Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Mercedes-Benz, I'd like to welcome you on both telephone and the Internet to our Q1 results conference call. We are very happy to have you with us today, Harald Wilhelm, our CFO. In order to give you maximum time for your questions, Harald will begin with an introduction directly followed by the Q&A session. The respective presentation can be found on the Mercedes-Benz IR website. Now, I'd like to hand over to Harald.
Good morning, everybody. We are happy that you find the time this morning despite all of the other news to share the update on where we are in 2022. Especially, I mean, due to the war in Ukraine, this has been a very challenging start into the year. It is obvious that the business challenges are nothing compared to the human tragedy. We at Mercedes-Benz try to support the Ukrainian people with several initiatives, big and small. This being said, now I would like, I mean, to switch over to the Q1 results. What can we say if we look at them on the page three? Well, I would say these results, I mean, reflect resilience and pricing power.
If you look at, I mean, the revenue, I mean, they are up despite lower volumes, and that's exactly pricing power and the shift in mix at work. If you look at the Group EBIT at EUR 5.2 billion, the reported one, that's obviously solid underlying performance. It also includes, I mean, benefits from our restructuring of the Grand Prix engagement, as well as the sale of our sales outlet in Canada. But we also took some adjustment on our Russia business, and we'll talk about that a bit later. If you look on the underlying performance, the EBIT adjusted of EUR 5.3 billion, I mean, that is a reasonable level of profitability that has been driven by good mix, solid pricing, favorable used car performance, but also effective cost measures, I mean, across all businesses.
We didn't stop to put focus on cash generation, continued on that one, and you can see that, the NIL ended up at EUR 22.7 post the spin by the end of the quarter. What were the key highlights on the Mercedes-Benz car side? Page four. The demand for our products, I mean, remained extremely strong in the quarter. However, I mean, the volume in sales had been impacted on a continued basis by the semi constraints. The semi capacity has been coming back online, but still, I mean, a high level of volatility and selective bottlenecks among critical components, which did not allow us, I mean, to push all of the demand through in terms of sales.
There is still, I mean, limitation in terms of visibility, when exactly these bottlenecks will ease. However, I mean, overall, we do expect some stabilizations throughout, I mean, 2022, but probably more in the second half of the year. Obviously, we continued our effort to work directly with the suppliers, but also with the semis themselves to make the system more robust and resilient. Maybe a few words on the situation in Russia and Ukraine. We strictly comply with all applicable sanctions and embargoes against Russia and personal sanctions in this context. That's why we suspended the export of passenger cars, vans, and spare parts to Russia, as well as the local manufacturing activity in Russia. The export freeze was effective immediately. Production sales, I mean, are shut down in an orderly process.
It is obvious that we cannot proceed with our usual business activities, and therefore we suspended them. Obviously, we continue to monitor the situation on a 24/7 basis. Needless to say that we all hope for a political situation, but I wouldn't wish to speculate further on this. I will come to the Q1 financial impact, I mean, a bit later on. On Ukraine itself, we are working with the suppliers in Ukraine to supply some components for our products. We are monitoring the situation here as well very closely and remain in close contact with these suppliers to work, I mean, on solutions to safeguard the supply chain. That includes, among others, to transfer production to other locations, which progressed pretty well in the meantime.
Again, in the first quarter, our plants showed a very high level of flexibility, and therefore we could avoid downtime as much as possible. Due to the current situation, we had adjusted, I mean, temporarily some shift plans at some plants, but didn't have complete shutdown. What are the other key messages, I mean, on the Q1? Well, we see a shift in the top-end vehicles. See it on the next slide in a second.
We're moving up also on the EV side as per our strategy, with important milestones in terms of the EV transition, definitely with the EQXX. I mean, record drive of more than 1,000 km from Stuttgart to Cassis, if you do it with a monster battery, as Marcus or Ola are saying, that's not probably a record, but I mean, we did it as a record as I think. I mean, the number which really makes a difference here is the average consumption of 8.7 kWh/100 km. That is, I think the true news in this experience. We opened the battery factory in the U.S. Quite some of you were with us over there.
You could also experience the EQS SUV on-road and off-road. In the meantime, we presented it, I mean, to the world in April. A lot of momentum, I would say, on the EV side. Early April, we also did the first holistic comprehensive ESG conference. I hope you appreciated that. A key message over there, it was, I would say that we aim to slash the CO2 emission by more than 50% by the end of this decade. Moving to page five. Again, we hope that you appreciate, I mean, the transparency, and these KPIs should demonstrate the progress we're making on the strategic front. Whereas the main total sales decrease, we can see that the top-end vehicles, I mean, grow, and also the electric vehicle.
