Welcome to the global conference call of Mercedes-Benz. At our customers' request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be directly followed by a Q&A session. [Operator Instructions]. I would like to remind you that this telephone conference 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 Steffen Hoffmann, Head of Investor Relations and Treasury. Thank you very much.

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

Thank you, Steffen, and hello, everybody. Welcome to that call. Well, if we look at, I mean, the first quarter, what is our key takeaway from that quarter, it is that we could demonstrate again, resilience in a challenging market environment. You have seen already in the pre-release, strong pricing, significantly outweighted headwinds from material costs and led to another solid quarter. But today, with the update of the guidance and outlook, I think you can see confidence built into that guidance, and that is, I think, what we wanted to demonstrate here that we keep the pace moving forward. But let's have a look into that a bit more in detail. If we go to the Page 3 on the group numbers, all of them are up year-on-year, slightly higher car sales, significantly higher van sales, generate 8% revenues up. Group EBIT, 5% up at €5.5 billion. The cash generation at €2.2 billion free cash flow, leading to a 0 of €29 billion. We look a bit closer on the car side in terms of the highlights and the key messages. On the performance side, we can see that the top end vehicles increased significantly by 18%. I think that underpins our progress towards the Top-End luxury strategy and execution. But also on the BEV side, we could almost double the sales, which means we continue to transform Mercedes at full speed towards an all-electric future. On the profitability side, we see continuing strong net pricing and now 6 consecutive quarters, reporting a double-digit margin which reflects and demonstrates the resilience and a structurally uplifted business performance. On the products, I mean, last week in Shanghai, we unveiled a new Top-End family member, the new Mercedes-Maybach EQS, fantastic vehicle, great seating comfort, just mean blows your way. But also this week, an all new E-Class was unveiled which will come to the market later this year. I think it was a pretty good feedback, which we received this week. And also the EQS SUV will start sales this quarter. On the strategy side, we had two capital markets events, the one in Sunnyvale on the MB.OS strategy, where we explained our chip to cloud architecture and also announced some new partnerships such as the one with Google and then the ESG conference, which we did more recently, outlining where we are heading and which progress we are doing on the ESG front with some examples such as a groundbreaking for the battery recycling plant or the power purchase agreement with Iberdrola. On the cars numbers, overall, we see a slight increase on the sales side. With a reduction in the core, some of you might have the question up, what's that? This is a technical mean model change over to our top-selling product. I mean the GLC, I can confirm, I can witness that this is a hot car and once available, you will see the core segment coming back up again and the GLC being a strong pillar in this segment. On the Top-End, we could grow by 18% in all categories of the Top-End, in particular, a strong increase of AMG sales by 43% with a high level of demand for G-Class and Maybach. The xEV sales increased 24%. On the BEV, we can see that it is as mean doubled or around double in the quarter. All in all, an xEV share now is around 18%. And on the BEV sales I already commented, I mean, this almost doubled with now EQS SUV being in the market, but also the EQE sedan next to the 3 segments. On the car financials, sales up, revenue increased by 8%. ASP, 6% up quarter -- year-over-year, which means mean quarter 1 compared to quarter 1 but also up compared to fourth quarter, which I think is good news. EBIT adjusted slightly above €4 billion and the CS bid significantly up at €3 billion. How did we get there on the Page 7 in terms of the EBIT walk? Departing from the €4.2 billion adjusted from last year, the bucket volume structure and net pricing increased significantly by €1.3 billion. The majority of that comes from strongly improved net pricing driven by gross list price increases, including escalation updates and tight discount management. The slight increased unit sales and the good product mix contributed as well the used business slightly negative year-on-year. slightly negative. On the industrial performance side, minus 550. What was behind that one? Raw material costs related to various smaller effects. One of that being on the lithium side, obviously, with a higher EV volume. You also have a burden there and an elevated mean spot level. Maybe at this point, just a note, if you see changes in the spot rates, I mean, in the market, it has a lead time before it hits the P&L, let's bear that in mind. Other than that, in industrial performance, we see also onetime commodity charges for some semi-related costs and inflation-related costs are also included in here. So as a key takeaway, I would say, net-net, and what we called, I think the net-net pricing, we significantly outweighed the headwinds from material cost and inflationary increases by pricing power. That makes the gross profit to grow by almost €600 million, with a stable gross profit ratio of 26%, and some of you know what I mean by emphasizing that. Selling expenses are slightly higher marketing expenses, volume and use selling expenses and agent remuneration from our new direct sales markets with a positive counterpart in the price bucket. The G&A is slightly higher due to inflation. Rest assured, the journey to focus on fixed cost mean reduction, the minus 20% until the mid of the decade definitely continues. In line with our full year guidance, we saw higher R&D costs for our future platforms and technologies, in particular, MB.OS. Well, MMA go-to-market will come closer by the end of 2024, and [indiscernible] will follow very quickly. So we need to get that ready. We need to mature it and that's why we put some incremental effort into it. It doesn't change, however, our longer-term perspective in terms of