So, welcome to Porsche's full year 2023 Analyst and Investors Conference. My name is Björn Scheib, and I'm the Head of Investor Relations at Porsche AG. With me today are Oliver Blume, Chairman of the Executive Board, and Lutz Meschke, Deputy Chairman and Member of the Executive Board for Finance and IT. Both gentlemen will be at your disposal with respect to the upcoming Q&A session. As you have seen, we already posted the intro statement on our web page, which you can find in the section of Investor Relations. Before we start, let me remind you that any of the forward-looking statements to be made during this intro statement and Q&A are subject to the risks and uncertainties mentioned in the Safe Harbor Statement included in the Porsche materials online. In addition, this call will be governed by this language.
With this, we open the Q&A session, and the first in the row will be George Galliers of Goldman Sachs. George, the line is open.
Good afternoon, and thank you for taking my question. The first question I had was around Porsche's product strategy in light of recent industry development. At the time of the IPO, I believe investors were very excited by Porsche's progressive approach to the battery electric vehicle transition. However, today it looks like there could be some risks to Porsche's leadership here, given what we're seeing in terms of BEV pricing in China, weak private BEV demand in Europe, and slowing BEV growth in the U.S. With this in mind, do you have any concerns around the potential commercial reception to the new Macan? And in 2025-2026, can this product achieve volume on par with those achieved by the ICE Macan historically?
To the extent European consumers do still want a midsize Porsche SUV with an ICE powertrain in two to three years' time, are there any contingent actions or potential products that could fill this space? The second question I had was on the margin guidance for this year. In basis points terms, could you give us any indication of how much cost is baked into the margin guidance that is directly associated with the phase-outs of the old models and the launch costs associated with the new models? Thank you.
Yeah, George, may I start with your first question, and maybe the second one can take over Lutz? First of all, on Porsche's product strategy, we stay to our strategy with a very strong BEV ramp-up. We presented the Macan in January yesterday, the Taycan, also with a special model, Taycan GT. We will continue with 718, Cayenne, and a luxury SUV as a fully electric car in the following years. At the same time, we have the flexibility in our product portfolio in between ICEs, plug-in hybrids, and BEVs. So we are able to react, according to the different speeds of transformation in the different regions of the world. Coming to the Macan, we are getting very positive feedback since our launching activities and, being concrete, we have over 10,000 order intakes already.
Mentioning that these customers haven't touched the car, haven't driven the car, and this is without China, Taiwan, and Japan still, where we will be in the start of sales in April. That's very promising. Also the feedback we are getting from our customers and also from the media with a completely new design profile of the car, the driver dynamics, the power, over 600 horsepower, acceleration 3.3 from 0 to 100, a real sports car, and the content and overall the digital offers we bring to our customers. To your question, in terms of Europe, it was a well-sourced and economical decision not doing an update for the Macan in Europe in terms of UNECE and cybersecurity content, because we think, on the one hand side, we will convince our customers with a new electric Macan.
We have the offer of the Cayenne and Panamera also with our product update or the new Panamera, where we will offer plug-in hybrids over 90 up to 90 kilometers full electric range, and having also the mix in an offer in a sport limousine and in an SUV with combustion engines. So we think we are well balanced also in Europe with our product offering.
Yeah, George, coming to your second question, the lower margin. We lowered the corridor of about 200 basis points compared to 2023. The main reasons are the four new product launches in 2024 with a V-shaped model changeover. The slow ramp down and then the slow ramp up phase will create a situation that we will suffer a little bit from these four model launches in 2024. It will help a lot when it comes to the acceleration in 2025. We have the more or less full, completely new model range in place. That gives us confidence to see a very strong 2025 then. The other reason is the increased D&A. The forecast is about EUR 500 million higher D&A due to the four model launches, of course. This is the main reason. These two levers are the main drivers for the lower margin.
Of course, we still heavily invest in our products, in technology, in brand, and digitalization. But these investments will be more or less on the same level as we already did in 2023.
So thank you very much. The next in the line will be Tim Rokossa of Deutsche Bank.