5% growth on the top-end vehicle side, 19% growth on the electric vehicle side again, whereas total sales, I mean, were in decline due to the same situation as explained before. How was it possible, in particular in the S-Class segment, with the S-Class, but also the EQS that favored the evolution on the top-end side and on the EV side, as well as a decent contribution on Maybach. I would say you can see that the strategy is gaining traction here. We want to accelerate this development further, and we should give you more color on that on May 19th during our Economics of Desire event. Page six on the financials. Sales were down by 10%. I mentioned that already.
Revenue was up by 8%, due to the net pricing and the mix. The ASP, the average sales price, rose by 18% to EUR 70,500 . We now calculate that number without the BBAC sales volume and also the BBAC parts by parts revenue. So I would say it's a clean, comparable number. EBIT adjusted went up by 21% compared to the quarter, I mean, a year ago. On the cash flow side before interest and tax, that was at EUR 1.7. We see some impact from working capital effects, which were chiefly due to the semi supply constraints, but also now some logistic chain issues related to Ukraine, Russia, and China. As I mentioned, China, maybe a word on the situation there.
So far, we have successfully managed, I mean, all COVID and supply chain-related risk, I mean, in China. In the first quarter, there was no major impact on our main operations in China. Overall, we have achieved a strong price premium over competitors in China during the first quarter of 2022. Despite COVID and supply chain dynamics, we delivered more than 190,000 passenger cars to customers in China during that quarter. EV saw a steady growth, while plug-ins were even setting a record high. The top-end vehicles, I mean, including the AMG, the Maybach, the G-Class, reached double-digit growth, among which the flagship S-Class maintains its segment leadership. Our sales rate of Maybach vehicles has been at over 1,000 cars for almost every month since June 2021.
Looking forward, we continue to monitor, I mean, the COVID and supply chain risk in China closely, and we'll react, I mean, flexibly if needed. Due to the COVID-related supply shortages, we have flexibly adjusted our local production program in China for April, I mean, and May. We all know in China, there is a risk of continued but even extended lockdowns, if we think of, for example, I mean, about Beijing, with potential, I mean, additional impacts which could impact, I mean, local production, but also global supply chains. Looking at the EBIT bridge on page seven. Even with a lower volume, the bucket volume structure, net pricing increased significantly by EUR 1.8 billion in one quarter. Therein, I mean, the pure volume effect is a negative low three-digit million EUR figure.
The structure, and here in particular, the top-end vehicle sales, i.e., the S-Class and the Maybach, and the net pricing are both significantly positive. On the net pricing, we see the combination of further reduced, I mean, discounts, but also further list price increases in many countries, I mean, at work. Used car prices in Q1 had a positive lower three-digit million EUR effect. For the full year 2022, we expect the used car pricing effect to impact with a low negative 3 million EUR. On the industrial performance, we had to face higher raw material costs on steel, aluminum, copper, lithium, but partly compensated by commercial efficiency.
We had some increase in product-related expenses, and then in particular, I mean, the disruption cost in our production network due to the semi situation, the stop and go, the logistic cost, but also, I mean, a step up in the energy cost created headwinds. Overall, you can see in the Q1, we could successfully compensate the raw material cost and the inflation by pricing. You can see as well that the fixed costs, I mean, as a whole, continued to be under the scrutiny of stricter cost discipline. The other, I mean, was negative. That was chiefly a Q1 2021 impact from the ChargePoint IPO. The adjustments referred to the restructuring of our Grand Prix activities, as well as the divestment of our own retail in Canada, as already mentioned.
We also took, I mean, an adjustment on the suspension of our industrial activities in Russia. In this context, we expensed EUR 658 million on the car side in connection with the adjustment of our business activities in Russia. Overall, you can see the EBIT adjusted at EUR 4.2 billion, 16.4% return on sales. Cash flow, page eight. EUR 1.8 billion on the reported, EUR 1.7 billion on the adjusted. As I said already before, we have a working capital charge of close to EUR 900 million that is due to the increase of semiconductor-related unfinished products and logistics chain disruptions causing higher stock. These effects are more pronounced than the positive ones from an increase in the trade payables.
On the inventory side, we expect that level to continue in the quarter two, roughly at that level. Before then, it should start to normalize in the second half of the year. On the investment side, EUR 400 million from the divestment of the own retail, as I mentioned. The net investment in PPE and intangible asset equals the depreciation and amortization and impairments. I think that is again an interesting demonstration in this quarter that we can transform our business. I would do not compromise the investments, I mean, into the future, into electric, into software, at the same time, staying within the ambitious targets we set ourselves.
