA3 is Gen 2, evolutionary step, but further ECU consolidation, deleting harnesses, reducing harnessing length, just simplifying everything to probably stay very clear to the mission of developing Volvo Cars, battery electric vehicles for the future. So it's been a kind of an obsessive journey on really, really, really chasing cost, making these great cars with great margins. We need to do both sides.

Great. Thank you very much. Thank you.

Let's take a question that's coming online then from the chat from Mattias Holmberg from DNB. Please clarify the key levers you have to mitigate margin compression, particularly in the first half of 2025. How much flexibility do you have on pricing cost reductions? We've partly answered that. But what are the main levers we have on?

So '24, we launched some new cars. We don't get the full benefit of those cars for the whole of '24, but we get the full benefit of those cars for '25. So the EX90, for example, we will have a full year of that car sales. The XC90, which we just released at the back end of '24, we get the full year of that new car, refresh car. That's a stall obviously on the lineup. We get the full EX30 in more markets than we have. So we have some new products coming in. And we also signaled in the presentation that we will have five brand new or refreshed products within '25 as well. We won't get all of those, obviously, in the first half of the year, but they'll all be in play by the second half of the year or certainly by the end of the third quarter. So that's going to help us as you bring new cars in, allows us obviously to price position those cars at the right point. And then at the same time, we're taking out costs as quickly as we possibly can. So it's those two factors together. But probably the single biggest thing for us is that we have a very balanced portfolio, and we've rebalanced that over the last two years. So yes, we sell a lot of BEV cars and we sell more than our competitors, but the XC60 is the number one selling PHEV in the whole Europe has been for the last year almost. So it's really about the balanced portfolio that we can bring to the market that's going to help us modulate through that. The mass market is going to be much more affected on pricing and discounting than the premium market. Premium market will still be affected, but less so. Now having said all of that, I think the first half of 2025 will be tougher than the second half, certainly for us, I think for the industry in general. So as we bring those new cars in through the course of the first half of the year, as we get the production in Ghent up and running through the first half of that year and we start to reap the benefits of those. So that should then take us into a stronger second half of the year and slingshot us into 2026, where we'll launch another five new or refreshed cars. So you think about that over the course of the next two years, all the hard work and all of the engineering dollars that we have spent start to now, as Anders put, start to now put rubber on the road. So that's the shape of the year. Hopefully, that helps Mattias kind of unlock a little bit of your question.

This one that comes to you, Johan, specifically, so to Johan. We consolidated NOVO during the quarter, and there were quite a few financial effects from this. Maybe, Johan, you can explain a bit what happened during the quarter when it comes to NOVO and how that influenced our numbers.

Absolutely. And as you said, we consolidated during the quarter, taking financial control or from an accounting perspective at least. Now we have also the agreement in place to buy the shares. Two things. One is the effect in joint ventures and associates line. That is an impairment of certain assets related to the fact that we will no longer build a joint venture together with Northvolt. And as such, things that were contributed as a part of the setup of that JV, especially from Northvolt side has now been impaired. That's ahead of the acquisition, and that's the SEK1.7 billion that you see in the joint venture and associates line in the fourth quarter. So it's essentially a write-down. And then in connection with the acquisition, we see which, if you read the purchase price allocation in the report, you have a reasonably substantial amount of negative goodwill, which is we acquired the shares at a lower value than the fair value of the remaining assets. And that falls out into our EBIT in the quarter. But what I would like also to be very clear on that is that there are always in the quarter a number of different, let's call it, one-timers or one-off items. And in this quarter, this one becomes quite visible. It's a positive item. We also have other negative items. We have examples we have costs for the wind down of the subscription operations, for instance, and the change of financing partners, et cetera. We had some provisions made. Nothing really major individually. But if we take the total sum of, let's call it, nonrecurring items in the quarter, it actually more or less offset each other. And that's also one of the reasons why I said in the presentation that I think the EBIT according to the report is actually a fair estimate of the underlying operational EBIT. So I wouldn't take that negative goodwill and just add it back because it's -- there are things in the other direction as well, less visible as it might be, but to be clear.

Good. Let's take the next caller then and that's Erik Golrang from SEB. Good morning, Erik. Go ahead with your questions.

Thank you. I have two questions. And the first relates to what you've included in guidance. Any thinking around potential sale of CO2 credits for this year? And then also if the cash flow guidance includes the sale of your stake in Lynk & Co.? And then the other part is any commentary thinking of this final rule from the US Department of Commerce on connected vehicle supply from China, if there are any implications for you? Thank you.

