Ladies and gentlemen, welcome to the Stellantis First Quarter 2024 Shipments and Revenues Call. I will now hand you over to your host, Mr. Ed Ditmire, Head of Investor Relations at Stellantis. Mr. Ditmire, please go ahead.

Thank you. Hello everyone, and thank you for joining us today as we review Stellantis Q1 2024 shipments and revenues. Earlier today, the presentation material for this call, along with the related press release, were posted under the investor section of the Stellantis Group website. Today, our call is hosted by Natalie Knight, the company's Chief Financial Officer. After a presentation, Ms. Knight will be available to answer questions from the analysts. Before we begin, I want to point out that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation. As customary, the call will be governed by that language. Now I would like to hand over the call to Natalie Knight, CFO, Stellantis.

Good morning and thanks, Ed. I'm pleased to present our shipment and revenue figures for the first quarter of 2024. Year over year revenues and shipment comparisons lagged stable customer sales due to transitions and our product offering, inventory management actions, regional mix and foreign exchange impacts. However, Q1 is also a period where we delivered improvements in key commercial dynamics. This is especially important as we move forward through 2024, where we're entering a phase which will be characterized by significant product portfolio updates and expansion, underpinning growth as the year progresses and right into 2025. So, let's start with our next chart. During Q1, our global sales to customers remain steady at 1.5 million units driven by material increases in two regions, the Middle East and Africa, up 23% and enlarged Europe plus 6%. Despite the stable retail sales development, shipments decreased by 10% to 1.3 million units, and net revenues declined 12% to EUR41.7 billion due to destocking and manufacturing initiatives as we prepare for significant new product launches later this year, as well as a challenging comparison to Q1 ‘23, when we build inventory by 228,000 units after prolonged supply constraints. Excluding these temporary dynamics, both shipments and revenues would've increased. In Q1, we also delivered improvement on three key commercial KPIs, which are setting the stage for us to deliver increased momentum later this year, which is why we are confirming our financial guidance today. First, we've stabilized and improved our market share sequentially in North America and Europe. In Europe, market share improved 230 basis points sequentially to 19.2%, while in North America, market share was stable with the prior period at 8.4%, demonstrating resilience even amidst multiple plant shutdowns as we geared up for the launch of our new EV models. Second, we delivered strong results in our strategic areas, low-emission vehicles, third engine markets outside of North America and Europe as well as commercial vehicles. And third, we've made important progress in preparing for a powerful new product rollout later this year. In 2024, Stellantis is launching 25 new or updated vehicles, including 18 BEV versions with the overwhelming minority of this still ahead of us. Let me walk you through our headline figures now. Consolidated shipments decreased by 10% year over year, impacted by destocking and manufacturing preparations were making to prepare to best position ourselves for the extensive product launches later this year. Let me provide a little more color here. In North America, volumes were reduced by nearly 100,000 units due to changes in production due to this product evolution, this includes 50,000 vehicles at our Brampton Assembly Plant. Following the discontinuation of the Chrysler 300, the Dodge Charger and the Dodge Challenger. We're now preparing to ramp up the next generation of the charger in Q3. Similarly, we completed the transition at our Sterling Heights assembly plant for the updated Ram 1500 light duty truck, which led to a decrease of almost 20,000 units year over year. We also had production downtime at our Stellantis van plant to prepare for capacity increases of our Ram ProMaster, which resulted in 12,000 fewer vehicles produced year-over-year. Finally, Q1 '23 included 12,000 units of Jeep Cherokee in the Belvedere assembly plant, which has been idled since then as we prepare for other electrification initiatives. I'll speak more about inventory in a moment, but it's important to remember that our Q1 focus has been on selling down prior-generation products in preparation for the launches of next-generation products, based on our new Stella platforms, which is expected to ramp up significantly in the second half of the year. Moving on to revenue. Lower volumes were the primary driver of the minus 12% development. Mix was also negative, due to a lower proportion of high ASP North American products in the period. The rest of the decline comes from foreign exchange, which we were able to more than offset with solid relative net pricing spot on the revenue development in the first quarter. Let's briefly discuss performance by segment. In North America, shipments declined 20%, largely due to the portfolio transitions I previously mentioned. The revenue decline was smaller at 15% due to positive nameplate mix, carryover actions and lower incentive spend in the period. A special call out for Q1 is our strong performance in the PHEV segment, where sales increased nearly 80% and contributed strongly to the global LEV growth of 13% during the period. This progress makes us a strong number two in LEVs in the U.S. Behind Tesla. With North America adding its first BEV models in H2, all on a multi energy platforms, we are confident in our ability to navigate the complex landscape of electrification. Moving to Europe, where the market has been tougher, shipments declined 6% due to the timing of production, where we took special actions to avoid oversupplying the market, given our heavy slate of upcoming model launches. Revenues are down 20% due to the higher buyback commitments related to our recent B2B deals with SYK and Avon [ph], as well as a somewhat lower BEV mix now at about 13% of sales, despite an improving net position versus our peers in passenger cars and our continued number one position in the important BEV Commercial Vehicle segment, where we enjoy a 33% share. Moving forward, we believe we can improve BEV even further due to the white space BEV model introductions in the coming quarters, including the extremely affordable Citroen eC3 and several C segment BEVs such as the high-performance Peugeot E3008 with the up to 700 kilometers of range. Shifting to our third engine, let me start with the Middle East and Africa, which delivered the Group's highest growth rate with consolidated shipments up 42% year-over-year. Our sales in the region put Stellantis in a strong number two position. Fiat's business in Algeria was the biggest driver, where we multiplied our shipments