Mercedes Benz Group Ag

Welcome to the global conference call of Mercedes-Benz. At our customer's request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the investor relations section of the Mercedes-Benz website. This short introduction will be directly followed by a Q&A session. If you have difficulties during the conference, please press zero and the hash key on your telephone keypad for operator assistance. If you want to ask a question after the presentation, please press nine star on your telephone keypad and you will receive a confirmation that you are now in the queue. To remove the question, please press again nine star on your telephone keypad and you will hear a noise which confirms the removal from this queue. Please note that dialing nine star a second time during the call will automatically withdraw your question. Please refrain from pressing the key combination multiple times during the call. I would like to remind you that this telephone conference is governed by the safe harbor wording that you will find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. May I now hand over to Steffen Hoffmann, head of Mercedes-Benz Investor Relations and Treasury. Thank you very much.

Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking on behalf of Mercedes-Benz. I'd like to welcome you on both the telephone and the Internet to our Q1 results conference call. I'm very happy to have with me today Harald Wilhelm, our CFO, To give you maximum time for your questions, Harold will begin with an introduction, directly followed by a Q&A session. The respective presentation can be found on the Mercedes-Benz IR website. Now, I'd like to hand over to Harold.

Thank you, Stefan, and good morning, everybody. Welcome to that Q1 call. Well, if I look at, I mean, this quarter, I would say this is a demanding quarter, looking at market evolution, supply chain, product transitioning. Therefore, I think it's important, I mean, that we all understand what are the temporary impacts in the quarter and what are the implications for the full year, in particular, I mean, for the guidance. With this being said, now let's have a look at the numbers at the group level, page two. Obviously, lower car sales mean lead to lower revenue. EBIT and EPS. So the EPA's reduction, however, is smaller, lower than the EBIT reduction. The net income is less impacted, and we have the accretion effect from the share buyback on EPS. We delivered a solid cash flow of $2.2 billion. So you see cash matters and is in the focus, and that supported a very comfortable net cash position with more than $33 billion by the end of the quarter. Before we turn to the numbers of the first quarter in more detail, I would like to highlight a few models, products which came into the market in Q1. I think this is also important to understand the Q1 sales and mixed evolution as these products are going to hit the market in the remainder of the year and obviously the time ahead of that. So what are they? First and foremost, the all-new GE. Cars on the ice. Next to it, we have the electric G-Class world premiere in U.S. and China last week. Simultaneously, you might have seen that this comes along with unique driving functions like the G-turn, the G-steering, and the intelligent off-road crawl functions. What else? We saw an extensive upgrade of the EQS with more than 800 kilometers range. new executive rear seats and a standing star in front of the hood, and lots of stuff on the AMG side with different E-Class variants of AMG, the 53, further GT Coupe variants in the first quarter. So, again, these products will hit the market in the remainder of the year, which will help, I mean, sales, but in particular, mixed and much more to come in the quarters and in the time ahead of us. Let's look at the sales evolution page four a bit more in detail. Total sales of cars were at 463,000 units, impacted by supply constraints, product transitioning, and market dynamics. So let's zoom a bit into the regional evolution. We could see basically a stable evolution in Europe and in the U.S. in the first quarter. If we zoom and deep dive a bit further into China, what happened here, the E-class availability was constrained in the first quarter. We also saw effects from the model year changeovers and the product launches. These product introductions, as just mentioned before, will support, say, H2 products. And overall, we have seen a market weakness in the first quarter. Also, our top-end vehicle products could not completely escape from that market weakness. If we look at the sales evolution from the segment structure, globally we can say that the first quarter was still constrained in terms of supply, but this is on the way to ease. The easing supply constraints had an immediate impact on the GLC in particular, which means the core segment increased by 8%. On the top end vehicle side, this is comparatively lower than last year, which was a pretty decent and high level. So the quarter one on the top end is a mixed bag of product transitioning, With 67,000 units, we saw the impact from the model changeovers at the G-class, the changeovers in high-volume vehicles like the AMG E-class and the GLCs, as well as supply chain bottlenecks. In the top end, as I just mentioned before, we also saw sales mean a bit lower. That also impacted mean on the F-class. However, F-class remains the undisputed leader in all regions. Overall, we see that sales should improve over the quarters. The top-end mix should also improve in H2 as well, while we continue to take a cautious view on the market overall. If you look on the best side of things, in the first quarter, the XEV share is at the prior year level. with EQC and Smart reaching the end of their life cycles in age one. We also see some slowdown in the EV adoption rate across the industry, and therefore we adapt our offerings to it. In this period of uncertainty, in terms of the EV transitioning, our top-notch plug-ins can play an important role in this transitioning. Cars financials, page 5, revenues down in line with the volume, ASP at 75,000 euro, EBIT at 2.3 adjusted, cash flow CFB at 2.3. Let's go through the EBIT walk in more detail on the page 6. So the return on sales adjusted is at 9% in the first quarter. How did we get there? Number one, the bucket volume structure net pricing is down, driven by the lower volume. The mixed impact, as I outlined before, a net pricing