Porsche Automobil Holding SE

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Investors and Analysts' Call regarding the Porsche AG Q3 2023 results. This call will be hosted by Lutz Meschke, Deputy Chairman and member of the Executive Board for Finance and IT. All materials such as the investor deck or the quarterly statement are available in the investor section of the Porsche website. Before we begin, Let me remind you that any forward-looking statements to be made during today's call are subject to the risks and uncertainties mentioned in the safe harbour statement included in the portion materials. The score will also be governed by this language. During the intro statement at the beginning of our call, all participants will be in a listen-only mode. After the intro, we will jump to the question and answer session. If you would like to ask a question, you may press start followed by 1 on your touchtone telephone. Please press the star key followed by zero for operator assistance in case of any technical difficulties. And now, I would like to hand over to Björn Scheib, Head of Investor Relations. Please go ahead.

So, good morning, everyone. Welcome to our Analyst Investors Call on the Q3 numbers of Porsche AG. My name is Björn Scheib, and today with me is our CFO and Deputy Chairman of the Executive Board, Lutz Meschke. Today, we would like to give you a brief insight on our business performance about the first nine months of 2023. And after this, as every quarter, we'll take your questions. So, Lutz, the stage is yours. Yeah.

Thank you, Björn. Good morning and welcome, everyone. Thank you for joining us today. We highly appreciate your interest in portions. Reflecting our discussions during the last few months, we recognize that there has been some uncertainty with regard to the performance of our company. In particular, after our unit sales in July and August. This triggered some questions if and how we would be able to compensate our pricing before volume strategy in China. Taking a look at our numbers, one can see a very robust demand at good pricing from around the globe. Yes, our global footprint has become even more balanced. At the same time, taking a closer look at our earnings and our P&L, one can see two effects. We are currently impacted by inflation and peak investments for product, innovation, our brand, and the digitalization of our ecosystem. Both have materially impacted our numbers, something we have on our agenda and we will address in our Road to 20. With our year-to-date performance and all what we know about Q4 2023, we are very confident about our guidance for the full year 2023. It remains unchanged. After this brief summary, let me start with my quick intro. This quarter, we have continued to inspire our customers, not only with the current product lineup, but also with exciting new additions. One year after the IPO, we are well on track in executing our Porsche modern luxury strategy. We have increased prices and more tailwind is about to come. We will also use new product launches to improve pricing and we will increase our customization offers. Benefiting from an increased product availability during this quarter, we were able to turn more and more soon-to-be owners into now happy Porsche drivers. The excitement about our products is also reflected in our incoming orders, especially for the new Cayenne. The first of our four upcoming product launches will be the all-new Panamera. We will be presenting the third generation of the four-door sports car on November 24th. With a completely new exterior and interior, new colors and many more design details. We will also increase electrical performance of the Panamera plug-in hybrid models with regard to driving dynamics, electric speed and charging performance. And let's not forget the most impressive technical highlight of the new Panamera. The active chassis, a system which actively controls dampers and enables a totally new level of driving comfort and body control. In addition, the new E-Macan is well underway. We are on track in bringing this very attractive product to market in 2024. As shown in our online Q3 presentation, press feedback on the first test drives has been very good. The EMAC card will be introduced to global markets in a staggered approach as usual. For sure, you will get invited to the world premiere that will take place early next year. Let's now turn to the financial results. Group revenue in the first three quarters was 30.1 billion euros. This is an increase of 30% compared to the previous year. Group operating profit was 5.5 billion euros at a margin of 18.3%. The earnings per preferred share for the first nine months amounted to 4.33 euros. In the automotive business, on basis of the strong demand for our products, we have produced more vehicles year to date than in the same period of last year. Production in Q3 was below sales. As you know, Porsche stops production during the month of August at all our plants for the summer break. We increased deliveries year to date, despite the challenging market environment in China. This reflects the strong demand by our customers around the globe. Germany, Europe, North America, and the area overseas and emerging markets have grown over proportionally, leading to a balanced and therefore resilient sales mix. In the first three quarters, we delivered more than 242,000 vehicles. This corresponds to an increase of 9.6% compared to the same period last year. Vehicle sales in Q3 2023 increased too. After a slow start to the quarter, we benefited from better product availability in September. Thus, our vehicle sales increased by 10% to 79,000 in Q3 2023 compared to previous year. Especially deliveries of our two-door sports cars and Taycan grew very strongly, benefiting from improving parts availability. Incoming orders during Q3 stayed robust. Thus, our order bank is unchanged on quite a strong level, covering production well into 2024. The mix and quality of our orders and order book show that our customers appreciate our exclusive product offerings. The opportunity to personalize our vehicles is highly utilized. As before, the 911 has the largest order book, a strong model mix, and the longest waiting time, around a year on average, across all derivatives. In uncertain times, we are benefiting from our strong product portfolio and our loyal customer base. Pricing was also robust. However, please note that during Q3 2023, we have only in part benefited from the price increases launched mid-year. The average sales price on retails this quarter was €118,000 per vehicle. However, this increase is mainly driven by relatively low retail numbers because of the reduced product availability in that period of time. The average sales price on sales in Q3 2023 was 112,000 euros, slightly higher than last