seven-fold year-over-year. Overall, revenues in the Middle East and Africa grew 24%. Moving on to South America, where we are the undisputed market leader, revenues were stable despite lower shipments, thanks to strategic price increases and the growth of our parts and services business, where we benefited from the recent acquisitions of DPaschoal in Brazil and Nore Alto in Argentina. For our Small China IAP and Maserati segments, market tightening and strategic shifts have led to reduced shipments and revenues. China, IAP volumes were down 46%, due to new emissions regulations, prompting inventory adjustments, while Maserati shipments declined over 50% reflecting the retirement of three key models. The Levante large SUV as well as the Ghibli and the Quattroporte Sedans. Maserati is now focusing in the near term on a tighter mandate in terms of its portfolio, reinforcing its luxury positioning with high-end variance like the Folgore and the BE versions of the Grecale, Gran Turismo and Gran Cabrio, and actioning new cost reduction strategies appropriate for its near-term scale while preparing for exciting new products based on next-generation platforms. Although they're not part of these numbers, I'd also like to congratulate our partner lead motor whose Q1 sales grew by 218% and are now in the number three position amongst new energy vehicles brands in China up from number four when we announced the partnership in October ‘23. Now let's turn to inventories where we improve sequentially compared to the fourth quarter of 2024. This is the first time since Q3 2021 when we have sequentially reduced total inventories and reflects the clear inventory discipline across all our segments. Between December ‘23 and March ‘24, we reduced stocks by 66,000 units driven by a decrease of 158,000 units of dealer stock, mainly in Europe, but with all regions contributing except for the Middle East and Africa where inventory expanded to underpin the region's exceptional growth. Looking forward inventory development will be in line -- aligned with the new launches and shipment evolution. I'd now like to provide some color on our outlook and financial guidance. With our full year ‘23 results, we highlighted the approaching and exciting new 24 product wave that I'm happy to confirm is fully on track. This expanded and enhanced our product portfolio -- expanded and enhanced product portfolio fuels opportunity for a more positive year-over-year revenue comparison, as well as more positive AOI and industrial free cash flows as the year progresses. Particularly, so in the second half, which is why we are pleased to confirm all of our full-year financial guidance today. Let's start with revenues, where despite unevenness in many markets, we believe the full-year macro environment remains positive for improving revenue dynamics, especially as we move into the second half when most of our new product initiatives come online. Therefore, we expect second quarter revenues to improve sequentially with smaller year-over-year declines, and for the second half of the year to be well-positioned to deliver positive year-over-year top-line growth. With respect to profitability, we remain fully committed to our double-digit AOI guidance for 2024, for the first half, we now expect a range of between 10% and 11% reflecting a large part in large part the softer first half, starting point on revenues, adverse regional mix, and an expectation of continued FX headwinds. As we think about the second half, we see opportunity to improve on that range driven in part by the upgraded product offer. Lastly, when it comes to industrial free cash flow, which is a calling card for Stellantis and a topic that we put, immense focus on timing of CapEx R&D and JV spend in ‘24 will be especially front half weighted to support the pending product transition. So, expect H1 industrial free cash flow to be visibly below last year's level. Now let's finish up by turning our attention to two topics that I'm personally very excited about. The first is a concrete example of some of these significant product portfolio upgrades featuring the fully renewed ram line being put in place over the next 12 months. Our updated core 2025 Ram 1500 already hitting the market in the first half of ‘24, features a new turbocharged inline six powertrain, the hurricane engine offers 25% more power and torque than the outgoing V8, while enhancing efficiency to comply with US emission regulations. And later this year, we'll start producing the Ram Rev, a top tier BEV version built on the new Stellantis frame platform, which is ready to provide new performance benchmarks, especially when it comes to range within the BEV truck segment. Following closely in 2025, the RAM Charger, a RAM extender electric vehicle with all the special performance characteristics of a BEV, plus a 700-mile range addressing long-distance customer needs and eliminating the challenges of low charging density areas. With these innovations, we're set to lead the light-duty pickup segment, offering the most advanced ice powertrain, a top-performing BEV and the first range extender electric vehicle, ensuring strong market competitiveness and pricing power. And I'd like to take a moment to provide you with some details about our upcoming June 13th Stellantis Investor Day to be held here in Auburn Hills, Michigan with simultaneous virtual participation facilitated via webcast. Carlos, myself, and group of our most prominent commercial and brand leaders will outline developments across our most important regions and functions. We want to help you better understand how we see the industry evolving, how we're leveraging standout technology, our leading operational discipline, and other competitive advantages that distinguish ourselves further, and how we're building a powerful and productive capital discipline that help us maintain and maximize sustainable returns. For those of you who are able to attend in person, you'll get the chance to engage directly with many of our most senior leaders and experience many of our exciting and new upcoming product portfolio launches before they hit the market. So, before I open it up to Q&A, I'll just take a moment to recap what I've presented today. In Q1, we focused it on managing the product cycle transition and inventory's normalization. We're delivering an important stabilization and improvements in our key commercial dynamics, such as market share, pricing and inventory levels, which put us in the best position to launch new products and expand the reach of our offering as we move forward in the year. And that product push itself is significant. It's being created on flexible platforms to be ready for different EV adoption scenarios with high agility to respond to a dynamic market, which will move us into a new phase of our story that will become even more clear in the second half of the year and beyond. Thanks for your attention. I'll now hand back to the operator for your question.