Thank you very much, gentlemen. It's Tim from Deutsche Bank. I would have two questions as well, please. The first one is, you made it always quite clear for some time now that 2024 is a transition year. You are renewing a much larger share of your portfolio than you would usually do, and that is generally also considered healthy to do. How long will this transition take? Does it already set the base for a much improved 2025 over this year, bar any major macro slowdown, of course? Or given that the transition phase may now take a little bit longer, also adding on to George's question on the EV portfolio, is the path towards a 20% margin or even just improvements from the 15%-17% that we've seen right now also delayed or still visible?
And then as a second question, perhaps more on the operations, it is pretty clear that the supply chain is very stretched globally. We see a lot of suppliers that have real issues structurally. It's likely not improving very quickly. Have you taken any measures to make sure that your supply chain is more stabilized? We now had a couple of really significant hiccups. Considering how high your ASP is, have you moved towards more double sourcing, triple sourcing, any other sort of measures that would help us not to have us to warn about new issues almost every quarter? Thank you very much.
Yeah. Tim, let me start with your first question. As already mentioned, in 2024, we are laying the ground for further growth then in 2025. Yeah, due to the launch of four new models, of course, we will see a transition year in 2024 and then a strong acceleration in 2025. Of course, we continue to strengthen our sales structure. We want to achieve a very well-balanced sales structure. I think we are already on a quite good path. We have shown this in 2023, despite the reduction of volume in China. We were able to overcompensate this reduction by other markets. First of all, the overseas and emerging markets market was very strong. We have seen here an increase of 16% compared to 2022. Of course, we continue to invest also in our new target groups in the brand itself and technology.
Very important is the entire ecosystem. It's important to invest furthermore in our Porsche driving experience centers, in fast charging stations, because we have to support the transition to electrification. Therefore, it's necessary that we also invest in exclusive charging stations. As in the past, priority remains our value over volume approach. That's very important. Therefore, we decided in China to adapt the supply to the demand situation in order to avoid significant discounts in future. I think that's the only valid approach and helpful approach for a luxury brand like Porsche. We cannot accept discounts in the market. Therefore, we have to react in this direction. We have to slow down production. Therefore, we are able to react equally in a situation like now in China. Of course, we think that China will recover latest in 2025.
And then we are well prepared through the very solid groundwork with the four new model launches in 2024.
Yeah, then I will take over the second question. To add only one aspect to the launching activities, it brings us in a situation that we will decrease the fleet age from over 3 years to the 1.5 year for the next years. That's a very positive situation, being with such a fresh product portfolio in the market. Coming to the supply chain issues, we were faced with some single topics. Semiconductors, as you know, are already solved. It was a tough work. We had the high-volt heater for the Taycan first generation. It's solved. We have some launching issues with the 911 with good progress. Our production colleague, Albrecht Reimold, is leading the activities with our partner for the battery cell for the hybrid for the 911.
We had the software issue with our partner for seats in the U.S., where we had to change from a Chinese chip to an alternative chip. That's already solved. We are reworking the cars. Nevertheless, the supply chain landscape is volatile. We are working with a so-called Risk Radar to challenge our supply chain and to have a clear look where we need more flexibility and more alternatives. We won't be able to avoid 100% issues from the supply chain. With this Risk Radar, we have more security to tackle the points and having a prevision of what could happen. Now the main issues are already solved.
Very good. So the next one in the row will be Patrick Hummel of UBS.
Yeah, good afternoon, everybody. Thanks for taking my questions. First, I would just like to follow up on what we just discussed here for 2025. Last conversation from your end was that you expect the 911, including the hybrid versions, to be available early in 2025. And you highlighted, Oliver, just the fresh lineup that you're going to have now, 1.5 years average age. So is it fair to assume that this is going to be the year that will be fulfilling all criteria to deliver on the medium-term operating margin target of the 17%-19% range again? Or is there anything from today's perspective that you would say stands in your way to reach that in 2025? And my second question, on the order side of things, can you talk a little bit about the order intake momentum in the main regions?
If I want to read between the lines in your statements, it sounds slightly more balanced, what you say about order intake in that Q4 release compared to the third quarter. Am I reading here too much into this? Or are you slightly more balanced and less bullish? Thank you.
Yeah, maybe, Lutz, you can take your question, Patrick, for order intake. I will give you some information for 911 and our expectations for 2025. We will be in the market in the second half of the year with a 911, step by step, in terms of derivatives and regions. With a whole portfolio, we have shown today, we will have all the launching activities during this year and being full-size with derivatives and regions in the market in 2025. We stick to our midterm and long-term guidance, also in between 17%-19% profit margin for 2025.
