Earnings Call Transcript
Ferrari N.V. (RACE)
Earnings Call Transcript - RACE Q1 2023
Operator, Operator
Good day, and thank you for standing by. Welcome to the Ferrari 2023 Q1 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead.
Nicoletta Russo, Head of Investor Relations
Thank you, Sandra, and welcome to everyone who's joining us. Today we plan to cover the group's Q1 2023 operating results and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group's CEO, Mr. Benedetto Vigna; and group's CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate website. And at the end of the presentation, we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement, included on Page 2 of today's presentation, and the call will be governed by this language. With that said, I'd like to turn the call over to Benedetto.
Benedetto Vigna, CEO
Gracias, Nicoletta. Thank you everyone for joining us today. I would like to start by thanking all the women and men at Ferrari for their passion and dedication, which have been essential in navigating the first months of this year. Without the tireless effort of all of them from first to last, the strong result we present today wouldn't have been possible, I have no doubt. The current technology transition is creating a continuously evolving landscape. From my experience, and having managed some technology transformation in the past, I have learned that being agile and nimble is key to success. These two qualities underpin our strategic plan and the progress we are making is perfectly on track with respect to what we presented at the Capital Market Day almost one year ago. In particular, I would like to comment on two elements extremely important for our further growth: the e-building and our differentiated product offering. Let's start with the e-building. It grows taller and taller every day we come to the office. This will be the home of our internally developed strategic electric components and it will grant us a higher degree of production flexibility for our hybrid and full electric models. And now the differentiated product offering. Today, it includes ICE and hybrids whose deliveries' weight doubled in the quarter reaching 35%. Moreover, in line with plans, we will soon add to the family our full electric model tailored to address our current client needs. As we have done throughout this, our history, we will exploit new technologies to the utmost to enhance our sports cars' driving thrills. And we will read in our own distinctly uncompromising way. We want to give our clients greater freedom to choose the right type of powertrain, so we welcome the commitment at European Union level to allow the adoption of e-fuels. We believe that ICE still has an important role to play also in a carbon-neutral world. And together with our partners, we are studying and evaluating solutions that will contribute to decreasing CO2 emissions. As Ferrari, moreover, we have a unique advantage because in 2026, our Formula 1 cars will begin to use 100% sustainable fuel. This means that we will continue to develop technologies on track and later move them to road. E-fuels can already power our current internal combustion engines. While the production of e-fuels will receive a boost from the recent European Union decision, I see many questions and doubts about their costs and availability. Although I can understand this question, I'm a firm believer in the power of technology innovation. I have learned from experience how initial difficulties in a new technology can be overcome as you learn how to optimize the process. This will be true for both electrification and e-fuels. We will, therefore, continue to execute our product strategy detailed during the Capital Market Day with the highest determination. As we move towards our objective to reach carbon neutrality by the end of this decade, we also want to play our part in setting an example and inspiring wider change in the energy landscape. While we continue tirelessly to improve the efficiency of our manufacturing processes and increase the share of solar energy use, we work also beyond the walls of our plant. As such, we recently announced the creation of a photovoltaic plant, serving the newly created renewable energy community of Fiorano and Maranello, which is the first one in Italy ever promoted and supported by a company for the benefit of its local territory. It will bring a positive environmental and social economic impact. Firstly, sharing zero-mile renewable energy reduces CO2 emissions and thus we can avoid energy losses during the distribution. Secondly, the energy community will grant tangible savings in energy bills for its members being citizens, institutions, commercial