[Operator Instructions]. And our first question comes from George Galliers from Goldman Sachs. Please go ahead.

Thank you for taking my questions. I have three questions. The first one just relates to the volume evolution. Natalie, obviously, it looks like you've had a reset and some destocking during the course of Q1. How do you feel about the inventory levels in the U.S. and Europe at the start of Q2? Did you start to roll out the new products? Are they at the right level? Or will we need to see some further destock through the course of this quarter? The second question I had was really a clarification with respect to the higher buyback commitments in Europe on the rental car business. Can you just clarify, is this a higher buyback commitment? Or is it higher volumes with buyback commitments? Obviously, as this pertains to rental car business, generally, I think the market has a view that rental car business is less profitable and margin dilutive. Could you give any insights into how the profitability on that business compares to your broader AOI margins for enlarged Europe? Thank you.

Hi, George. Thanks very much for the questions. I think first when we look at your first question, which is around inventories and do we think we're at the right levels, I think what you'll see, as we move through the course of this year is that, not only are we continuing to make progress on inventories that are going to really follow our shipments, but also improving, I'll call it, the shape of those inventories. I think that's one of the big focus areas we've looked at in the first quarter was making sure that, we're not just trying to manage a number down, but we're trying to make sure that we have the right product that supports us as we're bringing out the new products, so that we're really able to maximize that opportunity and that you are going to continue to see as the course of the year goes on. But I think in general at the level if you're trying to say, ''Hey, how do I see that?'' We're expecting our shipments in the second quarter to be above where they were in the first quarter and that means inventories will follow the shipment. The second question that you had was about buybacks in Europe. And there, we are having higher volumes with the buybacks. That's related directly to those two rental car deals that I mentioned in the prepared comments. I think that what's changed here, as we look at these and why we were excited and announced those in the first quarter is that, they do have a different dynamic. You're right that, historically those deals were sort of seen as the volume deals, where you had an immediate trade-off in terms of margin. I think as we go forward, we look at those as being something that's very inline with other margins that we have in Europe. It's something that is, of course, when you win those opportunities, a direct market share trade between yourselves and your peers, so something that we're very excited about. In terms of from a revenue line, just because they are buybacks and there's a different treatment with the revenue recognition, you don't see it as quickly in your results.

We will now take our next question from Thomas Besson from Kepler Cheuvreux. Please go ahead.

Thank you very much. I have two questions as well please, Natalie. The first is on the powertrain flexibility of the new BEV launch notably over H2. Can you tell us, how rapidly you can eventually introduce ICE versions of BEV models, so depending on the market's response to the product launches and whether this is fully integrated in your CapEx and R&D plans? That's the first question. The second, I think, there's going to be a press conference on that, but I still want to ask about it because you mentioned it. Can you tell us a little bit more about Leapmotor and the international GV that's going to be ramped up progressively in the coming quarters? Is there anything you can mention for that in terms of where the vehicles may be built, and whether it has any direct impact on H2 or whether it's more a 2025, 2026 driver for you? Thank you.