On the other side, you see the payments related to diesel, the BBAC at equity reversal, the other retail outlet sales and the MB Grand Prix restructuring, as already mentioned several times. On the adjustments, you find the usual legal proceedings on diesel and the M&A stuff. Over to the van. What were the highlights, I mean, on the van side. Also very strong market demand for the vans. Here, I mean, it was possible, despite the semi constraints, to keep unit sales, I mean, flat year-over-year. Which I think, given the context, was a good achievement. The first quarter it showcases, I mean, the best ever sales of the Sprinter and the Metris.
I mean, this is the U.S. name for the Vito in North America, with more than 17,000 units. We're also progressing on the battery electric van sales, with EV sales being up here, I mean, almost 60% year-over-year. The absolute number is still, I mean, a low one. Great potential there. We have also new products, I mean, in the small van segment. The T-Class has had its world premiere. The new Citan, with a strong customer demand, is pretty refreshing. In the course of 2022, the EQT and the eCitan will complete the portfolio of electric van offerings in all segments. The margin improved also significantly. Here as well, we see a healthy mix in pricing.
Looking on the page 10 on the financials, sales flat, the revenue is up by 9%. The profitability demonstrating a good product mix and net pricing. EBIT adjusted is at EUR 466 million. Cash generation well executed. Here we were successful to keep the inventory at a low level. If you look at the bridge on the page 11, here in the bucket volume structure and in the net pricing, obviously the volume is stable. You can see that the structure and the pricing provided basically EUR 200 million of benefit here. The used car business, I mean, also had a favorable impact.
On the industrial side, you see, as on the car side, that raw materials, and the disruption cost, in the production network, I mean, triggered, I mean, some headwind. Despite that, the overall, I mean, EBIT adjusted 6% and return on sales of 12.6%. Adjustments are EUR 51 million in particular related to the business adjustment in Russia, as explained already on the car side. Page 12 on the cash flow. Here cash flow is at -EUR 380 million reported, more than EUR 400 million, I mean, adjusted. Working capital remain favorable. I said already that despite the same related issues, we could maintain it at a flat level. Investments, we had also a share here from the sale of the sales outlet.
The depreciation and amortization here on the van side is higher than the net investments. That is, I would say somehow, I mean, cyclical effect. We should see further in the year that the investment side is coming up as we are progressing with the development of the VAN.EA platform. Over to mobility, page 13. Key highlights over there. Supply constraints and also lower market penetration also had an impact in terms of the new business volume. The interest margins remained on a very solid level. Net credit losses were at a very low level. The new business in Russia has been stopped, and we adjusted the credit reserves on the Russian portfolio. At the same time, we continued, I mean, the strategy execution in the first quarter. Looking at the financials, page 14.
The new business decreased by 13%. The truck spin-off had further to the issues I mentioned on the page before, I mean, an impact here. The portfolio increased by just, I mean, 1%, and EBIT adjusted increased by 6%. How was that possible? Page 15. On the positive side, we have mobility services and fleet business performances which improved in the quarter. The margin also benefited from lower refinancing costs, I mean, in the first quarter, and a bit of a favorable, I mean, FX development.
On the negative side, the volume reduced, I mean, due to the truck spin-off and the lower sales, the lower vehicle availability and the penetration rate as commented, with some higher expenses due to project-related costs and a bit of dyssynergies from the truck spin. We adjusted for the credit reserves on Russian business. All in all, the charges sitting in that number here is around EUR 100 million. Maybe as you see 20% return on equity, a word that, I mean, for the full year, we expect the performance to remain strong, but somehow normalizing in the course of the year. Cost of credit risk should return, I mean, come back to kind of a pre-pandemic level.
We should also see some normalization of the interest margin, driven by interest rate increases. Looking on the group side, page 16. Well, on the business evolution, I think I commented. On the reconciliation, we see a slightly negative at-equity result from Daimler Trucks and Buses. That is the contribution which we expect, I mean, in the Q1 on an estimate, I mean, has been offset by depreciation of the assets from the PPA, as we explained in our full-year release. With this, the EBIT adjusted stands at EUR 5.3 billion. Then we have the net of the adjustments. These are related to EUR 870 million related to Russia, as explained already several times, and M&A, a bit more than EUR 900 million.
The booked one, EBIT booked is at EUR 5.2. On the cash flow side, again, on the business, I think I explained, leaves me with cash taxes going up compared to 2021. I mean, higher profitability, less tax carry forwards obviously makes, I mean, the cash taxes go up to EUR 600 million. That makes, I mean, the free cash flow in the industrial side, a EUR 1.2. On the Net Industrial Liquidity based on the cash flow, we debated before, I mean, EUR 22.7. In that, we also have the benefits from the divestment, also a bit of a dividend internally coming from Mercedes-Benz Mobility and a bit of FX effect.
