Ferrari NV (RACE) Q1 2023 Earnings Call Transcript

Ferrari NV (NYSE: RACE) Q1 2023 Earnings Call dated May. 04, 2023

Corporate Participants:

Nicoletta Russo — Head of Investor Relations

Benedetto Vigna — Chief Executive Officer

Antonio Picca Piccon — Chief Financial Officer

Analysts:

Susy Tibaldi — UBS — Analyst

Giulio Pescatore — Exane BNP Paribas — Analyst

Stephen Reitman — Societe Generale — Analyst

Martino De Ambroggi — Equita SIM — Analyst

Monica Bosio — Intesa Sanpaolo — Analyst

Thomas Besson — Kepler Cheuvreux — Analyst

Matias Ovrum — Morgan Stanley — Analyst

John Babcock — Bank of America — Analyst

Tom Narayan — RBC Capital Markets — Analyst

Anthony Dick — ODDO BHF — Analyst

Gianluca Bertuzzo — Intermonte SIM — Analyst

Presentation:

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.

[Operator Instructions].

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 welcomce 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.

So, this call will be hosted by the group CEO, Benedetto Vigna, and group 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 — Chief Executive Officer

Grazie, 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 are 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 future growth, the building — the e-building and our differentiated product offering. Let’s start with e-building. It grows taller and taller every day we come to 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 clients’ needs.

As we have done throughout our history, we will exploit new technologies to the utmost to enhance our sport car driving traits and we will do it 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 the European Union level to allow that option for e-fuel. 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 decreasing CO2 emissions.

At Ferrari, moreover, we have a unique advantage because, in 2026, our Formula One cars will begin to use 100% sustainable fuel. And 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 the cost and availability. Although I can understand this question, I am 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 plants. As such, we recently announced the creation of a photovoltaic plant serving the newly created renewable energy community of Fiorano in 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 emission, and thus we can avoid energy losses during the distribution. Secondly, the energy community will grant tangible saving in energy bills for its members, being citizen, institution, commercial activities and factories.

And the renewable energy community initiative is complemented with the introduction of fossil-free hydrotreated vegetable oil on the trucks of our most relevant logistic partners in Europe, substituting the use of diesel and abating up to 80% 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 EUR1.4 billion, up 20.5% versus the prior year, adjusted EBITDA at nearly EUR540 million with a 37.6% margin, industrial free cash flow generation at approximately EUR270 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 Spiders. 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 cars is the continuous dynamism of the Ferrari preowned 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 in this — on a 1,000 kilometer adventure through Morocco culminating in the unveiling of 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 50s and 60s.

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 engine car 54 years after the launch of the 365 GTS/4 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 as the Red Dot: Best of the Best in the product design category. The second for and Ferrari Vision Gran Turismo voted the Red Dot: Best of the Best in the innovative product category. And the third one is the Red Dot for the 296 GTS, 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 One longest ever season. And as we did in the first four races, we will continue to fight race by race with a mission 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. In this March, at 1000 Miles of Sebring, it led Ferraris return after 50 years to the top class of the FIA World Endurance Championship. The three podiums we won in Sebring, Portimao 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 the Le Mans in June, a milestone for enduring racing and an experience we will share with our client and our fans.

But before leaving motorsport, I would like to remember that Spa-Francorchamps has been the better race for us because the Ferrari team that won with our 488 GTE was composed by 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. In this, together with our equal salary certification and the Girls On Track program underlines our strong commitment on the diversity and inclusion side.

2022 was important for the increased expression of our brand into a lifestyle, which we are continuing to nurture with the fourth fashion show that took place in February during the Milan Fashion Week. It generated a strong positive coverage from the press and key opinion leaders. I’d like also to underline the incredible reception of the brand new exhibition, Game Changers, that is on display since February 18 at the Museo Enzo Ferrari here in Modena that together with one in Maranello registered record level 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 megacoaster and the last addition to the Ferrari World Abu Dhabi.

