Dr. Ing. h.c. F. Porsche AG (P911) Earnings Call Transcript & Summary

Welcome to the intro statement of our analyst and investor conference 2024. My name is Björn Scheib, and I'm the Head of Investor Relations at Porsche AG. With me are today, Oliver Blume, Chairman of the Executive Board; and Lutz Meschke, Deputy Chairman and Member of the Executive Board for Finance and IT. Both gentlemen will give you an update on our 2023 results, our strategy and the '24 outlook. But before we begin, let me remind you that any forward-looking statement to be made during this intro statement are subject to the risks and uncertainties mentioned in the safe harbor statement included in the Porsche materials online. This call will also be governed by this language. And with that, I would love to hand over to Oli.

Fascinating sports cars. That's what Porsche has always stood for, for an iconic brand for a very special spirit. Our ambition is always striving to be even better and always backing our convictions. This is what we are about, always having the very clear goal of inspiring our customers again and again. Often, this requires extra effort but we will still go on doing things exactly this way. In 2023, we delivered, and with these strong results behind us, we are sizing the initiative and new. Our industry is changing. As a society, we are looking at the long-term trends in customer demand. We are backing the core of what has always defined Porsche. We are laying the groundwork for deciding the future of Porsche. First, with our products, which are the very heart of Porsche and always will be. 2024 is a Porsche product year. It marks the biggest model offensive in the history of our company. With these cars, we are laying the foundation for our success in the coming years. Combined with our globally balanced structure and strategy, we are convinced that with it, we will inspire our customers. Second, with the positioning of our brand, Porsche is exclusive, Porsche is individual and Porsche is desirable. Our brand fascinates people all over the world across generations, and we are going to keep them charged. With Porsche, our customers make their dreams come true. This is what drives us today and tomorrow. And thirdly, with the transformation of our company, we are taking smart investment decisions in innovations, digitalization and sustainability and the people who take Porsche with the work they do every day. All this will make for an exciting year and a workload one. And we are going to feel this, but we will be building on a solid foundation. Even in volatile times, Porsche is financially robust with strong figures, loyal customer base and a very well-balanced sales structure. Our business model is future-proof and our brand is more vibrant and stronger than ever before. Now I'm going to hand over to Lutz, who will explain last year's business numbers to you. Lutz, would you be so kind to give us an overview?