activities, and factories. The renewable energy community initiative is complemented with the introduction of fossil-free hydro-treated vegetable oil on the tracks of our most relevant logistic partners in Europe, substituting the use of diesel and abating up to 80% of the CO2 emissions. Now let's talk about our strong first quarter results that I'm sure you have already noticed on the projected chart. I'm very pleased to highlight the following three key data; revenues at €1.4 billion, up 20.5% versus the prior year; adjusted EBITDA at nearly €540 million with a 37.6% margin; industrial free cash flow generation at approximately €270 million. Our order book already extends into 2025 on the back of a continuously strong demand. We have just opened the order collection for the newly launched Ferrari Roma Spider. And today we are also pleased to announce the long-awaited reopening for the Purosangue with deliveries due in 2026. Further testament to the strength of demand for our cash is the continued dynamism of the Ferrari pre-owned market, which translates into sound residual values. The enthusiasm of our clients is also expressed by their attendance level at all our events. In March, the Ferrari Cavalcade attracted over 80 Ferrari vehicles and their owners on a 1,000-kilometer adventure through Morocco culminating in the unveiling of the Ferrari Roma Spider. This latest model from Maranello is a timelessly elegant high-performance car with a contemporary take on the chic pleasure-seeking Italian lifestyle of the 1950s and 1960s. What makes it so striking is the adoption of a soft top, a solution making a welcome return to the Prancing Horse range on a front-engined car, 54 years after the launch of the 365 GTS4 in 1969 that many of us have seen several times in the Miami Vice TV series. I'm also proud to state that Ferrari has won three prestigious awards. The first one related to Purosangue. It has been named the Red Dot Best of the Best in the product design category. The second, for Ferrari Vision Gran Turismo, voted the Red Dot, Best of the Best in the innovative product category. The third one is the Red Dot for the 296 GPS, Maranello's first spider powered by a plug-in hybrid V6 engine. And what about the motorsport? The racing year has just begun with mixed results so far. 2023 will be the Formula 1's longest-ever season. And as we did in the first four races, we will continue to fight race by race with ambition and humility. Attention to details, focus, and continuous learning will be key as the season unfolds. In October 2022, we unveiled the 499P, our Le Mans Hypercar. And this March, at the 1000 miles of Sebring, it led Ferrari's return after 50 years to the top class of the FIA World Endurance Championship. The three-podium we won in Sebring, Portimão, and SPA-Francorchamps are confirming we are competitive. And with humility, we will continue to learn race by race. We all eagerly await our return to Le Mans in June, a milestone for endurance racing and an experience we will share with our clients and our fans. But before leaving motorsport, I would like to remember that SPA-Francorchamps has been a special race for us because the Ferrari team that won with our 488 GTE was composed of two men and one woman. Lilou joined us a few months ago, and it has been the first time in FIA World Championship that a woman won a race. This, together with our equal salary certification and the girls on track program, underlines our strong commitment to diversity and inclusion. 2022 was important for the increased expression of our brand into lifestyle, which we are continuing to nurture with the fourth fashion show that took place in February, during the Milan Fashion Week. It generated strong positive coverage from press and key opinion leaders. I also like to underline the incredible reception of the brand-new exhibition Game Changers, that has been on display since February 18 at Museo Enzo Ferrari here in Modena, that together with the one in Maranello registered record levels of visitor attendance, in the first quarter more than 100,000 people, more than 1,000 people per day. Also, our thematic parks are experiencing record levels of visitor attendance, sustained by the introduction in January of Mission Ferrari, the world's most immersive mega coaster and the last addition to the Ferrari World, Abu Dhabi. Before handing over to Antonio to review Q1 2023 earnings in all the details, I like to conclude by saying that these first months of 2023 have been another significant step on a journey during which we will continue to execute our strategy with commitment, focus, and determination. Antonio, the stage is yours.