On those two questions. The first one was about the new products that we have coming and the ability to take those powertrains from BEV vehicles also into ICE or other versions. And this is one where I am really proud of the product launches that we have coming. This is something where, I mentioned in the comments that we have 25 new launches coming this year, 18 of which are going to have EV versions, and we actually have 21 of those to go. So, there's still a big piece of that needs to get visibility externally. So just in that definition, what you hear is that the majority of our products are either ICE vehicles or intended for to utilize that multi-energy platforms that we have. I think this is one of the great opportunities that we offer vis-a-vis our peers is having the multi-energy platforms for all our products and development and having the agility to move between them. Having said that, not every product will come immediately in those versions. For example, we'll be bringing out the Jeep Wagoneer S that's going to be an only version in terms of how we bring it to market. And you'll see others where they come very close in timing. So, if I think about our e-C3 or the Peugeot E-3008, an e vehicle comes first, but in the same both also in the first half, you'll see the ICE versions come along. So, our goal is to really put ourselves in a position where on the one hand we can show the market that we know where things are moving and that we're committed very much to the EV market, but on the other hand, that we have the flexibility to go and grow where the consumer demand is. Your second question was about Leap Motor International and the JV and how that's moving. You will see the timing is things are moving there quite rapidly. We've had very positive progress and you will start to see the first sales and revenues coming in there in the second half. I don't think it's going to be hugely material for us as a group, but you will hear us talk about that. We will make sure to highlight as those things come to market and as they appear. First is Europe, but we are seeing a lot of interest from both Middle East and Africa and South America to get moving on these products because they are very cost-competitive in their markets. And we see probably more opportunity there than we initially envisioned when we announced the joint venture.

We'll now take our next question from Michael Jacks from Bank of America. Please go ahead.

Good afternoon, Natalie. Thank you for the presentation. I have two questions. My first one is on the Ram 1500 model changeover. There still seems to be significant inventories of the older model of dealers. How should we think about the impact of incentives needed to clear the stock and make room for the new 1500, or was that already partly accommodated in the incentive provisions you booked in the second half of 2023? And my second question, I'm wondering if you're in a position at this stage to perhaps quantify the magnitude of raw materials and efficiency driven cost savings expected for this year, and how we should think about the phasing of these savings between H1 and H2? Thank you.

Let me start with the raw materials question. I think we've actually already provided that outlook, which is we do think there's probably about EUR1 billion of savings that we're going to be able to show deliver this year versus last year. I think what you'll see in terms of the phasing on that is that we'll probably be about two-thirds in the first half and a third in the second half. In terms of how those things are moving? Don't forget when it comes to our AOI, I mean that's one piece of the puzzle and there's a lot of other moving parts, but I think that is one, we've spoken about very openly as one of the tailwinds in our development. When it comes to your first question, which was the RAM 1500, and sort of what's the situation there? What we feel is that we're in a much better position with our inventories in the US versus where we were at the end of the fourth quarter. It's something where we've been thoughtful about how do we approach that in a smart way. I think one of the things that we've really been trying to do in North America is look at overall how do we make our pricing most appealing to consumers, but be able to hold that level. And we did have modest price increases in the first quarter. What you see as an example though, and I'll use Jeep versus Ram, but the concept is the same is we looked at it and we said, how do we make our products much more attractive versus competitor products when we're seeing that the economy does feel tougher, that people are looking for better pricing. And what we were able to do was we were able to take our MSRP down but take our incentives down at the same time so that we saw a net pricing improvement that was -- or a net pricing that was very, very stable with where it had been. When I look at the Ram 1500 in particular, we know here that the demand, it remains very strong. And so, as a result, the sell down that we've seen in the last 24 months is really progressing nicely, and that's without having to do any overspend on incentives. I think our incentive model as we're exiting this model year is something that's below what the competitors are doing in terms of supporting their prior model year product. And I think we feel very, very good about the new product that's coming.

And if I may just follow-up on the first part of the question that you answered there, might you be in a position to give any sort of framework or quantify the magnitude of efficiency-driven savings for this year?

I'm not going to give you one overall number for that, but what I'm happy to do is talk about where those efficiencies are coming from. I think there are a couple that are not as hard to for you to put some good ideas behind what that would have to be in terms of a quantification. Where we're looking at, I think the one that I can probably do the best quantification for you on is on our outbound logistics area where this has been a topic that we've been working on the last couple years or the last year. And what we've seen is an effort to really establish an internal fleet when we look at Western Europe and as a result be able to reduce our volatility. And the net that we're expecting from that is that you will see a 25% reduction in those outbound logistic costs. I think that's a number I can quantify for you. We're going to continue to optimize our labor costs. This is something that has been important both on the white collar, and to a lesser extent on the blue-collar side, something we've done consistently through the merger and there will be more opportunities, there other fixed costs that we're always running after. But what I want to call out, because I think this is the one that is underestimated by people externally is really the power of our converging multi-energy platforms. On the one hand, this gives us flexibility in terms of what we bring to the market and how we meet consumer demand, but it also has a really big scale effect for us. This is something where if you look at our business going from having a huge number of platforms historically to in the future having four or five, where we're really bringing all our products to bear. This is something where we're already seeing that this year as we bring products like the Wagoneer and the Dodge Charger out both on the large platform or we're able to bring a variety of our C segment vehicles in Europe out on the Stella medium. This is something where that piece is coming into play. It allows us not only in terms of what do we have to look at on R&D and CapEx, but also in terms of those incremental costs and how we bring our TPC or total cost down over time.

