Welcome to the global conference call of Mercedes-Benz. At our customer's request, this conference will be recorded. The replay of the conference call will also be available as an on-demand webcast in the investor relations section of the Mercedes-Benz website. The short introduction will be directly followed by a Q&A session. If you would like to ask a question, please press zero one on your telephone keypad. To remove the question, please press zero two on your telephone keypad. Again, for a question, please press zero one on your telephone keypad, and zero two to withdraw. I would like to remind you that this teleconference is governed by the safe harbor warning that you will find in our published results documents. Please note that our presentations contain forward-looking statements that reflect management's current view with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they were made. May I now hand over to Steffen Hoffmann, Head of Mercedes-Benz Investor Relations and Treasury. Thank you very much. Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Mercedes-Benz, I'd like to welcome you on both, the telephone and the Internet to our Q3 results conference call. We are very happy to have, Harald Wilhelm, our CFO, with us today. In order to give you maximum time for your questions, Harald will begin with an introduction, directly followed by a Q&A session. As always, the respective presentation can be found on the Mercedes-Benz IR website. Now I'd like to hand over to Harald. Thanks, Steffen, and good morning. Hello, everybody, to the Q3 call here. In the interest of time, let's jump right away into the topics. What is the key takeaway on the third quarter? We demonstrated that we can sustain our performance from the first half of the year, and that our business has become more weatherproof in a difficult environment. We could see robust demand across all the segments. We were able to increase sales while remaining constraints in the supply chain on the semi continued. On the basis of the solid financial performance of the first nine months, we set the pace for an increase of the full year guidance. If we look into the numbers and the group numbers in page three, well, with the higher sales, obviously higher revenues, a significant increase in the group EBIT to EUR 5.2 billion. Cash flow at the same level of EUR 3 billion. I come back to that a bit later. The NIL is at a healthy EUR 23 billion. On the highlights on the cars, page four. First on the product side, on the top end, I mean, obviously a very important addition with the EQS SUV. Great feedback from the markets with the sales in Europe and the US, which started. And a very good response, I mean, on that vehicle. Also in the top end, we have the first E-SUV from Affalterbach, namely the all new AMG EQE SUV. On the core segment, the newest addition is the all new GLC. Let's not forget that this is a very, very solid pillar in our core luxury segment and also a very important margin contributor in the future. Also in the core, we could see the world premiere of the full BEV EQE SUV ten days ago in Paris. On profitability, we could sustain the healthy margin which we had, I mean, year to date in the half year, basically in the third quarter, thanks to healthy mix and pricing. More on that a bit later. On the market and the performance side, we could see robust demand in all markets, despite the volatility, supported with a high backlog. In the US and overseas, very healthy demand level. In Europe, continuous good demand, mainly driven by pent-up demand, with longer order backlog carrying us into the next year. In China, we continuously perform well on a very high level. This is true for pricing, mix, and volume. Continuous situations of lockdowns obviously do not help consumer sentiment. For sure, we keep looking at this development very, very closely. A quick word on the semi. Overall the situation is easing, but we're still not happy with the overall, I mean, situation in terms of stability, reliability of the supply, and we expect that shortage to stretch into 2023. On partnerships, we signed a MOU with the government of Canada to secure electric vehicle raw materials. Next to that, we also signed an agreement with Rock Tech for delivery of average 10,000 tons annual supply agreement on lithium for our BEV acceleration. On page five, I mean, if you look a bit more closely at the top end and the BEV segment, a reminder, last year in the Q3, we have seen the trough in sales due to the semiconductor shortage. Due to the very limited chip availability back then and a pronounced focus on chip allocation towards higher end portfolio, we had an exceptionally strong mix in Q3 2021. This year, we could even build up on the high top-end level from last year's quarter by increasing it by another 5%. In the top-end segment, S-Class deliveries in Q3 were up in all regions except in the U.S., where temporary model year certification delays hindered the deliveries. Meanwhile, most of the certifications have been given by the authorities, and we are therefore confident to put these vehicles into the market in the fourth quarter and thereafter. The EQS continuously is ramping up. The Maybach and the G-Class and the AMGs continue to be on a high level. At AMG, we could see an increase despite the model year changeover of the new AMG C-Class. In the core luxury, the growth was mainly driven by the GLC launch, the C-Class, and now the EQE. also in the entry, we had a good momentum supported by the EQB. Overall, XEV sales increased by 39%, with the pure BEVs almost doubling in terms of the units, and the plug-ins having very good market acceptance in China. XEV and BEV sales are still impacted by chip supply constraints. Very important obviously, the margin side of things, where we see healthy margins on the whole portfolio of our