Bjorn Scheib - Head, IR Bodo Uebber - CFO

Daniel Schwarz - Commerzbank Stuart Pearson - Exane BNP Paribas Horst Schneider - HSBC Global Research Arndt Ellinghorst - Evercore ISI Jose Asumendi - JPMorgan Philip Watkins - Citi Kristina Church - Barclays Capital Charles Winston - Redburn Partners Stephen Reitman - Societe Generale Christian Ludwig - Bankhaus Lampe Fraser Hill - Bank of America Merrill Lynch

Welcome to the global conference call of Daimler. At our customer's request, this conference will be recorded. The replay of the conference call will also be available as an on demand audio webcast in the investor relations section of the Daimler website. The short introduction will be directly followed by a Q&A session. [Operator Instructions]. I would like to remind you that this teleconference is governed by the Safe Harbor wording that you find our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlining any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. I now hand over to Bjorn Scheib, Head of Daimler Investor Relations. Thank you very much.

Good afternoon. This is Bjorn Scheib of the Daimler Investor Relations team speaking. On behalf of Daimler and the entire management team, we would like to welcome you all on the Internet and here on the telephone, to our Q1 conference call. Today, we are very happy to have with us our CFO, Bodo Uebber. We will - he will be giving you a short introduction to give this conversation and Q&A session a framework. In order to give you maximum time for your questions, afterwards, I would kindly ask you to structure your questions to that way; that we keep it to one or two questions. And please, make your introduction and the answering of your questions, this time, precise and not too long, in order to give everybody the opportunity to raise questions. Now, with this, I would love to hand over to Bodo.

