Daimler Truck Holding AG (DTG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. This is Christian Herrmann speaking. On behalf of Daimler Truck, I'd like to welcome you on both telephone and the Internet to our Q1 results global conference call. We have already released our results and our outlook yesterday evening. So we are going to show details and share further information with you in this call. We are very happy to have with us today Eva Scherer, our CFO. Eva will begin with an introduction directly followed by a Q&A session. The respective presentation can be found on the Daimler Truck IR website. On our request, this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Truck website. I would like to remind you that this telephone conference is governed by the safe harbor wording you will find in our published results documents. Please note, our presentation contains forward statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. With this, I would like to hand over to you, Eva.

Thank you, Christian, and good morning, everyone, and thank you for joining our results call for the first quarter in 2025. Overall, our first quarter results came in strong, especially considering the growing macroeconomic uncertainties. In our Industrial business, we generated revenues of EUR 11.6 billion on the back of 99,800 units sold. Adjusted group EBIT totaled EUR 1.2 billion. Adjusted return on sales for the industrial business amounted to 9.6%, resulting in earnings per share of EUR 0.99. Free cash flow in the Industrial business came in at EUR 33 million, bringing our net industrial liquidity to EUR 7.9 billion at the end of the quarter. These results reflect our improved resilience on group level and underscore the commitment and performance of our global team. With market uncertainties continuing, we remain extremely focused on our optimization measures to structurally improve our business, reduce volatility and improve cash generation and return on capital. We are making good progress on several of our long-term key value drivers. We have increased our resilience and reduced the dependency on the on-highway market in North America with our vocational strategy. At the same time, the investments in our long-term customer relationships are paying off. We are continuing our cost and capital allocation discipline, focusing on the most attractive market segments. I want to extend a sincere thank you to everyone across the organization who made this possible. To bring us to the next level of performance, we have proactively implemented key measures in the first quarter of 2025. One initial measure was to reorganize the Mercedes-Benz Trucks segment and to merge our businesses in India and China into the Mercedes-Benz Trucks business effective January 1. Regarding India, this means that the BharatBenz business is being integrated into the Mercedes-Benz Trucks segment. Regarding China, we are assessing the future setup of our joint venture together with our partner, and China is now part of the Mercedes-Benz Trucks segment. Why are we pursuing this change in segmentation? It improves parts and components commonality across product platforms. It leverages a global production and development network. It enhances the utilization of our global talent pool, and it boosts BharatBenz Truck exports to global markets. On the customer and product side, we can also report some good news in the first quarter. In January, Amazon placed its largest ever order for electric trucks, 202 Mercedes-Benz eActros 600 vehicles, marking the biggest electric truck contract in our company's history. In March, we announced our TruckCharge initiative to establish Europe's largest semi-public charging network for electric trucks, aiming to deploy over 3,000 fast charging points by 2030 to accelerate the transition to 0 emission transportation. And we successfully tested our next-generation GenH2 fuel cell truck in the Swiss Alps, proving its power, reliability and 0 emission performance under extreme conditions. And the truck has delivered the latest version of its autonomous-ready Freightliner Cascadia platform to talk robotics, marking a major milestone towards commercial development. Testing now includes a high-volume freight corridor between Laredo and Dallas. In addition to this exciting product development, we will also continue our efforts to drive improvements on the cost side with our cost down Europe program. We announced last week that we have reached an agreement with the General Works Council, which now needs to be approved by the respective bodies. We have achieved a result, which will make Mercedes-Benz Trucks significantly more competitive and which enables us to reduce our cost base in Europe by more than EUR 1 billion by latest 2030. The agreement includes the commitment to optimize all relevant personnel and organization-related cost levers of our European truck business, including factor costs, personal flexibility, employee profit sharing, production footprint as well as the streamlining of all our indirect functions. One clear focus of our Cost Down Europe program is the reduction of factor costs across all functions and locations in Germany with the one aim: bringing our Germany-based organization to a competitive cost level. To do so, we are implementing different measures. For example, salary increases from collective bargaining agreements will be partly compensated by a reduction of other salary elements. In addition, 2 paid vacation days will be canceled per year. To increase our resilience and to manage volatilities in demand quicker and more cost efficiently in all German locations, we will increase the maximum quota for temporary workers to 18%. At the same time, we will increase the possible duration of temporary employment to 5 years in all locations. Whereas today, the profit sharing of our employees in Germany is mainly based on the overall global performance of Daimler Truck, we will transform this into a clearly performance-based model, linking the payout to the Mercedes-Benz Trucks Europe performance and our long-term profitability targets. At current performance levels of Mercedes-Benz Trucks, the new profit sharing model will lead to significantly lower payout spend today and employees will benefit once profitability targets are reached. The restructuring of our -- as of today, very Germany-focused production network will play a major role in bringing down our yearly operating cost and increasing our resilience. We will review and redefine the scope of components that we target to produce in-house in our German production locations. We will pursue the outsourcing of noncore business scope following a structured make-by process. We will relocate parts of today's production volume to alternative production locations outside of Germany, if economically feasible. We are committed to set up our indirect functions according to industry benchmark level. We will relocate and bundle more functions in lower-cost countries and source additional services from external suppliers. We will streamline all our current organizational structures, consolidate teams, and increase the span of control in all areas. Besides this, we are going to implement a lean headquarter in which only 2 global governance functions will be allocated. All the above described measures will lead to a significant reduction of internal workforce at our German locations, in our indirect as well as our direct functions and areas. Together with the works council, we have agreed upon the extension of our current securing the future so-called Zukommtzegerung Agreement, a collective labor agreement that excludes and force terminations for all employees in Germany until the end of 2034. But within this agreement, we have defined a clear process and measures on how to reduce the German workforce. As a result of this planned headcount reduction, we will recognize a provision for severance payments in the mid-3-digit million range in the second quarter. This will be treated as an adjusted item with no significant cash impact in 2025. In addition to the above outlined lever set, the reduction of material costs will play an important role in reducing our annual recurring cost base by more than EUR 1 billion latest by the year 