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Mercedes-Benz Group AG (MBGAF) Q4 2022 Earnings Call Transcript

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Mercedes-Benz Group AG (OTCPK:MBGAF) Q4 2022 Results Conference Call February 17, 2023 4:15 AM ET

Company Participants

Steffen Hoffmann - Head of Investor Relations and Treasury

Ola Kallenius - Chief Executive Officer

Harald Wilhelm - Chief Financial Officer

Conference Call Participants

Tim Rokossa - Deutsche Bank

Patrick Hummel - UBS

Jose Asumendi - JPMorgan

Daniel Roeska - Bernstein

George Galliers - Goldman Sachs

Horst Schneider - Bank of America

Dorothee Cresswell - Exane

Daniel Schwartz - Stifel

Tom Narayan - RBC

Frank Biller - LBBW

Philippe Houchois - Jefferies

Martin Wilkie - Citi

Stephen Reitman - Societe Generale

Operator

Welcome to nan world convention telephone of Mercedes-Benz. At our customers' request, this convention will beryllium recorded. The replay of nan convention telephone will besides beryllium disposable arsenic an on-demand audio webcast successful nan Investor Relations conception of nan Mercedes-Benz website. The short preamble will beryllium straight followed by a Q&A session. [Operator Instructions] I would for illustration to punctual you that this telephone convention is governed by nan safe harbor wording that you find successful our published results documents.

Please statement that our presentations incorporate forward-looking statements that bespeak management's existent views pinch respect to early events. Such statements are taxable to galore risks and uncertainties. If nan assumptions underlying immoderate of these statements beryllium incorrect, past existent results whitethorn beryllium materially different from those expressed aliases implied by specified statements.

Forward-looking statements speak only to nan day connected which they are made. May I now manus complete to Steffen Hoffmann, Head of Mercedes-Benz Investor Relations and Treasury. Thank you very much.

Steffen Hoffmann

Thank you. Good morning. Once again, bully morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Mercedes-Benz.

I'd for illustration to invited everybody present successful nan room arsenic good arsenic connected nan telephone and the Internet to our afloat twelvemonth results convention call.

We are very happy to person pinch america coming Ola Kallenius, our CEO; Harald Wilhelm, our CFO. You astir apt each joined position correct before. So conscionable arsenic a speedy reminder, nan respective superior marketplace position pinch each '22 figures and nan '23 outlook tin beryllium recovered connected our IR website.

Ladies and gentlemen, you whitethorn inquire your questions now. For nan group successful nan room, please raise your manus to show you would for illustration to inquire a question. And aft being prompted, please usage nan microphone up of you. Please property nan fastener earlier you inquire a question, and please property it again aft nan mobility to shut up it.

For nan ones who joined by phone, nan usability will explicate nan process successful a moment. As always, we'd for illustration to inquire you to place yourself pinch nan sanction and nan sanction of nan organization. Please inquire your mobility successful English. Please limit nan magnitude of questions to 2.

Now earlier we start, nan usability will erstwhile again explicate nan process for nan ones connected nan phone.

Question-and-Answer Session

Operator

[Operator Instructions]

Steffen Hoffmann

And nan first mobility goes to Tim Rokossa from Deutsche Bank.

Tim Rokossa

First of all, awesome to spot nan stock buyback programme from you guys. As you know, we've been discussing astir this for a agelong clip already. So this is awesome to see.

I person 2 questions. The first 1 relates to nan operation and nan 2nd 1 to pricing and volume, and each 3 up which are somewhat interlinked. TVs are expected to outperform portion income erstwhile again. Ola, you already said that semis are still a spot of a constraint, but it's easing. Do you consciousness immoderate unit internally to dilute nan operation immoderate clip soon?

Or tin TVs proceed to turn until MMA is being introduced, for example? And by nan way, I would not see a Baby G wagon that we could publication astir successful nan property and operation dilution. My wife's a large fan. So nan Rokossa family will intelligibly beryllium a purchaser of that.

And secondly, erstwhile we deliberation astir push measurement versus affirmative pricing, it's awesome to spot that you don't person immoderate existent fierce measurement assumptions. I deliberation we tin spot this arsenic a assurance motion that you don't push volume. But obviously, a batch of group would situation you connected your affirmative pricing assumption. How do you guarantee pricing remains positive? Is that because you still person this backlog successful Europe that you activity done wherever there's a batch of value increases still included?

Is nan nonstop income exemplary pushing into that? Or really do we really get assurance that affirmative pricing is still a point besides successful 2023?

Ola Kallenius

So if we commencement pinch nan first question, convey you, Tim, for that. Yes, we're guiding wide measurement astatine nan aforesaid level -- astir nan aforesaid level arsenic 2022, but we person an ambition to somewhat turn connected nan apical extremity side.

But I deliberation 1 point that shall not beryllium forgotten, if you look astatine really nan progression of this has been complete nan past 2 to 3 years, that wrong nan 3 segments that we have; Top-End, Core and Entry. You tin person value maturation wrong those segments. So indeed, you made reference to nan Entry side. Do we consciousness pressure? We person been capable to amended nan value of nan publication connected nan introduction broadside arsenic well.

Some of nan vehicles that we do waste location person very patient publication margins. So you cannot -- it's not a achromatic aliases white. You conscionable do nan 1 and you don't look astatine nan other. You person to negociate this full pyramid, aliases arsenic we presented past twelvemonth erstwhile we talked astir our luxury strategy, this gem and look wrong of it.

And truthful pinch respect to pricing. Of course, immoderate of it is action that you person taken past twelvemonth that past spell into a afloat twelvemonth effect. And it is so our ambition this twelvemonth excessively successful nan nett betwixt pricing and what we person going on, connected nan earthy mat and nan commodity side, to support that successful affirmative territory. And I don't remark to speculation connected our portfolio. There are truthful galore fans reasoning astir truthful galore different variants.

So you person to enactment tuned connected that one.

Operator

Next 1 is Patrick Hummel from UBS.

Patrick Hummel

Also 2 questions from my end. The first is conscionable a follow-up really to Tim's mobility astir pricing. And I would presume location are 2 very price-sensitive segments that you're still exposed to. Compact successful Europe, besides nan fleet segment, wherever you person a operation of, let's say, Entry and Core luxury cars, wherever I would presume that it's a good statement to locomotion betwixt pricing and measurement management.