Thank you, Bjorn, and good afternoon. We published our first-quarter figures this morning, and as you can see, Daimler had a strong start this year. As a result of the consequent execution of our strategy, we continue to progress further in terms of gross and profitability. We achieved significantly higher sales, revenues, earnings, and industrial free cash flow. Daimler's unit sales grew by 13%. Profitability of the automotive divisions increased by 200 basis points. At the same time, we continue to invest in our future. As R&D expenditures increased by 13%. Step by step, we are harvesting the rewards of our extended investments we have made over the past years. The combination of a strong product portfolio and the disciplined continuation of our efficiency measures, are enabling us to profitable expand our businesses. We are on track to achieve our full-year targets. Step by step, we are getting closer to our mid-term margin targets. In the first quarter, we continued our product offensive with the premiere of the GLE Coupe, the debut of the Mercedes Maybach Pullman, the production start of the CLA Shooting Brake, and the premiere of the new Mercedes-Benz Metris midsize van for the North American market. We also confirmed our forerunner role in the tournaments. Driving at the CES in Las Vegas, with our new autonomous F 015 Luxury in Motion research vehicle. Moving on to the highlights of our financials. Group revenues increased by 16% and adjusted for foreign exchange effects by 9%. Group EBIT from ongoing business grew at much higher rate of over 40% to €2.9 billion. Net profit reached €2 billion, which translates to an EPS of €1.83. Industrial free cash flow rose to €2.3 billion in the first quarter. Mainly driven by the profit contribution from our industrial businesses. As a result, the net liquidity position of our industrial business reached €20.5 million at the end of the first quarter. Please keep in mind that we paid out €2.6 billion in dividends in early April. On the other hand, we intend to keep net liquidity at a comfortable level. To weather the risks resulting from volatile markets. To maintain a strong and solvent balance sheet. To support our each A rating. And, last but not least, to sustain the financial strength and flexibility to continue to invest in product, innovation, and technology. To sum up, in the first quarter, we have continued to improve our performance, as well as our ability to sustain it. In combination with our disciplined financial policy, we further increased the robustness of our business. Let's take closer look at major developments in our single divisions. Mercedes-Benz Cars increased sales by 18% in the first quarter. It was again the strongest growing premium brand. To this success with double-digit growth rates. Especially, the new C-Class and the compact class family showed very strong sales dynamic. EBIT from ongoing business significantly increased to €1.8 billion, and our margin reached 9.2%. In addition to higher volume, pricing also made a positive contribution to the EBIT development. At the same time, we continue to invest in new products, technology, and additional capacity. Foreign exchange was a burden in the first three months, but we expect it to become a positive over the course of the year. Daimler truck sales grew by 4% in the first quarter in a very heterogeneous regional market environment. Sales in North America continued to grow dynamically by 18% in the first three months. Europe had a slow start, with sales developing around the low prior-year level. Emerging markets significantly weakened at the beginning of the year. The Brazilian market turned out to be more difficult than initially expected. Sales in Latin America were down by 29%. Sales in China and Indonesia also declined due to difficult market conditions. The order intake in the first quarter supports a strong dynamic in North America and points to order more positive outlook on Europe. Order intake in Brazil decreased significantly and reflects the weak economic development. In total, the order backlog of Daimler Trucks increased by around 40% compared to the end of March 2014, and confirms our full-year targets for Daimler Trucks. EBIT from ongoing business increased by over 50% to €563 million, while the margin improved to 6.4%. The main contributors were higher sales in NAFTA, positive foreign exchange effect, and further efficiency enhancements. Burdens arose from lower sales in Latin American and Indonesia, as well as higher warranty costs and expenses for additional capacity in NAFTA. Overall, the first quarter demonstrates the strength of our global truck business model that allows us to more than balance a huge market deterioration in Brazil and Indonesia. Furthermore, in February, we decided to sell Atlantis Foundries, which resided in extraordinary burden of €55 million. This decision is another proof point that we continue to improve the structure of our businesses to optimize the virtual integration where necessary. Mercedes-Benz Vans increased sales by 4% and revenue by 9%. EBIT from ongoing business climbed strongly by 80% to €221 million. With, a corresponding profit margin of 9.2%. The main driver here was a very strong development of our van product mix. Strong demand in Europe and NAFTA, along with benefits from efficiency improvements, contributed to the EBIT development. However, foreign exchange effects burdened the result. Sales of Daimler Buses decreased in the first quarter, due to the very weak business in Latin America, that could not be offset by stronger demand in Europe and Turkey. EBIT from ongoing business came in at €35 million, which equals the profit margin of 4%. Positive EBIT effects, resulting from strong demand for complete buses, a good product mix invest in Western Europe, and positive exchange rate effects could partially offset the weak business in Latin America. At Daimler Financial Services, new contract volume increased by 34%. The portfolio grew by 10% to €109 billion. In the first quarter, the division achieved an EBIT of €409 million, which corresponds to a return of, on - of equity of 20.4%. The main drivers were higher contract volumes and positive foreign exchange effects. While, we at the same time, invested in the expansion of the business. Net credit losses decreased to a very low level of only 20 basis points. After a good start into the year, let's turn to our expectations for the full year 2015. In line with the continuation of moderate economic dynamism, worldwide demand for cars is expected to increase by about 3% in 2015. We increased the truck market expectations for NAFTA to 10 to 15%, Europe to 5 to 10%, and Japan to around prior-year level. At the same time, due to significantly deteriorating conditions, we had to change our guidance for the Brazilian truck market to decline around 30%, and the Indonesian truck to drop around 20%. For the European van market, we now foresee a more positive development and expect the market to grow slightly. The forecast for the bus business in Brazil, has been reduced to at least minus 20%. Our guidance for Daimler Group remains unchanged. We continue to expect to significantly increase our group sales revenues and EBIT from ongoing business in 2015. At the division level, we expect to significantly grow ongoing EBIT in 2015 at Mercedes-Benz Cars, Daimler Trucks, and Mercedes-Benz Vans. For Daimler Buses, we had to reduce our forecast because of weak market developments in Latin America. Now we expect ongoing EBIT significantly below last year's level. Daimler Financial Services continues to forecast ongoing EBIT slightly above the prior-year level. And, based on the current F8 environment, we updated our guidance for the foreign exchange effect. And, now anticipate a positive impact on EBIT of around €1 billion. This figure reflects headwinds from - resulting from several emerging markets, currencies, and the Japanese yen. The key divisions benefiting from this effect are Mercedes-Benz Cars with around 60%, and Daimler Trucks with around 40%. In the full year 2015, we expect a free cash flow from our industrial business to be significantly higher than the dividend payment in 2015 of €2.6 billion. As we will continue and intensify our investment offensive, we assume that our free cash flow will be significantly lower than in 2015. And, based on our first-quarter results and developments, we are targeting the upper end of this range. To sum up, we are on track for what we promised at the beginning of the year. And, we'll step-by-step approach our mid-term targets. Our strategy is paying off. And, Daimler continues to be a promising investment case. We will renew and expand our SUV portfolio this year with the launch of the new GLC; the success of GLK; the GLE, the new name of the facelifted M-Class; and a completely new model, the GLE Coupe. In China, we also expect to grow stronger than the overall premium market. Thanks to our competing model portfolio and additional new products. Those in China will be supported by local production and imports. But, the lion's share of that growth will become from locally produced vehicles driven by the new GLA and the full availability of the new C-Class. Daimler Trucks is benefiting from the strongest product portfolio in its history and at the same time continues with efficiency programs. Next week in Las Vegas, we will show the future of transportation technology and prove Daimler Trucks front runner road. Finally, we are working to safeguard and further improve our current performance step-by-step by benchmark products, leadership and innovation, comprehensive financial discipline, and structural optimization. This will help us to further improve our performance and increase robustness of our business. Now, I look forward to your questions. Thank you.

