Welcome to the global conference call of Daimler. At our customer's request, this conference will be recorded. The replay of the conference call will also be available as an on demand audio webcast in the Investor Relations section of the Daimler website. The short introduction will be directly followed by a Q&A session. [Operator Instructions] I would like to remind you that this teleconference is governed by the safe harbor wording that you'll find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current views with respect to the 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 segments. Forward-looking statements speak only to the date on which they are made. May I now hand you over to Steffen Hoffmann, Head of Daimler Investor Relations. Thank you very much.

Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Daimler, I'd like to welcome you on both the telephone and the Internet to our Q2 Results Conference Call. We are very happy to have with us today Ola Kallenius, our CEO, Harald Wilhelm, our CFO, and Martin Daum, the CEO of Trucks & Buses. In order to give you maximum time for your questions, the three gentlemen will begin with an introduction, directly followed by a Q&A session. The respective presentation can be found on the Daimler IR website. Now I would like to hand over to Ola.

Thank you, Steffen. Good morning, everybody. And welcome to this Q2 call. In the second quarter of this year, we have continued to deliver strong financial performance, and this is in spite of the fact that the low availability of semiconductors has impacted both our production and sales. In tackling such challenges, I think we can rely on our flexibility, our agility and also increasing resilience of our business, as you can see in the numbers. But we have, of course, also in Q2, focused very strongly on strategy execution on the path to electrification and digitization. Let's start with Daimler and look at some highlights. The group EBIT and free cash flow is significantly above expectations. This high profitability is thanks to a very healthy topline development and also strict cost discipline across all divisions. The net industrial liquidity is on a healthy level. And as I said, it's been a quarter of strategy acceleration with a focus on electric vehicles and digitization. But also an important quarter on the path to what we call project focus, splitting Daimler into two pure-play industrial units. If I continue with Mercedes-Benz, we wholesaled 511,000 units in the second quarter. We had a new record in China, very strong order intake. We have a super attractive product portfolio starting with the flagship S-Class, but really across the board and especially on the top end. As I mentioned, the semiconductor shortage impacted us again in Q2 and its factors beyond the original corona issue, such as the winter storm in Texas, fire at the factory in Japan, and then more recently, the shutdowns in Malaysia. Harald will take you through more details on that. Improving the supply stability, needless to say, is a top priority for us. In that context, eager customers, Mercedes fans are really longing for their vehicles. And of course, we're doing everything we can to shorten some of those lead times with the demand situation that we have. On the Mercedes side, favorable product mix, strong pricing, ongoing cost discipline that delivered a double-digit margin at Cars & Vans for the third quarter in a row. On the xEV side, the xEV sales more than quadrupled, and we will continue to build on this momentum with more product launches during the year. If I switch to Vans. At Vans, the group sales were up by 37% in the quarter, driven by pretty much all regions. The group sales of electric vans increased more than eightfold in this quarter. And the beginning of May, we showed another one of those electric products for the van division, the Concept EQT. We also see an ongoing strong profitability on the van side here, again, healthy mix pricing and a tight grip on costs. Just one example of small structural measure, just to give you a flavor is that we decided to put two sales organizations together, Germany and Europe into one, reducing fixed cost, making processes leaner, faster and more customer oriented. To take us through more details on the numbers, I would like to hand over to Harald. Harald, please.