BEVs, from the EQS to the EQE, but also on the EQA and the EQB. Let's have a look on the Mercedes-Benz car financials. I mean, page six. Sales revenues, ASP, and EBIT are up. Sales are 38%, with a higher proportion of locally produced units in China, where we grew in particular in the core segment, mainly in the new C-Class, so the GLC and the E-Class segment. Therefore, the revenues increased strongly, but slightly less, i.e., 26%. ASP up to EUR 75,000, driven by strong structure and pricing, and that is EUR 5,000 higher than in Q2 this year. Talking about ASP, as part of our strategy, we continuously work on our value proposition to the customers in all segments. Latest example is the newly released facelift of the A-Class and the B-Class, which demonstrates a significant entry point value uplift in this segment as well. EBIT adjusted more than doubled to more than EUR 4 billion. CFBIT at EUR 3.6 billion. How did we get there on the margin side Page seven, to the 14.5% return on sales. Well, I mean, the product volume structure net pricing increased significantly by almost EUR 3 billion. About 1/2 of that is volume and structure, 1/2 of that is pricing. Net pricing coming from further reduced discounts and the list prices, which increased, as we said in Q1 and Q2. The mix remains very healthy with the addition of EQS SUV, AMG, and SL sales. FX slightly positive, mainly from the U.S. dollar and Chinese yuan. Industrial performance is mainly on higher raw material costs and one-time commodity charges. The raw material costs were still on elevated levels in Q3 on steel, despite declining spot rates, due to our longer-term contracts will take some time until they roll through. Additionally, we see increases on the lithium. On the selling expenses, we see slightly higher marketing expenses, volume-induced higher selling expenses, and agent remuneration costs from the new direct sales model in Austria, New Zealand, Australia, and India. In line with our full-year guidance, we see higher R&D costs for our future platforms and technologies versus last year. The other buckets is mainly driven by the higher at-equity contribution from BBAC. With that, overall, 14.5% return on sales adjusted. On the cash flow side, page eight, how did we get to the 3.4CFBIT, respectively 3.6, CFBIT? Well, the working capital impacted slightly negatively with EUR 0.4 billion. As we said during the Q2 call, our priority was on bringing down the position of semi-related unfinished products. The teams overall managed this well. You see the unfinished goods bucket improving by EUR 700 million in the quarter. The new vehicle stock position has increased. What does it mean? Some of the rework cars are still on the outbound logistics chain on their way to the markets for handover to the customers in the fourth quarter. In the new vehicle stock, we see an increase in heavy vehicles in the so-called long logistic chains being shipped to overseas market and customers, namely GLE, GLS, S-Class, EQS. On the S-Class, most of them are waiting for the new model year certification, as I mentioned before. The priority for the Q4 is now to bring the inventory to a lower level. The Q3 working capital headwinds from the new vehicles inventory are partially compensated by better receivables and payables. The net financial investments with close to EUR 200 million are mainly related to the sale of own retail outlets, I mean, in the U.K.. Overall, the net investments in PPE and intangible assets equal depreciation, amortization, and impairments again. The other line includes the reversal of the BBAC at-equity result. On the van side, pretty good quarter actually on the performance. We look at the sales side, significant, I mean, increase year-on-year with a strong growth, in particular in the privately positioned vans despite semiconductor shortages. On the profitability side, strong margin with a healthy mix and the pricing overcompensating cost inflation and raw materials. On the market side, we see robust demand in key markets, in particular in China, with more than 50% growth versus prior year quarter and also good momentum in Europe. On partnerships, very important for the van business. We signed the MOU with Rivian for the joint production of a fully electric van in Central Eastern Europe to further accelerate our EV strategy and also to ensure competitiveness in the price-sensitive van segment. In this context, we plan to reorganize our production network for large vans in Europe. On the financials of the van, page 10, sales up 18%. Revenues increased 22%. Here you can see that this is even more pronounced on the revenues. EBIT at EUR 500 million, and cash generation also very healthy at EUR 500 million. Again, how did we get there? Page 11. The volume structure pricing bucket plus close to EUR 600 million, significant, I mean, increase in volume, but also mix and net pricing. In particular, the sales of Vito, V-Class, and Sprinter increased notably. Among all markets, China contributed strongest. On the pricing side, discounts could be further, which is positive on the industrial performance. As we could see on cars, we see the higher raw material prices and supply constraint-related logistics cost. Further, we have decreased research and development costs versus last year's quarter. Same on the other bucket, we see an increase on the FBAC at equity result. With this, a healthy 12.7% return on sales adjusted at van. Also on the cash side, page 12, that has been well, I mean, converted into cash flow. Working capital, you see a black zero. Minor increase of new vehicle stock has been offset by trade payable development. The depreciation, amortization, and impairments are lower than the investments in PPE and intangible assets as we are progressing towards the van EA and the electrification of the van business as well. Other