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 Mercedes-Benz, Investor Relations and Treasury. Thank you very much.

Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Mercedes-Benz, I would like to welcome you on the telephone and the Internet to our Q3 Results Conference Call. I am very happy to have with me today, Harald Wilhelm, our CFO. To give you maximum time for your questions, as always Harald will begin with an introduction directly followed by the Q&A session. The respective presentation can be found on the Mercedes-Benz IR website. Now I would like to hand over to Harald.

Hi, everybody, and thanks, Steffen. So, let's jump right into quarter three, I would say we once again delivered, I mean, solid financial results despite a subdued market environment, despite intensified competition, especially on the EV side, despite high inflation with unprecedented spikes. All-in-all, according to our weather chart, this would rather call for a rainy macro scenario, and looking at our results, so I would say, they look rather fair -- between fair and sunny, let's say. In other words, I mean, Q3 underscores the resilience in a subdued market environment. Let's have a look at the numbers on the Page 3. On the group level, stable revenues, group EBIT at 4.8%, solid cash flow at 2.3%, and a strong NIL of 28. What are the highlights on the car side? Page 4, in terms of the performance, I would like to highlight, I mean, the Maybach sales up 26% in the quarter. The E-Class up 11% in the quarter. On the other side, the GLC and E-Class, I would say this is pretty much the same of the day, have been constrained by the 48-volt means supply. On the profitability, we see solid results in particular supported by improved the net pricing. On the products, I mean, we had the highlights during the IAA, the order show presented, I mean, the concept CLA. We also presented this year. I mean, in the quarter, AMG GT, and all new E-Class estate in Altavan [ph] as well as facelift of EQA and EQV. We also started the sales of the new E-Class in Europe and got excellent market feedback on the product. On the technology side, you can see with the concept CLA that this was a range of 750 kilometers, that really manifests some segment-leading efficiency was around 12-kilowatt hours per 100 kilometers and with 800-volt systems charging up to 400 kilometers in 15 minutes. Also, lots of interesting stuff on the customer-experiencing side in terms of over-the-air updates on the MB.OS to more than 700,000 vehicles. Jumping to Page 5 in terms of more details on the sales side, Q3 sales, at cars, 511,000 units. So year-to-date, that's a 2% up and therefore, I mean, fully in line with the full-year guidance. In essence, I would really like to say, we lost around 5% volume in the quarter. And if I look at the full year, probably we could do -- we could have done 5% volume more overall on sales. However, due to the 48-volt, we are constrained on the GLC and the E-Class. Year-on-year sales, are in the quarter lower, mainly in China, but the quarter-over-quarter is a positive trend. If you look on the segments on the entry side, you see our strategy prioritizing value over volume at work, in a very competitive market environment. The core is flat, that is mainly a result of the supply chain bottleneck on the 48-volt. And the Top-End clearly, we are defending, meaning leadership position in all markets. Combined is a healthy margin and very disciplined pricing. Top-End year-to-date is up 6%. And we do expect it to grow on a full-year basis over last year, consistent with our story. Let me give you a few more data points on the Top-End in the Q3. On the AMG, I see a bit of a lower number, but that is mainly due to model changes like, the AMG E-Class, GLC, and some positions on the AMG. So, these models will come in Q4 and then in 2024. On the S-Class, the S-Class clearly continues to lead in the segment everywhere in the world. In the S-Class, you see a bit lower due to temporarily smaller certification topics, in particular in the U.S., usual seasonality, and a bit of macro. In China, the S-Class holds more than 50% of the market share, and are up there in China by 9% year-over-year in the quarter. And also, in the U.S., if you don't look at the Group sales, but rather the retail sales numbers, you see that it's 48% up in the third quarter. I hear what this explains that what you see in the quarter three is of temporary nature. Looking on the electric side of things, the transformation into the EV world continues. We can see the fixed EV share now at 20% on the BEV side. The quarter is up 66%. And if you look more specifically to the EQS SUV sales, they more than doubled in the quarter. In total, in this quarter, we had EQE and EQS sedans and SUVs of around 24,000 units. I think that's a good number for a brand-new platform. In the U.S., the BEVs are growing nicely with the year-to-date EQS registrations ahead of the relevant Top-End competitors. And in China, we were ranked number one in terms of customer experience satisfaction in the survey of NES by the Chinese arm of J.D. POWER. Looking at the financials Page 6, fixed revenues are minus four in line with the sales. Year-to-date, revenues are up by 3%. ASP is almost flat year-over-year and slightly up quarter-over-quarter. EBIT adjusted at 3.4 %and CFBIT at 2.2%. Let's have a look at Page 7 on the EBIT evolution coming from €4.1 billion in last year's quarter. The bucket volume structure net pricing, net looks small, but what happened behind, is a much bigger thing. The arrows on the chart are roughly proportional