Thanks, Ola. And hello, everybody. Yeah, let's have a look now at the financials of Cars & Vans on the page six. Well, 620,000 units were sold in the quarter. It's 29% ahead of last year's quarter despite the semi impact, in particular, in June. At the same time, revenues increased by almost 50% to €28 billion compared to the last quarter. That demonstrates our strong performance in the topline. EBIT adjusted, again, was strong at 3.6%, CFBIT at 2.8%, meaning a cash conversion of 0.8%. Let's have a look a bit more in detail on page seven in terms of the margin evolution. Just as a reminder, in Q2 2020 that was a quarter where we heavily hit the brakes on production and spending, short term working, interruptions due to the COVID lockdown measures in most parts of the world. This quarter, the sales, I mean, were up, as I said just before, 29% despite the semi impact, in particular, in June. Nevertheless, the favorable sales momentum driven by convincing products generated a significantly positive gross profit effect out of volume, structure and pricing. Main drivers were especially S-Class in GLE and GLS, but also on the lower end of the portfolio GLA and GLB had a very positive contribution. Additionally, the overall pricing environment had a positive impact on discount levels. Furthermore, residual values continued to develop favorably. On the FX side, main Russian ruble and Turkish lira drove a negative FX, dollar was slightly positive. Industrially, on industrial performance, we see a balanced picture year-over-year. Last years quarter was supported by short term work effects. Furthermore, we saw higher raw material costs year-over-year, both effects could be compensated by commercial and technical efficiencies, as well as the extension of useful life or specific asset classes that we have disclosed earlier that year. Let's have a look at the fixed cost items. Due to the lockdown situation last year, we stood massively on the brakes in Q2 2020 in terms of spending, and we benefited from short term work measures. Q2 2020, therefore, I mean, cannot be seen as fully representative in terms of cost profile. This year, we obviously keep a tight [ph] grip on cost. However, with the business climate and sales improving, selling expenses were on a more normal level in the second quarter. The same holds true for G&A, where we continued working on efficiencies and on headcount reduction plan, but did not benefit from the short term work like last year. On the R&D side, we have a slight increase with €270 million, as guided in the full year, and that is fully in line with our technology road map. In the others line, the most permanent positive improvement is the impact of the interest rate assumptions on the accruals, which was hit last year and therefore is neutral this year. Adjustments in the quarter include expenses for legal proceedings and personal cost optimization program. On the cash side, page eight, the CFBIT reported was at 2.5, adjusted 2.8, cash conversion, 0.8, as spot on [ph] has guided. Moderate working capital movement of €179 million, which is a good figure considering the turbulences in the supply chain caused by semi. Our new and used car stock is on very low levels, the unfinished goods bucket increased during the quarter given the semi constraints. As you can see, net investment in PP&E and intangible assets versus depreciation, amortization impairments continues on an almost balanced level, reflecting our rigorous approach in terms of capital allocation. The other line is straightforward, includes adjustment of BBAC at equity result and non-cash valuations. On the adjustments, where we made the payments with regard to legal proceedings, including field measures in the diesel context and made payments in connection to the personal cost reduction program. With this, I hand over to Martin.

Thank you, Harald. Let's continue with Daimler Trucks. Despite the ongoing volatility and challenging - challenges around the availability of semiconductors, their uncertainty will remain for the second half of the year. We had a good second quarter. Some positive non-operating effects up. But overall, I'm pleased with the results, as we are making visible progress in turning this company into the right direction. In the second quarter, truck sales increased compared to the first quarter and certainly sales grew significantly compared to previous year's level across all core regions. Without supply shortages and it could have been more - it could have been more and the associated extra constrained costs burdened the result. But I'm grateful for a fantastic team that battled for every single truck. The order books are full and the supply side will ultimately determine the 2021 sales numbers, while we continue to ramp up our production further. We are literally sold out for this year in North America, as well as in Europe and haven't opened the order books for next year. Therefore, incoming orders are lower than in the last two quarters. This situation will significantly increase as soon as orders for calendar year 2022 will be accepted. Demand is still very strong, and our backlog is stable on an exceptional high level. On May 20, we hosted our Daimler Truck Strategy Day for investors and analysts where we set our financial and technology ambitions and showcased [ph] how we will unlock our full potential as an independent company after the spin. We are all set for an expected listing in December. Prior to the event, we will provide you a higher level of transparency in our commitment in terms of our key strategic initiatives, ambitions and targets of our segments by disclosing detailed segment specific financials. All this will presented at our Daimler Truck Capital Markets Day on November 4. Please mark that they are ready in your calendars. Since May, we haven't stood still. Recently, we announced that the three leading commercial vehicle manufacturers in Europe, Daimler Truck, the Traton Group and Volvo Group have signed a non-binding agreement to install and operate a high performance public charging network for battery electric heavy-duty long-haul trucks and coaches across Europe. The joint aim is to initiate and accelerate the build-up for charging infrastructure to enhance customer confidence and to support use transformation to climate-neutral transportation. And on the product side, the Daimler - Mercedes-Benz Trucks, we celebrated the world premiere of our battery electric eActros for heavy-duty distribution, heralding a new area with the launch of the first electric series production truck with a three pointed star. These products like the eActros is a range of up to 400 kilometer and the battery capacity of up to 420 kilowatt hours and more products coming to market soon, we are underlining our leading role on the road to zero emission. We are determined to lead the transformation to zero emission in our industry, stay tuned. Looking at the key financial for Trucks & Buses. In the second quarter, sales increased significantly by 92% to 117,000 units. Semiconductor shortages, especially had some impact in Europe in Q2, but less strong than we had expected in May. Especially June was a very good month with strong sales in North America, but also Asia. As mentioned before, demand is solid and strong. It's all about limited production capacities and pressures on the supply chain. Revenue of Daimler Trucks & Buses increased by 61% to €10 billion. Adjusted EBIT increased by €1.6 billion from minus €746 million to €831 million. Adjusted cash flow turned positive to €693 million. Now let's have a closer look at the EBIT development at Daimler Truck. Please keep in mind that the prior year second quarter was a quarter that was most impacted by the COVID-19 pandemic. Volume structure net pricing came in with a very positive contribution of €1.4 billion year-over-year, driven by sales increases of trucks and buses in almost all regions due to recovering market conditions, especially in Europe and North America. Contribution from the aftermarket and the used truck business due to higher demand and positive net pricing were also very favorable. The foreign exchange result in Q2 was slightly burdened by translation effects, mainly from the US dollar and the Japanese yen. Within the industrial performance, the second quarter last year was burdened by expenses related to customer service measures at Mercedes Trucks. This year, higher cost for raw materials, especially for steel and especially headwinds caused by the supply constraints had a significantly negative impact. However, on the positive sub note, our ongoing restructuring measures had a positive effect on our efficiency. On the fixed cost side, we made the extraordinary situation last year, the new normal. In the positive other line, we saw contributions from the listing of Proterra and the sale of our Campinas plant in Brazil. This leads to an adjusted EBIT of €831 million with a RoS adjusted of 8.3%. The shown adjustments were expensive - expenses for our still ongoing restructuring measures. Cash flow in Q2 benefited strongly from the solid EBIT development, mainly driven by North America and Europe. Working capital had a negative impact driven by increased inventories caused by the challenges on temporary effects on the supply side, resulting in a higher level of unfinished goods. Depreciation and amortization exceeded net investments and intangible assets underlying our focused investment approach. This leads to a cash flow of €667 million and adjusted for restructuring measures to a cash flow adjusted of €693 million. The cash conversion rate again strong and stood at 0.8% - 0.8. Joining Daimler's full year and half year results conference, this will be my last event for Daimler AG. However, together with my management team, I'm excited to talk to all of you again in the first quarter next year when presenting Daimler Truck AG's first full year result. In the meantime, we will see you latest at our Capital Market Day on November 4. With this, I hand it back to Harald talking about Daimler Mobility.