It's pleasure, Oli. Thank you very much. In the first year after IPO, we continued our profitable growth and delivered on our guidance. This success is a result of our value over volume strategy. Porsche sets ambitious goals every year, not just for model lines and derivatives, but also for our sales regions and individual markets. The focus is not on pure sales volume, but particularly on sales quality in the sense of balance demand and supply. In 2023, Porsche showed a robust growth and increased deliveries by 3% compared to 2022 to a total volume of more than 320,000 units. Our icons, the 911, benefits from unchanged strong global demand and lies ahead of all model series. An increase of around 10,000 delivered vehicles represents a strong growth of 24% compared to 2022. Our sales region with the highest volume was North America, where we delivered around 86,000 new vehicles in 2023. This corresponds to a significant increase of 9%. We recorded the greatest growth in the overseas and emerging market sales region with more than 52,000 customers taking delivery of their vehicles here in 2023, 16% more than in the previous year. In Europe, we also achieved a double-digit growth rate of deliveries in the past year. China and Hong Kong continue to be characterized by a challenging economic situation and weak demand in the luxury segment. Here, we have carefully reconciled supply with demand. Reflecting our strong focus on stringent pricing, mix and internalization, we were able to further increase revenues per vehicle to around EUR 117,000. With this strategic approach, we continuously develop our sales regions further. We foster the potential of growth areas, and we optimize our sales mix. As a result, our global sales footprint has become even more balanced and more resilient. Now let's take a look at our incoming orders. These remain robust, and we have a well-filled order book on our current models. And we expect positive impacts on orders and an additional positive pricing effect from our upcoming models and from increasing individualization. The new Macan Electric has already generated a great amount of interest and the order bank is developing very satisfying. The order book in China and several other regions is only about to open. In addition, we are continuously improving the Porsche ecosystem to strengthen our value proposition towards our customers with more functionality, extensive personalization and tailor-made experiences. The ones of you who have visited our exclusive manufacturer at Zuffenhausen know what I'm talking about. The mix and quality of our orders and order book shows that our customers appreciate our exclusive product offerings. Individualization per vehicle has constantly increased in the past years and is on a record high. Let's take a look at our 2023 results. As you can see, we achieved record results and resilient performance, benefiting from our solid pricing mix and continued strong customer demand. In a challenging environment, we have kept executing our goals with teamwork and agility. Stringent with our strategy, we kept spending for product, innovation and brand. In order to avoid overspending, we have expanded our ecosystem and partnerships. Our group revenue grew from EUR 37.6 billion in 2022 to EUR 40.5 billion in 2023. This corresponds to an increase of 7.7%. We improved our group operating profit by 7.6% to EUR 7.3 billion compared with EUR 6.8 billion in the previous year. The group's operating return on sales in 2023 was 18.0%. In the automotive business, we earned EUR 6.9 billion at a margin of 18.6%. We benefited from slightly increased sales, improved pricing and a beneficial product mix. On the other hand, we accounted for higher costs from parts, raw materials, energy and logistics. In 2023, we also increased our distribution expenses to strengthen our brand positioning. Key projects were our 75th anniversary, motor sports and digitalization. We also had to digest higher costs for the upcoming product offensive. On top, we had to deal with higher D&A of more than EUR 300 million. At Financial Services, the penetration rate was lower at 40.1% due to successive pricing of increased refinancing costs. The risk profile of our portfolio remains robust. In 2023, Financial Services achieved a return on equity of 19.6% despite a slight decrease in operating profit to EUR 300 million. One factor was the slightly lower portfolio margin due to the delayed pass-through of refinancing costs. The other drivers were less favorable valuation effects from hedging transactions. At the end of the financial year, the automotive net cash flow increased slightly compared to the previous year to EUR 4.0 billion. This corresponds to a net cash flow margin of 10.6%. The cash flow from operating activities of EUR 8.3 billion increased despite temporarily higher vehicle inventories at year-end, primarily driven by the launch of the new Cayenne. On the other hand, we invested around EUR 5 billion into product, innovation, the Porsche brand and our ecosystem. This is the highest figure in our company's history to date. Without our cooperations and partnerships this invest would have been significantly higher. At the end of 2023, our automotive net liquidity was at EUR 7.2 billion. As you may remember from our capital allocation discussions during the IPO process, we are targeting a net liquidity ratio of 15% to 20% of automotive net revenues. Our profit after tax rose from EUR 5.0 billion to EUR 5.2 billion. Earnings per preferred share that has amounted to EUR 5.67 compared with EUR 5.45 in the previous year. Of course, our shareholders will also benefit from our positive business development. The Executive Board and Supervisory Board will propose to the Annual General Meeting a dividend payment of EUR 2.1 billion for the past financial year. That's EUR 2.30 per ordinary share and EUR 2.31 per preference share. This distribution corresponds to 40.7% of the group's net income after tax. As we want our shareholders to participate in our future earnings, Porsche AG intends to pay an annual dividend of around 50% in the midterm. Our subsidiaries also developed exciting and successful products and offerings. MHP, Porsche Financial Services, Porsche Lifestyle Group, Porsche Engineering, Porsche Consulting and Porsche Digital contributed to our success in 2023 with positive results. In combination with our venture capital activities, they all make an important strategic and financial contribution, generating innovation influences and securing access to new technologies. These partnerships support Porsche's future unique positioning. When we see opportunities, we also enter into strategic partnerships outside of the Porsche ecosystem. Thus, with focus on the digitalization of the vehicle. We invested a mid-3 digit million amount in digital and software partnerships in the first quarter of 2024. This includes a stake in applied intuition, supporting our development corporation, which will further strengthen our business model in terms of car IT and driver experience. We can't say more about these collaborations at the moment, but you see me very satisfied at this point. In any case, we can look forward to some interesting news in the upcoming weeks. Let yourself be surprised. All this shows we are resolutely pushing ahead with digitalization in the company. In our operational business, we are already using artificial intelligence today. For example, to optimize customer contact to improve quality and to save cost. After talking about the preparation of our future, let's move to the outlook for 2024. As discussed earlier, we will keep inspiring our customers with 4 new models along with unique and truly engaging Porsche experiences this year more than ever. The model changeovers will require additional tasks and hard work by our teams. We have to deal with the ramp down as well as the ramp-up of the production of 4 of our products in 2 plants at the same time. These reshaped changeovers will result in a temporary lower output and will also affect our mix. Based on our strong product substance and annualization, we will continue to benefit from our pricing potential. With all that, we have a clear focus, quality and satisfied customers are our key priorities. Therefore, our first quarter of 2024 will not only be characterized by the introduction of the new Panamera and Taycan but also by quality and customer satisfaction initiatives. Based on this slow start into Q1 and reflecting our overall assumptions for 2024, we expect our group revenue to amount between EUR 40 billion to EUR 42 billion in 2024. On the cost side, we have to assume continued cost inflation in materials, labor and SG&A plus the mentioned quality and customer satisfaction initiatives. In addition, we will spend in the continuous development of our brand and ecosystem. Due to the 4 launches, we also forecast increasing D&A of capitalized R&D and fixed assets. Based on these expectations, we anticipate a group operating return on sales in the range of 15% to 17% in 2024. Our forecast for the automotive segment is an EBITDA margin between 24% and 26% and a net cash flow margin in the range of 8.5% to 10.5%. This range includes our continued investments in the upcoming product portfolio, digitalization, brand and other strategic projects and partnerships. As a result of the staggered product introduction of our new models, we expect steadily better product supply over the course of the year. We see higher availability of the new vehicles and our planned pricing initiatives we expect steady positive top line and earnings effect by the end of the year. As part of the 2024 sales forecast, the company expects fully electrified vehicles to account for up to 13% to 15% of total new vehicles delivered to customers, more than last year. At Porsche, we take challenges as an opportunity to excel. Porsche is switching to sport mode to further boost our resilience and be able to better counter uncertainties in the market. This will provide us with a strong foundation for the years to come. At the same time, we are pushing ahead with our ambitious Road To 20 program. With it, we want to further expand our long-term return target. Most importantly, Road to 20 is not a short-term 1 dimensional savings program. Rather, we have put together a strategic forward-looking program with carefully planned and closely coordinated measures. We are now working through this systematically. Thus, for the coming years, we are convinced that our exclusive range of new vehicles will continue to increase our margin. With that, I'll give it back to Oliver. Thank you very much.