year. Positives were pricing and model mix, while the fewer share of China sales, where revenues per vehicle include import tariffs and also taxes, had a dilutive effect. Automotive revenues amounted to 27.8 million euros year-to-date. The operating return on sales for automotive was 18.8%. At 5.2 billion euros, the automotive segment's operating profit in the first nine months of 2023 exceeded the prior year figure by around 500 million euros. This increase was a result of positive impacts from increased volume, better pricing, and a beneficial mix. Investing in our brand and product innovation to excite our customers is one of our key priorities. For 75 years, the Porsche brand has had a consistent and unique DNA like no other. Thanks to the clearly defined brand and product identity, all our sports cars have an unmistakable character. It is our task to transfer these values into the age of electromobility and digitalization. Year-to-date, we book tire sales and marketing expenses. With this, we return to the pre-COVID level by increasing our activities to strengthen our brand with events such as our 75-year anniversary and our motorsport engagements. In addition, we accelerated our broad-based digitalization initiatives. For example, the update of our well-known car configurator. At the same time, we incurred higher costs in the preparation of the four upcoming product launches in the next quarters. This is a unique cluster in the history of Porsche's launch calendars. We spent more than 2 billion euros net on research and development, the highest number in nine months in the company's history. Most of the R&D expenses in the reporting period were due to the conversion of the product range towards electromobility. The R&D ratio was 7.3%. Capitalized R&D amounted to 1.7 billion euros in the first nine months of 2023. As mentioned, the increase is due to the rising expenditure for ongoing projects, which are close to being ready for series production. Appreciation and amortization of capitalized development costs amounted to 691 million euros. The expense of R&D at 1.1 billion euros was slightly higher than last year. equaling around 4% of automotive revenues, which is at last year's level. Automotive EBITDA in the first nine months rose by 11% to 7.1 billion euros, corresponding to an automotive EBITDA margin of 25.5%. We earned an automotive net cash flow in our automotive business of 3.4 billion euros at a net cash flow margin of 12.2% in the first nine months of 2023. In Q3, the cash flow from our operational business benefited from a reduction in inventories, mainly because of the increased number of new Cayennes arriving at the dealers. The cash flow from investing activities reflects our increased spending for our transformation with focus on technological excellence, product innovation, and the entire Porsche ecosystem. Not to forget the four new products that will be introduced in the next quarters. In total, we achieved a net cash flow of 1.2 billion euros in the third quarter. All businesses of Porsche contributed to this result. Financial services revenue amounted to 2.52 billion euros in the first nine months. The operating profit of the financial services segment decreased to 0.23 billion euros. The decline was mainly due to the valuation of interest rate hedging transactions and derivatives outside hedge accounting in the context of regular refinancing activities. As discussed in previous quarters, this is part of our regular refinancing activities, while the credit quality of our book is still very strong. Reversals in loan loss provisions were lower than in the same period of the previous year, drivers that also impacted on our Porsche Financial Services results in the last quarter. Our financial services penetration in the first nine months was 40%, which was 160 basis points lower than last year. This development reflects that we pass on the market terms in our offers. At the end of the third quarter, our automotive net liquidity was at 6.6 billion euros. As you may remember from our capital allocation discussions during the IPO process, we are targeting a net liquidity ratio of 15 to 20% of automotive net revenues. Let's move on to the outlook for 2023. Porsche is benefiting from its strong global customer base. In Q4 2023, we expect improved product availability and continued robust pricing, while costs will stay inflated. For the full year 2023, Porsche AG Group confirms its forecast published in the Combined Management Report, also regarding the highlighted conditions. Based on these assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17 to 19%. This forecast includes assumed group sales revenues in the corridor of 40 to 42 billion euros. Our forecast for the automotive segment is a net cash flow margin between 10 and 12 percent and an automotive EBITDA margin between 25 and 27 percent. As part of the 2023 sales forecast, the company expects electrified vehicles to account for up to 12 to 14% of total new vehicles delivered to customers. However, this target requires a continued stable supply situation for the Taycan. Porsche is pursuing a disciplined capital allocation strategy. As of today, reflecting on our expected robust automotive net cash flow generation, we intend to have our shareholders participate with the outlined dividend policy of 40%. Distribution of 50% of net profits is planned in the midterm. Before we will start with the Q&A session, let me summarize. Unchanged dividends. Our products remain in high demand and our order bank covers our production far into 2024. In addition, Porsche is preparing for one of the biggest product offensives in its history, which will further strengthen our product offering. However, as with any product launch, we have to pay attention to industrialization and stability of the supply chain. especially regarding new suppliers to the brand. We will also carefully monitor the potential implications from the growing geopolitical tensions. Further details of our 2024 outlook will be shared within our full-year disclosure in March next year. Overall, we have a clear strategy for the future of Porsche, which we are continually enforcing. Our priorities are improving the quality of results at a higher price point and disciplined sales growth. Furthermore, the review of our offer strategy, for example, the derivatives portfolio. Additionally, we will keep investing in our brand and our ecosystem, such as charging hubs and new point of sale concepts. Combined with the stringent efficiency management, this will lead us to the successful execution of our road to 20. Thank you very much for your attention. I'm very much looking forward to answering your questions now.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. A handover again to Bjorn Scheib, Head of Investor Relations.