2030. Now after we have agreed on the framework conditions, we are fully focused on the execution of the Cost Down Europe measures. We will provide you with more details, including the ramp-up of savings over the years at our Capital Market Day in July. Turning to developments in our key markets during the first quarter. In North America, the Class 6 to 8 market declined 5% year-over-year, totaling 99,000 units. A primary driver of this decline is the increased uncertainty in the U.S. economy. Additionally, the Mexican truck market was particularly weak, following the transition to Euro 6 emission standards at the start of the year and the preceding prebuy activities in 2024. The heavy-duty market in North America reached 65,000 units in Q1, a 10% decline year-over-year. Despite these market headwinds, we maintained our strong competitive position. Our Class 8 market share stood at 41.9%, underscoring our clear leadership position and the fact that our vocational strategy continues to deliver solid results. In Europe, overall demand in the medium and heavy-duty truck market declined by 15% in the first quarter, totaling 80,000 units. The heavy-duty market mirrored this trend, also decreasing by 14% to 72,000 units. Our heavy-duty market share in Europe came in at 14.2%. We are continuing to prioritize profitability over market share and also our production was impacted by the ramp-up of new products. Looking ahead, we are confident in our ability to regain momentum starting in the second quarter. With the rollout of new products, most notably the new Actros L, we expect to strengthen our market position again. Now let's take a closer look at the development of unit sales and order intake in the first quarter. Overall, we recorded a book-to-bill ratio of [ 103% ] across all [Audio Gap]. Unit sales were down by 8% to 99,800 units while incoming orders declined 3% year-over-year to 103,000 units. At Trucks North America, both unit sales and incoming orders were impacted by the recent contraction in the U.S. market, decreasing by 16% and 29%, respectively. Mercedes-Benz Trucks saw a year-over-year decline of 18% in unit sales for the quarter. However, in the first quarter, we saw a positive trend in incoming orders with an increase of 9% versus prior year Q1. In EMEA, sales were down by 27% year-over-year on tough comps due to a still strong first quarter in 2024. Within that, Germany saw an even sharper decline of 43%. However, order activity in EMEA rose sharply, up 40% year-over-year, with March marking the second best month for the region in the past 12 months. There's an increasing uncertainty going forward based on the declining sentiment regarding the global economic development. India, as we communicated last quarter, is now included in the segment and recorded a 14% decrease in unit sales, totaling just shy of 6,500 units. Also, overall, India market slightly increased. Sales have been impacted by a market shift towards the 16 to 19 ton segment. Meanwhile, Latin America continued its positive momentum with sales up by 11%. At the same time, there are slowdown signs due to macroeconomic factors, particularly in Brazil. At Trucks Asia, unit sales in the first quarter totaled 24,800 units, representing a strong 16% increase year-over-year on low comps. This growth was primarily driven by higher deliveries to Indonesia. Orders also developed positively, increasing 35% versus last year's quarter 1. Turning to Daimler Buses, unit sales exceeded Q1 2024 levels by 11%, while incoming orders declined by 9%. All in all, the sales and order momentum in the bus segment has stabilized at strong levels following the post-COVID recovery we've seen over the past years. Year-to-date, we have sold 759 battery electric trucks and buses compared to 813 in the same period last year. Order intake for zero-emission vehicle has also remained relatively stable at 1,266 units. Today, we have 11 emission-free truck and bus models in production, including our eActros 600 for long distance transport in Europe, which has been well received by customers. A week ago -- a few weeks ago, at the Bauma trade fair in Munich, we introduced our eArocs 400. With this truck, we are now also bringing electrification to the important construction segment. Since the introduction of our first eCanter in 2017, we have successfully delivered over 10,000 zero-emission vehicles to date, meaning in terms of vehicles, the product transformation is in full swing. However, our customers will not be able to buy these vehicles in large numbers as long as the equally important charging infrastructure is not in place. As of today, infrastructure remains the bottleneck to accelerating ZEV adoption. The numbers make this very clear. And even if many of you know them by now, I would like to repeat them once more because there is a high need to act here. To meet the European CO2 by 2030, about 35,000 public fast charging points need to be in place. To date, we have far less than 1,000. The infrastructure buildup, therefore, urgently needs to pick up pace. This is a collective challenge. We urge all stakeholders, industry, policymakers, utilities and infrastructure providers to step up and work together on building a truly robust green energy ecosystem. At Daimler Truck, we remain committed to being part of the solution. We are launching pilot infrastructure projects, and we continue to actively engage with partners, policymakers to drive progress. And the coalition agreement in Germany, we also see steps in the right direction. It includes a clear commitment to accelerating the infrastructure buildup for both battery and hydrogen and the parties of the new government see the need to pull forward the revision of the CO2 targets. These are the right signals, but in the next step, they need to be further substantiated. Now let's have a look at our financial performance for the quarter. At group level, adjusted EBIT declined by 4% year-over-year, coming in at EUR 1.2 billion. Looking at the contributions from our segments, Trucks North America, Daimler Buses, Trucks Asia and Financial Services contributed positively to the overall result. Mercedes-Benz Trucks was the only segment with a negative contribution on tough comps. As a result, adjusted EBIT for the Industrial business declined by 4% year-over-year to EUR 1.1 billion in the first quarter. Trucks North America delivered a strong performance in quarter 1 and adjusted EBIT of EUR 778 million and an adjusted return on sales of 14.4%. While the contraction in the U.S. market had a significant negative impact on volumes, we also saw increased R&D spending. These effects were more than offset by several key positives. We benefited from an extraordinary favorable customer mix with more sales to smaller fleet customers and a lower share of mega fleets. We also had a strong product mix with more heavy duty on-highway and vocational trucks and fewer medium-duty trucks. Our value-based pricing and high Detroit captive powertrain penetration rate also contributed favorably, as did the solid performance of the used truck business and sustained high operational efficiency. Finally, we had a positive onetime warranty effect from vendor recovery. As expected, Mercedes-Benz Trucks had a slow start into the year with an adjusted EBIT of EUR 238 million and an adjusted return on sales of 5.4%. The main drag on profitability in quarter 1 came from the EMEA region. This demonstrates that we still need to increase our resilience in Europe. We now will execute decisively on cost down Europe to reduce our cost base. Outside of Europe, the picture was more encouraging. Our Latin American business remains accretive to the segment. India had a dilutive effect of approximately 10 basis points following its integration into the segment. That said, we continue to see strong long-term growth potential in India. On the EBIT side, we saw positive contributions from pricing in Latin America, reduced SG&A expenses and a mid-double-digit million onetime impact from releases of warranty provisions. However, these positives were not sufficient to offset the headwinds we faced. Lower volumes led to an underutilization in production. On top of that, we incurred ramp-up costs related to the launch of the new eActros 600 