Ford Otomotiv Sanayi AS

IST:FROTO.E

Earnings Call Analysis

Strong Year for Ford Otosan Despite Headwinds

Ford Otosan had a strong year with significant achievements despite some challenges. There was a 15% year-on-year growth, with the Puma model leading sales in Europe. The company increased truck production capacity to meet rising demand, though export share dipped slightly due to domestic market needs after an earthquake. Major plant investments are underway, including plans to expand capacity to over 400,000 units by 2025. Financially, there was a 28% increase in revenue to TRY 412 billion, with exports contributing TRY 302 billion. Operating profit stood at TRY 44 billion, and the overall strong performance resulted in low double-digit margins. Caution is advised for 2024 due to market normalization and potential margin impacts from new electric vehicle introductions.

Strong Performance and Market Leadership

The year was marked by a robust performance, with the company maintaining its top position in commercial vehicles in the domestic market, boasting a 27% market share. This dominance was exemplified across various vehicle categories, with light commercial vehicles taking 23%, medium commercial vehicles 32.5%, and trucks 29.7%. Domestic sales surged with a 38% increase in volume and a remarkable 54% growth in domestic revenues.

Expanding Exports and Product Launches

Contributions to exports were bolstered by the full integration of the Craiova Plants, which helped raise volumes by 26% and export revenues by 20%. Key product launches in the last quarter, despite some deferrals, demonstrated the company's commitment to quality and market acceptance.

Financial Highlights and Guidance

The financials showed substantial gains with total revenues up by 28%, and a 20% increase in export revenues. EBITDA soared by 46%, reaching TRY 50.7 billion. The net income hit TRY 49 billion, influenced by deferred tax assets and additional tax actions. Despite costs related to inflation and currency depreciation, the business model and effective cost management absorbed these headwinds. The strong fiscal health is projected to continue, albeit with an expected normalization in margins due to changes in vehicle availability and market conditions.

Strategic Investments and Future Outlook

The company is on track with its ambitious international expansion and is set to reach 50 countries by 2024. Furthermore, significant investments aim to position the Yeniköy Plant as a beacon of sustainable and technological transformation, with a capacity expansion to 245,000 units. The facility's capabilities will include producing internal combustion engine, battery-electric, and plug-in hybrid models from a single platform. Production capacity is expected to exceed 900,000 units by 2025, reflecting a strategic commitment to electric vehicle options and long-term projects.

Forward-Looking Production and Sales Projections

Anticipated total wholesale volume for the coming year is set between 660,000 to 720,000 units. This projection accounts for the continued momentum in product launches and increasing export volumes, especially as the company intensifies its focus on electric vehicles.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Ford Otosan A.S. Conference Call and live webcast to present and discuss the 2023 full year financial results.

At this time, I would like to turn the conference over to Ms. Gul Ertug, Chief Financial Officer; Ms. Bahar Efeoglu Agar, Head of Investor Relations.

Ms. Ertug, you may now proceed.

[Gul Ertug, executive]

Thank you very much. Dear investor community, greetings to all of you. I would like to welcome you all to our 2023 full year earnings presentation. So if we -- I hope you are able to hear me all right.

Let's move to the next page, please. I would like to give a heads up regarding our presentation. First, maybe on the disclaimer. A few seconds, I want to pass on that one.

This year, due to the Common Act Directive we have received from the Capital Markets Board, we are supposed to make our declarations in line with the standards of IAS 29 inflationary accounting provisions. We have -- in fact, that is the reason why we are holding this meeting on the 6th of March. Normally, you would expect the results to be announced much earlier. But this year, we are taking on this action.

Maybe some of us in the room would be old enough to remember the old days. But in this period, in fact, with our young team, it has been an interesting experience for all of us to make this in this professional manner. We have concluded it. And today, we will be sharing the results with you in line with these rules. I know that for some of you, this might have been a little bit maybe difficult to follow because you have the willingness to compare them against the earlier years but we are proceeding with this in line with the regulatory rules and to the extent possible within our presentation, the analyst presentation for the non-inflationary accounting portion, we have provided a review with some data.

So let's proceed to the flow of the day, what we are intending to do within our investor call. I will start with the highlights of the year 2023. Just touch on some physicals and like we will be going into our performance. Then I will leave the word to Bahar for the floor and she will give some updates since we last met. We will be proceeding to the financial results and our guidance. And afterwards, we will open up the floor for your questions. We will have a question-and-answer session. So I'd say let's give it a start.

So we are happy to announce that we have completed quite a successful year in terms of our performance, beating our budget targets.

