Björn Scheib – Head of Investor Relations Bodo Uebber – Chief Financial Officer

Tim Rokossa – Deutsche Bank Jose Asumendi – JPMorgan Arndt Ellinghorst – ISI Evercore Stephen Reitman – Societe Generale Fraser Hill – Bank of America Adam Hull – MainFirst Daniel Schwarz – Credit Suisse Horst Schneider – HSBC Patrick Hummel – UBS Francois Maury – ODDO Securities Harald Hendrikse – Morgan Stanley Christian Ludwig – Bankhaus Lampe Dorothee Cresswell – Barclays Demian Flowers – Commerzbank

Welcome to the Global Conference Call of Daimler. I would like to remind you that this teleconference is governed by the Safe Harbor wording that you find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management’s current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. May I now hand over to Björn Scheib, Head of Daimler Investor Relations. Thank you very much. Björn Scheib: Good afternoon, ladies and gentlemen. This is Björn Scheib speaking. On behalf of Daimler, I would very much like to welcome you on both the telephone and the Internet to this Q3 Results Conference Call. We are very happy to have with us today our CFO of Daimler, Bodo Uebber. In order to give you maximum time for your questions, Bodo will begin with a short introduction, which will be directly followed by a Q&A session. To make it pretty short, I would like now to hand over to Bodo.