buckets is a reversal of the FBAC result. Page 13 on the mobility key messages. Again, in that quarter, the supply constraints continue to impact the new business volume. We have a bit of a lower penetration ratio also due to increasing competition in financial services business as well as increasing interest rates. Solid used car prices and inflationary developments currently motivate also some customers to prefer a cash buy over a lease. Increase in interest rates currently put some pressure also on the interest margin. On the net credit losses, I mean, they remain low, supported by currently strong used car prices. Weakening macro results led to an increase of the cost of credit risk. Overall, we are protecting our margins and strive to pass on the increase in interest rates to our customers in this competitive environment. Furthermore, same as with cars and vans, we focus on profitable growth and high quality of our portfolio. On the financials, page 14, as I said already before, the new business mean decreased by 3% also due to the spin-off of some remaining truck business. The portfolio overall increased by 2%, but that is basically due to the FX and the EBIT adjusted decreased versus the exceptionally high level, I mean, last year, which I would like to explain on the page 15. I mean, let's bear in mind that the last year's quarter and the previous quarters probably a bit unusually favorably, I mean, elements in there. Now, I mean, this quarter, the return on equity has been at a lower level, but I would call that, I mean, on more normalized run rate level at a healthy 16% return on equity. Why that? A higher cost of credit risk, which we provisioned, a bit of a lower volume, some pressure on the interest margin, and also an adjustment, which we did on our participations in a more challenging market environment, which is included in the other bucket. On the positive side, we could lower our G&A and saw a bit of a tailwind also from the FX side. As I mentioned before, we expect the performance in 2022 to remain strong, but more on a normalized level, call it, I mean, a run rate level for mobility, as we guided already since the beginning of the year. Looking at the group numbers, page 16. We explained the business side, as I may say. What's left, the recon is positive, mainly due to the at equity result from Daimler Truck, which is partially offset by depreciations of assets from the PPA. EBIT adjusted is at EUR 5.3, adjustments on, mainly diesel. With this, I mean, the group EBIT is booked at the third quarter is at EUR 5.2 billion, which translates into a year-to-date EBIT of EUR 15 billion and an EPS of almost EUR 10 over the first nine months of the year. I also would like to give you a short update on Russia at this stage. The group intends to withdraw from the Russian market and to sell the shares in the Russian subsidiaries to a local investor. Final completion of the transaction is subject to the authorities' approval and the implementation of the contractually agreed conditions. From today's perspective, it is not expected to give rise to any further significant effects with regard to the group's profitability, cash flows, and financial positions beyond those reported in the previous quarters, hence no impact in the Q3 figures. On the cash flow side, page 17, we explained as well, I mean, the business side. What's left, income taxes at close to EUR 900 million. As reflected earlier, cash taxes are going up significantly this year. Reasons for that, higher earnings, and lower tax loss carryforwards. The other reconciliation at about EUR 180, which is some centrally processed one-time payments. With that, the free cash flow of the industrial side is at EUR 3 billion. The adjustments are mainly on the diesel side, with close to 300. Looking at the NIL, page 18. The net industrial liquidity increased to EUR 23 billion by the end of this quarter, from EUR 19 billion by the end of the last quarter, Q2. Obviously with the free cash flow of EUR 3 billion, but also in the other bucket, some FX effects and dividend distributions from Mercedes-Benz Mobility and some capital decreases at MBM. All in all, I think again, it's good to have such a healthy liquidity position in volatile times. You heard me saying during the Q2 call that this gives us optionality going forward. Now, probably the even more interesting part, the outlook, page 20. On the divisional guidance, please read the assumptions charts carefully. It's the same as in Q2, since the macro environment has not fundamentally changed within the past quarter. The assumptions are still covering our macroeconomic and geopolitical uncertainties, including situation in Russia and Ukraine, the overall inflationary pressure, increasing interest rates, the supply chain bottlenecks, and also the still ongoing uncertainties related to COVID lockdowns in China. Especially in those volatile times, one is well advised to have all sensors and early warning indicators activated. We're vigilant and ready to act quickly if necessary. Production planning and sales planning go hand in hand. We have shown every quarter since the start of COVID how to do this. Despite the macro risk, we continue to see healthy and high-quality demand for our products. This healthy demand is driven by our strong product portfolio. What does it mean for our cars guidance? We continue to see the full year sales slightly above last year, and we continue to see demand being above supply. We expect Q4 sales above Q4 last year. On the return on sales adjusted, so far year-to-date, we have managed to sustain a very strong 15% return on sales adjusted. It remains our ambition to continue with the year-to-date run rate. This also means that price and mix expected to stay on a high level, and that we continue to work on improving the cost base. We now lift our guidance