Maximilian Schöberl - SVP, Corporate and Governmental Affairs Harald Krüger - CEO Nicolas Peter - CFO Torsten Schüssler - Head, IR

Kristina Church - Barclays PLC Michael Tyndall - Citigroup Tim Rokossa - Deutsche Bank AG Adam Hull - MainFirst Bank AG Horst Schneider - HSBC Charles Winston - Redburn Patrick Hummel - UBS Investment Bank Stephen Reitman - Societe Generale

Good afternoon, ladies and gentlemen. This is Maximilian Schöberl.

I would like to welcome you all to our Telephone Conference for the Third Quarter Results. With us today is Harald Krüger, Chairman of the Board of Management; and Nicolas Peter, our CFO.

First, Harald Krüger will give you an update on the business performance during the third quarter of 2017. Nicolas Peter will then take you through our financial results.

Afterwards, we will have time for our Q&A session. Harald, please go ahead.

Good afternoon, ladies and gentlemen. Our priority is the long-term perspective.

For this reason, we are investing substantially in all relevant future areas of mobility. At the same time, we are maintaining a balance between the key indicators, sales growth, profitability and investment.

We showed the direction we are taking the company at this year's Motor Show in Frankfurt, to become a technology company for premium mobility and services. Our current focus is on e-mobility and autonomous driving.

In both of these areas, we are concentrating and expanding expertise at our home base in Germany. From here, we will drive the transformation of our industry with our innovations.

All our actions for the future are built on a strong foundation of sustained profitability. That is what differentiates us from new and established competitors in the automotive sector.

In a complex environment, we continue to chart our own course. Ladies and gentlemen, there are two topics I would like to focus on today, first, our business development for the current year; and second, our progress in implementing Strategy NUMBER ONE > NEXT.

Let's start with our performance. What did we achieve in the period between January and September 2017?

Group pretax earnings climbed to nearly €8.5 billion. For the 30th consecutive quarter, our EBIT margin in the Automotive segment remains within our target range of 8% to 10%.

At group level, the EBT margin for the year to the end of September stood at 11.7%. These figures show that our products and services are in strong demand.

More than 1.8 million customers bought a BMW Group vehicle in the year to the end of September. Our MINI, BMW, and BMW Motorrad brands each reported new all-time high, 9-month highs, BMW for more than 1.5 million vehicles; MINI for more than 270,000 vehicles; BMW Motorrad for more than 127,000 motorcycles and maxi-scooters; Rolls-Royce sold 2,343 cars and therefore, did not match last year's level.

As you know, the Phantom did not have full availability this year. At the annual press conference in March, I announced the biggest model offensive in our history, 40 new and revised BMW and MINI and Rolls-Royce models this year and next.

We are delivering on this. For the BMW brand, we are renewing and expanding our highly successful X family.

The third generation of the BMW X3 will be available as mid of November. For the first time, we will be offering an M Performance version.

From spring of the next year, the X3 will also be produced in South Africa and from summer 2018, in China. China is by far the most important market for this model, alongside the U.S.

The BMW X2 will follow in 2018. Its new and individual look breaks the mold.

This model is not just new, the X2 is also different, and it's incredibly cool. We assure that it will appeal to young trendsetters.

At the end of 2018, the BMW X7 will go into production. We presented this concept vehicle at the IAA.

This vehicle will strengthen our offering in the luxury class. With its large surfaces and sharp lines, it also provides a glimpse of our future design.

We have sold a total of more than 5.4 million X models since 1999. X models currently account for more than 1/3 of BMW sales.

We will continue this success story with new and additional X models. From November, the BMW M5 will complete the new BMW 5 Series range.

It's BMW's fastest series-production models offers all the benefits of a business sedan. With individual vehicles like the new BMW 6 Series Gran Turismo, we will also occupy important niche markets and win over new customer groups.

This model will also be launched this month. The new Z4 Concept has been very well received by the media.

We will be presenting the series production model next year. We highlighted the full range of the MINI brand at the Frankfurt Motor Show.

From the sportiest MINI of all time, the John Cooper Works GP Concept to that MINI Electric Concept. As an unban brand, MINI has always been destined for e-mobility.

This is demonstrated by the first MINI plug-in hybrid. We have sold more than 2,700 electrified Countryman cars since June.