and Actros L as well as higher R&D expenses. Trucks Asia reported an adjusted EBIT of EUR 64 million and an adjusted return on sales of 5.4% in the quarter. This is a good performance in a challenging environment and it was supported by positive pricing, continued growth in aftersales and lower SG&A expenses, which helped offset impact from ongoing foreign exchange pressures and cost headwinds. Overall volumes increased on low comps, but this was offset by an unfavorable sales mix development. Daimler Buses more than doubled adjusted EBIT in Q1 compared to prior year with EUR 126 million, reaching a return on sales of 9.4%. Higher volumes contributed favorably to EBIT as did a more favorable product mix. We also saw improved pricing and better production utilization. We were able to better leverage best cost production facilities. Foreign exchange was a headwind in quarter 1. Overall, this clearly demonstrates that our bus business is back on track, delivering strong results. Looking ahead, a solid order backlog and largely filled production slots for 2025 highlight the strong demand and positive momentum in the segment. This excellent performance came just in time to celebrate the 30th anniversary of Mercedes-Benz and Setra being under one roof at Daimler Buses, a significant milestone we are very proud of. Let's move to our Financial Services business. Adjusted EBIT increased slightly year-over-year from EUR 51 million to EUR 55 million, as continued improvements in volume and margin offset the higher cost of credit risk. However, adjusted return on equity decreased from 8.2% to 7.3%, mainly due to the capital injection made last year to support our S&P rating upgrade to A-. The high level of macroeconomic uncertainty further burdens the persistent difficult credit situation, particularly in North America. Due to the ongoing freight recession, we no longer expect an easing of the negative credit cycle in the second half of 2025. As expected, the first quarter cash generation saw typical seasonal effects in working capital, mainly from inventory buildup, most notably at Mercedes-Benz Trucks and Daimler Buses, resulting in a total working capital increase of EUR 304 million. Net investments in property, plant and equipment and intangible assets continued to weigh on cash generation, amounting to EUR 380 million. These investments reflect our commitment to further growth and innovation, such as the battery cell manufacturing joint venture, Amplify; the charging infrastructure joint venture, Milence, and continued development in fuel cell technology. As a result, cash flow before interest and taxes of the Industrial business came in at EUR 268 million. Deducting cash taxes of EUR 170 million and effects from interest payments, pensions and other reconciling items, we arrive at a free cash flow of the industrial business of EUR 33 million. Adjusted for M&A transactions and restructuring measures, free cash flow stood at EUR 143 million. At the end of Q1, industrial net liquidity amounted to EUR 7.9 billion, down from EUR 8.6 billion at the end of Q4, and EUR 9.4 billion at the end of Q1 2024. As a reminder, the group has paid EUR 1.5 billion in dividends and EUR 1.1 billion in share buybacks over the last 12 months, and we clearly aim to continue our strong cash return policy to shareholders. Let's move on to the outlook for the full year 2025. As always, our guidance is subject to further macroeconomic and geopolitical developments. Potential financial implications regarding the way forward for our China business are not included. They are contingent on the outcome of ongoing discussions with our joint venture partner. As mentioned before, restructuring expenses from the Cost Down Europe program are expected to be in the mid 3-digit million range. There are special impact to be adjusted from EBIT in quarter 2 with no significant cash impact in 2025. We have adjusted our volume guidance for the North American market to the range of 260,000 to 290,000 units, reflecting the implications of the current market dynamics and heightened demand uncertainty. The EU30 heavy-duty market guidance remains unchanged at 270,000 to 310,000 units. As the macro environment in the United States has come under pressure, we have reduced our unit sales expectations for North America. For Trucks North America, we now expect 155,000 to 175,000 units. This assumes increasing customer confidence and order behavior from current low levels. Despite our reduced unit sales predictions, we still expect a profitability for the full year in the range between 11% and 13%, underlining the strong resilience of our North American business. Under the assumption that we will be able to continue to operate under USMCA, we expect profitability for the full year in the lower half of this range. This remains subject to further changes of the tariff environment and resulting macroeconomic effects. For the second quarter, we expect Trucks North America volumes to remain roughly in line with quarter 1. With a more usual customer mix, we expect profitability lower than in Q1, but still towards the upper end of the full year margin corridor. At our full year disclosure in March, we anticipated the second half of the year to be stronger than the first. Due to the deteriorating market conditions, we now expect unit sales for the second half of 2025 on a similar level as in the first half. Margins will probably be lower in the second half of the year. As a result of the aforementioned uncertainties surrounding the macroeconomic situation in North America and the resulting negative impact on cost of risk, we are revising our full year outlook for financial services from a return on equity of 8% to 10% to 6% to 8%. For the second quarter, we expect return on equity around last year's quarter 2 level due to the impact of the mentioned increased market risk in the U.S. on our cost of risk provisioning model. For all our other segments, the full year guidance remains unchanged. To complete our outlook for the second quarter, we expect group sales at Mercedes-Benz Trucks to be above quarter 1, around 20% to 25% higher. Profitability at Mercedes-Benz Trucks is expected to be at a similar level as in quarter 1. At Trucks Asia, we expect group sales in the second quarter to be in line with the first quarter, with profitability anticipated to be within the lower half of the full year guidance range. Finally, for Daimler Buses, we expect higher group sales and profitability for quarter 2 at the top end of the full year guidance range. Given the reduced volume expectations in North America, we now anticipate the following impacts at the group level. Adjusted EBIT for the group is now expected to come in between minus 5% and plus 5% year-over-year. Unit sales have been lowered to the range of 430,000 to 460,000 units. Revenue for the Industrial business is now forecasted at EUR 48 billion to EUR 51 billion. Our outlook for free cash flow for the Industrial business remains unchanged with a decrease between 10% and 25%. Free cash flow will be back-end loaded towards the second half of the year. We have demonstrated also last year that the group has a track record of delivering a strong cash conversion towards the end of the year following typical seasonal patterns. As stated during our full year disclosure in March, we still expect an operationally stable 2025 compared to 2024 with adjusted return on sales of the industrial business between 8% and 10%. This is a strong testament to our improved margin resilience. Given the relative importance of our North American business to the overall group results, the fluctuations in the U.S. dollar-euro exchange rate could significantly impact the group's financial performance, primarily through translation effects. Before I conclude, I would like to remind you of our upcoming Capital Market Day on July 8 in Charlotte, North Carolina. We look forward to seeing you there. As previously announced, we will provide an update on our group strategy and long-term shareholder value drivers. This updated strategy is designed to strengthen Daimler Truck and position us as the world's best truck and bus company for our customers, shareholders and employees. With that, I now look forward to answering your questions.