Thank you, Björn, and good afternoon. The automotive industry and also Daimler continued to operate in a very demanding environment. Given the variety and the complexity of external factors, we are content with the results of this third quarter. Our numbers disclosed last Friday underlined the challenges we faced, as did the earnings adjustment we published the same day. Nevertheless, we still have a solid result to show. To be more specific, in the third quarter of 2018, Daimler sold almost 800,000 passenger cars and commercial vehicles. One of the reasons for these results are our attractive products. The renewal of the compact cars continues with the new generation of the B-Class and the A-Class sedan. We are adding one more member to the compact family. The first glimpse of the all-new GLE were disclosed at its premiere in September, which premiered at the Paris Motor Show. And in Stockholm, we presented the first major step of our strategy towards electrification, the EQC, our first all-electric vehicle of the EQ brand. The third quarter was also full of news of our commercial vehicles. The new Actros premiered shortly before the IAA commercial vehicle show. The new flagship product features active drive assist, which can brake, accelerate and steer in all speed ranges. With this innovation Mercedes-Benz Trucks is putting partially automated driving into serious production. This September, Mercedes-Benz Vans put its new plant in North Charleston in U.S. state of South Carolina into operation. And with the all-new eCitaro then the buses are shaping the future of public transport. It’s all electric and achieves a minimum range of 150 kilometers, and the first orders have already been placed. We are also expanding in the area of mobility services and launched our car2go sharing service in Chicago. Moreover, just yesterday, we announced the premium ridesharing joint venture in China in cooperation with GD Group Company. To the financials. Group revenue is about €40 billion. When adjusted for foreign exchange effects, revenue is at the prior-year level. EBIT decreased significantly compared to last year’s earnings to €2.5 billion, due to a significantly lower EBIT at the Mercedes-Benz Cars and the Mercedes-Benz Vans divisions. The significantly higher EBIT at Daimler Trucks did not offset these effects. Net profits attributable to shareholders amounted to €1.7 billion, equivalent to €1.58 per share. The industrial free cash flow decreased substantially and led to a cash outflow of €60 million in the first nine months of 2018. This was mainly due to the general business performance and the development of working capital, reflecting the stronger increase in inventories because of restrictions in the availability of vehicles caused by the delay of certification processes at Mercedes-Benz Cars. In addition, Mercedes-Benz Vans also experienced delivery delays of certain models. Therefore, the net liquidity of our industrial business amounted to €13.5 billion at the end of the third quarter. To sum up, the Group’s results showed the solidity of our business, but also reflect the manyfold challenges we faced in the past quarter, but we continue to invest strongly in products and technologies to be ready for the future. Our strategy remains in place and we are continuing with this consequent implementation. Let’s move on to the performance of the individual divisions. With almost 560,000 units sold, Mercedes-Benz Cars was 6% below last year’s level. The reasons for this sales decrease include model changes, restricted vehicle availability in Europe and some international markets and very intense competition. And to emphasize it again, the sales performance is a result of limited product availability and not due to low demand. The decline in volumes as a consequence of restricted vehicle availability caused by the delays in certification and the temporary weaker pricing policy had a negative effect on earnings. This led to an EBIT of €1.4 billion and a return on sales of 6.3%. We had a positive effect on EBIT from the remeasurement of the investments in Aston Martin in the amount of €185 million. Furthermore, vans in connection with ongoing governmental proceedings and measures, including those for diesel vehicles, as well as expenses in connection with the possible need to take action on certain vehicles still operating with the previously used refrigerant R134a, impacted earnings at Mercedes passenger cars and Mercedes-Benz Vans in the magnitude of a mid three-digit million amount. Daimler Trucks increased its unit sales by 8% this quarter. The overall book-to-bill ratio of 95% reflects the very strong sales situation in the third quarter. Incoming orders increased by 11%, a moderate slowdown compared to the previous quarters, which were at an exceptionally high level. The division’s EBIT of €850 million was significantly above last year’s result, leading to a return on sales of 8.5%. Positive effects came from growth in unit sales in the NAFTA region, as well as further efficiency enhancements. Higher expenses for raw materials and the weakening of the Turkish market had negative effects. Mercedes-Benz Vans sales decreased by 2%. This was mainly due among other things, to the partial suspension of deliveries of the Vito, V-Class and Sprinter models. However, we were able to strengthen our position in China with a best-selling third quarter for vans so far in that region. The van division’s EBIT amounted to minus €93 million. Earnings were impacted by expenses for the Sprinter model change and by expenses in connection with ongoing governmental proceedings and measures taken for diesel vehicles, as well as by lower unit sales caused by delivery delays. Unit sales at Daimler Buses increased by 7% in the third quarter, driven by higher unit sales in Europe. The division’s EBIT decreased to €30 million due to a modified product mix and higher inflation-related costs, which were only partially offset by efficiency enhancements. As a result of lower vehicle sales, new business at Daimler Financial Services decreased by 5% to €16.6 billion. Contract volume was at €149 billion at the end of September, which is 6% higher compared to the end of last year’s level. Our mobility services keep on growing and posted a user increase of 64%. At the end of September, we had 26 million customers in a total of 130 cities. Third quarter earnings of the Daimler Financial Services division amounted to €392 million, which is significantly lower than in the prior-year quarter, which have an effective for this development were the increasing interest rate level and the cost of the situation in Turkey. This was not fully offset by the growing contract volume. Let’s come to the outlook for the fourth quarter and full year 2018. At Mercedes-Benz Cars, we plan for unit sales in full year 2018 in the magnitude of last year. While we are benefiting from a very attractive product portfolio and unchanged strong demand in China, at the same time, our unit sales are, to a certain extent, influenced by delivery delays and drive cycle effects of certain model series, such as the new A-Class and the model upgrade of the C-Class. Daimler Trucks continues to assume a significant increase in unit sales based on the ongoing market recovery in NAFTA and the better European market. Regarding the current strong demand in North America, let me stress that we are very diligent about identifying speculative orders and are carefully monitoring and managing this phenomenon of the high market. As a consequence, incoming orders of the third quarter 2018 NAFTA has been adjusted for around 40%, not allowing potentially speculative orders in the backlog. Our prudent approach overall enables us to keep speculative orders from enlarging our backlog, and thus reducing the risk of cancellations. But based on the incoming orders, we do not expect a weaker market in the United States. The Mercedes-Benz Vans division expect significant sales growth of 2018, driven by the U.S. and China. We expect positive sales development also at Daimler Buses, especially in Europe and in Latin America, though with less dynamism than previously expected. Daimler Financial Services anticipates further growth in contract volume for 2018, with new business expected to be in the magnitude of the previous year. Based on the generally positive sales assumptions, we expect the Daimler group to post a slight increase in revenue for the year 2018. We are committed to the environment and air quality, as well as to individual mobility. Mercedes-Benz cars has started to offer an exchange premium for diesel vehicles of up to €10,000 in certain German regions. The company will also participate in the hardware retrofit program. The temporary restrictions occurred in the availability of Mercedes-Benz Cars vehicles in the third quarter were partially affect the current quarter. For a longer time period, Daimler has been working intensively on software updates on the change over to the new European test standard WLTP, as well as on the technical and legal clarification of open questions. We continued to see unchanged high demand for our cars. That’s why we expect that the situation will return to normal in the fourth quarter and that inventories can be reduced again by the end of 2018. A similar development also applies for the Mercedes-Benz Vans division. Due to the previously mentioned expenses in connection with the ongoing governmental proceedings and measures in various regions with regard to diesel vehicles, delivery delays and the provisions recognized related to the refrigerants R134a, we have reassessed our guidance. Daimler Group EBIT is now expected to be significantly below the prior year level. For Mercedes-Benz Cars and Daimler Buses, we also expect EBIT to be significantly below last year’s level. The guidance for the other divisions remains unchanged. Our guidance for the free cash flow of the industrial business also remains unchanged. This, of course, implies that our elevated vehicle inventories will return to normal. We continue with our transformation towards the future of mobility. The large investments we have made and continue to make in the strategic case fields are bearing fruit already today. With the GLE and the B-Class, we are progressing with the rollout of MBUX. Together with our partner, Bosch, we are working to both Level 4 and 5 automated driving and just recently premiered automated better parking in China. We expect to receive the approval of the relevant competition authorities in order to proceed with the merger of Daimler’s and BMW groups on demand mobility services this year. With this joint venture, we want to strengthen our position in that area. The future is electric. Within well received EQC, we have taken the first step towards it, but it definitely won’t be the last. Our electrification strategy is on track, with 10 battery electric models in our line-up by 2022. In addition, we continue with the most visible step, the transformation of the company into separate legal entities. After receiving the approval of the board of management and the supervisory board in July, we continue to be well on track with Project Future. You will receive further information in the run up to the Annual Shareholders Meeting in May 2019. The new company structures would enable us to become more efficient and flexible in a fast-changing environment. Moreover, with the appointment of Ola Källenius, as future Chairman of the board of management of Daimler AG, the succession of Dieter Zetsche has been clarified at an early stage. The company is now able to focus even more on the implementation of its strategy and to operational business. Personally, I have decided to place my task into younger hands after the end of my contract. The new management team will not only be younger, but will also ensure long-term continuity in corporate management and the stable development. Finally, I want to emphasize that we are well aware of the importance of the dividend to our shareholders. We will stick to our outlined dividend policy to distribute 40% of the net profit to Daimler shareholders. At the same time, we will take into consideration the sustainability in our payments. We are confident of achieving further long-term profitable growth and creating value for our shareholders by continuously investing into the future. Daimler continues to be an interesting and attractive investment case, with an attractive dividend policy. I now look forward to your questions. Thank you. Björn Scheib: Thank you very much, Bodo. Ladies and gentlemen, you may ask your questions now. Again, as always, the operator is going to identify the questioner by name, but please also introduce yourself with your name and the name of the organization that you’re going to represent. A few practical points, please avoid using mobile phones as these may distort via the speaking systems. And of course, ask your question in English. And please last but not least, try to limit your questions to the amount of one, because it will give everybody on this call to raise his question or her question. Now with this, I’m going to pass on to the operator who will again explain the procedure.