for return on sales adjusted for the full year to 13%-15%. This range would imply that for return on sales adjusted in the fourth quarter, we see an upside of around 1 percentage point versus year-to-date loss on volume revenue quality. A downside of -1% loss versus year-to-date return on sales due to one-time commodity charges and some raw materials. Thirdly, with respect to the current macro uncertainties, we remain prudent and continue for Q4 to assume a well-familiar market environment projection of around 2% loss. The cash conversion rate for cars remains unchanged in between 0.8-1, and PPE and R&D remain unchanged. On the van side, sales remain slightly above 21, so unchanged on this. On the profit side, on the return on sales side, we are lifting, I mean, the guidance to a range of 9%-11%. What's the rationale for that? Well, obviously, with the year-to-date at 11.8, we aim to keep this year-to-date run rate also for the full year. However, comparing Q4 with year-to-date, we see a downside of -1% return on sales versus year-to-date on mix and revenue. A downside of up to 2% on increasing material and logistics costs, and also a general market risk protection as in cars. PPE, R&D unchanged. On the cash conversion, based on the strong year-to-date performance, we're lifting that to 4.8 - 1. At Mercedes-Benz Mobility, no change in the guidance at the run rate of 16%-18% return on equity. On the group KPIs, page 21, I'd like to remind you that we compare here the group KPIs versus the 2021 continued operations setup. How do they look like for 2022? No changes in revenues on the group EBIT with a year to date, EUR 15 billion, in the nine months. Our increased return on sales guidance for cars and vans, which is, I mean, pretty obvious that we now increase the expectation for the group EBIT by one notch to significantly above prior year. Free cash flow on the industrial business remains at prior year level. We see it, however, at the upper end of this range. How do we look at that? As reflected at the beginning of the year, cash taxes are significantly higher. Furthermore, we work proactively with higher safety stocks for some potential gas shortages and also the semiconductor-related shortages. Additionally, the restocking of the outbound supply chain influences our working capital till the year end. On the emission side, on the EU CO₂ emissions, we now see, I mean, a slightly above prior year level. I mean, why that? Some of the delays in production resulting from the constrained supply chains and the limited availability of semis impacted, I mean, the ramp-up on the BEVs. As in 2021, we expect to meet the CO₂ emission targets also in 2022. Let us conclude on the strategic priorities which we set out at the beginning of the year. I think quarter-over-quarter, and again this third quarter, we're making good progress, I mean, on all of them. We're scaling the BEVs year to date close to 160% with EQS SUV as I mentioned before. The EQE launch, and I mean all of the eight portfolio positions which we have on the BEV side. We have strong growth expectations. I mean, for the full year, we see the XEV sales to increase by more than 20%, compared to 2021 on full year basis. The increase is coming, I mean, mainly from the BEV side, which means that in 2022, every second XEV sale will be a BEV. That was every third in 2021. On the luxury side, we continue to grow our top-end vehicle sales single digit, I mean, this year, impacted by the shortage and the limitations on the supply chain, the semis. We're very happy with the latest product additions to the family, like, I mean, the EQS SUV, but many of the others I mentioned already during the call, and we are well on track to develop, I mean, that very important segment further. We're also accelerating on the software side. We will give a capital market update on our software strategy on February twenty-first in next year. We have moved this event to sunny California in the U.S., and we want to show you some real cool tech stuff, I mean, over there, not just slides. I would really appreciate if you could pencil, I mean, that date down in your busy diaries so that we can have a cool session all together over there in California. On the supply chains, we see the constraints to continue, but at the same time, we make progress, and we work hard on structural changes, such as deep sourcing and direct sourcing. I mentioned lithium with the MOU with Canada and Rock Tech before, but we're also doing that, I mean, in other areas of the supply chain and the commodities, to make that a more stable and resilient place in the supply chain. Needless to say that we continue the focus on the cost side despite the inflationary elements which we see all over the place. We keep our targets as we communicated them before, and you see the results of that in the third quarter and in the uplift of the guidance. With this being said, we're now happy to take your questions. Thank you, Harald. Ladies and gentlemen, you may ask your questions now. A few practical points as always. Please ask your questions in English, and as a matter of fairness and some change compared to previous calls, please try to limit your questions to one per person to give everybody on this call the opportunity to ask questions. Now, before we start, the operator will again explain the procedure. Thank you. If you would like to ask a question, please press zero-one on your telephone keypad. The first question is from Patrick Hummel, UBS. Your line is now open, Mr. Hummel. Yeah. Good morning. Thanks, good morning, Harald and Steffen. I would like to talk a little bit about how you maneuver through the coming months and quarters. You said semi supply is easing. You say it's still a constraint into next year, but we hear from everywhere that the situation is improving pretty fast. I'm wondering