Welcome to all of you for Porsche AG's Q1 Conference Call. With the intro statement, as the operator outlined, available, we will not have any introduction statement or summary on the numbers, and we'll jump into the Q&A session right away. Only one governance statement. As you have seen in the intro statement, this call will be governed by our Safe Harbor wording. Now, we start with George of Goldman.
Good evening, and thank you for taking my questions. The first question I had, obviously, this was a challenging quarter with the changeover on both the Taycan and Panamera, as well as some of the hold-ups you had in U.S. ports. Can you just give us some insight into how you expect the wholesales and margins to evolve from here as we think about the second quarter and the second half of the year? And then the second question I had was with respect to pricing. If we look through this quarter, and particularly look at the wholesale evolution versus the revenues, it would seem that you had positive pricing in Q1. Can you just remind us, what are you expecting in terms of gross price increases for 2024, and also price increases net of content? Thank you very much.
Yeah. Thank you, George, for your question. Let me start with the Q1 questions regarding the challenges with regard to the changeover of the Taycan and Panamera, and of course, also the hold-ups regarding the U.S. Customs and regarding wholesales and margin development in Q2. The challenges differ significantly in the respective quarters, and I'm quite confident about Q1 being the lowest point. Why? Because you already mentioned the first quarter was characterized by the changeovers for the Taycan and the Panamera. We had a very slow ramp-down phase and also quality-driven slow ramp-up phase for these two models, and therefore, of course, also our, I would say it suffered a lot in the first quarter, also compared the retail figures—compared to the retail figures.
In addition, we have seen a disproportionately high cost situation when it comes to R&D, when it comes to marketing activities. We heavily invested also in the first quarter because this is a very important investment in our future, and therefore, yeah, we accepted the situation that wholesale doesn't fit exactly to the cost situation. We clearly addressed it. It's a different quarters. We will have challenges in yeah, completely different directions. And, yeah, due to the changeovers in the first quarter, the disproportionately high cost situation, we are confident that, yeah, Q1 will be the lowest point in 2024. In Q2, we will have the new model ranges ramped up step by step across all markets.
Yeah, the Cayenne, the Panamera, and also the Taycan will start volume-wise to contribute on. And, what's very important with regard to the second quarter is that the cost situation will not change. It will be in line, more or less, with the first quarter, and in addition to the better wholesale situation and quite good mix also. Regarding, first of all, the 911 series, we expect a much better situation when it comes to return on sales and also when it comes to net cash flow. However, in the short-term perspective, the current situation in the Middle East might be a risk factor, as well as other ongoing geopolitical situations regarding China, U.S. And these factors we have to consider, of course.
And the market situation in China, you know it very well, needs also to be closely monitored. And you have seen the situation when it comes to the luxury segment in China. It's still a challenging situation. The luxury segment in China doesn't exist when it comes to electrification, and therefore, it's necessary when it comes to the further transition towards electrification with the e-Boxster with the Cayenne. Porsche has to create, has to build this segment also in China and therefore, it's necessary not only to count on strong products, but also on a strong ecosystem and exciting experiences for our customers.... Regarding price increases, as usual, we will implement price increases on existing models with the model year changes.
Of course, furthermore, we have a lot of opportunities due to the four model launches to see also higher price points for the successors of the combustion engine cars, and you will see it also for the 911 successor. That gives us additional potential, first of all, then in the second half of this year.
Very good. We will then now continue with the next question, and that's Horst of Bank of America. Horst, the line is open.
Yeah, thank you. Thanks for taking my questions. The first one that I have relates more to H2, since you have commented already on Q2. I know you don't give a guidance by quarter, but of course, the hope that we have is that the 911 can make already a bigger contribution in Q4. I think you outlined various times before that you have got some, I don't know, some battery supply issues on these hybrids. So is there some hope that this issue can be resolved maybe earlier than expected, or is the situation unchanged, challenges, and therefore you can deliver these high-end derivatives only in Q1 2025? That's question number one. Question number two that I have relates to the sequential pattern from here, D&A versus R&D.
In Q1, we had a very high burden again from R&D expenditures. I think that's still related to the Macan. Since that is now getting launched, can we expect from Q2 onwards already R&D expenditures to get down? And then was the D&A for the e-Macan already included in Q1, or that's just gonna follow in Q2?
Yeah. Thank you, Horst. Let me start with your first question regarding the availability of the top-end models for the new 911. Yeah, we clearly addressed it that we will have a very strong product mix in the first half of this year for the existing 911 model range. But in the second half of this year, due to the quite late introduction of the 911 GTS in the fourth quarter, we will see a quite a high share of the base model for the 911, and we expect about 70% base share in the second half of this year.