the investment profile, which is also the minus 20% by the mid of the decade. The others are mainly coming from effects in connection with the discounting of noncurrent provision, which was more a quarter 1 2022 entry. Therefore, all in all, we see the EBIT adjusted at €4.1 billion with a return on sales at 14.8%. On the cash flow side, Page 8, €3 billion cash conversion, 0.7%. What was behind that? Negative working capital charge of €0.8 billion, mainly from new vehicle stock. The stock increased due to an elevated overall amount of vehicles, where we had production running ahead of sales to refill the pipeline for the customers, but also a switch in the U.K. to the direct sales model, which leads to highly -- slightly higher inventories in the books. On the other side, we had better receivables and improved payables offsetting these effects by a large portion. Looking at the net financial investments of €350 million, we have a Formula One Grand Prix restructuring and cash proceeds in here as well as some further retail outlet sales. Net investments in PPE and intangible assets versus depreciation, amortization are negative. All in all, in line, however, with our guidance. The other includes the adjustment of the BBC equity result, where I mean obviously, dividend is to come later in the year. And the adjustments are the well-known ones, I think, as you can read on the chart. Page 9 on the Vans performance. 99,000 vans being sold in the first quarter with strong earnings despite the ongoing challenges also on the logistics side, on the outbound. Profitability strongly improved net pricing, higher unit sales definitely outweighed higher material cost and inflation here. On the product side, in February, we had the world premiere of our New East printer, that was also very well perceived and the market launch will be in the second half of this year with an electric range according to WHP of up to 400 kilometers. On the strategy side, please pencil it down. We are preparing for a virtual van strategy and business update on the 16th of May. Page 10. We look at the sales, sales up by 12%, mainly driven by Europe, strong contribution coming from the commercial side of things. EV sales are up 22%. And in 2023, we'll have the Easton and the EQT also joining the portfolio, which means the entire product offering has an EV for sale. Page 11, the financials, all figures up here. Great quarter by the vans, very well done. The demand side for premium vans is very high, very solid in terms of volume and pricing. Revenues are up 25%. The EBIT adjusted €719 million. That shows that the vans could further improve pricing, leading to such a high level of margin, more than 15% despite the cost inflation and also translate that into cash flow of €450 million. How did we get there to 15.6% return on sales adjusted, Page 12. Well, I mean, the bucket volume structure pricing here increased by €600 million. That is also coming from a very strong net pricing. Discounts were significantly reduced versus last year, and the list prices were up. On the sales side, I want to emphasize sprinter, the Vito, Stan and the T-class,which increased, on the industrial performance, same comment as on the car side, higher raw material prices, onetime commodity charges, inflation and outbound supply chain-related costs. And that means that the net-net -- that the net price increases could definitely outweigh inflationary increases. So the net-net is definitely very positive, as you can see here on the chart. Direct selling increase. Same thing as on the cars with the direct sales and the adjustments, I think, are well known, as you can read on the chart. Page 13, on the cash side, on the €410 million, reported, €450 million adjusted, a slight working capital charge of €100 million with inventory higher than that, driven by production ahead of sales to refill the pipeline, and the pipeline being very well underpinned by the order book. This effect is also partially offset by payables and receivables also channel mix with shorter payment terms was helpful on the van side. Net financial investors are also related to the own retail sales divestment. On the investment side, as guided, we have higher investments in PPE and intangible than the amortization side. That is due to the ramp-up of the EV transformation, namely the Van EA. On the other side, provision consumption and the FAC equity results. Looking at mobility, Page 14. Overall, solid profitability despite a challenging market environment. stable portfolio development and overall, the penetration close to our ambition level of 50%. The net credit losses remain on a low level, stable cost of credit risk will reflect a high portfolio quality. The interest rate are generally -- or the high-level interest rates are generally passed on to customers, but the consequently higher customer rates intensify the competition in the financing sector and put pressure on the interest margins. Mobility actively supports the electric vehicle sales of cars and vans with tailor-made finance and Mobility products and services. That's how we recentered the strategy for Mobility with good progress in the first quarter. Next to that, Mobility is now also in charge to elevate the customer experience by charging, building up a network around the globe in the charging infrastructure. In terms of the financials, Page 15 for Vans. The new business in Q1 and the portfolio are roughly stable. The EBIT adjusted decreased, however, compared to an exceptionally high level last year. What is behind that? Page 16, in the on equity have been lower, but we're still on a good level despite headwinds from the pressure on interest margin from rising interest rates and slightly increased investments in the transformation towards a digital and seamless integrated customer experience. The portfolio at about same level. And slightly positive effect on EBIT resulting from the low quarterly cost of credit risk, reflecting the update in the economic outlook. Now on the group side, the group EBIT, Cars, Vans and Mobility, I explained already, list the con, which is positive mainly due to the ad equity contribution from our friends from Daimler Truck which is a year quarter-over-quarter change of €117 million. So which means €60 million, roughly €60 million positive