which is in total positive, and additional measures, investments into the product lifecycle to keep the product at the cutting edge. Furthermore, we see in the bridge FX negative due to the Turkish lira. whereas on the industrial performance side, we see a positive evolution. The main effects here are tailwinds from lower raw material prices and improved operational efficiencies, which suggests that we're doing our homework in terms of the efficiencies. The R&D spend is slightly below prior year level. Main effects in the other bucket of minus 200 are the BBC at equity results, and the absence of some prior year one-time effects. On the adjustment side, we see 133 million euro upside related to legal proceedings in the diesel. You might have heard the positive news for our company that the DOJ has closed the criminal inquiry into Mercedes-Benz related to diesel emissions in the United States. I would like to point out that the 133 million results from various developments and assessments and may not necessarily relate only to one specific proceeding or case. With this all together, the EBITDA is booked at 2.5, with the Roth at 9.6. Obviously, this is not the level where we want to be, and we'll talk later in terms of where we want it to be for quarter two and subsequent quarters. On the cash flow side, CARS, page seven, The CFBIT is at 2.3 with a cash conversion at 1. Slight tailwind from working capital at 0.3, more or less all in balance. Net investments are in PPE and intangible are lower than the depreciation, which means the investments are prioritized and stringently managed. The other line includes adjustments of the BBC at equity result in the absence of a divvy in the first quarter. So if you turn to the van side, a strong start into the year with regards to sales driven by the commercial vans, especially strong performance in the U.S. and in China. Our strong product portfolio, has been further supported with the launch of the new E-Sprinter and the midsize vans. That product substance and portfolio, the healthy mix, robust net pricing, and price premium combined with efficiency measures all in all resulted in another quarter with very good financial performance on the van side. At the same time, obviously, we continue to prepare for then EA, with a groundbreaking inventory of being the latest example. Sales numbers on the land side, total sales 7% up in all regions. As I just said before, the all new ED portfolio has been launched in the quarter one, therefore not leaving traces in the quarter one yet, so being available in the quarters to come. And with this, we obviously expect also the EV share to increase with the new eSprinter and the midsize EQV and EV2 once they're fully available. Key numbers on the page 10 for vans, all figures up, revenues up in line with the volume, EBIT adjusted up by 11% to $800 million, and also the cash conversion up by more than 50%. EBIT bridge on the page 11, so return on sales adjusted at 16.3%. Where is it coming from? Significant tailwind from the volume structure pricing bucket with increased volume with positive structure, healthy pricing supported by the product substance. On the industrial performance side, we have a bit of a headwind from higher inflation. and supply chain-related cost. With all of this, I mean, the EBIT adjusted is at $800 million. On the adjustments, same comment as for cars related to legal proceedings and diesel. On the cash flow side of things, the CEBIT reported 0.6, adjusted 0.7, cash conversion 0.9, moderate working capital uplift, The net investments exceed the depreciation, no surprise, as we've invested in our plans to make them ready for the recently announced models as well as the van EA generation to come. On the other buckets, same comment as on cars. On mobility, what can we see here in terms of the highlights in the first quarter? New business remained at the same level. We see in China penetration rates lower due to significant competition in the local banking sector. The XEVs see an increasing acquisition rate. Mobility continues to support the ramp-up of the EVs with every second vehicle being supported by MBM financing options. The profitability of the new acquisitions continues to improve. The increase in the cost of credit risk is mainly driven by the development in the U.S., and at the same time, we continue to develop them in our charging business, with more charging hubs already being up and running in the first quarter. On page 14, the key numbers. New business, as I just mentioned before, at the same level. Portfolio also roughly same level as at year end, 2023. And for the EBIT, we look on the next page on the walk, page 15. So as we guided for the quarter one, which would be in single-digit territory, That's what you can see here on the chart. How did we get there? Higher cost of credit risk, mainly driven by the U.S., due to increased credit losses in the consumer segment, were one of the key drivers. Besides the continued improved acquisition margin, we see a positive impact from the development of the portfolio versus in the first quarter. However, the overall portfolio margin is still under pressure, as it takes time for the improved acquisition margin to be reflected in the portfolio. At the same time, we also see an impact from a bit lower remarketing results at Atlon, and we also included in these numbers the investments in terms of the charging business for the first quarter. With all of that, I mean, this is at 8.5% return on equity. Group numbers, page 16, so cars, vans, mobility, I already explained, leaves the Racon, the consolation item. Here basically we find the equity result of Daimler trucks with a bit more than 200 million included. The EBIT adjusted at 3.6. After the adjustments I elaborated before, we see a group EBIT reported at 3.9. How did we turn that into cash? Page 17. Income taxes, and obviously division evolution, I mean, I explained already before. Income taxes at minus 0.7, a bit lower. That's the usual seasonality. And we have slightly negative impact due to interest received, seasonal pension effect, and a bit of others in the recon items. All in all, I mean, a pretty strong cash flow at 2.2 billion euro in the first quarter, and cash adjustments of 90 million for legal proceedings related to diesel. Looking at the nil evolution, page 18, so end of the quarter, we see a comfortable 33.6 billion. That has been