I think that is a very strong and healthy level of Net Industrial Liquidity, and I think it's good to have that in such a volatile times. On a very short notice, subject to AGM approval on Friday, we will hand over a good part of that net industrial liquidity over to you with a dividend of EUR 5.3 billion. Now let's have a look for the full year 2022. How do we see that on the basis of the first quarter results? First, on the divisional guidance, I mean, page 20. Really please read the assumption chart, I mean, carefully. What do we say? The macroeconomic and geopolitical conditions continue to be characterized by an exceptional degree of uncertainty.
The war in Ukraine, with its effects on supply chains, development of prices, and supply of energy and raw materials, remains a source of risk. Further effects due to the rapidly changing situation in Russia and Ukraine are not currently known, but could possibly have substantial negative consequences for our business activities should it escalate beyond its current state. In addition, continuing bottlenecks in the supply of semis and other industrial upstream products and inflationary pressure are another source of risk. Not least the further course of the pandemic, in particular, strict countermeasures in China, hold uncertainties for the expected development of the market, supply chain and production. On that basis, we confirm the forecast for almost all KPIs that were made in our annual report in 2021. What is the guidance for cars? We continue to expect the sales are slightly up.
We continue to expect the return on sales adjusted for cars to be between 11.5 and 13%. Obviously, the Q1 results of 16% ROS gives us confidence for the full year guidance. On the back of that, we see the full year return on sales adjusted at the higher end of that range. Let me shortly walk you through how we get from here to there, maybe. We see the price and the mix to stay at a high level. The top-end vehicles growth is further targeted to be above 10, I mean 10%. Used car business will impact negatively. The tailwind from depreciation which we had in 2021, I mean, should come down. The discontinuation of the non-current provisions, the R&D going slightly up.
Finally, with the current macro and the political uncertainties, we want to be prudent and assume a general market environmental protection for the remainder of the year as we see further risk on raw material, I mean, increases in inflationary trends. It is definitely our target to compensate that by net pricing. However, I think at this stage it is prudent to keep a risk protection. On the cash conversion rate unchanged, 0.81. PPE is now at a prior year level compared to slightly above before, thanks to the good progress in the first quarter. On the R&D side, it's unchanged. On the Vans, sales are slightly above 21, unchanged. ROS 8%-10%.
Here, I would say we see it rather at the upper end of the corridor, thanks to the basis of the Q1 performance, and on the remainder, I think that is unchanged. On mobility, we see the range at 16%-18%. What do we expect in the remainder of the year to happen? Margin headwinds due to higher refinancing costs. We expect lower contract volume and a normalization of the credit risk. On the group guidance, all KPIs are confirmed, I mean, as before. Brings me to the end on page 22. We set ourselves strategic priorities on the 20th of February for 2022.
In a nutshell, what is the progress we have been doing so far on scaling the electric and mobility? We increased the EV share by 15% in the first quarter. The BEV share even increased by more than 50%. We introduced the EQE. Some of you had the privilege to experience them in a test drive. We have the EQS SUV world premiere. I commented on the EQA SUV. I think a lot of momentum, not only in terms of numbers and financial results, but really laying the foundation for the EV ramp in the future. On the top-end vehicle side, the share is 16% and stay tuned for our May 19 event for more to come.
We have important software development milestones which are ahead of us, I mean, in 2022. We know you're curious on it, and that's why we will hold a separate, I mean, CMD event in July dedicated on software. On the supply constraints, we continue to monitor the work on the semis, as commented before, with risk mitigation, with tangible results. The interruption of the supply chain in Ukraine, I think you can see that it was pretty well managed without any material, I mean, disruption. We're making further progress in terms of sourcing and deep sourcing. You could see the opening of the battery factory, cooperation on the cell in the U.S., and many others, in the quarter and more to come.
In summary, on the Q1, I would say you can see the pricing power at work, coupled with a continued strong mix. Shifting gears towards luxury, supported by continued lean cost discipline, translating into, I mean, reasonable margins and in particular, a much more resilient business. I think, I mean, that's what matters, I mean, in these days, in this environment, pricing power and resilience. With this being said, over to the Q&A.
Thank you very much, Harald. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioner by name, and please introduce yourself, with your name and the name of the organization, before asking your question. As always, please ask your question in English, and as always, as a matter of fairness, please limit the amount of questions to a maximum of two. Now, before we start, the operator will again explain the procedure.
Ladies and gentlemen, if you want to ask a question, please press zero and one on your telephone keypad. To remove the question, please press zero and two on your telephone keypad. Again, for a question, please press zero and one on your telephone keypad and zero and two to withdraw.
The first question goes to Tim Rokossa from Deutsche Bank.