Thank you very much, Eva. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioners by name, but please also introduce yourself and the organization you are representing. A few practical points. As always, please ask your questions in English. And as a matter of fairness, please limit the amount of questions to a maximum of 2. Now before we start, the operator will explain the procedure.

[Operator Instructions] The first question comes from Nicolai Kempf from Deutsche Bank.

It's Nick Kempf here from Deutsche Bank. Well done for a strong start to the year. Two questions from my side. First, starting with North America. Your guidance does assume that orders will pick up in the coming months. Have you always seen this trend in May? I know it's kind of early months, but still it would be nice to hear first comment on that. And then also staying in North America, you'll highlight that Q2, the profitability will likely be at the upper end of the segment guidance. What's driving this? Because I'm still wondering how much backlog you have left. And that would be just interesting there. A bit more color on that.

Nicolai, thanks a lot for your questions and positive feedback. So first question, I think it's an obvious one. How do we see the order situation in North America right now? I guess everybody has seen also the ACT order report on April orders in the market, and that has been extremely low. So we did see that also over the last couple of weeks that momentum has really stalled with many customers taking a wait and see approach. So the question is now, will we get back to the decent levels of quarter 1. We do believe that despite uncertainties the market demand is still there, and we really stay focused on executing our strategy and not overreacting to market volatilities. What we also do see is that we have also smaller fleets that are ordering right now. In this uncertain environment, they're buying because certain of their customers are not impacted by tariffs or economic uncertainty and some of them are also replacing older equipment, which they couldn't get during the capacity constrained years. And so we do believe there is a possibility, obviously, that orders will pick up in the course of quarter 2. When we look now at the news flow over the last couple of days with the temporary agreement that the U.S. and China have reached on tariffs that could also give positive impulses in that regard, but of course, a bit early to tell, and that hasn't obviously translated into orders just yet. But also on your second question on the profitability, for the upper end in the second quarter, we are confident on that one because of our order book. So the orders in quarter 1 were decent, and our quarter 2 from a production program is largely filled. So that means we see this profitability also then in quarter 2, as largely secured. We are encouraged by the April profitability that we have also already delivered. And so this is something where we have the backlog for, but then obviously, when we look at quarter 3 and 4, this is not filled yet. That's only partially filled. And for that, we then need a stronger order momentum to come in.

The next question comes from Miguel Borrega from BNP Paribas.

I've got a few. On North America, there's obviously investigation of Section 232. Have you calculated potential impact if tariffs are applied in the same way as, for example, light-duty trucks even if you are USMCA compliance, can you quantify that?

Miguel, thank you for your question. So obviously, we're looking a lot into what's happening right now also the Section 232 investigation. I think you will understand these are highly volatile times, which make it difficult to predict anything. But what I can say is that we're not too concerned about the Section 232 investigation as we believe it would be difficult to assert the trucks made in Mexico present a threat to national security in the U.S. What we believe is that we think USMCA will continue. The agency has already started taking input on changes. We do believe that they will potentially make it more strict so to require a higher U.S. content, which is something that we could adapt to them. We really have also demonstrated in quarter 1 and we expect to demonstrate in quarter 2 that we have a high flexibility in our production network and that is key for our operational efficiency. We can really quickly ramp up or down with also bringing our costs then down accordingly if we have to adjust volumes [Audio Gap]. Potential adaptations to USMCA, we believe that would provide us still with the regulated framework that we use to and that we could operate efficiently. It's too early to speculate about impact. Obviously, we have calculated many, many scenarios. But as I said, if the direction would be just requiring a higher U.S. content, we believe that's something that we could deal with.

And a follow-up to what you just said. If you indeed increase the content from the U.S., how do you maintain your competitiveness or your cost advantage relative to your peers who don't have any Mexican or almost any Mexican production?

I mean, obviously, that also has an impact on the supply chain. So also our suppliers are fully compliant with USMCA. This is all clearly documented. So we have some possibilities to adjust something there. And I'd just like to emphasize if USMCA continues, what currently looks like a realistic scenario, then we will be continuing to produce a portion of our products in Mexico, and we will continue to have a benefit from that. What's also important to note is that also with U.S. production right now and also peers of us who produce in the U.S., they also have higher costs right now because of tariffs. So it's something that really affects all of us in the market, maybe not equally, but it all affects us and the market will have to adapt to that.