And if we touch on the highlights, what we achieved this year, we have kept #1 position in commercial vehicles in the domestic market with a market share of overall 27%. For the overall industry ranking, we are in #3 position. You know our -- the LCV, light commercial vehicle segment turned out to be 23%; medium commercial vehicles 32.5%; and for trucks, 29.7%.

The performance in the domestic market was quite robust. We see a 38% rise in volumes in terms of the units and a 54% increase in our domestic revenues. It was quite a successful year and successful results achieved in the domestic markets.

Also, with the full integration of our Craiova Plants added onto our export performance, we have a good result. Volumes raised -- volumes up by 26% and our overall export revenues were up by 20%. Over here, most of you, I believe, you have had the chance to follow us in last year when we made our quarterly updates, especially for the Q4 of last year, we were supposed to be launching several of our key products, custom, long-term vehicles and Courier.

For the successful and quality launch, in fact, I had informed several of you in the declaration that we were paying a significant importance on the successful rollout in terms of quality and market acceptance. That's why in Q4, the launch of these vehicles, we have seen a deferral. And that is the reason why even if we have an increase in the overall volumes, the export revenues over here coming from Craiova Plants, didn't support as much, plus we have had a onetime tax-related issue coming from the earlier pre-acquisition level of the Craiova plant, that is reflected in our financial results.

For the overall capacity utilization across all of our plants, we see successful results. Gölcük achieving 88%; Yeniköy, 93%; Eskisehir 98%; and Craiova plant 75%. Thanks to our performance and like both the cost performance and also the effect of the very good pricing and cost control, OpEx control in the market. We have achieved a successful EBITDA level on average EUR 2,183. And for the PBT per unit, we achieved EUR 2,388.

And while we were doing all of these things in a quite a heavy CapEx period, launching our vehicles and the capacity increases, we were also able to distribute our dividends. The dividend payment occurred in 2 installments in a total value of TRY 15.4 billion in nominal terms. So this highlights quite a successful result for the year.

For some further details, now I will leave the floor to Bahar so that she can delve into the -- a little bit more details on these. Bahar, will you take on, please?

[Bahar Agar, executive]

Thank you so much, Gul. Hello, everyone. Thank you all for joining us today. So now let me continue with our significant contribution to both Turkish and Romanian automotive industry and also for the Europe in this period. So in 2023, as you can also see from this slide, Ford Otosan produces 40% of total auto production in Turkey, whereas 37% in Romania, which makes us #1 producer in Turkey and #2 in Romania.

On the other hand, we continue to support Ford's performance in the European markets with our flagship products and also proud to share that. Currently, Ford Otosan produces 70% of Ford's commercial vehicle sales and 1/3 of passenger car sales in Europe, and we believe that our contribution to Ford will rise in the upcoming period with our Renault product portfolio, which Gul mentioned earlier. And also, it will have Zero emission options in the market in the upcoming period as well.

Our net-net proceeds with the domestic market performance. This year, domestic market reached historical high levels and tested all of 1.2 million units with an increase of 56%. So when we look at the performance in each segment, there was significant year-on-year growth in the passenger cars and also medium commercial vehicle segments, with increases of 63% and 50%, respectively. So as a result, the share of passenger car sales in total increased by 4 points and reaching around 76% level in this period.

Actually the main reasons behind the strong year-on-year growth can be explained as the high demand for the vehicles in the inflationary environment since they are seeing as an investment instrument. Additionally, a remarkable improvement in the vehicle availability with the easiness in supply chain and logistic constraints. We can say that also support this performance.

And let's see how Ford Otosan performed in the strong market environment. This year, we were partially benefiting from the robust domestic demand, because we mainly prioritize domestic market in a location with the support of Ford Motor Company, and we were focusing on meeting high customer demand. However, we experienced limited positive impact on our sales, mainly due to the end of Korea production in July and delays in the launch of new generation Courier and custom models.

Actually, in order to achieve best quality and efficiency metrics in the launch period, as a result, our domestic sales increased by 22% in total and we maintained 3rd position by attaining 8.9% market share which is a bit below the previous year figures.

On the passenger car segment, although we are a relatively small player, our sales almost tripled. Thanks to the better availability in our model. On the other hand, we sustained our leadership in commercial vehicles with around 27% market share despite facing with supply chain-related challenges, especially in the beginning of the year and also deferrals in the launch timing as we mentioned earlier. So we were able to keep #2 position in both light CV and heavy truck segments, whereas maintaining undisputed leadership in medium commercial vehicles with around 23% market share.

I would also like to highlight that we continue to focus on our pricing discipline as part of our profitable to over market share strategy in passenger segment and profitable growth strategy in commercial vehicles.