Yeah, in general, our order bank is robust. It's robust above our pre-COVID level. What's very important, the order bank covers a significant part of the entire year 2024. Also, the first order intakes of the e-Macan are very satisfying. What's also very important, the order book is not opened in China and in some other markets. Therefore, we are quite well prepared when it comes to order intake and the resulting order bank for 2024 and 2025.
Thank you very much. So the next in the row, Patrick. OK, the next in the row will be Dorothee of BNP Paribas Exane.
Yeah, hi there. And thanks for taking my question. I just wanted to come back to this BEV mix. I'm a bit confused still about the guidance for 13%-15% BEV mix in 2024 because that's such a modest step up versus the 12.8% in 2023, particularly given what you've said about Macan BEV demand and obviously the fresh Taycan in the lineup as well. So why is that so modest in terms of stepping up? And then obviously, the 13%-15% is a really long way from the previous mid-decade 40% and the end-decade over 80% target. So how are you thinking about those mid- to long-term targets? And do you have any revised guidance on those for us today? Thank you.
Yeah, we stay to our mid-long-term targets in terms of BEV ramp up, fully electric cars over 80% by 2030 in short term. And as we explained, the launching aspects for Taycan and Macan, we won't be full-size in the market this year. And therefore, our expectation is more conservative. But in 2025, we will have all the derivatives and regions for Taycan and Macan in the market. And we will increase much, much stronger the BEV share. On the other side, we are now in the market with the PHEVs, which was one part of our mid-term 2025 target. From Cayenne and Panamera, the order intakes are very promising. And in share in between BEVs and plug-in hybrids, this will support. So sticking to our mid-term targets in terms of BEV and also long-term targets for 2030.
So the next one then in the row would be Mike Tyndall of HSBC.
Yeah, thanks. It's Mike from HSBC. Two questions, if I can. The first one, just if we can go back to China, you're talking about potentially recovery in 2025. I just wonder, is there any structural issues in China that may prevent you from coming back to prior levels, things like Common Prosperity, where conspicuous consumption is now kind of not quite as favorable as it once was? I wonder if that's part of the reason why luxury has taken such a hit. And also, what are your thoughts around the prospect for luxury BEVs in China? Because that's clearly been an area where really that market hasn't been tapped yet. And then the second question is just around we've got this swath of new product coming this year. What are your thoughts in terms of the cyclicality that that's going to drive in the business?
Because you're doing more refresh than you've ever done in one small space of time. Does that mean that everything ages together? Or is there something else coming in the portfolio that will balance that out as the rest of the decade unfolds? Thanks.
Yeah, may I start, Mike, with your China question? On the one hand side, we know about the economic and the real estate situation in China, where we have the crisis, which is producing this pricing situation and discount situation in the market. And therefore, it was a very well-thought decision to decrease our volume in the market, not to join pricing, not to join discount levels, and to strengthen our luxury positioning and our philosophy value over volume, and with the opportunity to switch volume, especially to overseas, where we have a fourth strong, strong pillar in terms of volume share. We think the Chinese markets will come back medium-long-term because the capital is there.
Therefore, we think with our product strategy, having a well-balanced portfolio in between ICEs, plug-in hybrids, and the BEV, we are matching perfectly in the market and also with the offerings and the content of products we do have. This is very, very positive. We are investing in services. We are investing in experiences there. We are investing in our brands and tapping into new profit pools. There, we have opportunities about the luxury segment. It isn't still built in terms of BEV. And there, with our BEV strategy, we see a unique opportunity in China to build this segment now with the Macan, with the Taycan, following with the 718, who used to be very strong in China in all times and will be in the future in BEV.
Then, with a fully electrified Cayenne and a luxury SUV above positioned the Cayenne, we will have five models in the BEV market on top positioned and then covered by a strong Cayenne, strong Panamera with plug-in hybrids and ICEs, and the 911. That's the expectation for China. Yeah, as Oliver mentioned, it's very important that we create a real luxury segment when it comes to BEVs in China. At this point in time, the segment above EUR 80,000 is quite limited with about 20,000 cars a year. Therefore, we see huge potential for the future with our upcoming BEV products. The second question was about the aging of our model range. I think we have very good groundwork done at the end of the year 2024 after the launch of the four new models. Then we have a very young age in average.