to real numbers. So, what does it mean? Year-on-year, net pricing further improved. Net pricing was on similar level as the second quarter '23. And overall at a very healthy level. Pricing almost outweighs the slightly lower volume and the Q3 lighter mix effect. Volumes and mix, I have explained already before, some on the AMG and the S-Class effect and the non-availability of the 48-volt on GLCs. Used car business was slightly negative year-on-year coming from a very high level as we guided before. FX very briefly, 313 negative chiefly from the Turkish Lira, which is compensated in pricing and remain as a translation effect from the renminbi. Industrial performance minus 400. I mean, here we have now tailwinds from lower raw material prices. But they are out weighted by disproportionate inflation charges and supply chain-related costs compared to previous quarters. This is the main reason for lower profitability in the third quarter compared to H1. And I would like to explain what does disproportionate mean. That means that the charges in the quarter three relate to the first nine months of the year, so to the year-to-date time frame and performance. Selling expenses are slightly better due to lower marketing expenses, G&A is slightly positive. And in the others, I mean, we have on the upside, the proceeds from the sale of our operations in Indonesia and on the other side, the positive impact we had last on the interest rates, which we don't have any anymore. So, let leaves us with the EBIT at 3.4%, return on sales adjusted 12.4%. On the walk Page 8 from EBIT to cash, what can we see? Cash conversion rate, I mean, of 0.7. Working capital is negative around 500 heavier finished vehicles sitting in the inventory, which I think that underpins, I mean, the softer Q3 top end sales mix, and therefore, I mean, that should improve in the fourth quarter. So, the vehicles are there, I think that explains that the mix in the quarter three is temporary. What else? On the other side, we had a bit of payable trade payables, which is offsetting the inventory effect in the third quarter. Net financial investments refer to the sale of the operations in Indonesia. The net investments in PPE and intangible assets compared to depreciation are stepping up in line with the guidance, and that refers obviously to the investments in our vehicle architectures and future technologies. On the other bucket, I mean, you see the BBAC at equity result and not EV in the third quarter. On the adjustments, these refer to the legal proceedings and M&A. Page 9 on the vans. On the sales side, in terms of the performance at the same level. However, on the profitability side, I would say, I mean, very strong set of results with solid net pricing, good product mix, balancing supply chain related cost. On the product side, we had a preview of a new lineup on the EQV, V-Class, and V-Class Marco Polo was more luxurious corrector and on the eVito and Vito sharpened premium corrector. Looking at the sales of the vans, Page 10, as I said, flat, in particular strong in the NAFTA region. And here, the EV sales also mean doubled, however, coming from a low base. Page 11, in terms of the financials, all numbers are up. Big thanks and kudos to the van team, outstanding results, I would say. So, with flat sales, I mean, revenues are 15% up, so you can see pricing and mix at work, EBIT adjusted €700 million and the cash generation of €1 billion. On the van, Page 12, volume structure, pricing bucket increased by more than €500 million. That is coming mainly from the strong pricing and the better mix, industrial performance is negative due to higher inflation supply chain related cost despite raw material tailwind. In the interest of time, I would say I jump over the remainder. Going to the cash side of things, Page 13, we see a €1 billion, mainly just see a bit on the van side. The adjusted cash conversion rate at 1.4%, working capital, I mean, slightly positive with 130, lower finished vehicle inventories, favorable trade, payables, and receivables. Higher investments as guided in PPE and intangible, that refers to the ramp up of our investment into the Van EA platform. And in the other buckets, you have several small effects, which are adding up to €160 million. On mobility, key messages, market environment is challenging, remains challenging, in particular increased competition, I mean, in China. The overall penetration rates, I mean, are under pressure with a positive trend. However, on the EV side, in particular in the U.S., thanks to the IRA. On the performance side, we see the impact in the minimum margins from higher refinancing rates and intensified the competition. In addition, we also see the cost of credit risk, I mean, stepping up by weakening macroeconomic environment. At the same time, we also ramped up, I mean, our charging activities and you might have seen that we opened I mean the first site on the 16th of October and more will come in Germany and U.S. in a couple of weeks. Page 15, key numbers, I think I mentioned already, new business increased in Q3, portfolio remained stable, EBIT adjusted decreased. Why? Let's have a look on the Page 16. So how did we get there to €360 million and 10% to return on equity adjusted, a bit of negative FX, negative cost of credit risk driven by the more challenging macro environment. And then the big one is lower interest margin, which is impacted by the higher refinancing cost and a higher level of competition. On top of that, we see investments for the charging unit in the third quarter. And I would say then a bit of favorable