this quarter. The EBIT adjusted at €5.4 billion adjustments. I don't think I need to read that out. Page 18 on the cash flow bridge, they see bits of cars and vans. I explained before already, leaves the income taxes at roughly minus €1 billion. As we flag, they are going up, higher earnings obviously and lower offsettable tax loss carryforwards are the reason for that. Free cash flow, industrial side, €2.2 billion with net minor adjustments to the reported number. On the NIL side, Page 19, well, a decent progress in the first quarter to close to €29 billion, driven by the free cash flow, which we did just before. Maybe just a comment on the others as this includes the first tranche of the share buyback. By the end of March, we bought back shares for approximately €30 million. As we speak, this number is roughly €100 million. So all in all, I think, NIL on a strong and very comfortable level. Now let's turn to the outlook. First, on the division side, Page 21. Please read the assumption chart carefully definitely. I think we see significant regional differences. And the overall momentum of the world economy still likely to remain rather subdued, high, albeit declining inflation rates and the restrictive monetary policies at central banks in U.S. and Europe weigh on growth. In addition, the recent turbulences in the U.S. and the EU banking sector brought additional new uncertainties and geopolitical imponderabilities remain by Crest energy prices, it should be less volatile and global supply bottlenecks are expected to ease further. At this juncture, a word on Russia. As of this week, we successfully transferred our Russian business activities to the investor Avtodom. In the first quarter, '23, there were no significant effects on the profitability and the cash flows. For Mobility, we expect a loss in the low €3-digit million range on the sale becoming effective, which will be adjusted. No significant effects are expected on the liquidity and the capital resources. Let's have a look on the demand side of the markets for Europe. On the incoming order side, we see that in the first quarter still sluggish. The order bank in Europe, however, may support the sales in the coming months. In the U.S., we continue to see U.S. demand on a good -- on a healthy level. And in China, we see the momentum coming back post-Chinese New Year with strong demand and order intake at the end of the first quarter which is, I think, good news. On the division side for cars. The sales guidance, I mean, is unchanged at the same level includes for the full year overall, TEF sales expected to be slightly above the prior year with definitely tailwinds from the first quarter, the 18% growth. And on the BEV sales, we also expect to approximately double the BEV sales, which has been demonstrated in the first quarter. Return on sales guidance. Well, I mean, with the quarter 1 at 14.8%, we had a solid start into the year compared to our guidance range of 12% to 14%. This gives us a good head start and the strong foundation for the following quarters. We do see in quarter 1 what we told you already that our net-net pricing is positive in Q1 and yes, it is our target to retain that for the full year. Therefore, it is a good likelihood that the coming quarters, so it will also be on a strong level. Maybe we are a bit prudent, and it is still early in the year. That's why we confirm the guidance in the range of 12% to 14%. However, let me be very clear, we see us being at the upper end of that guidance corridor of 12% to 14% by now. That even leaves, I would say, some further upside potential for the remainder of the year. CCR unchanged at 0.8 to 1. R&D now significantly above mainly to MB.OS and investments in AMG, EA and AMEA, as I commented before. On the van side, sales guidance with the tailwinds from the first quarter and the full order books. Throughout the year, we lifted the sales guidance to slightly above. On the return on sales side for vans, here, we lift the guidance by 200 basis points to 11% to 13% with a strong tailwind from the first quarter. Going forward, we see more volume and the net-net pricing being stronger than anticipated before. However, not everything from the first quarter can be taken into the run rate for the full year compared to the first quarter, we see, in particular higher R&D. Within that, the corridor of 11% to 13%, however, similar comment, we also see that at the upper end of that corridor. CCR increased to 0.6 to 0.8. On Mobility, the return on equity unchanged, 12 % to 14% with 15.6% in the first quarter. Also here, we see us at the upper end of this now. The building blocks why we see full year return on equity at lower than the Q1. However, I mean, remain unchanged compared to what we said at the beginning of the year, which means the deterioration of the interest rate margin and an increase in OpEx for the charging network I mentioned before. On the group guidance, Page 22. Obviously, that follows the same premises as a segment guidance. The group revenue, EBIT, free cash flow are confirmed and unchanged on group EBIT, resulting out of the adjusted van guidance in the upper end car and NBM guidance, we also see the group EBIT guidance at the upper end of the guidance range. And on the free cash flow side, on the industrial free cash flow, we also see at the upper end of the guidance range. CO2 also remains unchanged, significantly below prior year, prior year level. To wrap it up, Page 23, usual vehicle. Well, we told you in February that we are executing in our strategy with a focus on profitable growth with better pricing and a healthy operating optimum that we remain focused on resilience with cost discipline and that we continue to grow our Top-End vehicles and our BEV offerings. With these Q1 results, we again delivered and provided good headroom with regard to the full year guidance on which, hopefully, you could hear a certain level of confidence on this call so far. And with this, happy to take your questions. A - Steffen Hoffmann: Yes. Thank you very much, Harald. [Operator Instructions]. As always, a few practical points, please ask your question in English. And as a matter of fairness, please limit the amount of questions to a maximum of two. So now before we start, the operator will explain the procedure.