So, Let's start with the Q&A session now. And we have overall already a quite long list of people who want to ask questions. So therefore, please stay disciplined. Limit yourself to one, maximum two questions. And we start with George. Then we have Tim. George, the mic is open.

Thank you, Bjorn. And I'm afraid I'm going to use the maximum of two questions. The first question I had was with respect to China and the reallocation of production away from China, which seems a smart strategy given the market dynamics. Can you give us some insight into how you're thinking about this in terms of how much you want to reduce the allocation to China? I think historically it's been around 30% of volume in recent years. Do you have a set target in mind, such as 20%, or are you looking at it on a case-by-case basis? And obviously, reallocating this to other parts of the world, how confident are you that other parts of the world can absorb the volume without compromising Porsche's strongest qualities, namely wait lists, less supply than demand, and lack of discounting? The second question I had was just with respect to the distribution and administration costs, which have consistently been 10.5% to 11% of sales over the last four years. In Q3, they were almost 200 basis points higher, which if we add back to the 17% margin, would have led to you reporting a margin closer to 19% for the quarter. You did touch a bit about it in the touch a bit on it in the opening remarks, but can you help us to understand how much of this is permanent and how much of it is temporary? And do you see the historical 10.5% to 11% range as achievable going forward? Indeed, could there even be an opportunity for the ratio to be lower with the degree of operating leverage? Thank you.