impact from our portfolio on mobility services. Page 17, what does it mean on the group side? The business side, I explained. There is the recon reconciliation item positive with the Daimler Truck at equity result, and that gives us an EBIT adjusted of 4.9%, reported 4.8% in between you have the adjustments for legal proceedings. On the cash flow bridge, same thing, business side, I mean, I explained. Income taxes are roughly minus €1.1 billion. Cash taxes are going up year-over-year, also due to lower offset able tax loss carryforwards, with significantly improved interest result due to the higher interest rate levels. And other than that, the recon item includes mainly central function related topics. The free cash flow, therefore, on the industrial side of the business is at €2.3 billion. And I think with this number year-to-date, €7.9 billion which is, for memory, I think almost the level of full-year 2022. On the NIL, page 19, 28.5 at the end of the quarter. We're starting from 26 at the beginning of the quarter. Solid cash flow, as commented before. We bought back shares in line with our share buyback program of 0.5 billion. And as we speak or I mean, as of today, we bought all in all roughly 1.3 billion back. That means we are well on track for the 4 billion program, which runs within the up to two years. So, I think in terms of timing, we are front loaded. On the other side, FX and also dividend payment from MBM. Now let's turn to the outlook. First, on the division side, the division guidance, I really would like to invite you to read the assumption charts mean carefully in the interest of time, however, I jump over it and go to the Cars division guidance. First, on the sales side. We expect the pace from the first three quarters of 2023 to continue for the remainder of the year as the 48-volts supply constraints on GLC and E-Class continue, we expect, I mean, Q4 sales at the same level as Q3 level. Without the supply issue, we would have expected a higher quarter four and the full year of approximately 5% higher. Quarter four expected top-end share is expected to be higher than quarter three. And with that altogether, we continue to see the full year sales level '23 at prior-year level. Looking on the return on sales guidance for cars or return on sales adjusted cars, we confirm the 12% to 14% full-year range. At the Q2 disclosure, we said that we see ourselves at the upper half of this corridor. What happened since then, the best pricing competition has intensified. We have defined our red lines here, but I cannot stay out of it completely. The GLC ramp-up continues to be limited due to the 48-volt supply issues. The GLC is a hot car, an important volume and margin contributor, and we would love to be able to hand over more of these fascinating cars to our customers. Also, the 48-volt supply issue now limits the ramp-up of the new E-Class, the 214. The new E-Class is a great car with synthetic part substance, enjoying great initial customer feedback. We just can't ramp up as planned at the moment. Last but not least, we see inflationary-related supplier costs sitting at a higher level than at the beginning of the year and at H1 level. Despite all of these headwinds, we confirm our full-year guidance of 12% to 14% return on sales adjusted, but now see ourselves at the lower half of this range. The remainder cash conversion rate PPE as well as R&D remains unchanged. On the van side, the sales guidance is confirmed. The margin guidance with a strong margin year-to-date. We see the end-adjusted return on sales, I mean, at the upper end of the 13% to 15% guidance range. We continue to see good sales performance, but some higher ramp-up project-related expenses by the end of the quarter for the van EA. The adjusted CCR is also confirmed at 0.7 to 0.9. Invest PPE R&D is unchanged. On the mobility side, we're coming from a 12.9% year-to-date. We see the quarter four at a similar level than Q3. The effects of the deteriorating interest rate margin is likely to see a low point in the fourth quarter. Furthermore, we continue to see OpEx for our branded high-power charging network. In the full year, we confirm our guidance, however, at the lower end of the range of 12% to 14%. Without the increased OpEx for charging, probably we would expect for full year rather at the mid of the range. On the group guidance, Page 22, based on the Q3 results and our outlook, as provided before on the segments, we confirm all KPIs as before. And with this, let me turn to the last page of the presentation, 23. We are not only defending our leadership position on the top-end segment. I think I made it clear that what you saw in the third quarter should be temporary in nature. And if I allow me to have a look into the product momentum for 2024. We see great stuff coming up. What is it I'm talking about? Definitely, we'll see the world premiere of the electric G-Class. We see the start of the AMG GT sales, a real cool car, the AMG E53 hybrids, the CLE 53, 63. So tons of great stuff to fuel momentum in the top end. And with this, I think we're happy to take your questions now. A - Steffen Hoffmann: Absolutely. Thank you very much, Harald. So, ladies and gentlemen, you may ask your questions now. As always, I'll identify the questioner by name. However, please also introduce yourself with your name and the name of the organization before asking your question. Please ask your questions in English. And as a matter of fairness, please try to limit the number of questions to a maximum of two. Now before we start, the operator will again explain the procedure.