Thanks, Martin. So now let's have a look at the DMO on Page 13. New business increased significantly compared to last year's quarter. Daimler Mobility is also supporting the electric vehicle sales and acquisitions are increasing dynamically. Signed contracts are now for more than four times as many vehicles than last year in that field. The market environment remains very favorable. Net credit losses remain low and refinancing costs to have significantly improved compared to last year. Maybe a short outlook on the Europe [ph] family. We could see a strong rebound in the second quarter, as the pandemic restrictions relaxed across Europe the demand for digital mobility services was significantly higher. Now free now, the ride hailing, we have seen a record growth on the multi-mobility platform and achieved 140% year-on-year increase in taxi and private hire vehicle rights. On the car sharing, we could experience also a strong upswing. Long-term rentals increased by 41% in the first half of 2021 compared to last year. In parallel to the progress on the operating business, we are building two separate financial service powerhouses mean in DMO for cars and trucks as part of the planned spin-off. On the page 14, the financials. The new business was up 23%, main driver here was Europe. The contract volume overall remains stable at about the same level, while the portfolio of finance contracts with customers increased, dealer financing decreased, finance contracts with customers increased, sorry for that, and the dealer financing decreased by the same amount due to the semi-related shortage of supply. On the operating lease rate side, that's interesting to note, it has been stable or even slightly lower despite an increase in the electric vehicle share. The adjusted EBIT jumped to €930 million, I'll explain that on the next page. So with 930, we are obviously mean at a pretty decent return of equity. Is that the new run rate? Let me give you a bit color, maybe not, but I think very good. Main reason for the increase compared to last years comes from the cost of risk column. Let's have a look at the components. On average, in a normal quarter, let me say, we have around €150 million of provisions, which we had in the second quarter last year, we booked over 300 million in anticipation of rising credit losses, so recall [ph] CORONA pandemic, over €150 million more than in a usual quarter. As credit losses are significantly lower than last year anticipated and non-performing loans significantly improved in the second quarter, we were able to release €120 million of existing credit provisions in quarter two, '21. Adding up, the quarter-to-quarter impact resulted in the 437 you see on the chart. Therefore, I would say that there are €270 million as a non-recurring in the quarter two. Interest margin has been another positive driver due to the decrease in refinancing costs. Last year, we benefited from short term working in the year-on-year comparison. This leads to slightly higher personnel costs. The positive €50 million on the others line was mainly due to the improved performance of the three now GVs or the now GVs, as I explained before. All in all, I think we were very pleased with the €930 million. Now looking at the group, page 16, I think we almost touched, I mean, all KPIs. Here. You can see the sales growth, I mean, the EBIT and free cash flow numbers has already reported last year and the strong net liquidity. Page 17. If we look on the EBIT side beyond what we explained on the division side, I think nothing particular to comment, neither in the group reconciliation nor in the adjustments, we went through them on the division section, a minor amount of €50 million. You can see there, tiny on the right hand side of the chart, which is in the context of the - I mean, cost related to the spin. On page 18, same thing on the cash flow, all of the elements we explained before. The one thing I would highlight is the income, cash taxes paid of €700 million. That's what we said at the beginning of the year that cash taxes, I mean, would be higher and probably are even more high - more higher than we said at the beginning of the year due to the step-up in profitability throughout the year. And that's what you should bear in mind also when you look ahead for the year. And then I move on to the net industrial liquidity, page 19, starting the quarter with €20 billion, you could see the cash flow, the cash flow from earnings, the working capital balance, the investments balance was depreciation, adding the €2.6 billion cash flow reported. And from that, we paid a dividend of €1.4 billion, which makes a very healthy €20.9 billion of net cash, which gives us significant financial flexibility. Now let's come to the outlook section, page 21. Before I start with the guidance, I mean, obviously, please note that all guidance are made under the assumptions you see on the slide. Meaning no further COVID-19 related setbacks, but in particular we assume that the worldwide shortage of supply of semiconductor components will affect our business also in the second half of the year. We also recognized that the visibility how the supply situation will actually develop further is currently low. How do we see the market guidance for the full year 2021? Based on the expected continuation of the global economic recovery, we anticipate a continued favorable development of worldwide demand for cars and vans this year, and significant growth in market volume for 2021 as a whole, as well as for Europe, US and China. This is no change in guidance. The economic recovery should also result in improved demand in the major truck markets. That means that in the North America and in the