Antonio Picca Piccon, CFO
Thank you, Benedetto and good morning or afternoon to everyone joining us today. Starting on Page 4, we show the highlights of the first quarter results, which represent a very strong start to the year with revenues up more than 20% versus the prior year, and adjusted EBIT, adjusted EBITDA, adjusted diluted EPS growing more than 25%. In particular, revenues came in at €1,429,000,000; adjusted EBITDA at €537 million; and adjusted EBIT at €385 million, with remarkable percentage margins at 37.6% and 26.9% respectively; adjusted net profit at €297 million, with an adjusted net profit margin of 21%; and finally strong industrial free cash flow generation of €269 million, slightly lower compared to the prior year, which was sustained by the advances collected on the Daytona SP3 and the 812 Competizione A. Turning to page 5, you can see the details of the Q1 2023 shipments, which were up 9.7% compared to the prior year. The increase was mainly driven by the Ferrari Portofino M, the 296 GTB, and the 812 Competizione. In the quarter, we commenced the deliveries of the 296 GTS and the 812 Competizione A while the F8 Tributo reached the end of its life cycle. The Daytona SP3 was in a ramp-up in the quarter with lower deliveries compared to the Monza SP1 and SP2 last year. As already highlighted by Benedetto, you see that in Q1 we doubled the hybrid versus last year reaching 35% of total deliveries as we roll out the allocation of our four hybrid models. As customary, the geographical allocation was deliberate and reflected the pace of introduction of new models. As such, Americas and Mainland China, Hong Kong, and Taiwan posted double-digit growth versus the prior year. On page 6, you can see the walk of our group net revenues growing 18% at constant currency. The growth in cars and spare parts was driven by higher volumes, a richer product and country mix, a strong contribution from personalization as well as the price increase on selected models and markets that we communicated last year. Personalizations were widely spread among the portfolio and stood at 18% in proportion to revenues from cars and spare parts. Sponsorship commercial and brand reflected the better prior year Formula 1 ranking and the contribution from lifestyle activities mainly led by museums' visitors and retail. Engine revenues declined in line with the reduction of supplies to Maserati as the supply agreement gets closer to its maturity. Currency had a positive impact, mainly following the US dollar dynamic. Moving to page 7, the change in adjusted EBIT bridge is explained by the following variances: First, volume positive for €28 million reflecting the shipment increase versus the prior year. Mix and price strongly positive for €85 million driven by higher personalizations whose contribution exceeded our projections. The richer product mix compared to the prior year was led by the 812 Competizione and the SF90 families as well as the decreased weight of the F8 family. Positive country mix in absolute terms was sustained by the Americas and Mainland China, Hong Kong, and Taiwan, as well as the already mentioned price increases. Industrial and energy expenses grew €47 million, mainly due to higher depreciation and amortization and raw material cost inflation which is visible. The latter, together with the larger share of shipments to China, is containing our percentage gross margin which anyway remains slightly above 50%. SG&A were negative by €22 million reflecting marketing and lifestyle activities obviously centered around the Roma Spider unveiling in Marrakesh and the fashion show in Milan, as well as our organizational development. Other was almost in line, mainly reflecting the better prior year Formula 1 ranking and the higher contribution from lifestyle activities. The overall total net impact of currency was positive for €28 million. Turning to page 8, our industrial free cash flow generation for the quarter was strong at €269 million, reflecting the increased profitability partially offset by a negative change in working capital provisions and other mainly linked to the increased inventory value both in relation to the running volumes and the richer product mix. Our inventories will remain high throughout the year also to preserve our agility in a context where the fluidity of the supply chain is not yet fully restored. Capital expenditure for €150 million is in line with our product and infrastructure development and consistent with the full year guidance to end up higher compared to last year up to €850 million. In the quarter, the capitalization ratio of our development expenses was 43% increased versus the prior year as we entered the development phase on a number of future models and per effect of the budget caps imposed on the spending in Formula 1. Net industrial debt at the end of March was €53 million decreased compared to December 2022 reflecting the solid industrial free cash flow generation net of the share repurchase program. It is also worth mentioning that during the quarter we completed the refinancing through new bank loans of the bond maturing for €390 million and this allowed us to successfully diversify sources and tenors while keeping a stable and safe level of total liquidity. To conclude on page 9, we confirm the 2023 guidance which targets solid growth and consistent progress in profitability. Looking at the development of the year as we see it today, we directionally expect a strong Q2 followed by a softer tail in H2 and particularly Q4 in line with our planned product cadence. In essence, to conclude, we keep executing flawlessly according to our strategy thanks to the passion and enthusiasm of everyone here in Ferrari and with all of our partners. With that said, I turn the call over to Nicoletta.
Nicoletta Russo, Head of Investor Relations
Thank you, Antonio. Sandra, we are now ready to open for Q&A.
Operator, Operator
Thank you. We will now take the first question. It comes from the line of Susy Tibaldi from UBS. Please go ahead. Your line is open.
Susy Tibaldi, Analyst
Good afternoon. Thank you for taking my questions and congratulations on another strong quarter. My first question relates to something you just mentioned. If I understood correctly, you said that you expect the second half to be slightly weaker, particularly in the fourth quarter. Previously, you indicated that this year would be more weighted towards the second half. Could you clarify what has changed? Looking at the mix progression, the first quarter was definitely weaker than anticipated for the rest of the year, especially with the expected ramp-up in Daytona and competition in the specials and higher-value cars. Can you explain the details behind this? My second question is about the Purosangue. It's impressive that you are already accepting orders for 2026. Could you share some qualitative feedback from your customers? Are you also seeing demand for a hybrid version? Thank you.