[Operator Instructions].

And we start the Q&A now. And the first question goes to Stephen Reitman from Societe General.

Yes. I have two questions. First of all, clearly, very good result from pricing here. Could you comment on what the reaction has been from customers really because you've obviously raised prices quite significantly with the -- when you did the refresh on the A class and obviously, the GLC, which you referenced as well. Can we assume that we will see similar pricing moves on the E-Class as well that you've just now shown? And I would like to ask about the AC model. That's now been introduced in the U.K. from Vein this year. Are there any preliminary thoughts on how that's been going through and what's happening to transaction prices?

Thanks a lot, Stephen. On the first question on pricing, pricing positioning, I think during the full year, we emphasized that as part of the model not the model change in the mid-life update on the entry segment. We also elevate in the pricing level over there. These vehicles are being opened. I think, in the days and the weeks to come to market, we do expect positive feedback, I mean, on that uplift. On the GLC, I can definitely say the level of demand is high. Hot car, we have some constraints in terms of, I mean, the ramp-up of which we are trying to overcome. That's why you could see the numbers. In the first quarter still at the low end, there is significant uplift and upbeat in the substance of the vehicle, which justifies an elevated pricing levels. So far, I have no indication for pushback on that side, therefore. And we definitely expect, I mean, the same thing on the E-Class. When some of you could see the interior of the E-Class in Sunnyvale, you could see the features which are being offered not just from a fantastic hardware of the vehicle, but also on the software side of things. And now you know the jewelry also on the outside. And I think, therefore it is also fair to position it correctly from a pricing point of view. So we expect a very positive resonance the E-Class when it will hit the market later in the year. The direct sales in the U.K., number one, I think, went very smoothly. Number two, can confirm that basically each and every move of the markets we have been doing so far into the direct sales model had a supportive element in terms of the net pricing, in terms of the consolidated discount management? I will not outline any particular or individual impacts by markets. Obviously, they are different and we should not confuse ourselves. But I can witness that is a positive impact. We had a burden on the inventory. As I commented before, but definitely, we see a potential moving forward to consolidate also on the inventory side between the dealer stock, which did exist before in our own and seek efficiencies, therefore, as well on the working capital side.

Thanks, Stephen. And we continue with Jose Asumendi from JPMorgan.

Questions, please. Can you comment a little bit more around the -- maybe the proportion of high-end vehicles? Where do you see this as a proportion of group sales short term or medium term? Should we think about maybe medium -- should we think about mid-20s as proportion in -- maybe by the end of the year or 2024? Second question, Vans Capital Markets Day. Got to be very, very interesting. Maybe it's a question for you also for -- but should we think about this division -- should it sit as it stands right now within the group? Or is there a chance to strategically think that the van division could be maybe separated from the Mercedes-Benz luxury product. And as such, strategically, we could potentially discuss a different path for this group for this division going forward, maybe a spin-off or a different construct versus where it stands right now?