Before handing over to Antonio to review Q1 2023 earnings in all the detail, I’d like to conclude 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, please, the stage is yours.

Antonio Picca Piccon — Chief Financial Officer

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 EUR1.429 billion, adjusted EBITDA at EUR537 million and adjusted EBIT at EUR385 million with remarkable percentage margins at 36%, 37.6% and 26.9%, respectively. Adjusted net profit at EUR297 million with an adjusted net profit margin of 21%. And finally, strong industrial free cash flow of EUR269 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 deliveries of the 296 GTS and the 812 Competizione, while the F8 Tributo reached the end of its lifecycle. The Daytona SP3 was in ramp up in the quarter with lower deliveries compared to the Monza SP1 and SP2 last year.

As already highlighted by Benedetto, you’ll 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, 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 around 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 One ranking and the contribution from lifestyle activities, mainly led by museums visitors and retail. Engines revenues declined in line with the reduction of supplies to Maserati as the supply agreement gets closer to its maturity.

Currency has 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 EUR28 million, reflecting the shipment increase versus the prior year. Mix and price, strongly positive for EUR85 million, driven by higher personalizations who contribution exceeded our projections. The retail product mix compared to the prior year 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 sustained by Americas and Mainland China, Hong Kong and Taiwan, as well as the already mentioned price increases.

Industrial and R&D expenses grew EUR47 million, mainly due to higher depreciation and amortization, and raw material cost inflation which is visible. The latter, together with a larger share of shipments to China, is containing our percentage gross margin which anyway remains slightly above 50%.

SG&A were negative by EUR22 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 were almost in line mainly, reflecting the better prior year Formula One ranking and the higher contribution from lifestyle activities.

The overall net impact of currency was positive for EUR28 million.

Turning to page eight, our industrial free cash flow generation for the quarter was strong at EUR269 million, reflecting the increased profitability, partially offset by a negative change in working capital provisions and others, 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 were EUR150 million, 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 EUR850 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 EUR53 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 EUR390 million and this allows 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, and to conclude, we keep on 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.

Questions and Answers:

 

Operator

Thank you.

[Operator Instructions]

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 — UBS — Analyst

Good afternoon. Thanks for taking my questions and congratulations for another strong quarter. The first question on — just to go back to something you just mentioned. If I heard correctly, you said that you expect now H2 to be a bit weaker and especially Q4. I think previously you were flagging that this year was going to be a little bit more H2 weighted. So, can you just explain like what has changed? Because if we look at the mix progression, Q1 definitely was weaker than what we should be expecting for the rest of the year because you’re going to have a ramp-up in Daytona in the competition — in the specials and some of the higher-value cars. So can you explain the moving parts there?

And then, my second question on the Purosangue. Super impressive that you are already taking orders for 2026. I was wondering if you can share a bit more qualitative comments from your customers and also whether you are seeing demand from customers also for a hybrid version? Thank you.

Benedetto Vigna — Chief Executive Officer

Susy, ciao. I’ll take here the second question, the Purosangue, and the first one, Antonio will come back to you. So, the Purosangue, we decided to reopen the orders starting in 2026 because we see that, let’s say, there was — as we told you last time, there was a collection of expression of interest from many customers.

At the beginning when we launched the cars, we were not expecting such strong, let’s say, reaction from the clients. So we had to put a little bit of stop to organize ourselves, so that we could reopen properly. So there is no change in our strategy to keep this Purosangue at always lower 20% of our annual volume. This is very, very important to underline.

What we see is that the clients have — are positively surprised because it’s a really unique car that gives you the feeling — if people start to try it, it gives the feeling of a sports car with the roominess that usually a sport car is not able to provide because it’s smaller. So this is the decision we took and we wanted to share with you and the rest of the world today because I think it’s very important. And if you want, also make us a little bit proud to make something that is highly appreciated by our client.