EU, we expect significant growth in demand for heavy-duty trucks, this is unchanged. Now we also anticipate significant expansion for the Brazilian market, where as before, we saw only a slight increase. Page 22. We expect continued positive stimulus from the economic recovery and good underlying demand for our products. We continue to expect group revenue and EBIT in 2021 to be significantly above 2020 figures. Now the free cash flow reported, and this is important, with the free cash flow in the second quarter, we lift up our guidance by one notch and expect for the full year that the free cash flow reported will be slightly below last year, previously, we had guided significantly below. In terms of free cash flow, slightly translates into more than 10% deviation and less than 25%. Just to remind you, we see the FCF reported now slightly below considering the following points. First, the payments in the context of the settlement with the US regulators in civil law proceedings related to diesel emissions. Second, cash outs due to our restructuring program. Third, higher cash taxes in 2020, as flagged earlier. Fourth, costs related to the planned spin-off of trucks. Fifth, we have included a kind of working capital protection due to the volatile semi situation. Despite all of these factors, we lift up the guidance by one notch. This change in FCF reported guidance also means that we now expect the FCF adjusted to sit at 2020 level or could be slightly above 2020 level, despite higher cash taxes. We do expect to see [ph] as bit, the cash flow before interest and tax on the automotive side 2021 to sit significantly above prior year. Our group guidance for investments in PPE is unchanged, same level as 2020. Group R&D expenditures, we now expect them to be slight significantly above 2020 - for strategic topics like electric drive and software before we have guided slightly above. No change in European CO2 emissions significantly below. With that to the division guidance, page 23. Let's first talk about cars. And I would like to comment on the semiconductor topic. The semiconductor shortage, which started in fall of 2020 and continues throughout 2021 has affected our production and sales volumes. Factors beyond corona, further affected the supply situation in the first half of the year, such as winter storm in Texas and a fire is a key factory in Japan. More recently, Corona shutdowns in Malaysia have led to additional disruptions. In general, this means that the supply pipeline for semiconductors is operating [Technical Difficulty] problems, making firm commitments. During this period we have been working with our suppliers to mitigate the shortages and optimize allocation of parts towards higher contribution vehicles in order to safeguard our profitability. Needless to say, for 2022, we are working with a complete supply chain throughout the tiers to further improve stability. The overriding structural shortage of semiconductors is expected to remain an issue throughout 2022, but should improve compared to '21. Therefore, this topic will continue to have top priority in our strategy going forward, so that Mercedes can continue to serve its customers by delivering luxury vehicles. Having said that, we now expect unit sales from cars to be at prior year level only, before we had expected sales to be significantly above 2020. Despite that, we confirm the guidance for RoS adjusted at cars & vans at 10% to 12%. What does this imply for the return on sales adjusted in the second half of 2021 versus the first half? First, we will take the positive H1 momentum in terms of mix, pricing and cost efficiency into H2. Second, the lower full year sales guidance that I have just explained means sales H2 should be approximately at H1 level. Third, you'll remember that in Q1 reflect non-recurring valuation topics of around 1% RoS in the quarter, which translates into 0.5% per year - half year. This effect, we do not see in the second half of the year. Therefore, we would deduct half RoS point. Fourth, as a consequence of the semi issue, we see higher supply constrained related costs, i.e., in logistics for the industrial interruptions of approximately 1% in the second quarter compared to first quarter - first half, sorry, second half compared to first half. Fifth, in terms of raw material costs, we see stronger headwinds in the second half in vicinity of minus 1% RoS versus H1. This is due to prices for steel, aluminum, copper, palladium and rhodium. And point number six, we want to be prudent and assume a general 1% RoS protection in second half as a potential market environment deterioration. This is a rationale that guides us when we confirm the 10% to 12% corridor for vans at the lower sales, as I explained before. On the cash conversion side, we continue to expect a healthy level of 0.7 to 0.9. Looking at trucks and buses, the sales guidance remains unchanged at significantly above 2020. This also means H2 sales should be stronger than H1 sales despite the same issue. With regard to return on sales adjusted, so far, we have guided for 6% to 7% and hinted towards the upper end of this range. With a good Q2 performance in terms of top line and the expected stronger H2 sales versus H1 sales, we now extend this range to 6% to 8%. Guidance for cash conversion remains at 0.8 to 1. At the DMO, we see - we increased the full year guidance to 17% to 19% return on equity adjusted. This reflects that the low cost of credit risk situation and improved funding costs continue in the second half. However, on a more normalized level in terms of provisioning for the future credit risk than we have seen in Q2 and as I explained before. With that, I give back to you, Ola.