Therefore, we see a certain compensation of the very good mix in the first half 2024 than in the second half of this year when it comes to the 911 contribution. Regarding the ramp-up call for the battery cells, we are quite good on track. We expect that the battery cells will be ready in the fourth quarter, and that means, yeah, we expect no further delay when it comes to the 911 GTS introduction. That means the car will be delivered to our customers in the fourth quarter, and then followed in 2025 by the S model and in the mid of 2025 by the top models.
That will have a very good mix when it comes to the 911 in 2025, with a very good margin situation. Your second question regarding D&A versus R&D. We already addressed that we will have a significant increase when it comes to D&A in 2024 compared to 2023. It's about EUR 500 million. Therefore, you will see a similar effect, impact in the second, third, and fourth quarter, as you have seen it in the first quarter. Regarding R&D expenditure, of course, we will have a very ambitious situation also in the upcoming two years because we have to develop parallel combustion engine cars and electrified cars. Therefore, you will see the peak of R&D and CapEx in 2026, maybe 2027.
And then, we will have a situation that the D&A will be first time higher than the R&D and CapEx in total. But for the upcoming, it's still a very high level when it comes to R&D and CapEx, because we have also situation with a slowdown, Europe and U.S. when it comes to the transition to electrification. And therefore, of course, we have to react, and we have to spend also more when it comes to combustion engine cars in the upcoming years, as we have expected two or three years ago. And therefore, we still see a very ambitious situation when it comes to R&D and CapEx.
Before we come to the-
Okay. That's great. Thank you.
Before we come to the next in the queue, let me just repeat: we put the intro statement as a sound file on the investor relations webpage. I would highly encourage all participants on the call. to listen to this intro statement, because here also the spending with respect to CapEx and R&D is put within the context of our exclusive strategy of Porsche. This all then boils down into Lutz's quote in the intro statement, that the spending of today is the revenues of tomorrow. With this, we come now to the next in the queue, which is Patrick Hummel.
Yeah, thanks. Good afternoon or good evening, Lutz and Björn. I want to follow up, first of all, on what you just said on the peak in CapEx. That's quite a meaningful change, obviously. And I guess nobody here in the call would disagree that it's wise to keep the ICE product fresh for longer in light of what's happening in the markets. But it seems like other OEMs are able to manage that without another increase in spending by just, you know, doing more minor things on the existing platforms. Maybe change the top hat a little bit and make sure the connectivity and entertainment is up to date, but without, you know, new platform development.
So why is it that Porsche cannot keep the ICE product fresh without a significant additional amount of money to go into CapEx and R&D? And my second question is the combination of fixed costs and your expectations for the Macan. What I mean with that is, you know, you obviously need volume, as we can see in Q1, with wholesale being low and fixed cost absorption being poor. You did say, on my question in the 3Q call, that you think the Macan volumes will be higher once the EV version is up and running than the ICE version only. So, the A part of that question is: do you still stand behind that comment in light of all the difficulties you have in the Chinese market in that price segment?
And if not, what does that mean for your fixed cost base from here? You're talking about more spending, CapEx and R&D. Don't you need to accelerate the other fixed cost savings programs that you're running to make sure that profitability can return back to that 17%-19% medium-term corridor? Thank you.
Yeah. Thank you, Patrick, for your question. Let me start with your question regarding R&D and CapEx. It's yeah, very important to address that we have the parallel phase of ICE and EV in a very significant manner for about four to six products. And of course, it's necessary not only to refresh the engine, but also the platform and the software when it comes to infotainment, when it comes to autonomous driving functions. We are not relying at this point in time on just one platform, and therefore, it's an additional investment necessary. And of course, we have to think about the development towards electrification in the upcoming years in the different world regions.
You see, high speeds when it comes to electrification in China, and so already mentioned, slowing down the situation in Europe and the USA. And we have to balance the situation when it comes to our further plans regarding CapEx and R&D costs. And therefore, yeah, we have to think about the planned ramp-up phase in the upcoming years for new EV models. Of course, we have to think about the derivative range. We have to think about using just two platforms in future when it comes to electrification. All these aspects are already considered when it comes to our outlook for the R&D and CapEx situation in the upcoming years.
But it's not realistic that we can come down with R&D and CapEx in the upcoming years due to the different challenges in the different world regions. Your second question regarding the fixed cost situation and Macan expectations. Yeah, we clearly addressed that we expect in the upcoming years a higher volume when it comes to the Macan, due to the parallel phase of the combustion engine car and the electrified Macan. And as the situation or this expectation is still considered in our forecast, of course, we see a very strong yeah response when it comes to the new e-Macan in the markets. And of course, the situation for the existing combustion engine Macan is still very strong also in the USA, not only in China.