And then just one question on Mercedes-Benz. I know you don't disclose European orders, but overall, Mercedes-Benz orders were up 9%. I imagine Europe would be double-digit up for the second straight quarter, correct me if I'm wrong. So what prevents you from becoming more optimistic in the European outlook?

So when we look at the first quarter orders and also the orders that we've received in the last couple of weeks in Europe, we are cautiously optimistic, so to say. And if that trend continues, we do believe there will be a stronger second half of the year when it comes to volumes and to profitability, which is also what we have considered in our guidance. And we also see that our new products, the eActros 600, but of course, when it comes to volumes, especially the Actros L is being well received in the market, and we believe that then translating into sales in quarter 2 and the second half of the year. So cautiously optimistic, I would say. Let's give us a few more weeks before we call it a trend, but so far, we do see it moving into the right direction.

The next question comes from Shaqeal Kirunda from Morgan Stanley.

Shaqeal from Morgan Stanley. There seems to be a 5 percentage point decline in the EU30 heavy-duty market share. Could you please explain some of the drivers here and whether this is a temporary effect?

Shaqeal, thank you for your question. Yes, you noticed that correctly, I also commented on it. In my speech, obviously, this doesn't come now as an unexpected effect because we know that we had very low order intakes last year. Also then quarter 2, quarter 3 and coming into quarter 4 still. And so this, we see now in our unit sales, and that translates into a lower market share. We do believe that it will get better with the rollout of the new products as we started delivering the eActros L as our new flagship product beginning of the year. And we do see when we look now at April that this is slightly picking up, but it will take a while to gradually regain some market share. And as I also said in my speech, we are continuing to put in profitability over market share. Market share is -- it's not that it doesn't matter, but we're not willing to start excessive discounting activities in order to buy market share.

Understood. And then one more for me. Can you please tell us a bit more about the flexibility measures you have in Trucks North America and how you plan to deploy some of these -- like if orders don't inflect by mid-June, for example, do you then start to reduce capacity?

Yes. So we have already started to deploy these flexibility measures in North America. So there we have also in the U.S., we have labor agreements in place that enable us to ramp down capacity and also reduce wages as a part of that. And in particular, in Mexico, we are very flexible. So for example, if we close down for a week, then we also only have to pay 50% in wages to then really be able that we don't have significant underutilization effects. So we have not been in a position yet where we had to release people, which we've also heard in the market, but we have not because so far, we're managing it well with having shut down days, and that will also get us well through quarter 2. As I said before, quarter 2 is largely filled. When we look at our production program, so we have a good visibility there. Of course, should orders not pick up now in the next couple of weeks, then we will also look at further adjusting capacities in the second half. But I believe our quarter 1 profitability on low volumes and also our guidance for the quarter 2 margin to still be in the upper end of the margin range for North America that demonstrates that we can operate highly profitability -- in a highly profitable way also in the current environment with low volumes. And just to remind you, volumes for North America in quarter 1, we expect them to be more or less in line with quarter 1. So with that -- with that capacity, we can manage it well. Should it now get to a situation where the second half of the week -- of the year is weaker than the first half, we also have clear measures in place how we can adjust that we still, of course, safeguarding profitability levels.

The next question comes from Klas Bergelind from Citi.

So I just want to come back to North America, again, a lot of questions here. But what you said, Eva, just to confirm, on the warranty release, I think you said a mid-double-digit impact in Mercedes-Benz. What did you say from North America? And did you say that full year margin would be at the lower end of the 11% to 13% range. I heard you on the second quarter, you just confirm the full year comment.

Klas, thanks for your question. So you're right about the impact in MB. It's a mid-double-digit impact. Also the positive impact from vendor recovery in the U.S. is a mid-double-digit million impact. So I guess that answers your question. And I think the second part of your question was the full year impact of the margin. Yes, let me explain that in a bit more detail, just to make it very clear for North America. So what have we considered in the guidance now? Obviously, we guide the market in North America for Class 8 at a midpoint of 275,000 units. If that happens, then we are confident that we will reach the unit sales that we are guiding from 155,000 to 175,000 units. That would mean volume-wise, first half of the year comparable to the second. But the margin in the second half of the year would probably be lower because we've started the year extremely strong with a very, very favorable business mix with that impact from vendor recovery. But I also want to say, even if I exclude that impact from vendor recovery, we'd still be above the top end of the guidance range in quarter 1. And then quarter 2, still being at the upper end of the guidance range for DTNA. But that if you do the math, in the second half could be a bit lower. And then now the question is what have we considered when it comes to tariffs? So we have considered that USMCA holds for the year as it is currently in place. And then also, we have considered the tariffs that are currently in place. That means the 25% for steel, aluminum, copper. It also means the 10% retaliatory tariffs that we have in place now for the 90 days. So we have simulated that for the full year, and then also the China tariffs that are currently in place. And with that, we expect to be at the lower end of the 11% to 13% range, which I believe is an extremely strong statement.

Very clear. Just on Section 232, obviously, the consultations are ending here in May. But if you look at sort of previous discussions, this can be quite a lengthy process. So even if it turns out to be negative, I don't know what you think about timing here, but I mean it might actually run into year-end or into '26. I don't know if you have any comment there.

Well, it's so difficult to make predictions nowadays. Everything can change quickly. But the good thing about it is that it seems to be an orderly process where we can also present our input and where we will have then if there are adaptations as I said, potentially requiring higher U.S. content to have clear calculation methods behind, to have clear documentation methods behind that we are very used to, that our suppliers are very used to and that we would also hope, of course, to have some time to implement so that it wouldn't happen overnight.