Yeah, in the upcoming years, we will have also then the e-Boxster and the e-Cayenne in place, followed then by the luxury SUV above the Cayenne. That gives us a perfect portfolio for further growth, first of all, in China because we have a huge potential due to the reduction in 2023, the overcompensation by other markets. If China overcomes the crisis, the real estate crisis, Oliver mentioned it, then we have a very young model range, huge potential for further growth in 2025. Of course, all models will be updated regularly.
OK, so the next one in the row will be Stephen Reitman of Société Générale. As we have around 20 minutes left, I would kindly ask you to be crisp with your questions. Thank you very much.
Thank you, Björn. Stephen Reitman here, Société Générale. I have two questions on the Macan and on the 911. On the Macan electric, you haven't yet announced, as you said, the prices in China. I think that will happen in April. Can you confirm that you'll be pricing it at a premium to the kind of price range of the $600,000, remember, pricing starting price of the ICE Macan? And looking at the trend we're seeing in BEV demand in the rest of the world, we understand that you can't sell the car in Europe beyond June. But do you feel that maybe the tail for demand of ICE Macan is going to be greater in the rest of the world for a bit longer? And are there any steps you can take to keep it, keep renew what is effectively a 10-year-old car?
And secondly, on the 911, you mentioned that you're on track for now to have the hybrid version of the 911 out early in 2025. Have you taken any steps to mitigate the delay of the hybrid 911? Are you able to build any more of the higher-end 911s up until the changeover in August to offset the impact of not having the hybrid versions in the fourth quarter as was originally planned? Thank you.
Yeah, maybe let me start with the pricing question. The price for the e-Macan is not officially communicated yet. But as you know, I've addressed several times, really increased the entry-level model prices by about 15%-20% when it comes to the transition towards electrification.
Yeah, and coming to the 911, we have a clear planning how to enter in the market. And we will start with the ICE versions of the 911 in the second half of this year. And this one will be followed with a strong hybridization for the GTS, Turbo, and Turbo S in the following months. And there, up to now, we are on track and having already the provision for the volume for this year included this planning of the 911 step by step by derivatives and by regions. So the next one in the row will be Harald Hendrikse of Citigroup.
Thank you, Björn. I hope you can hear me OK. And I think George really took most of my question. But just strategically back to Macan again, Macan is such an enormous proof point for your post-Volkswagen strategy in terms of pricing relative to competitors. And so can you just talk a little bit more about how much volume you would be willing to give up? Would you be willing to continue to price the Macan higher and higher relative to the competition, even if that costs you on the total volume side? Are you looking at your pricing relative to Mercedes and BMW? I would have thought that you had plenty of room for upside given your branding. And then lastly, you haven't talked about the profitability of the new Macan EV versus the ICE version, at least not today.
With these price rises, should we assume that the new Macan EV is at least as profitable as the ICE version? Thank you.
Yeah, may I start with the product? We have set new standards with the new Macan in terms of driving performance, design, and a large number of new features and digital offerings. This was leading to the great interest we are mentioning in the market. The order bank is already very satisfying after a good month with over 10,000 order intakes. We will start with the sales in China not until April this year. What's already very, very important for us in terms of pricing and volume is value over volume. So we are leveraging all the markets.
When it comes to the margin comparison between ICE and BEV, we have already a very good proof of concept in place with the Taycan. We were able to come quite close to the combustion engine margin with the Taycan. And therefore, it's also the goal for the upcoming electrified Porsche cars to close the gap as soon as possible to the combustion engine margins. One lever is, of course, our pricing potential. I've already addressed the price increase starting with the entry-level models by about 15%-20%. Our target is also to increase the individualization rate. We want to have a better product mix within the Macan model range. That all will help us to come in midterm close to the margins for the ICE Macan.
What’s further important, we, of course, heavily invested in research and development and in CapEx for the parallel phase of combustion engine development and BEV development. Of course, we will see the peak of research and development costs and CapEx in about 2-3 years. Then we will see synergies and efficiencies due to the heavy investments in our electrification transition because then we have set up the platform, the SSP K1 platform for the upcoming SUVs and Taycan and Panamera platform. Of course, we can use this platform also with other group brands. That will give us additional profit also from this side. That all will create a situation that we can accelerate the margin development towards the combustion engine margins in about 2-3 years.
