Hello, and a warm welcome from my side from Porsche headquarters in Stuttgart-Zuffenhausen. This is Sebastian speaking, and I'm happy to have you all in this call. This is a joint press and analyst call, and we will start with an intro statement by Lutz Meschke, our deputy chairman and member of the executive board for finance and IT. After this, we will first answer the questions of the media, followed by those of the analysts. Before Lutz starts, I hand over to my colleague, Björn Scheib, our head of investor relations.
Hi, good morning, hello, and welcome to all of you to this call. Interesting and important to mention, all materials, such as the investor deck or interim reports, are available on the investor relations section of our website. Before we begin, let me all remind you that any forward-looking statements being made during today's call is subject to the risks and uncertainties mentioned in the safe harbor statement included in our Porsche materials. This call will be governed by this language. With this, Lutz, please go ahead.
Yeah. Good morning and welcome, everyone, to the Q1 2023 joint investor, analyst and media call. In the next minutes, I will walk you through the major milestones we've achieved in the first quarter. But before we take a look at the Q1 2023 numbers and our strategy, let me talk about our anniversaries this year as well as the new Cayenne. This year marks the 60th anniversary of the Porsche 911. 911 is our icon, and we will celebrate its creation just as deserving as our 75 years Porsche sports cars anniversary. Our Porsche fans and customers will jointly celebrate the two anniversaries with outstanding events over the whole year. In the course of 2023, you can look forward to some very special highlights. We have a couple of surprises in store for you. We recently presented the new Cayenne at the Shanghai Motor Show.
It's one of the most extensive product upgrades in the history of Porsche, with far-reaching changes to the drivetrain, chassis, design, equipment, and connectivity. It also includes extensive development of our plug-in hybrids, which will have more power and more electric range in the future. Let's talk numbers now. This quarter, we were confronted with a broad set of challenges, geopolitical tension, inflation, and supply chain disruptions once again. Thus, we are very grateful that we are benefiting from unchanged high demand from our loyal customers, and were able to deliver the highest number of vehicles in the first quarter ever. At this point, I also want to thank all our Porsche employees and our Porsche partners for their great teamwork. Without their efforts, this success would not have been possible.
During the first three months of this year, we generated a strong increase in group revenues by 25.5% to EUR 10.1 billion. Increase is mainly the result of higher unit sales as well as continued pricing and product mix effect. The group operating profit increased accordingly to EUR 1.8 billion. We continued our robust performance and underlines the resilience of our business model once again. The operative margin remained on strong 18.2%. With EUR 0.8 billion R&D spending and EUR 0.3 billion CapEx, we continued to heavily invest in technology, innovation, digitalization, and product. Pushing ahead with our modern luxury strategy. Our investments are the foundation of Porsche's commitment to being a leader in exclusive and sporty mobility.
We are sticking to advancing our electrification strategy in terms of attractive product line up and disciplined ecosystem deployment. In our automotive segment, we have seen the highest number of vehicles sold in the first quarter. Overall, we sold over 84,000 cars. All products remain quite popular with our customers. Despite the continuing bottlenecks in the supply chains and the limited availability of parts, the BEV share was 11.4%. As discussed earlier, the order backlog stays robust at a high level, and our customers unchanged, opt for a high share of individualization for their vehicles. In Q1, the operating profit of the automotive segment was EUR 1.7 billion. This exceeded the prior year figure by EUR 0.4 billion.
This automotive sales revenue of EUR 9.3 billion, the operating return on automotive sales of 18.5% was on previous year's level. The unchanged strong performance is a result of continued positive pricing and product mix effects, volume growth, as well as a stable and lean cost structure. At the same time, we had to digest higher material, raw material, energy, and logistic costs. Automotive EBITDA increased by EUR 0.4 billion - EUR 2.3 billion, corresponding to an automotive EBITDA margin of 24.4%. Automotive net cash flow climbed to EUR 1.4 billion, which was a result of positive effects from EBIT and some tax payments effects. As of March 31, the automotive net liquidity decreased by EUR 2.5 billion - EUR 5.7 billion compared to the end of the fiscal year 2022.
This development is due to the cash outflow from the payment of the last profit transfer for the 2022 financial year to Volkswagen and, on the other hand, to the positive contribution from net cash flow. Let me add, this was the last payment of this kind. The domination agreement and the profit and loss transfer agreement were terminated at the end of 2022. You can find more details on the net liquidity development in the deck on our website. Stringent capital deployment remains one of our key priorities. The Porsche Financial Services segment's operating profit was EUR 86 million in Q1 2023, around EUR 20 million lower than last year. This development was mainly due to an increase of refinancing costs. The operating return on sales in financial services amounted to 10.7%.