Thank you, Lutz. Porsche is facing the future with courage and acting decisively with pioneering spirit and passion. We at Porsche, don't believe in coincidences. We strongly believe that success can be planned. This is how we've always developed Porsche, with a consistent strategy and a specific concept for how to implement it. We do not rest on our laurels, and we don't [ share ] any challenges, we stick to our path. The heart of Porsche is our products in which we combine our tradition and our values with state-of-the-art technologies to make our customer's dreams come true with each and every car. We are going to make 2024 a year of new fascinating products never has Porsche had so many new models in a single year. We are starting with the new all-electric Macan, the first car based on our new premium platform electric which is produced net carbon neutral here in Leipzig on the same line as its combustion engine predecessor. This gives us maximum flexibility in order to react precisely to the demands of the market. Then the Taycan, whose success shows that electromobility made by Porsche is a winner, and now comes the next generation of the Taycan, and it's better in practically every respect. The same applies to the Panamera. The third model generation is more digital, more luxurious and more efficient. And finally, our Icon the 911, in 2024, the 911 is set to impress once again with technological innovations with an even higher performance hybrid drive derived from Motorsport. One thing is clear, with these new models, we have an ideal starting position for the coming years. In 2025, we'll have an almost completely new product portfolio on the market, all set up already with innovative drive technologies, allowing us to meet the widest range of customers' expectations all over the world. It's also clear that making so many launches in such a short period is an extremely complex task, which is why we are approaching it with care and consideration, because there are further challenges, the geopolitical situation remains tense, some of our supply chains are still volatile and some markets are undergoing major changes, in China, for example. We have to master all of these challenges, but we have prepared ourselves out and with foresight, a solid foundation with which we can be optimistic. In other words, we are holding all the cards and now is a time to play them. With Macan, we are taking the digitalization of our cars to a new level. You all know our standards with regard to exclusivity and performance. With regard to quality, design and driving dynamics, our standards for digitalization are just as high and we have prioritized this topic accordingly. Our new Car-IT Executive Board area and Sajjad Khan. Sajjad, has been on board for a good 3 months. And I have to say that with his expertise and experience, he has already been the source of important impulses in close collaboration with our Executive Board member for development, Michael Steiner. In their work, they apply themselves consistently to the question, what do our customers expect of Porsche? The answer is obvious. They want to have the digital environment that they are used to in their car as well. That said, their preferences can be very different, depending on the part of the world we are. As a global brand, we want to take this into account. One example, we offer our customers the option of controlling car functions directly in Apple CarPlay. It's the first manufacturer worldwide. They can change radio stations, adjust their air conditioning or the ambient lighting. Android Auto is also available. We are also expanding our collaboration with Google. Here, too, we aim to integrate the services even more fully into our cars, for example, navigation, voice control and the app ecosystem. Our customers in China, on the other hand, use their own digital ecosystems and platforms for news, chat, entertainment and payments. We are also pushing forward the integration of these services. We're collaborating with strong partners in every area that counts. Because it's also clear that a Porsche must always remain a Porsche, and it will, the new Macan is currently proving this. You all know our goal. We want to deliver more than 80% of our new vehicles fully electrified in 2030, depending on demand and on the development of electromobility in the respective regions of the world, which is why we are staying flexible with a wide range of drivetrain technologies, all electric cars, efficient plug-in hybrids and emotional combustion engine cars. Even overlapping for a specific period depending on the market for the optimal fulfillment of all customer wishes. We are focusing on our long-standing loyal customers just as much as on new buyers. For example, in the Asian region, where we are winning more and more people over to our brand. And this is where we also see a lot of potential. All the while, we are adhering consistently to our strategy, we are prioritizing value-creating roles, expanding our portfolio and at the same time, making our products even more exclusive, more individual and more desirable. We are helped by the strength of our brands. In 2023, we celebrated 75 years of Porsche sports cars. The event showed that the Porsche brand is an icon. It has the power to bring people together across generations, all over the world. Owning a Porsche is one thing. The other is being a part of something bigger sharing joy and enthusiasm with others, but also our values, our responsibility to society. At the same time, Porsche is exclusive, highly individual. And for many, the fulfillment of a very personal dream, we don't believe this exists anywhere else in the world. And we are going to further hone this profile. With even more opportunities to customize a Porsche to the latest detail all the way to the exclusive one-off car. To this end, we have re-interpretated the legendary Sonderwunsch programme, which gives our customers almost unlimited possibilities. But exceptional products also require exceptional experiences and services. We want to inspire our customers to inspire them everywhere they come into contact with our brand. This is why we continue to invest in our ecosystem. So what's key here, doing the right things and doing them right. This is what we focus on, and this is what has made us so successful at Porsche for many years. To the credit of the entire Porsche team, thank you all for your excellent work, you're a fantastic team. And of course, we all know that the path to success is never straightforward. And then this year, in particular, the challenges will be considerable. We know we can do this. We've proven it time and time again during the coronavirus pandemic, in the face of the semiconductor shortage or the consequences of the Ukraine-Russia conflict. And we can continue to act from a position of strength. We are going to market with attractive new models and our customers' feedback shows us that we are on the right track here. 2024 offers many opportunities and exciting important time lies ahead of us, and we'll know how to use it.