[Operator Instructions] The first question is from Tim Rokossa, Deutsche Bank. Your line is now open.

Yes. Thank you very much, Bodo and Björn. Good afternoon. I would like to come back to the dividend point then because there was some confusion around it this morning. Bodo, you always said two things about the dividend. You said you’re interested in a sustainable dividend payout and that you target to distribute around 40% of net profit, as you just said also. Now looking at the EPS development, 40% payout will probably result in a much lower dividend versus last year. How should we think about this? Are you happy to go above the 40% and also look more on an absolute level that is sustainable? Thank you.

Tim, thank you for your question. I do think I have addressed it already in my introductory remarks, but we are now sticking to our policy, which is a composition of the payout ratio, as you already mentioned, of 40%. And even when you look in our past, we have overachieved this – or we had – we were over and above this percentage already in the past by looking into different kind of aspects of the dividend. And one important dividend, as you already mentioned, is the sustainability in our payments, and that is also what we will consider, finally, of course, in February 2019.

Okay. So you are looking at the absolute level as well when you talk about sustainability?

That is also what I said. Sustainability means also looking at the absolute level.

Thank you.

Thank you.

The next question is from Jose Asumendi, JPMorgan. Your line is now open.

Hi. Jose, JPMorgan. Bodo, just one question, please. On Trucks, are you happy with the progression on the truck division year-to-date? I think third quarter did show some improvement there. What are the earnings drivers going forward for this division? And can you remind us, please, if the bulk of the cost savings of the cost savings plan you launched in the truck division now for the past years is the bulk of these cost savings will be booked in 2019. Thank you.

Jose, thank you for your question. So first of all, I do think unchanged that – are the targets of the truck division. Of course, we have to, on the one hand, to have strong product. And finally also, we need to turn truck where markets are in the right environment into growth, of course, for trucks, to get our fair share based on good products. And secondly, that needs to accelerate also our growth once markets are good for this direction. And on the other hand, you will see the famous 8% target ratio – target margin, which we have, and that is the target of the truck group, as we already discussed early in the year. Finally, to make this a sustainable number, so to say, so it means to overachieve the 8% in certain market conditions. Based on this, we have outlined our program, it’s called Screen. It’s €1.4 billion, as we have said. But the full effect on this program, we will see in 2019, and that we confirm as of today that, that will happen. Of course, we have not yet discussed the market conditions of 2019, which are, in general, turns positive, when you look at NAFTA, for example. On the one hand, when you look at the pretty stable situation in Europe. Of course, when you look at some emerging markets, these are also very positive. On the other hand, we have to cope with difficult situations in Turkey, as we have already mentioned, and also Argentina, for example.

Okay. Thank you very much.

Yes, thank you.

The next question is from Arndt Ellinghorst, ISI Evercore. Your line is now open.