For the first one, H1/H2 relative weight, I leave it to Antonio if he can explain to you.

Antonio Picca Piccon — Chief Financial Officer

Thank you, Benedetto, and Susy for the question. I think probably I was a bit unprecise back in the call of February because I said that margins would have improved during the course of the year, which is correct actually. Nothing changed compared to that. It’s simply that I forgot to mention at the time that Q2 would have been the strongest quarter as it is — as we see it today.

And then, of course, there are refinements of allocation by country and by product depending throughout the various months. So there is nothing more than a better visibility or more precise planning of our product delivery during the course of the year.

Susy Tibaldi — UBS — 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, then you have lower weight of F8. So, in theory, the mix from here should improve.

Antonio Picca Piccon — Chief Financial Officer

Yes, you’re right. That’s definitely what we see today.

Susy Tibaldi — UBS — Analyst

Okay, thanks.

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 — Exane BNP Paribas — Analyst

Hi. Thanks for taking my question. And good afternoon, everybody. So, the first one, just I need to follow-up on the guidance because it’s just not clear in my head. So, you had a first quarter margin, especially on the EBIT level, way above the guidance, almost 100 bps above the guidance. You’re now saying the Q2 will be better. I understand that there will be maybe a slowdown in Q3, Q4 even though it’s not really clear in my head why that would be the case given the Daytona and Purosangue. So, I’m just trying to connect all the dots here. What am I missing? Why 26% EBIT margin is still the right target for this year?

Then — sorry — the second question on the cash buybacks. You’re very close to being a net cash position. I think in the past, you clearly said that you don’t want to be in a net cash position. Why not stepping off the buyback? Should we expect you to be more focused on the buyback program going forward, given that cash flow should also accelerate in the second part of the year?

And then the last question. I remember in the past, having too long waiting list could weight on your customer demand because some customers are not willing to wait three years or two years plus to receive delivery of the cars. So, is that an issue? At what point does it become an issue? And if it does, will you be forced to accelerate the phasing of deliveries compared to your initial plan?

Benedetto Vigna — Chief Executive Officer

Giulio, Benedetto taking the question and then I leave the first to Antonio. The waiting list, clearly, if we do — if we say we reopen the order in 2026 is because there is a strong interest. And I can tell you that there is no trend in order cancellations that we see from the customers, okay? There are — I can share you with these things. Yesterday, I was having a dinner. There was a guy that was 58 years old and he is planning for making himself a gift when he turns 60. So, it’s perfectly in line with our plan to reopen the order.

So, we don’t see client, let me say, canceling the orders because of the time. They are considering it already. So, this is the question about waiting list. And for the other two questions, I hand over to Antonio.

Antonio Picca Piccon — Chief Financial Officer

Thank you, Giulio. And I’ll try and help you connect the dots if possible on the first question. First there is not just the sports car [Indecipherable]. So, when looking at the — our — let me call intra-quarter seasonality, you also need to take into account the unfolding of the expenses of the other businesses, which is basically the — what we have, R&D, opex, that’s an element obviously in driving the profitability in each single quarter.

And then there are other elements. When you look at the development of the EBIT margin, you need to take into account also the development of depreciation and amortization, which is not linear over the course of the year, but start and unfold as we present — as we start producing the model that we then deliver.

So, that explains this very strong Q1 EBIT margin compared to the guidance for the full year. And I think the comment I made before may help explain in why Q2 is so strong. We see it strong — relatively — stronger in relative terms.

The second question with respect to cash and the fact that it might end up being net debt positive, I would say, at the Capital Market Day, we clearly communicated a program — a buyback program of EUR2 billion. That is what has been executed in line with the generation of cash. We have an initial tranche that we are going to complete soon. And then, obviously, as the time unfolds, we’ll define what to do next. Hope this helps.