[Operator Instructions]. The first question is from Daniel Schwarz, Commerzbank.

First one would be on [indiscernible] you had a very strong first-quarter despite somehow we could mix that maybe implied that mix effect is just not very important anymore due to the more profitable derivatives of the small cars or is it more just over compensated by the volume effect? And will the mix effect improve over the year with the start of the new SUVs or would you rather expected flat SUVs more compensating for weaker E-Class and S-Class sales? And then just one quick question the increase in the currency guidance the additional 500 million is that [indiscernible] mostly transition effects a trigger this upgrade of the guidance. And if it's translation effect is a bigger part of that to be found in trucks rather than Mercedes? Thank you.

The first question relates to the profitability and mix that you asked. The main effect we see of course mix prints in the first quarter we had more compact cars relatively spoken of Chris Whitmore smart cars relatively spoken to last year. But it was overcompensated as you said secondly by volume and also by pricing in the first quarter. We do expect the mix developing from first-quarter on to be slightly also worse or to say that in the first quarter so we have more compact car and smart cars there in the quarter to come. But as a said before we offset this effect in the first quarter. Your question with regard to currency, I've updated you with a number we expect 1 billion in currency 2014. Mainly 60% is impacting Mercedes Car Group and 40% is Daimler Trucks and Daimler Trucks is most of it is translation effects. Because we're naturally hedged almost in every region so 90% 95% transition effects in that gives you the rough guideline for your question.

But also the transaction effects is now bigger than you expected

It's bigger of course it's the currency developing the spot rate of the dollar it was quite favorable in the last two months. We also seen some currencies in emerging markets got stronger and of course the forecast of course was not easy to made these facts in total made it fact that we increased our guidance from 500 million to 1 billion.

The next question is from Stuart Pearson, Exane BNP Paribas.

So two questions just starting maybe on the China joint venture it appears the profitability steps up quite materially in Q1 and close the gap so maybe could talk a little bit about what went on there because we forgot weaker pricing in China but it appears that the case in Mercedes. I guess the long C-Class helping. Maybe on a technical point if you could confirm the JV when it is paying royalties to Daimler and buying parts from Daimler is not being invoiced in MMD or euros. This first question. And that brings me to the second which is on the car business cost changes line which is obviously positive art of that was the China extra income but even ask that is not as negative as it has been I think you said that took that to continue. Reasonably it will pick up again on the negative side as more launches but maybe just give us a feel with the high triple digit negative number about the right ballpark level for that this year or just some color around that. Thank you.