Benedetto Vigna, CEO
I'll address the second question about the Purosangue, while Antonio will respond to the first. We've decided to reopen orders for the Purosangue starting in 2026 due to the strong expression of interest we've received from many customers. Initially, when we launched the car, we did not anticipate such a strong response. Consequently, we had to pause briefly to better organize ourselves for a proper reopening. Our strategy remains unchanged, with the Purosangue representing no more than 20% of our annual volume, which is crucial to emphasize. Customers are pleasantly surprised by this unique car, which delivers the experience of a sports car while providing more room than typical sports cars. We wanted to share this decision with you all today, as it reflects our pride in offering something that is highly valued by our clients. Now, for the first question regarding H1 and H2 relative weight, I will let Antonio explain further.
Antonio Picca Piccon, CFO
Thank you, Benedetto and Susy for the question. I realize I was a bit unclear during the February call when I stated that margins would improve over the year, which is still accurate. Nothing has changed in that regard. I simply forgot to mention that Q2 would have been the strongest quarter based on our current outlook. Additionally, there will be adjustments in allocation by country and product throughout the year. This is just a matter of enhanced visibility or more precise planning for our product delivery as we progress.
Susy Tibaldi, Analyst
Okay. Understood. Very clear. But when it comes to the mix is it fair to assume that Q1 was, let's say, the weakest, the softest quarter of the year in terms of mix if we just think about the phasing of the models that are coming? So, we've got the Daytona. You've got the specials and you have lower weight of F8. So in theory the mix from here should improve.
Antonio Picca Piccon, CFO
Yes, you're right. That's definitely what we see today.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Giulio Pescatore from BNP Paribas Exane. Please go ahead, your line is open.
Giulio Pescatore, Analyst
Hi, thank you for taking my question and good afternoon, everyone. I need some clarification on the guidance because I'm a bit confused. You had a first-quarter EBIT margin significantly above the guidance, nearly 100 basis points higher, and now you're suggesting that Q2 will perform even better. However, I understand there might be a slowdown in Q3 and Q4, though I'm not clear on why that would happen considering the Daytona and Purosangue. I'm trying to piece everything together. What am I missing? Why is a 26% EBIT margin still the correct target for this year? Additionally, regarding the cash buybacks, you are close to having a net cash position, and previously you mentioned not wanting to be in that position. Why not pause the buybacks? Should we expect a stronger focus on the buyback program in Q2, especially since cash flow is expected to increase in the latter half of the year? Finally, I recall that having excessively long waiting lists could negatively affect customer demand, as some customers may not want to wait two or three years for car delivery. Is this a concern? At what point does it become problematic? If it does, will you need to expedite delivery timelines compared to your original plans?
Benedetto Vigna, CEO
Benedetto will take the question, and then I'll let Antonio speak. The waiting list indicates that if we reopen orders in 2026, it’s due to significant interest. I can assure you that we haven’t observed any trend of cancellations from customers. For instance, I had dinner yesterday with a 58-year-old man who is planning to treat himself when he turns 60. This aligns perfectly with our strategy to reopen orders. We don't see clients canceling orders due to the waiting time; they are already considering it. Now, regarding the other two questions, I’ll pass it over to Antonio.
Antonio Picca Piccon, CFO
Thank you, Giulio. I will try to clarify the first question. It's important to note that our analysis goes beyond just the sports car segment. When examining our intra-quarter seasonality, we must also consider the expenses associated with our other businesses, particularly in R&D operating expenses, which play a significant role in driving profitability for each quarter. Additionally, when assessing the EBIT margin, we need to factor in the depreciation and amortization, which does not follow a linear pattern throughout the year and begins to unfold as we start producing the models we later deliver. This is why we observed a very strong EBIT margin in Q1 compared to the full year guidance. I believe the earlier comments can help explain why Q2 appears to be relatively stronger as well.
Giulio Pescatore, Analyst
Yes, it does. Thank you. So can I just follow up on the initial question on waiting list and orders? If I remember correctly, at the time of the CMD, one of the assumptions you made in the target for 2026 was that demand was going to normalize. Based on what we're seeing today, is that still a fair assumption?
