Toto Talks São Paulo

We came away from Mexico with our advantage over Ferrari in the fight for second in the Constructors’ intact. That is an important battle for us and one we are focused on winning.

Leaving Mexico with a second-place finish, given the challenging start to the weekend and our grid positions, was positive. The car showed very good race pace however we know we’ve got more work to do to extract the maximum from the W14 across all three days. Lewis put in a very strong performance to score a podium and George gave it absolutely everything, even when his tyres had gone off at the end.

We’ve got one last race in this triple header and it’s in Brazil. We know we’ve taken a good step forward in recent races, but Mexico showed W14 can still prove tricky to master. We will look to arrive in Interlagos with a solid baseline to work with and we’ll see what we can do from there.

Of course, we have fond memories from Brazil, especially the past two visits with Lewis’ spectacular win in 2021 and George’s first victory in 2022. The fans are super passionate about F1, and we always get such an enthusiastic reception from them. Hopefully our package will run well there, and we can put on a good show for everyone.
Fact File: São Paulo Grand Prix

    The Autódromo José Carlos Pace is the fourth-shortest circuit on the 2023 F1 calendar at just 4.309 km long.
    The only tracks shorter than it are Monaco, Zandvoort, and last weekend’s venue, Mexico.
    However, 67% of the lap is spent at full throttle.
    That ensures that it is the second-quickest lap time of the year, behind only the Red Bull Ring.
    The current lap record is held by former Mercedes driver Valtteri Bottas, who recorded a 1m 10.540 in 2018.
    The absolute track record, the fastest ever lap of the circuit in an F1 car, is held by Lewis who recorded a 1m 07.281 to take pole position in the same year.
    The São Paulo Grand Prix venue is situated 800 metres above sea level, the second-highest altitude we visit on the calendar.
    Again, only last weekend’s venue in Mexico City is higher although that has significantly more elevation, clocking in at over 2,200 metres above sea level.
    Interlagos provides a tricky challenge to set-up the cars. The first and third sectors require low drag for the long straights, but the twisty middle sector requires high downforce.
    With two DRS zones, the focus typically falls towards higher downforce for the ultimate fastest lap, but a balance still needs to be found to be competitive for overtaking and defending during the race.
    From the exit of Turn 12, there is 1.2 km of full throttle before reaching the braking zone for Turn 1.
    In this part of the track, there is also an elevation change of 33 metres.
    The biggest change in elevation however is from the start/finish straight to Turn 4, which sees a 40 metre drop in elevation.
    The long straight before the start of a flying lap requires smart deployment of energy from the ERS to maximise performance towards the end of the out-lap.
    Turn 1 is heavily banked towards the inside, which unloads the front-left wheel and can cause lockups.
    However, as the tyre is unloaded, flat spots are less likely and time loss isn’t as high due to the steep banking and variety of lines possible.
    The uphill grid requires the drivers to find a balance between holding the car on the brakes as gently as possible, without rolling backwards.
    From Turn 10 to Turn 6 (around 3.5 km) the left-hand front tyre does very little work and therefore cools down quickly. This provides a challenge in keeping the tyre in its operating window.
    Interlagos is a flowing circuit, with plenty of combined corner entries (where the car is cornering and braking at the same time). This means good stability is important along with a good front-end for the low-speed middle sector.
    Track temperatures can reach some of the hottest of the season here, getting up towards 60 °C.
    The weather in São Paulo can also be mixed at this time of year. It is not uncommon to see sunshine and high daily temperatures followed quickly by a thunderstorm bringing a deluge of rain.
    This weekend’s São Paulo Grand Prix marks the final sprint event of the 2023 season.

Lewis Hamilton

I've been struggling all weekend with the car and it has been a bit of a nightmare to drive. We've had to try and put the performance together piece by piece, and we made good changes going into qualifying so that I was much happier with the car. Q1 and Q2 weren't looking too bad - especially the second run in Q2. But the car is just really peaky - sometimes it's in the window, sometimes not. And I couldn't squeeze anything more out of it on that final lap. The race is definitely going to be a challenge: we will be overheating the tyres and the brakes, so it won't be easy to battle the cars around us. I don't really know what kind of race to expect but it's going to be on a knife edge.
George Russell