Thank you, George, for your question. Let me start with China. we have shown that we are able to compensate the severe situation in China with reduced sales, first of all now in the third quarter by other regions. And if you have a close look on the overall sales development, then you can see we already have – already overcompensated the reduction of the Chinese market by more or less all the other regions. We have a very strong sales situation and also a very robust demand situation when it comes to Germany, Europe, the U.S., and North America, and a very strong region overseas and emerging markets. We reduced heavily and very actively the volume in China. We addressed it very early to our dealers a couple of months ago. We have a clear approach pricing before volume, and we have a very positive reaction within the dealer network in China. We have been in China last week. We had... very good talks to the dealer committee and they very well understood that we have to focus on exclusivity, that we have to focus on a better product mix and higher individualization rate and not on volume. And that gives us confidence that we will see a very, very a healthy situation when it comes to profitability also within the Chinese dealer network. And when it comes to all the other regions I already addressed it, we have very, very strong growth rates in Germany. We have a plus of 16% in Europe, 23%. And in overseas and emerging markets, we have an increase of 23% per Q3. And that shows that we have a very well-balanced, even more balanced sales situation than in the previous years. And that gives us confidence to see also a very good development in the upcoming months. And you mentioned the share of China. In the past, it was above 30%. Now we are talking about 25%, but that's not a real topic. We have to closely monitor the situation. And as I've already mentioned, yeah, we have to focus on exclusivity, on low discounts. Better said, zero discount. Also in China, that has to be the target. And we will proceed this path in the upcoming months together with our dealers. Coming now to the sales cost and administration cost situation. You are right. We have seen a certain increase, but it's more or less the same level now. compared to pre-COVID situation. Of course, due to the COVID situation and the war in the Ukraine, we cut costs heavily, first of all, when it comes to sales and marketing. It was absolutely the right reaction at this point in time. But now it's clear that we have to invest also in the future of our brand. And that means we have to invest in our brand itself. And therefore, you can see the steep increase in sales and marketing costs. And of course, it's important to invest in the brand because, as I've already mentioned, the clear focus is on exclusivity, having a very strong luxury brand. That means it's not the product just itself, it's more the entire ecosystem. It's all about investing in additional driving experience centers. It's investing in our Porsche communities in the digital hubs. It's also necessary to further invest in exclusive fast charging network, not only in Europe, but also in China, very important. And therefore, it's necessary to further invest in this direction. But of course, it's very important. It's part of the DNA of Porsche also to identify possible efficiency within the administrative processes, also by using artificial intelligence tools. And here we are on a very good path to get the needed efficiency in the upcoming months and years.

With this, we come now to the next one, which is Tim of Deutsche. And after Tim, we have Jose of JP Morgan.

Yeah, thank you, Lutz and Björn. I have two questions on the effect of all the model renewals that you will have over the next few quarters that have now started with the Cayenne, obviously renewing quite a few of your vehicles. How shall we think about when you reach full year run rate with these cars? Is this a continuous process that will always result in volatility that we have now seen it over the last two quarters with respect to your margin for the next, I would say, four, five, six quarters, or with the launch of the Cayenne now, being obviously a pretty strong hitter and contributor to that, can we expect that your margin will continuously go up from here, perhaps even be above in 2024 versus 2023? And then secondly, just like to follow up to George's point on the distribution costs and then also obviously when we think about R&D, there is quite a bit of volatility on a quarterly basis here. Will we come to a point in time where that is now more stable? Perhaps do I interpret your remarks correctly that you even say we can see downside potential from here going forward? Thank you very much.