Yeah, thank you very much. Good morning, guys. It's Tim from Deutsche Bank. I would have two questions, please. First one is, even when you continue to beat results every quarter, and you show these impressive numbers, some market participants just want to be negative, and they will again say, this is peak pricing and mix. To confirm, they will obviously point to your guidance, no increase despite a much better result in Q1. What do you say to that? Is that just reflecting the risk protection that you just mentioned, Harald, Russia, China, etc., or do you actually already see a material slowdown in your EBIT numbers to come? Secondly, when we talk about one of the main ingredients to that is obviously pricing. When we talk about pricing, you already mentioned your view on used cars. I think that's a very prudent assumption.
What do you think about list prices and discounts? I assume there are basically no discounts currently. When would be a moment of volume decline where you then allow your dealers again to start moving into discounts? How much did you increase your list prices already, and is there more to come? Thank you.
Thanks, Tim. Yeah. On the walk, basically, from the Q1 and the full year, I think you could hear it, I mean, before. We see the strong momentum on the demand side, I mean, to continue. We see the mix to continue. We want to grow, I mean, the tech share even further, the EV share as well. And we do expect, I mean, and we do target, I mean, the pricing, I mean, to continue. I would say again, another quarter, yeah. The bears, maybe they just need to be patient and wait quarter by quarter to see the results coming through. I think that's quarter number six now or so, or maybe even seven. Well, not good at counting.
Let's see, quarter by quarter, we will keep going on the pricing side. I come back to that, I mean, as part of your second question in a second. However, in the current context of things, we do believe it is appropriate to be more prudent, I think, in the risk section, in the assumptions. I mean, I outlined, I mean, a few of them. I guess many of you also look very closely to China in terms of, I mean, the lockdown and what, I mean, could happen further there. I don't have a crystal ball for that, but in this context, I think, I mean, it is just more prudent.
Our management ambition is clearly to continue to do what we had been doing in the first quarter again, which means using that pricing power to offset, I mean, the inflationary trends and the raw material, I mean, increases. Other than that, you have a few technical ones. I alluded to them in the remainder of the year, which is next to the used car pricing and the depreciation, which is probably half a percentage point, a bit of a discounting of the provisioning, which we had in the Q1. That is a tailwind. That is a headwind of half a ROS point. The R&D is another, I mean, half of a ROS point.
I think that gives you a bit of a color in terms of the size of the risk protection. On your second question, I mean, on the list pricing and on the discounting, yeah, we had adjusted, I mean, list prices, I mean, last year ahead of time, compared to what we do normally, and also more pronounced in many countries, I mean, in Europe, in the U.S., in Canada, I mean, in China, and again now in April, as a response to the inflationary trends which we see. These have a more pronounced impact in 2022 compared to what we expected, I mean, even at the end of 2021 and at the beginning of 2022.
I don't think that we will walk backwards from here in terms of the list. On the discount, I mean, they are running, I mean, at a low level. It's not, I mean, the discounts we put at work. I mean, I cannot comment on the discounts the dealers, I mean, the independent retailers and dealers may put at work. I mean, that's their responsibility, but ours are tight. They are not zero, but they are tight. They are not a function of semi. They are a function of a different approach to market, which is not to push the volume into the market.
This is definitely what we started to do in third and fourth quarter 2020, which we still do in first quarter 2022, and what we intend to do moving forward, and we'll talk about that as well, more on the 19th of May.
Thank you.
Thank you.
We continue with José Asumendi from J.P. Morgan.
Good morning, José Asumendi from J.P. Morgan. Just a couple of questions, please. The first one, Harald Wilhelm, can you speak a little bit around the negative bucket of industrial performance, a little bit the key drivers in the first quarter, and how do you expect that to evolve in the coming quarters? And also, if you can remind us, please, when does this GLS electric hit the market, either in Europe, U.S. or China? And second question, you have obviously starting to see a meaningful share of electric vehicles now within your product portfolio. Can you comment on the profitability of these electric vehicles? Do they exceed or at least match the margin contribution you get from your combustion engine vehicles? Thank you so much.
Thanks, José . Yeah, industrial performance, if you look at the bridge, the EBIT walk, I think you'll find approximately EUR 1 billion of a headwind in there. I would say probably you can take half of that for raw material costing increases. That is basically on the purchasing side. The other half is basically split between inefficiencies in our own operations due to the stop-and-go, the logistic cost, the higher energy cost, and also some higher product-related expenses. On your question, if I got it right, it's the EQS SUV. This is going to hit the markets in the second half of the year.