Our next question comes from Patrick Hummel from UBS. Please go ahead.

Yes. Thank you. Good afternoon, Natalie. Two questions also from my end. First one, and thanks for all the reassuring comments about the profitability of Europe F launches, thanks to the multi-energy platforms. I'm just wondering, if I take your first half guide for AOI margin between 10% and 11%, that means about EUR9 billion let's say, if I round it. AOI content for the full year is EUR22 billion suggesting EUR13 billion in the second half. Is that something you feel comfortable with in light of all the puts and takes you talked about?

I'm not sure about the absolute number, but I would say is, if we look at the second half in terms of AOI, I did make very purposely the comment that I see more potential, when we look at that in the second half of the year. It's something where we expect to see an improving trend, based on the product launches we have coming, based on the improving comparable, not having the strike impacts in North America from the prior year. Also, we are making improving the profitability of our BEVs as we go into the second half. Where you might expect, ''There would be a more significant dilution, that's something where we feel more optimistic about in terms of our ability to manage that across our profitability in the period.

Thank you. My next one, just in terms of the next few years and the ICE product plan. Obviously, EV transition happens a little bit slower than probably many people have expected. My question is, simply are you revisiting ICE versions of models that you previously considered to be best only on the new platforms? Are you thinking about just expanding the ISN hybrid offering on these new Stellar architectures? Thank you.

On that one, what I would say is we're actually, I think very open to saying how can we best address the consumer need. The number that I talked about in terms of the '25 for this year isn't about, ''Hey, how do we just expand BEV-only products into other offerings?” It was definitely reflecting all the things that we had planned for this year. You would see their things like our ProMasters in the U.S. that's coming out in the second quarter, the full van lineup in Europe in the second quarter, the heavy-duty pickups that were coming out in the fourth quarter, the 2,500 and 3,500 from Ram. So, it's definitely something where we think about it quite holistically, but I also don't want to ignore the fact that we want to stay close to the consumer and if we see there's an opportunity and those models where we have started, we've introduced as a BEV first, and that's the name first, we might look at is that an opportunity. And we also can look at are there the opportunities in terms of models that we have out in the market and wanting to extend their life period if we see continued demand.

Jose Asumendi from JP Morgan. Please go ahead.

Jose from JP Morgan. A couple of questions please. I just want to come back to this, to the margin guidance for the first half. I mean, does this imply that basically pricing does not offset currency headwinds that you are going to see a more larger negative impact of volumes and cost savings will not offset the fixed cost? I'm just trying to think a little bit about the buckets to get the margin in the first half. And the second question as a follow-up to get to these margins in the first half, this implies basically Europe below, well below the 10% margin. So, has there been maybe a pricing deterioration in the European market that we're not aware of? Maybe if you could comment on those angles. Thank you.

Okay. When we look at the second quarter, I think what you can expect is that you will see incremental or sequential improvements versus what we've shown you in Q1. And that has to do with on the shipment side and the revenue side. I think in terms of that piece, expect the volumes in Q2 to be above Q1. In terms of your question about pricing and how would is that something that's going to not be able to compensate Forex? No, we expect pricing to definitely continue to fully compensate, if not overcompensate for Forex as we look at the second quarter. I think the last part you asked on there was about Europe in particular and kind of what's the margin outlook and what are we seeing there? I do think it's fair to say that the European marketplace is one of the tougher ones out there and it's about, I think winning is about having that right mix of profitability and market share and we want to optimize as both of those as we go forward. And so that's something when we look at how do we succeed in the European market, it's about being able to make sure that we are able to do both of those things successfully. But I do think that would -- that's when we look at Europe, there have been, you did ask specifically I think about net pricing. Was that right?

Correct. Yes.