Let me also give some update on our main export markets. According to the full year figures by ACEA, European Van market grew by 16%, which is our largest export market, so improved availability low-base year impact and acceleration in fleet renewals can be expected in this performance and considering the increasing average age of vehicles in Europe, which is actually 14 years in commercial vehicles and last year in passenger cars, it's expected to create higher placement demand in the near future.

And in this environment, Ford was able to preserve its #1 position in the commercial vehicle market. And with the support of our best selling products, and we continue to play a critical role in their performance as 70% of Ford CV sales are produced by Ford Otosan. Besides, when we look at the European passenger car market performance, we saw similar jump. So it is 15% year-on-year growth. And in this segment, we contributed to Ford's performance with our best-selling Puma model by producing 1/3 of Ford's PC sales in Europe. And with the gradual launch of our CV and PC models, which I found the options in the upcoming period, we expect to further strengthen our contribution to Ford, especially in the European and U.K. region.

Let's move to Ford Trucks performance. As a recent development in the last quarter, we increased our truck production capacity to around 23,000 levels in order to meet the rising demand of the markets we operate in. Now we can look at the sales performance in the international market. So in Toronto today, our sales reached to around 7,400 units, actually, which was slightly lower than '23 figures and below the market performance.

In fact, the main reason behind this performance was the volume allocation to domestic markets rather than exports to -- in order to actually meet original logistic needs of impact is from the earthquake, which we experienced in February and the construction of the region, the impacted regions. As a result, the share of exports in our total truck sales decreased from 58% to 48% levels in this period. However, in total, for trucks achieved all-time high production and sales units of more than 19,000 units. It's a very important indicator for us to follow the actually rising performance, rising success of Ford truck business. On the other hand, our international expansion plans are also on track and we are targeting to be in 50 countries by 2024. Currently, we are in around 49 countries.

Let's move on again some update on the ongoing plant and product-related investments. In November, we took decision to lead the sustainable and technological transformation of the automotive industry. We integrated our Yeniköy Plant, actually, which we call it the plant of the future. And we expanded our capacity in that plant to 245,000 units. Therefore, as part of our investment for Ford Turkey announced in 2021, we redesigned our plant with cutting-edge solutions, smart sector practices and sustainability.

Besides, this is also a very critical point to actually evaluate the performance of the new plant. We have flexible production capability in Yeniköy Plant, which gives us opportunity to produce ICE and BEV and plug-in hybrid model from the same platform.

Our Yeniköy Plant started to manufacture all new port cost, which we have transit on tunnel options on it in the fourth quarter. And with that model, so the fresh -- with that fresh model, we were able to won the International Van Of The Year Award with our flagship product. Also the plug-in hybrid and all-electric versions of custom will be available in the market this year in 2024, which we expect to support our electrification journey.

In addition to that, as part of the port Volkswagen strategic alliance, Ford Otosan will also manufacture Volkswagen's next-generation [ Bon-Ton ] commericial vehicle in the upcoming period, and with the completion of investments, we expect to expand plant's capacity more than 400,000 levels by 2025.

Now I'd stop here and Gul ma'am will continue with our financial performance and guidance for '24. Then we will be happy to answer your questions. Thank you so much.

[Gul Ertug, executive]

Thank you very much, Bahar. So let's start with our financial highlights on the revenues after the inflation accounting adjustments, all of these numbers are reflected. So we have been able to achieve almost TRY 412 billion, and the export portion of it is almost TRY 302 billion, and domestic revenues TRY 110 million. Over here, we see the overall revenues up by 28%, and export revenues 20%, and I had explained the explanation at the start of my speech. Domestic revenues, 54%. Out of that on the EBITDA, since we are seeing that the application of the inflationary accounting on our basis, due to the total asset valuation, we are seeing a monetary gain. And out of this, in fact, it is supporting our EBITDA levels.

On the appendix page, you can compare the results, but we see over here a result equaling TRY 50.7 billion, 46% up versus a revalued level for 2022. And excluding the other items, it would be TRY 43.3 billion.

Operating profit strong TRY 44 billion. And the net other income increased 197% year-over-year due to the net FX gain from operating activities. Profit before tax, we see TRY 47.4 billion, 86% up mainly supported by the monetary gain due to the high monetary liability position. And the net income level. Here, we see the effect of the impact of the deferred tax asset on the net income, partially offset by the additional tax related action due to the earthquake of last year, reaching to TRY 49 billion.

If you follow on the -- if you take a look at the margins, this year, you are seeing that, in fact, we are keeping our performance on the low double-digit margins still achieved, thanks to our strong performance, enhanced vehicles we produce and give to the markets strong domestic volume, pricing discipline, and ongoing cost reduction measures and OpEx control, the impact of the exchange on our export business. These all helped us. Last year, I should say, it was a strong year with regards to like even though we have suffered from the earthquake issue, as Bahar explained, overall, it was quite strong. But going forward, maybe I will touch more on the guidance page.