Giulio Pescatore — Exane BNP Paribas — Analyst

Yes, it does. Thank you. So, if I can 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 — Chief Executive Officer

Yes. I think, we see this — we don’t see any big variation, either in terms of execution and in terms of assumptions we had with — we made for the Capital Market Day.

Giulio Pescatore — Exane BNP Paribas — Analyst

Okay. Thank you.

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 — Societe Generale — Analyst

Yes, good afternoon. Thank you for taking my question. Again, on the first quarter, obviously, the very strong print you made on the EBIT margin, obviously, we were kind of like guided towards this weak quarter from a sort of mix perspective. But, obviously, you started now selling the 296 GTS, so — which has got a substantial price increase over the F8 Spider which it replaces. So, are we being — see now an impact of your moves on increasing prices on your serial cars [Indecipherable] sort of 296 GTB. And obviously, the Roma Spider significantly more expensive than the Portofino M that it replaced as well.

And secondly just a question also about the mix because I thought that looking at your geographic mix, it wasn’t particularly helpful having China being such a big growth part of that because, obviously, we know that it’s high revenue, but when we take into account the taxes, I understand that the contribution it makes to the overall group margin is negative or is a headwind. So if you can comment on that please?

Benedetto Vigna — Chief Executive Officer

Antonio will take it.

Antonio Picca Piccon — Chief Financial Officer

Sure, Stephen. As I think I already commented in the past, we don’t look at the margin on a single model, but rather these models are priced in their position. And obviously, we try and adjust prices on models that are newly introduced or in advance to the time of delivery to our client. So, it is a gradual move, this one.

And then, we should not disregard the fact that even the cost base is changing from time to time. Inflation has not come to an end anyway. We see it visible. By the way, in terms of our margins, that’s an element of attention also for the rest of the year. So, the guidance is also predicated upon this assumption.

The other question was I think in respect of — sorry. Mix, yes. I’m sorry. The strong mix acting on EBIT margin and China not visible. The fact that — the positive element that I mentioned in my comment before is that actually personalization came in much better than we would have expected. And this almost entirely offset the negative impact of China on our percentage margin. So, when you look at the absolute margins, China is positively contributing, as I mentioned a number of times. This is not the case when we come — look at the percentage margin, but the negative impact in the quarter has been offset by the level of personalization and the margins we have on that.

Benedetto Vigna — Chief Executive Officer

This has been extremely important, Stephen, This part of the personalization has been really very, very important. We see this trend that helped us a lot.

Stephen Reitman — Societe Generale — Analyst

Thank you. And can you expect a big pickup as well when you have your new paint shop, when you have your new paint line as well?

Benedetto Vigna — Chief Executive Officer

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. And it’s 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.

Stephen Reitman — Societe Generale — Analyst

Thank you, very much.

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 — Equita SIM — 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 mix of region, product, personalization, prices, could you roughly split the price/mix contribution very, very roughly?

Benedetto Vigna — Chief Executive Officer

Okay, Martino, Benedetto. So thanks for this question. Let’s start from the Purosangue. So, we are starting, let me say, to deliver in next quarter. Clearly, there is a ramp-up phase. We will keep growing quarter-over-quarter, more or less at ratio 2 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 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 30 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. 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 — Chief Financial Officer

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, add to the quality of the margins finally. So we’re very careful on these aspects.

Martino De Ambroggi — Equita SIM — Analyst

Okay. Customization was 18% last year. So in Q1 was how much?

Antonio Picca Piccon — Chief Financial Officer

Pardon me? So, personalization [indecipherable] was 17%, right?

Benedetto Vigna — Chief Executive Officer

Yes, 17%.

Antonio Picca Piccon — Chief Financial Officer

18% this year.

Martino De Ambroggi — Equita SIM — Analyst

Okay. Thank you.

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 — Intesa Sanpaolo — Analyst

Thank you. And good afternoon, everyone. Once again, on the personalization, just a curiosity. On which model 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 cost. I was wondering if you just can quantify if we have some increases over this year and the next one.