The penetration rate moved to 41.6% after 45.7% in Q1 last year, as we immediately reflected on the changed terms due to the inflationary environment. Let's move on to the outlook for 2023. As it's planned for 2023, the Porsche AG Group assumes that average global economic output will continue to grow at a slightly lower level compared to 2022. As detailed in the slide deck available on our website, this is subject to risks, uncertainties, and assumptions relating to the development of the economic, political, and legal environment in individual countries, economic regions, and markets, and in particular for the automotive industry. Based on these above-mentioned assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17%-19%.
This forecast includes assumed group sales revenues in the corridor of around EUR 40 billion-EUR 42 billion. Our forecast for the automotive segment is a net cash flow margin between 10% and 12% and an automotive EBITDA margin between 25% and 27%. As part of the 2023 sales forecast, the company expects, despite the supply challenges, fully electrified vehicles to account for up to 12%-14% of total new vehicles delivered to customers. For the fiscal year 2022, the executive board will propose a dividend of EUR 1 per ordinary share and EUR 1.01 per preferred share to the annual general meeting. This is to be distributed in early July. In the medium term, Porsche aims to pay out approximately 50% of net income to shareholders. We wouldn't be Porsche if we were satisfied with what we have achieved.
Despite all our satisfaction, we have set ourselves very ambitious goals to position Porsche even stronger financially. We have a clear plan on how we want to achieve this. We call it Road to 20. The number 20 represents our long-term target, more than 20% group operating return on sales. Porsche is striving for this very ambitious goal in the long term. To this end, we are now putting everything to the test again, starting with our product range through pricing to the cost structure. We are setting up a comprehensive package of measures to increase the quality of contribution margins and make our products even more attractive. Above all, we wanna make our products even better, even more unique, even more desirable. We want to focus even more on our customers and offer them even more performance and luxury experiences.
With Porsche-specific technologies and partnerships, we want to fulfill even more individual wishes, so that even more customer dreams come true. All in all, of course, we are sticking to our medium and long-term targets. Group operating return on sales of 17%-19% for 2023, and in the long term, more than 20%. Thank you very much for your attention. We are very much looking forward to answering your questions now.
Ladies and gentlemen, at this time, we will begin the question and answer session. First, we will answer the questions of the media, followed by those of the analysts. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press Star followed by one at this time. I hand over to Dr. Sebastian Rudolph, Vice President Communications, Sustainability and Politics.
Thank you very much, and thanks, Lutz, for your intro statement. We have now maximum 30 minutes to answer the questions of you, ladies and gentlemen. I would kindly ask if you could limit your questions to one or two, so that everybody gets the chance to drop their questions in. With this, we now go to the first question, it goes to Victoria Waldersee of Reuters. Please, Victoria.
Hi. Good morning. Thank you for taking my question. I wanted to ask if you could give us a little bit more specifics as to why the return on sales didn't rise in line with revenue and operating profit. Presumably this had something to do with higher costs. If so, related to that, could you just give us your outlook on what costs are gonna look like in the coming months in terms of energy and raw materials? Are there specific costs that you think are going to remain high, or is there anywhere that you see some decline? Thank you.
Yep. Waldersee, thank you for your question. We have seen a very strong increase in sales in the first quarter, and we have seen also a very strong increase in operating income, more or less the same level as we have seen for the increase in sale. Therefore, we reached a very stable return on sales ratio of 18.2%. Therefore, there's no, yeah, one-time effect in place in the first quarter. When it comes to the entire year, to the outlook for the entire year, we are very confident that we can reach, yeah, the announced figures. When it comes to turnover, it will be between EUR 40 billion-EUR 42 billion.
We expect a return on sales, of 17%-19% and, a net cash flow margin between 10% and 12%. We expect a very stable and successful year, 2023.
I also saw Jan Schwartz, also from Reuters, in the Q&A queue. Jan, you dropped your questions. If you still have one, I'm happy to take your question. Jan, if you still can hear me, your finger was lifted, then please go ahead. Otherwise, we're fine. Jan, if your question arises, then lift your finger again. We, in the meantime, we switch to Marco Engemann from dpa-AFX. Please, Marco.
Yes, good morning. Thanks for taking my question. My question revolves around the other side of the equation, so to say, the price environment. Mr. Meschke, could you please give us some color on what do you expect in the coming quarters, concerning average selling price, which has gone up over the last year and quarter, year-over-year. Do you feel that's gonna hold over the whole year? How are you enforcing price, the raising of the prices?
Mr. Engemann, thank you for your question. We have seen a very strong pricing enforcement with our entire model range in 2022 and also in the first quarter of 2023. We expect the same development for the entire year of 2023. We have already decided a price increase for the new model year in the U.S. and in Europe, starting then with the second half of this year. The price increase will be between 4% and 8%. In China, of course, with the introduction of the new Cayenne, we will see also a certain price increase when it comes to the launch starting point.
Okay, thank you very much.
Okay, Jan appeared again. Jan Schwartz, please, the next question is yours.
Can you hear me now?