So welcome to Porsche's Full Year 2023 Analyst and Investors Conference. My name is Björn Scheib, and I'm the Head of Investor Relations at Porsche AG. With me today are Oliver Blume, Chairman of the Executive Board; and Lutz Meschke, Deputy Chairman and member of the Executive Board for Finance and IT. Both gentlemen will be at your disposal with respect to the upcoming Q&A session. As you have seen, we already posted the intro statement on our web page, which you can find in the section of Investor Relations. But before we start, let me remind you that any of the forward-looking statements to be made during this intro statement and Q&A are subject to the risks and uncertainties mentioned in the safe harbor statement included in the Porsche materials online. In addition, this call will be governed by this language.

With this, we open the Q&A session and the first in the row will be George Galliers of Goldman Sachs.

The first question I had was around Porsche's product strategy in light of recent industry development. At the time of the IPO, I believe investors were very excited by Porsche's pretty aggressive approach with the battery electric vehicle transition. However, today, there looks like there could be some risk to Porsche's leadership here given what we're seeing in terms of BEV pricing in China, weak private BEV demand in Europe and slowing BEV growth in the U.S. With this in mind, do you have any concerns around the potential commercial reception to the new Macan? And in 2025, 2026, can this product achieve volume on par with those achieved by the ICE Macan historically? And to the extent European consumers do you still want a midsized Porsche SUV with an ICE powertrain in 2 to 3 years' time. Are there any contingent actions or potential products that could fill this space? The second question I had was on the margin guidance for this year. In basis points terms, could you give us any indication of how much cost is baked into the margin guidance that is directly associated with the phase out of the old models and the launch costs associated with the new model?

Yes, George, may I start with your first question and maybe the second one can take over, Lutz. First of all, on Porsche's products strategy, we say to our strategy, I would say, very strong BEV ramp-up. We presented the Macan January yesterday, the Taycan, also with a special model Taycan GT. And we will continue with 718 Cayenne and luxury SUV as a fully electric car in the following years. And on the same time, we have the flexibility in our product portfolio in between ICEs, plug-in hybrids and BEVs. And so we are able to react recording to the different speeds and of transformation in the different regions of the world. Coming to the Macan, and we are getting very positive feedback since our launching activities and being concrete, we have over 10,000 order intakes already. And mentioning that these customers haven't touched the car, haven't driven the car. And this is without China, Taiwan and Japan still where we will be in the start of sales in April, that's very promising and also the feedback we are getting from our customers and also from the media with a completely new design profile of the car; the driver dynamics; the power over 600-horsepower; acceleration, 3.3 from 0 to 100; a real sports car and the content. And overall, the digital offers we bring to our customers. To your question, in terms of Europe, it was a well thought and economical decision not doing an update for the Macan in Europe in terms of UNECE and cybersecurity content because we think, on the one hand side, we will convince our customers with the new electric Macan. And we have the offer of the Cayenne and Panamera, also with our product update or the new Panamera, where we will offer plug-in hybrids over 90 -- up to 90 kilometers, full electric range and having also the mix in an offer in sport limousine and in an SUV with combustion engines. And so we think we are well balanced also in Europe with our product offering.

Yes. George, coming to your second question, the lower margin. We lowered the corridor of about 200 basis points compared to 2023. And the main reasons are the 4 new product launches in 2024 with a reshaped model change or with slow ramp down and then the slow ramp-up phase will create a situation that we will suffer a little bit from these 4 model launches in 2024, but it will help a lot when it comes to the acceleration in 2025, then we have the more or less full completely new model range in place, and that gives us confidence to see a very strong 2025 then. The other reason is the increased D&A. The forecast is about EUR 500 million higher D&A due to the 4 model launches, of course, this is the main reason. And these 2 levers are the main drivers for the lower margin. Of course, we still heavily invest in our products, in technology, in brand and digitalization, but these investments will be more or less on the same level as we already did in 2023.

So thank you very much. The next in the line will be Tim Rokossa of Deutsche Bank.

It's Tim from Deutsche Bank. I would have 2 questions as well, please. The first one is you made it always quite clear for some time now that 2024 the transition year you are renewing a much larger share of your portfolio than you would usually do and that is generally all the considered healthy to do. How long will this transition take? Does it already set the base for a much improved '25 over this year by any major macro slowdown, of course, or given that the transition phase may now take a little bit longer? Also adding on to George's question on the EV portfolio, is the path towards a 20% margin or even just improvements from the 15% to 17% that we're seeing right now also delayed or still visible? And then the second question, perhaps more on the operations. It is pretty clear that the supply chain is very stretched globally. We see a lot of suppliers that have real issues structurally slightly not improving very quickly. Have you taken any measures to make sure that your supply chain is more stabilized as we had a couple of really significant hiccups, considering how higher ASP is, have you moved towards more double sourcing, triple sourcing, any other sort of measures that would help us not to have us to warn about new issues almost every quarter?