[Operator Instructions].

And we start the Q&A with George Galliers from Goldman Sachs.

Good morning, and thank you for taking my question. Obviously, you've seen some disruption in Q3 from the 48-volt. And also, I believe you still face high supplier compensation request. Maybe just thinking a bit further forward to 2024. Do you think that this provides you with some volume catch-up opportunity on the vehicles that have been constrained by the 48-volt? In addition, when we think about supplier compensation in 2024, an absolute would your base case EBIT, this should be substantially lower than it has been in 2023. Thank you.

Thank you, George. Definitely, we do expect, not only expect, I mean, we work hard, I mean, on the 48-volt topic, I mean, with the supplier to cure the problem and therefore, allow ramp-up of GLC and the E-Class in 2024. I think I would not give our numbers for 2024 in this respect, but the support you view that, that should generate, I mean, positive momentum with the GLC being a hot car, E-Class being a hot car, and both of them having healthy margins, I think, that therefore, definitely, that should support, I mean, 2020 not only in terms of sales, but also in terms of margin evolution. On the supply chain inflation related, I mean, cost step-up, we are facing, I mean, this quarter and also in quarter four. Definitely, I have the expectation that they will come down over time. But we would wish to be cautious maybe at this juncture how and when exactly that is going to happen. Clearly, we do expect each and everybody, including the supply chain to do their job, fight inflation, fight cost increases as we are doing. Just to give an example, I mean, our fixed cost trajectory, the journey we laid out in 2020, we didn't change it due to inflation. We kept the target, which just means it's harder. So, we expect the same thing from the supply chain, and therefore, we'll take a hard look at that. But again, when it's going to come down, let's see a bit when we enter 2024.

Thank you, George. And we continue with Patrick Hummel from UBS. Patrick Hummel : Two questions also from my side. You mentioned at the very beginning that it's getting a bit rainy outside. And that would suggest that you would lean towards 10% to 12% margin rather than the 12% to 14%. Now for the time being, you've done quite well. But if we take a look into already 2024 beyond Q4, there are these headlines about high inventory days in the U.S., discounts in Europe, et cetera, difficult EV situation in the market overall. You called out the pricing pressure and the red lines you defined, you mentioned more cost-cutting that you're working on or intensifying your efforts to reach your absolute targets. What does this all mean for 2024 qualitatively? Would you say we should be prepared for the rainy margin corridor? Or are you still confident to stay in that 12% to 14% range going into next year? And my second question simply against that backdrop. What does this all mean for your cash return and capital allocation? You were in stage in Munich at IAA starting basically a debate on stage what kind of net cash level appropriate for this company. And you clearly left us under the impression that you're sitting on too much net cash, and there's flexibility. So how do you think about this against the backdrop of a more rainy weather situation outside? Thank you.