supported by the cash flow, obviously, of 2.2 billion. At the same time, we bought back shares for around $300 million. Let me update you shortly on the capital allocation, page 19. On the chart, you see on the left-hand side what we announced in February in terms of our new capital allocation framework. How do we implement it now in May 2024? Right after the AGM, we will start with our already announced additional 3 billion euro share buyback program. From then onwards, and I think this is the piece of news here, both buyback programs, the remaining 4 billion and the new 3 billion, will run in parallel. They will be executed by an independent bank, which makes its trading decisions obviously without influence by ourselves. As a milestone, we expect buybacks to reach a total of around €4 billion by Q3 this year, and to finish with a total share of buybacks up to €7 billion all in all in Q1 2025 before the AGM. As of today, approximately 13 months after we started our initial share buyback, We have already acquired approximately 2.3 billion. This means in around 11 remaining months, we plan to buy back additional shares in the amount of up to 4.7 billion euros. Both share buybacks will be executed through the stock exchange with the purpose of redeeming the shares at the end of the program before AGM 2025. As we said, we intend to ask for a renewal of the authorization for SBBs in our AGM in 2025 to further continue share buybacks in line with the share buyback policy. With any share buyback, we'll keep, however, flexibility on the execution in case of unexpected market developments. So let me sum it up on this one here, I would say. Cash flow generation remains one of the key focus topics of the company, as you can see with the cash flow in the first quarter, and capital allocation, shareholder return, obviously equally important to us. With this, let's turn to the outlook on page 21. For the assumptions, please read the chart carefully. what is written there in terms of macroeconomic and global uncertainties. Let's jump to the car side in terms of the situation with regard to the supply. So we see that the current supply bottlenecks are on the way to ease on GLC and on E-Class and are expected to improve further. The Q1 is considered to mean to be the trough in terms of the sales. Quarter 2 should be better already. What does it mean for the sales guidance? Total car unit sales we expect at prior year level with all new E-Class and GLC expected to support the core segment development this year. and the top-end vehicle segment improving versus the first quarter level due to the product transitioning, which I emphasized before. Looking at the regions in Europe overall, we see a sentiment which is unchanged. The more detailed picture in Europe shows, however, a bit of a heterogeneous picture in the different markets. With regard to China, we do see the availability of products to improve, in particular on E-class. Here we see a very good product acceptance for this one and others, like the GLC. So from the product portfolio side and an availability perspective, we see growth potential. However, overall, in terms of market assessment, I mean, for China, we remain a cautious perspective. On the U.S., we still see a solid momentum for sales and demand with a positive year-on-year development. Positive effects come in particular on the SUV side, and here I would mention the GLC. On the XEV share, we confirmed the guidance at 19 to 21%. Be aware our consolidated smart sales are running out since the new smart is not part of the reported sales figures anymore. On the adjusted return on sales cars guidance, this is unchanged at 10 to 12%. So how do we want to get there with the 9% in the first quarter? Well, we do expect the volume to increase over the quarters. We clearly target the mix improvement in the second half of the year. We want to hold pricing and defend it at the current levels. We clearly see raw materials improving further, generating further tailwinds. At the same time, we see supply chain related costs generating further headwinds. However, all in all, material costs remain a net positive i.e., a further tailwind. So with this, all in all, we confirm 10% to 12% return on sales adjusted in a continued demanding environment. For PPE, R&D, cash conversion rate adjusted for cars, all unchanged. So with this, I would move to the van side. So here the guidance is unchanged. We had a strong quarter one, as we walked through before. With the start into the year, we have a comfortable cushion, I mean, for the remainder of the year. Considering current macro developments and uncertainties with regard to H2, we stay rather prudent and confirm full year guidance at 12% to 14% return on sales adjusted. We also expect a healthy quarter two in terms of return on sales. Market demand is expected to be softening in private and commercial land side. Full year guidance on all the other KPIs are unchanged. On mobility, the adjusted return on equity is also unchanged in the range of 10% to 12% for the full year. We see quarter one as the trough with improvements in the second half of the year, despite the further increase in the ramp-up costs of our charging infrastructure. So how do we get there from the 8.5% in the first quarter? Positive effects from the increased acquisition margins translating into the portfolio, as I emphasized before. and some improvements in the cost of credit risk compared to quarter one. On the group guidances, that follows page 22, follows the same premises as the segment guidance. All group guidances, KPIs are confirmed. With this, I would wrap it up here in terms of the summary, the takeaway from the first quarter. So we clearly expect the volumes, I mean, to come up. We do see quarter one as the trough. We have a great product lineup. We talked about the top end. Vehicle products, I mean, to come into the market in quarter two and beyond. In particular, I mean, in H2, we see a strong potential and momentum here from the products. And further on in 2025, obviously, I emphasize the G-Class, the GT, the E-Class, AMG versions, the GLC AMG versions, and a lot of products to come in 2025 and beyond. At the same time, we stay flexible on the transitioning from ICE to EVs. and do our homework in terms of efficiency while staying focused on the cash generation and on capital allocation. With this, I would now be happy to take your questions.