My second and final one is on the cash flow. It's typically weaker in the quarter, but cash flow now at least against what I thought, even more back-end loaded. You're obviously lowering the EBIT guide on the volume decline, but you're not lowering the cash flow guide. I mean your range is much wider on cash flow, of course. So are we saying that we're going to see cash flow down at the higher end of the decline, i.e., down 25% down to around EUR 2.3 billion. Obviously, on top of that, you will have cash out for restructuring, but that will come later as it is a provision. So I'm keen on the sort of the free cash flow for the year, if you could give an indication, Eva.

Yes, sure. So as you rightfully stated the guidance corridor is fairly broad with [ minus 10 to ] minus 25, which is also why we didn't see a need to adjust it. But obviously, yes, we will probably slide down a bit within that bandwidth. Of course, also with the lower sales volume, we have the ambition for lower working capital, which is expected to result in a slightly positive effect. And of course, we will even be more cautious on spending and early collection in these uncertain times that we're in. And in quarter 1, cash flow was clearly also burdened by the production ramp-up of our new products, the Actros L and the e600, mainly. So we will work heavily on getting that down again. But yes, it's also realistic to say that probably will still be back-end loaded towards the end of the year.

So a quick final on the PSO. Obviously, transactional FX, PSO down a lot year-over-year. Did you get any benefit in Trucks North America from that at the EBIT level?

I mean we're not disclosing the exact effect, but there are positive effects from that coming in, but they are not major.

The next question comes from Michael Aspinall from Jefferies.

Michael here from Jefferies. Just 2 for me. I'll stick to 2. Can you step through Mercedes-Benz orders with the segment, plus 9%. I think you said EMEA was plus 40%. Maybe you can just touch on the other moving parts from Mercedes-Benz so we can kind of round out what orders look like for this segment geographically? And can you touch on Germany as well?

Yes, Michael, thanks for your questions. So you summed up EMEA already. In Brazil, we did see orders come down year-over-year. However, there's a special effect in there because we're shifting from build to stock to build to order, which is affecting that number. Overall, we see some slowdown effects in the macroeconomic environment in Brazil, but we're actually looking at our business and our customers. We're still fairly optimistic about the year and the positive contribution. Also from a profitability perspective, Brazil is highly accretive right now to the segment. In India, we had a bit of a slow start, but we do believe that we'll get better, but obviously, the effect of India on the segment overall is not that high. What we do see is that in Germany, we have an increase of 80% year-over-year in orders. So that is going into the right direction.

That's super useful. And then one on the agreement with the work council. I know you're probably going to talk about this at the CMD, but I'm wondering what you can share with us now in terms of where margins could go in Europe or maybe where margins need to move back towards to have employee profit sharing kind of get back to what it was previously? I imagine that was part of the discussions.

So obviously, the full details you will get at the Capital Markets Day. What I can say is that obviously, when it comes to reducing our labor costs in Germany, it was important for us to have a profit-sharing model that is aligned with the targets we set for profitability for the Mercedes-Benz Trucks segment in Europe. So I can say that it's now really geared towards achieving a much higher level of profitability than where we are with the overreaching principle of closing the performance gap to our best-performing peers. So this is how it is all structured towards. And at the CMD, we will then, of course, present you with the strategy, how Mercedes-Benz trucks as a total segment will move then to that direction of closing that profitability gap to the best performing peers, of which Cost Down Europe will be an important part, but of course, there are also other initiatives that we will share.

The next question comes from Akshat Kacker from JPMorgan.

Akshat from JPMorgan. I have 3 questions, please. The first one, sorry to come back on tariffs that are in force in the market since March. Could you just give us more details in terms of the impact on the business that you've already seen in Q1? In what shape and form has it impacted your P&L or cash flow or the supply chain? And how do you expect this cost item to evolve as we go into Q2, please? And the second question is on inventories. In the last 2 quarters you have produced over and above your retail sales and orders. Could you just talk about the inventory situation at a company level and even at the dealer level, if you are comfortable with the overall inventories in the channel, please? And third question is on capital allocation. As you said, you're at the tail end of your 2-year share buyback program. Could you tell us how you're thinking about the balance sheet going forward? And if you have talked about minimum liquidity or cash that you want to hold on the industrial balance sheet, please?

Thank you, Akshat, for your questions. So let me start on the first one on tariffs. The impact on the P&L was minor. In quarter 1, we had basically nothing to mention there yet, but the impact on demand, we could for sure see and the uncertainty in the market that it has created in particular in the U.S. We did not see any major supply chain impact. Of course, over the last couple of weeks, we have been closely monitoring the situation, in particular related to rare earth. At the moment, we see a path, how we can manage that, but of course, it will remain volatile. And then as I answered before to Klas, so we have considered the current level of tariffs that are in place right now as the basis for our full year guidance, and this is what we have considered. Then maybe I'll first do the capital allocation question. Yes, our current share buyback program will run until August. And of course, we are also looking into the framework going forward also when it comes to net industrial liquidity targets and so on, but you can expect an update on that at our CMD. At the moment, it's too early, and I would kindly ask you to wait for about 2 months and then we can discuss. On the inventory side, what I can say in the U.S., of course, we've been having inflated inventory levels on the dealer side. But what we can also say is that, that has been also driven by a change in mix because with more vocational business coming in and especially a significant growth that we have shown on the vocational side that increased -- that leads also to increase dealer stock because the vehicles take longer to be at the body builders before they actually reach our customers. We do see that inventory levels in the U.S. are still at a high level comparably, but also slightly coming down sequentially. When it comes to our own inventories, in our books, we do see that we obviously brought them down quite significantly at the end of quarter 4. And now, as I explained before, also because of ramp-up of new products and so on, we have increased them temporarily again, and we'll bring them back down over the course of the year.

The next question comes from Daniela Costa from Goldman Sachs.