So I'm wondering, arsenic your measurement guidance for nan group implies level and you said Top-End, you want to grow, truthful you're evidently prepared to return a definite deed aliases a mini deed connected nan volumes astatine nan bottommost extremity of your portfolio, really do you steer your distribution successful that regard? Where are nan symptom points successful position of losing volumes wherever you would say, okay, we person to do a spot much connected pricing? What are nan incentives? Can you talk a small spot much astir nan regular creation of optimizing, arsenic you called it conscionable before?

And my 2nd mobility relates to China. There, we spot a very competitory marketplace environment, particularly successful what is your Entry and past Core segment. We've seen a batch of value action connected nan EV front. And I'm conscionable wondering what that elevated level of title successful nan EVs that will astir apt impact you astatine slightest astatine nan bottommost extremity of your portfolio, what that intends for your trajectory towards EV separator parity. If you tin conscionable springiness america an update connected that?

Ola Kallenius

You commencement pinch nan first one, possibly I'll statesman connected nan second.

Harald Wilhelm

A spot of a further heavy dive into pricing, but possibly not quantifying each and each lever connected nan pricing. I deliberation we person been talking rather often about, I mean, what's down pricing? I mean it's decidedly -- it's, I mean, nan first pricing of nan vehicle, I mean, which should enactment complete nan life cycle. It is nan escalation updates year-over-year. It is really we negociate nan discounts.

And now very important, I mean, nan lever coming from nan nonstop income model.

So we activity connected each of these. So we took, I think, I mean, an eager attack successful position of nan first pricing for basically, I think, each of nan variants, which came, I mean, into nan market, and we'll proceed to do so. However, we request to enactment astatine nan holistic arsenic good and watch, I mean, nan competitory abstraction successful nan environment. Second 1 is connected nan year-on-year price, I mean, escalation. You cognize we reacted, I think, very quickly and swiftly backmost successful 2020, 2021 to measurement up, I mean, beyond nan mean people successful position of, I mean, nan ostentation update, nan escalation update.

And we took measures for 2023 already for this to be, I mean, nan lawsuit successful 2023. Discounts, I mean, you could spot it successful nan floor plan fundamentally connected -- successful nan locomotion -- successful nan EBIT locomotion '21 to '22, had a very important impact, I mean, successful nan value bucket.

We sewage it really, I think, to a bully level. I mean, here, we request to adopt a bit, I would say, to marketplace environment. But past nan switchover of nan nonstop income exemplary should beryllium a bully enabler successful position of managing discounts moving forward. The markets which we turned astir truthful far, I think, really proved very beneficial successful this respect.

And erstwhile -- beyond nan anticipation we had erstwhile initially mounting retired nan business lawsuit for nan move complete of nan nonstop income model. So nan entirety of each of these measures allows america to opportunity that nan pricing should beryllium affirmative and moreover truthful affirmative that it tin offset nan headwinds, which we expect, I mean, from earthy mat commodity supplier inflation, la, la, la, la, la. Will it beryllium arsenic precocious arsenic 2022? I.e. nan locomotion from '22 to '23.

Probably not, but should be, I mean, bully and coagulated enough, I mean, to compensate.

Ola Kallenius

And if you deliberation astir nan tools, you asked astir nan tools. If you're retired location successful nan market, really do you really thrust nan market. And it's a associated task betwixt nan trading and salespeople and Harald's squad connected nan finance side.

It's fundamentally a attraction connected publication separator and besides publication separator per vehicle. So to negociate nan wide contribution, that is KPI #1. If we talk astir China, it is perfectly existent that complete nan past fewer years, nan maturation of nan electrical conveyance marketplace successful China has been from nan bottom.

So astir of nan action has been beneath RMB 300,000, segments wherever we almost don't person anything. So it's for illustration nan EV marketplace has been beneath wherever premium and precocious premium and luxury sits. And 1 has to admit that nan competitory strength successful that conception of nan marketplace is very, very, very high, which is, of course, thing that we're watching, whereas nan premium and precocious luxury is still successful very early days. It's almost for illustration it's -- successful its infancy.

So I deliberation we person to use immoderate strategical patience present and look astatine really this grows organically because it doesn't make consciousness to jump into -- astatine nan precocious extremity and nan aforesaid dynamics that possibly is happening astatine nan little end. So it's early days. We're watching it and possibly we're going to person to person immoderate strategical patience.

Steffen Hoffmann

Thank you, Ola. Thank you, Harald. And we move to immoderate of nan colleagues connected nan telephone line. The adjacent man would beryllium Jose Asumendi from JPMorgan. Jose, if you tin perceive us?

Jose Asumendi

Jose from JPMorgan. Hi, Ola, congratulations connected nan year. Can you perceive me?

Steffen Hoffmann

Yes, we tin perceive you.

Jose Asumendi

Perfect. Just a mates of questions, please. There's a spot of delay. So I'll conscionable astir apt return some questions. When -- nan first mobility for Harald, please.

Can you remark connected nan gross separator dilution connected BEV versus ICE, if location is immoderate wrong Mercedes-Benz. We are seeing immoderate of nan competitors disclosing a important gross separator dilution betwixt vehicles and soul combustion engine. This taxable is evidently going to accelerate successful nan coming quarters arsenic different car companies disclose margins. I would emotion to understand, please, if location is immoderate separator dilution for you connected BEV versus ICE connected gross margin. And if location is not immoderate important dilution, what are you doing amended than nan others?

Is it pricing power? Is it [indiscernible] scale, purchasing battery, et cetera?

And past 2nd question, please, for Ola. But erstwhile I look astatine nan margins, very beardown performance. However, I would emotion to understand a spot amended this medium-term separator ambition you person for Mercedes-Benz cars. Have margins peaked successful 2022? What do you deliberation are nan levers to amended nan profitability margins to higher levels successful nan adjacent 2, 3 years?

And do you deliberation we could beryllium astatine slightest connected our broadside underestimating nan move from wholesale into retail?