The question with regard to the joint venture as you already pointed it it's mainly based in develop and maybe because on the C-Class performance we had a very good sales start with our locally produced C-Class that is one effect in the second one is in general we have for the C-Class also a good pricing start. So price positioning is better than the old one as you know that has an impact in the JV on top of it the currency developed favorably within the JV and the other main effect why the TV did very good. We're very pleased that develop and. The second question you had was the cost changes. We had a very good first-quarter, yes. Even if you expect the JV impact in the cost changes to the state was very favorable for the total year we expect as we've also pointed out in the beginning of the year a couple of hundred million negative which is more or less based on higher depreciation on the one hand we had life cycle measures and product attractiveness as you know some marketing costs for example and that makes it a couple of hundred but as you know the numbers over the last years were very favorable number and that points out to a very successful implementation of the leadership program which will be finalized in its first phase this year and we're working on structural effects on top of it. I do think that where the questions you had.

Yes maybe you could clarify that last point you say a couple hundred million negative line item. That includes the impact of the China the improved China equity income conservation?

Yes right. The cost change is yes

The following question is from Horst Schneider, HSBC.

First of all I want to ask about the pricing. Used explained a little bit that you had a very good pricing in China on the new C-Class . Maybe you can also make some comments on the price trends in other regions. As far as I understand Mercedes price trends was not too bad and I remember that you guided at the conference and marks for flat pricing in 2015. I would be interested to know if the price trend is developing a little bit better and if there's any chance that this could continue basically also in the next few quarters especially having in mind that your launch in so more new models. And again at follow up on the currency effect I want to know if you could be explained us a little bit more in detail if there are any currency effects also in the cash flow or this just feeds through from the earnings side into the cash flow. And if there are more effects maybe you could want to buy them. And then I want to know on the hedging policy review can update us of what exposure or what % of exposure has been hedged for 2015 and also for 2016 and of course would be great to know what is now your assumption on that euro U.S. dollar rates you take for 2015. Thank you.

With regard to pricing of course we it's right that we have plans for stable development and full year currencies seeing a very solid develop and in pricing its many based on positive impacts on our product family and strong products for example C-Class in Chile for example and almost all the regions as a positive impact. We've also positive impact if you might say so due to some emerging markets where he had very weak currency develop months we also increased pricing but also included in this develop and of course now to say one quarter is a full year you know we try to do post in terms of pricing in first quarter was good and I expect we're doing a good job also in the quarters to come. In this direction.

Your individual outperformance or is the price discipline in the Permian segment all right instable?

I do think it's a very good candidate from our point of view which volume and pricing to reflect the product mainly - and good management from a point of view.

Okay, so individual outperformance is good. All right.

There is additional questions of course currency has an impact because currency sinking with exposure to EBIT and EBIT is impacting from ongoing business of course the cash flow than what you're seeing here is also cash flow impacted. Finally of course it's not true for translation effect although there also finally in cash flow - I'm very pleased with the develop months in the first quarter operating performance has also the cash flow performance on the one hand and we commend also on positive cash tax act. From the past which are included in the first-quarter on the other hand also our accounts payment for example or at a good level. All in all we increased our cash flow guidance based on develop and for the total year and decreased by roughly 1 billion.

And the hedge?

80% this year 60% next year. For the dollar and mainly for the major currencies directionally. Of course that is not true for currencies which are have been very volatile markets in emerging markets with a price for hedging might be too high so that you don't hedge on these kind of level so you are trying to optimize it when currencies are getting stronger in emerging markets but in general it's true for all major currencies were looking into for exposures.

The next question is from Arndt Ellinghorst, Evercore ISI.

One quick question for Bodo really. Looking at your net liquidity now and projected to cash performance for the rest of this year and hope we also into next year and assuming that you are running a more stable ship now, and that your less intrigue to go for major M&A, when would you be prepared to % to the market and balance sheet strategy? Or illiquidity strategy talking about, minimum cash requirements of what you're going to do with your ex liquidity I sustainable basis? At that's really something that is missing in your equity story.