At Rolls-Royce, delivery of the new Phantom will begin in January 2018. We already have a large number of preorders.

The eighth generation of the Phantom is the pinnacle of luxury. Every detail can be customized to the owner's individual taste.

At BMW Motorrad, the new K 1600 B and new G310 GS are now available, following the wave of new models in spring. All these new models will support our sales growth over the coming year.

Our model offensive with all brands is part of our Strategy NUMBER ONE > NEXT. That brings me to my second point.

Our progress in implementing Strategy NUMBER ONE > NEXT. In e-mobility, we are concentrating on three main areas, First, electrification of our lineup; second, expansion of charging infrastructure; and third, enabling our production network.

With electrification, we are already ramping up Phase 2. Right now, there are more than 180,000 electrified BMW Group vehicles on roads all over the world.

At the end of October, I was at plant Leipzig to celebrate the production of 100,000 BMW i3 cars. In the year to the end of September, we sold a total of more than 68,600 electrified vehicles.

This was more than in the whole of 2016, and it reflects an increase of over 64%. This means, we are on track to meet our goal of selling 100,000 vehicles with electrified drivetrains this year.

BMW remains the clear #1 in plug-in hybrids in the premium segment. The new BMW 5 Series plug-in hybrids is especially popular.

In some markets, it accounts for 1/3 of BMW 5 Series Sedan sales. We will offer 25 electrified models in 2025, 12 of them pure electric.

Our BMW i family will become even better with the introduction of attractive new models. We have added another variant for the i3, the sporty BMW i3s.

This will be followed by the emotional BMW i8 Roadster as a plug-in hybrid in 2018. Our BMW i Vision Dynamics will take e-mobility to a new dimension with a range of up to 600 kilometers.

The media has been very positive about this 4-door Gran Coupe. To enable the wide-scale rollout of e-mobility, we are working to expand charging infrastructure.

We have formed a joint venture with other manufacturers to create a rapid charging infrastructure across Europe. ChargeNow is currently the world's largest public charging service.

By the end of 2017, customers will have access to more than 130,000 charging points. The technological shift towards sustainable mobility is not proceeding at the same pace and with the same intensity in all regions of the world.

That is why we are also aligning our global production network to this development. We're creating flexible architectures and using modular construction kits.

This will give us the flexibility to build electric drivetrains, plug-in hybrids and efficient combustion engines at our plants, based on demand, from 2020. Germany plays a key role for us as a manufacturing location for e-mobility.

The BMW i Vision Dynamics will be built at our Munich plant. Our new technology flagship, the BMW iNext, will be manufactured in Dingolfing.

Our second major focus topic in addition to electrification is autonomous driving. We are also making rapid progress in this area.

At our campus in Unterschleißheim, near Munich, our first 500 employees are already working together with colleagues from Intel and Mobileye. Other strong partners like Fiat Chrysler Automobiles, Delphi, Continental and Magna are helping enhance our open platform for autonomous driving.

Leaps in technology demand appropriate structures and not least, a future mindset among all employees. With the expansion of our FIZ Research and Innovation Center in Munich, we will have an innovative working environment for 5,000 employees by 2019.

We recently launched our new project FIZ Future, which will create completely new working environments there by 2050. We are already using new work methods such as scrum or lean development in development and business IT to support our transformation into a high-tech company and boost our profitability.

Ladies and gentlemen, after the first 9 months of the current financial year, we are confident of meeting our targets for 2017. We are targeting new all-time highs for deliveries and group earnings before tax.

In the Automotive segment, the EBIT margin should remain with our target range. However, it is also clear that the business environment is still marked to a large extent by volatility and uncertainty.

In all markets, there is fierce competition for every customer and every leasing contract. And on the political side, there are many unknowns.

The outcome of the Brexit negotiations between the European Union and the U.K., further developments in the Middle East, just to name a few. And from the German new government, we would welcome open and constructive discussions regarding important future topics.

It is in all our interest to enable Germany to pioneer new technologies. In talking to analysts and investors at the Frankfurt Motor Show, we received a lot of positive feedback on Strategy NUMBER ONE > NEXT and our model offensive.

People recognize that we are tackling the relevant challenges and coming up with viable solutions. The price of BMW common stock has reflected this over the past few weeks.

I firmly believe that, the BMW Group will not just be part of the industry's transformation. We will lead it.