Evercore. One question on the more medium-term outlook, Bodo, really. Given that the stock is trading, I think we shouldn’t spend too much time on the nitty-gritty quarterly stuff here. Can you ensure investors that there is growth in Mercedes cars that you can keep the level of profitability at 8% to 10% for the, say, coming two years to three years? Can the Group generate €4 billion to €5 billion of free cash flow ballpark? Could you, as much as you can, I don’t – I know you don’t want to give us a guidance for the next year, but can you give us a bit of a framework for the next two years to three years really because some of your long-term investors or the potential investors here? I think that’s incredibly important at this point.

Arndt, thank you for your very good question. And let me outline a little bit in this direction. I do think we have given you a frame for the strategic direction of Mercedes cars. When I go back to the last Capital Market day and the things we have shown at this day, and these are – I do think I can refer nicely to your question. I do think in the long run, we do have possibility to grow the Mercedes car group volume because of strong product on the one hand of our core product, but also the upcoming electric product. So there’s a – as you know, our 10 models, of course, we are investing a lot in this direction. So I’m fine with the product portfolio to accelerate growth in the long run over and above the market volume. You can see in passenger cars. On the one hand, we have outlined our strategy to stick to the 8% to 10% bandwidth of profitability. That includes, of course, the higher investments, on the one hand, as we have mentioned, but also the Fit for Leadership program, which addresses the optimization of the total business model, as it was also outlined. So we will accelerate in these directions also on the cost side, as I have mentioned, over the €4 billion program to make sure that we achieve the bandwidth. We have to consider some certain rules, of course, which I need to tell you. We had some discussions, as you know, about customs and other stuff, which might have some short-term impacts, which I can’t exclude, but I do think we have, again, finally, also the answers on this kind of questions, finally. So nothing has changed in the direction. We need to accelerate. We need to be disciplined in terms of spending, and so on and so forth. But other than this, there is no change of the strategic directions. The market for premium is still better than for volume, from my point of view. We have always in-depth discussion about this development. When you look at China, for example, and other markets, I do think we are in the right segment for accelerating growth. And I even do believe that, for electric products and for elements out of case, that the premium manufacturer is well positioned in this area of digitalization and electrification.

Okay, many thanks, Bodo.

Thank you.

The next question is from Stephen Reitman, Societe Generale. Your line is now open.

Yes, good afternoon. My question is also on Mercedes-Benz. You highlighted obviously the story, heavy inventory buildup in the third quarter should impact the working capital and the negative free cash flow. What can you say about these cars that you’re going to be then delivering to the market in the fourth quarter? Are they all customer-ordered cars? Or is it very high proportion, and so there is no risk of just dealer inventories rising? Thank you.

Stephen, thank you for your question. Of course, it is not 100% customer orders because we are delivering also to dealers and into general distributors, for example. But as we also have mentioned, that there is high demand on our product. Of course, the answer is most probably yes, so to say, because the demand is good. When you look at our markets, there are certainly some markets, which, of course, are more difficult. But the majority of the markets, they have a good demand. And therefore, the answer is yes. Just to tell you, the number we have – we will achieve – we will reduce our inventory from Q3 to Q4, it’s more than 50,000 units. That is, of course, also the – that finally, quick going into our cash flow impacts in the fourth quarter. But yes, mainly customer order’s behind it. I can’t see in our systems each and every customer. As I said before, these are also dealers and the GDs. But tentatively, answer is yes.

Thank you very much.

Thank you.

The next question is from Fraser Hill, Bank of America. Your line is now open.

Fraser Hill, Bank of America Merrill Lynch. First question, I guess following on from Stephen’s question. [Indiscernible] the Mercedes-Benz Cars performance.

Just to tell you, Fraser, I would like to answer your question, but it is not possible to hear what you are saying. So maybe you dial in again and then, I will answer your question. We can’t hear you.

Okay, I’ll try again.

We move on with the next question from Adam Hull, MainFirst. Your line is now open.

Hi, good afternoon, guys. Thanks for taking my question. If you go back on the cash flow side and really to dig a bit deeper in terms of what the potential here, you tend to sort of give a number and you say you’ll do that more than that during the year. You had a lot of one-offs this year, the China tariff as well. But actually, when I break down €4 billion, really I take out China, you’re really only doing a cash flow margin of about 2%, which is really not a great number. Can you give us some hope that this can really be a significantly higher number in the mid-term? You’ve given us unit – sorry, your margin target, but you haven’t really given us the sort of mid-term free cash flow number. Can we get to €6 billion in a couple of years or some 3% out of your revenues? Maybe just help us a little bit there. And particularly on the cash spend, are we now peaking in terms of the percentage of revenue? Thanks.