Probably the contribution to 2022 in terms of volume is, I mean, not at the full run rate. I mean, that we'll see in 2023. The response, I mean, to the vehicle, which we could see, feel ourselves in the U.S. during the battery factory opening, when we showed the vehicle and now when we officially, I mean, present it, is extremely strong. I think this is going to be the true hot seller, a hot car in the various markets, being basically, I think, I mean, the only true EV platform in that size, in that category. In terms of profitability on the BEV vehicles, well, I mean, let me take, I mean, the EQS.
I'll just say, I mean, looking at now, I mean, the sales, I mean, in the first quarter, what did we have? I think a bit more than 5,000. It starts to be meaningful. It starts to be, I would say as well, representative, I mean, in terms of margin. We positioned the vehicle, I think, on the pricing side, where it belongs to, i.e., in the S-Class segment. The variable costs, I mean, are under control, obviously, with the raw material, I mean, cost, that needs to be watched moving forward. I mean, the batteries at this juncture are not getting cheaper, but rather a bit more expensive. I can calm you down.
I'm pleased with the margin on the EQS. If you would see me, I think you could see a smile on my face.
Thank you. I can confirm that Harald was smiling. Next question goes to George Galliers from Goldman.
Yeah. Good morning, and thank you for taking my questions. The first question I had was just on the working capital and obviously the higher inventory of finished goods and work in progress. Should we expect that to unwind in the second quarter, or is this somewhat reflective of the stop-start nature and disrupted supply chain that we see today? The result business as usual going forward will require more finished goods inventory and more WIP. The second question was with respect to Maybach. You mentioned that the monthly sales had been exceeding 1,000 units a month, and obviously in Q1, it looks higher than that. What should we think about as a kind of annualized target for Maybach going forward? Is 12,000 units per annum the right number?
Actually, given what we saw in Q1 and presumably there will be EQS variants, perhaps you could do a bit better than that. Thank you.
Thank you, George. I mean, on the working capital side, well, the inventory increase, which we could see in the first quarter, probably we will hold that level roughly in the second quarter. How do we get there? Well, in the first quarter, we decided, I mean, to build vehicles even with some critical components lacking as we do expect them to be delivered, I mean, over the second quarter and then over the third quarter. So I mean basically there is quite a high number of blocked vehicles.
A part of that will then be turned around, i.e., in the second quarter, but there will be new ones coming, i.e., blocked vehicles as the semi constraints continue to apply in the second quarter. That is one of the reasons, I mean, for the step up in the first quarter and why we see that, I mean, still being at that level, I mean, in the second. The other one we cannot ignore is that logistics chains are impacted by the geopolitical and macroeconomic, I mean, implications. Transport long chains, I mean, you need the trains and the trucks and the ships and the harbors.
I mean, they just take longer and I mean, each and every day is millions in inventory, I mean, in a second, right? So that is as a matter of fact right now. I find it, I mean, honestly, I mean, quite incredible as we've been using, for example, I mean, a train via Russia before, that within a few days that has been rerouted, I mean, without coming to a halt. Therefore, I mean, we just have to accept, I mean, a more expanded inventory level at this stage.
We definitely target, I mean, the inventory to normalize, and would rather see that, I mean, in the second half of the year, at least with regard to the semi situation on the other constraints, obviously geopolitically, I mean, I cannot make a prediction on that one. On the Maybach, we're happy with the momentum. We think with the current versions, I mean, of the Maybach, there is a solid ground for that. We have other, I think, I mean, interesting stuff in mind on what to do on the Maybach, and we're happy to give you more color on the 19th of May on that.
Great. Thank you very much.
We continue with Daniel Roeska from Bernstein.
Hi. Morning, gentlemen. It's Daniel Roeska from Bernstein. Let me start with a question maybe following on the profitability. Some of your peers have started to announce that they will increase the transparency on the EV versus ICE side of the business, kind of looking at breaking out revenues, contribution, and investments more clearly. What's your thinking on this? Maybe more specifically, what's the timeline on this to consider kind of giving some more detail on a regular basis? Then secondly, we're going to talk about premiumization in Monte Carlo, but could I ask for a short update on your digital services business? If I'm not mistaken, the last time you talked about this was late in 2020 with about a EUR 1 billion EBIT target for 2025.
Just a, you know, what have you learned so far, what are you most excited about, and also hear kind of what's the timeline for the next update on your digital service business plan.
Maybe on the second question, well, the EUR 1 billion we still see today. I mean, ahead of the update we want to give you in July on the subject matter, I mean, the learning is, I think our conviction that, if we look what is happening, I mean, around us, it's even more important, I mean, to accelerate on that side. That is what happens with important milestones this year in the cooperation with NVIDIA, but many, many others. I'm happy to talk about that, I mean, when we're getting to that, I mean, event in July.