Yes. We have said when we look at the margin in Europe, there were three factors that drove the margin. Or our sales, excuse me, our revenue and you'll that will translate also into margin over time is on the one hand we have the higher rental car sales and those again, I think promising, in terms of margin impact versus maybe what's been expected in the past. But it is an impact. We've talked about on the revenue side, love vehicles having, being a lower percentage of the mix. That's actually, when we think about it from a margin perspective, obviously positive. But the other item that I called out was that you did see lower net pricing in the market. I think, we have some of the best relative net pricing in Europe, but it is a place that's been a bit under pressure.

The next question comes from Bruno Dossena from Wolfe Research. Please go ahead.

Thanks for taking my question. We know that Stellantis has a large number of prospective launches this year in the second half. Could you help us think about the impact of these launches on market share and relative pricing as we move through the year, and then longer term, as we've seen this general downward trend in market share, especially in North America. And I recognize that a large part of that is intentional due to your evolving product mix, but how should we think about an appropriate trend market share in North America and other, and other key regions as you balance utilization and price and mix? Thanks.

Thanks for the question. I think they're both rather philosophical questions. When we talk about the launches in terms of their impact on market share and pricing that's indirectly at least a question on our market share outlook. And I think they're -- for us, it's all about how do we get the best financial performance for this business. And that means we have to find that right balance between profitability and market share. And that's why I'm excited because new products are key. That gives us an ability to reset market in terms of different pricing. We're moving heavily into LEDs and BEVs where we have opportunities in terms of both market share because there's white spaces we haven't been in as well as pricing opportunities for us there. When we look at North America specifically, because you asked there about the trend, I actually am very proud of the first quarter that we were able to hold a stable market share that is an accomplishment for us in North America when we look at the last year and a half or so. And that's despite what we see as a segment mix shift. The US market has become tougher. There's a bigger focus on smaller and less expensive vehicles. At the same time, it's something where it's really important now to make sure that we have the stronger products coming that are going to allow us to continue to fight for the gains as we move there. I am optimistic. I think when we look at North America, our eyes, -- the next big target for us is 10%. We have some things to prove before we're going to get there, but we're on our way. Things like that. Big growth of the PHEV where we had almost 80% growth in the period and we were now number two behind Tesla that's saying we're attacking, I think, the right segments in terms of where there is future potential growth and profitability. You asked kind of generically about other regions, what I can say when we look at the European market, this is a space where we also see lots of volatility in the market in terms of what's happening day to day with regulation and different items that are changing there. But we're very pleased that we were able to just from Q4 to Q1, increase our position by 230 basis points. And there again we're at a -- our vision is how do we get to that 20% threshold? And I think that's one where -- it's again, very much the finding the right mix of increasing the share, but doing it in a profitable way. And so, what you're always going to see from Stellantis is not the big land grab in terms of how do you grab share in a way that isn't sustainable, that isn't healthy, but how are those things where we can really create what we believe are long-term opportunities? And that's why this product portfolio where on the one hand we are able to build share, but we're able to do it with exciting products that we think really catch the appeal of consumers, but also do it in the background in a very financially secure way for us, get us excited about what the potential can bring. We think we're really in that spot just in terms of we're transitioning out a set of current-generation products and getting ready to usher in that new generation, where people will really be able to see the strength of the product portfolio and how we bring in the market.

Okay. Thank you. Just a quick follow-up. Can you just remind us how you're thinking about the net impact of pricing, specifically relative to the change in pricing net of currency relative to change in variable cost? In essence, do you expect contribution margins to be trending up or trending down this year?

I'm sorry. We had a little trouble hearing you. Could you repeat the question?

Yes, sorry. Can you just remind us, how you're thinking about pricing this year and specifically pricing relative to the change in variable costs? In essence, like do you expect contribution margins to be trending up or down this year? Thank you.

I think that's something that you're going to see. Obviously, it varies by region and it varies by model. But our goal is always how do we improve our TPC, our costs in terms of the product and that's something, where we expect that number to continue to decline this year. That's one of our -- we're working very hard to reduce that number, and that will definitely help us, as we do that. I think it's also something that is going to be something more than able to compensate the potential price reductions.

We will now move to our next question from Henning Cosman from Barclays. Please go ahead.

Hi. Good afternoon. Thank you very much. Hi, Nathalie. Henning speaking. Thank you for all the color on the margin side. I wanted to please clarify what you said on the free cash flow. Did I hear you right that, you said first half free cash flow clearly down? Perhaps I can then also bring up the consensus figure. I believe the consensus stands at somewhere around EUR11 billion and EUR11.5 billion. Would you be prepared to put that in a bit of context or tell us, if you are comfortable with that figure, just so we get a bit of reassurance on that side as well? Secondly, I think we've tried to touch on it from a few angles, especially on the U.S. inventory. Thanks for the comment that you said, it would be trending inline with shipments. Does that basically mean, you are happy with now the absolute inventory level in the U.S. and we shouldn't be expecting any destocking going forward at all basically? In that context, if I can just ask you again about how that reconciles with the 10% to 11% margin in the first half? Because if there's no U.S. destocking, volume shouldn't be that bad and then pricing is up. You have raw material savings, logistics savings, synergies. It doesn't quite want to reconcile for me with a margin level of at least the bottom end of the range. Maybe you can help us what we're all missing as to how to get to that bottom end. Thank you.