Adam, thank you for your question. I do think I’ve outlined the impact for the fourth quarter. Of course, as we are currently with the minus €60 million for the first nine months, of course, that means that we are backloaded so to say. In the first quarter, it’s about roughly €4 billion in free cash flow, and that is, of course, as we said, a normalization of the sales situation in Mercedes-Benz Cars and Vans. And I already said in the last question that we want to reduce our inventory by more than 50,000 vehicles in the car group in the first quarter, and that should of course impact our cash flow. On top, we have also informed the market that our dividend payments from China with regard to our joint venture is of a certain amount. So therefore, also a certain amount will impact our first quarter also in this regard. Longer-term, of course, as you know, we are currently massively investing into CapEx and R&D on a very high amount. As you know, we have accelerated that over the last couple of years, and therefore, I don’t want to give an outlook. What we are – in terms of your question with regard to €6 billion, let us discuss this in February in Capital Markets Day where we have a longer-term outlook in this regard. But again, we are investing a lot, and our target was also to stick over and above the dividend, which is our target. This year was our target. Last year, as you know, last year, we had – excluding the pension contribution of €3 billion, we achieved a, I didn’t know, out of my mind, roughly €5 billion free cash flow. So that number was not so far away from your €6 billion. But anyway, we keep investing into the future, and we need to because we run up a bigger portfolio, electrified vehicles, plug-in hybrids, and so on and so forth, and our investments into connectivity and so on, which is also future related, is in our budgets for last year, this year and next year. As you know, the amounts, they have increased over a couple of years.

And maybe just to follow-up, just to be 100% clear. Industrial free cash flow, of course, I’m assuming doesn’t include anything from your nearly €2 billion of EBIT coming from financial service. That is a kind of separate asset earnings that feeds through into your dividend potentially.

Okay. We separate – we have a guidance for our free cash flow industry that excludes, of course, the portfolio increase of Financial Services. So we have – if you want to get free cash flows, one is the free cash flow industrial, that was I was referring to. We have a free cash flow, so to say, for Financial Services, which is negative by the portfolio growth, the combination of both targets is a Daimler target. But as you know, for us, strategic discussions, you need to separate the two numbers. The one is a kind of a bank number, so to say. The other one is an industry number. So I do think there is common practice also in other automotive companies.

Absolutely, thanks very much.

Yes, thank you.

The next question is from Daniel Schwarz, Credit Suisse. Your line is now open.

Yes. Thank you for taking my question. I have – you just mentioned that – I have a question regarding Financial Services. The cash outflow in the third quarter was €2.6 billion. That was despite the decline in new business activities by 5%. Could you explain that? At what stage would that business be a cash-generative business?

Daniel, that’s – two answers to this. One is the free cash flow and the cash flow spending in Financial Services is more or less determined by the growth of the portfolio. So as long as Financial Services is able to increase their penetration rate, we are keeping the quality high on what we are buying. It means the cost of this should be low. We are growing our portfolio, and we need to finance this. It means we have to spend, at the end of the day, more equity into Financial Services to make this growth happening. But the free cash flow, so to say, is negative. If the industry is accelerating units here, the same happens with Financial Services. The outcome is for – year-to-date, we have increased our portfolio by €6 billion, I think, roughly. And that is mainly based on two aspects: growing business in industry; and on top, a higher penetration rate, mainly in personnel costs, for example, but on a healthy status. So therefore, it’s good news when it is growing because we can – we have a better loyalty to the customers, we have a retention program, and so on and so forth. So it’s good for our business to do so, but we have to make sure that the underlying equity is on the certain level. The equity, of course, is therefore also good news. In – when you look at our net liquidity bridge, we get more dividend spendings from Financial Services than we put equity in. Normally, that should be the general direction. That means Financial Services does generate a net income, which is higher than the equity you need to grow the business, and that is good because that goes into the industry liquidity and strengthened the position of our rating and our financial position of the industry. So these are the two elements. So to say, so this is – they are general remarks, sorry for the others, who’s on the short answer because it is now a little bit of details in the methods.

Okay, thank you.

Yes.

The next question is from Horst Schneider, HSBC. Your line is now open.

Good afternoon and thanks for taking also my question. I have a more specific question on Mercedes-Benz Cars. When I look at the other cost changes in the third quarter and I consider that also the costs for the diesel measures are included there, it seems to me that other cost changes on an x diesel base is much better in Q3 than thought. So therefore, yes, I want to ask if there’s something changing in the guidance. I think so far, the guidance was always other cost changes minus €1 billion for Mercedes for this year. And does it also mean that we have got long term here, some downside potential in the costs? So that means when the times are getting a little bit tough, that you try to increase the cost saving effort. Is it a trend that we should also expect then for the next one or two years? And then more specifically, on the fourth quarter, I want to understand in which direction we are moving now? I understand that you destock, that the sales pick up, but I also see that you produced a lot in the third quarter. So is it fair to assume that still volume structure net pricing will be negative in the fourth quarter and other cost changes and FX as well? Thank you.