Thanks, Jose, for the questions. Then on the first one. If you remember, I mean, the presentation at the economics of desire a year ago in May, we said that by the end of 2021, the Top-End was around 16% in terms of the sales of the portfolio and that we have the ambition to grow that. 2022, I think, overall, we could command high single-digit growth number in the Top-End. Good news, I think, I mean, quarter 1, 18% for the full year. We also want to grow in the Top-End, definitely with a good head start from -- coming from the first quarter. What is behind, obviously, great products on the AMG side, the SL, GT to come at a later point. And it fair to talk about the G-Class and the Maybach, which are driving that high level of demand for these products. So overall, we want to have a higher level growth rate at that end. But I mean, I don't think we should speculate about 25% or what the numbers were. I mean, you just quoted before that, that doesn't make sense, I think, to push it into hard definitely, this is very important to protect the pricing in this field. Also, probably needless to say that, I mean, we talk about share of 16% or so in terms of the Top-End out of the whole portfolio or the share in terms of revenues is above that. And if we think about the share of the Top-End in the margin of the company as a whole, it is a totally different number, and that's exactly why we are putting the emphasis on the growth in this segment. On your question on the van side, I don't want to steal the thunder from the May event. The one answer I can give you at this stage is then sits very well in the portfolio of Mercedes. It's a good place to be for the vans -- in Mercedes portfolio. And it is also good to have the vans inside the portfolio for the car side of things. Why? We will tell you on May 16.

Thanks, Jose. We stay in London and go to George Galliers from Goldman.

It's George from GS. I had two questions. The first one was just starting with the ASP. Obviously, very strong again in Q1 and up 6%. When we think about the composition, there are clearly several factors, including price/mix and FX. Can you directionally tell us what your expectations are for each of these components in coming quarters, particularly in light of your comments on sluggish demand in Europe and also giving consideration for the new models that you are introducing, including the E-Class? Then secondly, just on the gross margin, I think 26.2% is a record, but maybe you can confirm that. Obviously, you've achieved this in a period where your bill of material and manufacturing costs presumably fairly elevated due to inflation. How do you think about the inflationary pressure going forward? Are we within a couple of quarters of seeing a stabilizing or even a decrease in those inflationary pressures or not at this point of time?

Yes. Thanks, George. Yes, I think we're happy in that we could further expand the ASP in the first quarter, year-over-year, i.e., compared to the quarter 1 in '22, but also compared to fourth quarter 2022. In terms of where do we see that going? I would not wish to quantify that. Definitely in terms of the pricing overall and the pricing being composed of the base pricing, the inflation adjustment and the discount management, we want to continue the pricing policy and the strategy, which was quite successful, I think, so far. Probably the growth rates in terms of price enhancements, you cannot expect that to continue as we had been commanding that now over the last 6 quarters. I think that would be a bit too ambitious. On the FX side, at least for 2023 on the main currencies, we're pretty well hedged, I would say, leaves -- and on the mix side, well, head start, I mean, from the first quarter, I would say, if I look at the full year for 2023, let's not speculate now maybe about each and every quarter to come, but I don't see a structural reason why the mix should dilute the ASP moving forward. But maybe in terms of the growth rates of ASP overall, again, compared to the last 6 quarters, we cannot expect the same level of growth moving forward, but definitely, we want to hold it. In terms of the gross profit ratio and inflation inside to your second question, where we see overall on the macro side some decrease in inflation, also due to the monetary policy measures, we still expect some impact from the supply chain in terms of higher level inflation charges. On a discretionary basis in the remainder of the year that is built into the guidance for the full year and therefore, see some headwind from that. But definitely, in terms of the net pricing, as we could see in the first quarter, we also want to keep the net-net pricing positive for the full year, i.e., for the quarters to come. That is the strategy that is built in the numbers, and that's how we drive it.

Thank you, George, and we continue with Dorothee Cresswell from Exane.