I can start shortly on the Lynk. Yes, it's included.

Yes. And CO2 credits as well, yes, that's included as well. That legislation has been around for quite a period of time. It's pretty well defined. We obviously have CO2 surplus and so that is included as well. And then in regards to what you referred to as ICTS, which is a legislation in the USA, everyone is still unpacking that. That's a document that runs around 200 pages. So we need to see exactly what that looks like and if we need to make any technical changes to the vehicles in order to remain compliant. On the technical side, we have the competency, and we've done this 1,000 times. Regulation is different in different parts of the world. And Anders and his team have a standing team of people that ensure that the connectivity and all the other different regulations that we need to meet in different countries around the world are adhered to. So I don't have a problem with the technical aspects if we need to make changes to that. We need to also see if there's anything else within the ICTS rulings that would cause us to have to do anything else. So other than that, we need to wait and see.

Good. Thanks. Let's stay with the callers. Next in line is George Galliers from Goldman Sachs. Good morning, George.

Thank you for taking my questions. Jim and Anders, I wanted to just start with the software update given the Superset tech stack. During your comments, Jim, you mentioned that this year, you would do a full over-the-air update for free for your customers. Looking at some of the Chinese OEMs, it would appear that they're doing over-the-air updates as frequently as once a month and in some instances, even more frequently than that. Could you just give us some insight into the sort of pros and cons to that approach? And could we see Volvo doing over-the-air updates at that level of frequency in the future? Then Anders, apologies for my sort of lack of technical know-how, but I wanted to ask how important is data capture and machine learning to the evolution of your ADAS capability with the new Superset tech stack? And are you able to leverage data from older cars in your fleet as well as cars elsewhere in the Geely Group for the new tech stack or is this something where the valuable data effectively starts to accrue with these new models? Then finally, just one quick housekeeping. You mentioned that the CO2 credits are included for this year. Can you just confirm, does that also include any assumptions around payments from Mercedes who have now joined you in CO2 pooling? Without getting into numbers, when would you sort of expect to recognize potential revenue or payments from Mercedes? And when would you expect to receive cash given they won't know their shortfall until December 31st? Thank you

All right. I'll start with the first one with regards to the software over-the-air update. Could we -- if we wanted to do an update every week? Of course, we could. That's the technical capability we essentially have or could build. That's not a great idea though, to be perfectly honest. That's too frequent, right? We are aiming to land in a steady state of four releases a year, four planned releases a year. And of course we will have the ability to do hot fixes in between. But that would be kind of a sign of failure, I guess, because people don't want to update their phones or the cars every single week. That's a bit of a pain. So we could, but we chose not to. We want to find a steady state, meaningful upgrades. Customers know roughly what's coming and can expect some exciting news every time there's a release, not just general bug fixes. That would be disappointing. When it comes to data capture and ADAS, yes, absolutely. Data capture is an integral part of our entire approach on AD and ADAS. And our team internally at Volvo Cars, but also our fully owned subsidiary, Zenseact, they're working essentially right now from code to car every day, getting test data from test fleet, our own company car fleet and the customers who generously agreed to share data with us. We do look at those incidents coming in live every single day and working to make improvements on a daily basis, releasing again code to car every day so we can validate those changes, see the improvements. And when ready, all the boxes checked, we roll them out to the fleet as part of the frequent OTAs, right? So it's very much an integral part of the whole approach on AD, ADAS.

Maybe just talk a little bit as well about a federated cloud architecture because I think that's something we've not really unpacked for this community either.

Yes. So combined with all this, and this becomes a bigger question, right, the whole foundation for application. And again, Zenseact and our ADAS stack is really the tip of the spear for our AI application, right? We apply AI, our tip of the spear is where it matters the most, which is saving lives. But the general approach in the company, I think we're very far are mature in our digital AI strategy. And we are doing a big work now on converting our legacy IT infrastructure into a federated data model with quality assured, containers of data with clear ownership of ensuring ground truth on every single data point and the responsibility as a data owner to expose your data to the rest of the company in a standardized way. And this is really the underpinning, the foundational layer of any AI and ML application, right? You need to have reliable data first and foremost. Otherwise, you can't trust the results. So this is another massive development ongoing in the background, right? And this is really where the car, the product that we're building and putting on the road, this digital premium product that we're doing, the software-defined vehicle is becoming symbiotic with both the tool chain that creates it, digital tool chains, both software and hardware simulations and the entire federated data model inside the company. It all kind of goes together. This is the big application of the so-called digital twin. That's all of it. And then the number of data products we can pull out of this and the things we can do is pretty much endless. So that's the journey we're on.