A word of caution will be important here because in 2024, the availability of the vehicles in markets and the possible tightening, we expect the pricing ability on the domestic units to be slightly less. So you should be expecting some type of a normalization. And as you see, our investments going on and the volumes, new products coming up, the export volume will be going up as we introduce more of our battery electric vehicles, they will be coming into the picture with increased volumes through Puma as the passenger vehicle. It will be, I think, mindful to expect some level of normalization on the margins, but it is very healthy, thanks to the strong performance.

If we continue with the following page. In fact, this year, we had some significant cost headwinds. You are all aware of the inflation, CPI actions. There has been also EUR/TL, if you look at that, there has been the depreciation of Turkish lira at 48%. However, its pace was less than the CPI, maybe a little bit larger than the PPI.

So over there, in fact, we are seeing important cost pressures. I believe this is open to all of the exporters are subject to that. But with the innovative approach, heavy cost reduction work and also the engineering support on the quality, we have been able to manage our work in this area. And due to our business model with export operations, even though we had these headwinds, it didn't hurt us badly. But of course, we are mindful that it is very important going forward because it is at the end of the day, it is affecting overall competitiveness. That's why going forward, we are placing more and more attention and focus on this area.

Let's continue. I will not go into sales volume of the -- by model increase, but we can follow on with the balance sheet and cash flow statement. Over here, you see that we have a strong balance sheet, overall assets going up by 24%. The cash flow, especially out of the operating activities, it is very strong, 48% up versus last year. We are going through a significant investment period. That's why you are seeing the impact over there. And also we are having some important financing activities. We are having some long-term loans coming into the picture that you are seeing the results of them.

On the following page, we can -- you are seeing the overall result of our financial ratios. And I can say that, in fact, on all of them with respect to last year, we are performing much, much better. The net debt-over-EBITDA values, we are keen on in this heavy investment period. We are at 1.19 level, and our return on equity is 67.2%. If we check through the margins, like I tried to explain, in fact, we are doing quite well on all of them versus last year, there's a significant improvement. But let's also keep in mind that there will be some level of normalization around there.

So on the next page, what do we have? And here comes our guidance. So year 2023, in terms of the local market, it was an extraordinary year. At the start of the year when we were doing our budgets, we weren't expecting to have an industry of 1.3 million units, but we achieved that. Since that became a reality, in fact, most of the pent-up demand has been -- we believe it has been fulfilled in year 2023. That's why with the effect of that high base, we are expecting to see some level of contraction in 2024.

You might argue the first 2 months of the year came in quite strong. However, we believe that is mostly due to the -- this handicap certificates that -- which has supported the volumes over there. And we all know that we will be having a local election this year on the 31st of March. Afterwards, we are expecting some level of normalization versus last year. As for our export operations, in fact, in our export markets, we are expecting to see a somewhat similar level of industry, maybe a little bit higher in some of the markets. But now since we are in the catch-up mode, we have reached our ramp-up level for the newly introduced vehicles. Due to that reason, even if the overall market in Turkey and Europe in net, it should show maybe a reduction. We are not reflecting that into our sales and production volumes, thanks to the product launches.

Our overall wholesale volume across the board, it will be -- we are expecting it to be in between 660,000 to 720,000. There will certainly be the launches that Bahar has mentioned, they will be continuing within this year. We will be having BEV versions of our vehicles coming in. However, again, likewise, keeping a careful eye on the quality and market readiness of the vehicles to be fully intact because not just us, but also Ford Motor Company, places a lot of importance on quality launch. That is also, in fact, reflecting its wealth in the reduction of our warranty costs, which also, in turn, supports our EBITDA margins. That's why we might have some deferral action in those or the intended volume might not be fully realized.

That's why we have placed a somewhat conservative approach over there. And in this period, we will be continuing the long-term investment plan that we had shared with all of you earlier in earlier announcements. Out of that, CapEx investment, the fixed investments covering both Craiova, Turkey products and general investments we are targeting to have an investment of EUR 900 million to EUR 1 billion of investments.

So I think that concludes my section and we can open it up for your questions.

[Operator]

The first question comes from the line of Kilickiran Hanzade with JPMorgan.

[Hanzade Kilickiran, analyst]

Congratulations on the successful results. Actually, you explained some part of my question during your presentation, but I'm trying to understand it a little bit better. Your -- I understand that you are looking for some normalization in your profitability in 2024 because of increasing share of exports. But is it possible to provide a soft guidance what level of normalization we should be forecasting in our model? I mean, is it going to be a normalization to like 8%, 8.5% EBITDA margin or a bit better?