In terms of the EV KPIs, I think we started to give, I mean, some color, I mean, with the chart on xEV and EV and the share of the plugins and the BEV over there. I would also invite you, I mean, to have a look into our EU taxonomy reporting, where on a voluntary basis, I mean, we report basically already for 2021, and obviously we'll do so for 2022 as well, how many vehicles are being compliant, I mean, with the future EU taxonomy rule, i.e., below 50 g CO2 per kilometer. You can see the numbers there.
In particular, on the investment side, we can see that the capitalized R&D, which are actually, I mean, the platforms, are already, I mean, 40% of the investment today, and that number will definitely go up. So I think that provides all of the transparency in where we allocate, I mean, the capital to.
Yeah, I'll push back and follow up, right? Because given that you're required to do this under EU taxonomy, that's clear. But have you had any discussions in the board whether you want to kind of go down a more, let's say, formulate route where you really provide transparency between two sides of the business or give us some updates on the profitability of the two sides. I'm sure you're aware of, you know, what peers are thinking about. Just wondering where your thinking is in that process.
Yeah, I mean, I'm happy to elaborate on that. I mean, before I respond, I mean, do we break up the profitability on the BEV on the ICE side? I want to state very clearly we have a very intense debate on how we want to transform a Mercedes moving forward. I can say the board, the management board and the supervisory board are of exactly one opinion. This is one team, this is one Mercedes team, this is one company, and we're transforming the whole company into it.
I mean, we are not pursuing, I mean, a strategy, I mean, to break up the company into an ICE part and into a BEV part or call it into a bad part and a good part or an old part and a new part. No, we're transforming the whole company and transforming it into the electric world. This is what we had been saying in last year in July. This is what we are doing. Why does it make sense? I mean, let me just give you, I mean, a few data points. Sales of vehicles, I mean, on ICE and on BEV are coming from the same sales force, from the same team, from the same network. The industrial side of things are in common. If you look on the assembly parts, I mean, of the plants, they do both.
We have the flexibility in the transition. Yes, the power plant, I mean, is a separate industrial undertaking, but even on the power plant side, I mean, it's one team managing, I mean, the ICE, the engine world, and the gearboxes as well as the battery and the eATS. The engineering side, I mean, suspension of the vehicle, is that different on a BEV compared to an ICE? No. Sorry. I mean, in terms of dis-synergies, dysfunctions, it would be absolutely, I mean, devastating.
The strength of, I mean, this company of more than 130 years to build luxury vehicle, the leading luxury vehicle, you need to take these ones into the future and don't put it in a shell company and call it a bad asset. This is where we are going. Now, will we spell out, I mean, what is the profitability on individual, I mean, vehicles? No, I think you will understand we're not doing it. I think we give you a lot of color, how we want to address the transition, how we want to address the margin evolution on the EV vehicles. José had the question already before, and we will continue to do so moving forward. I hope that answers.
Perfect. Thanks for that.
Thank you. We continue with Harald Hendrikse from Morgan Stanley.
Yes, thank you so much for taking my question this morning, and thank you so much for that answer just now. It's very, very helpful to have clarity in that split conversation. My question, I'm afraid, is back to my usual concerns, which is, firstly, can you just talk a little bit about what has surprised you in the last, I mean, maybe even this last three months again? You know, what do you think is fully achievable and sustainable? And what would happen if you had, for example, a normalization of production? Does a full normalization of production and supply chain actually help you, or do you think it would hinder you? And then sort of the same question, but the strategy is obviously working incredibly well.
I think the comparison with your major peer in the next few weeks is gonna be super interesting. Are there limits to what you can do with this strategy? Is there a limit in terms of volume that you have to produce? Even on affordability, again, your peer has just launched a brand-new car. The price of that car is nearly 50% higher than the last generation of the same car. I'm getting a little bit concerned whether there is ever going to be an issue with affordability, or are your customers happy to continue to pay these higher prices? Are there any real limits to this strategy, or do you think you can keep going for a long time yet? Thank you.
Thanks. Maybe the first question I think was more on the production side. Well, let me take the Q1 numbers, 488,000 units in terms of the group sales on the car side. I would say definitely we could have sold more vehicles than 488 without deteriorating the mix and without deteriorating the pricing, i.e., at the same discount level as we had with 488.
In that respect, it's a shame as the same situation puts a constraint as I think there would have been, I mean, a bucket of opportunities which we could have nicely added, I mean, to it without jeopardizing the strategy in terms of the pricing and the mix. Definitely we want to take and grab these opportunities moving forward. I mean, with the full year guidance here you can see slightly above the previous year level. I think it's a bit more than 4x 488. Where is that going to come? Maybe it's more in the second half of the year. I mean, given the current ongoing uncertainties, I would say.