how you actually manage production in the coming months. I'm trying to tie that into the order backlog situation, which probably also stretches well into next year. You certainly need to make sure you don't overproduce so that you can sustain your pricing power and your price over volume strategy. If you can just talk a little bit about how you navigate this very challenging environment with some visibility, thanks to the backlog, but a lot of macro uncertainty at times of improving supply. Thank you. Yeah. Thank you, Patrick. On the fourth quarter, you heard me saying that we see them in the fourth quarter, I mean above fourth quarter between 2021. As we are already more or less, I mean, a third of the fourth quarter behind us, I think we should have pretty good visibility, meaning in this respect. Then if you look into 2023, I mean, this is a Q2-Q3 call. We will not give our guidance for the full year of 2023. Rest assured, I mean, we permanently each and every week look at them in the demand side of things. As I said just before, we still see constraints on the semi side, which somehow, I mean, yeah, constrains the unconstrained demand. Then consciously, we adjust compared to the free demand to make sure that we were not putting too much of a material remaining into the market and permanently manage this matching between the sales and the production, so that, I mean, we are not sitting on too much material. That is a permanent process. Usually at this point of the year, you do your operational plan. I would rather say that is just a picture, a snapshot. We work then obviously with scenarios, and we adapt each and every week in our operational meetings to the demands of which we see. As we speak, however, let me be clear, we see a good level of demand, I mean, in Asia, in China. We see very good level of demand, I mean, in the U.S.. The backbone of all of that obviously is a very strong product portfolio I emphasized during the intro. In Europe, we also see good level of demand supported by a healthy and strong backlog which takes us well into 2023. This is what we see today. For sure, we'll have plenty of opportunities to touch base for further insights into 2023. Is there any difference between the top-end luxury and entry-level in terms of visibility and the length of the backlog? Well, I just mentioned Europe. I mean, in Europe, I mean, we have a strong backlog across all segments. Almost obvious, I mean, to state that, given the prioritization we had been doing in 2021, in 2022 again, there's this pretty strong backlog, also on the entry luxury segment. We'll then see, given the production constraints, the semi situation for 2023, how we're going to prioritize for 2023. Globally, definitely, you know, we give priority to the top end, as we definitely want to grow that further in all of the markets. In particular with the additions in the top-end luxury, we see a strong demand at that end. Thank you. with GLC and C-Class and EQE. That's something we sometimes tend to forget a bit, that there is this very healthy and important core segment with a strong portfolio positions growing. Thank you, Harald. Thank you, Patrick. We continue with Tim Rokossa from Deutsche Bank. Yeah. Good morning, Harald and Steffen. It's Tim from Deutsche Bank. A little bit into Patrick's direction as well, because I think that's obviously what people wonder about. Thinking about the environment you're heading into and giving us confidence that you can continue to do so well, you still have the 2% points macro buffer in your guidance. One could argue macro is really not good right now, yet you didn't have to draw on it. What specifically went better than you feared, and why do you feel you still need to keep this buffer, given that you're basically going to probably ease into the winter holidays in six or seven weeks from now? Thank you. Yeah. Thanks, Tim. Well, let's make a quick check on what we said in Q2. In Q2, I think we said in the third quarter, in the remaining of the year, we should see a good continued run rate momentum. However, some more, I mean, raw materials, a bit higher R&D, a bit maybe of USD. The latter one, I mean, did not materialize. So the first two materialized. Overall, given this unprecedented macro volatility and uncertainties and the geopolitical on top of it, we built in a 2% risk protection contingency. You can see with the Q3 results that obviously we did not make use of that risk protection and contingency. That is exactly, I mean, the way we take it now, I mean, forward also for the remainder of the year. As I said, we see a healthy demand, mixed pricing, volume, with a +1 for the fourth quarter. We see the raw materials and some commodity charges with a -1 compared to year-to-date run rate of 15. Then a 2%, you could argue, is it a one, a two, or a three? But we feel, I mean, two is appropriate at this stage. If we can do without, obviously, I think we're all happy. If some unforeseen happens, I think we are protected. That gives you, I think, comfort and ourselves as well. Thank you. Thank you, Tim. We continue with Horst Schneider from Bank of America. Yes, good morning, everyone, thanks for taking my question too. Harald, I want to start my question basically with a quote that, the Renault CFO made in the Q3 call. He said, those car makers which generate double-digit EBIT margins, should compensate suppliers for higher costs. I'm sure you love this statement. In that context, on industrial performance, we see an ongoing high burden. You outlined a little bit why that is. Could you maybe specify these one-time commodity charges, and could you maybe tell us, because you have got for that by now, I think, pretty good visibility also already in 2023, when this line, industrial performance finally turns positive, or can it at all positive, or will higher raw material