And the 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 — Chief Executive Officer

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 — Chief Financial Officer

China and labor cost.

Benedetto Vigna — Chief Executive Officer

Okay. So let’s start from the last one, so that is special. The story of the battery. The battery — the chemical element, if you want, that we are using more or less are the same. It’s the chemistry that is a little bit more specific to our needs. And what I can tell you that there are two dimensions that we are following to optimize our batteries. One is the energy density. Another one is the power density. So we don’t have a single chemistry. We have different kind of chemistry, a little bit more tailored for our needs considering the two vectors of energy and power.

And as I said at the beginning, we are on track with our plan that we shared with you, the 16th June last year.

The first question, which is the trend you see, we don’t see any specific trend by models. We don’t have also any specific trend by countries. It’s — let’s say — really it’s very much personal. Like I was telling you, our client are making more and more personal the Ferrari, the one they want to drive and the one they want to live. So this is the question — the answer to the question.

For the China split and the labor cost, Antonio can be a little bit more specific on this.

Antonio Picca Piccon — Chief Financial Officer

Yes. Hi, Monica. On China, our deliveries to China, Hong Kong and Shanghai, our deliveries in the course of the year are more or less — a bit less than 10% of total deliveries. And in terms of distribution by quarter, the first and the third quarter are the ones that currently are a bit more loaded than the other two. Don’t take it for granted because we may have slight changes in the allocation, but it’s more or less directionally how this should develop over the course of the year.

And the last one is labor cost. We are not engaged actually. We completed the negotiation. So it’s an 11% increase on a cumulative basis over 2023 and 2024, which is impacting this year in the region of 6%. And this obviously is in the numbers.

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 — Kepler Cheuvreux — 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 Daytona to your lucky customers? That will be the first question. Or broadly, said differently, how many units we should expect a quarter in 2023, 2024?

Second question, there was a bigger tailwind from forex than I was expecting in the first quarter. Is it still the main scenario to have something broadly neutral for the year or do you think we should now see a positive forex boost in 2023?

And lastly, you mentioned e-Fuels have a positive element for you over the mid-term as it gives a huge opportunity to offer various kinds of powertrain 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 powertrain mode in 15, 20 years’ time, or is it still way too early to discuss that?

Benedetto Vigna — Chief Executive Officer

Okay. Okay, Thomas. So, the first one, the number of Daytona per quarter will be more or less between 30 and 40.

The second — I think the third one — the tax Antonio will elaborate. The third one is about e-Fuel. Well, last year before our Capital Market Day, we thought extensively on this point because we believed already at the time that ICE can — there is — can deliver still a lot of things. There is a lot of way to go. So that’s the reason why we said, if you remember, that in 2026 and 2030 we were always having in mind and we shared our plan what is our offering in terms of ICE.

The decision — the recent decision of European Union of — about e-Fuel is very much welcomed by us. If you want, it’s a confirmation of the goodness of the strategy that we shared with you last year. So we have no change. We have not changed.

We have — the reason why last year we presented the split between the different propulsion was because, based on our experience, let’s say, the transition — the technology transition, especially when they touch the energy side, are not digital. It’s not something that can come from one day to another. It takes time. So we are really — we welcomed a lot the decision of e-Fuel because this can — is a further substantiation of our strategy.

Antonio, about the FX.

Antonio Picca Piccon — Chief Financial Officer

Yes. On the FX, Thomas, I think, obviously, take it with the benefit of all of us living in a world of significant financial volatility. If the spot rate of US dollar to euro remains more or less where we are today, we expect this to remain — to have more or less [Indecipherable] impact year-over-year. Obviously, it depends, if it goes — if the euro strength becomes much stronger, this could be an assumption to be reviewed.

Thomas Besson — Kepler Cheuvreux — Analyst

Thank you very much.

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.