Yeah, Tim, thank you very much for your questions. Let me start with the product offensive. Yes, we clearly addressed that we will have the, yeah, biggest, the strongest product offensive in place in the upcoming months. That gives us a lot of tailwind, of course, but as you have already mentioned, the introduction will be a continuous process over the upcoming quarters. And therefore, you will see the entire impact of the new products in 2025, but not in 2024, since it's a continuous process. And we will start now with the Panamera. We will have the product launch in the upcoming spring. And then later on, we will launch also a new Taycan, the E-Macan, and also a two-door sports car. And that gives us, as already mentioned, a lot of tailwind when it comes to our strong products. In parallel, of course, we have a lot of new suppliers to Porsche. And therefore, during a phase with four product launches, it's absolutely necessary to closely monitor um yeah the um the entire supply chain the industrialization of the suppliers and the stability of the supply chain first of all we are working in a completely new technological field and it comes to um yeah new models not not with all models but with a higher share of the new models, and therefore it's a very important point to closely monitor the industrialization also of our suppliers. When it comes to FX, then we have a very long-term oriented hedging policy in place. You know it very well. We have a very flexible strategy with a lot of option derivatives in place, and therefore we can be quite sure that we We'll have a similar tailwind from FX in 2023 as we have already seen in 2022, and we will have also a very robust situation in 2024. When it comes to research and development cost, we have the situation that we currently have to invest in parallel in electrification and in our combustion engine cars. And in addition, when it comes to the high capitalization rate, you have to take in mind that a lot of projects are close to series production now. I've already mentioned the four launches for the new products. And therefore, we see a very high capitalization rate with more than 90% in Q3. And of course, we have a lot of other new derivatives in the pipeline for the upcoming months and years. And therefore, you will see also in the upcoming years a relatively high capitalization rate. We are talking about a capitalization rate of about 70% to 75% in the future.

May I just add to this one? I see from the text messages that I get with respect to an outlook on 2024, we have given an outlook on 2024 in the intro statement. And please understand, as of today, we will not go beyond the 2024 guidance with these statements. You will see the details in the full year 2023 disclosure. But the intro is the outlook for 2024 as it stands. So the next one then will be Jose. And after Jose, we will have Patrick.

Mr. Azomente, your line is open.

You may ask a question. A couple of questions, please. The first one. Thank you very much. It's Jose from JP Morgan. Good morning, Lutz and Bjorn. Just a couple of quick ones. On the first one, I'm aware you don't guide on a quarterly basis, but can you help us a little bit on the pluses and the minus for the margin in Q4 versus Q3? And should we expect a fourth quarter margin that could be maybe above the first quarter? Or can you elaborate a little bit on the pluses and the minus for the fourth quarter? And then the second question is simple. How do we reengage the Chinese consumers into the Porsche brand? Is it a function of selling electric vehicles, deploying the portfolio, or is there something more structural when it comes to overall premium demand in China? Thank you.

Thank you, José, for your questions. Let me start with the margin question. Yeah, please understand that we do not guide single quarters. You know it very well. But I think it's fair to assume that the return on sales sequentially will be higher than Q3 as we should benefit from a better product mix and also a better product availability in Q4 compared to Q3. But at the same time, we have to assume also unchanged elevated cost levels from our operational business and all this in combination with the spending for the upcoming production launches, as I've already mentioned before. And of course, as every year, we also have to assume some year-end effects in addition. I didn't get exactly your question regarding the Chinese consumers, to be honest.

Jose? Jose, what did you mean?

Whether deploying and launching electric vehicles in China re-engage... Whether selling electric vehicles in China will re-engage back to purchase the vehicles in China Or is there anything else a bit more structural when it comes to premium demand in the Chinese market, seeing an overall slowdown in demand?

Yeah, it's a very important question. I think in China, it's very important to heavily invest in our brand itself because We want to be attractive for completely new customer groups. First of all, when it comes to the transition to electrification, we are addressing younger people. We are addressing females. That's very important. We already have a very high share of females in China, but there is more potential. And therefore, it's very important not just investing not just investing in your products, but also in the entire ecosystem. And we have to address also the social responsibility of Porsche more than we did in the past. I think it's very important, first of all, for the new customer groups we want to attract, that we give part of our success back to the community. That's very important. And when it comes to investments in our brand, it's also necessary to extend our sponsorship to be more effective when it comes to media activities. It's very important. first of all, when it comes to attracting new customer groups. That's crucial for us because the portfolio, the customer portfolio will change extremely with the transition to electrification. And the other point is that the luxury segment and the electrified car segment has to be developed over the upcoming months and years. It's a not existing at this point in time. The volume, the sales volume of cars above 80,000 euros at this point in time is just 20,000 cars. And with the Taycan, we have about 25% market share. And of course, this segment has to grow over the upcoming months and years. And we as Porsche, we have to invest heavily in this segment. development because we want to profit from a very strong luxury segment also in the electrified car segment.