That is, I mean, the perspective we have at this stage. In terms of, is there a limit? Well, I think it all goes, I mean, with the substance of the product and the appeal of the product in terms of capital being available and the desire of people, I mean, wealthy people, to spend the money for exceptional products. I would say there's no barrier. There is no limit. At least that's what we can see right now. It all goes back, I mean, to the substance of the product and the appeal. In this respect, I mean, the size is not everything. It is the distinguished luxury which matters and maybe not the too pronounced one.
I think we'll again, I am repeating that quite often here this morning. Wait for the 19th-
Yeah.
of May or wait for the July. Maybe that is a good opportunity to talk in more detail about it.
Yeah. Perfect. Thank you so much.
Thank you, Harald. We continue with Dorothee Cresswell from Exane.
Yes. Hi there. It's Dorothee Cresswell from Exane. Thanks for taking my questions. The first one is actually around your distribution strategy. You've obviously spoken about the plan to move to this agency model. Could you outline a little more where the financial benefit from that comes from? Is it just the fact that you have more control over pricing and maybe you can generate some synergies by bundling functions, or is it also that you're gonna capture a chunk of the dealer margin? Then a very quick one at the end, just on the electrification target. You said you want to increase the BEV volume significantly this year. Can you tell us where you think the BEV mix will be for the full year 2022? I think you were at 5% in Q1, and I think 4% in 2021.
Thank you.
Thank you, Dorothee. Well, what is the benefit of the direct sales model? I mean, very clearly, better control over the pricing. In the context of the strategy we're talking, disciplined pricing, obviously that matters a lot. I mean, here we see the benefit, and that means that we do expect that the implementation of that model will help us also in terms of the progression on the pricing side. Next to it, I mean, obviously, there should be also cost benefit coming out of it. As part of that move, over time, there should be some consolidation in the network.
I don't want to, I mean, point out only, I mean, the things which are, I mean, beneficial. It comes, I mean, with a bit of a bill, which is also, I mean, the inventory side. I mean, dealer inventory, I mean, is coming over on our balance sheet. We'll have an opportunity to improve basically the end-to-end process and probably therefore, I mean, mitigate, I mean, the impact which is coming out from the working capital and the inventory side. In terms of EV and BEV, 2022, well, overall, as we said, we wanna be, I think, 15%, in 2022.
We said, I mean, should have around, I mean, more than 400,000 EV vehicles. If you look into the Q1 chart, you can see that in the Q1, the progression on the BEV side is definitely, I mean, much more accelerated. We continue on the plug-in, important transition technology, but the real ramp is now happening on the BEV side. How is it possible? EQS, I mentioned 5,000 in the first quarter. I think that's a good run rate, and maybe hopefully has even more potential. In terms of volume, EQE coming in, the sedan, and then EQS SUV later in the year, and next year obviously the EQE SUV.
These will be the real ones, I mean, pushing the BEV share to another level.
The last question goes to Stephen Reitman from Société Générale.
Yes. Good morning. Question quite similar on the BEV subject. Congratulations on the run rate you're seeing already on the EQS. Could you comment now that you've opened the order book for the EQE, what preliminary signs you're seeing on that? Could you comment maybe on the cadence you expect for BEV penetration just during the course of this year, presumably very much weighted towards the second half of the year. Thank you.
Yeah. Thanks, Stephen. Well, in EQS, as I said, good momentum, more than 5,000 in the first quarter. Huge appetite, I mean, for the high-end version of the vehicle. Huge appetite, I mean, for the Hyperscreen. So we need to see how we can match that level of demand in 2022. That's what we would say mean on in this respect. On the EQE side, I mean, the step up in the production, I mean, will be second half of the year. I mean, the true run rate, I think, I mean, is definitely more 2023 subject than 2022.
However, I think the experience, I mean, on the EQS makes us very, very confident that EQE sedan, but also EQE SUV, is going to be really, I mean, a hot car. You know, the EQE basically is a, I mean, just a little sister or sibling or the shrink version of the EQS. Therefore, I think that would be very, very attractive in the market, yeah.
Are there any semiconductor shortages or other issues that are holding you back on your BEVs at the moment, specifically?
As we speak, I'm not aware of any specific supply constraint on the BEV or on the EVA2 side. I mean, the constraints, I mean, here, they are, I would say more in common, I mean, between ICE and BEV, not specific to BEV.
Thank you very much.
With that, ladies and gentlemen, thank you very much for your questions and for being with us today. Thanks a lot to Harald for your answers. As always, IR remains at your disposal. In two days on Friday, April 29, our virtual AGM will take place. We hope that you, as an investor of Mercedes-Benz, will find the time to join us on that day. To all of you, have a great morning, great afternoon, and great evening, and we look forward to talk to you soon. Thanks and goodbye.