Thank you, Harald. Ladies and gentlemen, you may ask your questions now. I will identify the questioner by name. However, please also introduce yourself with your name and the name of the organization that you are representing before asking the question. Please ask your questions in English and please limit the number of questions to a maximum of two. Now, before we start, the operator will explain the procedure.

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We start the Q&A, and the first question goes to Tim Rocasa from Deutsche Bank.

Yeah, good morning, gentlemen. Thank you, it's Tim from Deutsche Bank. Harold, you have a number of things going for you. There's a really strong buyback now in parallel. The cash flow remains strong. That's amazing. But obviously the 9% cast margin is really tough to swallow this morning. And we knew that Q1 would be weaker. This is still weaker than most had anticipated. And you know how important this KPI is. So it is quite crucial for you guys to rebuild the story with this very strong decline that we have now seen for multiple quarters in a row. You say that Q1 was the trough. Will Q2 already see a material turning point for the cast margin? Will it be above 10%? Or is this sort of like a slow transition into the second half? And we have to wait for that time to really see this. Secondly, this is a pretty busy autumn morning. You see a couple of consistent themes from the reporting. Pricing seems to hold up very well in the mass market as well as in the premium market. Mix is not great and volume seems to be quite weak for everyone. On the positive side, that tells us the industry remains very price disciplined. We wanted that. It's good. But at the same time, it is quite curious why everyone really struggles on the volume side and talks about product availability being an issue and a lot better volumes to come in H2. Can that really be the case? And what are you preparing for? in terms of pricing for if everyone really needs to make up a lot of volume with all the newly available models launched in H2. Thank you.