And we should highlight as well that we've made investments, of course, in order to be able to have this capability within the company and have this within a federated platform that we have our own data center that we've continued to invest in. I think it's one of the biggest data centers in Scandinavia now, of course, running on NVIDIA GPU technology. So that allows us the computational power and capabilities that you need in order to bring this data and make it meaningful to either improving the performance of the car or better understanding or better performance of the algorithms themselves. So that's something which I think we're way, way ahead of the competition in many, many spaces in terms of understanding data, data analytics, data capture and effectively data monetization in one form or another.

And just to add, since you brought up ADAS specifically, it's worth to know this is our ADAS stack. This is our vision perception stack. This is our data. So we're in a flat topology software-defined vehicle. So that data pipeline of the information from the cars, it's ours. It doesn't pass for a Tier 1 supplier, which has obviously an interest to build up their system. This is our technology foundation, our data. That is, again, generally provided by a customer who agrees to share data for to allow us to continue to develop safety.

Great. Question on CO2 credit?

Yes, on the CO2 credit, I can verify that CO2 credit is included in our forecast. But when it comes to the specific agreement with Merck, we will not disclose anything, not amount nor exact timing due to that contract. We will, of course, disclose in due course when needed.

Understood. Thank you very much.

Thank you. Let's stay with the callers. Next is Hampus Engellau from Handelsbanken. Good morning, Hampus, and go ahead with your question.

Thank you very much. Three questions from me. Just a quick question on the NOVO and battery supply from your guys have anyway changed the potential rollout of the EX60. Second question is more on the sales lift of EX60 and also how you think about long range there for the European market. And I'm sorry to come back on the credits, but you had a quite big boost in battery electric sales last year. But I noticed that the emission credits are pretty stable, around 900. And given what's coming up in Europe, could you maybe help us square out to think about those credits, not talking specific buyers here? Thank you.

The first one -- I'll take the first one which is basically the question around does the NOVO situation affect or delay this path relaunch? No, it does not. We have a very robust supply chain. We generally speaking, always have wherever possible, of course, have multiple sources. And in that sense, we have more than one source of those batteries. So it won't affect the launch of the EX60.

And there's another question on emission credits because how do we look into emission credits in 2025 given it's been pretty stable over the last few years.

Yes. It has been. And I guess it's always depending on the demand and supply, I guess, and the number of other buyers needed it from a deficit perspective. We will not guide on any specific numbers for CO2 credits into 2025. But of course, we are in a good position. We have a high share of EVs. And of course, as such, increasingly going forward in the current legislation, we are in a very favorable position, but I will not guide in specific amounts into 2025 to be honest.

Thank you. Another question coming in. We're seeing several legacy premium players paying billions to access tech stack developed by new entrants BEV only players. So how good is Volvo's tech stack versus what you see in the market? And is Volvo cars open to entering into a licensing agreement with other established OEMs to offer our own tech stack? So maybe you can speak a bit more generally about?

So the tech stack and the electrical architecture and compute architecture primarily in the center of this question, what we launched in the EX90 and continue to evolve into the EX60 SPA3, et cetera, is bleeding edge, right? So on the compute side, we're working currently with NVIDIA. We're launching the EX90 with NVIDIA Orin processors. We're working with Qualcomm, silicon on the infotainment system. And the kind of the Gen 2 zonal architecture, especially in SPA3 as it evolves, is absolutely the bleeding edge and the first legacy car company to launch that type of core compute technology. It's on par or better with a lot of the newcomers, the other car companies and even including the ones you read about in the press, getting in license money from legacy car companies, right? Super happy with that. We have had the privilege to be able to develop this and launch this over the last few years. Again, it's been super hard work, but that tech stack is now brought up, launched, and now we're in this gradual refinement phase. So, yes, this is -- I mean, from that perspective, this is quite a feat, right? It's been a very hard journey. No doubt about that. But now we climb that hill and now we're about to reap the benefits.