Okay. Thank you for your question. Of course, it was a longer one, so to say…

Yes, sorry. It was three in one, yes.

But let me try to give you a direction. First of all, you are right that with your assumption, that what we did in terms of these measures with regard to diesel and then the procedures and so on and so forth is right, is within the passenger car business and within the van business. And that has affected, of course, the cost changes, and therefore, the answer is, yes, you’re right. On the other hand, of course, we had also positive effects in certain area. One of the bigger ones, as you know, is the buildup of inventory. As you know, with the build up of inventory, costs are capitalized, so to say, and that has a positive effect in third quarter, and that will lead to a negative effect in the fourth quarter. In total, for this year, directionally, we have cost changes of roughly €1 billion negative, including everything what we had in the third quarter. That’s the direction. And again, there are some other ups and downs. On the cost side, as you know, we have referred always in the last couple of years. Also this year, our investments we do in CapEx and in plans. On the one hand, in the research and development area, of course, had also a negative impact in the third quarter, but also – that was also true in the second and the first quarter, and that will be true also in the fourth quarter. So that’s with regard to the cost development. For the fourth quarter, of course, we have given you now a guidance, of course. We see typically down in the fourth quarter. Of course, I can tell you we had a certain sales effect as we have also referred that bigger to a normalized situation, so that you will see also in our monthly development that we are – this would see the effects. On the other hand, we – over the year, we – I do think we will also have some mixed effects in the fourth quarter from a product point of view. Other than this, it will be the main effect. And of course, we will have, as I said before, the cost effect from negatively spoken from the destocking of the more than 50,000 cars. But in general terms, we should see a good quarter in fourth quarter to make up for the full year.

So volume structure net pricing, positive most likely in Q4, right?

Pricing, too.

Yes, okay.

Okay.

Good, thank you.

The next question is from Fraser Hill, Bank of America. Your line is now open.

Hi. It’s Fraser Hill from Bank of America. Can you hear me better now?

Yes, Fraser. Thank you that you’ve dialed in again.

Great. So it seems pretty clear in Mercedes you’ve got about 50,000 plus cars that you will sell out of inventory in Q4. But can I ask that another way? I mean what was the lack of availability of product in Q3? I mean how many vehicles do you think you could have sold in Mercedes-Benz had you had full availability? And what will be the boost to, let’s say, the Q4 units as you see it today given the normalization of that inventory? And then I’ve got another question, which I’ll ask about cash flow, but I’ll leave it there.

Fraser, sorry to say so, but it’s a theoretical question. So it’s very precisely to really find it out in the combination of everything in this nearly impossible. So that’s – I would like to stay with the 50,000 units I told you. That is what we have built, a more than 50,000 we build up, and then this is what you’ll see again in the fourth quarter. Of course, I even can tell you there might be even some customers, which we have lost, so to say, that might have not waited for the car due to the delays. But in general terms, as I said also before, we have a good demand towards our product. We see the markets are demanding our cars, but we had to cope, of course, with the delays in the third quarter, and now we have to go back to normal as much as we can.

Okay, thanks. And then the second question was on the cash flow for the rest of the year. I guess you should have nearly a €2 billion inflow on the inventories from selling down these vehicles. Would you [indiscernible] (40:14) to have a payable effects of negative €2 billion as well in the fourth quarter? So can you just run us through some of the numbers that will get you towards that €4 billion free cash flow for the fourth quarter given that your payables and inventories might be somewhat matched in the quarter?

Of course, in general terms, with regard to passenger cars, I already addressed the inventory reduction, which should have a direct impact on cash flow as long as we do get this into payments, so to say. That is also something we need to consider. That is one element. In terms of the cars, of course, the second one is that we have a dividend inflow from our Chinese joint venture as we have addressed it already in the beginning of the year. There is, of course, a huge dividend payments for the total year. We are missing one large and final invoice, so to say, a payment in the first quarter. On trucks, we should also mention trucks. Trucks has always a strong quarter in fourth quarter, so that should also generate a decrease in inventory. Björn Scheib: High demand.

And a high demand, as you know, also, in general terms, so that we should not – we should keep in mind. On the other hand, we will have the remaining piece, of course, of our investments and CapEx spending in the fourth quarter, which we do as disciplined as possible in the fourth quarter.

Okay, thanks, Bodo.

Yes, thank you.

The next question is from Patrick Hummel, UBS. Your line is now open.

Thank you, good afternoon, Bodo and Björn. One question regarding Tesla. They have outsold you in the U.S. market in September. Looking at the profitability, their Model 3 has now become a profitable car, while your guidance for the EQC was that you will not make any money with that vehicle. And also looking at the steps for the EQC in terms of weight, power to weight ratio performance, acceleration, range, et cetera. The car doesn’t really stand out. So my question is, do you think you’re doing enough and quickly enough on the EV side to defend your market share? And actually, should you be more worried about Tesla coming to Europe with the Model 3 next year and the impact on your C-Class sales?