That's the expectation we have to set ourselves. That is why we have increased the pace with e-mobility and autonomous driving.

And we will continue to take a global, long-term view. We remain committed to free and fair global trade.

It guarantees prosperity and progress. No one should underestimate the capabilities of our company, nor our commitment to the next phase of the auto industry's development.

We remain profitable. We are highly flexible.

We are taking advantage of all opportunities. We are leading the way in new technologies.

This is how we are creating the future. Thank you.

Thank you very much, Harald. Now Nicolas Peter will give you an update on the financials of the BMW Group.

Nicolas, please go ahead.

Ladies and gentlemen, good afternoon from me as well. The BMW Group enters the final quarter with strong financial figures.

We have set the right course. After the first 9 months, we are on track to meet our guidance for the full year.

We achieve our business goals and at the same time, invest strongly in the future. Both in our automotive business and at group level, we increased our earnings for the first 9 months.

The EBIT margin in the Automotive segment for the year to the end of September stood at 9.1%. Group earnings before tax climbed 9.6% to €8.48 billion.

Deliveries worldwide grew by 3.7%, up to the end of September. We are targeting profitable growth and an optimal balance between sales volume and earnings in all regions.

In China, we did well with both, our BBA joint venture and imported vehicles. Sales in Europe increased slightly in the first 9 months of the year.

In the U.S., the auto market contracted further in the year to the end of September. We remain 100% committed to our principle of profitability before volume.

Our goals for the full year remain ambitious. One of our key high-volume models, the new BMW X3, will be launched in the fourth quarter.

Furthermore, the new BMW 5 Series is now fully available. The revised model of our successful BMW i3 and the sporty i3s will also strengthen our broad lineup of electrified vehicles, starting in November.

Our strategy is successful. We are taking advantage of the momentum from our attractive product portfolio and the flexibility of our global presence.

At the same time, we are making our car business even more efficient. We are taking complexity out of our product and service offering for our customers.

And we sharpen our focus on the essential. This will enable us to pursue our goal of being a leader in important future technologies.

Ladies and gentlemen, let's take a look at our financial figures in detail. Group revenues for the third quarter were on par with last year at €23.42 billion, despite being dampened somewhat by currency headwinds.

Revenues for the first 9 months climbed 5.0% to €72.67 billion. As announced earlier, higher R&D costs in the third quarter slowed earning growth compared with the first half of the year.

Group pretax earnings for the third quarter totaled €2.42 billion. The figure for the first 9 months increased by 9.6% to €8.48 billion.

Despite high upfront investments, the EBT margin for the third quarter was 10.3%. Therefore, the BMW Group remains one of the most profitable vehicle manufacturers worldwide.

We continue to make the necessary preparations for the challenges our industry will face in the future. The company invested a total of €2.82 billion in equipment and products in the first 9 months of the year.

This represents a significant increase of over €800 million compared to the previous year. The CapEx ratio stood at 3.9%.

Research and development expenditure for the first 9 months increased to €4.06 billion, surpassing last year's figure by over €700 million. As announced, the R&D ratio for the year to the end of September rose to 5.6%.

We recently opened our new campus for autonomous driving near Munich. Here, up to 2,000 engineers will be working on future mobility.

In addition, we are investing around €400 million for the expansion of our research and innovation center, FIZ. By 2019, around 5,000 employees will be working in this creative environment.

We are also continuing to forge ahead with electromobility. We now offer customers a total of 9 electrified models, battery electric or plug-in hybrid.

The BMW 5 Series and the MINI Countryman are 2 additional high-volume models with plug-in hybrid drivetrains we have just successfully launched, and further projects are in the pipeline. This shows the BMW Group is on the leading edge in the field of electromobility.

We have the broadest range of electrified vehicles in the premium segment. Moreover, we are systematically investing in increasing the flexibility of our production network and expanding charging infrastructure.

Ladies and gentlemen, that was an overview of the Group's performance. Let's take a closer look at our Automotive segment.

In the third quarter, the BMW Group sold more than 590,000 BMW, MINI and Rolls-Royce vehicles. Sales were therefore 1.2% higher.

Between January and September, deliveries increased by 3.7% to 1.81 million vehicles. In the first 9 months, segment revenues rose by 2.3% to €64.71 billion.

Third quarter revenues totaled €21.04 billion. Revenue development was dampened slightly by currency headwinds.