And as you already progress on the EV side, I think EV is also going to dilute your margins going forward. So is there a target of sustainable EBITDA margin in your business model. I'm sure there is, but is it possible to share it with us?

And you highlighted that you are looking for mostly flat demand environment in Europe, right? I'm not really sure. So I wonder how do you see the demand environment in Europe across the markets, particularly in the U.K. market. And I'm trying to understand whether this 14% plus export volume growth is largely because of the new generation model launches or some sort of better demand in Europe is also hitting this guidance.

[Gul Ertug, executive]

Thank you very much, Hanzade. now, let me take your questions in order. I will try to be as clear as I can be. Maybe in terms of full numbers, full figures, I might not be able to give the numbers, but I will try to be as clear as possible. In fact, when I said there will be some level of normalization, I was also like maybe at the start, I was thinking of the Turkey market firstly. In this year, in fact, we are seeing that the availability of the vehicles in the market it's higher. Like most of the brands, they have the availability over there.

And due to the -- currently with the involvement of [ Mohammad Sheikh ] and his team, there are certain macroeconomic actions taken in order to take the inflation under control. There has been some interest related updates we have -- on Turkish lira, we have reached 45% levels. And like this is in an effort to combat inflation.

Due to that and due to the availability of the vehicles in Turkey, there is a possibility that some of the demand, which was originally taken as like a way of preserving value was buying a vehicle, that might now go into several other investment options even though maybe in real term, still there is a room for such asset ownership. I think, we are -- we think it is still there, but there will be some other options. And since there is greater availability in the market, the pricing ability versus 2023 might be a little bit tighter. So this kind of explains the domestic view.

For the export view, you are right, since our -- within our business model, the export markets which Ford Motor Company, we have certain particular supply contracts for each vehicle line we produce and we export to Ford. Over there, on the exports, it is -- since the risks and reward mechanism is different, we are the entrepreneurial entity in Turkey, but we are not the interpreter in the other markets. That's why you can take that the margins on the exports are less.

With respect to commercial vehicle versus passenger vehicle. Commercial vehicles are more profitable. And as the battery electric units comes up, not necessarily the nature of the business and the nature of our agreements are not necessarily different, but at the start of these vehicles, if you look into their cost structure, the bill of material and the overall makeup of the transfer price, the battery units are a little bit more expensive.

That's why when you compare the overall remaining margin to the overall transfer price, these margins turn out to be smaller. And as they tend to increase in numbers, from a like mechanical perspective, the weighted average of all that combined action will be coming to a little bit of a lower level. So this was what I was trying to say.

But Bahar can help me out here. As far as I recall, we do not give out the breakdown of these units. We are providing the overall result as an average. That's why I am like I'm not entitled to say more than this. I hope with overall inference, this is going to be helpful for you in your model so that you can put it clearly.

And like you were asking about in your question, I think, how the European markets are going to act. In fact, based on our data sources and our interaction with Ford Motor Company, we are seeing somewhat of a level market. At earlier times, there were like talks around, could there be a recession, could the demand come down, but we are not seeing the signals of that. Still like market-by-market, you know that our production -- our units are sold in large variety of markets.

So within Europe, maybe there can be mixed back mix stories. In U.K., it might be stronger. And in Germany, it might turn out to be a little bit over. But overall, as an overall average, we are expecting to be -- to have a level market, maybe a slight positive end. But because of the pent-up demand over there, we projected the overall numbers in a little bit conservative side, while we were converting them into our own wholesale numbers, though, since now the launches are in place, we believe, thanks to our newly introduced vehicles, we will be capturing the market intact.

And can you remind me your last question?

[Operator]

Apologies, the line has been dropped off the questioner. So -- actually she just joined the Q&A session. I'll just pass the floor to Ms. Kilickiran Hanzade.

[Gul Ertug, executive]

Thank you. Sorry, Hanzade, I forgot the last one.

[Hanzade Kilickiran, analyst]

No, you answered my questions, but unfortunately, I was cut off in the first part. So I missed the comments around the margin, but that's fine. I can ask later. I don't want you to repeat that part, but the export question has been answered.

[Gul Ertug, executive]

Thanks for your interest and consideration. Thank you.

[Operator]

The next question comes from the line of Demirtas Cemal with Ata Invest.

[Cemal Demirtas, analyst]

Congratulations for good results. My first question is about the sentiments in domestic markets. So far in the first 2 months, we had significant growth in the extraordinary 2 months. Do you receive any signals you are cautious and most of the sector participants are cautious. When do you think we are going to get more signal about possible slowdowns? Or do you already see some additional signal? That's my first question.