Patrick, of course, the general remark, of course, is always look – to look at competitors, which we are doing. We are analyzing also the whole data. We can get through their disclosure. And first of all, of course, we are happy for Tesla, first time, first quarter, positive, but also for the industry because the difference in direction that the electric – the portfolio – electric portfolio, that makes a lot of sense. And our own strategy makes a lot of sense. So that I do think the takeaway other than this, of course, we make all this deep dive into this product. On the other hand, we have never said that we don’t do any money with electric cars. The positive sales contribution with electric cars is something of course we have in our scope to do. So therefore, I’m happy to see this development, and that should also give us a possibility also to work on pricing and cost for our electrified strategy. When they come to Europe, of course, it’s nothing new. They have already addressed this, and that should give us the opportunity even to more – to compete and do our job and to accelerate as we can. But as you know, I would like to have the EQC already today. But you know that there are some certain things to be done in development and introduction to make it happening. And therefore, we have our timings. But also when I look back over the last month to two years, we were also able to accelerate in some product launches for the next five years to get the product earlier than we have thought a couple of years ago. So that is the competition we are in, and not more or less.

Can I ask one follow-up on your EV strategy in terms of make-or-buy decisions? Because I think your initial plan was to be asset light, as asset light as possible in EVs because you saw that electric powertrains are going to be more of a commodity. Would you still subscribe to that view? Has maybe the Model 3 or what you have seen generally in the competitive landscape changed your strategy in that regard that you need to have more control in-house about powertrain and other core parts of an electric car?

Patrick, to keep it short and simple, we have not changed our strategy in this regard. So we go in this direction. We have outlined already one year ago or two years ago. So we stick to our strategy. We have said, and of course, we have a strong product pipeline, as you know. In the last five years, we are accelerating, delivering new product in each year to the market.

Okay, thank you.

Thank you.

The next question is from Francois Maury, ODDO Securities. Your line is now open.

Good afternoon. I have a question related to the Van division. I should say that I’m a bit surprised by the magnitude of the collapse of the profitability of this division in 2018. In 2006, when you launched the produce Sprinter, the profitability of the Van division remained quite at risk. So I have two questions. Could you first quantify the main factors behind the collapse in 2018 between the Sprinter, the diesel, the recall? And second, could you help us understanding what could be the magnitude of the rebrand we should expect in 2019 for this division?

So in general terms, I would not call it a collapse. So I tried to explain it. Of course, the profitability is negative, that is true. We have, first of all, the effect on the deliveries, talks and delays in the Van business. That is one event, which impacted our financial to look into the third quarter. Secondly, we have the product launch of the Sprinter in the plant of Dnsseldorf, which is our main plant. We have to say – we have the launch in Charleston in the United States. Of course, that is related also with cost. We have also, on the R&D side, in this regard, higher expenses over the full year, but also in the third quarter. And last but not least, I also referred in the beginning of my introduction with the expenses related to measures and proceedings of – with regard to diesel and authorities, which are also included in the Van business. And that makes up the reason why we are negative, of course, as the volatility will be reduced with regard to our delivery delays and stops. In the fourth quarter, we will expect a good fourth quarter development. For next year, I do think we are – we’ll tell you in February about the guidance in 2019. As you know, the product pipeline is a strong one as we have also new products now up and running. We have added the extras to the Van business. On top, we have a strong mid-sized portfolio. And with this – having said this, I’m – we were based on this. I do think a good sales development other than this in February as the final guidance.

Thank you.

Thank you.

The next question is from Harald Hendrikse, Morgan Stanley. Your line is now open.

Hey, guys. Thank you so much for taking my question. Just a sort of simple question. But I mean the guidance for the fourth quarter and selling the extra 50,000, maybe even 75,000 units of inventory feels reasonably ambitious, particularly given the fact that without the sort of detailed data, x WLTP, it’s not entirely clear that the trends in Europe are necessarily as strong as they were in the first sort of six or seven months. And clearly, the China situation is also much less clear. Can you just give us, I mean, some plus and minuses in terms of the assumptions you’re making for total volume in Q4, both in terms of the major markets where you think the risks might be? Some of your competitors have already highlighted some of those risks. And then also with regard to price, I mean all of you are going to have a lot of inventory to sell in Q4. It feels like all of you think you’re going to sell all of that inventory in Q4. Isn’t that going to put more pressure on pricing?

All right. Thank you for your questions. I do not want to go into total details of fourth quarter, but I have mentioned the markets in Europe are in good shape. We see a strong good demand for our products, except maybe UK That is a market where – of course, we have seen also the September development. When you look to Asia, of course, we are also – our monthly development well underway to have a certain growth. You have seen the September numbers and also the August numbers with regard to China. You see – you know the situation in the United States. Of course, I can go now to other markets, which are not in very good shape, like Turkey, as I also mentioned, with trucks. But all in all, the demand is good, and we should make our targets in fourth quarter.