In the third quarter, Automotive EBIT, earnings from our operating business, stood at €1.75 billion. The EBIT margin for the same period was 8.3%.

As previously announced, high expenditures for research and development and strategic projects are increasingly reflected in the third quarter results. As in the first 2 quarters, R&D expenses were above the previous year.

In the third quarter alone, they increased by €164 million compared to 2016. Other operating expenses included additions to provisions for legal disputes and other litigation risks.

These are not related to the recent antitrust review by the EU commission. Competition worldwide remains as intense as ever.

We are constantly working to achieve the right balance between profitability and volume. The financial result for the year to the end of September improved to €682 million.

This was mainly due to positive valuation effects in the first quarter, and the strong performance of the BMW Brilliance Automotive joint venture in China. The financial result for the third quarter totaled €127 million.

Let's take a brief look at the segment's cash flow. Despite the high level of investment mentioned above, free cash flow continued to be strong in the third quarter.

In the first 9 months of the year, it amounted to €2.70 billion. Free cash flow for the full year is expected to total more than €3 billion.

The Financial Services segment also performed well between January and September. Almost 1.3 million new contracts were concluded with retail customers in the first 9 months.

This represents a slight increase of 2.0% over the previous year, mainly due to growth in credit financing in China. Around 435,000 new leasing and financing contracts were concluded in the third quarter.

As of 30th of September, the Financial Services segment maintained a total of almost 4.95 million contracts with retail customers, 5.2% more than at the end of 2016. The penetration rate for the first 9 months stood at 46.7%.

This means that nearly half of the new BMW Group vehicles are either leased or financed by the Financial Services segment. The percentage of leasing contract is trending downwards slightly, due in part to a lower leasing penetration in the U.S.

In the year to the end of September, pretax earnings for the segment climbed 9.3% to €1.79 billion. The risk situation remained mostly unchanged from the previous year.

The credit loss ratio of 0.30% for the entire credit portfolio is still at the same low level as last year. On the international used-car markets, the situation was largely stable in the third quarter.

We are continuing to monitor trends for used vehicles with diesel engines very closely. The Financial Services segment follows a comprehensive, proactive approach to risk management and has made adequate provisions.

Let's move on to the Motorcycles segment. BMW Motorrad continues to perform well with a strong sales increase of 10.1% to almost 128,000 units in the first 3 quarters.

In Europe, sales development has been very positive so far this year. France and Italy both reported double-digit growth.

Despite a drop in the overall market, deliveries in Germany saw a solid increase. Sales development in China remained dynamic.

Segment revenues rose by 11.1% between January and September, in line with sales development to reach €1.83 billion. Third quarter revenues totaled €514 million.

EBIT for the year to the end of September climbed 25.9% to 8 -- €282 million, while third quarter EBIT reached €53 million. The EBIT margin for the first 9 months was 15.4%.

Ladies and gentlemen, I would like to turn now to the outlook for the full year. With the current uncertainty surrounding political and economic developments worldwide, the fourth quarter will also remain challenging.

Despite these challenges, we continue to remain on course to meet our targets for the full year. On the basis of the positive business development in the first 9 months, we are now expecting a solid, rather than slight increase in Group pretax earnings for the full year.

We forecast slight increase in deliveries in the Automotive segment, assuming conditions remain stable. Due to currency translation effects, especially the strong euro, we now expect a slight increase in Automotive segment revenues for this year.

Despite high upfront investments in future-oriented projects, we remain committed to an EBIT margin of between 8% and 10% in the Automotive segment for the full year. Deliveries in the Motorcycles segment are expected to increase significantly this year.

As in the Automotive segment, we are also targeting an EBIT margin within the 8% to 10% range for the Motorcycles segment. The positive business development in the Financial Services segment should continue in 2017.

Faced with increasing equity capital requirements and normalization in the risk situation, return on equity is expected to decrease slightly. However, it should still remain above our targeted level of 18%.

Our forecast assumes that economic and political conditions will not deteriorate significantly. Ladies and gentlemen, the BMW Group is one of the most profitable auto manufacturers in the world.

Our financial strength forms the basis for the continued development of cutting-edge technologies. Our claim to leadership in the premium segment is formulated in our strategy.