We can, Jan. Please go ahead.
Great. Great. I had some technical issues, so sorry for that. Good morning from my side also. I would like to try another time to get more color, perhaps, on the margin, staying at 18.2%. You said there were no special effects on that. Yeah, just to understand more, higher cost is obvious, but what exactly are the reasons for margin changed at this level, which is very good, but could be better?
As I've already mentioned, Jan Schwartz, we've seen a very strong performance in the first quarter. We have seen a volume increase. We've seen a continued positive product mix and very positive price effect. In addition, we have seen also a continued positive FX effect in the first quarter, and we expect it also for the upcoming months. Of course, we were also able to offset the increased cost with this positive effect. We have seen, of course, inflationary effects. We have seen increases in raw material costs and also increases in our R&D costs. Therefore, yeah, we are quite happy to see a very stable return on sales with 18.2%.
As I've already mentioned for the entire year, we expect the range of 70%-19% when it comes to return on sales. We expect also a very strong cash flow margin between 10% and 12%. If you have a close look on the first quarter, we have shown a cash flow margin of more than 15%. Of course, it was a little bit benefited by a tax payment effect of about EUR 250 million. Also without this positive effect, we would have seen a net cash flow margin above 12%, and that's a very strong performance. As I've already mentioned, we expect a similar development for the entire year, and therefore we will stick to our very ambitious goals when it comes to 2023.
Despite all challenges in geopolitical area.
Yes, that's.
achieve. Jan, do you have a follow-up on this?
No, no, thanks. Thanks much.
Okay, good. We jump to Markus Klausing from Dow Jones. Please, Markus.
Yes. Good morning. Thanks for taking my questions. I would like address the pressures again in the first quarter. The delivery conditions have eased somewhat, but where do you still feel headwinds? Then maybe you can say something about the production of the Taycan in particular, as there you have been considerable supply bottlenecks recently. Thank you.
Mr. Klausing, thank you for your question. Of course, we see some headwinds when it comes to supply chain disruptions. We have still some issues with the semiconductor supply chain. Of course, when it comes to the Taycan production, we have some issues when it comes to the high voltage heating system. Therefore the focus in the first quarter when it comes to the Taycan was to deliver spare parts for our existing customers. Therefore you have seen or we have seen a BEV share of just 11.4%. Now we are in a very steep ramp up curve together with our supplier when it comes to the high voltage heating system.
Therefore we expect an increase in the BEV share in the upcoming months. We are very confident to reach the BEV share of 12%-40% for the entire year. That's the main headwind we expect, but as I've already mentioned, we expect also tailwind when it comes to FX, since we have a very flexible and long-term oriented hedging policy in place. Therefore, we are quite confident that we can reach the same, more or less the same, level of tailwind when it comes to FX impact. What's also very important, our order bank is still very good, and also the order intake is very robust across all the world regions.
We go from Dow Jones to Bloomberg and Monika Raymond. Monika, please.
Yes, good morning. Mr. Meschke, we saw that Porsche Financial Services was less immune from the impact of inflation and rising interest rates last quarter. I was wondering if you might say how you expect interest rates and inflation to impact leasing and financed vehicles over the coming quarters. Thank you.
Ms. Raymond, thanks for your questions regarding Porsche Financial Services. It's a very important pillar for us. Of course, we have seen the effect of increased interest rates also in our penetration rate. That's an expected development when it comes to the penetration. What's very important that we have a very strong residual value management in place. We have already considered the new interest rate environment when it comes to our residual value setting for the entire year 2023. Therefore, we expect a very stable penetration rate over the upcoming months now for the Porsche Financial Services group. Of course, we will have certain differences when it comes to single markets. In the...
All in all, we expect a very stable development of the Porsche Financial Services business. Yeah, we are quite confident that we can reach our goals also in this segment.
I have one more question on my list, so if you have a question, you're a journalist, then please lift your fingers. The next question, and maybe the last one, goes to Marco Engemann with a follow-up question of dpa-AFX.
Yeah. Thanks again. My question would just be about a confirmation, I guess, around the new model of the Macan. Is it still on track for coming to market in 2024? Could you tell us in which timeframe, maybe at the early beginning, in the first quarter of the year of 2024, or is it more like Q2 or Q3? I guess you are starting production in Leipzig in, end of or the back end of this year. Could you tell us a little bit about that? Thank you.
Yeah. Mr. Engemann, thank you for your question. The Macan is in its final testing phase, and we are very confident that the delivery to customers will start in 2024. The exact timing depends on the customer's region based on our staged market introduction. Yeah, as I've already mentioned, we are quite confident that we can stick to our launch plan. As I've already mentioned, yeah, we are in the final testing phase. The hardware is more or less finished so far, but we have some software bugs to solve. In general, we are confident that you will see or that we will see a very successful start of the eMacan in 2024 across all world regions.