Yeah, thank you very much, Tim. So on the first question, how do we exit from the 9% ASAP? I can say very clearly, I mean, I'm not happy with the 9% in the first quarter. Very, very clear. And that's, I mean, there's a lot of emphasis on getting out of that territory as quickly as we can. What do we expect to happen in the second quarter without giving, I mean, a detailed guidance now for the quarter? But clearly, I mean, we target, I mean, volume higher in the second quarter than in Q1. That's why I did say before that quarter one is a trough. I do see that on the material cost, in particular on raw metals, I mean, there should be further tailwind, I mean, in the second quarter. I think that gives opportunity to improve in the second quarter already. And clearly, I mean, I would have the ambition that we see a double digit again in the second quarter. Whereas, I mean, the mix improvements rather kicks in the second half of the year in terms of top-end vehicle availability and further ramp up given the supply constraints. So that should be trajectory, I mean, to get to the full year guidance of 10 to 12%. In terms of your second question, so much stuff to come. I have a bit of different perspective, I may say. You could see the high level of demand materializing on GLC availability with 8% up in the first quarter. on the core, driven by the GLC. What is my message here? These products are in high demand. So it's a product substance which is driven, which drives the market, the dynamics. And we see exactly the same market feedback demand on the E-class. Also in China, we were constrained also in other overseas markets, in particular in South Korea. So once the products are now available in these markets, we see the demand for customers for it with healthy pricing level. We stay competitive, but the pricing levels on the products are healthy. I commented before, are stable. So as we discussed, I think, at earlier occasions, I mean, the heat is rather on the EV pricing. the ice pricing is in a solid territory. Sounds good.

Thank you. Thank you, Tim. And we continue with George Kaye from Goldman Sachs.

Yes, good morning, and thank you for taking my questions. The first question I had, which was a little bit related to Tim's question, was just with respect to the drop-in wholesales that we saw in Q1. Obviously, if we compare that to the run rate of the prior three quarters, it looks like you had around a 60,000, 50 to 60,000 unit drop. Could you just help sort of break down what the buckets are there in terms of how much of that is E-class changeover, how much of that is maybe due to demand dynamics, and how much of it is a result of the supply chain constraints that you flagged. And then the second question I had was a more general question. One of your peers at their full year results called for a comprehensive review of EU fleet CO2 legislation. Do you share the view that this should be revisited? And would a change in legislation actually prove economically a net benefit for you given the ongoing investments in battery electric vehicles at this point in time? Thank you.

Thank you, George. Well, I would say in terms of the volume drop in the first quarter compared to previous year and compared to where we want to be on the full year basis, product availability is still the number one in terms of volume size, and that refers, I mean, a lot to E-class availability. Number two, I would say, is the product transitioning in various segments, but in particular on the top-end side. And number three, I think all in all, is some softness on the market in the top-end in China and maybe also a bit in overseas. So that's the ranking here. How I would see it, you can read from the confirmation of the full year sales guidance. I mean, that obviously we do expect to overcome that quarter one situation. As I just commented before, following Tim's question already, I mean, with quarter two sales being up and then further progression in H2. Your second question in terms of revisiting CO2 legislation, I think, if I'm not mistaken, there is a juncture in 2025 at the EU level to see where the EV penetration stands with regard to the 2035 ICE ban. I think that probably makes perfect sense in order to see whether the customer demand is there to support the transitioning as initially envisaged. Therefore, taking a pragmatic view, I think we support that perspective. However, let me say at the same time, we start to be a bit too nervous and I think too much on the back foot in terms of EV transitioning in these days. It remains our objective to go It remains our objective to go CO2 neutral, and therefore I think keeping ambitious targets also in terms of EV transitioning is what we globally support in line with our strategy.

Thank you, George. Thanks, George. And we continue with Stephen Reitman from Bernstein Societe Generale. Yes, thank you very much. Some more comments, please, on how you see the market in China developing. You mentioned that the class has been very well received. Can you talk also about the general environment you're seeing both on ICE and for your BEVs in terms of incentive activity and your pricing level there, please?