And I guess as I kind of don't take our word for it. One of the things which I think was -- we're happy to see was that Anders personally was awarded on behalf of Volvo Cars at this Consumer Electronics Show this year as the Innovator of the Year for software-defined vehicle for Motor Trend, which is a pretty well-regarded publication. So we're starting to see some external validation of our tech stack by the people who pay a lot of attention to this as well. So that's an external proof point in terms of where are we in terms of parity with the best-in-class of software-defined vehicles in the world right now. On the licensing, yes, I mean, I think as you develop technology, we're a public company. We spend engineering dollars and development technology and the whole aspect of that technology is to get a return on that investment at some point in time. Some most of the time that comes by implementing that technology into our vehicles and selling those vehicles to our customers. But there's other revenues like royalties or licensing deals and stuff like that. And of course, we would be, I think we'd be fools not to look at all the possible licensing revenues that would be available to us. So, yes, absolutely.

Good. We are running out of time now. So maybe we'll take a last couple of questions. So let's go to perhaps our last caller for the day and this comes from Nordea, Agnieszka Vilela. Good morning. Please go ahead.

Perfect. Thank you and good morning. So a question to you, Johan. Could you please quantify the tariff cost on exports from China to Europe in Q4 specifically? And also how do you think this cost will develop in Q1 and Q2 given the ramp-up of the production in Ghent? Thanks.

Yes. Hi. Maybe a little bit boring answer. I will not quantify that exactly. We haven't done that. It's fairly limited in '24. It's some cost. But of course we did go into the period of the tariffs with some cars in inventory, et cetera. So it's fairly limited in 2024. There will, of course, be an increased cost for that during the especially during the first half of 2025 until we have the full production pace running in Ghent. But so I will not do an exact quantification. It will be a little bit more of a headwind than it has been in '24. But from a group perspective, it's not a huge magnitude either. So let's call it that. But it will increase in especially the first half of '25.

Thank you. And then maybe the last one to Jim on pricing. As we see more risk for higher pricing pressure from competitors even in Europe, can you tell us about your own balance price versus volumes currently? What will you do in 2025?

Yes. So let me pull that apart a little bit. So there's three basic elements to that. One is what's the strength? The mass market is going to be more affected than the premium market. First and foremost, I fundamentally believe that, but there will be effects in the premium market as well. So then you need to look at the brand strength. Why do people buy Volvo Cars rather than another car? What is the brand attributes that people care about? We're very defined in terms of safety, sustainability, human-centric tech and of course, the Scandinavian design that people like. We have a pretty loyal customer base and we're selling in the premium market. That's not to say that we'll be immune towards that. So the countermeasures that we can put in place obviously is that we can reduce the BOM cost so we can then reduce our pricing. So we're working hard on our BOM cost of existing vehicles. So we can reduce our pricing without eroding our margin. So that's obviously a continuous project. But then the other way in which to protect your margins and pricing is to bring new cars to the market. And that's exactly what we're doing in 2025. So we have a refresh. We have a new addition of the EX30 coming out in the cross-country version, and we'll have the ES90, which will be in full production. And then we'll see some of the markets that don't quite have, that haven't been seeded yet with the EX90 and so on. So we have five new or refreshed cars that are coming out in '25, which will help us certainly in the second half of that year to maintain that price point. And then we have some cars that we launched late last year that help us a little bit in the first couple of quarters such as the EX90 and the full deployment of the EX30 in the countries we've not yet launched that. But nevertheless it's still going to be a volatile marketplace, I think, in terms of pricing and pricing discipline.

Thank you.

Maybe I'll let in one more caller because he's been waiting for a while. So this is Pushkar Tendolkar from HSBC. Good morning, Pushkar. Please go ahead.

Yeah, hi. Thanks for taking my questions. Just the first one on the guidance. The challenges that you mentioned for 2025, volumes, price and amortization, you kind of already faced them in the fourth quarter '24 as well, and you reached a margin of around 5.5%. So from that level, do you see further risk in 2025 from the fourth quarter exit rate level? That's my first question. And the second one is about just that we've talked a lot about tech on this call. Just wanted to understand how do you plan to monetize that as the risk of overspecing cars where what we are kind of seeing in China. So how do you avoid that? Thank you.