Harald Wilhelm

Yes. Jose, convey you. So connected nan BEV margin, I would opportunity you cognize that since rather a while, we take, I think, I mean, a cautious and a prudent position connected it successful position of really do we judge, I mean, nan mid- and nan semipermanent outlook, I mean, connected nan BEV margins arsenic nan important step-up successful adaptable cost, I mean, from nan e-drive train, I mean, peculiarly successful nan artillery coming is simply a truth and moreover much truthful if you look astatine nan earthy worldly prices.

So to talk about, I mean, costs parity aliases separator parity, sounds to maine a spot excessively ambitious. So we take, I think, I mean, a much realistic stance successful this respect. And that's why we reside each of nan different levers, I mean, to compensate, I mean, a separator dilution.

Where did we extremity up? I mean, successful 2022, well, you don't spot really traces. I think, I mean, nan family, which is successful nan market, EQ family pinch nan EQS, pinch nan SUV EQS starting, nan EQE sedan starting, but besides moreover Mini QE and EQB are doing good successful position of nan margin.

And now, I mean, we standard significantly, I mean, successful 2023. We opportunity astir double nan vehicles are there. And structurally, however, I mean, they beryllium beneath them successful nan respective eyes. And that's why successful nan guidance, I mean, for 2023, I said before, you person a flimsy dilution from this step-up, which we want to compensate by nan Top-End share.

Maybe erstwhile I opportunity slight, you could spot that successful nan bid of magnitude successful position of, I mean, 0.5% successful position of ROS dilution for 2023. Individual margins, I think, doesn't make a batch of consciousness now to talk astir nan individual margins of each and each conveyance arsenic depending connected erstwhile and really they scale. I mean this is changing. And -- but I mean, nan 1 thing, I mean, I would say, moreover connected nan ones wherever you would expect a beautiful mediocre separator astatine nan little extremity are doing fine, are doing okay. So nan margins are not that acold distant from nan respective ICE vehicles.

I'm referring to EQA and EQB, for example. And connected nan EQS, I mean you cognize that we took a very eager stance successful position of wherever to position in, and we'll definitely, I mean, support nan aspiration, I mean, to amended them successful nan margin. So I would say, for 2023, mean to flimsy dilution. And for nan different levers, I deliberation that, Ola, refers to your 2nd question.

Ola Kallenius

Just arsenic a wide statement, Jose. The alleged upwind floor plan that Harald presented astatine nan strategy update successful May of past year, that stands. There, we outlined what our ambition is by nan mid of nan decade erstwhile we person progressed further into transformation. We haven't vanished nan transformation, but we person progressed further into transformation.

So that ambition nether those different upwind information stands, which intends we want to negociate nan translator successful a profitable manner. So I don't want to opportunity thing that changes that coming because that is our financial ambition. But you asked specifically astir nan dynamics of going into nonstop sales, and I've had nan opportunity to talk to different markets connected this present recently. A fewer weeks ago, I went to India, whereas it's not a very ample market. It is simply a marketplace successful maturation and an system successful growth.

And that was 1 of nan overseas marketplace that we turned into nonstop income past year. And I had a gathering pinch nan trader board. And I deliberation nan champion is really to get nonstop feedback from nan group that person switched their business exemplary together pinch america and what do they say.

They were tremendously affirmative connected what they had knowledgeable connected this shift. And I deliberation there's 1 effect that we had calculated with. But arsenic you said, Harald, possibly truthful far, that came retired a small spot amended than we had expected, is if a customer makes a determination that they want to bargain a Mercedes, let's opportunity you want to spell retired and bargain an E-Class, astatine immoderate constituent successful that purchasing decision-making process, nan customer has made up his aliases her mind.

Then usually, what happens is you either spell to nan trader of choice, nan 1 that you cognize and you spot and you make nan transaction, aliases you commencement shopping around. And nan shopping astir successful nan 1 marketplace area, possibly you spell to a mates aliases 3 dealers. Inevitably, you would person a move going connected there.

Once you spell to nonstop sales, and it is nan shaper that sets nan price, you move distant from trading nan value to conscionable trading nan product, which by nan way, should beryllium your attraction anyhow if you person a luxury ambition.

Not only does that return worry distant from nan transaction arena and besides gives nan customer assurance that erstwhile they buy, they're not going to get a amended woody adjacent door, truthful to speak. So that dynamics mostly successful nan marketplace that we person had turnover truthful acold has led to a higher customer restitution and much value stability. So yes, moving into nonstop income is 1 of those levers to woody pinch nan summation successful adaptable costs driven by EV thrust trains, which is what nan separator communicative is each astir connected nan EV side.

Steffen Hoffmann

Thanks, Ola. Thanks, Harald. Thanks, Jose, for your questions. We enactment virtually successful London and proceed pinch Daniel Roeska from Bernstein.

Daniel Roeska

It's Dan from Bernstein. Congrats connected nan beardown Q4. Maybe a small spot much connected nan strategical timeframe connected nan upstream and downstream astir nan full BEV transition. Could you talk astir your goals for your upstream proviso chain? Where are you seeing capable investments from suppliers and governments?

And wherever do you deliberation you whitethorn still request to measurement successful beyond what you had planned truthful acold from earthy mats, mining, refining, immoderate manufacturing benignant of, wherever do you comprehend nan velocity to beryllium nan slowest correct now? And reasoning astir nan downstream benignant of your sales, location person been plentifulness of studies asking consumers, 20% to 40% typically successful nan marketplace are consenting to bargain an EV, but location are still holdouts. They are 20% to 40% who don't want to bargain an EV yet.

And truthful successful your view, what are nan astir important issues you request to tackle on, you request to person benignant of those holdouts successful nan adjacent 7 years, benignant of what are you focused connected benignant of bringing those past non-EV buyers into nan fold?

Ola Kallenius

Yes, Daniel, if we commencement pinch nan earthy worldly picture, we are benignant of mapped successful a matrix, nan full world and each nan applicable earthy materials conscionable to mention nan main ones, lithium, nickel, cobalt and truthful on. And arsenic you are aware, we person already struck immoderate offtake agreements. We person besides signed agreements to spell each nan measurement to nan root into mining pinch Canada and refining successful this case, successful Europe. And we're moving connected different imaginable options to spell into heavy sourcing. But anterior to that, and alongside pinch that, we're moving pinch each 1 of our Tier 1s and looking astatine nan sourcing concatenation completely, besides region for region.