Because of this, what was, as said, we're not communicating on A or B. It's in 2024 with the eMacan. With this, we go to the financial partner, Patricia. I'm sorry, Patricia Nilsson.
Good morning, and thank you very much for taking my questions. Two questions, please. One is, you attribute higher profits and sales to a favorable price mix. Does this simply mean that demand is booming for your more expensive cars, or are customers spending more fitting their cars? It would be great if you could give some color on this. Mr. Meschke, I believe you came back from Shanghai not long ago, and it would be great to hear what struck you when you were out there in terms of the Chinese markets and what Porsche must do ahead there to maintain its market share. Thank you.
Yeah, Patricia. We have seen, yeah, the strong product mix in the first quarter of 2023, and we expect the same development also in the upcoming months. We have a very high model share in place so far and a very high individualization rate. That's key also when it comes to our BEV strategy. We will focus on a very good product mix. We will focus on a high individualization rate. Of course, we wanna use our pricing potential when it comes to the transition to BEV, starting now with eMacan in 2024 and then followed by the 718. We will see a price increase when it comes to the base models for the eMacan and 718 compared to the combustion engine car by 10%-15%.
We will have a clear focus on luxury product, but also on customer experiences beyond the car. It's important that our customers, first of all, in China, can experience some special events in Porsche communities, that we offer them very convenient fast charging solutions. We start now in Europe with exclusive fast charging solutions, and also in China. What's also very important is the sustainability effect, first of all, when it comes to the younger generation and when it comes to female buyers. Sustainability is a very important aspect, not only the ecological part, but also the social part.
Our customers expect that we give some of our success back to the society, and therefore we count on or we rely on an entire ecosystem, starting with a luxury product over, very, yeah, attractive customer experiences and, as I've already mentioned, sustainability. All these aspects are very important. I've already mentioned it for China. You have asked for my impression when it comes to China. We have seen a very strong development of local brands when it comes to mass market, when it comes to premium.
Yeah, we see a very positive rebound of the entire economy, and we think in opportunities when it comes to our brand, and therefore we are very confident that we can see also a very positive development for our market share when it comes to BEV business. Yeah, we see a lot of potential when it comes to the number of high net worth individuals expected to grow as the net high worth individuals is growing significantly over the upcoming years. We see additional potential when it comes to SUV business, and you know we sell more than 50% of our cars in the SUV segment. Of course, we are a leader in the luxury segment of BEVs, and therefore we see for our brand in the luxury business, a lot of additional potential also in China.
To add on this, Lutz, we communicated in April the delivery in Q1 and Porsche was up by 21% compared to previous years. This counts into what Lutz said from his impression of China. With this, we close the Q&A session for the journalists. Thank you very much for asking, and thanks, Lutz, for your fruitful answers. I hand over to my colleague, Björn Scheib, Head of Investor Relations. Björn, the floor is yours.
Thanks, thank you very much. Now we would love to start the Q&A session for the analyst investors with the following sequence. First question will be coming from Tim of Deutsche Bank, then we continue with George of Goldman, and then we've got Dorothy of Exane. As I see a quite sizable number of people in the queue, it would be great if you could limit yourself to one or two questions. With this, Tim, the line is yours.
Thank you very much, Björn. Good morning, Björn and Lutz. Thank you for taking our questions. I would have two, please. The first one is, this may very well be semantics, but obviously some of us noticed that. We did notice that you changed your wording on the order intake situation from very high with the full-year result presentation to quote-unquote high only in the Q1 result. Is there anything that we should read into this? Has the order situation slowed down a little bit? Is it actually unchanged, and this really is just semantics? It's obviously an unquantified KPI. Secondly, when we think about the automotive margin, which I, Lutz, I fully agree with you, this is a pretty decent result, but at the same time, we see very strong results from a lot of car makers in Q1.
It's just been a generally very strong and profitable reporting season for them. Should we see this as the peak margin that you are able to reach in the current environment before the Road to 20 program really hits in and the BEV rollout actually starts to increase, or would you say that there is still room for you to improve a little bit should the supply chain stabilize a little bit more, FX comes into favor, and all these type of things? Thank you.
Tim, thank you for your questions. Yeah. Our order book is still very high, as I've already mentioned. We are very satisfied with the strong order backlog, and this we have seen also in the first quarter, very strong order intakes across all world regions. Some model series still with increase of order bank, it's very important to announce that. We see we have some safe buffers for the next quarters, and therefore, we are very confident that we can reach our targets when it comes, very ambitious targets when it comes to the entire year 2023. We have shown our return on sales margin of 18.2%. In the automotive business, we reached 18.5%.
I think that's a very positive result and with all the headwinds we have already mentioned with the supply chain disruption, still ongoing supply chain disruption when it comes to semiconductors, with some issues when it comes to the limited parts availability for the Taycan, and we will, we expect that this situation will ease in the course of the year 2023. We can be very positive for the entire year. I can say that the order intakes in the first quarter are above our expectations and therefore you can see that our expectations for the entire year 2023 should be fulfilled.