Sustainable profitability and consistent orientation towards the future are our clear focus, and they go hand in hand. We have made further strategic decisions to secure the future competitiveness of our company.

We are one of the leading providers of electrified vehicles worldwide and are continually expanding our e-mobility offering. We are working with strong partners to develop a system for autonomous driving that will set standards in the industry.

For us, performance is not just about satisfying customers, it is about exceeding their expectations, and we are systematically optimizing our products and services to do so. With BMW, MINI, Rolls-Royce and BMW Motorrad, we have 4 strong, highly appealing brands.

We are staying the course with the passion to innovate and a clear commitment to our profitability targets. Thank you.

Thank you very much, Nicolas. Ladies and gentlemen, now the line will shortly be opened for questions.

Please wait for some technical advice.

It's Kristina Church at Barclays. My first question is looking at the volumes, obviously, Q3 sort of consolidated numbers ex China did dip into negative territory.

I know you were talking just now about the importance of profitability coming over ahead -- over and ahead of volume growth. But I was just wondering, sort of what your outlook is with the new products coming for the remainder of this year and going into 2018 on the volume side?

And then my second question is on pricing, and whether you've been taking anymore decisive views or taking a sort of stricter view on pricing and the volume decline has been as a result of that? Or is it normalized outlook on pricing at the moment?

Not specifically, looking at diesel or petrol, but just overall BMW pricing. And then a final sort of more admin question on FX.

I was just wondering, what you're assuming for the remainder of this year on the FX side, and then looking into 2018, giving the hedge -- given the hedging that you have in place so far, what your outlook is on the FX front for the group?

Thank you very much, Kristina. So we start with Harald and the first question on volume.

Kristina, concerning the volume development, first, I would like to start with China. We see good growth in China this year definitely, and it's going to continue because the 5 Series long-wheel base has just started in the third quarter, which is a very important product for the market.

We do not have full availability of the 1 Series Sedan, so we believe, we're seeing see more growth in China this year. And next year, we will have the X3 being localized in China in the second quarter, which will bring us another momentum in China.

Secondly, the growth in the rest of the world, we see some balancing -- balanced growth in the United States, but this will change in the next weeks and months to come that we will see more growth. The reason why we will have in the second half of November, already the first new X3 coming to the U.S.

market, which is just recently launched. And with three production locations for the X3 in the future, we will have 1 in South Africa, 1 in China and 1 in United States, as more capacity for X vehicles available for the United States.

Second one is also that the X2 is coming to the market next year, which is a brand-new product, where we are optimistic that we are gaining new customers in all over the world definitely. So we will have a huge momentum and by the end of 2018, we will produce the X7.

So if you look into 2018, we will see definitely momentum and growth coming from the X family and new model members of the X family. Next year, we will also have the first time the new 5 Series at full available, scale, volume and that gives us -- new products are also coming in like the 6 Series Gran Turismo.

So we will see in 2018 -- I'm optimistic that we will see further growth in Europe and also in the United States.

Okay. Thank you very much, Harald.

The question about pricing and FX will be answered by Nicolas.

Kristina, maybe to start with FX for the remaining couple of months in 2017, we expect slightly positive combined net effect. And maybe to give you, and we have hedged our main currencies US dollar, renminbi and British pound for 2017.

And we have solid -- already solid hedges in place in our books for 2018 as well. Now maybe coming to the situation regarding pricing environment, and I think we should focus on the 3 main regions in our business.

So U.S., Europe and in China, overall, we still experience a very fierce competition in all marketplaces. And I have to say thanks to our very flexible production facilities, we have been able to allocate production in line with customer demand.

And therefore, have seen and very stable pricing environment. Even I think more important, if we look forward, we have been able to adjust our inventory level in the right way, in particular in the U.S.

and in the U.K. environment to markets where we experience a dip in the overall market.

Based on the strong product momentum, the full availability now of 5 Series, X3 kicking in step-by-step in all markets around the globe, we expect positive development in 20 -- in the weeks to come and good outlook for 2018.

It's Mike Tyndall from Citi. Two if I may.

Just if we look at the Financial Services business, it looks like your new contracts in the third quarter were down 12% year-on-year. And I understand what you're saying in terms of China and the restrictions there.

But I would have thought that would inhibit growth rather than send contracts backward. So is there an element of derisking going on here where you're stepping away from certain parts of the business?