It was a bit of a shame to end up P8 because we showed signs of strong pace at points, but we didn't deliver when it counted. We lacked consistency today - some runs we were strong, others not, so it was a confusing picture. On the final run, we had one set of new tyres and tried something different on the out lap, and it didn't work and the tyres weren't in the window. As for tomorrow, it will be hard from P8 - the brakes will need managing and PU temperatures are always a challenge, too. We came here expecting to be competitive and I hope we can make progress in the race, but it won't be easy.
Toto Wolff, Team Principal & CEO

P6 and P8 are less than we had hoped for from qualifying today. We made some good steps with the car today, but we couldn't put the lap times together when it really counted. Ferrari made a massive jump from Q2 to Q3, and you could see all the way through the session that it was all about fine margins - two or three seconds of out lap pace, and getting the tyres perfectly in the window, or just slipping out of it. On our final new tyre, it looks like we were a bit too slow and the tyres a bit too cool - but it's just tricky to find that sweet spot. We are less than three tenths off pole, but it feels like a lot more given our starting positions. We showed some decent race pace yesterday - but we don't know if that will translate tomorrow, after the set-up changes we made. But the only goal will be to move forward from where we start.
Andrew Shovlin, Trackside Engineering Director

To qualify P6 and P8 is disappointing after we made good progress with the car since yesterday - and doubly so when the gap to pole is less than three tenths of a second. The field is just so tight these days and we were not fast enough when it mattered. It's frustrating as the team worked hard overnight to get the car into a better place and it feels like we have made good progress, it's just clearly not enough. It's very difficult to know how the race is going to pan out; we've made enough changes overnight that our Friday long run data is not particularly relevant, but hopefully we've improved the pace. Ferrari certainly look like they have a good car here and, given the championship position, it's important that we can stay in the race with them. Also, interesting that Daniel is up there. We've had good race pace recently but for many different reasons we've not been converting it into points. Hopefully we'll do a good job of that tomorrow.

Toto Talks Mexico City

Austin was a weekend of mixed feelings. The positives are that the upgrade looks to have given us a step forward in terms of performance. Our pace was strong all weekend and it was encouraging to be in the fight for victory.

The negative was of course failing to capitalise on our pace with the result. Losing a podium finish hurts and is not a position we want to find ourselves in. The complexities of a sprint weekend and a bumpy circuit caught us out. But rules are rules. We will learn from this and improve. Now we move on to the next race.

Mexico is always an exciting weekend. The fans are super passionate and energetic. The venue also presents a unique challenge with the high altitude. It has a major impact on how we operate the car, and it is always a challenge to find the optimum solution.

It will also be a good test of our upgrade package; seeing how it performs at a circuit with very different characteristics. That will be useful for our continued learning and development for W15. Finally, FP1 will see Fred Vesti in the car for one of our two mandatory rookie sessions. He has acquitted himself well in Formula 2 and I am sure he will do a good job for the team.
Fact File: Mexico City Grand Prix

    The Autódromo Hermanos Rodríguez is the third-shortest circuit on the 2023 F1 calendar, behind only Zandvoort and Monaco.
    It does however have the longest run from pole position to the first braking zone at 811 metres.
    Mexico City sits at over 2,200 metres altitude which affects the car in a number of different ways.
    Because of that high altitude and therefore low air density, the air is incredibly thin.
    The ambient pressure is by far the lowest of the season at 782mb.
    The oxygen levels are therefore 78% of what they are at sea level. This has a big impact on the aerodynamics and the Power Unit.
    The Power Unit sees a decent drop in output due to the thin air. The turbocharger makes up for some of the power loss, but not all of it, and has to work much harder than it does in normal conditions.
    Due to the altitude, we run a high downforce package in Mexico City but experience Monza levels of downforce.
    Top speeds are therefore some of the highest of the season and typically exceed 350 km/h.
    The Autódromo Hermanos Rodríguez still largely follows the original outline of the circuit which was first developed in 1959.
    The main difference is the former, more fearsome version of the Peraltada corner is now bisected.
    The first championship Grand Prix race took place at the circuit in 1963, before disappearing from the calendar after 1970.
    The second F1 stint at the circuit came between 1989 and 1992, before the championship returned in 2015 with Nico Rosberg victorious for our team.

Insight: Rookie FP1 Sessions - How we Prepare a Driver

"It's my first ever Free Practice so obviously my expectations are high, but there is a check list that I need to go through and tick all the boxes and that's where I'm going to keep my focus."