So the next one then will be Patrick of UBS and thereafter we have Horst of BNP. And taking a look at the time, please focus on one question in order to give also others the chance for questions.

Good morning, Lutz. Good morning, Bjorn. I hope you can hear me well. I'll focus on the Macan, please. I want to understand how we should think about Macan volumes next year. The electric Macan is going to ramp up, but probably it's a new platform. One should not assume a super steep curve. I guess you will focus on quality of the launch. At the same time, I think the ice Macan is phasing out by the end of next year in Europe. And also in light of the situation of reallocating the China volumes to the other regions, you probably don't want to push too hard. So my question is simply, should we expect as a base case that overall Macan volumes, ice and electric together, will be down year over year in 2024? And the B part of that question is related to the pricing. You mentioned before that you want to price the Macan like 10% to 15% above the the ICE Macan. Now we've seen a somewhat lackluster EV demand environment in the Western markets and basically all the attempts of OEMs to price the EV product significantly higher than the ICE product have failed. So I'm just wondering if that is still your strategy to price that vehicle 15% higher or you will price it more below, more closer to the ICE Macan and with that you would accept lower contribution margins of the E-Macan. Thank you.

Thank you for your question. Let me start with the Macan question. It's exactly the opposite next year. I think we can expect further growth within the entire model line Macan because we will sell the combustion engine Macan in parallel with the new E-Macan and that will give us additional push when it comes to the Macan model line. will see or we expect this effect late in 2024 and and especially then in 2025 as well and um yeah i think we have a lot of additional potential when it comes to to further growth growth in the other world regions like the overseas and emerging markets region first of all southeast asia but also South America and also India should give us further potential, not in the upcoming months, but in the upcoming years, of course. And therefore, we are very positive that we can overcompensate reduced sales situation in China with all the other world regions. And I have already mentioned that we clearly addressed actively towards our dealers a couple of months ago that volume is not the goal in China. We want to grow price-wise and not volume-wise. Clear focus on pricing, product mix, individualization, and offering customers entire ecosystem to our customers. That's the focus. We want to proceed with the strategy to have more fashioned retail concept. We want to go more in the inner cities with our concept. And we want to expand also our fast charging network. And that gives us the confidence that we can still work also in future with our clear focus on luxury pricing together with luxury products and a luxury ecosystem. You are right. It's very challenging. market environment in China when it comes to the electrified segment. But that's not the way we want to go. We have a clear luxury focus. We addressed it clearly. And we will do it also with the new Imacan. The planned price increase will stay in place.

So taking a look at the time, then we take Horst, Dorothy, and Stephen. And after this, unfortunately, we need to come to an end. But IR for sure will take care of the open questions. So, Horst, please, hurry up, Dorothee and Steven.

Okay, good morning. Can you hear me?

Yes.

Okay, great. I just have one small follow-up. I'm still scratching my head on the fourth quarter. I know that you made already some comments and you don't give detailed guidance for Q4, but nevertheless, I want to try it can you maybe confirm if you expect rising year-on-year deliveries in the fourth quarter? And can we assume that the capitalization rate stays as high in Q4 as it was in Q3, since you gave already the capitalization rate guidance even for 2024? Thank you.

Yeah, thank you, Horst, for your question. Yeah, it's right. We expect a slightly higher situation when it comes to return on sales in the fourth quarter compared to the third quarter, because we have much better availability now for the new Cayenne, and this effect will be in place in the fourth quarter, and that would help a lot to go run in this direction. And what was the other question? Units, that's a good question.

Regarding volume?

Volumes and R&D capitalization.