For instance, we announced astatine nan opening of past twelvemonth that we will, by nan mediate of this decade, we will North American aliases -- Americanize our proviso concatenation for artillery cells successful nan United States for nan mid of nan decade. So we person sat down pinch that subordinate and looked astatine wherever are nan earthy materials going to travel from, wherever is nan refining capacity and truthful on.

So this is simply a very ample matrix wherever you effort to benignant of capable section aft section from a mobility people to an exclamation mark. If you inquire maine wherever is nan strategical situation for nan wide earthy worldly marketplace of those? I deliberation it is nan gait of lithium extraction and refining. It's not nan only challenge, but that is possibly nan 1 that has nan biggest ramp. Because if you put each nan ambitions of each nan car companies connected apical of each other, if you look astatine what nan existent level of accumulation is, a batch needs to hap betwixt now and nan extremity of nan decade and into nan adjacent decade.

So this is simply a move and moving area, but wherever we are going beyond what we would traditionally do trust connected nan Tier 1s taking attraction of nan problem. And past remark connected that, arsenic you each know, we took a liking successful nan aspiring European compartment champion, ACC. So now we person a tremendous magnitude of visibility done being a partner successful that task of precisely what's going connected successful compartment manufacturing connected each levels, which so increases not only our visibility, but besides our know-how connected really to spell aft this. So nan EV holdouts, we are each realistic astir nan modulation that switching from high-tech combustion to each EV is simply a task that is going to spell connected passim this decade and adjacent decade. We person an ambition to effort to spell faster into it and person nan customers astatine nan precocious extremity of nan market, past specifically nan Mercedes customers, to spell successful faster.

And I deliberation galore things are happening and request to happen.

On nan 1 broadside -- connected nan merchandise side, it will get much and much attractive. I concisely alluded to nan truth that immoderate of nan technologies that we developed for nan EQXX Research Car, I mean, successful 2 aliases 3 years, you will already spot immoderate of these things successful nan market. What does that mean? Better efficiencies, amended system for nan customer, amended range, is that little scope anxiety, faster expertise to charge, and you harvester that pinch nan proliferation of nan charging infrastructure that we are contributing to ourselves arsenic well. Those would adhd some economical and convenience arguments on nan way.

I'm not going to dress that nan afloat transportation to a afloat electrical early is simply a locomotion successful nan park. It's a very, very large occupation for immoderate institution and for nan industry. But I tin perpetrate to that we, arsenic Mercedes-Benz, we are going to put massively connected making that travel for our customers progressively much attractive. And past we will spot erstwhile nan past holdout jumps, it will beryllium arsenic acold arsenic we are concerned, immoderate clip successful nan '30s, person to nan opening than nan end.

Daniel Roeska

Maybe if I could travel up connected your first reply a small bit. Do you person a consciousness what nan captious way is benignant of to get nan upstream proviso concatenation into style basically? When is it benignant of -- erstwhile is nan past captious constituent erstwhile you could measurement successful pinch investments aliases do thing else, benignant of really overmuch clip do your suppliers and nan proviso concatenation person to show that they tin get to nan higher lithium capacity that for illustration '25? Or is it much '28, '29 connected nan captious path?

Ola Kallenius

I deliberation it's intolerable astatine this shape to pinpoint that precisely nan marketplace is excessively heterogeneous and not transparent capable to moreover beryllium capable to judge this positive cipher knows precisely really speedy is nan take complaint going to be. So location are truthful galore factors that would facet into that. You can't pinpoint it.

The only point you tin do successful a business for illustration this is to get going and commencement moving, and that's what we're doing.

Steffen Hoffmann

Thanks, Ola. Thanks, Daniel. And nan adjacent man successful statement is George Galliers from Goldman Sachs.

George Galliers

The first mobility is connected nan optionality, Harald, that you person exercised. I'm judge galore investors will beryllium very happy to spot you initiate a buyback program. And together pinch nan dividend, it does magnitude to a sizable shareholder return.

The 40% dividend payout ratio has been a accordant staple of Mercedes' superior allocation model for galore years. Is it adjacent that investors should now besides see a buyback arsenic an ongoing pillar of your superior allocation framework? And past nan 2nd mobility I had was conscionable astir mobility.

You're targeting a 12% to 14% return connected equity, aliases 13% to 15% earlier nan charging costs for this year, which is evidently immoderate measurement beneath nan 2021, 2022 tally rate. You mentioned higher liking rates playing a part, which presumably you could effort and walk done to your customers decreasing nan affordability of nan cars and truthful perchance expanding nan request for incentives aliases which nan business business could subvent to support nan customer. So nan correct -- truthful nan mobility really is, is it adjacent to opportunity your absolute privilege is nan pricing connected caller cars to nan customers and nan continued occurrence of nan top-end luxury conveyance sales? And if that intends that nan financial services ROE slips into nan targeted 13% to 15% scope pre-charging from today's levels, you are happy for that improvement and disciplined and stronger pricing connected nan caller cars is nan absolute #1 priority?

Harald Wilhelm

Yes. Thanks, George. Well, I spot you guys. You move from optionality to reality, and you proceed to grab. Well, what's nan connection here? I deliberation nan €4 cardinal complete nan 2 years, I mean, to come, definitely, we want to do that. We said we want to do that maximum wrong 24 months. So let's see, I mean, nan velocity of execution.

We besides said we want to money that from nan rate travel to beryllium generated aft exertion of nan divi successful '23 and past successful 2024. And I think, Ola, arsenic we guidelines here, we have, I think, immoderate volition to proceed doing truthful moreover beyond 2024. But past I would say, let's do '23, '24 successful position of strategy execution, successful position of margin, successful position of rate generation, successful position of implementation of nan €4 billion, and past we person ample of time, I mean, to spot wherever we're going. Anything beyond that does not make excessively overmuch consciousness astatine this stage.

Second mobility connected mobility. I deliberation you heard, I mean, what I explained successful position of nan separator guidance for 2023. If you return nan underlying 13% to 15%, I deliberation that sits wrong nan mid- to semipermanent corridor wherever we think, I mean, mobility should beryllium successful position of return connected equity. I mean, we're driving that business astatine a 9% to 10%, I mean, equity ratio. I deliberation that sits supra our costs of capital.