I think you pointed out some of this topics you are asking for in the past. One major element is of course based on this financial taxability a can sustain to be able to invest in part innovation technology with several of my point of view is we said okay yes we're going into separate segment which we were not in before and this something you can afford. When you have some liquidity and both very stable and very comfortable. The second topic is that we have volatile markets note out. You see some these emerging markets need to keep some more liquidity on hand based on these volatilities. Another topic and that is more where you are asking for is we keep our a rating and the a rating is asking us the rating agencies to keep financial flexible to of 12 months and this 12 months taxability in a growing industry of course gives us more clearly level we have currently to meet this target. And therefore have to of course adjust the dividend payment in April to come down to 17.5 billion in April to come down to 17.5 billion and that's nuts a number we need to do for the rating agencies and as we pointed out at some volatile risk and so will be hedged. We will at the end of year again look into the financial liquidity as it did last year and of course there are two further on to elements one is using our underfunded position the discount rate went down to 1.5% so our underfunded position went up so to speak so we've considered as one option of course again pension contribution is no decision about that it's one option. And the second is of course basis for topic of the dividend payout ratio for the % we give to the market is also a good one if you have my stick with the level on hand. So that is more unless the reasons why we did this liquidity on this level.

That implies basically that an OEM with the financial services organization would never be able to return as much cash as other cyclical or Industrials right?

I do think our cash performance on the last year improved with other different times were short of cash and a do think the finance organization made a very good job in this on working capital management for the business and doing a really good improvement and we're now talking about the company which is facility for 5 billion cash flow. I think discussion of course were to invest in what to do with the better one than we had before. And therefore I do think now going forward of course we will certainly look what we do with our liquidity and difficult forward and overachieving dividend payments of course they certainly some measures even to the server to share hopes on one hand and dividend payments or pension contribution and so on and so forth. It's a minor item I would say is even now but years ago the financial services elements because financial services has a net income develop and so to say it's able to mainly move their own liquidity and equity position with the financial performance. What we need once in a while is shy of contribution and that might not be only this financial liquidity from industrial peace but as a said before A rating is key for my point of view because financial services is in the future more and more important because of the high penetration you can generate in the current acquirement digitalization is the right path to go customer orientation and financial services in the higher court does it ever has before.

The next question is from Jose Asumendi, JPMorgan

A couple of items please the first one on the margin production for the 2015. Believe you're guiding for EBIT to be stronger in the second half versus the first half and this obviously applies to the EBIT margin. I'm wondering if this guidance is still valid. Also we compare this - the EBIT Thomas Quigley basis last year it was pretty much a straight line. I'm just thinking if you're planning whether there's been some in the third quarter or is not going to be the case again in 2015? And the second item is on efficiency gains. You have a big launch next year? I haven't heard of any specific comments around the efficiency gains in Q1. When should we expect a bigger uptick the must be some large cost savings you can generate lunch with the new E-Class in 2016. Thank you.

Was a thank you for your questions. I think we pointed out our guidance for this year that the first element a significant higher than 2014 that you're right the second half should be better than the first half but we don't comment on our to develop and although I would say it's 9% and for my point of view to do it. Therefore we state with that which and second half and first half and that's it. The cost savings you are right in the first quarter yes we had cost savings based on our program especially our pointed out that we have a cost included higher depreciation and higher sales cost for example but also a nice measures as you know so we are included in this new develop and in the first quarter is also said in the next quarter's to come this number will be negative so to say we've planned for couple of other lien negative to stay in this line item which is of course the improvements towards the 2014 and 2013 so very good develop and period in trucks were more or less see the same develop and pick it slightly negative we were impacted by initiatives in and capacity increase in NAFTA so we see excellent these elements also the efficiency in the truck area and I'm pleased with in the first quarter.

The next question is from Philip Watkins, Citi.

I just had two, the first one was on trucks and Latin America. I can fully understand the guidance. Is any sort of visibility as to when things might turn around their? And how is the pricing progressing at that market? And on that is a pretty good quarter actually in that it seems to me. Is any was my that fatal any one offs in that division in the quarter? Thanks.

Visibility is pretty low if you might say but the currently we forecast also the 30% negative and there might be reasons to be even lower than this number. Why do think it was 40% down. The visibility is low and the need in the country is high in terms of the investments are low their political problems on the other hand and so on and so forth. That program interest rates were increased or doubled the maturity of the term was expanded to therefore also everything was heading into the negative so we can't tell you right now really where it's going to or our guidance is not element but might be even worse than this number. The van business I wouldn't talk about one off it's a very successful business in the first quarter were mix had a higher impact. We're selling a lot of relatively to last year within the midsize van were very successful with sale of the D class. Therefore the mix also in the midsize and was very good one and this made of course a major contribution including efficiencies in the van business were pleased with the development. I don't expect to be at this high rate in the next quarter's to come. So we will see impacts from the Latin America business more and more in the quarters to come and we will not stay at this high level margin wise in the van business. But anyway business good quarter and

On the pricing in Latin America trucks?