It's Dorothee from Exane. And my first one is around the order intake, the demand dynamics in Europe. You've told us that you were going to take still quite sluggish in Europe. I'm just wondering whether you've seen a worsening of that dynamic or even some order cancellations increase all those price cuts from Tesla that you had to make any adjustments in test your BEV pricing specifically or maybe just things like the leasing rate or the vehicle open packages? And my second question is around China. It sounds like you're feeling much more optimistic around the outlook there. Could you tell us if you think you can pass through the regional earnings trough and could you say kind of how many vehicles you still have in inventories that are the China 6 emission standards? And then if you could remind us when you think [indiscernible] bigger would be great.

Thanks, Dorothee. [indiscernible] was a bit I got it right. Order intake momentum in Europe, well, yes, when we commented in February, sluggish still running a lower level as we speak. The order book I mean supporting the sales in the months ahead of us. We do expect, however, I mean, that some of that, I mean, will improve in terms of order intake momentum moving forward also with consumer confidence, I mean, rebuilding. We see a competitive environment. This is absolutely fair. We see a very competitive environment. I mean, in particular, at the year in the lower segments to which we respond, but within the overall framework, as we outlined, I mean that we don't want to push volume. So we're rather ready to sacrifice on volume here to protect them in the pricing. And we can do that as we adjusted on the industrial side, we have the industrial flexibility means to do so. We lowered I mean the breakeven point, as you know, and at the same time, maybe to your second question, we see also momentum in other meds, not only in China, but in the U.S. being solid. And therefore, we don't see pressurized MAC to fill up the pipeline and volume in Europe. On China, yes, there is this change over where still some a level of uncertainty left in terms of the final date, so a bit of tactical maneuvering, which probably led to some turbulence in the first quarter. I commented that by the end of the first quarter. We could see the momentum, the sales momentum, but also in showroom traffic and level of demand, definitely picking up. I would say, same applies also for the months of April to the beginning of the second quarter. But same comment in here, we definitely want to emphasize on the Top-End and not enter too much into the very competitive environment in the lower range, which is very much, I think tense competition on the BEV side, whereas the situation in the Top-End is still dominated in the ICE world or by the ICE world, and that applies, I think, not only to us, but the Top-End segment still being overall, a very much an ice segment, in which we are definitely market leader, and we'll hold that and we'll transition then into the BEV world as well.

Thank you, Dorothee, and we continue with Horst Schneider from Bank of America.

Just also my questions. Just a few follow-ups. Relating to this inventory issue, you said you want to handle that a little bit better going forward. Does it mean that you are planning to reduce a little bit production as of Q2? And if yes, in which regions? Then another follow-up on the cost guidance. Harald, you said that it's going to remain a burden also for the rest of the year. But the burden should decrease somewhat in H2, of course. Is it possible that we maybe see another burden in Q2 and then maybe a kind of tailwind as of the third quarter. And the last question that I have that relates more to the EV business again, we have now the inflation reduction in U.S. in place. So maybe can you provide a little bit color about the trends by region is the audit situation in the U.S. on the EV side Better than expected. In contrast, a little bit weaker in China in Europe, I think it's a normal business as we speak.

Yes. Thanks, Horst. Well, I mean, managing sales and production and inventory, that's a day-by-day business, obviously. You can see from the first quarter, that production was running ahead of a set that is against an expectation in terms of commercial opportunities for the remainder of the year. If that comes through, obviously, that provides an opportunity. If it doesn't, we would then adjust inventory and obviously, production as need be. Overall, the guidance, you could see is unchanged in terms of sales being the same level. But definitely, on the other side, we don't want to miss opportunity. I think that's what you should read behind. Overall, yes, I can say that inventory level is an issue where I'm not completely happy and satisfied and my colleagues know that. And we work on that. And I do see, I do think, I mean, there's potential. I know that I bore you a bit about heating that since many quarters. But obviously, the volatilities, which we could see from COVID and then semi and the market volatilities were not necessarily mean the good boundaries to drive structural changes at the inventory at this juncture, but rest assured that remains on the-do list. On the cost side, cost overall, well, inflation headwinds here should overall mean decrease over the year, raw mats should improve from here on. towards the end of 2023 from what we can see today in terms of spot markets and this translating then via our contracts into the P&L. However, as I said before, probably some discretionary adjustments and supply chain charges, we have to expect or we do expect for the remainder of the year, which will not level out. That is at least the perspective we have as of today. And as I said before, is built into the guidance statements. On the BEV momentum, I confirm. I think your judgment in terms of the level of momentum. Good momentum on the BEV in the U.S., IRA definitely mean support it. We're also making use of it or in the field of leasing, as you know, so the demand here for the EQS sedan, but now in particular EQS SUV is at a good at a healthy level. We're happy about that. Europe to come out thereafter. And China, the momentum being slower for the reasons I commented before, namely, again, Top-End vehicle segment clearly being dominated, not only at our end globally by the combustion world where the transition to the BEV is only going to happen. But I think with the products such as EQS, SUV and then also the EQE SUV, we have the right, the good tools into place also to be present in this market.