But astatine nan end, I mean, frankly, this is 1 company, cars and mobility. And I mean, we joined forces to beryllium successful, I mean, successful nan market. So there's nary constituent in, truthful to say, connected nan 1 side, I mean, subsidizing nan business side, nan cars aliases nan van broadside and plummeting them successful nan mobility return aliases connected nan different side, doing nan opposite. Now we're doing that. I mean, arsenic 1 team.

And astatine this stage, erstwhile we talked about, I mean, nan little liking complaint margin, that has really been a usability of nan modulation shape successful immoderate of nan markets. You cannot correct away, I mean, walk further connected nan higher level of interest, I mean, to nan customers. There's a clip delay, I mean, successful between, namely successful Germany.

But there's besides a main competitory environment. And that's why I think, I mean, we cater for that. But ambitioning for this benignant of underlying 13% to 15%, we consciousness comfortable astir that successful position of wherever it stands. But again, astatine nan end, some activity hand-in-hand to beryllium astir successful successful nan marketplace space.

Steffen Hoffmann

Thanks, Harald. Thanks, George. And we proceed pinch Horst Schneider from Bank of America.

Horst Schneider

It's Horst Schneider from Bank of America. The first 1 is for Harald, please. It would beryllium awesome if you could possibly stock immoderate much specifications connected business capacity for 2023. So possibly you tin stock immoderate specifications what precisely you expect conscionable successful position of scope for nan earthy worldly value burden, costs cost increases, supplier pass-through. I deliberation that each falls into nan business capacity bracket.

Then #2 is possibly much for Ola. When you opportunity you want to double your EV income successful 2023, possibly you tin supply immoderate much specifications really you want to execute that. So successful which region, particularly, you want to grow? I cognize you launched a batch of EVs, astir apt maturation comes from nan caller models arsenic well. But is it conscionable from nan caller models aliases you besides expect increases from nan EQA, EQB environment, but not immoderate easier pinch nan Tesla value cuts.

So possibly that affects peculiar EQA, EQB arsenic well. So therefore, nan mobility is besides really you expect EV pricing to create successful nan end? And is location a trade-off betwixt measurement and EV pricing successful nan extremity for 2023?

Harald Wilhelm

So connected nan first one, Horst, connected nan business capacity broadside 2023. Well, you mightiness spot immoderate alleviation connected nan earthy worldly side. I mean, if I deliberation astir steel, for example. But past astatine nan aforesaid time, connected artillery materials, I mean, lithium, obviously, they are still astatine a very elevated level. And arsenic nan stock goes up connected nan BEV side, I mean, that evidently causes a headwind.

What else? We do expect commodity one-timer, one-time charges, I mean, successful 2023 to proceed besides astatine an elevated level and besides ostentation hitting, I mean, nan commodity bill, truthful to say, besides I mean, nan 2nd tranche of this ostentation compensation, I mean, successful Germany, nan €3,000 per employee, conscionable to sanction a few.

So each successful all, still, I mean, a important headwind connected nan business side, little than from today's perspective, I mean, little than successful nan span successful '21 to '22, but still, I mean, material.

Ola Kallenius

To your 2nd question, Horst, if you spot really our EV portfolio is processing and you look astatine from now to nan midterm into nan mid of nan decade, what will transportation america complete nan adjacent mates aliases 3 years are nan vehicles that we person now. On nan 1 hand, arsenic you mentioned, nan EQA and EQB and besides nan 4 family members of nan EQA, EQS family. That is what carries america for nan adjacent mates of 3 years. The 2nd activity that comes beyond that is past nan MMA architecture and nan MBEA architecture, wherever we person a full big of products that are some successful Core and successful nan Entry segments. So specifically for nan twelvemonth 2023, it's a spot of some of what you mentioned.

Yes, we person very bully momentum connected nan EQA and EQB, particularly successful Europe. But we person launched EQB successful nan United States. So that's conscionable benignant of started. As I mentioned, successful China, we're looking astatine really nan marketplace develops. It makes nary consciousness to occurrence waste vehicles into that market, but past possibly to person a small spot much patience than that.

So a operation of this readiness I'm looking astatine nan EQS present connected stage, nan smaller [indiscernible] to that EQE-SUV comes successful nan 2nd 4th of this year, received very bully feedback from that. It will beryllium a bully conveyance for The United States, but besides for Europe and besides for China.

So it's a operation of these things, and that's why we consciousness that successful this existent market, moreover though we're guiding measurement staying astir nan aforesaid level arsenic adjacent twelvemonth that our BEV broadside of nan business has a bully opportunity to turn by 100% this year.

Horst Schneider

Just a mini follow-up. Ola, you expect to use from nan ostentation simplification successful nan U.S. aliases it's a nonevent for you successful 2023? Or possibly both?

Ola Kallenius

Because nan Inflation Reduction Act does supply a argumentation for leasing, yes, that applies to our vehicles arsenic good successful nan United States. So that is simply a nett use to nan customer and will lead to immoderate impetus successful nan marketplace location for america arsenic well.

Steffen Hoffmann

Thanks, Horst. And we proceed pinch Dorothee Cresswell from Exane.

Dorothee Cresswell

It's Dorothee Cresswell from Exane. I only person 1 left, which is astir residual. So we've evidently seen caller car pricing peak. And I conscionable wondered whether you could springiness america immoderate much colour connected nan size of nan headwind that you're anticipating from little off-lease plus disposal profits successful 2023. I deliberation you said that was reflected successful your guidance.

I conscionable for illustration to understand really large that is?

Harald Wilhelm

Yes. Thanks, Dorothee. Well, I mean, do we really spot worldly drift to move? I mean, correct now, not truthful much. I cognize we person been talking astir that, I mean, again and again, and past it didn't happen.

So I'm not opinionated present and opportunity outcry wolf. But I think, I mean, astir apt successful nan discourse of nan wide macro situation, it is, I mean, prudent to see a spot of a softening here, which would mean it still remains very positive, but past would lead, I mean, to a little affirmative publication successful 2023 compared to 2021.