Yes. Thank you, Harald, and also thank you, Martin. When we met at the beginning of the year, we talked about three main tasks for the year 2021. Number one, strengthen our financial performance and make the business more resilient. Two, accelerate our strategy towards electrification and digitalization. And three, deliver project focus. Now we are at half time, and if we look back at these past six months, I think we're progressing rather well on all those three tasks. The results that you have seen here are strong, and compared to what we have delivered historically very strong. And this is in spite of fighting a challenge like the semiconductor issue. We're really picking up speed on the strategic side and have started launching more and more vehicles, fully electric vehicles. I think the highlight of the quarter was the presentation of the new EQS. And tomorrow, you were invited, as you know, to talk to us about the electric strategy for Mercedes. And the progress on project focus and splitting the company is on track, and we'll come back to you with more information with regard to that also in the second half. So half time, lots of work done lots of work ahead of us, but I think it's been a pretty reasonable start. Ready for Q&A.

Thank you very much, Ola, Martin, Harald. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioner by name, but please also introduce yourself. A few practical points. Please ask your questions in English. And always, as a matter of fairness, please limit the amount of questions to a maximum of two. Please keep in mind that we will hold our Electric Drive Day for Mercedes-Benz tomorrow. We are really looking forward to answer all your questions regarding this topic tomorrow. So today, we would appreciate to receive your questions regarding the Q2, the full year, the operational business. Now before we start, the operator will explain again the procedure.

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

Yes, good morning. Thank you for taking my questions. There would be two, please, and they are somewhat related. The first one is maybe Ola to you, also Harald, the semi shortage is now something that we obviously hear about in every quarterly call. We always hear that the next quarter is going to be the worst. I take it as a big positive that you guys always managed to avoid that and really on an operational basis, managed to navigate through this in an exceptional way. The question is obviously, the market is getting a bit tired [ph] of coming to next quarter to worst. Could it be that next quarter is again not the worst and that we will never really see the worst quarter, so to say. Or are there signs that you're now picking up in July, really but July is a lot more difficult than what you have seen in June? And is Q3 indeed now in the trough for this? And do we see the improvement from it, and then finally move on with Q4 also from a capital market perspective? And the second question is just to understand and Harald, you already alluded to some of those ingredients. How conservative is your guidance on a group basis and specifically for Mercedes? How much is really factoring in that the market will normalize again when it comes to pricing, mix and these kind of elements? You already mentioned the mobility, €150 million in Q4 and risk provisions. You mentioned 1 percentage point on the Mercedes margin. If I put those things together, is it fair to say that on a group basis, we're talking about multiple hundred millions or potentially even more than €1 billion that you're assuming will the market normalize again? Thank you.

Well, thank you, Tim, for those questions. Maybe I'll start with the first one then. I guess managing uncertainty is part of our job. So it's one of those things where you have to make the company resilient, but also flexible and agile. When will we see the trough of the semiconductor issue? I think you actually have to separate two factors here or maybe even three. And I think Harald alluded to some of them in his presentation. One, you have an underlying issue coming out of last year. Sometimes I describe it as a traffic jam on the auto band, everybody stops, and then it takes a while before everybody drives again. That is what led to the original shortage at the end of last year, beginning of this year. But then you had some compounding effects that really probably had nothing to do with that. The winter storm in Texas put down factories for four weeks, sometimes more. The fire at the plant in Japan, which is one of the most crucial plans for automotive chips for some chips. And recently, when we saw some light at the end of the tunnel in Q2, when I felt in the middle of Q2, I felt more optimistic only to see in the month of June, Malaysia go down, which has several of the factories that actually process the wafers. So some of this is unpredictable. But I would not like to take the negative view that you have that this is like an unfixable problem. It is a fixable problem, and it leads me to the third factor, a structural thing. The content technology content in cars is rising. So even if the production volume of cars would stay the same, but you have more content in the cars. There is a need for more chips. And that underlying structural pressure, but not on the levels that we're seeing now in Q2 or probably in Q3 is still there, but it's also being worked on. So in the mid term, even though I realize that probably in 2022, we're going to talk about this as well. In the mid term, I'm a little bit more optimistic. And then if you look at Mercedes specifically, there's probably not a manufacturer in the world that on average across every single car that we sell has more technology than Mercedes. So we have the most technology. We have the highest level of luxury cars. So to put together this jigsaw puzzle for us is most likely the most challenging issue. So you have to bear with us here with a level of uncertainty that we have to live with, and we're working on making the business deal with that uncertainty. Q3, Harald mentioned it could be lower than Q2. I'd like to take a slightly more optimistic view on Q4, but I've also become more cautious as you have, Harald?