Distressed. You can imagine that this market where once in a while the order intakes are so low that their the pricing is under pressure. You've seen us we've lost a little bit of market share there's also goes back to we don't to all of these deals within this competition. But it is stressed.

The following question is from Kristina Church, Barclays.

My two questions are first the intensive cost on particular cost for Co2 compliance in 2020. Do we start to see any ramp up as we get closer to 2020 or is it more of a linear progression? So what you're seeing currently is a continued level for those costs. And then leading on from that the question about your mid-term margin targets particularly in cars. The 10% target obviously is through the cycle so clearly you would want to be getting higher margins in the peak times. What is there to do is it still a case of the efficiency savings coming through that should push the margins up to their or is it more the product side when you get the full renewed with the E-Class as well? Which is the most important driver to get to those medium-term targets? Thank you.

So what you said in terms of Co2 related cost of course you are right. They will increase over time we don't see major effect this year but over the years to come of course there is higher share in this kind of costs. The second question the 10% target as we've pointed out there will be a step-by-step increase in margins and progression to this targets. Last year we were at 8%, we’re starting now the year with somewhat over 9% we do everything we can to make this sustainable and go further into the 10% region and that is our guidance.

Thank you. The following question is from Charles Winston, Redburn Partners.

Just two questions for me. Pricing on Mercedes would you be able to offer any quantification perhaps in the percentage of revenue was it very least above or below 1% increase in aggregate just to perhaps get a little bit of a feel of the quantum there. And then secondly on mixed with talked about product mix my understanding is that there also a negative impact from regional mix in the first quarter. Which I thought was a little bit strange given the patterns of development we saw, can you confirm that the regional mix is negative and if so perhaps put a little bit of color as to why we saw that and what we can expect from regional mix as we go through the year. Thank you very much.

Your second question with regard to regional mix of course there was some effects for example UK and other countries which had more sales but in these countries so to say lower margins. We've also in fact we have higher share of the locally produced cars in China which are included in this message and these are the effects would pointed out. Your first question with regard the pricing effect I've asked you understand that we do not quantify this effect for competitive reasons.

The following question is from Stephen Reitman, Societe Generale.

First of all on the restructuring charges for sales organization the still a quite low figure the 20 million on the [indiscernible] cars and another 4 million on trucks. When do you expect that to accelerate to get to around 500 million you're talking about for 2015 and 2016? And secondly could you comment about the market share develop on Mercedes trucks in Germany which looked pretty low in the first quarter. What was going on there in terms of - were you keeping away from certain contracts and pricing there? And thirdly on China, obviously we have seen an improvement in the results from BBAC could you give us some idea of the margin or if you're not prepared to give the margin, how far away do you think you are from the benchmarks as we've got some much better detail from some of the competitor companies like BMW and Volkswagen and joint ventures on their actual results. Thank you.

Your first question with regard is mainly related to the restructuring our retail network which we pointed out that we would have charges of around 500 million over a two-year period. The number will pick up during the course of this year. So we don't want to differentiate in this year and next year as for your understanding because it is transaction related. The more transactions we’re doing so to say enclosing the more effects we will see this year. And therefore it will increase now over the quarters to come. The second question if I got it right this and is difficult to understand, sorry to say so. I think you are at the question was up there to market share in Germany?

That's correct

There it goes back to fourth quarter last year the market share development in the first quarter is more or less a result of order intake in the fourth quarter last year were price competitiveness was a very high one and therefore we did not do every deal. I expect the market share in Germany and Europe going up over the quarters to come. Your third question was with regard to our BBAC development. I do think there is no - we do not - the 10% share margin we have made now in BBAC is a good number but I can't tell you more in comparison to BMW or other joint ventures.

The next question is from [indiscernible].

