Operator

Good afternoon, everyone. Welcome to the First Quarter results for CIE Automotive. We have Lorea Aristizabal, Director for Corporate Development. [Operator Instructions]

Now I'll hand over to Lorea. Go ahead, please.

Lorea Aristizabal
Director of Corporate Development & Investor Relationship

Good afternoon. Welcome to this conference call with the results for this first quarter 2026. A quarter that somehow confirms the disparity between markets with markets evolving at very different speeds and with increasingly divergent dynamics in an environment where apart from all the above, demand and production don't always evolve in a synchronized way as we'll see when we review what happened in each market.

Starting with China, the Chinese market situation can be summarized under 2 concepts: normalization and competitive pressure. On the one hand, normalization. China has already shown a clear adjustment in demand with sales falling by around 20% in this first quarter compared to a more limited output fall of 10%, a demand adjustment that reflects some normalization after the post-COVID years of very strong growth, an adjustment in demand that reflects a mature market with electrification levels close to 50% in both sales and production and demand adjustment to which, without a doubt, the reduction of incentives for electric vehicles has had an effect, which was implemented at the end of 2025 in the context of reorientation of the Chinese government's industrial policy. And in 2026, it has stopped considering the automotive sector as one of its strategic priority sectors in terms of investment.

We also mentioned the competitive pressure, that competitive pressure and the price wars between manufacturers, which continues to be very, very intense. So the adjustment