And therefore, in total, we expect a higher volume than we have now as a parallel phase for the e-Macan and the combustion engine Macan. And therefore, we should have a good, yeah, fixed cost coverage in future, also when it comes to the Macan model range.
Thank you.
Only one word about Q1. I hope you all have taken a look at our fact sheet, and you recognize that we had, in the first quarter, an increase of our future spending from CapEx and R&D by 45%. This is for sure something that you should not annualize what Lutz meant to this degree is that when we talk about annual numbers, we talk about these ratios. But Q1, from the seasonality, is a very specific one.
It's a specific one. Maybe it's the lowest one, of course, in 2024. Because it's not just about the two model changeovers for the Panamera and the Taycan, it's also the situation regarding the delay of the Cayenne plug-in hybrid, which has led to a difficult situation for the ramp-up phase for the new Cayenne in general, first of all, in the USA. And you have also to consider the quite weak situation in China when it comes to the luxury segment. And of course, we have to invest heavily in our future products in parallel. And we have also supporting.
We have also to support our new model launches by marketing activities, and therefore, you have an extraordinary situation when it comes to the fixed cost situation in the first quarter, and that will be a much more balanced situation in the upcoming quarters. And therefore, yeah, we are clearly on track when it comes to our full year guidance for 2024.
Very good. So-
Okay, thank you.
Next one, and last one in the row, will be José of J.P. Morgan. José, the line is open.
Thank you. Thank you, Björn, and hello, Lutz. Hope all the travels went well. Just a couple of questions, please. Can you comment on the working capital? So first quarter, how much was it impacted by inventories, and how do you expect this to reverse in the coming quarters? And then second topic, the Taycan has a substantial price increase, the new Taycan, and I would like to understand a bit better if the new Taycan is substantially more expensive to manufacture, to produce, or the content is higher versus the previous one, or on the contrary, you're gonna benefit from that substantial price increase you have done with the latest launch. Thank you.
Yeah, José, let me start with the question regarding working capital in Q1. We have seen an increase in inventory from end of year 2023 to the end of the first quarter 2024, of about EUR 400 million. But when it comes to the quarterly comparison between the first quarter 2023 and 2024, there was no significant impact out of the inventory situation. It was almost same level, but we have negative impact in working capital regarding liabilities and provisions. The amount is about EUR 300 million-EUR 400 million. Regarding a Taycan price increase, of course, we see additional pricing potential when it comes to our new models for the successor, because it's a fantastic car with fantastic driving dynamics. We have a higher range.
The range increased more than 100 kilometers in real driving situation. We have a fast-charging situation. We were able to shorten significantly the charging time between 10%-80%, 10%-80%, to about 18 minutes. We can charge up to 320 kW, and of course, we are quite confident that we set a very good price point with the new Taycan, and we have very good market response when it comes to the functions and features of the new Taycan. Therefore, we are quite confident that we are good on path with our price positioning of the new Taycan. Of course, we have a very challenging situation when it comes to China.
I addressed it a lot of times. It's a challenging situation. It's driven by the real estate situation in China, first of all. And of course, we have seen a different landscape when it comes to the transition towards electrification. It's a completely different game. You cannot compare it with the combustion engine segments. I addressed it already. We have to create the segment, and we are already addressed a lot of measures in this direction. It's not only about our products, which are very promising, you know that very well. It's all about our investment beyond the car, in the ecosystem itself, in the customer experiences, and in our strong brand. And therefore, we see also a very challenging fixed cost situation in 2024.
But it's necessary to invest in our brand, in our products, in digitalization, in order to have a, yeah, a very good situation for the upcoming years when it comes to, yeah, the planned recovery towards return on sales of 17%-19%. And with the new products, with a, yeah, comprehensively new model range in place next year, and with a much better fixed cost situation than compared to turnover, we are quite confident that we are back on track towards a margin situation of 17%-19%.
Okay. So thank you very much for all your interest. Thank you very much for joining us for this conference call as of today. For the ones of you still being in China for the Beijing Auto Show or being on the way back, thank you very much for joining us also under these inconvenient manners and times. We stay tuned and stay at your disposal to help you with any open topic that should be left after this conference call. And taking a look at our incoming IR program, we have a couple of broker trips that either will visit us in the U.S. or here in Germany, and we very much look forward to give you the opportunity to experience Porsche and to experience our products. Stay tuned, and we for sure stay in touch.
Thank you very much, Lutz, for taking the time, and we all speak soon. Stay healthy. Bye-bye.