Thanks, Ola. And by the way, at the end of Q1, we said Q2 should be lower than Q1, and that's exactly, I think, what you can see in the numbers. I mean, on your second question with regard to the guidance, Tim. First, on the division side, on Mercedes, as you allude to that. I think confirming the guidance of 10% to 12% at the same time, lowering the sales guidance for the second half and the full year to same level 2020 compared to significantly above, for me, implicitly is a step-up in guidance, in an environment, which is extremely volatile. And as Ola explained, I mean, the visibility being low at this stage. I also mentioned without repeating all of the elements in the bridge and I mean, we're happy to pick that up subsequently to this event, again, in more detail, but you also could hear that we put somehow, I mean, in the kind of a protection for market environment. That, I think, tells you as well. I mean, things could be a bit to the upside. But from today's point of view, given this uncertainty, given the limited visibility, I think it would just not be prudent to do something else than the 10% to 12% on the cars. And by the way, on trucks, I think that's a very good news. Stepping up to 6 to 8 and also on the DMO 17 to 19 is a material step-up compared to what we announced at the beginning of the year. At the group level, I think we are qualitatively in the EBIT above 2020. And if I take the EBIT adjusted by the first half, I think we are already at €10 billion. So that looks pretty safe, I would say. And on the free cash flow, you heard that we also stepped up the guidance in terms of the reported and you heard that we were saying as well that the free cash flow adjusted could be at 2020 level or significantly or above. And I'm happy to take you as well, I mean, through these elements. Last point I'd like to make on that if I may, who would have imagined 12 months ago, that at the sales guidance of about 2 million units for cars, we would confirm 10% to 12%. I think nobody listening in this call. And I think this is, therefore, for me a remarkable step forward, which we want to protect moving ahead. But I would dare to say that, I mean, this guide, the actual achievement nor the guidance for the second half and the full year of 10 to 12 is priced in today. So nobody should be disappointed.

Thank you.

Next question is from Horst Schneider, Bank of America. Your line is now open.

Yeah, good morning. And thanks for taking my questions as well. Horst Schneider from Bank of America. So the first question relates to pricing because I find it difficult to work with a year-on-year number in your EBIT bridge on volume structure and mix. Maybe you can provide some comment how the pricing in Q2 has developed sequentially versus Q1? And also provide some more color by region and also maybe in terms of trends by region where you expect the pricing to get stronger or weaker. And I also understand that in this price bucket, there are residual value impact included as well. So maybe you can comment on that as well, to what extent the pricing is at the moment driven by residual value gains. The second question that I have that relates to raw material prices because I know you guided before for something like €500 million negative impact in 2021. I could imagine this assumption got more negative. So maybe you can specify a bit what was the raw material impact in Q2? And what is the guidance for the full year? And what is driving the raw material higher now in H2? Thank you.

Yeah. So quite a lot of points in this time, let's try to make that short. Well, I think we somehow need to keep, I mean, lips tight on pricing, I think on a call like that. But the favorable momentum we could see in the first quarter continued in the second quarter. I think if you make the analysis of the quarter two over one, I mean that's what you can see. If you look in the year-over-year bridge in the presentation, in the €4 billion, you can reasonably assume, however, that by far more than 50% - by far more than 50%, I mean, is coming from volume and mix and not from pricing. However, I mean, a very healthy evolution on the pricing side. In the second quarter, we have not included any residual value provision release. The used car vehicle business continues to perform very nicely. That's providing reasonable margins, and also taking inventory out, but no release of provision being included here in the quarter. On the raw material, you're right. The headwinds we now see moving forward are stronger than what we assumed so far. We said, I think, at the beginning of the year, we could probably have on the full year 0.5% in terms of cost headwind. I mean, now you could hear us, I mean, saying 1% in the second half. And actually, I mean, we can see that all in all, in cars and vans, as well as in trucks and buses. So we have three digit headwind number already included in the second quarter, which, to some extent, we could offset and fight by other efficiencies, but that will be increasingly more difficult in the second quarter.