Benedetto Vigna, CEO
Yes. We don't expect any significant changes, either in our execution or in the assumptions we had during the Capital Market Day.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Stephen Reitman from Societe Generale. Please go ahead. Your line is open.
Stephen Reitman, Analyst
Yes, good afternoon. Thank you for taking my question. Regarding the first quarter, you achieved a very strong EBIT margin, even though we had been guided to expect a weaker quarter from a mix perspective. Now that you're selling the 296 GTS, which has a substantial price increase over the F8 Spider, are we starting to see the effects of your pricing strategy on your serial cars? The 296 GTB and the Roma Spider are both significantly more expensive than the Portofino M they replace. I also have a question about the geographic mix. It seems that having China as a large growth area might not be particularly beneficial because, while it brings in high revenue, the taxes associated with it appear to negatively impact the overall group margin. Could you comment on that, please?
Benedetto Vigna, CEO
Antonio will take it.
Antonio Picca Piccon, CFO
Sure, Stephen. As I mentioned previously, we don't evaluate margin based on a single model but consider how these models are priced within their market context. We aim to adjust pricing on new models or any models well ahead of their delivery to clients. This is a gradual process. Additionally, we must acknowledge that our cost base is fluctuating over time. Inflation is still a factor, and we are seeing its effects on our margins. This is an important consideration for the remainder of the year, and our guidance reflects this assumption. Regarding your other question about the mix, the strong mix contributing to EBIT margin in China is not evident. However, I noted that personalization has performed better than we anticipated, which has largely counteracted the negative impact of China on our percentage margin. While China contributes positively to our absolute margins, as I've pointed out multiple times, this is not the case when examining the percentage margin. The negative effects experienced this quarter have been balanced by the level of personalization and the margins we achieve from that.
Benedetto Vigna, CEO
This has been a simply important, Stephen. This is a part of the personalization. It's been really very, very important. We see this trend that helped us a lot.
Stephen Reitman, Analyst
Thank you. And you can expect a big pickup as well when you have your new paint shop, when you have your new paint line as well?
Benedetto Vigna, CEO
Yes, that's true. That's also what we said when we met. When we talk about personalization, we're talking about painting. That is something that you do in the last step of the manufacturing. You're talking about rims. You're talking about the trims in the car. So this is very, very important. And we care a lot about personalization because it's a way to make the Ferrari more and more personal. And in our luxury industry, this is key. It's key for the experience we deliver to the client. It is also key to make this car more and more unique and let's say to deliver the unique experience that the client are looking for.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Martino De Ambroggi from Equita. Please go ahead. Your line is open.
Martino De Ambroggi, Analyst
Thank you. Good afternoon, everybody. One more question on the Purosangue. You reopened the orders for the strong demand. Does it mean you could revise the volume guidance of up to 20% of total volumes, maybe not in the short-term but in the long-term? And on the first quarter, could you tell us the number of Daytonas you delivered? And what should we expect for the ramp-up of the Purosangue in the next few quarters? And if I may, very last on the mix effect. Because it's a mix of region, products, personalization, prices, could you roughly split the price/mix contribution very, very roughly?
Benedetto Vigna, CEO
Okay, Martino, Benedetto. So thanks for this question. Let's start from the Purosangue. So we are starting to deliver next quarter. Clearly there is a ramp-up phase. We will keep growing quarter-over-quarter, more or less at a ratio to quarter-over-quarter. This is the volumes that we will keep delivering in terms of increase. We do not plan to extend the life of the cars versus what was originally planned. This reopening of the order was done because, as I said, we were caught by a positive surprise for this strong interest. So we wanted to make sure that everything – we want to put a little bit of the situation, if you want, under more control from an industrial point of view. So there is no extension, not at all. This is the first question. The second was about Daytona. Well, we delivered the third Daytona. The third one that you are asking the split between the geography product, I understand your curiosity. I would do the same question. But I would also understand if you would not reply to me with the exact split. What I can tell you is what I said to Stephen and also Antonio said, we see a positive trend in the personalization increase. I think this is in line with the trend also we see in other luxury industries that our client want to have more and more personal-rich car. I mean already our Ferrari were pretty much if you want – each Ferrari is different from others. Now they are becoming even more different if you want. And this is something that we experienced positively in the second – in the last two months of the quarter.