Thank you, Horst. And we go over to Daniel Roeska from Bernstein.

I'd like to talk a little bit about direct-to-consumer. Could you update us on the progress on the plan for this year, kind of how is the transition progressing? What's the impact possibly we can expect by the end of the year? I don't in terms of numbers, where do you want to be. And then more strategically, I think recent price actions have captivated the financial market potential a bit, but it also shows one of the limitations, right? It's difficult to do individual consumer price discrimination in a direct-to-consumer model. How do you think about this more broadly in the context of your own direct-to-consumer move and how you think about your pricing toolbox going forward?

Thanks, Daniel. Well, in terms of what is the road map in terms of the progress on direct sales, commented on U.K. being accomplished at the beginning of the year. We are now preparing for the migration of the German market, which is obviously the largest in Europe and a very important market. That should happen in the second half of the year. All in all, next to the ones we did already, the road map, I think, from the top of my head is that by 2025, around 80% of the European markets will be migrated, which I think is a pretty massive undertaking and progressive will do it then in all of the markets, which are eligible for it, which means, as you know, not feasible from our perspective to do it in the U.S. In terms of what does it mean in terms of customer relationship and pricing toolbox as you call it, well, obviously, you have much more visibility, more transparency at both ends. I think that is favorable. Today, it's not only about competition interbrand, but intrabrand, so the customer trying to get in brackets been the best deal. So once I've made up, I mean, on the individual vehicle and then watching out where can you get that best deal from dealer? And so the customer definitely, therefore, has in the future a benefit in terms of sort that the deal, she or he gets is the best fair deal, which will not be a function of the individual dealer. So I think that is beneficial to the customer. Overall, you know that we have the intention and the strategy to be also a reliable partner when it comes, I think, to the product, but also then to the [indiscernible], which means we not to do erratic pricing adjustments up or down but rather having stable pricing, reflecting the intrinsic value of the products. And that's, I think, how we will take it forward. In the markets where we switched over, so far, be it Sweden, India, Australia and others, we could see overall that it was really beneficial. And if I may say, even I think from all stakeholder perspectives from the customer side, as I just commented before, from our side in terms of the impact on the pricing, on the net pricing, the discount management, but even from the dealer side. So I think all I could witness that, during some of the recent visits in some of these countries that even the dealers might have been a bit skeptical. the first place. At the end, we're pretty happy Obviously, as you know, they keep the aftersales business, which is the margin business and still are, obviously, as an agent, very much involved until the new vehicles. But probably, also a bit of a the risk-reward transfer being beneficial for all stakeholders.

Thank you, Daniel. We try to sneak into more questioners. Next one is Tom Narayan from RBC. Afterwards, Henning Cosman from Barclays.

Tom Narayan, RBC. I was wondering if we could just get a little more commentary on what you're seeing on mix for the remainder of the year. So GM earlier this week said they expected a down shift in mix. They prioritize chips on higher-margin cars, and now that with semis availability improving, they were saying they were going to see it down chip. I know you guys are different. But just curious if you could just shed some light on why you're so confident that mix should be resilient. I know you have some product launches? And secondly, this might be a question more for Ola. But Tesla made some comments on their call about how they were willing to sacrifice profitability in order to grow scale and sell autonomy. Judging from what we learned Sunnyvale, I'm guessing you don't maybe agree with that or at least not for Mercedes, but curious on your thoughts at a high level on this strategy, in other words, selling software subscriptions at higher margins to enable you to effectively cut pricing on the car business.