Of course, we'll benefit also from a strong tailwind when it comes to FX and all these aspects will support our business in the upcoming months. This is strong order backlog in the entire world. Yeah, we can be sure that we reach our targets.
Thank you.
Tim, you also had a question concerning the supply chain as far as I understood, or?
I think that was okay. Lutz just answered that the supply chain is improving. That is all what that I was after, but still remains-
May I only add to this one. When Porsche is talking supply chain, we don't talk commodities. From the discussions that I had with a couple of you this morning, it's totally true that chips and steel and rubber and some commodities are increasing with respect to supply chains. When Porsche talks supply chain, we talk about the luxury business. Here we talk about the specific parts and components that our customers are ordering for the personalization of their vehicles. From that point of view, here we still recognize disruptions. This is important to mention. We are not talking commodities.
Thank you.
The next one in the row would be George, and thereafter it's Dorothy.
Good morning, and thank you for taking my questions. I had two questions, one on the recently launched Cayenne and the second one on financial services. Just starting with the Cayenne, I do note that on your online configurators, there seems to be a lot more customization available on this car versus prior generations, particularly with respect to Exclusive Manufaktur. Is this part of Porsche's strategy going forward in terms of enabling customers to increasingly customize their vehicles, thereby hopefully leading to much stronger mix for you in outer years? Is the level of customization on the Cayenne indicative of what we should expect on all future models? The second question I had was with regards to financial services. Obviously, a solid performance in terms of the EBIT in Q1. We have seen some volatility, however, in the earnings evolution there.
Could you perhaps just give some insight into, A, what's driven the volatility in recent quarters, and B, what your expectations are through the rest of the year? Related to that, are you seeing any drop-in penetration rates as APRs increase? Thank you.
Yeah. Thank you, George. I will start with your first question regarding Cayenne. It's a very important question when it comes to our entire strategy. As I've already mentioned, for us, it's very important that we offer our customers a luxury product, combined with very ambitious customer experiences, focusing on sustainability. When it comes to as a luxury product, a clear focus on individualization possibilities. It's crucial that we as a luxury brand offer our customers the most personal car, because when you want to stay with your high premium fees in the luxury segments, then of course, then you have to offer the best product and the best customization possibilities.
Our target is not to grow volume-wise, but value-driven, and therefore, we want to increase our product mix. We want to grow when it comes to the expansion of our product range, upwards with the Cayenne in the top-end SUV segment. Of course, we want to, yeah, want to tap into new customer pools. First of all, we see huge potential when it comes to younger generations and when it comes to female buyers. Therefore, the expectations when it comes to a luxurious product is a little bit different than we have seen it or we've seen it in the Western world. There's a strong focus on individualization. There's a strong focus also on digitalization aspects, and therefore we invest heavily in connectivity and digitalization, first of all in China.
Therefore, we decided to establish digital hubs there in order to work together with the local tech companies in order to meet the needs and requirements of the local customers there. Yeah, that's a focus of our ambitious strategy, high customization rates, and the most luxurious product possible. You will see it also with the upcoming model launches. There's a clear focus on higher customization rates. As I've already mentioned, the entire strategy is focusing on a luxurious environment for our customers, and therefore we decided to heavily invest in the electrification and digitalization of our products in the upcoming years.
When it comes to the Cayenne model launch now, the new Cayenne, you will see also a huge step forward, when it comes to driving dynamics, when it comes to the electric range of the car. You will see electric range of above 80 km, and that's a huge step forward compared to the existing models. Okay. The second question was regarding Porsche Financial Services. You mentioned the impact on the operating income. I've already mentioned that we have seen a certain impact from the interest rate side. We have reflected, of course, these interest effects also in our leasing rates. Therefore, we have seen a slight difference compared to the penetration rate 2022.
Now we have a penetration rate of almost 42%. That's absolutely in line with our expectations. What's also very important to know is that when it comes to off-lease disposals in 2023, we don't expect a significant impact because we have already considered all these topics in our residual value settings. Therefore, there is no surprise when it comes to the upcoming months for our Porsche Financial Services business. The next in the row then would be Dorothy from Exane. After we take Jose of JPMorgan, then Patrick of UBS.
Thank you for taking my question. I have two, if I may. The first is just coming back to the order book. The second is around the Taycan. On the order book, do you think you could share any detail on the order book by model? For which products are the order books largest and where are they smallest?
With regards to the Taycan, could you tell us if there have been any changes in the Taycan residual values that you've become aware of over recent weeks? Because obviously the competitive dynamics, specifically in the BEV segment, is somewhat in flux at the moment. Thank you so much.