Yes. Thanks, Patrick. Actually, it did rain this morning in Stuttgart. I see a bit of blue sky coming up, but maybe too early. No. Well, I think this is Q3 earnings call. So, I think giving guidance on 2024 at this juncture is a bit difficult. I mean, so -- but I'd like to give you a few elements, I would say definitely, I think the EV space is an extremely competitive space. I think I said before we defined our red lines. But overall, as you can see with the Q3 results, particularly on the pricing side, I mean, we could materialize the strategy in terms of value over volume and protect the margin overall of the portfolio. And as we have the tactical flexibility to adjust in terms of, I mean, the EV ramp, the demand from customers we can bring, I think the whole product portfolio, the very competitive portfolio. I mentioned the GLC before, I mean, the E-class, the AMGs to come next year at work. And I would expect, I mean, they have a favorable impact in terms of the mix for 2024. In terms of, I mean, the overall demand side of things I commented in the half year in terms of the volume, i.e., 2024, I mean, not to be below 2023. As we speak today, I still have the same view for 2024 when it comes into the volume side of things. And well, supply chain-related costs, where we talked about, I mean, before. So, rest assured, I mean, our ambition sits also for the future where it sits for 2023. But now probably my colleagues will stop me from talking before I start to give further guidance on 2024. On the net cash, well, I know you all want to have the €28 billion back now. No, we're not doing that. My point is I think we have a lot of flexibility. I don't change -- I mean, I don't see a fundamental change in the cash generation despite a more subdued macro environment and more rainy scenario out there. And as you can see, we're progressing out with the SPB program well ahead of timing, the proportional timing and we'll continue to think in terms of what does that mean for capital application moving forward, but we still have a bit of time until we complete the program.

Thank you, Patrick. And we go to Frankfurt to Tim Rokossa from Deutsche Bank.

It's Tim from Deutsche Bank. I was also going to ask you about the weather, obviously, but Patrick has already done so. Let's try to approach it in a different way because obviously, it's a key question today to investors. You specifically are known for someone that has things very well under control. You have a very tight grip on the numbers with Mercedes. That's a reputation that you already had with Airbus and now you certainly have it in Mercedes. Now can you help us understand how much of what was going on in Q3 and will now go on in Q4 is somewhat of a short-term glitch, where we really talk about the GLC issues that are out of your control with your supplier and then the supply compensation payments? Or is there just so many issues falling on Mercedes right now or the overall industry, actually, that it's just getting a lot more difficult to control and that we should prepare for an environment where at least there's more volatility on the margin even if you don't want to point us now towards the 10% to 12% or 8% to 10% in a rainy environment? And secondly, how should we think about the discounts in Germany and the stories that we've seen over the last two days in the press? You obviously introduced the agency model here. The point of that is better pricing control. Now we hear a lot about discounts for also, brand-new vehicles. Have you overdone it on the ASP side, at least in the market in Germany? Or what was reading on that? Perhaps you can contextualize this. Thank you.

Yes. Thanks, Tim. I would say let's get the elephant out of the room. So, what happened in the third quarter, I commented before that, I mean, the step-up in supply chain-related costs, in particular, I mean, inflation-related costs, is the main reason for the margin evolution in the third quarter compared to the H1. And we do expect this to be also at an elevated level, maybe even higher level, I mean, in the fourth quarter. And that is -- I mean, the main reason why you see the comment on the full-year guidance now at the lower half of the range of the 12% to 14%, which, obviously, you guys calculate it immediately in terms of what does it mean for the fourth quarter margin, which mechanically therefore would sit below 12%. But let me be extremely clear, when I commented before on the disproportionate element in the quarter three of the higher-level supply chain-related costs, it refers to the nine months. And when I say in the fourth quarter, we do expect, I mean, even higher charge on this topic, it refers to the full year, not to the fourth quarter was my message. Therefore, you shouldn't look in terms of the run rate on the quarter, but you really need to look on the run rate on the full year, and that is for 2023, the 12% to 14%. To your second question, yes, EV is a very competitive space. I mean, come on, with price discounts or some of the other guys, more than 30%, some of the traditional players selling best vehicles below the pricing level of ICE with variable costs probably sitting above, as you know. I would say this is a pretty brutal space. In this context, I think you could see that we had been doing. Again, look at the Q3 pretty well. And overall, kept the discipline on the pricing, as you can see in the Q3 print on the chart, which is indicated with the arrow on the chart. Within the portfolio, many have vehicles, hot cars, which do not afford or which do not require apologies, which do not require, I mean, any particular measures. You have other portfolio positions, which require a bit more measures. And I think this article you're referring to, I think that refers, I mean, probably to some short-term year-end stock measures. I'm a bit speculating here as I didn't write the article. But you should not conclude, I think, from this one on the overall pricing strategy, which has been demonstrated as term and is not robust in the third quarter. However, I repeat, on the EV side of things, this is extremely competitive in these days.