Tim, let me start with your first question. As already mentioned, in 2024, we are laying the ground for further growth then in 2025. And yes, due to the launch of 4 new models, of course, we will see a transition year in 2024 and then a strong acceleration in 2025. Of course, we continue to strengthen our sales structure. We want to achieve a very well-balanced sales structure. And I think we are already on a quite good path. We have shown this in 2023 despite the reduction of volume in China, we were able to overcompensate this reduction by other markets. First of all, the overseas in emerging markets market was very strong, and we have seen here an increase of 16% compared to 2022. And of course, we continue to invest also in our new target groups in the brand itself and technology. Very important is the entire ecosystem. It's important to invest furthermore in our partial driving experience centers in fast-charging stations because we have to support the transition to electrification and therefore, it's necessary that we also invest in exclusive charging stations. And as in the past, priority remains our value. Our volume approach is very important and therefore, we decided in China to adapt the supply to the demand situation in order to avoid significant discounts in future. And I think that's the only well approach and helpful approach for a luxury brand like Porsche. We cannot accept discount in the market, and therefore, we have to react in this direction. We have to slow down production and therefore, we are able to react actually in a situation like now in China. And of course, we think that China will recover latest in 2025. And then we are well prepared through the -- yes, very solid groundwork with the 4 new model launches in 2024.

Yes. Then I will take over this question and to [indiscernible] only 1 aspect to the launching activities that brings us in a situation that we will decrease. The fleet age from over 3 years to the 1.5 year for the next years. And that's a very positive situation being with such a fresh product portfolio in the market. Coming to the supply chain issues, we have faced some single topics. The semiconductors, as you know, is already solved. It was a tough work. We had the high volt heater for the Taycan first generation. It's solved. We have some launching issues with the 911 with good progress and our production colleague, [indiscernible] is leading the activities with our partner for the battery cell for the hybrid for the 911. And we had the software issue with our partner for seats in the U.S., where we had to change from a Chinese ship to a alternative ship that's already solved and we are reworking the cars. Nevertheless, the supply chain landscape is volatile, and we are working with a so-called risk radar. And to challenge our supply chains and to have a clear look where we need more flexibility and more and more alternatives. We won't be able to avoid 100% issues from the supply chain but with this risk radar, we have more security to tackle the points and having a prevision, what could happen. But now the main issues are already solved.

Very good. So the next 1 in the row will be Patrick Hummel of UBS.

First, I would just like to follow up on what we just discussed here for 2025. Last conversation from your end was that you expect the 911, including the hybrid versions to be available early in 2025. And you highlighted, Oliver, just the fresh lineup that you're going to have now 1.5 years average age. So is it fair to assume that this is going to be the year that will be fulfilling all criteria to deliver on the medium-term operating margin target of the 17% to 19% range again? Or is there anything from today's perspective that you would say, stands in your way to reach that 2025? And my second question, on the order side of things, can you talk a little bit about the order intake momentum in the regions -- in the main regions? And if I want to read between the lines in your statement, it sounds slightly more balanced, what do you say about order intake in that Q4 release compared to the third quarter? Am I reading here too much into this? Or are you slightly more balanced and less bullish?

Yes. Maybe, Lutz, you can take the -- your question, Patrick, for order intake. And I will give you some information for 911 and our expectations for 2025. We will be in the market in the second half of the year, it was a 911 step-by-step in terms of derivatives and regions. And with the whole portfolio we have shown today, we will have all the launching activities during this year and being full sized with derivatives and the regions in the market in 2025. So we stick to our midterm and long-term guidance also is in between 17% and 19% profit margin for 2025.

Yes, in general, our order bank is robust. It's robust above our pre-COVID level. And what's very important, the order bank covers a significant part of the entire year 2024. And also the first order intakes of the Macan, the E-Macan are very satisfying. And what's also very important, the order book is not opened in China and in some other markets. And therefore, we are quite well prepared when it comes to order intake and the resulting order bank for 2024 and 2025.

Thank you very much. So the next in the row -- Patrick? Okay. The next in the row will be Dorothee of BNP Paribas Exane.

I just wanted to come back to this BEV mix. I'm a bit confused still about the guidance for 13% to 15% BEV mix in 2024 because that's such a modest set up that I think 12.8% in '23 particularly given what you said about Macan base demand and obviously, it's the fresh Taycan in the lineup as well. So why is that still modest in terms of stepping up? And then obviously, the 13% to 15% is a really long way from the previous mid-decade, 40% and the end-decade over 80% target. So how are you thinking about those mid- to long-term targets? And do you have any revised guidance on those for us today?