Please understand that we don't wanna comment on individual model lines when it comes to the order books. Of course, we have different waiting times when it comes to different world regions and model lines. For instance, for the 911, the customer has to wait more than one year in the USA and in the overseas regions. When this comes to the SUVs, in China, you have to wait for a couple of months, and therefore you can see that there are differences between model lines and regions. In total, we have a very strong order book in place. When it comes to the Taycan, the Taycan is a success story from the first day onwards.
We see a very strong residual values in all the different world regions. The slight reduction in the BEV share is only caused by supply chain disruptions and limited parts availability. The demand for the Taycan is still very high in all the different world regions.
By the way, as Lutz said earlier.
Yeah. When it comes to the entire year, for the Taycan, of course, we confirm our sales targets with some BEV share between 12% and 14%.
The next in the row then would be Jose, then Patrick, and after Patrick, we take Steven. Of course, those two should drop.
Good morning. It's Jose from JPMorgan. Good morning, Lutz and Björn. Congrats on the solid results. Couple of questions, please. First one, capitalized R&D. Can you give a bit more guidance how to think about this journey throughout the year and also into 2024? That'll be the first topic. Second topic, can you discuss a bit how you want to protect or enhance the profitability of the business as you launch the Macan BEV, and how should we think about pricing on e-electric vehicles? That, you know, equation of launching electric cars and increasing prices to be able to obviously offset the incremental cost of the battery, how is that for you an opportunity, and how do you think about it? Thank you.
Yeah. Thank you, Jose. Jose, when it comes to R&D, the capitalized R&D, of course, is depending on the product launch cycle. Please understand that we don't want to comment on the product launch cycle of Porsche in detail because of competitive reasons. You can expect a similar level of capitalized R&D also in the upcoming months and also in 2024. When it comes to the pricing of the e-Macan, I have already mentioned that we will increase the prices when it comes to the base models for the e-Macan by about 10%-15% compared to the combustion engine car in the same model year.
Of course, we will do it in the same or similar way when it comes to the product launch of the e-Boxster. Yeah, that's our expectation when it comes to the BEV transition, that we can achieve also a very high price premium when it comes to the entire BEV range. We see a lot of potential. We have a proof of concept in place with the Taycan, and therefore, we are very confident that we see a similar development also when it comes to the transition of the existing combustion engine cars. We achieved a share of first-time Porsche buyers with the Taycan of 60%, and of course, we expect also a very high number of new customers when it comes to the transition for the e-Macan and the Boxster.
That gives us a lot of potential when it comes to the BEV transition. That's also very important since we have set ourselves very ambitious goals when it comes to BEV transition. We want to reach a BEV and a plug-in share of more than 50% in 2025 and more than 80% of purely electrified cars in 3018. We set ourselves ambitious goal to reach more than 20% return on sales, and that would mean we have to reach a parity between BEV and combustion engine business as soon as possible. With the high pricing potential of our brand, we see increasing economies of scale when it comes to our BEV platforms, since we rely on just two BEV platforms within Porsche in future.
Yeah, we will see parity in a couple of years, and that will help us a lot to reach our ambitious goals when it comes to return on sales.
Before we move on to the question of Patrick, let me also add to this degree. We get a question with respect to the capitalization rate.
More or less any quarter. Please understand that this is a reflection of our accounting policies, and this is not artificially set in order to boost EBIT. This company is predominantly managing its business with respect to cash conversion and with respect to cash flow. If you take a look at our historic numbers and the most recent numbers, you see that we have a quite attractive cash conversion. Therefore, we don't focus in our decision-making on the EBIT. With this, the next question will come from Patrick, then we will have Steven, and after Steven, we will have Horst of Bank of America.
Yeah. Thank you, Björn. Good morning, Lutz, also, thanks for taking my questions. My first one, Lutz, very, very simply put, you've delivered 9% price mix increase year-over-year, roughly. Your auto EBIT margin is below 25% automotive EBITDA margin. Are you actually happy with that? To be honest, I have to say price mix +9 %, if you had asked me six months ago or so, I would have said that's an incredibly strong outcome, and I would have expected the margin to reflect that. That's not the case. I'm just wondering if you're really happy with this underlying performance despite the phenomenal price mix growth year-over-year.
The second question on the supply chain, and thanks, Björn, for the color you already gave that we're not talking commodities here, but I wonder, can you help us understanding what the root cause of this supply chain bottleneck still is? I mean, the whole world had semiconductor bottlenecks, logistics challenges, et cetera, and neither of that seems to be a major thing still. Is it that the suppliers are in some ways constrained with their own capacity when it comes to the modules required for the individualization? Or what is it that's still holding your supply chain back?
Yeah, Patrick, thank you for your question. I will start with the increase in price mix. You have already mentioned the 9% increase in the top line. Yeah, it's a very ambitious goal when it comes to the upcoming year to grow with a CAGR of 7%-8% in total when it comes to group sales revenue. The main focus is on product mix. It's on a better customization rate. Of course, we will focus also on special editions, first of all, when it comes to the 911. Yeah, we will use our huge pricing potential when it comes to BEV transition, as I have already mentioned it.