Fred Vesti is quite rightly excited to make his maiden appearance in an F1 car on a Grand Prix weekend. Whilst it will be a proud moment for the Dane, he is aware that he has an important job to do. How do we make sure a rookie driver is ready for that task?

"We can replicate plenty of things in the simulator. For Fred's outing, we've got a session prepared with George's race engineers so that he can go through all the comms, all the language that they use, get ready for that and then also he will be helping us doing our pre-event work," says Senior Performance and Simulation Engineer, Zhaoming Li.

Holly Chapman, Trackside Power Unit Engineer, adds: "To make sure a rookie driver is fully prepared for driving the car we'll go through a pack of slides with them, which covers all the basics that they need to know. As they become more experienced, we can then add to that, but we really tailor it to the rookie at that time."

The learning also continues on once the driver is on track. Hugues Bretonnier, Senior Performance Engineer, comments: "As with the race drivers, there will be an opportunity between runs to have a look at the data. We can discuss with the engineers how he can build up his confidence, progress the speed in a couple of corners maybe, using different tools on board and adjust the setup to try and progress with our weekend according to our run plan."

Lewis Hamilton

That was a fun race! I made a good start into turn one and had a really good battle with Charles (Leclerc). Running in second, I was then focused on trying to get closer to Max (Verstappen) in those early stages. Their pace at the moment is undeniable though so I wasn’t able to get close enough to challenge him. We’ve still got a long way to go to equal the pace he showed throughout the Sprint. Nonetheless, I’m really happy to be back on the podium.

Starting ahead of Max tomorrow is helpful. Ultimately, I think he will be breathing down our necks before too long given the pace that he had today. I think that will open up a good fight though between ourselves, the Ferraris and the McLarens. We’re all quite similar in pace this weekend by the looks of it so I hope we get to have a good battle tomorrow. Keeping Max behind would be awesome but if not, we’ll do everything we can to finish on the podium and bring home good points.
George Russell

It’s been a bit of a scrappy day for me. Both penalties that I received today were fair. I was unable to give the position back to Piastri in the Sprint as Gasly had already passed him. If I let Piastri past, I would have had to let Gasly past too. It was a bit of a shame as it was an optimistic move from myself. Ultimately though, there aren’t a huge amount of points up for grabs on a Saturday.

We’re in a good place to fight for a podium from P5 tomorrow. It’s going to be an interesting race. The tyres felt good in the Sprint but that was helped by the cloudy conditions and the temperature dropping a little. It will be close between a one and a two-stop tomorrow and we’re going to have to be dynamic in order to react to the situation. We should have a good fight with the Ferraris and the McLaren of Norris. We may have the speed on them, but they are starting ahead so we will see what we can do.
Toto Wolff, Team Principal & CEO

We can be carefully optimistic with how the weekend has gone so far and how our updates have performed. We didn’t think this would be a track where we would be anywhere near the front. There are a lot of fast corners that are not usually our strength, so we’ve made a good step. That has proved key in putting us in a position to score solid points today.

After a tougher Sprint Shootout, both drivers showed strong pace in the Sprint itself. Lewis pressured Max early on but ultimately his speed proved too strong. We know we’ve still got a lot of work to catch up to the very front, but we can be encouraged by our first sprint podium of the season. George did everything he could today and bringing a point home having started P11 is useful for the team. His penalty was completely justified, and we should have given the position back. That was my fault as I thought we had more pace to get further ahead than five seconds. If we play the strategy well tomorrow, we should be racing for a solid podium position.
Andrew Shovlin, Trackside Engineering Director

There's lots of encouragement we can take away from today, even if we could have walked away with a few more points if everything had gone our way. Lewis had good pace in the Sprint Shootout. We were 0.139s off pole on Friday but 0.069s today. That’s a good sign that the update has moved us in right direction. George didn't have a new set of soft tyres for his final run which is costly here, so he was never going to be able to trouble the front rows.

In the F1 Sprint, George did a good job to pick up positions. It's a shame to drop a place with the penalty but it's good to have got into the points. Lewis meanwhile did a great job. Second was the best that the car had in it today, but it was encouraging to see how much pace he had over Leclerc. That’s another sign that we are moving in the right direction. We've now got some good data to review overnight as part of our preparations for the race. The longer race opens up some options on strategy, so hopefully we'll be able to make progress with both drivers. Max was able to keep us at arm's length today, but it looked like we had the pace to challenge everyone else. Our stretch target for tomorrow therefore has to be a double podium.