costs be just replaced by higher personnel costs next year, that industrial performance continues to remain a stronger burden? Thank you. Yeah. Thanks, Horst. Please accept that I will not comment on that quote. What we're doing, I think, is to work in partnership with the supply chain. We have contractual arrangements which need to be honored, I think, on both sides. On the other side, we have, I think, we take a fair look into the situation and I mean, if we need to do something, we are ready to do. What is behind the commodity charges in the bridges we explained obviously is higher cost. I mean, when it comes to semi, I think that's the vast majority, I mean, of that one. Over time, I agree with you. I mean, that should come down with lots of these actions we're taking, including direct supply and deep sourcing. We're investing into that, and we should have some return. Over time, I think we should see some easing of that. I would caution that this is already, I mean, very material, I mean, in 2023. As I said, the semi constraints probably will stretch into 2023. On the raw mat side, yes, we see the spot coming down in some of the commodities. Steel, it takes some time until it rolls through our contracts. I mean, we could see in some commodities some easing. On the other side, on battery materials, on lithium, we see continued high level. At this stage, don't wanna give any indication for 2023 whether the industrial performance bucket is going to be green or red. One thing seems to be for sure, cost inflation coming through on top of it, which we want to fight, as I said, and we keep our targets on the fixed cost side. Energy probably we'll see the bill for higher energy costs also in 2023. As 2022, we were pretty well protected. 2023, by the way, we also well protected contractually, but we'll see a step up. I don't want to frighten you with all of this, but I think we have our arms around all of these commodities. Rest assured that at the same time, we'll keep going on the pricing side, on the top line side, to make sure that net pricing remains positive. That's what we demonstrated in 2021, in 2022, with a very material, I mean, step up in raw mats, if we take the two years together. Definitely we wanna do that moving forward, 2023. Maybe then beyond the 2023, there is an opportunity opening up for some further easing, in particular, if we're moving more into a recessionary environment, one could expect that these commodities can normalize to lower levels. Just quick follow-up. When we look at the EUR 1 billion negative number in industrial performance in Q3, could you maybe indicate what's the split between raw material price, supplier passthrough, and this one-time charge that you have taken? I would say the vast majority is on the raw material side, which I mean by now is definitely higher than what we expected, I mean, at the beginning of the year here and also, I mean, a year ago. As I just said before, we were able, I mean, to offset that by net-net pricing. Mm-hmm. I mean, again, we'll continue to do so. Excellent. Thanks very much. Thank you, Horst. The next gentleman in line is George Galliers from Goldman Sachs. Good morning, and thank you for taking my question. I had a question on pricing. I think on the call it sounded as if the price increases you took in earlier in the year actually started to flow through the P&L in this quarter. Is that correct? As a result, do we see that continue over the coming nine months? Then when we think about pricing, where are you seeing the greatest improvement? Is it in the top-end luxury, or is it on the core and entry-level luxury vehicles at this point? Thank you. Thanks, George. Yeah, I mean, we commented, I mean, the idea in spring, there was another price increase on top of the one, I mean, in fall last year. I mean, for sure that is coming through now on a run rate in 2022. It's only one element of all of the levers we're doing on the top line side. Discounts continued to come down to even lower levels, which I think in the current environment, I mean, is pretty remarkable. I would say it's a kind of a proof or, you know, of approaching markets, I mean, differently, more cautiously. In particular, I think it's a testimony of the strong product substance. Now, I mean, all of the new models coming into the market are positioned or have been repositioned, I mean, in terms of pricing. Not just I mean doing a price markup, but I mean they offer a lot of substance and value to the customers. Look at the GLC. Probably if you look at the exterior, you might not see even so much of a difference. If you look under the hood, under the software, under everything, you will see it's a lot more. That's basically what applies to each and every of the new product, I mean, additions that we could step up, I mean, the pricing of the vehicles materially. Altogether therefore, the price escalation year on year, the discounts and the price positioning of the vehicles are contributing to the healthy price environment. That goes, I mean, all across. I mean, definitely on the top end side with the EQS, the EQS SUV, the SL, but also, I mean, the GLC, the EQE. In the intro I also mentioned even the entry luxury, I mean, with the A and the B, and the facelift of these vehicles, where we have a price step-up. Great. Thank you. Thanks, George. We continue with Jos`e Asumendi from JP Morgan. Good morning. It's Jose from JP Morgan. Can you please comment on the at-equity contribution from your Chinese business into the profit bridge? They came very, very strong in the third quarter. How do you see that evolving into the fourth quarter? Can you provide more color with regards to the improvement year-on-year? Can you remind us a little bit around the maybe localization of vehicles that you want to produce in China? Thank you. Yeah. Thanks, Jose. The at-equity