Matias Ovrum — Morgan Stanley — Analyst

This is Matias here on behalf of Adam. So China, Hong Kong and Taiwan hit 11% of deliveries this quarter. And we know that you’ve 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 — Chief Executive Officer

You may take this one.

Antonio Picca Piccon — Chief Financial Officer

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 — Chief Executive Officer

So it’s a quarter that is fully in line with our strategy.

Antonio Picca Piccon — Chief Financial Officer

Yes.

Matias Ovrum — Morgan Stanley — Analyst

All right. Thank you so much.

Benedetto Vigna — Chief Executive Officer

Thank you.

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 — Bank of America — 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 — Chief Executive Officer

Opportunity to take–

Antonio Picca Piccon — Chief Financial Officer

To take up prices.

Benedetto Vigna — Chief Executive Officer

Look, it’s a good question. As we said through all the year and last year and what we are doing now, we are — we said that we were going to increase mid-single digit selected model on — and that’s what we are doing. So we saw this opportunity and we are using it. So, I think it’s also important that we value properly what we are offering to our client and they fully understand it.

John Babcock — Bank of America — Analyst

Yes. Thank you.

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 — RBC Capital Markets — Analyst

Hi. It’s Tom Narayan, RBC. Thanks for taking the questions. So hybrids were 35% of shipments in Q1. Curious if you could talk about the demographics of these customers, age or the — are they new to the brand? Just curious, if there’s any read-throughs as we can think about your electrification path ahead.

And then, just a quick follow-up on the Purosangue relaunch in 2026. Could the pricing be raised? I know the initial pricing, given the strong demand, it would suggest you could raise it. Just curious if pricing could be raised.

And then lastly, a follow-up on e-Fuels. One hurdle potentially for e-Fuels is infrastructure needed, right, for fueling et cetera. Curious if you could share any comments on how you think that might develop. I know that the EUs — or governments are definitely supportive of it, but certainly would require an investment there. Thank you.

Benedetto Vigna — Chief Executive Officer

Okay. So, Tom, thank you for your question. Let’s talk — let’s start from the demographics of the hybrid. This is something that we are looking carefully because we are also interested to understand what’s happening. And I can tell you that, any quarter, we have a look at these numbers and we don’t see there a specific pattern. So we have — if you want, we have the same client that is buying the hybrid and ICE. We have a client that entered the Ferrari world through the hybrid and then they buy the ICE or vice versa. And also, if you see the pattern across the continents or across the — let’s say, the age, we don’t see a real pattern. So this is a very interesting question that we are always making ourselves.

We wanted to report in this quarter this important target. Basically 35% of them are hybrid. We also checked the average age of the clients that buy hybrid or the red or the yellow in the chart that Antonio was presenting. There is no difference. So this is the first question.

The second question is the Purosangue. Today, we said that we are reopening with deliveries in 2026. Usually, we do not comment about the price increases so long in the time. You can you’re your own assumption, but we do not want to discuss specifically on this point.

The last one, maybe I misunderstood your question, but the e-Fuel is something that can fit in our engines as it is. We are already doing a test with different kind of fuels that are not fossil-derived. The infrastructure is the same. Clearly, you have to produce it. So you have to combine the CO2 of the atmosphere with hydrogen coming from the water. But infrastructure is the same.

An area where we are working a lot together our partners is to make sure that in case there is a clear mandate to recognize the e-Fuel because you need to feed the e-Fuel in the car where we need to work — and we are working already with partners to make sure that the e-Fuel is properly recognized versus the fossil fuel. This is — there is no — really no modification required in the infrastructure.

Tom Narayan — RBC Capital Markets — Analyst

Yeah. I guess I wasn’t referring to your infrastructure but more of the fueling infrastructure, petrol stations et cetera.

Benedetto Vigna — Chief Executive Officer

It’s the same, Tom. There [Indecipherable]. Clearly, in the production of the fuel, there is a difference because you don’t have to dig a hole in the earth to take the oil, but you have to, let’s say — it’s like fertilizers. You have to take the CO2 from the atmosphere. But there is no difference in the distribution network.