I just have one left, and I wanted to follow up back on some of the points of discussion in North America on the strong margins that you had this quarter. You mentioned right at the beginning, the mix manual, you also mentioned efficiency and thanks for clarifying on the vendor financing, by the way. But can you maybe give us a sense of what of those 2 things is a bigger contributor? And particularly on the mix, how do you see the sustainability of that? Is the order recovery that you see potentially going forward, more of those smaller higher-margin customers? Or is that more fleet if you can help us there?

Daniela, thanks for your question. So the vendor -- you mentioned vendor financing, I think I have to clarify there. It was really a vendor recovery where we recovered money from one of our suppliers for defects that happened in the past. That was a one-off thing. But also without that, as I said before, our profitability in North America would have been slightly above 13%. So that means special impact there, but still strong performance. So the mix certainly was a big effect in quarter 1 with more smaller fleets compared to the mega fleets less medium duty. We see this a bit normalizing into quarter 2, but still having a good mix in quarter 2. And as I said, still being at the upper end of the margin corridor in quarter 2. And now the question is, how will it continue in the second half? As I said, quarter 2 is largely field when it comes to the production program, quarter 3 and 4, partially. So that's where we have to see what orders will come in. Of course, we do hope the large fleets will start ordering again if the economic momentum improves. And that would then, of course, lead to slightly lower margins in the second half of the year, but you can do the math if we end up even in the lower half of the margin guidance range that would still be a very strong result on the volumes that we're operating on.

And sorry, how much was pricing? And how do you see that one going forward?

Pricing was a net positive pricing impact in quarter 1. And that's what we generally see continuing also in quarter 2. As I said, we have very high visibility into quarter 2. But now it depends what happens to market if there's a disaster scenario and everything comes crashing down and nobody orders. Of course, that's a difficult situation. But if we achieve the volumes and if we reach the market Class 8 orders of 275,000, then we do believe there will also be still a net positive pricing effect for the year.

The next question comes from Hemal Bhundia from UBS.

Firstly, just a quick question on free cash flow. I noticed that there was a line called Other, which saw a large outflow. Just wondering if you could explain what that is.

[Audio Gap] And there was obviously an effect of noncash items that we had in our EBIT. So also the biggest one being released of some warranty accruals in North America, but also Mercedes-Benz standard process of obviously reducing our provisioning models. And that is something that is not free cash flow relevant.

And then just wanted to touch on Mercedes-Benz very quickly. In terms of the margin profiles for Brazil, Europe and India, I appreciate you mentioned past that Brazil was -- sorry, Latin America is more margin accretive. Is having a great exposure to Europe, the reason why margins are expected to be largely flat in Q2?

The reason, yes, it is part of the reason -- obviously, we're going to see growth in quarter 2 compared to quarter 1 when it comes to volumes. And Europe will have a good contribution of that. But then also what you just -- what we just discussed when it comes to the release of warranty provisions in quarter 1 that had a mid-double-digit euro million impact in quarter 1. So that is something that we will not probably have in quarter 2 and that explains then why we expect to be on a similar profitability level.

The next question comes from Jonathan Day from HSBC.

It's Jonathan from HSBC. I was wondering if you could just talk a little bit more, perhaps give us a bit more color about the cost of the ramp-up for the new models in Europe and how are you see those fading perhaps over the second half and impacting margins? That's the first one. And then maybe a second one, just a bit more color on the U.S. credit cycle, and that's a lower guidance and what you're seeing in financial services?

Thanks, Jonathan, for your question. So yes, cost of ramp-up for the new models, I would say it's all running fairly well. You always have some hiccups when you start producing a new truck. But we've also then managed it fairly well by the end of the quarter, and I think we will gain maturity there during quarter 2 and probably will then get to a more stable mode again in the second half of the year. So yes, that's something that you can consider. From a cost perspective, of course, it will come with increased efficiencies, but we also need that then to be able to ramp up the volumes that we do expect in production in the second [ half ] of the year. On the U.S. credit cycle, yes, we did that to develop differently when we started the year because we thought that would be an easing of the freight recession and cost of risk going down. And now unfortunately, it seems like we will see that sticking around for longer. And of course, due to the macroeconomic situation deteriorating, we have to look at our provisioning models now, again, also over the course of quarter 2, which will have a negative impact, which is why we reduced the guidance for financial services. So it's a direct result of the market development in North America with our Financial Services business being extremely geared towards North America.

The next question comes from Nick Housden from RBC.

Nick Housden from RBC. My first one is whether you could provide some comments about, I guess, your North American market share strategy because the market outlook for the year has been cut by 25,000 units at the midpoint. And that's the same as your cut in TNA unit expectations. And so I'm just wondering if we can kind of infer something about Daimler's strategy regarding possibly ceding market share to maintain price discipline in the market? So just curious about your thoughts on that.

Sure. Thanks, Nick. Good question. Just want to emphasize the market guidance at the midpoint of 275,000 units, that's Class 8. Our unit sales guidance of 155,000 to 175,000, that's everything. And obviously, we've looked at it in detail. You also need to consider that the medium-duty market was extremely strong last year, it's getting weaker now. And if we all take that into account, our guidance on our unit sales consider stable market shares and it's also what we see happening right now.

And then just a follow-up on the North American positive mix effects from some of the smaller buyers being more active in the market. Is there a risk that this kind of extends the pain that we've been seeing in the freight market and just lengthens the amount of time that it takes the capacity to reduce that? Or is it primarily different segments that we're buying units?