Well, arsenic a norm of summer, I would opportunity possibly it's a -- I mean successful this guidance we gave coming roughly, I mean, 0.5% successful position of ROS effect headwind dilution, which we included astatine this juncture. But again, this is not based connected nan technological information point. This is more, I mean, a consequence protection from existent perspective.

Steffen Hoffmann

Thanks, Dorothee, for your question. And we proceed pinch Daniel Schwartz from Stifel.

Daniel Schwarz

Yes. Actually, I had 2. 1 is connected nan EBIT separator outlook. Last year, you included a 2 percent constituent buffer for [indiscernible]. This twelvemonth it's 1 percent point.

Is that an look that consequence mostly spot little aliases your visibility is amended compared to past year? And nan 2nd mobility would beryllium connected nan stock buyback. The [indiscernible] says that Geely and BAIC stay beneath 10%. Can you possibly opportunity why that is? Was it important to you?

Or is location a regulatory logic that they cannot transcend nan 10%?

Harald Wilhelm

So well, location is nary signs arsenic good betwixt 2% past twelvemonth and 1% by now. No, I think, I mean, based connected what we could execute successful 2022, managing truthful that business connected nan pricing, connected nan commodity side, connected nan different side, immoderate of nan earthy mats, I mean, I mentioned alloy going correct direction. Maybe, therefore, I mean, we do judge that operating, truthful to say, pinch this 1% macro contingency astatine this shape is nan correct thing, I mean, to do.

Obviously, we'll show very intimately nan improvement successful each of nan levers. I mean, passim nan year, but probably, I mean, having a excessively wide of a scope you wouldn't admit either having gone done nan experiences quarter-by-quarter [indiscernible] successful nan past year.

On nan 2nd point, I deliberation -- we very much, I think, I mean, bask and admit nan business pinch each of them pinch BAIC and pinch Geely pinch a different attraction and therefore, having that benignant of beardown support. This is, I think, what you tin publication from this statement to enactment beneath 10%. That intends nan stock buyback action is powerfully supported by each of them, respectively, BAIC, I mean and Geely. So I deliberation it's an endorsement, I mean, of nan partnership, which we're having, not conscionable connected nan shareholding side, but also, I mean, connected nan business, connected nan strategy broadside of things.

And connected nan different side, keeping maine successful nan shareholding beneath 10% successful nan existent geo context, I think, is besides an important thing. And needless to opportunity that location is nary pooling, i.e., you should decidedly publication nan shareholding separate, i.e., there's a BAIC shareholding and there's a Geely shareholding and not publication that arsenic a mixed shareholding.

So I deliberation we're happy. We're very pleased and grateful and thankful for nan support from some of these to work together pinch us, truthful I mean connected short announcement up of nan announcement. Again, that endorses, I think, a awesome partnership.

Steffen Hoffmann

Thanks, Daniel. Thanks, Harald. If location is further mobility successful nan room, please springiness maine a sign. I'll return nan adjacent 1 connected nan phone, and past we spell backmost to nan room. Next workfellow successful statement would beryllium Tom Narayan from RBC.

Tom Narayan

Can you perceive me?

Steffen Hoffmann

Yes. Very well. Loud and clear.

Tom Narayan

Looking guardant to adjacent week's event, I will beryllium there. So I person 2 questions. Another nosy 1 connected pricing. So Ford noted astatine their results telephone nan quality betwixt pricing successful nan U.S. and successful Europe, they had said that incentives are already very precocious successful Europe, dissimilar successful nan U.S.

And there's besides evidently firm car fleet successful Europe, higher BEV sales, premium vulnerability is higher. So conscionable wonder, you're evidently successful some markets, but if you are seeing a benignant of a quality successful nan dynamics of pricing successful Europe versus nan U.S.? And past my 2nd mobility is, I mean, I don't cognize if you tin springiness an nonstop number. But immoderate colour connected nan nett savings per car of going nonstop to consumer, and possibly connected apical of that, immoderate commentary connected nan dynamics successful nan U.S. of going nonstop to consumer, fixed nan dealership dynamics there.

Ola Kallenius

So possibly I'll commencement and consciousness free to jump in, Harald. Whereas we don't evidently disclose our typical discounts for different regions, what you mentioned owed to a higher level of fleet income successful Europe mostly for many, many, galore years, nan inducement levels successful Europe person -- sat supra nan United States traditionally.

I don't want to remark connected what immoderate different carmaker says, but that is mostly true. But it's baked into nan wide exemplary of managing this. In position of really nan markets look, and I deliberation Harald mentioned it earlier is that nan system has been remarkably resilient successful nan United States.

But I do publication nan press, and I do perceive to nan Fed that they are very wished connected getting ostentation nether power and will proceed to summation liking rates and truthful connected and truthful forth. So there's a intent down that, that we request to watch. But that is arsenic acold arsenic typical discount guidance is concerned.

For nonstop sales. Also, we don't disclose what nan nett use of it is successful position of economically for our full model. But it is simply a nett benefit. And particularly this rumor adjacent to -- there's a costs savings use arsenic well. It's not conscionable astir nan marketplace dynamics and intra-brand title and truthful on.

It's both. And I tin only reiterate that connected that broadside of it, we person truthful acold been somewhat positively amazed by really it has developed. United States is simply a different animal. With nan franchise exemplary successful nan United States, we are not pursuing nonstop income successful nan United States, but are moving pinch our very beardown partners to create our position successful nan U.S. market.

What we did do, though, and I deliberation we were 1 of nan first OEMs, possibly nan first OEM. We person signed an statement pinch our dealers pinch respect to over-the-air updates and really that is going to beryllium handled successful nan United States, which is very, very important. Because you would not want to person nan inconvenience of a customer that tin bargain thing complete nan aerial having to past thrust to a beingness location to get that over-the-air update.

I mean, it defeats nan full intent of nan exertion if you would person to do that. So I'm happy that we could find a balanced statement pinch our dealers that some parties profit from over-the-air successful nan United States. And moreover though I recognize that this is simply a mini number now successful position of nan revenue, and we will talk much astir it adjacent week, this is simply a number that tin grow.

So successful that regard, we will beryllium capable to waste straight complete location to nan customers, but successful business pinch our dealers successful nan United States.