Antonio Picca Piccon, CFO
And if I may, do not disregard the fact that keeping OpEx, meaning selling and general expenses and R&D expenses at a growth level, which is lower than revenues obviously, adds to the quality of the margins finally. So we're very careful on these aspects.
Martino De Ambroggi, Analyst
Okay. Customization was 18% last year. So in Q1 was how much?
Antonio Picca Piccon, CFO
Pardon me? So personalization flat was 17%, right? Yes, 18% this year.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Monica Bosio from Intesa Sanpaolo. Please go ahead. Your line is open.
Monica Bosio, Analyst
Thank you and good afternoon, everyone. Once again on the personalization, just a curiosity on which models did you see the higher requests in personalization? And should we assume that the personalization rate trend of the first quarter will keep growing over the next quarter? I'm asking this along with another question. It's on the different evolution in the deliveries to China. Do you expect a different evolution across the year or the deliveries will be equally distributed across the different quarters in China? And another question is on the cost. I read on the press release that the company is running the renegotiation on the labor costs. I was wondering if you can just quantify if we have some increases over this year and the next one. And last question is more general on the batteries. In 2025 the company will launch the electrified Ferrari. Can you share with us your view on the different materials of the batteries, if you are evaluating any solutions that look more suitable for Ferrari than others? Any insight would be useful. Thank you very much.
Benedetto Vigna, CEO
Thank you, Monica for your question. There are four questions. I will take the first and the last. I will leave the – Antonio to elaborate a little bit more...
Antonio Picca Piccon, CFO
If I may love it.
Benedetto Vigna, CEO
Okay. Let's start with the last one to make it special. The story of the battery involves the chemical elements we are using, which are generally the same, though the chemistry is a bit more tailored to our specific needs. What I can share is that we are focusing on optimizing our batteries in terms of energy density and power density. We do not rely on a single chemistry; instead, we utilize different types of chemistry that are more suited to our requirements based on these two factors of energy and power. As I mentioned earlier, we are on track with the plan we shared on June 16th of last year. Regarding the trends, we do not observe any specific trends by models or countries. This is quite personal; just as our clients are customizing their Ferraris to reflect their personal preferences, the same applies to this situation. For details about the China split and labor costs, Antonio can provide more specific information on that.
Antonio Picca Piccon, CFO
Yes, hi Monica. Our deliveries to China, Hong Kong, and Shanghai make up just under 10% of our total deliveries for the year. The first and third quarters are currently a bit busier than the other two quarters. However, this could change slightly as we adjust allocations, but it generally reflects how things are expected to unfold throughout the year. Regarding labor costs, we haven't finalized our negotiations yet. There is an 11% cumulative increase planned for 2023 and 2024, which is affecting this year by approximately 6%. This is reflected in our numbers.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Thomas Besson from Kepler Cheuvreux. Please go ahead. Your line is open.
Thomas Besson, Analyst
Thank you very much. It's Thomas from Kepler Cheuvreux. I have a few questions as well. Is it possible for you to confirm over how many quarters you plan to deliver the update on your lucky customers? That will be the first question or broadly say differently how many units we should expect third quarter in 2023 and 2024? Second question there was a bigger tailwind from FX that I was expecting in the first quarter. Is it still the main scenario to have something broadly neutral for you or do you think we should now see a positive FX goods in 2025? And lastly, you mentioned if you have positive elements for you over the mid-term as it gives us the opportunity to offer various kinds of portrait solutions to your customers in the mid-term? Could you share with us what is the initial thinking about the long-term proportion of vehicles that could stay with that kind of portrait mode in 15, 20 years' time, or is it still way too early to discuss that?
Benedetto Vigna, CEO
The number of Daytonas produced each quarter will likely be between 30 and 40. Regarding the fuel, we spent considerable time discussing this before our Capital Market Day last year because we were already aware that internal combustion engines still have significant potential. That's why we mentioned our plans for 2026 and 2030, focusing on our offerings related to internal combustion engines. We are pleased with the recent European Union decision regarding e-fuels, as it aligns with the strategy we shared last year. Our stance remains unchanged. Last year, we outlined the distribution of our different propulsion technologies based on our experience, as technological transitions, particularly in energy, take time and are not instantaneous. We view the e-fuel decision as further validation of our strategy. Antonio, regarding the...