Thank you, Tim. And we go to London to Jose Asumendi from JPMorgan.

More than two questions, please. First one, on the UltoBridge [ph]. Can you go back a little bit to this volume structure pricing category? Maybe break down or probably a few more details behind that bucket? And second, can you talk a little bit about your Chinese auto business? Can you provide a bit more details behind volume mix and maybe the ramp-up of the facility [indiscernible]?

Good morning, Jose. Your question, volume structure mix is referring to quarter three, quarter four or '24, '25?

Q3.

Well, in the bridge, I think you can see volume is now year-over-year is slightly negative. Mix is negative for the reasons mentioned before on AMG and S-Class chiefly certification, temporary impact, whereas the pricing is nicely favorable. And then within the industrial performance, the raw mat now started to be positive. So, we are enjoying the tailwind. We're counting for since a little while, but then offset by these higher-level supply chain-related costs I addressed already in before. So, I think this, in essence, I mean, the mechanics of the quarter three bridge and maybe I repeat myself, but the supply chain-related topics and the non-availability of 48-volts on the GLC and the E-Class are the main reasons why you see the quarter three at 12.4% rather than 13.5% and the H1. In terms of how should that move and may develop further, I tried to augment before. So, you should see a mix favorable. We should see pricing stable in the fourth quarter. We should see the supply chain-related cost picking up as well as some seasonal cost effect in the last quarter. I mean, as we see that basically each and every year, and a bit of the minor things like the capital gain from the sale of our Indonesia operations. And if you do the math, you're getting, I think, to the numbers I explained before within the 12% to 14%, but at the lower end of the range. So, I would say, under control. on China in terms of the China momentum year-over-year, I mean, we are down in China. But I would caution maybe to take the third quarter '22 as a reference. I mean remember, the second quarter 2022 was heavily impacted by the lockdown. Quarter three came up, I mean, pretty sharply then in China. If you compare the evolution in China more quarter-over-quarter maybe in this respect, more relevant, i.e., quarter three over quarter two, 2023, we see momentum picking up, so a positive trend. We see the demand on the top end, very strong, commented on Maybach and G-Class, and I think that refers to China as well. The macro EBIT would not hide that, if I may say. The overall, I think, macro situation and the consumer sentiment in China did not come back completely after coming out of the COVID lockdowns since the beginning of the year, and that's probably still remain a sentiment, which is hanging out there on the market overall, where also the top end segment is not completely immune. But in the longer term, we do expect or we see the potential, obviously, in China, and that's why we're holding the position in the top end of more than 50% with the S-Class being the undisputed leader.

Thank you, Jose. We continue with Horst Schneider from Bank of America.

Yes. Good morning. Hope you can hear me. I want to ask another follow-up question on Q4. I hear you, Harald, regarding the bridge. Mathematically, your guidance implies that for Q4, a margin of 7% to 11%, which is, of course, a pretty wide range. When I hear you talking about the bridge items, hard for me to imagine that it should be at the lower end of this range. So maybe could you narrow a little bit the outlook for Q4 if You should think about 7% or 11%? And then again, regarding the reasons, I get the sense that it's mainly related to supplier costs. Could it be that this is an industry problem because basically, the whole industry has got a bet problem? And therefore, the cell producers, they are charging basically compensations, which would imply also for you that potentially, the supplier cost issue is an issue also for 2024. Would you agree or disagree to that? Thank you.