A volume increase is not our target, but of course, we expect also a volume increase. A major part of the sales increase will result out of better product mix, special editions and higher customization rate and our pricing potential, as I've already mentioned. Nevertheless, we will see also a volume increase. I've already mentioned the very positive growth fundamentals when it comes to the number of high-net-worth individuals expected growth in SUV sales, the expected development when it comes to luxury BEV cars, and therefore, we will benefit also in this direction.
Yeah, therefore, we are very confident that we can reach our ambitious goals also when it comes to the steep ramp-up towards electro mobility, regarding Macan, regarding e-Boxster, and then followed by the e-Cayenne. When it comes to EBITDA margin, yeah, the effect is regarding the depreciation, when you have a close look on the development of our operating profit, then you will see that this development is completely in line with the increase in sales. We have seen a slightly disproportional development when it comes to EBITDA, but it's only driven by the relatively flat cost of depreciation. The depreciation will increase in the upcoming months and years.
You will see the inflection point in 2025. You will see first time that the depreciation will be higher than the sum of research and development costs and CapEx. Therefore, we are completely in line with our expectations, and we are completely confident to reach our ambitious goals. When it comes to supply chain, yeah, we are still in a situation that we don't have 100% coverage of the semiconductor, conductor supply chain. We have some issues when it comes to the Taycan, first of all, regarding our high volt, high voltage heating system.
Therefore we have seen limited parts availability in the first quarter. We expect that this situation will ease over the upcoming months, and therefore we stick to our very ambitious goals when it comes to bed share between 12% and 14%. Of course, we are focusing on our top-end models when it comes to the supply chain. We are closely monitoring the situation, first of all, when it comes to models like the GT3, but also when it comes to Taycan, since the Taycan, it's very important for our strategy, for our equity story, for our fast-moving transition towards electromobility.
Therefore, there is a clear focus on top-end models and the Taycan when it comes to the supply chain of, yeah, in the direction of limited parts. As I probably mentioned, we will see a better situation when it comes to the high voltage system starting now in the second quarter. The first quarter, we had a clear focus on the delivery of spare parts to our existing partners. Now we can focus again on serious production when it comes to Taycan. Therefore, we don't expect surprises when it comes to bed share in the entire year 2023.
Lutz, Just to be clear on the supply chain side, You talked mainly about Taycan now, which suggests that you can fire on all cylinders for the ICE models in the coming quarters.
No, we have also some issues regarding our combustion engine cars. For instance, for the GT3, I have mentioned the semiconductor situation. We are not on 100% coverage, and therefore, yeah, we have to fight also in the upcoming months when it comes to the supply chain. Nevertheless, we stick on our ambitious targets.
Thank you, Lutz.
This is what we mentioned earlier. We don't talk commodities. This is a luxury product over here, and when our people individualize their vehicles with sound systems or carbon parts, we don't miss these parts and ship a half-finished product. Our customers expect that they get the full-fledged product. This is exactly the point why we put this now multiple times, that we don't talk commodities.
Sure. I totally get that. I'm just surprised that these individualization parts are a bottleneck. We can take this offline. That's fine. Thank you.
Very fine and happy. Now let's speed up a little because we are running out of time. We've got Steven, Horst, and Henning, and pathetically sorry about this, but we need to keep it disciplined. Please stick to one questions in order to give everybody a chance to ask a question.
Okay, yes, Stephen Roman here, Société Générale. The question, one of the key factors during the IPO process was the talk about entrepreneurial freedom that would be gained from the separation from Volkswagen. Could you maybe give us some example of how Porsche is moving forward in this respect? You know, how are you able to move faster, the entrepreneurial freedom that you've gotten from the separation, please?
Yeah, thank you, Steven. That's a very crucial point for the development of our brand to get more independent from the VW group. That was, yeah, one of the most important goals when it comes to the IPO of Porsche. Of course, we already benefiting from higher speed now when it comes to new products, when it comes to hiring of new employees. We can focus on strategy fields like battery cell development or software development. Yeah, that gives us high speed, that gives us access to competencies in this very important strategy fields for the future of Porsche. In addition, we can use also the synergies within the VW group in future.
That gives us a more or less unique position in the automotive industry. We can play the strengths of a luxury sports company, and we can benefit from synergies within the VW Group. Of course, we will use the synergies when it makes sense for Porsche only in this case, when it makes sense when it comes to bundling of purchase volume, when it comes to mission pooling, and maybe when it comes also to using new platforms regarding the electrification of our model range. All these aspects together sets us in a very, very unique position.
Thank you.
Next one would be Horst and then Henning.