Antonio Picca Piccon, CFO
Yes. Regarding the foreign exchange, I believe we must consider the significant financial volatility we are experiencing. If the current exchange rate between the US dollar and the euro stays roughly the same, we anticipate a similar inflationary effect year-over-year. Of course, this is contingent on whether the euro strengthens significantly, in which case we would need to reevaluate our assumptions.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Adam Jonas from Morgan Stanley. Please go ahead. Your line is open.
Unidentified Analyst, Analyst
This is Matthias here on behalf of Adam. So China, Hong Kong and Taiwan hit 11% of deliveries this quarter. And we know that you got to do some front-loading of that in the region, but just curious how you see this heading into 2025 based on your forward book. Thanks.
Benedetto Vigna, CEO
You may take this one.
Antonio Picca Piccon, CFO
Yes. Okay. On China, I think this quarter has been rather front-loaded, meaning we had a chunk of deliveries to China which has been comparatively higher, within, let me say, sort of, target for the year of about 10% of total deliveries to that region. When looking at the future years, I think we stated already at the Capital Market Day that we expect our shares of deliveries to China to not exceed significantly the 10% mark.
Benedetto Vigna, CEO
So it's a quarter that is fully in line with our strategy.
Operator, Operator
Thank you. We will now take the next question. It comes from John Murphy from Bank of America. Please go ahead. Your line is open.
John Babcock, Analyst
Hi. This is actually John Babcock on the line for John Murphy. Just one question. Could you talk about the opportunity you have to take up price on your vehicles?
Benedetto Vigna, CEO
We see a chance to increase prices. It’s a valid question. As we mentioned throughout last year and continuing now, we planned to raise prices by mid-single digits on selected models, and that’s exactly what we’re doing. We recognized this opportunity and are acting on it. Additionally, it's crucial that we properly value what we offer to our clients, ensuring they fully understand it.
Operator, Operator
Thank you. We will now take the next question. It comes from Tom Narayan from RBC CM. Please go ahead. Your line is open.
Tom Narayan, Analyst
It's Tom Narayan from RBC. Thank you for taking my questions. Hybrids accounted for 35% of shipments in Q1. Could you discuss the demographics of these customers, like their age and whether they are new to the brand? I'm interested in understanding how this might inform your electrification strategy moving forward. Additionally, I wanted to ask about the Purosangue relaunch in 2026. Is there a possibility of increasing the pricing? Given the strong demand, it seems likely that you could raise it. Lastly, I have a question about e-fuels. One challenge for e-fuels is the infrastructure needed for fueling, among other things. Can you share your thoughts on how that might develop? I understand that the EU and governments are supportive, but investment is certainly required. Thank you.
Benedetto Vigna, CEO
Thank you for your question, Tom. Let's begin by examining the demographics of the hybrid. We are closely analyzing this as we want to understand these trends better. Each quarter, we review the data and have not identified any specific patterns. Our clients often buy both the hybrid and ICE models; some enter the Ferrari world through the hybrid and then purchase an ICE model, or vice versa. When looking at patterns across continents or age groups, we don't see any significant trends. This is an intriguing question we often ask ourselves. This quarter, we wanted to highlight that approximately 35% of our clientele is purchasing hybrids. We also looked into the average age of clients buying hybrids compared to those buying different models in Antonio's chart, and we found no notable differences. Regarding the Purosangue, we announced that we will resume deliveries in 2026. Typically, we don't comment on potential price increases well in advance. While you may speculate, we prefer not to address that directly. Regarding e-fuels, I may have misunderstood your question, but they can indeed be utilized in our engines as is. We are already testing various non-fossil fuels. The infrastructure remains the same, although producing e-fuels requires combining atmospheric CO2 with hydrogen sourced from renewable processes. We are actively collaborating with our partners to ensure e-fuels are recognized appropriately, as they will need to be integrated into our vehicles. There won't be significant changes required to existing infrastructure.
Tom Narayan, Analyst
Yeah. I guess I wasn't referring to your infrastructure but more of the fueling infrastructure petrol stations et cetera.