Thank you, Horst. I think we can clarify the understanding of the guidance ranges. So, when we say 12% to 14% and 11.5% would not qualify for the guidance range. So, by my math, the very low of the range we're guiding here today, i.e., the 12% to 14% in the lower half of it means a Q4, which doesn't fall, I mean, in essence, or which doesn't go single digit, let me call it this way. So, I mean I think that's what we're talking about when you compare it to quarter three performance. So around, I mean, 200 basis points to 300 basis points. And that is fully explained by this supply chain-related costs and seasonal cost phasing. I think I gave the elements already been a few times, I mean, before. Looking forward, I mean supply chain-related costs, I mean, obviously, I mean, cover everything in terms of the relationship, the whole portfolio, some inflation related. Obviously, also, I mean, the question in terms of what is the offtake on given programs. However, I mean, I'm not commenting on individual supply relationships, nor on individual programs, I mean, any charges, I mean, which might occur from there. Over time, I think, I mean, therefore, as I said before, the supply chain-related costs should come down. Again, the timing of it, I would remain cautious maybe at this juncture. And I think it's kind of a law in supply chain management that you get your yearly productivity. And I want to see the yearly productivity back. As said before, I mean, inflation, yes, it spiked. Energy costs spiked. But I mean we are beyond the worst. And I mean, therefore, the spikes on the bill of material within the suppliers should relax over time, and that's what we want to see then coming through as well. So, no detailed comment in terms of the tailwind for 2024 here, I would say. But in the longer term, definitely, we should try to recover some of the stuff we lost here.

That's great. And last question that I have maybe on order books, the order trend. Is it getting negative or stable?

Order book and order intake is going the right direction. And as we said, I mean, GLC e-cars are hot cars. Obviously, given, I mean, the constraints we have, we still have, we probably don't see the full momentum yet in the order intake, either. As I mean, too many models are unfortunately constrained here. So, once we're getting out of that, I think we'll also see the order intake momentum stepping up. Overall, I think I commented before that for 2024 sales, I see from today's point of view no reason why 2024 should be below 2023.

Okay. Great. Thank you.

Thank you, Horst. And we continue with Stephen Reitman from Societe Generale.

Yes, and good morning. I have two questions. First of all, if you could comment on what you've been seeing in Germany with order intake on BEVs after the change in the tax treatments for company cars at the beginning of September? And what your thoughts about how much is sort of like incentives or government bonuses are impacting this market? And secondly, also, if you could comment as well on the agency model. You made some comments already, but I was just wondering if you could maybe talk a little bit about how you've seen pricing, how price -- how you're seeing price realizations, and the degree of satisfaction you're registering with dealers and with your customers. Thank you.

Thanks, Stephen. Well, I mean, on the change in legislation end of September, I mean, we are a few days after end of September. I think it's a bit early to me to judge on from there. Definitely, I think what we can say is that the tax treatment of xEV vehicles is an important element, in particular, when it comes man to fleet customers to corporate fleets. And therefore, I mean, we need to watch that item. But too early, I would say, at this juncture to speculate about it. With regard to the agency model, now we have it into place in quite a lot of markets in already. As, Germany moved latest in summer, in June. U.K. beginning of the year. I think all in all, wherever we look at in terms of, I mean, what's that economic impact, I mean, of the model, it -- I think we can clearly say it's favorable. So, to the pricing, to the net pricing and definitely supported within the margin bridge we were talking earlier before to the -- also the quarter three pricing performance. It will also help, I think, to consolidate, and therefore, all in all, reduce the spend on the sales and the distribution side. And in terms of, I mean, the working capital, you see, I think that overall, I mean, the amounts are pretty well digestible. So, the step-up in inventory in the third quarter is more a function of the mix and at a bit of the volume rather than the function of the agency model, I would say.

Thank you. Very much.

Thanks, Stephen. And we continue with Henning Cosman from Barclays.

Thank you. Good morning. Thanks for sort of drawing the floor, I guess, at 10% margin for the fourth quarter in the cars. But done I'm still trying to fully understand the supplier compensation thing. So am I right in understanding, you said at the Q3 stage, it was overproportionate because you compensated for the entire first nine months. And then in Q4 now, you will have even larger overproportionate compensations because you will be compensating for the entire full year. And there is compensation negotiations, I guess, that hasn't been concluded. If you could just confirm that that's the correct understanding and that you asked us to then still view it on a full-year basis on an overall run rate so that, I guess, when we then transition into 2024, everything else equal, already from the relief on a normalized basis, it should be a little bit better. If you could just confirm that? And the second question is on mobility. I think you mentioned there was or there would be a low point in passing on of higher interest rates in the fourth quarter. Can we take that as an indication that also the absolute EBIT level is around or will be reaching a low point in the fourth quarter, not too dissimilar from the adjusted EBIT level in the third quarter and we can see some sort of normalization up in '24 in mobility from that level? Thank you, very much.