Yeah. Good morning. It's Horst here from Bank of America. Thanks for taking my questions as well. Just a few follow-ups or one follow-up. Mainly that is when I look at your wholesales versus retail sales in the reports, I'm seeing that there's a gap of something like 3,000, 4,000 units in Q4, but also in Q1 2023. Can you maybe explain why that is? Is it because more vehicles are in transition, so basically on boats to customers? Are you building up here some inventories, and if yes, on which models? Thank you.
Yeah. Horst, thank you for your question. Yeah. It's a very important point. Of course, we have seen some impact-From the limited availability of parts, as I've already mentioned, when it comes to the Taycan or also for top-end models in the 911 range. Therefore, we have seen an increase in inventory in the first quarter 2023, but we will see a normalization during the course of the entire year since we have more or less solved crucial supply chain issues. I've already mentioned the high-voltage heating system. We are now on a very good path together with our supplier, and then therefore we can focus now starting with the second quarter again, on our serious production when it comes to Taycan.
We see also a better situation when it comes to the parts situation for our top-end 911 models, and therefore we will see also a normalization for the combustion engine cars, starting with the second quarter of 2023.
We are talking here about finished goods inventory, right? When I talk about the difference between wholesale and retail sales, that has got nothing to do with parts shortage or not?
It's both. It's both. It's unfinished and finished products. It depends on the situation of the car production. Sometimes we have already filled the pipeline, the car is still in the property of the Porsche Group, and sometimes the car was not able to finish due to some limited parts availabilities. Therefore it's a mix of both. Regarding the availability, I already mentioned that we will see a better situation starting in the second quarter, therefore we will see a much better situation when it comes to inventories on the one hand, when it comes to unfinished products, and on the other hand, when it comes to finished products. It's both.
Okay, all right. Thank you.
What's also important, when it comes to the difference between wholesale and retail, the wholesale figures includes also the used cars, while retail only report new car sales. That's also a very important reason for the difference between wholesale and retail.
I will follow up on that. I don't fully understand that. I will call Björn on that. Thank you.
Okay. The last one in that row will be now Henning of Artus.
Yeah, good morning, and thank you. I'd like to actually take a slightly different angle on the margin situation and the evolution in the course of the year with the 18.2% now in Q1. I just wanted to reconfirm that the price increases, Lutz, you mentioned 4%-8% in the key regions in the second half. I just wanted to reconfirm that will materialize in the P&L in the second half already. Basically gets applied to the cars in the order bank and the ones that you account for in the second half. Just wanted to reconfirm that. Also the sequence of these limited editions. You've mentioned these surprises, anniversary specials, also the sequence of those vehicles materializing in the P&L.
Can you confirm that also affects the second half already? In the context of that, starting with 18.2, so above or in the top half of the full year guidance range already, are you not even in a position to confirm now that you would end up in the top half of the full year guidance range in the context of this basis and with the price increases and the high margin limited and special editions ahead for H2? Thank you.
Henning, that's right. The price increase for the new model year is not reflected now in the sales of the first quarter, of course. We will start with the price increase in the second half of the year in the US and in Europe. Therefore, you will see this effect then in the second half of this year in the P&L. Of course, this price increase will help a lot to achieve our ambitious targets when it comes to operating income and return on sales. Of course, we see a very confident and promising situation regarding our order intake and our strong order backlog.
We expect a strong tailwind from FX, but we cannot be sure that we have the same effect in FX as we have seen in 2022. We have a flexible hedging strategy in place. We use a lot of option derivatives, therefore there's a certain corridor you have to steer when it comes to hedging, therefore we stick to our corridor of 17%-19% return on sales when it comes to the entire year. I think that's an ambitious target regarding the very ambitious market conditions with the ongoing inflationary environment.
Yeah, with the situation on the supplier side, we have to be careful, and therefore, I think the range of 17%-19% is exactly the right corridor for the entire year 2023.
Thank you, Lutz, and sorry, just on the limited editions and anniversary specials, are we expecting some shipments of these in H2 this year already, or do they get launched this year but shipped next year?
It's a bit early to talk about new special editions. We are in our anniversary year. We want to show also some surprises. Understand it's a bit early to address new models at this stage.
Okay. All right. Thank you.
We now come to an end. As discussed earlier, this is the 75th anniversary of Porsche. As discussed with a couple of you already, we have a number of quite interesting events. To that degree, I would draw your attention to the 10th of June, where we'll be hosting a very special occasion event at the Hockenheimring. It would be our pleasure if you're able to join us over there. Because understanding the brand, seeing the brand, but last but not least, also touching the brand, is one of the parts which are really decisive to understand the community and the understanding the backbone of our luxury positioning. It would be our pleasure if you joined us over here. Thank you very much to all of you.
I'm 100% sure Sebastian would also say farewell to the journalists. Speak soon.
Thank you guys, and Frohes Schaffen in German, I would say. Have a good day, stay safe, and take care. Bye-bye.
Thank you also from my side.