And the second 1 is the inflation accounting side. Again, I repeat for many companies and most of the companies didn't give anything. You had limited disclosure like the [indiscernible] Group companies that -- only 1 company gives much more details about the inflation accounts related to their balance sheet and income statement. There's only 1.

I wish it has been more disclosure. I talked to many companies before. But as you mentioned at the beginning, regulators, they only mentioned 1 thing, but I would expect for like global companies to be more than the regulation requires. So I just want to -- I'm well disappointed to all. It's not specific to Ford, but I would like to reiterate that again.

And then I will go to my question. In order to say, forecast, at least for the following quarters, we are going to be dealing with inflation accounting for the following 2, 3 years at least because of the inflation, even at P&C. So it's very important. And we have a comparison to some extent for 2023. Could you further elaborate from your perspective as you gave the numbers, we see that you are positively impacted. I can't see that.

But about the mechanism, especially you have monetary provisions, the monetary gains, I'd say, what are the drivers behind that? And going forward, then we make calculation because from now on we are going to be make board calculations to put into our -- the models, the nominal and the interest, where the inflationary context is based off. Could you give us more hint about this slide? How really you were affected? And what was the driver behind that positive impact on financials?

[Gul Ertug, executive]

Thank you very much. So let me start with your -- clearly regarding the domestic markets. I tried to explain it, but let's -- let me try to give a little bit further detail. The first 2 months turned out to be strong in Turkey markets, but I'm sure you're also aware of the situation. Everybody is really careful on how the overall economics view the macroeconomic changes will adjust. And since we are coming from a 1.3 million industry in the earlier round, I believe there is a somewhat of a consensus in the expectation for the industry for this year.

Maybe our initial going-in position can be a little bit conservative, but we -- since -- especially after the election time period, even though there are certain guidelines that we are all collectively working towards, there could be some changes in the demand structure we wanted to go back with a little bit of a conservative view.

Having said this, I think, I should also make the highlights that since the weaker launches and the ramp-ups regarding them, the overall production in the quality manner that has come to a place which, in fact, which -- the units that we had lost in the Q4 of last year, now we have the potential to recover and now the overall levers are in our hands. If there is a possibility to see some larger demands, I think we are well equipped to react to that. But overall, we are more mindful and we are seeing this more prudent to act in this manner. That's why this is the guidance we have provided.

And like I said, I believe there is pretty much consensus on the industry expectation. Regarding your disappointment for the inflation accounting, I understand where you are coming from. But maybe this explanation I have to make. Overall, whatever we explain, whatever we disclosed to the public, it has to be independently audited. And now with this Common Act with this legislative change, let's say, we have adjusted our valuation towards the IAS 29 principles and our independent auditors audited these results. Like whatever they audit it, we are to disclose this value.

If we disclose something unaudited that would be against the rules. We cannot act in that manner. So I cannot speak on behalf of the other companies maybe some other multinationals, I don't know, maybe they had the chance to have independent audits in place. But since this was not the case for our particular issuance, this is what we had to go with. And in fact, in this interim, in order to give some support to you, we try to provide some additional information if the inflation accounting was not in place, what would the numbers be that is on the appendix page, Page 24 of our investor presentation.

And I'm really hoping that this is going to help you in your analysis. But not just for this audio call or investor call, but for the later on period, we will not be entitled to share more than this since our audited numbers are with the inflation accounting.

And I hope going forward, as we keep on issuing our results in the quarterly calls. And as data builds up, I hope this is not going to adversely affect your calculations too much. So I understand the frustration. I think we did our utmost potential for this disclosure. And I understand that you are willing to understand a little bit more details how this turned out, we have monetary gains. For this one, in order to give the best explanation, I will give the word to you so that to the extent possible, we shed some light to our investors so that they can follow it better than maybe make the projections in a healthy way.

Floor is yours, [indiscernible].

[Unknown Executive]

Sure. Thank you, Gul. Today in the morning they have already explained very clearly about why we couldn't share. In fact, that's not our choice. I'm just -- I just want to rephrase that again, that's not our choice, but by regulation, we cannot disclose any more information. Of course, we want to help you. However, that's what we can do.

So regarding your question about our monetary gain. We are very high -- very heavily asset high company. And looking at the other way, we are a monetary liability, we are holding a high monetary liability position in our balance sheet. And for the IAS 29 implications, what we did is, as you know, from 2004, the last inflation accounting period that was 2004 for IFRS, we adjusted all our balance sheet to the end of 2023.

So holding a high monetary liability position. This gives us a monetary gain in our financials, because we are adjusting all our assets with high inflation rates, and we don't have a high non-monetary position in our liability section, even including our capital structure because as you all know very well, our capital -- we are -- Ford Otosan is distributing almost all of its profits to the shareholders. So we don't have a high capital position in our balance sheet as well. So that's the main driver that you asked under our monetary gain position in 2023.