Mercedes-Benz Group AG (ticker symbol: MBG) achieved solid third-quarter results in a subdued market environment marked by intense price competition, particularly in the electric vehicle segment. Earnings Before Interest and Taxes (EBIT) reached €4.8 billion (Q3 2022: €5.2 billion) as improved net pricing at Mercedes-Benz Cars and a rise in sales of premium vans helped to partially offset higher inflation, currency effects and supply-chain related costs. Revenue fell 1.4% to €37.2 billion (Q3 2022: €37.7 billion) in part because passenger car sales were around 5% lower in the quarter, due to a supplier-induced shortage of 48-volt systems.

Mercedes-Benz continues to pursue its strategy of profitable growth. Thanks to strong sales of Mercedes-Maybach and G-Class vehicles in the Top-End and good pricing overall, the adjusted Return on Sales (RoS) at Mercedes-Benz Cars reached 12.4% (Q3 2022: 14.5%). With an adjusted RoS of 15.0% (Q3 2022: 12.7%), Mercedes-Benz Vans once again benefited from solid demand and a favourable model mix.

“The team at Mercedes-Benz delivered solid results despite a challenging environment. We continue to demonstrate resilience thanks to desirable products and a disciplined go-to-market approach. While we remain vigilant regarding the macroeconomic outlook, we confirm our full-year financial targets for 2023.”
Harald Wilhelm, Chief Financial Officer of Mercedes-Benz Group AG
Transformation

At the IAA in Munich, Mercedes-Benz showcased how it will redefine the segment with its Concept CLA Class, an electric car with efficiency of around 12kWh/100km, giving it a range of more than 750 kilometers (WLTP)1. To accelerate the shift to electric mobility Mercedes-Benz is building its own global charging network. It opened its first charging hub a few days ago in Chengdu (China). Atlanta (USA) and Mannheim (Germany) will follow in a few weeks. To further demonstrate the outstanding safety of its electric cars, Mercedes-Benz conducted the first live, frontal-offset crash test involving two electric vehicles. The passenger safety cell of both electric models remained intact and the doors could still be opened. In an emergency, this would make it possible for occupants to exit the vehicle on their own or for first responders and rescue personnel to reach them. The high-voltage system in the EQA and the EQS SUV switched off automatically during the collision. 

Investments, free cash flow, liquidity

The free cash flow of the industrial business in the third quarter reached €2.3 billion (Q3 2022: €3.0 billion) on lower passenger car sales and higher investments into future technologies.

The net liquidity of the industrial business rose to €28.5 billion (end of 2022: €26.6 billion). The Group’s investments into property, plant and equipment in the third quarter totaled €0.9 billion (Q3 2022: €0.8 billion). Research and development expenditure amounted to €2.5 billion (Q3 2022: €2.3 billion) due to higher investments in future platforms and technologies, including MB.OS.
Divisional results

Mercedes-Benz Cars Q3 revenue dipped 3.8% on lower vehicle deliveries, narrowing adjusted Earnings Before Interest and Taxes to €3.3 billion (Q3 2022 €4.0 billion). The average selling price remained stable in Q3 compared to the prior-year quarter reaching approximately €74,600 (Q3 2022: €75,400) and even rose slightly from approximately €73,500 in the second quarter. Healthy net pricing partially offset slightly lower volumes and the change in model mix. A €329 million headwind from foreign exchange further dampened earnings. Overall sales of Mercedes-Benz Cars reached 1,529,800 units in the first nine months of the year (+2%), and 510,600 units (-4%) in the third quarter. Volumes were impacted by a model changeover for the E-Class and a supplier bottleneck which constrained availability of the GLC in particular.
Mercedes-Benz continues to defend its leadership position in the Top-End Vehicle segment where the S-Class enjoys a market share of above 50% in China. Overall, Top-End Vehicle sales are expected to increase on a full-year basis.

In Q3, S-Class wholesale deliveries were impacted by a seasonal slowdown, temporary certification matters and the macroeconomic environment. However, S-Class sales were up 9% in China and retail sales in the U.S. rose 48% in the quarter. 