Two questions please. The first I don't think you answered Stuart Pearson's question about in which currency you invoice your joint venture and which currency you also receive the royalties from your Chinese partner. And the second question is you have I think this is the record low for the cost of risk for Daimler Financial Services at 20bips. Any particular explanation there? Should we look forward to that continuing for a while?

You are right I haven't answered this one question. The invoicing currency is euro. And your second question was, can you repeat it please?

The last chart you show us the net credit loss from the financial services, at 20bips the lowest ever and is there a particular reason or should we look forward to that continuing?

Once in a while this number will increase when we come to a kind of normality in many, many aspects of course it's an all-time low. It's even includes some difficult markets like Russia or Brazil for example. It's included in this low number. So it's difficult to perceive we expected every year to increase and over the last two years we were wrong. So it went further down but I don't think there is much leeway in this number downwards so it's difficult to access - if we get to some normality in the market of course this number will increase but it will be by far lower than the average over the years which we were 60, 65, 70 basis points so we need a couple of years to get to this normal levels

If I can ask one more is, now that you [indiscernible] China in your financial services, is the cost of risk higher or lower than average in China?

We have already since the beginning of the China joint venture we have consolidated this numbers those these companies into financial services. We don't have any consolidation effects. Other than competitors I think they have consolidated all their Chinese adventures and therefore they have effects we don't have

My question was try to understand is if China is helping in general in kind of improvement or is it an issue?

It's more or less in the same vicinity so all the regions in financial services are in pretty low levels. So I wouldn't see any difference between Europe, for example in China currently in terms of good levels of risk. There are other markets as I said before Brazil and Russia and other emerging markets which are higher levels - everything else is currently all-time lows.

The next question is from [indiscernible].

Just two quick question, one would be on the tailwind expected it from the remaining three quarters from the foreign-exchange particularly at Mercedes-Benz. Whether we should expect that to increase from quarter to quarter or whether the let's say up to 600 million - 700 million is quite evenly distributed among the three remaining quarters. And the second question would be I don't know if you give some detail on that we look at the improvement in the transaction rate expected for this year compared to last year and you look forward to 2016 compared to this year where we should see the large improvement as a transaction rate with regard to major currencies. Thank you.

So to your first question yes we will see increase or better situation if you might see so in the Car Group over the quarters, that’s right and your second question of course we will see also positive effect in 2016 but we don't do any guidance on this topic now because there's so much volatility in currencies that we do anything wrong today we will update you in the first quarter of this year than we have more stability and that we see further of how the currencies are developing. We have pointed out that we are hedged with roughly 60% in the major currencies and that is a guideline for you.

The next question is from Christian Ludwig, Bankhaus Lampe.

One question from my side left. Looking at your R&D costs , the capitalization ratio has increased from roughly 20% as an average of last year to 26% in Q1. Is there something that is just a one off or is it a structural and what is driving this?

There is no specific, it's a normal level so of course we have some volatility so to say in this number depends on where the major did in the development phase or not, so therefore that is normal level of capitalization.

The next question is from Fraser Hill, Bank of America Merrill Lynch

Just one question left for me which was on China and NDRC, I think with the full year disclosure and conference call then you talked about some negotiations with the NDRC and expecting some conclusions to their investigations or thoughts around the new vehicle pricing. I know you’ve had one small find last week from a local province. Could you provide an update to that topic and your thoughts there? Thanks.

Of course there is nothing to be added. So we have cooperated with the authorities in this regard. We've had in this investigation in this topic and the decision of the authority was made and we will do everything also in the past but also in the future to comply with the law that is our focus on. We've made the necessary provisions for this decision. And there is nothing more to add.

So ladies and gentlemen, as we can see from the list it seems that we are fine. So thank you very much for your questions and being with us today. Investor relations remains at your disposal to answer any additional or left open questions that you may have. As a reminder we're going to host our truck event in Las Vegas next week and we're very much looking forward to see you at one of our upcoming road shows or capital market events. We hope to talk to you soon. And thank you also to all participants on the Internet. Bye, bye.

Ladies and gentlemen thank you for your attendance. This call has been concluded. You may now disconnect.