And regarding pricing, the same? I mean, it feels like you’ve all got the same strategy, which feels a little bit dangerous.

Compared to the third quarter, of course, we should somewhat do better. We had mentioned that the pricing and the intensive spendings are very much related to this – to our issues we had in the sales delays, the delays and the stoppings and vans and so on and so forth. And therefore, pricing should be better than in third quarter.

Okay, thank you.

Thank you.

The next question is from Christian Ludwig, Bankhaus Lampe. Your line is now open.

Yes, good afternoon. Two quick questions from my side. First of all, on the one-offs, one on the deal related costs and then the costs for the R134. Do you think we’ve seen the end of this? Or do you expect that will have additional cost burden results in Q4 or going into next year? And second question will be on WLTP. Could you give us a quick update where you stand with respect to your home location? How much have you certified now? And do you think you’ll be at 100% by end of the year? Thank you.

Christian, thank you for questions. And as it is always, of course, the results we are putting together and – which we are auditing based on the actual situation and assessment, which we are doing, and that is the – what we have outlined in the third quarter. Other than this, of course, we get a lot more information with regard to our risk report. When you read it, everything is in there. And that is a statement I can do more than this – I don’t know, more information on this, what I have said. Of course, that is everything. I can’t tell you more about your question, sorry. Thank you.

The next question is from Dorothee Cresswell, Barclays. Your line is now open.

Hi. It’s Dorothee Cresswell from Barclays. Thanks for taking my question. Could you elaborate a little bit on what’s going on in the Financial Services division? It seems that the return on equity has contracted, and I just wanted to know how much of that is due to the higher interest rates and how much is due to greater risk or greater cost of risk in Turkey? Are you struggling to pass on high interest rates to your customers? Or is that just the question of time? Thank you.

Dorothee, thank you for your questions – for your two questions. Financial Services, in general terms, had an impact from higher volume, as I said before, but also interest rates, spreads and the risk costs. The risk costs are related to a very big amount by the development in Turkey, where we needed to provision for, so to say, for bigger customers in the country where we have difficulties. On the other hand, when you look at the overall development, the credit loss development, which we are disclosing in our appendix of the paper to the third quarter is, all in all, in average term, pretty okay. We have some developments in some certain countries, which are ticking a little bit upwards. But when you look at the total average, we are well positioned also for next year that you don’t see with the stable GDP environment, so to say. Also, good numbers for next year. But we also said that, once in a while, we get to a normal life situation. The spreads, of course, are – interest rates are a topic, for example, in the United States or China where there’s higher interest rates. And there’s a question, when can you pass it over to customers? And that needs also – there is always a time lag, and so I don’t think that we can cope with the issue. Finally, both of the elements are 50-50 in their impact, same amount roughly in the third quarter. So if you would add back the topics, you will come up with, again, with a 17% return, so – but anyway, of course, in this quarter, we had the two impacts in Financial Services. Keep in mind that all of our investment into mobility services are included in Financial Services, so that means, of course, we have, of course, an investment phase in mobility services. And therefore, the return on equity as such is, of course, somewhat lower than we – if we would not invest into mobility services.

That’s helpful. Thank you.

The next question is from Demian Flowers, Commerzbank. Your line is now open.

Hi, thanks very much. This is Demian from Commerzbank. So hopefully, a simple question. Just on the one-off that came last week, this diesel proceedings and other expenses. You made 3-digit million amount, as you’ve said. But given that your €4 billion free cash flow guidance for 2018 did not change, would it be correct to assume that the cash impact of those expenses is coming mainly in 2019? Thanks.

Yes. A very short answer.

Thanks. Björn Scheib: So ladies and gentlemen, thank you very much for your questions and being with us today. Also, thank you very much to Bodo for answering all of your questions. Now as always, Investor Relations remains at your disposal to answer any open or additional questions that you may have. In this context, I also would love to annotate one topic. As discussed earlier on, we are investing heavily into our future, and it’s not only into the established business, but also in the future profit pools and the revenue opportunities. From that point of view, we would highly encourage you to attend the upcoming CS in Las Vegas. Here, Daimler will offer a broad-based program in order to demonstrate to you what we’re doing in order to tap the future opportunities. And this will not only be done with a regular program in context of the entire fair, but we will also have three of our board members present in Las Vegas to answer and to present to you. And this is not only on the passenger car business, this will be namely also about the Daimler Trucks, too. So we look forward to see you at the beginning of the year. And with this, thank you very much to everybody listening on the Internet and here attending on the phone. Have a great afternoon, a great morning and a great evening, and we look forward to see you soon. Bye-bye.

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