Yes, we will stay to our mid-long-term targets in terms of BEV ramp-up fully electric cars over 80% by 2030 in short term. And as we explained, the launching aspect for Taycan and Macan won't be full size in the market this year, and therefore, our expectation is more conservative. But in '25, we'll have all the derivatives and regions for Taycan and Macan in the market. And we will increase much, much stronger on the BEV share. On the other side, we are now in the market with the PHUVs, which was 1 part of our midterm 2025 target from Cayenne and Panamera, the order intakes are very promising. And then share in between this and then plug-in hybrids, this will support. So sticking to our midterm targets in terms of BEV and then also long-term targets for 2030.

So the next one then in the row would be Mike Tyndall of HSBC.

Yes. It's Mike from HSBC. Two questions, if I can. The first one, just if we can go back to China, you're talking about BEV potentially recovery in '25. I just wonder, is there any structural issues in China that may prevent you from coming back to prior levels, things like common prosperity where conspicuous consumption is now kind of not quite as favorable as it once was? I wonder if that's part of the reason why luxury has taken such a hit? And also, what are your thoughts around the prospect for luxury BEVs in China because that's clearly been an area where really that market hasn't been tapped yet? And then the second question is just around we've got this swathe of new product coming this year, what are your thoughts in terms of the cyclicality that that's going to drive in the business because you're doing more refresh than you've ever done in 1 small space of time. Does that mean that everything ages together or is there something else coming in the portfolio that will balance that out as the rest of the decade unfolds?

May I start Mike with your China question. On the 1 hand side, we know about the economical and the real estate situation in China, where we have the crisis, which is producing this pricing situation and discount situation in the market. And therefore, it was a very well-thought decision to decrease our volume in the market, not to join pricing, not to join discount levels and to our luxury positioning and our philosophy value over volume. And with the opportunity to switch volume, especially to overseas where we have a fourth, strong pillar in terms of volume share. We think the Chinese markets will come back medium, long term because the capital is there. And therefore, we think with our product strategy, having a well-balanced portfolio between ICEs, plug-in hybrids and the BEV, we are matching perfectly in the markets and also with the offerings and the content of products. We do have -- this is very, very positive. We are investing in services. We are investing in experiences there. We are investing in our brands and tapping into new profit pools. There, we have opportunities. About the luxury segment, it isn't still built in terms of BEV and there, with our BEV strategy, we see a unique opportunity in China to build this segment. Now with the Macan, with the Taycan following with the 718 who used to be very strong in China in all times and will be in the future. And BEV then with a fully electrified Cayenne and a luxury SUV above positions to Cayenne. We will have 5 models in the BEV market on top positions and then covered by a strong Cayenne, strong Panamera with plug-in hybrids and ICEs and the 911. And that's the expectation for China.

Yes, as Oliver mentioned, it's very important that we create a real luxury segment when it comes to BEVs in China. This point in time, the segment above EUR 80,000 is quite limited with about 20,000 cars a year. And therefore, we see a huge potential for the future with our upcoming BEV products. And the second question was about the aging of our model range. I think we have very good groundwork done at the end of the year 2024 after the launch of the few -- of the 4 new models, then we have a very young age in average. And yes, in the upcoming years, we will have also then the E-Boxster and the E-Cayenne in place, followed then by the luxury SUV above the Cayenne and that gives us a perfect portfolio for further growth, first of all, in China, because we have a huge potential due to the reduction in '23, the over compensation by other markets. And if China overcome the crisis -- real estate crisis, Oliver mentioned it, then we have is a very young model range, a huge potential for further growth in 2025. And of course, all models will be updated regularly.

Okay. So the next one in the row will be Stephen Reitman of Societe Generale. And as we have around 20 minutes left, I would kindly ask you to be crisp with your questions.

I'm Stephen Reitman, Societe Generale. I have 2 questions on the Macan and on the 911. On the Macan electric, you haven't yet announced a certain prices in China. I think that will effect in April. Can you confirm that you'll be pricing it at a premium to the kind of price range of the CNY 600,000 pricing -- starting price of the ICE Macan. And looking at the sort of trend we're seeing in BEV demand in the rest of the world, we understand that you can't sell the car in Europe beyond June. But do you feel that maybe at the moment the tail of the demand of ICE Macan is going to be greater in the rest of the world for a bit longer? And are there any steps you can take to keep it to renew what effectively [indiscernible] car? And second, on the 911, you mentioned that you're on track for now the hybrid version of the 911 out early in 2025. Have you taken any steps to mitigate the delay of the hybrid 911? Are you able to build any more of the higher-end 911s up until the changeover in August to offset the impact of not having the hybrid versions in the fourth quarter as was originally planned?

Yes. Maybe let me start with the pricing question, the price for the E-Macan are not officially communicated yet. But as you know, I [indiscernible] several times, we will increase the entry-level model prices by about 15% to 20% when it comes to the transition towards electrification.

Yes. And coming to the 911. We have a clear planning how to enter in the market. And we will start with the ICE versions of the 911 in the second half of this year. And this one will be followed with a strong hybridization for the GTS, Turbo and Turbo S in the following months. And there up to now, we are on track. And having already the provision for the volume for this year, included this planning of the 911, step-by-step by derivatives and by regions.