Just a follow-up on pricing, Harald. I understand that you cannot provide much detail, but you would also not expect the price pricing to get weaker already in H2. So these price tailwinds are going to last for longer, is that correct?

We definitely want to carry on with the strategy, which we announced last year. So next to a favorable market environment, it is our strong determination to carry on with a policy of profitable growth, and that means not to push volume. And that effect, I mean, that should stay even beyond the short term quarterly or I mean, post-corona move. That is our firm intent and determination. In the second half year guidance, you heard it before, we included a protection from market environment, but this is unspecific whether it's price or mix. This is due to the volatilities we alluded to before.

All right, excellent. Thank you.

The next question is from José Asumendi, JPMorgan. Your line is now open. José Asumendi: Thanks very much. José, JPMorgan. Just a couple of questions, please. I think the first one, with regards to Mercedes-Benz cars, if you could comment a little bit more around the categories of the industrial performance, in general cost savings that you can generate in the second half related to the industrial performance, that could also offset some of the headwinds you are suggesting for the second half? Second question with regards to trucks, would like to understand a bit better the orders booked in North America in the second quarter, that book-to-bill ratio, please, and whether you have the ability also to maybe to pass on price increases to offset rising raw materials? Thank you.

Maybe I do the industrial performance on car side quickly. In the second quarter, as I just mentioned before, the headwinds from raw materials basically could be offset by industrial efficiencies, but mainly on the buy side. Looking forward to the second half of the year, the size of the raw material bill, as explained before, I mean, will be definitely higher. And therefore, I mean, we'll probably not be able to compensate that by efficiencies. At the same time, the stop-and-go induced by the semiconductor means that the efficiency on the operational side is impacted, i.e., I mean, the objective in terms of variable cost reduction, I mean, it's difficult, I mean, to materialize in such circumstances. You can easily imagine, if you stop it, you go, if you stop. So that has an impact. At the same time, however, we're making great progress in reducing the fixed cost also in the operational side, not in the overhead, which provides some compensation. I hand over to Martin.

José, thanks for your question. First of all, we have a very healthy still book-to-bill ratio from about order backlog. The book-to-bill ratio indeed, is 70%, but that has one sole reason. At the moment, we only accept orders for 2021. And these are basically either school buses or pre-reserve [ph] slot for long-term customers that now fill up the pre-reservations with concrete orders. We haven't opened yet the order book for 2022 because we want to look how raw material continue in the mid term. So - because once we are locked on the pricing side, the raw material risk goes over to us, and we all want to avoid a similar burden that we had to cover this year despite a good profit development that we have that for next year as an extra profit potential. So I see there will be a month, either September, October, you'll see in North America, healthy five digit order numbers and the book-to-bill ratio that jumps immediately higher than 100%, stay tuned. José Asumendi: Good to hear. Thank you.

The next question is from George Galliers, Goldman Sachs. Your line is now open.

Yes. Thank you for taking my questions. Its George Galliers from Goldman Sachs. The first question I had was coming back to the pricing point. We can see, obviously, a very healthy development in third party data, as it pertains to some of the marketing support you have on the vehicles. Could you give us an idea of how much you've actually increased your retail lift prices over the course of the last 12 months? And given the shortage of semiconductors and as a result, presumably a pretty healthy balance between supply and demand, is there an opportunity to sequentially increase the retail prices in the second half and into 2022? And then the second question was coming back to the point you made, Harald. Obviously, I would agree with you that at 2 million units, I don't think anyone of us would have envisaged 10% to 12% margin guidance. With that in mind, could you perhaps give us some insight into how much of the margin improvement is coming from the efficiencies and cost saving actions that the company has been taking. And to what extent or by what percentage have you managed to reduce the breakeven point already at Mercedes since the Capital Markets Day last year? Thank you.

Well, George, thanks for the question. I think on the pricing side, I think we cannot go beyond what we were explaining and discussing before in terms of individual approach in terms of pricing towards the markets overall or by the level of detail, I mean, you asked - or please understand. On your second question, well, I mean, I invite you to go back basically to the weather chart, I mean, of October 2020. So since then, I mean, we have been working on all of the levers, all the levers. Pricing, yeah, we debated that before, definitely on the variable cost of the vehicles, definitely mean on the mix. In this call, we're not talking a lot about the mix, but the mix has been a very strong impact, which means the constrained industrial situation, I mean, it can be used in a way to favor a stronger mix. And that has a very material impact. But then at the same time, compared to 2019, if you look at the numbers, the focus on the fixed cost is just massive. And if you look on the cash flow side, I mean, you can see as well that the funding level, the investment level now sits at the depreciation level, where in 2019 from the top of my head, there was a kind of a €4 billion gap in between. So I would say that is material progress on all fronts, stay tuned.