Benedetto Vigna, CEO
It's the same Tom, there isn't any involvement. Clearly, there is a difference in the production of the fuel because you don't have to dig a hole in the earth to extract the oil, but you do need to capture CO2 from the atmosphere like with fertilizers. However, there is no difference in the distribution network.
Tom Narayan, Analyst
Okay. Got it. Thank you.
Benedetto Vigna, CEO
Thank you.
Operator, Operator
Thank you. We will now take the next question. It comes from the line of Anthony Dick from ODDO BHF. Please go ahead. Your line is open.
Anthony Dick, Analyst
Yes. Hi. Thanks for taking my question and congrats on the great results. Just a couple of follow-ups on my side. Firstly, on the Daytona. Could you actually give us the number of Daytona that were delivered in Q1 like you did previously for the Monzas? Also when you talked about the ramp-up of between 30 to 40 units is that sort of the maximum capacity that you can produce, or is that just the way that you want to sequence these deliveries? And then a second question follow-up on the personalization rates. Again, as we should see a ramp-up in Daytona deliveries, do you expect to maintain that 80% personalization considering the much higher ASP on these cars? Thank you.
Benedetto Vigna, CEO
Okay. So Anthony, the first question about Daytona deliveries in Q1 is 30. We maintain a range of around 30 to 40 units this quarter. This should be seen as a flexible line in our case, flexible in terms of the equipment needed to produce the cars and also in how our employees manage different steps. There is no relation to maximum capacity. Regarding the personalization rate, I can provide some additional details that might help you and the previous colleague who asked this question. A significant change we made to the personalization rate is that we have introduced carbon look components for our clients. This means there are now more options available for clients, and typically, carbon look components are more expensive than other options. Overall, I believe I've addressed all three questions you raised. Thank you.
Operator, Operator
Thank you. We will now take the last question. It comes from Gianluca Bertuzzo from Intermonte SIM. Please go ahead. Your line is open.
Gianluca Bertuzzo, Analyst
Hi everybody, thank you for taking my question. I want to revisit the price and mix discussion. Over the course of the year, do you anticipate that the mix or price will be the primary driver of growth for the average selling price? Additionally, regarding the Daytona, I don't want to speculate too much, but do you foresee a time gap between the current Daytona and the next one, similar to what happened between the SP1 and SP3, or will it be a more seamless transition?
Benedetto Vigna, CEO
Okay. This is the last question. So we split 50-50 between me and Antonio.
Antonio Picca Piccon, CFO
On price/mix, the answer is mix.
Benedetto Vigna, CEO
The Daytona, I understand that you're looking for detailed information. We mentioned producing 30 units in Q1, and around 30 to 40 units in the following quarters. Our production planning considers the clients' needs, particularly regarding customization, given the importance of carbon look components in this car model.
Antonio Picca Piccon, CFO
And your questions for the period after Daytona please wait.
Benedetto Vigna, CEO
Secrecy is important, Gianluca. We have to is, the visibility is very important. So we have to...
Gianluca Bertuzzo, Analyst
Of course and the very last one, if I may, what is your assumption in terms of cost inflation for this year? Thank you.
Antonio Picca Piccon, CFO
So I'll take this one. It's difficult to mention percentage-wise. Anyway, I would say, high-single digit, but it's really a mix of components. Last year we have seen energy and metals beginning of the year. Nowadays, these two components are not anymore the most relevant. Inflation is going through a number of commodities and products and components. On top of that labor costs are adjusting. So that's an assumption we'll see.
Benedetto Vigna, CEO
Last year we saw more on energy side and that is easing down now. While this year we see suppliers suffering a little bit more on the labor cost impact. That obviously has a delay of one year.
Gianluca Bertuzzo, Analyst
Thank you very much, Benedetto. Thank you very much, Antonio.
Benedetto Vigna, CEO
Thank you.
Antonio Picca Piccon, CFO
Thank you.
Operator, Operator
Thank you. I would like to hand back over to Benedetto Vigna for closing remarks.
Benedetto Vigna, CEO
Thank you all for joining us today and for your interest. The first quarter of 2023 represents another strong start to a robust year. Looking ahead, it's clear from our discussions that we approach the future with enthusiasm, agility, and the confident humility required during challenging times. Wishing you all a good afternoon, and thank you for your time, questions, and attention. We look forward to seeing you in a quarter. Thank you.
Operator, Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.