And can you give us an insight as to why it might be that you're not biting as much business on the Financial Services side? And then, with regard to EBT upgrade, you've mentioned it's got to do with the business doing better.

You've also mentioned it was to do with equity income and also commodity hedging, but just I'm trying to understand that given that certainly the equity income appears to have been down year-on-year in Q3. I'm wondering, how much of it, I guess, is coming from commodity hedging?

So I wonder if you could just perhaps provide a bit more color with regards to the upgrade there, particularly as Q3 PTP was down year-on-year?

Thank you very much, Mike. Nicolas, please.

Mike, maybe to start with financial services. So the impact in China, which you see in our results -- in our accounts has to do with the fact that, as you are aware, in China, we have to balance between what is on our own books and what is with corporation banks.

This has to do with the limitations we have in the Chinese environment. And this is also the reason why this has impacted, as you might have seen, free cash flow as well, that is why we had to inject additional equity into our Financial Services business in China.

So next question is related to the EBT upgrade. Maybe it's worthwhile to start with to mention that, if we look at our EBIT development in the first 9 months of 2017, EBIT in the Automotive segment has been very stable, trending at 9.1% in 2017.

In 20 -- outlook for the remaining part of 2017 is, on one-hand side that we have due to the risk situation in the U.K., some -- yes, some slightly uncertainties on one-hand side, but on the other hand side, due to the fact that we have after 9 months already a very solid development of our EBT on group level, we are very optimistic to be able to achieve a solid growth in the full year 2017.

I have two questions please. It's Tim from Deutsche Bank.

The first one is just a follow-up on Kristina's first question. If we summarize your answer, can we basically say that we have seen the troughing growth for EMEA and that you expect it to pick up again from, say November, December onwards, is it fair to say?

And then as a second question, you've highlighted that you have now ramped up to about 70,000 electric vehicle or electrified vehicles sold year-to-date. For example, in Germany, you are saying the BMW 530e iPerformance for €2,000 less than the comparable 530d diesel engine, that's probably an interesting development looking at your margin performance, you're still staying at the same corridor.

How do you really offset the additional costs that you surely have on these vehicles? Do your customers typically purchase better options for example?

And how do customers react to this with respect to the take rates?

Okay, thank you very much, Tim. We start with Harald and then Nicolas.

Tim, as you mentioned, so we do see volume pickup in November and December. I think we will see an increase in November and December figures and it will continue in 2018, unless there's something happening more in the world, we should never know.

But from the product momentum and from the availability of the X family and new X2 coming to the market, which didn't had any predecessor, the X3 going on demand and later on in 2018, the 3 production locations for the X3, we have then 2 production locations for the X1, 1 in Netherlands in Regensburg and the 5 Series availability for the whole year in China and Europe, I think there is definitely a positive outlook from our side.

Thank you, Harald. Nicolas?

Tim, your second question is referring to one of the major challenges the industry will face in the years to come, how to deal with the additional cost, we have to add into the car for electrifying the drivetrain. And I'm optimistic that we will see 2 aspects, which will support a positive development in the quarters and the years to come.

On the one-hand side, we will continue to optimize our portfolio with combustion engines in order to support with this improvement, the switch into the new area into electrified mobility. On the other hand side, we are working very hard in engineering, whether it's research or development on production to make plug-in hybrid and electrified cars even more profitable.

And the third element, which is important and this is depending of course on the market situation, market-by-market, we will have to make our customers understand that this technology is not for free, and therefore, step-by-step to increase pricing measures in order to support profitability with plug-in hybrid and electrified cars.

And Tim, to add one more review to this one. We need to have a strategic ramp-up of the electrified vehicle for the next years to make the CO2 targets in 2020 and beyond.

So going to 100,000 vehicles, electrified vehicles being sold this year, and we are going to continue that journey next year, it's an important also milestone of our way forward and the Strategy NUMBER ONE > NEXT to achieve CO2 targets.

Adam Hull from MainFirst. So two questions.

Firstly, on the free cash flow -- on the Automotive free cash flow, could you just clarify that the €668 million you report in Q3, does that actually includes the €400 million or so capital increase in the Chinese JV? And then maybe you could give bit more guidance for the Q4 cash flow.

I mean, you talk about you're more than €3 billion, but you are well on track for that already. And just maybe give us a bit more for Q4 as well there?