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

Yes, good morning. I'm Stephen Reitman, Societe Generale in London. Two questions, please. First of all, if you could comment on demand situation in China, what reaction you're getting on the S-Class? And second question, which relates also a little back to George's question about mix. In your Capital Markets presentation, back in October, one of the key messages was that you were going to improve the mix and deemphasize some of your cheaper offerings. And as you mentioned, clearly, the semiconductor shortage has accelerated that program quite significantly. Questions we're getting is sales guidance, the unit sales guidance is lower - is lower now. But the question I want to know is to what extent when semiconductor situation improves, you're going to make up some of those lower models? Or have you now moving to a more permanent situation where the mix is much more at the higher end with margins that the company had? Thank you.

So good morning, Stephen, I'll try to tackle both of those, and Harald, feel free to jump in. The order entry on the S-Class is very healthy, particularly in China now that the Mercedes-Maybach model has just hit the market as well. This situation gets even stronger. And frankly speaking, the reaction that we got on the EQS across the world when we launch that should provide even more impetus at this top end of the segment. So literally, what's holding us back now is what we have been discussing this morning are supply constraints. That dovetails into your second question. When you're in that situation, of course, you prioritize the vehicles on the higher end of your portfolio. If we hadn't had the situation, we would have done that also. So part of our strategy, the pillar 2 in the strategy is what we call profitable growth that is in a very thoughtful way, grow the company, but select the models and also the models within the segments that have the most attractive contribution margins. That doesn't mean that once supply constraints are eased that we should artificially stay at €2 million. That wouldn't make sense because we do still have fixed cost in the company, and we have many vehicles also on what we call the contact segment that have very decent contribution margins. So we will take advantage of that when the market supply constraints ease, but according to the playbook of pillar 2 of the strategy. So not just build every car that we could sell, sell to every, I don't know, rental agency or whatever you could do, that some companies do in the fight for market share, we won't do that. We will do it in a thoughtful way. But I think now with this supply constraint, it's artificially low.

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

Yeah. Morning, guys. Thank you very much for taking my questions. Two quick questions, please. Just on the production, it's obviously a very unusual quarter where your retailers at 591 Mercedes, wholesale 521 and then production at 499. We've heard some stories about OEMs building almost finished cars. How should we look at the situation for you guys, have you got 100,000 almost finished cars sitting in the lots and all over the place? Or is this really a shortfall of production of 100,000, which obviously would be pretty bullish for the second half of the year? So that's the first question. And then secondly, on the cost of risk on the Mobility business, you said you made a - versus a normal €150 million provision for credit loss, last year was 300. This year, you've released 120, which obviously gives you the sort of 270 split. But then how does that compare with the 437 year-on-year that you show on the credit loss in the bridge? So I just want to understand what the unusual part is, is it 270 or is it actually virtually all of that 430? Thank you.

Yeah. Good morning, Harald. I'll start with the first one, past over the second one to Harald. Yes, here and there, it does make sense to build an almost finished car and you put it on the lot. But you can see from the numbers and also the working capital that we're not going to let this balloon out the proportion, absolutely not. We then rather manage more of a tight chip and not just fill up a lot with cars. And in some cases, depending on what part that is missing, if it's the wrong part, you can't build an unfinished car. So this is also a game with a certain level of volatility to it. So we have some unfinished cars, but we have not let it balloon out of proportion.

And I mean what it tells you as well, that the inventory level at our end, and obviously at the dealer end is coming down, I mean, big times as well, I mean, you wouldn't get into the numbers you've just quoted. It also tells you, I mean, with 490 production in the second quarter, obviously, what we were saying in terms of sales for the third quarter when it will come through, i.e., that we see third quarter sales probably below second quarter. Over to the question of cost of credit risk. Year-over-year, yeah, 120 release, I would say this year, 300, I mean addition last year, that roughly makes more than the 400 in the bridge. In terms of run rate analysis, as I said, I mean, if you take the 930 second quarter, 24%, basically, I think you should take off something like a 270, that's what we're saying, the 120 release and basically add 150 for normal run rate provision addition for new business. That gives you more of the run rate in terms of return on equity at the DMO level moving forward.

And thank you. And Harald, does that start in the second half of this year already, the normalized run rate?

Definitely, that's what is built in the guidance.

Okay. Thank you.

So ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you very much to Ola, Harald and Martin for answering the questions. Now IR remains at your disposal to answer any further questions you might have. As a quick reminder, we've said it already, tomorrow, July 22nd, we will hold our virtual Mercedes-Benz Strategy Update on electric drive. We hope that you will find time to join us tomorrow as well. To all of you, have a great morning, great afternoon or great evening, and we look forward to talking to you soon. Thanks, and goodbye.