So the next one in the row will be Harald Hendrikse of Citigroup.

I hope you can hear me okay. And I think George really took most of my question. But just strategically back to Macan again. Macan is actually enormous proof point for your post-Volkswagen strategy in terms of pricing relative to competitors. So can you just talk a little bit more about how much volume you would be willing to give up? Would you be willing to continue to price the Macan higher and higher relative to the competition, even if that cost you on the total volume side? Are you looking at your pricing relative to Mercedes and BMW? I would have thought that you had plenty of room for upside given your branding. And then lastly, you haven't talked about the profitability of the new Macan EV versus the ICE version, at least not today. With these price rises, should we assume that the new Macan EV is at least as profitable as the ICE version?

Yes. May I start. With the product, we have set new standards with the new Macan in terms of driving performance, design and a large number of new features and the digital offerings. And this was leading to the great interest we are mentioning in the market. And the order bank is already very satisfying after a good month with our 10,000 order intakes. We will start with the sales in China, not until April this year. And what's already is very, very important for us in terms of pricing and volume is value over volume. And so we are leveraging all the markets.

When it comes to the margin comparison between ICE and BEV, we have already a very good proof-of-concept in place with the Taycan, and we were able to come quite close to the combustion engine margin with the Taycan. And therefore, it's also the goal for the upcoming electrified Porsche cars to close the gap as soon as possible to the combustion engine margins. One lever is, of course, our pricing potential. I've already addressed the price increase starting with the entry-level models by about 15% to 20%. Our target is also to increase utilization rate. We want to have a better product mix within the Macan model range that all will help us to come in midterm close to the margins for the ICE Macan. What's further important we, of course heavily invested in research and development and in CapEx for the parallel phase of combustion engine development and BEV development. And of course, we will see the peak of research and development costs and CapEx in about 2 to 3 years. And then we will see the synergies and efficiencies due to the heavy investments in our electrification transition because then we have set up the platform, the SSP 61 platform for the upcoming SUVs and Taycan and Panamera platform. And of course, we can use this platform also with other group brands and that will give us additional profit also from this side and that all will create a situation that we can -- yes, accelerate the margin development towards, yes, the combustion engine margins in about 2 to 3 years.

So the next one in the row will be then Horst Schneider of Bank of America.

I'll try to keep it short. When we think about the guidance for 2024, this 50% to 20% operating margin guidance. Could you maybe provide some color what kind of seasonal pattern we can expect between H1, H2? Sounds to me in terms of volumes that H2 is going to be stronger than H1 and for earnings, it seems to be a little bit like [indiscernible] where we have got import issues in the U.S. in Q1, then 911 mix issues in Q2, D&A comes in for E-Macan. So a little bit of color on the sequential progression of margin would be great. Second question relates a little bit to this tariff and subsidy debate that we have got in general in the market, which particularly could affect Porsche and you are still 100% exporter out of Europe, and you are not yet producing locally in China and the U.S. So if there was, for example, imposed an increased tariff in the U.S. or there was retaliation by China against Europe, if there was an increased tariff imposed by Europe, would that cause you react on that and to localize production or you would say, from the debt perspective, 100%, this will not happen?

Yes, Horst, you know exactly that we don't give quarterly guidance. But of course, we will see -- Okay. I can give you some color, of course. Yes, we see a slow start in Q1 due to the, yes, model changeover for the Cayenne, right now for the plug-in Cayenne, for the Panamera and then the Taycan. And in addition, we invest heavily, as I already addressed in our products, in our brand and in digitalization, and beyond in our entire ecosystem for our customers. And therefore, we will see a weaker H1 compared to H2 where we should have more models in place -- new models in place in the second half of the year, and that will help a lot also with the coming 911 with a new generation of the 911 with GTS. We expect the GTS to be in place in the fourth quarter that will have a lot to improve our mix. You know exactly how important the 911 model range is from Porsche. And therefore, we will see a better H1 compared to [ H1.] And D&A, you know that it starts with the start of production of the new models. And that means we will see a significant impact due to the model launches in 2024. I addressed already that we expect higher D&A compared to 2023 of about EUR 500 million.

And start of production of the E-Macan, do you think in Q1 or is it Q2 or just in summer?

No, we will be in the market in the second half of the year.

We already started slowly the production, of course.

Slightly, we are ramping up right now.

And for the ones who are fortunate enough to join us next week to Singapore for the dealer introduction event, you will also have a chance to drive not only the new E-Macan but also the new Taycan and the incoming 911. So with this...

We have -- you can have a vision of E-Macan there. And there was a second question.

The one-off factories.

Yes. Okay. I can answer quickly on this. our production footprint. On the one hand side, we have a very flexible production footprint in between Germany, Slovakia and the CDK production we have in ASEAN in Malaysia. And everything invested, that's positive. Everything to come now will be integrated in these invested factories. So we haven't got plans to go out to China or to the U.S. and mentioning that it is still a very strong quality argument and value that most of our cars are designed, engines are produced in Europe, especially in our own plants in Zuffenhausen and in Leipzig.

Very good. The next one will be Daniel Roeska of Bernstein.