Yeah, thanks, Stephen. So if we zoom a bit more in depth on the China market, number one, availability on E-class, as I emphasized. So once that is coming up, we can see a demand for the product also at healthy pricing level. We clearly see a very strong field of competitors and product availabilities in the EV space. I think many of you were in Beijing last week on the show. So definitely a very strong supply of products in the EV space. And we positioned ourselves here on the EV side. But as you can see also from the numbers, we're not artificially pressing or trying to buy a share of with the products on the EV space in China. So we are rather leveraging the products where we feel intrinsic customer demand, as just outlined before. And the number three, I would mention that globally, given the macro evolution in China and still, I think, some lack of consumer demand, comfort and given the consumer sentiment, we see the dynamics of the market still being at a slower pace, including the top-end segment, which also leaves some traces in the first quarter and probably also for the full year. However, this is not related, I think, to our products. We see that our products in the top-end space in particular, I mean the S-class, remain absolutely market leader. not only in China, but in all of the markets, but that is a system of evolution which hits, I mean, also top end globally. So that's what I would say roughly in terms of the dynamics on the China market.

Thank you. Even, and the next gentleman in line is Jose Acemendi from JP Morgan.

Thank you very much. Jose from JP Morgan. Good morning, Harald. Just a couple of questions. The first one, can you please quantify how many units did you sell? Did you miss in terms of deliveries in Q1 from assistance cars due to the supplier bottlenecks? Can you maybe just give us a few more examples of why you think these bottlenecks are easing into the second quarter? Is this something that you already see in Q2? It looks like the topic has been dragged for a couple of quarters. So any anecdotes you have on those bottlenecks easing, that would be great. And then second, can you comment a bit on your share of electric cars in China? So swimming into China, how do you think about the powertrain mixing in the region? We're seeing one of the competitors have a higher share of that, a quite high share of that in China. Do you plan to increase the share of electric vehicles in your Chinese sales in the coming quarters, or do you plan to keep it stable in 2024 versus 2023?

Yeah, on your first question, Jose, I mean, as just commented before, the sales or the volume impact in the first quarter, I mean, the most important in there was the product availability given the supply constraints and what, again, mentioned ECAS in terms of the – given the unit sales being the most impacted area still in the first quarter. On the other side, you could see, I mean, with the GLC availability that this is coming up, which gives, I think, confidence that once availability on ECAS is there, that we also see this one improving in the quarter that's a minute to come. In terms of the EV share is... Just to comment it, we follow, I mean, customer demand. We're not pushing excessively, I mean, the products, I mean, here into the market. We want to protect, I mean, the product substance. We also want to protect margin. And that's why I would say we'd rather see an EV share globally growing this year, which is rather stable at 19% to 21%. That also applies, I would say, for the market of the EVs in China. But this is a very important point. Let me take the opportunity of your question to go beyond the quarter. We are in a situation right now where we do not have EV offerings in all important segments of the market. Here I look very much into 2025 and then further into 2026 when MMA comes to market, which obviously will have a much larger, much broader offering in terms of EV vehicles in the entry segment. And then I'm looking very much to electric C-Class and GLC 2026 to come to markets, which obviously is the area where we see most of the EV growth in these days. where given the lifecycle evolution of EQC, which we commented to Min earlier in the call, we don't have a product offering at this juncture. So that explains, I would say, why you see different dynamics also in terms of EV evolution between market participants. At our end, this is a function of product availability. and the products which are to come, MMA and C-Class and GLC Electric. We are very confident that they're going to meet customer expectations towards Mercedes products in the years 2025 and 2026. And therefore, we're going to build a curve on the EV share, not only in China, but also in the rest of the world with these products to come. I think this is very important. that we have a good understanding in terms of the product sequences, and here there is really good stuff, and many of you have seen the products, and I think share our belief that they are going to make a difference in the market. Thank you so much. Very clear.

Thanks, José.