Steffen Hoffmann

Thanks, Ola. Thanks, Tom. And nan adjacent man would beryllium successful nan room, Frank Biller from LBBW.

Frank Biller

Yes. There's a mobility astir nan ineligible proceedings. In nan past quarter, location was a affirmative for much than €300 million. Maybe you tin explicate a spot what changed present to nan affirmative and what is that going connected successful 2023?

Harald Wilhelm

Yes. I mean, wrong that, good spotted was successful nan Q4. I mean, obviously, arsenic each and each closing, we do a renewed appraisal of each of these proceedings. And that one, I mean, caused, immoderate merchandise of nan positioning, but also, I mean, method improvement successful position of nan FX evolution, which is besides being recorded successful there. So that is fundamentally explaining nan evolution.

Steffen Hoffmann

Thank you, Harald. I spell backmost to nan telephone to Philippe Houchois from Jefferies.

Philippe Houchois

Sorry to spell backmost to this nonstop selling. But 1 mobility I person is we've seen what Tesla has done precocious successful position of pricing. And by nan way, I'm much willing successful is benignant of nan transparency of what is happening successful nan nonstop trading business aliases nan agency business model. I mean, correct now, nan manufacture useful much successful an opaque mode betwixt customer and nan trader and nan trader and nan OEM and nan consequence successful much nonstop trading approaches is we get overmuch much transparency, overmuch much move pricing and a spot of a yo-yo connected nan pricing.

And I'm conscionable wondering really that -- what it intends for your brand. Tesla is not a luxury brand. It's hardly possibly not a premium marque complete time, but you are moving successful a different direction. So really does this visibility, transparency, aliases volatility successful pricing effect nan marque perchance negatively? And besides if there's a large variance, really that would perchance impact consequence aliases your assumptions that you built into your business model?

And past different mobility possibly much for Harald is from a modeling standpoint, and you pointed out, you're moving from being a wholesale business much to a much unit business model. That intends you return connected much consequence connected inventory, vanished and activity successful progress. But you besides driblet a batch of nan trader receivables connected your captive finance equilibrium sheet.

And I'm conscionable wondering from a consolidated business standpoint, are we going to person -- is it going to beryllium much superior intensive to beryllium doing nonstop trading alternatively than 1 -- much superior tied up connected nan business equilibrium sheet, possibly done inventory and little -- overmuch little tied up successful nan captive finance equilibrium sheet?

Ola Kallenius

On your first question, I want to spell backmost to nan feedback that we person received truthful acold from nan markets that we person turned. It's really raised nan comfortableness level pinch astir customers that they are getting a adjacent deal. Yes, erstwhile you spell into nonstop sales, you tin person movements and you would emotion to make those decisions arsenic you spell on and really nan marketplace moves.

Ideally, you should effort to forestall it from swinging excessively overmuch successful a excessively short play of time, of course. But there, I travel backmost to this homework #1, managing nan operating point. As I said, it is simply a craft. It's not thing that is done without acquisition and sophistication. So yes, location would beryllium much transparency connected that, and you will person to effort to negociate those swings arsenic champion you tin and effort to not make it erratic.

But I want to underline that successful nan first market, we turned 3 years ago, South Africa and Sweden. So we person now immoderate acquisition pinch this complete nan past mates aliases 3 years. And successful those markets, that has worked rather well. Now we're getting into immoderate large markets present pinch nan U.K. and Germany this year.

So we're excited astir really that's going to develop.

Harald Wilhelm

And Philippe, connected nan modeling. On a nominal basis, yes, you are right. I mean, switching into nan exemplary D fundamentally intends that nan unit banal comes connected our equilibrium sheet. But erstwhile we person a different attack aliases an ambition of it, namely having overmuch much direct, I mean, relationship visibility, I mean, pinch customer let america to optimize besides nan inventory end-to-end from nan ordering down into nan mill and improve, therefore, nan travel of nan outbound. So -- and therefore, I deliberation location is definitely, I mean, a imaginable to not only adhd up, I mean, nan inventory coming from nan dealer, but having a consolidated position of an inventory successful dealer, which is little than 1 positive 1.

You mightiness spot successful nan guidance for 2023, erstwhile we opportunity we person a rate conversion of 0.8 to 1, well, I mean, U.K., arsenic Ola said, I mean, is already online. And Germany is coming online this twelvemonth pinch a very important size of nan market. So we do judge and tin sorb that overall, but besides within, I mean, nan inventory letter cover we want to do astatine large.

On nan financing side, well, I think, I mean, mobility already serves trader financing. But also, I mean, nonstop customer financing today. So we could say, I mean, to immoderate extent, wholesale financing falls isolated and different stock comes connected board, I do not expect immoderate worldly displacement successful nan size of nan vulnerability connected nan mobility broadside nor successful nan in installments quality, if I whitethorn say. As again, we are successful it already today. And I deliberation nan in installments quality, but also, I mean, nan consequence guidance allows us, I think, to tally that exposure.

I said it earlier coming pinch nett in installments losses astatine a very, very mean level. And I do expect that, that is not going to alteration arsenic a usability of nan move complete of nan model.

Ola Kallenius

I would for illustration to underline 1 point that Harald said connected nan guidance of nan inventory. If you put it successful a spreadsheet, it's not for illustration you're not paying for nan unit inventory today, you're paying it done nan trader margin. So successful a much optimized exemplary that Harald described, really aged wholesale banal positive now caller unit banal if that tin beryllium optimized amended successful nan market, really 1 positive 1 becomes little than 2.

So nan economical load of nan full strategy of specified a exemplary is little burdensome and much economical than nan exemplary that we person today. That is 1 portion of nan costs savings of going into nonstop sales.

Harald Wilhelm

And arsenic you said before, I mean, nan intra-brand competition, well, I mean, nan trader A, has nan vehicles connected stock, right? And nan trader B has a conveyance connected stock. In nan future, you don't need, I mean, nan vehicles of trader A and B. You only person 1 set. So nan elimination of nan intra-brand is besides an enabler to little inventory.

Steffen Hoffmann

And now I invited Martin Wilkie from Citi successful nan line.