result, I mean, of BBAC in the third quarter, I mean, was very healthy and strong. It was close to EUR 600 million improvement. I mean, let's bear in mind that quarter 3, 2021, we had to go pretty much on the brakes, I mean, in that quarter, given the semi constraints at the point in time. All in all, yeah, a very healthy profitability level in the JV. I think on the full year we provided some color in terms of like the financial KPIs of BBAC. In terms of profitability, balance sheet, we're not. We don't need to be shy. We like the contribution which is coming from that side. On top of that, I mean, if you look on the CBU business, obviously this is doing very well in the market, I mean, in China. Great acceptance of the products, I mean, healthy margin. All in all, I think a solid contribution coming from China. Thank you. Thanks, José. We continue with Stephen Reitman from Société Générale. Yes. Good morning. I understand the rules in Germany are changing next year on eco bonuses relating to supplying hybrid vehicles, and they will no longer qualify for the eco bonus, and it will be reduced on electric vehicles. Can you talk about how you're planning in terms of accelerating the switch to BEV? Thanks, yeah, Stephen. God, I mean, what an echo, but I get it right. Your question refers, I think, to the incentives, I mean, in Germany. Well, I mean, our take on that one is that purchase incentives, I mean, on plug-ins are lowered or, I mean, taken away. However, I mean, the very important one on the plug-ins is, I think, the fiscal regime or the taxation rules. So without giving you a lecture, I mean, on this one, but we understand that they are maintained, which means that basically it's half of an ICE in terms of taxable income. That makes the plug-ins continuously to be very attractive also in 2023, as lots of the plug-in fleets are also, I mean, on corporates and company fleets. We therefore see continued strong demand, I mean, for plug-ins in Germany also in 2023. On the BEVs, I think, I mean, the incentives are maintained as per my understanding. Thank you. Thanks, Stephen. The next gentleman in line is Harald Hendrikse from Morgan Stanley. Morning, guys. Thank you so much for taking my question. Back to sort of price mix really, which is I think the main occupation of most investors. If I look at the volume price mix, they had another incredible quarter with nearly EUR 3 billion contribution year-over-year from volume price mix. In the past, you've given us a little bit of a split between the volume price mix. If I look at it in Q3 this year, you've had 150,000 units more sales, whereas in last quarter you had EUR 1.5 billion contribution there, but you had lower sales. It looks to me like the overall volume contribution to volume price mix is much, much bigger. I was obviously wondering what that means for the mix price contribution quarter-on-quarter. Considering that the comps on pricing are obviously getting more difficult in the fourth quarter, can you just talk about not so much the level of pricing, which is obviously incredibly robust, but how do you see that? You know, do you see further upside in terms of pricing, and what sort of percentages should we look for? And then lastly, on leasing, we've spoken to some of the U.S. dealers in the last month or so, and obviously lease prices have gone up very, very substantially for expensive cars, $500, $600, $700 a month. How is the consumer reacting to that? Are they still as keen to buy, or are they buying smaller cars, or are they actually spending that extra $600 or $700? I'd love to hear your comments. Thank you. Thanks, Harald. Well, I think I commented that the EUR 3 billion bucket is about 1/2 of it volume and structure, and half of it is net pricing. Well, I also said, I think, the Q3 2021 was extremely strong in terms of mix, right? Remember we had the 380,000 units only, so obviously we favored all of the top-end vehicle. So therefore to have basically a favorable volume is obvious, but I mean a structure on top of it, so is I think, I mean, quite a good achievement in the Q3 2022. I mean, the other 1/2, I mean, being pricing, I think I gave the elements before on the discounts on the products and on the year-on-year escalation. I mean, a very good achievement. Obviously, in terms of taking that to next levels more and more will be increasingly difficult. We should not expect, I mean, the trees to grow into the skies, but definitely, I mean, we have the ambition to continue the favorable net pricing. On the U.S., on the leasing side, yes, obviously, I mean, we're conscious. We have pricing in the market, as we now debated, I mean, in the questions before. We see the step up in the interest rates. We are on the way to pass them via pricing further on, I mean, to customers, protecting our interest rate margin. That means that all in all, I mean, the lease rates are going up, I mean, significantly. At this juncture, we don't see, I mean, a pushback in terms of too elevated, I mean, lease rates. We see customers, as I said, in the intro of the call, preferring some cash buys. It's one of the signs obviously we look at carefully, whether, I mean, there is a point where maybe that level is too elevated and whether that would then impact, I mean, either sales or pricing. At this stage, we don't see it. Perfect. Thank you. Thanks, Harald. We continue with Dorothee Cresswell from Exane BNP Paribas. Yeah. Hi, it's Dorothee Cresswell from Exane. Thanks for taking my question. It's actually a slightly longer term one around IRA eligibility. Can you tell us how you're thinking around IRA eligibility in the U.S.? Perhaps more specifically, I think the lithium agreement you signed with Rock Tech will supply BEV production in Europe. Should we expect you to present a similar plan for battery raw material sourcing in the U.S in