We continue with Philippe Ruchois from Jefferies. Yes, good morning. Thank you for letting me ask the question. My question is on R&D. There was a nice tailwind to the Q1 performance, and I'm just trying to understand how much of that is no seasonal weakness that will kind of normalize back. And also in the broader context, as we look at potentially the industry having to manage a longer transition to EVs than initially thought, to what extent there's a need to reinvest in a longer lifespan for ICE. And also, as you know, many of us were in China last week, and we see that interest in plug-in hybrids in the U.S. and in China and the return or the expansion of the range extenders. And any thoughts that the need within the Mercedes portfolio to consider range extenders as, again, a longer transition into a world of best? Thank you.

Thanks, Philippe. Absolutely, you're right. I mean, on the plugins, I think they can play a very important role in many markets in terms of the transitioning. I would dare to say that probably we have the richest, the broadest, the most versatile, the most useful portfolio of plugins in the market. with autonomy, with range of 100, 130 kilometers autonomy. So you can do basically most of the missions a week on a fully electric basis. But then once you need the range, you have the combustion engine to take you further. We can see also in the quarter one that the plug-in share is at a bit higher level than in previous quarters. the products are there. So it's not that we need to invest R&D into it. They are ready to hit the street. So I think this is a jewel in the toolbox, which we can leverage. And we're happy if the market demand supports that, not only China, but in many other markets, U.S. as well, in the future as we go through this transitioning process. In terms of the investments for the EVs, let me be very clear, we do not slow down the investments on the EV side. Despite some doubts in terms of the pace of transitioning, we don't take a tactical approach here. No, we keep the strategic focus in terms of investing into the EV products. I commented before on MMA in 2025, on GLC and C-Class in 2026, but obviously more stuff to come thereafter. So we stay full throttle on in terms of the investment on the EV side. And also on the ICE side, we do a lot to keep the products at the cutting edge. In the quarter one bridge, I also said that we invest into measures to further improve cutting-edge technology and content in the vehicles, not only for new vehicles, but over the life cycle. So the ICE portfolio, which is in the market, has a great future and therefore can support with healthy margins. Overall, well, what you can see in the quarter one, I would not take it times four in terms of full year R&D and investments, a bit of phasing as always on the R&D side. You can see a bit as well, I mean, that we are prioritizing the investments. Not each and every idea being brought forward is being passed. So despite the focus on EV investments, on technology investments, software, MBOS, drivetrain, however we prioritize, and that's what you also see in the numbers. With this, on the margin side, but also on the cash flow side, if you look into the first quarter. So these are, I think, the elements at work. Great. Thank you. Thanks, Philipp.

And the next gentleman in line is Henning Kosman from Barclays.

Yeah, thank you. Good morning. Thanks for taking the question. I had a couple of questions on pricing, please. Firstly, if you could remind us if in the net pricing you include the residuals or the remarketing gains and the year-over-year change of that. And if you could remind us how this is trending and how you see this developing in the course of the year, if you could perhaps give us the euro million impact in the first quarter and how you see it trending in the course of the year. And then the second part of the pricing question is, if you could, again, help us reconcile the pricing and how it's holding up for you. And you said you see it holding up for yourself. And I'm always trying to reconcile that with the headline discounts that we're seeing in the market, not only in China, but also in the estuary. get this third-party data. It doesn't seem to reconcile with the strong pricing that you're continuing to enjoy. So if you could please help us understand again, is this a function of list prices still improving for you and net-net despite higher discounts, that's still stable? Or is there a part that the dealers are currently still digesting and how you think about the sustainability of that element? Or might you have to start digesting a bit more of the discount yourself in the course of the year and into next year. Thank you very much.