The next one in the row will be then Horst Schneider of Bank of America.
Yes, and thanks for taking my questions, too. I'll try to keep it short. When we think about the guidance for 2024, this 15%-20% operating margin guidance, could you maybe provide some color? What kind of seasonal pattern we can expect between H1 and H2? Sounds to me, in terms of volumes, that H2 is going to be stronger than H1. For earnings, it seems to me a little bit like Whac-A-Mole, where we have got input issues in the US in Q1. Then 911 mix issues in Q2. D&A comes in for the e-Macan. So a little bit of color on the sequential progression of margin would be great.
Second question relates a little bit to this tariffs and subsidy debate that we have got in general in the market, which particularly could affect Porsche since you are still 100% exporter out of Europe, and you are not yet producing locally in China and the U.S. So if there was, for example, imposed an increased tariff in the U.S. or there was retaliation by China against Europe if there was an increased tariff imposed by Europe, would that cause you to react on that and to localize production? Or you would say, from today's perspective, 100% this will not happen? Thank you.
Yeah, Horst, you know exactly that we don't give quarterly guidance. But of course, we will see. OK, I can give you some color, of course. Yeah, we see a slow start in Q1 due to the model changeover for the Cayenne right now, for the plug-in Cayenne, for the Panamera, and then the Taycan. And in addition, we invest heavily, as I already addressed, in our products, in our brand, and in digitalization and beyond in our entire ecosystem for our customers. And therefore, we will see a weaker H1 compared to H2, where we should have more models in place, new models in place in the second half of the year. And that will help a lot also with the coming 911, with the new generation of the 911, with the GTS. We expect the GTS to be in place in the fourth quarter.
That will help a lot to improve our mix. You know exactly how important the 911 model range is for Porsche. And therefore, we will see a better H2 compared to H1. And D&A, you know that starts with the start of production of the new models. And that means we will see a significant impact due to the model launches in 2024. I addressed already that we expect higher D&A compared to 2023 of about EUR 500 million.
The start of production of the e-Macan, is it in Q1 or is it in Q2 or just in summer?
No, we will be in the market in the second half of the year.
OK, OK, so then also.
We already started slowly the production of Porsche.
Slightly, slightly we are ramping up right now.
OK, all right.
May I just.
For more information for the ones who are fortunate enough to join us next week to Singapore for the dealer introduction event, you will also have the chance to drive not only the new e-Macan but also the new Taycan and the incoming 911. So with this, we have to send you a question on factories.
Yeah, you can have a vision of the Macan there. There was a second question from the one on factories.
Yeah, OK, I can answer quickly on this. Our production footprint, on the one hand side, we have a very flexible production footprint in between Germany, Slovakia, and the CKD production we have in ASEAN in Malaysia. Everything invested, that's positive. Everything to come now will be integrated in these invested factories. So we haven't got plans to go out to China or to the U.S., and mentioning that it is still a very strong quality argument and value that most of our cars are designed, engineered, and produced in Europe, especially in our own plants in Zuffenhausen and in Leipzig.
Very good. So the next one will be Daniel Roeska of Bernstein.
Hi, gentlemen. Good afternoon. Maybe just one. Could you talk a bit and expand about the upcoming e-Cayenne? I know not too many details are here. But I was wondering how much of that car, the e-Cayenne, will be based on the PPE technology that's kind of in the e-Macan? Where do you think your competition will be by that point? It's kind of a little bit guessing. How far do you need to develop the e-Macan? How much do you think you need to improve on the current technology in terms of electric efficiency, software, autonomous driving to create a competitive package by that time?
Yeah, the fully electric Cayenne matches perfectly to our strategy, having a flexible mix in between ICE plug-in hybrid with the already updated Cayenne, already in the market this year, and then coming with an electric version and having up to the '30s this flexibility. The new fully electric Cayenne will be based on a pre-developed PPE platform. We will use the E3 1.2 architecture with major updates. We will offer drivetrains for supreme performance. Also, we will use the next generation of battery. And what I can tell right now, we are coming from the first tests of our prototypes, that the charging speed is massive. And it's reaching a level never seen before at Porsche. And that's only to tease the new Cayenne, which will be at the end a true Porsche in terms of design, DNA, sportiness, aerodynamics, and driving dynamics.