the near future? Thank you. Yeah. Thanks, Dorothy. Well, I mean, if I look at the IRA globally, I think with a strong presence, I mean, we have in the U.S. with the SUVs in Tuscaloosa, I mean, we are well-positioned in this respect. I do know that, I mean, there are some ceilings in terms of price levels where probably given our focus on the top end, we might be above. In principle, I mean, we are well-positioned with our industrial footprint, I mean, in the U.S. Rock Tech, as you said, probably is more for the supply of lithium to the European needs. As we announced earlier this year, we entered into agreement with AESC for local supply of battery cells to the Tuscaloosa facility, to the SUVs over there. There will be an industrial footprint on the cell supply by AESC in the United States, and therefore I think that should be in line with the IRA regulations. This is something that we see right now, but this is I mean, beyond that, at this stage, we have no other intention to fundamentally change our industrial footprint. Thank you. Thanks, Dorothee. We continue with Henning Cosman from Barclays. Yeah. Thanks, Steffen. Hi, Harald. Good morning. Maybe one more question on price. I feel like we're dancing around a little bit the real question, because into next year I feel, of course, you're not lowering list prices, of course. The question is almost what happens to a potential re-expansion and discounts. I just wanted to ask your comments on if there's a hard policy, how you're going to deal with that. Is there a certain hard ceiling where you say, "We don't let them expand beyond a certain level anymore"? Is there maybe other meat on the bone somewhere else in the distribution channel where you expect your partners to be also contributing to a potential incentive re-expansion? What we're most likely to see at first in lower lease rates, and is there something that you could maneuver? If you could just comment on that or if I may be wrong and it's not the incentives and it's something else, but can you keep them under control? Is there a hard policy in place? Thank you. Thanks, Henning. I like what you're saying. Definitely we have not the intention to lower the list price. Definitely we don't have the intention to step up, I mean, the discounts. As I said before, in the current difficult macro context, I mean, we could further improve in the discounts. Definitely we wanna hold them into 2023. If I think about price escalation, probably there's some further room of maneuver in terms of further price escalation. How and when and how much, probably we're not going to debate now on this call. All of that, I mean, suggests to me that pricing power evolution overall, I mean, should still be favorable in 2023 compared to 2022. What else? Well, we have a very important changeover in the sales and distribution network as we're moving more and more countries into the direct sales model. We now did Australia, South Africa, Sweden, Austria. Next year will be a very important year as we will have a switchover of Germany being the largest market in Europe. At least on my side, I do have some expectation that it will give us on top, I mean, better control over the pricing and maybe some incremental margin potential, or at least to stabilize, I mean, the pricing on the key levers I mentioned before. That is the game plan and then remains the question, what's happening on the cost side, whether the net-net remains positive or balanced. Definitely the ambition is to be at least balanced in terms of net. That's great. Thanks, Harald. Thanks, Henning. We have time for one more question. The next one goes to Daniel Schwarz from Stifel. Yes. Thank you for taking my question. Just quickly, you increased the EBIT guidance but not free cash flow. Could you say how structural the higher level of working capital is, and for how long is that? Or should we look at it as a opportunity for 2023 or rather not? Maybe just in that context, could you say how many S-Class were affected by these certification bottleneck in the U.S.? I mean, as I said, we have a model year changeover on the S-Class, and the certification are largely achieved. These vehicles basically can come into the markets in the fourth quarter. The bulk of that one should leave the inventory by the end of the year. I mean, here we're talking a few thousand vehicles. Overall, I think I can say that we're sitting on a pretty elevated level of inventory by the end of the third quarter. Definitely, I mean, we wanna take that to a lower level again. It obviously requires, I mean, more and more stability, reliability on the supply chain on the semi side. That is the major trigger for the reason why we are at this elevated level. To do that within the remainder of the year, i.e., the remaining three months, is pretty tight. Therefore we might not see the kind of normalization of working capital and inventory level, I mean, by the end of the year, as we would have wished for or as we could do if you would give me another month or two or quarter. If you extend the fourth quarter by a month or two, maybe, then the cash flow looks different as well. No, joke aside, but that is the reason why we see not a full conversion of the step up on the EBIT side into the cash flow. I would then rather look into 2023 where we need to see that, I mean, we can make the inventory flow, supply chain inbound, outbound, and smoothen that compared to the bumpy road as we have it in 2022. Great. Thank you. Thanks, Daniel. Ladies and gentlemen, thank you for your questions and for being with us today. Thank you very much to Harald for answering the questions. Now, as always, IR remains at your disposal to answer any further topics, you may have. To all of you, have a great morning, great afternoon, great evening, and we look forward to talking to you soon. Thank you and goodbye.