Tom Narayan — RBC Capital Markets — Analyst

Okay. Got it. Thank you.

Benedetto Vigna — Chief Executive Officer

Thank you.

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 — ODDO BHF — 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 Daytonas. Could you actually give us the number of Daytonas that was 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 — Chief Executive Officer

Okay. So, Anthony, the first question, Daytona we delivered in Q1, we said before it’s 30. We keep staying in the quarter around 30, 40. This is — let’s say, considered in our case, the line is pretty much flexible. And this is flexible either in terms of equipment that you need to produce the cars, but also in terms of ability of our employees to manage different kinds of steps. So there is no relation with maximum capacity.

And the last point, the personalization rate. Maybe here I can provide a little bit more color that will help you and the previous colleague that made this question. One big change we did in the personalization rate is that we have reached the carbon look component that are available to our clients.

So if you want there is — there are more option available for our client that are carbon look. And usually, if you want the carbon look component are more expensive than the others. But these are the three — I think you addressed all of them, the three question you gave us.

Anthony Dick — ODDO BHF — Analyst

Yeah. Perfect. Thanks very much.

Benedetto Vigna — Chief Executive Officer

Thank you.

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 — Intermonte SIM — Analyst

Hi, everybody. And thank you for taking my question. I want to jump back on the price/mix. On a full year basis, do you expect mix or price to be the biggest contributor in terms of growth for the average selling price?

And a second one, on the Daytona, I don’t want to anticipate too much, but do you expect there will be a time lag between the current Daytona and the next one as it was the case with — between the SP1 and the SP3 or it will be a smoother transition? Thank you.

Benedetto Vigna — Chief Executive Officer

Okay. This is the last question. So we split 50-50 between me and Antonio. So Antonio will take the price and mix.

Antonio Picca Piccon — Chief Financial Officer

Price/mix, the answer is mix.

Benedetto Vigna — Chief Executive Officer

So you were very fast. The Daytona, no, I think — look, we gave you — I understand that you want to have all the possible detail. So as we said, 30 in Q1, 30, 40 more or less in the next quarters. And we are planning this production according, let me say, to what is also the — which are the needs of the clients also in terms of personalization, okay, because there are a lot of carbon look component that are very important in this car model.

Antonio Picca Piccon — Chief Financial Officer

And if your question was for the period after Daytona, please wait and [Indecipherable].

Benedetto Vigna — Chief Executive Officer

Secrecy is important, Gianluca. We have to is — desirability is very important. So, we have to–

Gianluca Bertuzzo — Intermonte SIM — 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 — Chief Financial Officer

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. And on top of that, labor cost is adjusting. So that’s an assumption, we’ll see.

Benedetto Vigna — Chief Executive Officer

Last year, we saw more on energy side that is easing down.

Antonio Picca Piccon — Chief Financial Officer

Yeah.

Benedetto Vigna — Chief Executive Officer

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 — Intermonte SIM — Analyst

Thank you very much, Benedetto. Thank you very much, Antonio.

Benedetto Vigna — Chief Executive Officer

Thank you.

Antonio Picca Piccon — Chief Financial Officer

Thank you.

Operator

Thank you. I would like to hand back over to Benedetto Vigna for closing remarks.

Benedetto Vigna — Chief Executive Officer

Thank you, all. Thank you for the time you spent with us today. And also thank you for your interest. The first quarter of 2023 represents really another strong start to a very robust year. And we look ahead with — I think it’s clear from the question and the answer, we look ahead with enthusiasm, energy, agility and also the confidence, humility that I think is always required when you are in challenging times. And having said this, I wish all of you a good afternoon. And thanks a lot for your time, for your question and for your attention and meet you in a quarter time. Thanks.

Operator

[Operator Closing Remarks]