Martin Wilkie

It's Martin from Citi. Just 1 mobility to travel back. You touched connected nan Inflation Reduction Act successful nan U.S. a mates of times. Obviously, there's a batch of talk successful Europe astir what mightiness hap present and perchance immoderate decisions towards nan extremity of March.

Are Brussels approaching you arsenic to what you'd for illustration to urge arsenic an industry, arsenic to what Europe should do to respond. And certainly, what you would for illustration to spot arsenic a company? And obviously, location are incentives for electrical vehicles successful galore countries successful nan EU already, but is it much to do pinch nan information of proviso of captious components and truthful forth? Just really you mightiness for illustration to spot that create successful Europe?

Ola Kallenius

In nan dialogues that we person pinch governmental leaders successful Berlin and successful Brussels, whereas we support nan underlying conception of pushing ourselves faster into a decarbonized future, I mean, it's 1 of nan foundations of our full strategy. And should Europe beryllium consenting aliases capable to do much successful this respect beyond what they person done pinch [indiscernible] and truthful on, of course, that would beryllium a affirmative thing. So we would beryllium for that pinch a but, without adding a protectionistic perspective to it.

We effort to remind, and I deliberation astatine slightest Berlin is very alert of this, nan biggest exporters from nan United States backmost to Europe are German companies. And we are 1 of those German companies. So supporting, I don't know, investments and different things to make it -- make nan modulation much economical, faster, bully waste and acquisition barriers, please know.

Steffen Hoffmann

Clear statement, Ola. Thank you very much. And we proceed connected nan statement pinch Stephen Reitman from Societe Generale.

Stephen Reitman

I person a mates of questions, please. Just immoderate clarification. You mentioned that you're readying to double your BEV income this year. I was conscionable wanted to beryllium clear connected what ground we're talking about. Is it connected nan unit figures that you described?

So nan 118,000 astir that you sold successful 2022, double that? Or you're looking astatine nan wholesale fig that I'm looking astatine successful Slide #20 of nan truth book wherever you're showing wholesales, which I conjecture includes mini [indiscernible] of 150,000 units.

Second question, could you remark connected PHEVs and pinch nan bullish [indiscernible] consumer-facing eco-bonus successful Germany, what nan guidance person you seen to request for PHEVs successful Germany and different markets arsenic well?

Ola Kallenius

So to beryllium very specific, and this was 1 of nan conversations that we had earlier this meeting. We ever authorities our wholesale numbers to debar confusion. So erstwhile I opportunity double, I'm talking astir nan Mercedes-Benz branded vehicles wholesale. That's what I'm talking about.

Smart. As you know, immoderate of it sits successful nan accumulation that we still person successful Hamburg of nan [4.2], which is continuing passim 2023 and into 2024. That, we will not double. I deliberation that will astir apt beryllium astir nan aforesaid level aliases thing for illustration that.

In nan associated task that we person pinch Geely, we're conscionable astir to motorboat aliases we're successful motorboat correct now of nan first merchandise called nan Smart #One. Great merchandise metropolis -- mini metropolis SUV. That merchandise is going from 0 to many, galore thousands. But they request to talk astir that associated task separately. You request to talk astir that.

So it's not meaningful erstwhile you had 0 earlier to talk astir nan percent connected that side. So that's it.

PHEVs, you could spot that we went from '21 to '22 connected a comparatively unchangeable level. We have, indeed, though, introduced much and much of nan caller plug-in hybrids successful nan caller cars that are coming into nan marketplace that connected a WLTP ground person astir 100 kilometers range. And we tin spot that a batch of customers that for illustration this champion of some world's proposition, they really emotion that. You tin benignant of -- tin beryllium electrical from Monday done Friday. But if you person longer travel ambitions, you still person nan combustion engines.

Yes, Germany has changed their incentivization, but it's a ace heterogeneous image astir nan world present and astir Europe.

So nan plug-in hybrids will stay very applicable besides successful nan adjacent fewer years.

Steffen Hoffmann

Thank you very much. We person clip for a past mobility retired of nan room, Patrick Hummel.

Patrick Hummel

Just a high-level mobility successful position of really you attack merchandise innovation. Where does Mercedes nowadays guidelines betwixt nan accepted 7-year merchandise life rhythm and nan MOP, arsenic you for illustration to telephone it, successful nan past astatine least, mid-of-life rhythm versus nan changeless accelerated invention exemplary that immoderate of nan caller players maintained pinch overmuch shorter merchandise life cycles. Innovations connected nan alert that are much than conscionable mini creation refreshes. I'm reasoning EQA, EQB. In a mates of years from now, they will astir apt look beautiful dated against nan MMA vehicle.

And nan aforesaid mightiness hap to EVA 2 vehicles erstwhile MBA is fresh and nan AMG version. So really do you deliberation astir nan invention connected existing products? Do you person to group much CapEx aliases R&D speech for keeping these products caller than was nan lawsuit successful nan past? How is that baked into your finance budget?

Ola Kallenius

On nan integer broadside for each vehicles and, of course, accelerated arsenic we past spell into nan MBOS era, it becomes a changeless flow. It is for illustration this river. You conscionable adhd h2o to it, and there's nary opening and nary end. So yes, connected nan integer side, we're already moving into that direction, and we will accelerate nan gait connected that guidance connected each of our vehicles, not conscionable nan artillery electrical ones.

With respect to nan electrical drivetrain, and possibly immoderate different features arsenic well, particularly for nan artillery electrical vehicles, it's not for illustration you now do a occurrence and forget, you put this beautiful EQS into nan marketplace and you opportunity that's it, let's aftermath up successful 4 years' clip aliases successful 7 years' clip and spot what's going on. That's not going to work. So you tin expect america to also, during nan life rhythm of a vehicle, do things that possibly we didn't do successful nan past.

Steffen Hoffmann

Thank you very overmuch for this lively speedy Q&A. Thanks a batch for your participation. Thank you very much, Ola and Harald for your answers. As always, from an IR perspective, we are astatine your disposal afterwards. For nan ones who want to travel nan media Q&A, this will commencement successful astir 15 minutes.

To each of you erstwhile again, person a awesome morning, awesome afternoon, awesome evening. Look guardant to talking to you soon. Look guardant to seeing immoderate of you adjacent week successful California. Thank you very much, and goodbye.

Editor: Naga



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