If I start on the Q1 question, I think, as Jim alluded to, I mean, we will have number of things happening in 2025 and also a number of new and refreshed cars coming in, et cetera, which will mainly be an effect in the second half. If you look at how '25 will play out, as we've said, that we think it will be challenging to reach volumes and profitability for the full year '25. And also, if we look at the first quarter, I think this might be important as well because it will not be a totally linear journey into '25. In '24, we had a couple of aspects. In the first quarter, we were ramping up, starting selling EX30, which essentially was wholesaling to filling up dealer inventory, et cetera. And since wholesale is more the financial measure than retail sales that will be an effect in the first quarter of 2025 as well as the fact that which was, of course, an important part of us getting very good cash flow in the fourth quarter, taking down inventory in the fourth quarter of '24. That will also have an effect, let's say, on the balance between wholesale and retail deliveries in the first quarter of '25. So and that's more on the volume side if you will. And also seeing now we have sold out quite a bit of order book in 2024. And as such, the price pressure, if you will, sequentially comes in for us in the fourth quarter and continue to do so into the first quarter. So I would say it's going to be a fairly slow start to 2025 and then gradually improving over the course of the year. I think to understand that sort of curve is important as well if you look at the guidance.

The second part. The second question is a really great question because it really picks up something which is new to legacy automotive, but it's inherent to the software-defined vehicle. How do you specify hardware, which is future proof to do the things, the car we build today, so we can deploy the software functionality we want to four years from now to that car in the market to that customer without overspecing and putting in too much hardware, which costs too much, right? So it's a very, very good question. And this is something we very, very diligently work with. I think the first answer is we apply technology for humans in a human-centric way, right? So we are not part of a silicon bragging contest. That's number one. So we're carefully monitoring when we develop. We try to have foresight on kind of the needs of the future, how much do we need in terms of CPU, GPU, memory to foresee that on the hardware and find that right balance. It's a difficult game I know because looking forward four years ahead on what we will be deploying in terms of software, it's kind of on that horizon, it's a guessing game. Ask me two years horizon, I know pretty well, right? So we're doing that very diligently, monitoring CPU load, memory usage, et cetera, in the fleet, in the cars, looking at the road maps of the functionality we are planning to launch to find that sweet spot and never getting into kind of trouble where we're like, I wish I put in more memory in this car four years ago. That would be a shame. But not never ever putting in silicon there, we won't be able to use. So it's a very, very relevant question. This is one of the key kind of balancing games because the software-defined vehicle is essentially launching capable hardware that you can deploy future software to. And that is one of the kind of magic that we need to be really good at, right?

All right. Good. I think with that, I think we will try to bring this to a close, but I'll give you, Jim, the final word. We've discussed the game plan for managing a challenging 2025. Anything else you want to close with?

Yes. Maybe I'd say. So I'm going to go back to '24, just for a second because I talked to the fundamentals. It was -- '24 was a turbulent year as well. And even though we think '25 will be a little bit more turbulent than '24, what you need, what I think we've done reasonably well in '24 is that we've sharpened up our game to be able to compete at a higher level. And as things get more turbulent and things get more complex, we've already taken a lot of the steps forward. We're starting to reduce our cost base meaningfully. We're really starting to increase our execution engine. And I'll point back to the numbers '24, tough year for everybody, but we managed to get over SEK400 billion of revenue for the first time in the history of the company. And that was with lower contract manufacturing. So we drove that through sales. We managed to get to SEK27 billion in terms of EBIT for the first time ever in the history of the company. And maybe most importantly, we managed to generate SEK14 billion of free cash flow in the fourth quarter alone. So that means from a management, from a core functional operational part of the business, we know the levers and we know how to work that in order to run the business. So it's really a demand problem. And we're in a cyclical downturn right now in the industry and that happens in most industries. The auto industry is no different. So we're in a cyclical downturn, we're also going through an energy or a technology transition. We're going to be very, very well positioned with technology as we come out of this with brand new SPA technology, SPA3 technologies we swing into '26. That's going to be a lower price point 15%, 20% than what we see in SPA2 right now. And so as that turns because when it comes back, you've got to invest now in order to be positioned to when the market is going to turn with the right technology at the right price point. The old adage, since we're in Sweden, the old adage of skate to where the puck is going to be rather than continuously trying to chase the puck. And that's what we're trying to do with the business is we're skating to where the puck is going to be. And the puck is going to be an upswing in volumes, we think, in the next few years towards the relevant technologies of the future, which is definitely going to be EVs as well as PHEVs and MHEVs which we're building and you need to be able to do that in a cost-effective way. And that's everything that we're building. Back to that comment that we made in the presentation, we won't sacrifice the future on the altar of the present. And the companies that do that, I think, will come out much, much stronger. And so that's really my closing comments for the. But the fundamental aspects of the business will prove and work, we get more volume on top of that, then you start to see the benefits very, very quickly.

Thank you. Thanks, Jim, Johan and Anders. Great to have you. And thank you, everyone, for tuning in this morning from all of us here. Have a great day ahead. Goodbye.

Thank you.