Okay. Let me start. There were several questions in there, so if I don't get to each of the individual sub points, remind me. But maybe starting with the free cash flow. As I mentioned in my comments, free cash flow is something that is very important to us at Stellantis. This is what we see as, one of the real core USPs of our business versus many of our peers. So, you can be confident that we are very focused on how do we maximize the free cash flow, especially as we look at the full-year number. I'm not gonna give you a specific full year number. We don't do that. We've just given you the guidance that it's going to be positive and I hope that the strength of my answer here is telling you how seriously we take it. When we look at the first half, I wanted to be clear with people, because they are basically two things happening. One is you've seen what's happened in terms of our shipment and revenue development in the first quarter, and that's something that will have an impact on profitability and that plays into free cash flow. The other one is very strictly just a timing impact in terms of how we look at our R&D, our CapEx, and I'll call it especially our investments and joint ventures. There are -- a lot of them are around batteries and things in the electrification space. And if you look at the last two years, you've seen us have probably a split in that spend of, I'll call it 60% to 65% of it has been in the second half with the smaller portion being in the first half. This year, that number just flips around, and that's because those are, that is very much tied to our product launches that you are going to be seeing skewed to the third and fourth quarters. So that's really the driver of it. But in terms of our confidence in free cash flow generation, our commitment to keeping that strong and steady and what does that mean in terms of consistent shareholder returns? I want to make very clear that continues to be a big priority for the group. The second thing that you asked about was inventories, just in terms of where they are in North America. Are we satisfied with the absolute level? I think your language was a little provocative with would we never change the number again or would we be satisfied with that number forever? And I think the answer is when we look at our position in North America, I believe we are in a spot where it is in the healthy range. I think it continues to be at the high end of where I as a CFO would like to see it. But I also want to make sure that as we are looking at our inventory, we are able to preserve our pricing power, we're able to grow market share, we're able to do things and what is a sensible way, where there is a lot of noise happening in different parts of the US market. So, it is something I made that comment of, hey, watch our inventories to move in line with shipments, because I definitely don't want us to be in a spot where we're impeding growth, because we are looking at pushing too hard on getting inventories down on an absolute level. As I mentioned earlier, for us, it's all about having a healthy inventory mix and making sure that we're really getting that balance right between what does the consumer want and need today, and at the same time, how do we bring the right product to market as we go forward? Those are my comments.

No, that's great. And no provocation in intended. I'm just trying to gauge if we should expect in any quarter, wholesale being materially weaker than retail. That's just what I was trying to get at. But thank you very much for the color.

No problem. And don't forget, if you look at our Q1 figures, I mean, they are below where they were in December, so we are, I think we're -- it's something where when we do that in a good and healthy way, I think we're seeing progress on that item. And it is something we care about. We just want to make sure we get all of those factors aligned so we're not doing it in a way that impacts our ability to really maximize the impact of our new products coming.

[indiscernible] from Stifel. Please go ahead. Your line is open.

I would have two follow-ups. The first one would be on the revenues. How should we think about the revenue trend in ‘24? Should we think about revenues being broadly flat for Stellantis with H2, revenues offsetting the softness of the first half? It would be my first question. And the second one is in H2, what would be the biggest earnings driver? Thank you.

On revenue trends, I'll give a little bit the same comment that I did on free cash flow, which is, we're not giving any full-year guidance and what is different than what we have presented to date, and that's that -- what I've said is if we look at our revenues, we're expecting that macro backdrop to be something that is improving as we go throughout the year. I also mentioned that we see sequential improvements in the second quarter and in the second half. Revenue's always something that, there's a lot of different pieces in there. There's seasonality. I don't want to get into all of the specifics, but I do think when we look at the second half you will definitely see sequential improvement versus where we've been, which would suggest something certainly much higher than what we've delivered year to date. On the earnings question, I'm sorry, what was that question?

It was a very simple one. High level, what will be the biggest earnings driver in the second half of ‘24?