Also, with all the digital offers, we were able to tease today for the Macan already.
Thanks. Maybe just to follow up, I mean, you've been leveraging Volkswagen technology more and more over the past decade. Is there kind of more and more kind of Porsche's own development again in cars like the Macan or then also the large luxury SUV? And for the simple investor, is that the direction we could foresee also for Porsche's future, that there will be more kind of in-house development again?
Yeah, for the future, and that's important for our positioning, we are developing for a two-door sports car platform. The 718 Electric will show this. We are focusing on a Porsche-developed so-called SSP platform, where the new luxury SUV will be the first car, followed by others. In terms of cooperations and using modules also from Volkswagen Group, we will do so in the future in terms of scale effects. But all the specifications we do will be done by Porsche. Then we are looking also for external partners, for example, for offering the ecosystem for our customers. Yesterday, with the Taycan GT, we presented the collaboration with Apple we do have, using Apple instruments, especially for the racing applications in the Taycan GT. Or today, we presented the fully integrated Apple CarPlay and Android Auto. And this is our strategy.
This, what makes us different, we will do by ourselves or with specific partners from the market. Where we can benefit from scale effects, we will do so also in Volkswagen Group.
Thanks very much.
But maybe it's good to address it again. With the BEV transition, we focus more than ever on Porsche-owned platforms in the future. Oliver mentioned it for the e-Boxster. We create the sports platform. And for all the four-door sports cars, we are developing right now the SSP platform. And that means the clear focus in the future is to rely on Porsche platforms when it comes to BEV transition. And that gives us also the arguments regarding synergies and efficiencies within Porsche. And of course, in addition, we will use also the VW synergies as in the past. And that gives us a double effect when it comes to synergies in the upcoming years.
Very good. So I see that we have still time for one more analyst. And this would be then Daniel Schwarz of Stifel.
Yes, thank you for taking my question. I had another question on the e-Macan. The Taycan residual values seem lower compared to Panamera and the other ICE products. Do you assume used car prices for the e-Macan will be similar to the ICE Macan? Could you remind us where the residual value gains and losses are booked in the auto division or financial services? Then quick question, I think, Lutz, you said in the press call that Porsche would like a higher free float. Oliver, you are CEO of Volkswagen. Lutz, you're a member of the Porsche holding board. Could you just say what you think about the free float? Is a higher free float an option in the foreseeable future? Thank you.
Yeah, let me start with the residual value question. For the e-Macan, of course, we see a development when it comes to residual values for BEVs, which is not satisfying right now in the overall market. We see also this impact for the Taycan. Of course, we have a very conservative residual value positioning within Porsche Financial Services. And therefore, we are well covered. We have expected for the first generation of the Taycan that the residual values will be a little bit lower than the residual values for the Panamera as a comparison. And it's very important also for the future that you steer the second use and the third use phase in order to have the demand and supply situation under control as Porsche itself.
Therefore, we will focus in the future also on the used car phase when it comes to our offerings regarding financial services within our group. There's a clear target to cover more the used car phase. In addition, we already ramped up in the past a strong Porsche Approved warranty program. All these factors should support a strong residual value in the future also for our BEV cars. But it's very important to take in mind that also the further improvement of the battery technology should be used then in the used cars. That means we should be able to integrate new battery modules also in the predecessor cars. That should be a target for the future in order to keep the residual values as high as possible.
Yeah, and in terms of free float, Daniel, because of the strong and robust situation of liquidity in Volkswagen Group, tomorrow we will present the results. We do not comment on this point. Tomorrow, we will talk about the Volkswagen results. That today is not the right place to talk about it.
So, Oliver, Lutz, thank you very much for answering all these questions. Gentlemen and Dorothy, thank you very much for asking your questions on this call. As always, I ask stays at your disposal to deal with any open questions that should be unresolved. For the ones of you that we're going to see in the upcoming roadshow meetings, we look forward to seeing you all. And for the ones who are going to join us next week to Singapore, safe travels. We look forward to seeing you on the other side. Have a lovely afternoon, lovely morning, or lovely evening, wherever you joined us. Bye-bye and see you soon.
Thank you.
Thank you.