Thanks, Henning. On your first question, I just can say very smartly analyzed, understood and commented. So, I just can say, I do confirm your understanding. On the second question for the mobility, I would say, I mean, there are two things. Number one, the higher level of refinancing cost, which we try to pass on to customers, obviously, from a customer point of view, constitutes, I mean, higher-level bill, which affects, in essence, all markets next to the very competitive behavior of some market participants in China. On top of -- and probably that doesn't go away quickly. I mean what you saying higher for longer. So, I don't want to speculate here in terms of when might rates come down. But as long as the rates are where they are, then that just mean that higher-level bill is not a given that you can just pass it on. On top of it, I think you have some temporary issue in it. What do I mean in certain countries, the contracts or I mean, the vehicle purchase and the financing, I mean, attached to it has been done some time ago, call it, 18 months ago, given the supply chain, the semi-related delays, some of these bookings are, I mean, a vintage of, call it, 12 months or 18 months and therefore, have been concluded at interest rates levels lower than the one we are facing today. So, if you deliver the vehicle now, I mean, you're facing refinancing costs, which are sitting at a higher level and therefore, wait on the interest margin. That doesn't apply to all markets, and it applies to some markets, in particular, in the European space. So, this impact, I mean, somehow should level out, I mean, over time. And then obviously, in the new business, we are trying to step up, I mean, the interest rate margin. And I can say in the acquisition rate we are seeing today, we see the trend going in the right direction, but it will take a while until I mean all of the new business comes through before the old one from the portfolio has been released to the P&L. So yes, I would say we should see, therefore, some kind of a bottom line in the fourth quarter, but it will not mean immediate recovery in the quarter thereafter. So, I think we need to be a bit patient. But trying to fight that by efficiency measures, digitalization, all other types of things.

Thank you.

Thanks, Henning. Considering the fact that at our time, many of you will have the next OEM call, I think we have time for one more question, which would go to Harald Hendrikse from Citi.

Good morning, and thank you, so much for taking my question. I just got one question. Given you say the EV market is brutal, we understand all of this, I think you've been very, very honest about the development of your own vehicles, and I think we're looking forward to the performance of the CLA in 2024. But does the environment on BEVs make you question the targets that you have? Or are these stepping stone? I mean the reality is that these cars are probably now less profitable than you would have hoped. The pricing power in this part of the market is clearly more difficult. Does it make you change strategy? Or is there really just no choice in moving towards that 2030 target? Thank you.

Yes. Thanks, Harald. Yes, as said, I mean, the space today, I think, is very competitive. I mean you call it brutal. On the other side, we see an adoption rate, customer adoption rate running at a lower level. So, I would say if the margins on the EVs today are sitting at a lower space and then assumed maybe some time ago, I mean, there is an upside potential, I think, from the tactical flexibility of the portfolio, namely, I mean, a very competitive and margin healthy ICE portfolio. I think this is exactly the benefit of one company transitioning from ICE into BAV rather than being BAV only. However, we don't take it lightly as we completely stick to the strategy in terms of full electrification and we're doing all of the investments for the products. Some of you, I mean, could see what is going to come here. And I think, I mean, these products, all it means kind of, I mean, second wave after the first wave of early adopters, I mean, grabbed what you can get in the market with heavy discounting. I think there will be a much broader wave of, I mean, customer then honoring the value of the products, I mean, moving forward. And next to the very competitive space, I mean, today, probably the current environment is not a healthy and a sustainable one moving forward. I think we'll see some consolidation. We will see some normalization. I don't want to sound naive here. But I can hardly imagine that the current status quo, I mean, is fully sustainable for everybody. So, we are doing, I mean, what we have to do, which means we play the long game. We invest into the product. We invest into the charging. So, we address the customer concerns, which might still be today range anxiety, charging anxieties. So, we cover all of these. And we, therefore, completely stick to the strategy, use the tactical flexibility in between, and retain the overall objectives, which we outlined.

Yes. And with that, ladies and gentlemen, thank you very much for your questions and for being with us today. Also, thank you very much to Harald for answering the questions. As always, IR remains at your disposal for any further questions you might have. Have a great morning, great afternoon, great evening. Thank you very much, and goodbye.