[Operator]

The next question is from [indiscernible].

[Unknown Analyst]

Congratulations for the strong results. And I would like to ask about the intense competition created by Chinese brands in the automotive industry. We know that they challenge Global Place with their low-cost production, especially in automobiles. How is the situation in Ford Otosan, and light in the having commissioned commercial vehicles that you produce?

[Gul Ertug, executive]

Thank you very much. I'm going to take the question for MCV. We don't -- we are not -- in terms of mass production, we are not selling electric vehicles in the HCV yet, but we have e-transits. And in fact, within year 2023, we have had around 15,000 units of sales in under Ford Pro across Europe, and it has been a successful vehicle.

In fact, in your comments, you are right. There is going to be significant competition in the EV world. And in fact, if we compare our finalization, the latest demand uptake and the latest electrification curves versus the earlier ones. We are seeing some slowdown in the take-up of the electrification. And when the Chinese brands come in, there could be a potential that there will be some tough competition over there.

For our plants, what I can say is both for the 1-tonne units, custom units and our 2-tonne vehicles, we have carried out the structure of our Yeniköy and Gölcük plants in such a way that and also for the Craiova case in Courier, we have constructed the plants in such a way that there is utmost flexibility to turn into ICE versus BEV.

Like if the electrification demand over there falls, we can make up for it with the ICE versions. Of course, there are certain things that we have to follow on because it's not just the plant capacity and the lenders, the suppliers are also imported on this one. But we made our plans accordingly because we are all mindful like both Ford Otosan and Ford Motor Company, we are mindful that we are just going through this electrification journey, electrification revolution, maybe I should say, altogether in these years.

And for that reason, in fact, all OEMs are paying utmost attention to put the right capacity, right technology at the right point. Of course, there will -- like we have the sustainability targets, the net carbon zero neutrality plants, and we are -- we have commitments on those fronts, and we are doing our investments in line with our commitments. But while doing so, we also placed big importance on this flexibility issue because we are seeing from the markets, some signals and also hearing from some other OEMs that there could be some changes, maybe the initial projected speed of electrification might not be in that way.

And if that turns out to be the case, like even though there are some Chinese entrants into the market, we believe the ICE versions of the production, we are protected, and we are flexible. This doesn't mean that like, okay, we are giving up on electrification. No, we are not. But we are best utilizing the time to adjust into the new technology with the best vehicle view in the market.

And for Ford Pro, maybe I should also give some information, it is not just the vehicle itself and like how it is electrified, but also in the professional -- Ford Pro stands for Professional, our commercial vehicles are the best partners for the locations in -- across Europe for the 1-tonne we are the sole producer for the world.

And the Ford Pro value proposition comes together with certain service actions, some connectivity, certain uptime proposals, propositions. And in fact, thanks to all of these actions, we are seeing some high traction in the markets. And we believe with the support of all this network, we have a competitive advantage towards the Chinese brands. Some of them, yes, you are right, they might be competing with lower prices. But we believe the overall product proposition with our vehicles, they are competitive. I hope this answers your question.

[Operator]

We will now move to our webcast question. Actually, we do have a follow-up question from our audio participant, Kilickiran Hanzade with JPMorgan.

[Hanzade Kilickiran, analyst]

I have 1 more question about your CapEx. You are also targeting a similar CapEx this year. And when I look at your past 3 years CapEx, it's already reached EUR 2.6 billion. So your kind of targets announced like a couple of years ago for the next 5 years. So how should we think about 2025 in terms of CapEx side? Is it a low CapEx year? Or you will continue to do some sort of CapEx, model CapEx in 2025?

[Gul Ertug, executive]

Bahar, I think we don't have that slide in this presentation, but can you help me out, please, with the overall journey that we are having both on our overall vehicle investments, the product investments plus the capacity run taking us to 900,000 units overall? Over there, maybe we can give some level of information for the investments falling into year 2025.

[Bahar Agar, executive]

Sure, Gul. Our production capacity was around 455,000 by 2019. Then by that Romania plant and by launching new products on customer and Courier site, our production capacity reached to around 746,000 level by the end of last year, and we expect to exceed it to 900,000 levels by 2025. So far, when we look at the previous CapEx investment levels in the last 3 years period, we had EUR 300 million investment in 2024, which we started to have our investment -- heavy investment period, then it increased to EUR 800 million level in 2022 and the '23, according to '23, it's around EUR 900 million, and we expect to have a similar level of CapEx spending for this year. And that's why Hanzade is asking what's our expectation for '25. So we may share a general outlook for the upcoming 2 years actually for '24 and '25 to make their models in a better way.