Sorry about that. I just wrote down earnings. Three things there really easy. One is of course, the launches. That is something that's critical for us because that's where we're going to, while they may not be huge in volume as they first come out, that's where you create excitement with consumer, and we definitely have some blockbuster products in there as well. As I mentioned, another one of course is the third engine. We didn't talk about that much today, but that's something where we're very pleased with the development of that piece of our business. I think it's something where Middle East and Africa continues to go from strength to strength. When we look at just the quality of the business, again, there's always seasonality in the business, but something where it -- I really do believe that that can sustainably be for us, a part of the business where we deliver the highest margins in the group as we go forward. Also, you'll see I think, strengthening of the South American market as we go forward in the year. It's really good progress in the third engine. I could talk about our CVs as well. I mentioned that we're having a launch of the full van lineup in Europe. It's definitely a spot where we've now got these number-one positions in Europe, in the Middle East and Africa and South America. We really are growing the quality of that business and a big focus on how do we look at that even here in North America in a more substantial way. And the last piece that I would say is, it wouldn't be a Stellantis question about earnings if we didn't talk about cost reductions. That's one of the things we're very focused on. As I said, you'll see lower spend on R&D, CapEx and joint ventures in the second half. We have a lot of our efforts, when we look at the initiatives we start every year, where we see a natural crescendo of those as we go into the second half and that will definitely be the case here again this year.

Thank you for your questions. And we have time for one last question today from Harald Hendrikse from Citi. Please go ahead.

Thank you. Can you hear me okay?

Yes. Thank you.

Thanks so much, Natalie. Great conference call. I don't think I can remember a call, where we got quite so much color and yet then I have the cheap chat for more. On the margin guide specifically for the first half and maybe a little bit for the second half, but I just wanted to give you a chance to talk about the regions a little bit more. The inventory correction seems to be bigger in the U.S. than in the other regions. Should we expect after what was an incredible first half 2023, is that where really the biggest part of the margin normalization comes? Secondly, sorry, just on the macro, but you've mentioned a few times and a few of the other companies have mentioned the second half of the year is going to be better. Unfortunately, I've been an analyst for 25 years and whenever I've heard that, I've always been a little bit scared of those statements. Can you just explain, where that macro improvement is going to come from and why you're thinking that way? I would have thought you guys are the ones that really would manage the costs ahead of any macro assumption.

Maybe on that part first, as I said, it's not a Stellantis call if we aren't talking about cost and financial discipline. That's obviously part of our recipe. When we look at those macro factors that are moving, I think we have seen timing on the interest rate push back a little vs, what our expectation would have been earlier in the year in terms of potential interest rate easing. When we look at our logistics, our outbound logistics improvement that we're projecting, that definitely accelerates as we go into the second half. It's I think something that is happening externally, but also something that we're able to be part of driving that solution. I think there are pieces in terms of, what happens potentially on the political front, which there may be positives or negatives associated with that, but at the moment, we're in a little bit of a wait and see position. And so, there's certainly potential that can come there. The other part just on the macro side that's very positive from the industry side is, while I think we've got definitely the best product portfolio of things coming to market in the rest of the year, there are a lot of people out there with product stories that are coming in specific categories and this is a spot, where I do think that has an opportunity to lift the industry and consumer sentiment, as we move into the second half. On your comment about margin guidance in terms of how things are happening with the regions and specifically you asked about inventory, let's make sure, it's clear that, the biggest reduction in inventory in the first quarter came from Europe. That really is the spot where I think we probably had the biggest need in terms of that's where you'll see the most of our new products on the BEV and LEV side coming first. A big congratulations to that team for driving that improvement. But you're right, there were improvements in all of our regions except for the Middle East and Africa because we've got so much growth coming there. I think substantively in North America, there were very important improvements that happened. When you look at your comment about what does that mean for the margin guide by regions and why have we looked at this perhaps more conservatively than what people would have previously expected. I think we're just looking at, what is the development in each of the regions that we've seen in the first quarter and we want to make sure that we're not overly optimistic. That at Stellantis we put a real value on making sure that we guide to a range and a belief of what we think is very, very realistic. And we're very pragmatic about that. I believe while we have improvements coming in North America, I think that's the spot. When we look at the first half, you will see declines in margin in several of the segments.

Yes. Fantastic color. Thank you so much.

Good, then I'll take that as a last question and maybe it just gives me the opportunity to wrap things up a little bit from my side. I think it's really important when we close out today that we just remember, we are in this transition period where we are getting ready to show you the true color of Stellantis as we bring new products to market where we have multi energy opportunities that'll allow us to benefit from a cost side, from addressing the consumers in the best way and also showcasing our agility. I think, while there are things, we would love to have seen different and better in the first quarter, we are very proud of where we're moving when it comes to market share on inventory. We think we're doing things in the right way. And although there are I wanted to make sure everybody had better clarity about what our results are likely to look like at the half year. You hear a clear commitment from us to maintaining our financial guidance for the year. We're excited about the opportunities ahead of us and are really looking forward to speaking more with you in ‘24. The next opportunity is our Investor Day on June 13th. Thank you very much.