Thanks, Henning. On the first question, with regard to the remarketing used car business, as we guided for in the full year guidance in February, we do see some softening on the used cars, which is included in the volume structure pricing bucket on the EBIT walk However, not in the commentary on the pricing, where it said pricing stable. So you can rather, I mean, allocate that to structure or so. In terms of what is the evolution, I mean, in the expected evolution, I mean, in 2024. So we end at 2023 with a pretty decent situation, I would say, in terms of the price. the use card of the marketing results still being in the four-digit territory, in the low four-digit territory, higher than what we initially thought. However, we do expect some softening, part of which we could see in the first quarter, some further softening. We do anticipate at this juncture, I mean, for the remainder of the year, which should still leave us with a healthy three-digit, mid to high three-digit million remarketing result in the full year 2024. I hope that explains a bit the building blocks on that element. In terms of the second question, the pricing dynamics, why are we saying that pricing has been kept stable in the first quarter? Clearly, this is, I mean, the sum of new pricing for vehicles to come to market. So the MSRP evolution, including year-on-year escalation update, and the discount evolution on the other side. So we continued our Pillar 2 strategy, value over volume, in terms of product positioning on the MSRP side. We used some flexibility, I mean, here and there, I mean, on commercial measures to stay tactically competitive. And the sum of the two is a net positive. Let me say at the same time, however, as you guys obviously spot each and every movement and each and every discount the dealer is giving on an individual vehicle, We, at the end of 2023, but also into, I mean, quarter one, we had some stock measures and stock clearances, so to say, cleansing, which has been done, I mean, by dealers. And that, I mean, yielded some higher level discounts. I would say in particular, I mean, on the EV side, and we look at that very carefully, and then we take respective conclusions in terms of how much supply is healthy, how much supply can be digested or is demanded by customers in view of the stock at dealer, stock at our end, and then if need be, we do adjust. So therefore, I mean... I do expect that some of these measures you did observe should not be with us for the remainder of the year. On the ICE side, overall, I mean, the pricing is at a more comfortable level, at a healthier level than on the EV side.

Thank you.

Thanks, Henning. And we conclude the Q&A with Horst Schneider from Bank of America.

Yeah, thank you. Can you hear me?

Loud and clear.

Okay, excellent. Thank you. I just have got some smaller items left in terms of questions. What I'm observing basically for a while is that your interest income gets pretty strong. So the run rate that we are seeing basically since Q4, can we extrapolate that now for the next two quarters? If you have a kind of 150 million euro positive net interest income, The number two that I have is related to the bridge items, foreign exchange and also industrial performance. However, you said industrial performance is going to remain strong, so we can expect for the next few quarters that we see an even better number than we did in Q1. Is that right? And in terms of foreign exchange burden, is that something that will now carry through the year, or that is something which will peter out maybe in the next few quarters?

Thanks, Horst. So the credit in terms of the improved interest rate results, I mean, I'm happy to pass it to Stefan, managing that with his treasury head. But maybe not at 150 million run rate a quarter. It would take it slightly down, I would think. Maybe still in the three-digit territory, but just at the beginning of it. He's nodding with a hat, so it suggests, I mean, that is a close to true statement. On the other items, FX, frankly, is a bit difficult, I would say, to predict. I'm not claiming to have a crystal ball in front of me in terms of the key currencies evolution. What we do observe, however, now since a while is the evolution of the Turkish Lira, So maybe this is still constituting some headwind, which we try to offset on pricing side. It goes without saying. Thanks to remind us on the industrial performance. I mean, this is really the name of the game in terms of the effort of the teams in all areas in supply chain management. try to materialize, cash in the raw material evolution, which should be further beneficial. I mean, as we go through the year, it is the effort of the teams to mitigate, minimize claims coming through the supply chain in terms of inflation claims or capacity-related claims. Here I still see some further headwind on these kind of one-off claims, but trying also to leverage commercial and technical efficiency in the supply chain. So an extra effort has been set up here by the purchasing teams to extract more value, not necessarily saying cash out of the supply chain, but more value out of the supply chain So it's really a gigantic effort, which all in all, on the material cost of the vehicles of the product, should provide us some further tailwind as we go through the year. But not limited to the supply chain. Obviously, also in our operational field and environment, we took quite significant steps. operational objectives in terms of further HPV evolution, efficiency gains, fixed cost reduction in operations to drive efficiencies through the factories and the whole company. So altogether, these efforts in terms of efficiencies beat supply chain be it operations internally, should provide us with a tailwind for the quarters to come.

Okay. Thank you very much.

Thank you, Horst. So, ladies and gentlemen, thanks a lot for your questions, for being with us today. We know it's a busy day for you as well. Also, thank you very much to Harold for answering the questions. As always, IR remains at your disposal to discuss further topics. Have a great morning, great afternoon, and great evening. Thank you very much, and goodbye.