In the Top-End segment Mercedes-Benz sales reached 246,500 units (+6%) in the first nine months of the year and 69,900 units in Q3 (-11%) as Mercedes-AMG sales were impacted by model changeovers of the GLC, the E-Class and entry models in China. By contrast, Mercedes-AMG BEV sales rose by 51% in the third quarter. Mercedes-Benz continues to expand the market for Top-End electric vehicles, with the Mercedes EQS SUV seeing a 162% rise in sales with strong growth in all regions. In the U.S., registrations of the EQS outpaced those of its main Top End peers in the first nine months of the year.

In the Core segment, Q3 sales reached 290,200 units (-1%) and in the Entry segment sales reached 150,500 units (-5%) as the A- and B-Class models received a mid-lifecycle makeover. The company presented the AMG GT Coupe and an all-new E-Class Estate.

Mercedes-Benz Vans increased its global sales in the third quarter of 2023 to 105,100 units (+1%) thanks to a strong contribution from commercial vans. Global sales of all-electric vans doubled to 6,300 units (Q3 2022: 3,100). All-electric sales accounted for 6% of total sales. In the strategically important U.S. market, the division sold 21,800 (Q3 2022: 15,500) units reaching the best sales quarter ever. Thanks to solid net prices, improved product mix and lower raw material costs, EBIT increased to €715 million (+44%) and was able to offset inflation and supply chain-related cost increases. Adjusted for non-recurring items, EBIT rose by 36% to €743 million. Revenue was up to €4.9 billion, 15% higher than in the prior-year quarter. This development resulted in a Return on Sales of 14.5% and an adjusted RoS of 15% respectively. Third-quarter cash flow amounted to €980 million and adjusted cash flow amounted to €1.04 billion.

In the third quarter of 2023 Mercedes-Benz Mobility’s new business increased to €15.2 billion and is above the level of the prior-year period (Q3 2022: €14.3 billion). The contract volume of Mercedes-Benz Mobility amounted to €133.8 billion at the end of September, matching the level at the end of the previous year (FY 2022: €132.4 billion). At €363 million, the adjusted EBIT was below the previous years level (Q3 2022: €577 million), a decrease mainly caused by higher refinancing rates and intensified competition in the financial services sector. In addition, the cost of credit risk is elevated, driven by a weakening macroeconomic environment as well as higher delinquencies in some markets. This combined with negative foreign exchange effects, resulted in a decrease of the adjusted Return on Equity (RoE) to 10.4% (Q3 2022: 15.8%).

Outlook

With regional differences, the overall growth momentum of the world economy is likely to remain rather subdued for the rest of the year. The above-average inflation in many places and persistently restrictive monetary policy of key central banks is likely to continue to weigh on growth. Global gross domestic product is expected to increase by only around 2.5% in 2023. Geopolitical imponderables remain another major factor of uncertainty. By contrast, energy prices are expected to remain at a significantly lower level on average in 2023 than in the previous year.

Mercedes-Benz Cars: The rate of sales from the first three quarters in 2023 is seen remaining at approximately the same pace. Full-year sales are thus expected at the prior-year level. As the 48-volt supply constraint is expected to continue, we expect Q4 sales to remain at the same level as Q3. The adjusted RoS is still seen at 12% – 14% for the full year. Due to intensified pricing competition particularly in the BEV segment, and given the 48-volt supply issues, it is expected to be in the lower half of this range. Inflation-related supplier costs are seen sitting at a higher level than at the beginning of the year. The adjusted Cash Conversion Rate is seen at 0.8 – 1.0. Investments in property, plants and equipment and into research and development are seen significantly above the prior-year level.

At Mercedes-Benz Vans, unit sales are expected to remain significantly above the prior-year level. In addition, some higher ramp-up related project expenses are seen in the final quarter. The adjusted RoS is expected in the range of 13% – 15% and is seen at the upper end of this range. The adjusted Cash Conversion Rate is expected at 0.7 – 0.9. As part of the technology and product offensive, investments in property, plant and equipment and into research and development are still seen significantly above the prior-year level.

The adjusted RoE at Mercedes-Benz Mobility for the full year is seen at the lower end of the 12% - 14% range and is expected to remain at a similar level in Q4 as it was in Q3. The effects of the deteriorating interest margin are expected to have reached their low point in Q4. Operating expenses are expected for the rollout of the Mercedes-Benz own-branded high power charging network. Without the increased operating expenses for charging, full-year adjusted RoE would be expected in the middle of the range.

The Mercedes-Benz Group expects revenue at the prior-year level. Group EBIT continues to be seen at prior-year level. Free Cash Flow of the industrial business continues to be expected slightly above the prior-year level.