And then secondly, looking at the Q3 Automotive margin of 8.3%. I mean, it seems you listed a number of little one-offs, legal disputes with suppliers, there is payment to German mobility fund and I think your diesel software update.

Maybe if you could just give us some of the quantification on what was sort of exceptional in a sense in that Q3 auto's margin?

Thank you very much. Adam, Nicolas?

Adam, starting with free cash flow of €668 million free cash flow do include the equity injection in China, which of course, is, in certain way an exceptional topic, which we had to execute in Q3. So if you in a certain way, in a theoretical way would add this on top, you can understand even better my statement that free cash flow definitely was very strong again in Q3.

Outlook for the full year unchanged, more than €3 billion in free cash flow for the full year. Your second question was related to the auto margin of 8.3%.

I think first of all, it's worthwhile to, once again, state that with the 8.3%, we are, once again, in our guidance between 8% and 10%. They are as stated one-offs for legal disputes.

And they are, as I said, not related to the [indiscernible] issue, but they are related to patent topics and some litigations with suppliers.

It's Horst from HSBC. I have got a question first on other cost changes.

Maybe you can remind us what were the level of other cost changes year-to-date? And how does it compare against the guidance for full year '17?

And then I want to get back again on foreign exchange. You said, you have got solid hedges in place for 2018.

Does that mean that we shouldn't expect any negative FX impact for 2018? I just asked that because you see already -- you have seen already in Q3 a negative impact on revenues of course.

I just asked in a sense that at some point of time, we will see also an earnings impact? And then the last issue or the last question that I have is, you stated in your Q3 report that you have started internal investigations on cartel issue, I just want to know by when you will have concluded these internal investigations?

Okay. Thank you very much, Horst.

We start with your question about internal investigations with Harald and then Nicolas.

Horst, on the internal investigations, we started them as soon as we were aware of the article in German Mirror. We also asked the consulting company and the legal company to support and advice, but it will take time.

And I can't give you a final date for the investigation, because we're going backwards 20 years, and we need to look into lot of details and a lot of protocols, and this is going to continue for the next weeks.

But it might be 2018, right?

Yes, this might be 2018, definitely.

And as soon as you've got this knowledge, you can also then quantify maybe the associated risks, right?

By today, we don't know this at all, because we are still looking and searching for data.

Okay, all right.

Nicolas?

Yes. Horst to start with the FX hedges, it's a little bit too early to comment in detail 2019.

'18?

As I said, 2018, we have for most of our important currency hedges in place. So we are confident and 2019, let's discuss this in 12 months from now.

Regarding the other cost changes in the quarter, as you rightly mentioned, it was more or less flat. This means that we have been able to offset the increase in R&D expenses by efficiency gains and in a year-on-year comparison for the first 9 months, it's a slight negative impact in the low 2-digit numbers, which is also an indication that we have been capable to offset most of the additional R&D spending.

So for the full year then?

For the full year, due to the fact that we will continue to invest, in particular, in R&D, in the fourth quarter as well, we expect a low 3-digit -- low- to-middle 3-digit negative impact for the full year, which will not impact in a negative way our overall EBIT guidance for the full year, being 8% to 10%.

This is Charles from Redburn. Apologies for asking what might be a rather dry question on accounting.

But I just want to understand, if I go to Note 34 in the quarterly report, the depreciation of assets in Financial Services in the quarter fell from €2.7 billion to about €1.9 billion, it's down about 32%. In the first half, it was plus 2%.

So there has been a very radical shift in the depreciation of assets in that quarter. I was wondering if you could explain why, what's behind that?

Secondly, is there any impact in the P&L from that move and if so, could you give us some idea of what the P&L impact would be? And the third question is, is this the ongoing level?

Is this much, much lower level of depreciation, the new normal? Or is it a bit of a one-off?

Thank you, Charles. Nicolas, please?

Well, Charles, the development between 2016 and 2017 is a result of the lower new lease business on one-hand side, and it's also in a certain way driven by the strengthening of the euro versus major currency. Furthermore, it's impacted by the stable environment in the used-car market, which didn't necessitate material additional impairment on lease assets, which you would also have to be to account in this line item.

Having said this, it's not impacting the P&L number. Why?

Because this is a gross depreciation number, whereas in the P&L, this is a negative figure, which also takes disposal into account. Now to your last question, is this the new normal?