Thanks, Tom. First, on the mix, we guided in February for the full year that we would increase, the Top-End vehicle share slightly. And by the guidance brackets and corridors, you know what that means. Now having achieved in the first quarter 18% growth in Q1 '23 over Q1 2022. I think that is a good head start. I think what are the tools behind to enable that, definitely, I think we have EQS SUV full year. We have continued high-level demand on the AMG side on G-Class on Maybach, and the GLC also have, I think, a favorable impact once we're coming out of the ramp-up. And the Top-End, let's not forget about, the SL where we should have this year, first full year of SL and then at a later point to come also, GT. So I think there are a lot of products and product substance behind to drive the mix in line with the full year guidance. And again, quarter 1 gives us a good head start into that. And in terms of driving profits from software subscription, you know during the Sunnyvale presentation, we outlined our approach to that. We definitely consider that to be an intrinsic part of the vehicle offering in the future. With the various packages, the Connect package, the DRIVE package, i.e., infotainment, navigation, then the ADAS functionalities Level 2, Level 2+, Level 3, and last but not least, also, the charging. The numbers which we outlined, I think, in Sunnyvale, allude to some incremental potential in terms of revenues and margins. However, we do consider that this will not be -- this will not replace or change the profile of the company in terms of being a subscription margin company and the margin on the new vehicle sale, therefore, being less important, no. Here, we are a Audi company. We stay an Audi company with very solid margins on the new vehicle side supported by the features on subscription, i.e., these packages, connect and drive and charge. And the size of the margin we're having today on the new vehicles, I think you would -- you don't need to be, I think, very creative to imagine that, that would be ever replaced by subscription margin. And therefore, we stay rather humble on that.

Thanks, Tom. And last one, Henning Cosman from Barclays. A quick one, perhaps.

Yes. The first question, just a appreciate the color on the guidance and achieving more at the Top-End of the range. So I'm wondering if it's just another way of saying or commenting towards this 1.5 percentage points buffer that you have built into your full year guidance 1% for macro 0.5% for residuals. Has anything changed how you think about either of these 2 components as compared to the start of the year? Of course, as we go and we are not using the buffer is another way, I guess, of saying that there's more upside risk to the guidance, if you could just maybe pick up on these 2 components. And within that or related to that I think came up a couple of times now, this discretionary is discretionary supply or supply chain compensation. Just maybe another word on that, could that be meaningful? I think in the press some suppliers have been quoted as saying I expect 80% to 90% compensation? Are European OEMs have dismissed that level. If you could just give us an idea of who should be wary of that, could that be very meaningful at the end of the year? And second, short question, just Mobility that €540 million EBIT that you've shown in Q1. Do you think that's a good run rate now? Or is that the ceiling on a quarterly basis? Could it only go from here in the course of the year? A little bit of color on that would be great.

Yes, I think you can read from the guidance today, namely confirming the guidance, however, saying that we see it at the upper end, namely 14%, for cars that we have more confidence around supported by the performance in the first quarter. Some of the key building blocks, the ones we outlined, I think, are still the same, the used car. We could see the used car coming down a bit in the first quarter already. That commends,I think, holds for the remainder of the year. we'll see growth on the path with the dilution impact, and that's why you see here the 14 and anything else, I think, is to come for later, and we'll watch the situation. But I think, yes, you can read the confidence but I think management determination that we hold of the performance in the remainder of the year and that we stick to what we're saying that we see Mercedes at a double-digit margin moving forward and not going out lift, and the best being over. That is a message we want to give here. Supplier claims and payments. Please understand, I will not comment too much further on this. We want to ensure, a good trustful relationship, with the supply chain. That's why we're looking in case by case into it. There might be one or the other adjustment. That would be the case. However, that would definitely be a one-timer without out baseline moving forward, namely mean for the years ahead. But one has to recognizing that we some significant movements here and there on commodities. But again, that is a discretionary judgment at our end. We'll keep you posted on it. On Mobility, well, I think we need to anticipate a bit of further softening on the interest margin. That's my -- I think in the Q1 run rate might be a bit lower, for the remainder of the year and then, obviously, need to watch out on the cost of credit risk, which, as you know, is a function of the macro environment, which is a bit difficult to predict in the guidance. There is a bit of a step-up anticipated in the cost of the credit risk compared to what we had in the first quarter, given the continued macro uncertainties and volatilities. That is why you see the 12% to 14% guidance confirmation on Mobility. However, same comment here rather at the upper end, namely the 14.

So with that, ladies and gentlemen, thanks a lot for your questions for being with us today. Harald, thanks a lot for answering all those questions. IR is at your disposal afterwards. As always, last thing to mention from my side, you've heard it. We'll have a virtual strategy update on the Vans business, May 16. Please pencil it in your calendar. And now to all of you, have a great morning, great afternoon, great evening. Look forward to talking to you soon. And thanks and goodbye.