Maybe just one but could you talk a bit and expand about the upcoming E-Cayenne? And I know not too many details are here but I was wondering how much of that car, the E-Cayenne will be based on the PPE technology that's kind of in E-Macan? And where do you think your competition will be by that point? It's kind of little bit guessing how far do you need to develop E-Macan, and so how much do you think you need to improve on the current technology in terms of electric efficiency, software, autonomous driving to create a competitive package by that time?

Yes. The fully electric Cayenne matches perfectly to our strategy, having a flexible mix in between ICE plug-in hybrid with an already updated Cayenne already in the market this year and then coming with electric version and having to up to the 30s, this is flexibility. The new fully electric Cayenne will be based on a predeveloped PPE platform. We will use the EQ 1.2 architecture with major updates. And we will offer drivetrains for Supreme performance. Also, we will use the next generation of battery. And what I can tell right now where we are coming from the first test of our prototypes that the charging speed is massive, and it's reaching a level never seen before at Porsche, and that's only to tease the new Cayenne, which will be at the end, a true Porsche in terms of design DNA, sportiness, aerodynamics and then driving dynamics. And also with all the digital offers, we were able to tease today for the Macan already.

Maybe just a follow-up. I mean you've been leveraging Volkswagen technology more and more over the past decade. Is there kind of more and more kind of Porsche own developments again in cars like the Macan or then also the large luxury SUV. And for the simple investor, is that the direction we could foresee also for Porsche's future that there will be more kind of in-house development again?

Yes. For the future, and that's important for our positioning. We are developing for a 2-door sports car platform, the 718 electric will show base and we are focusing on a Porsche developed so-called SSP platform, where the new luxury SUV. We'll be the first car followed by others. And in terms of cooperations and using modules also from Volkswagen Group, we will do so in the future in terms of scale effects. But all the specification we do is will be done by Porsche. And then we are looking also for external partners, for example, for offering the ecosystem for our customers. Yesterday, with the Taycan GT, we presented the cooperation with Apple where. We do have using Apple instruments especially for the racing applications in the Taycan GT or today, we presented the fully integrated Apple CarPlay on Android basis. And this is our strategy. This what makes us different, we will do by ourselves or with specific partners from the market and where we can benefit from scale effect we will do so also in Volkswagen Group.

But maybe it's good to address it again. This BEV transition. We focus more than ever on Porsche-owned platforms in future. Oliver mentioned it for the E-Boxster, we create the sports platform. And for all the 4 door sports cars, we are developing right now the SSP platform. And that means the clear focus in future is to rely on partial platforms when it comes to BEV transition. And that gives us also the arguments regarding synergies and efficiencies within Porsche. And of course, in addition, we will use also the BW synergies as in the past, and that gives us a double effect when it comes to synergies in the upcoming years.

Very good. So I see that we have still time for 1 more analyst, and this would be then Daniel Schwarz of Stifel.

Another question on the E-Macan. The Taycan residual value team lower compared to Panamera and the other ICE product, you assume used car prices for the E-Macan will be similar to the ICE Macan? And could you remind us where the residual value gains and losses are booked in the Auto division or Financial Services? And then a quick question, I think, Lutz, you said in the press call that Porsche would like a higher free float. Oliver, you're a CEO of Volkswagen, Lutz, your member of the Porsche Holding Board. Could you just say what you think about the free float? Is the higher free-floating option in the foreseeable future?

Yes. Let me start with the residual value question. For the E-Macan, of course, we see a development when it comes to residual values for BEVs, which is not satisfying right now in the overall market. We see also this impact for the Taycan. Of course, we have a very conservative residual value positioning within Porsche Financial Services. And therefore, we are well covered. We have expected for the first generation of the Taycan, there's a residual value will be a little bit lower than the residual values for the Panamera as a comparison. And it's very important also for the future that you steer the second use and the third use phase in order, yes, to have the demand and supply situation under control as Porsche itself. And therefore, we will focus in future also on the used car phase when it comes to our offerings regarding financial services within our group. There's a clear target to cover more the used car phase. And in addition, we already ramped up in the past a strong Porsche approved warranty program, and all these factors should support a strong residual value in future also for our BEV cars. But it's very important to take in mind that also the further improvement of the battery technology should be used then in the used cars. That means we should be able to integrate new battery modules also in the predecessor cars. That should be a target for the future in order to keep the residual values as high as possible.

Yes. And in terms of free float, Daniel, because of the strong and robust situation of liquidity in Volkswagen Group, tomorrow, we will present the results. We do not comment on this point. And tomorrow, maybe talk about the Volkswagen results, and that today is not the right place to talk about it.

So Oli, Lutz. Thank you very much for answering all these questions. Gentlemen and Dorothee, thank you very much for asking your questions on this call. As always, I ask this at your disposal to deal with any open questions that should be unresolved. For the ones of you that we're going to see in the upcoming roadshow meetings, we look forward to see you all. And for the ones who are going to join us next week to Singapore, safe travels, we look forward to see you on the other side. Have a lovely afternoon, lovely morning or lovely evening wherever you joined us. Bye-bye, and see you soon.

Thank you.

Thank you.