Probably not, probably not, because as I said, it's also depending on factors, which we can't control like currency development. And of course, the trend -- the further trend in the leasing business.

Thank you very much, Nicolas. So ladies and gentlemen, it's 5 minutes to 3.

We have time for two more questions.

My first question is regarding the R&D ratio. I think you were quoted saying this morning, whether comment from you, Dr.

Peter, that 6% to 6.5% R&D could be the new normal for next few years. I think at the beginning of the year, you said, you would deviate from your usual 5% to 5.5% more towards 6%, but 6.5%, I heard that for the first time.

So I just wanted to double check if this is the guidance going forward, and what actually has changed that, that drove the increase -- the further increase in R&D? My second question relates to autonomous driving and your partnership or your collaboration that becomes bigger and bigger.

I was a bit surprised to see FCA joining that collaboration project. Does it essentially mean that it's really all about economies of scale and there is no way to differentiate as a brand i.e., will FCA vehicles, which clearly have not been known as the innovation leaders in the industry, have the same technology on board as BMW vehicles?

And lastly, we had very poor diesel, overall, monthly data from Germany and U.K. in October.

Could you just share the BMW specific trend, is it following this 9, 10 percentage point decline we're seeing for overall market in those 2 countries? And if so, would that trigger any change in terms of your strategy as far as implementation of mild hybrid 48-volt technologies concept?

Okay, Patrick. We start with your question to diesel and data, but we have no data about October, but with diesel with Harald.

Patrick, concerning on your questions on diesel, first of all, on a global basis, the diesel has been reduced 2017 to 2016 on -- from 37% to 35%. If we look at Europe, overall Europe, we had an diesel share at BMW about 73% and this decreased to 68% in Europe.

And Germany was down from 65% to 60% from 2016 to 2017. I don't have the detailed number of the U.K., but it should be then in the range of the European number.

The change in strategy, as I mentioned in my speech, we are definitely pulling and driving the plug-in hybrids as well as the battery electric vehicles business forward. We want to have in 2025, 25 electric vehicles on the market, 12 of them fully electric.

This means that also that in the next years and this is already in the pipeline, we will bring more plug-in hybrids to the markets and -- to react to the diesel change and to cope with the CO2 emission targets. Second question you had is, was on the partnership automotive driving, Fiat Chrysler Automobiles joining us and is there is a risk that there's a partner where you might not differentiate the BMW technology to the Fiat Chrysler technology.

This is not a risk to us because there are still lot of things which differentiate from the common availability of the technology in how does the car drives and how the motions in the motion controllers. But for Fiat Chrysler, it gives us an opportunity to open up into the United States and regulation in the United States.

So it gives us your opportunity with Fiat Chrysler being part of that, that we also have a bigger footprint in the United States for autonomous driving.

So the question about ratio will be answered by Nicolas.

Patrick, will the 6% to 6.5% be the new normal? If we look long-term, no.

If we look the next 3 years, definitely, yes. And we believe that this is very well invested money.

So we will see around 6% this year. In '17, we will see the peak in 2018.

And while we had to accelerate certain programs because clearly, the trend towards electrification is gaining speed in all areas of our business, in particular, China is further accelerating and we have -- and you have seen some of the examples at the Frankfurt Auto Show. We have to accelerate also the development of plug-in hybrids with latest Gen 5 technology.

Directly after the Brexit vote, the German auto industry made it very clear that it was very much in the favor of free trade agreement, staying with the U.K. Do you feel that the German auto industry is -- has an influence in the negotiation with some of the EU with U.K.?

This is a really good question. The last question for the Chairman, Harald.

First of all, what I would, clearly, state is again that we are clearly in favor of free trade everywhere in the world. So it's not just a question about the Brexit, so it's a question of the international trade, which is bringing wealth on both sides.

Come into the Brexit, I think there is an influence in terms of you know that if you would like to be competitive customs and supply chain management and the customs for this amount of money, it needs to be competitive. So I do believe that we will hope that we will find a pragmatic solution between the EU's 27 and as well as the U.K.

in solving this issue, because if we don't find a pragmatic solution, both sides will lose.

Thank you very much, Harald. Ladies and gentlemen, thank you for joining us today.

I wish you a pleasant day, and I look forward to seeing you next time. Thank you very much, and bye-bye.