[Gul Ertug, executive]

Thank you.

[Operator]

We will now move to our webcast question.

[Bahar Agar, executive]

Sorry. Hanzade, you may expect some level of high CapEx levels for '25 as well because considering the ongoing projects for EV options of our models and ongoing investments for our long-term commercial vehicle projects. But after '25, you may issue some normalization, some level of normalization.

[Operator]

We will now move to our webcast questions. The first webcast question comes from Dominic Leoni with Consilium Investment Management, and I quote, "congratulations on a great year. Could you please give us further detail on market share changes from 2022 to 2023 for your PC and CV, Pages 8 and 9 of your presentation?"

[Gul Ertug, executive]

Bahar, maybe you can give this here.

[Bahar Agar, executive]

Well, let me try to give more details about that information. So thanks for your question, Dominic. Actually, you may expect further information on the domestic market share performance with segment breakdown on Page 53 of our investor presentation.

Let me give some summary info on that. There are -- for instance, our total market share was around 10.5% as of the end of '22 in total, but we achieved around 8.9% market share this year. And the main reasons behind this performance, we explained earlier, in PC segment, we increased around 1.2 points our market share, and we increased it around 1.9% to more than 3% levels with support of better availability, especially in passenger car segment.

On the other hand, on the LCV, MCV, and truck side, which we are also local producers, local manufacturer in this segment. Our top sales market share in commercial vehicles was around 34% of by the end of '22. However, it decreased to 27% level this year. And the main reasons behind this performance was the launch deferrals in some of our flagship models like customers, Courier, and some of the supply chain related to challenges which we faced with, especially in the beginning, of course, this year. I hope this answer your question.

[Operator]

We will now move to our next webcast question, which comes from Oliver [indiscernible], apologies. And I quote, "can a visible reduction in inflation, reduce your profitability, for example, due to lower protecting value demand, but not only?"

[Gul Ertug, executive]

Can you read it again. Maybe I couldn't hear it well. Can you repeat it, please?

[Operator]

Yes, of course. Can a visible reduction in inflation reduce your profitability, for example, due to lower protecting value demand, but not only.

[Gul Ertug, executive]

It's like -- in fact, over here in all of these measures, we are seeing inflation as an issue acting against us. So if inflation comes to normal terms, I wouldn't see that as a negative result. Like the entire macroeconomic pattern is targeting to take inflation under control. And I hope that turns out to the reality, like because we are not just issuing, like we are not taking advantage as if people are just afraid of inflation. That's why they are buying the vehicles.

No, that's not the case. They are buying it for their business. And our vehicles are competent, very competitive. That's why it should go back to the normal terms. And like if you think of the export side of our business, the successful, the high-performance vehicles are doing quite well in their markets. And thanks to our business model with Ford, we are -- we have the chance of utilizing cost plus markup methodology on the overall setting, whatever the cost is, we are able to recover.

Ford is not giving us profit guarantees. It's not giving us essentially volume guarantees. But when we have our investments, there is a guarantee for the investment recovery. The combined pieces of the domestic and export business model is a healthy one. And I don't think that, that would hurt us. Just on the contrary, if things come back to normal, with enhanced feature of our vehicles, it should be giving us a positive edge.

Maybe what I said earlier, myself confused you, I was trying to say that in year 2023, because of the inflation and the interest rates, at first, interest rates were very low, but inflation was very high. And in that kind of a little bit, how should I say, a little bit strange environment since the real interest rates were negative, people thought, "Hey, we need to find a way to save the value of our money. " In order to do that, they saw the purchase of a vehicle as kind of preservation of money.

But of course, in normal terms, being a successful vehicle producer and not just a producer but also we have enhanced our abilities in the R&D front, engineering work, and also manufacturing engineering, we would like to operate in a normal on the market. And that's why I'm not seeing that as an overall negative sign but versus where we were in 2023. Since the macroeconomic setup is now trying to be pulled into the normal area, we might lose that part of the volume to some other investment alternatives. That was what I was trying to say. And we have already baked that into our projection for the overall volumes.

[Operator]

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Ms. Ertug for any closing comments. Thank you.

[Gul Ertug, executive]

Thank you very much, and thanks for this question-and-answer session. I think it has been quite a fruitful discussion. And like, I will say, once again, for the ones that who feel themselves a little bit disappointed, I'm really said that this turned out to be the case. But in line with the regulations, this is the information that we can support you with.

And if you have any other further question maybe after this call, if something comes up to your mind our Investor Relations team, Bahar, [indiscernible] from Corporate Finance and myself, we will be at your service to try to answer any other questions, if that comes up to your mind. Thanks very much for your time, and see you in the next quarter, I would say. Thanks a lot. Bye-bye.