Yeah, okay. Regarding volume, we expect also a better situation due to the better supply chain situation for the Cayenne and also the Taycan because we have also a clear target to achieve at least 12% share of the Taycan. And when it comes to the capitalization rate, of course, we will see a similar situation compared to Q3 because we have a lot of products to come in the next couple of months. And therefore, all these products are close to series production. And when they are close to series production, then you have to capitalize 100%. of the costs regarding this project. And therefore, yeah, clear statement, no change at all.

It's higher year-on-year deliveries or just sequentially higher deliveries?

Sequentially higher deliveries. All right, thank you.

Just as a caveat, always take into consideration supply chains. Therefore, this is something that we have to monitor. The next one then will be Dorothy, and then we have Steven.

Yeah, hi there. Thanks for taking the question. It's a slightly longer-term one, and really I just wondered whether you still feel comfortable reaching the 50% XEV mix target by 2025, of which I think 40% was meant to be pure BEVs, because that's obviously quite a big step up from, I think, around 12% this year, and also given the launch timing of the Macan front stage much later in 2024. Thank you.

Yeah, Dorothee, thank you for your question. Yeah, that's still our target to reach the 50% share of pure electrified cars and plug-in cars in the middle of this decade. And we are on a good path right now. Maybe it will not happen in 2025, but early in 2026, you should be able to deliver a share of 50% electrified and plug-in cars. Because, as I already mentioned, there are a lot of new models coming to the market in the upcoming months and years. Not only the e-Macan, but also the e-Cayenne and also the e-Boxster. And therefore, you will see this effect as we have addressed it before.

And you can confirm that the bulk of that is going to be BEVs, because I remember that chart where it always looked like about 40% BEVs.

Yeah. Okay, perfect. Absolutely. It will go in this direction. It will be about 40%. Thank you. Maybe slightly higher.

So the last one then will be Stephen now.

Yes, thank you very much, Stephen Reimann, Société Générale in London. Clearly, when Porsche IPO'd last year, it came at a substantial premium to other German premium automakers. And obviously, a lot of it has been with the brand value, but also execution. And obviously, this year, we've seen a few issues which have certainly been problematic. Obviously, the continuation of issues with the Taycan. I mean, it's now been solved, I think. But also, this issue with the Cayenne and the sales halls and things like that. I'm just wondering what guardrails are you putting in place as you enter, as you say, one of the most, the largest product launch periods the company is actually facing next year in order to actually have a much smoother execution, which I think is obviously has an impact on people's perception of the company, the share price. Thank you.

Yes, Stephen, that's a very important point. You are absolutely right. We struggled a little bit this year with quality issues, first of all, regarding Taycan and Cayenne. We addressed it also in the last quarter call. And, yeah, the positive is that we more or less solved all these issues. You can see it also now, obviously, increasing delivery rate for the new E-Cayenne and also with – the growing sales figures regarding Taycan. I think we are in a quite good path to reach the 12% dev share. And yeah, it's a very important aspect when it comes to our luxury strategy to always deliver the best possible quality. And therefore, we have to monitor closely all the upcoming product launches. I addressed it already. The clear focus is on the industrialization and stability of our supply chain. It's so important. We have seen it now with the e-kayen and also with the Taycan. And therefore, as you said, we'll stop. We'll focus on our luxury strategy, on quality, and there's no doubt about that there is all these aspects addressed by our task forces.

Thank you.

So, ladies and gentlemen, thank you very much for joining us on our Q3 conference call this morning or your afternoon. It was our pleasure to discuss our results and outlook with you. As earlier indicated, you will find invitations to our upcoming events, such as the Panamera World Premiere, in your inboxes. In this context, we will also provide you with an update on our strategy with respect to individualization of our vehicles and also with respect to the global footprint, namely the strategy in the Gulf region and region number five. With this, for sure, IR stays at your disposal. Stay healthy, and we look forward to see you at one of our upcoming next events.

Thank you, and bye-bye. Thank you. See you soon.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.