I'm not exactly sure whether I understood what you said, but I'll try to answer it. So of course, I think I answered it before also where we say -- where we see that the mix in quarter 1 was particularly strong. It will be a bit weaker in quarter 2, but still strong, and then we expect the large fleets ordering again. I think what's important to know when we talk about our strength in North America and why we're so resilient there, which you see with our -- well, quarter 1 result and also the guidance is we have an extremely strong customer mix and loyalty in the U.S. We have now a very strong vocational business. We have a competitive cost structure. We have an efficient production network with an extremely high flexibility to ramp up or down in short notice. That will be a key success factor now with that uncertainty about volumes. So we can ramp further down if needed and bring costs down quickly, but we can also ramp up quickly. We have a high captive powertrain penetration rate. We haven't talked about that in this call yet, but I mentioned it in my speech. That was a major impact for quarter 1 also where we saw on the vocational side and on the Class 8 side. Our captive penetration rate going up, which really speaks to the quality of our Detroit Powertrain and how well it is received in the market. We have a good and stable services and parts business. And last but not least, we have a very lean organization and a highly competitive cost base that we are constantly improving and optimizing.

The next question comes from Anthony Dick from ODDO.

Just a couple remaining on my side. First, you mentioned the captive engine rate in North America. Could you just remind us where that stands today and where you expect this to go? And secondly, on the European cost reduction program. I was just wondering if you could tell us to what extent this can contribute in the short term, i.e., in the next couple of years and how significant that can be in the sort of intermediate years before the 2030 deadline?

Thank you. Of course, happy to answer that, and I've said it in previous quarters on the captive powertrain penetration rate. For our heavy-duty engine platform, for our Cascadia, it's more than 90%. And also for vocational, we have moved now above 60%. So I've also explained before in various discussions that on vocationally it's still lower but we're also moving into the right direction there, which is helping our margin contribution for the vocational business equally. And then on Cost Down Europe, there will be an impact in fiscal '25, but it will not be a major one. And you can expect that we will show you details on the ramp up year-over-year at the Capital Markets Day, as we have now come to an agreement, we start implementation basically now, calculate everything through again and pull forward as much as possible into the earlier years and then we will share that with you and we can discuss at the CMD.

[Operator Instructions] The next question comes from Harry Martin from Bernstein.

Harry from Bernstein. The first one, just coming back on to the tariffs in the U.S. You obviously have a position to see the cost difference between both the U.S. and the Mexico production. Can you confirm that the onset of the steel and aluminum tariffs and the continued USMCA compliance actually improved the relative cost position of your Mexico plants in Q1. Did you shift more production into Mexico in Q1? Is that part of the health to the margin? And would that also continue into Q2 as well? That's the first question that I have.

Thank you, Harry, for the question. So obviously, please understand that we're not sharing more details than what we already have on that sensitive topic of tariffs. But what I can say is that looking at the footprint that we have in the U.S. and in Mexico that has remained as it is. We have not done any shifts over the last couple of months, and we're operating with the footprint that we have set up successfully over the last couple of years. What I can say overall about the steel and aluminum tariffs is that the impact of that one and related to U.S. and Mexico is not major.

And then a second question just on the free cash flow and an outlook for the investments for the rest of this year. I guess it would be useful to just put an overview of how you expect CapEx to develop, but also the investment into the JVs and associates. Do you still expect to close the software-defined vehicle JV with Volvo this year as an example?

So the investments, and I already said that when we guided for the full year, we expect them to be on a comparably high level. For this year is -- obviously also our investments into the transformation to decarbonization and these are reaching peak levels, I would say, more or less stable developing quarter-over-quarter when we look at it globally. Of course, we're also looking at changes in the regulatory and political environment, and we see how we adapt to that. That's also something we will discuss in detail at the Capital Markets Day. Your second question, yes, we expect to close the software-defined vehicle joint venture, maybe also before the end of this year.

And does that come with an upfront capital investment that's within your guidance already?

That is considered in our guidance. We are absolutely in line with the timeline that we had defined and that went into our planning.

So ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you, Eva, for answering everything. After short break, the Q&A call for media will start in approximately 10 minutes. Now as always, IR remains at your disposal to answer any further questions you might have. We are looking forward to staying in touch with you. Otherwise, have a great day, and stay healthy as always. Thank you, and goodbye.

Good morning, everyone. Welcome to this conference call on our first quarter results of 2025. I would like to welcome our CFO, Eva Scherer. Yesterday evening, we informed the capital markets and the media that Daimler Truck reduces market and sales guidance for North America due to increased macroeconomic uncertainty. This morning, we published all other relevant documents on our website. I assume that most of you already have followed today's presentation by Eva and the analyst call just prior to this media Q&A. Let me just mention a few housekeeping notes. This call is conducted in English. So please be so kind to ask your questions in English as well. So operator will explain the procedure for registering your questions in a moment.

Ladies and gentlemen, we will now begin the Q&A session. I will address the questionnaire by name, but please be so kind to also introduce yourself and state your media outlet at the beginning. Take your time for your questions, and please ask them slowly and clearly. So operator will now explain the procedure for registering your questions.

[Operator Instructions]

At the moment we have no one here. So please be -- be so kind and -- there's the first one. We start with [ Kyra Jäger ] from Nikkei, Frankfurt.

I just have a question on the current status of your fusion with normal toys. Could you give us an update there, please?

Yes, sure. So if I understood you correct, it's about the Hino transaction, right? So yes, so obviously, we have signed a memorandum of understanding with Hino about 2 years ago in 2023. And we still believe very much that this would strategically be a great fit for us. And for our Mitsubishi Fuso business in Asia and for Hino. As you're probably aware, Hino has been having some issues when it comes to engine certification and related emissions and has reached settlements in the U.S., the so-called cost and degree, which still have to be now confirmed by the court. One court approval has been reached. The second one is still outstanding. So we're really waiting for this to be concluded and at the same time, finalizing the due diligence and finalizing the negotiations. But I would say we are moving into the right direction and if everything gets confirmed as we hope it will, we believe there could be some positive news soon.

Next in line is Ilona Wissenbach from Thomson Reuters.

I have questions on the U.S. tariff impact. Do I get it right that the demand weakness is the main tariff effect you have to deal with rather than that you are affected directly by imports or partly when they come from Mexico or Europe. So I would like to shout it out a bit how much you have a direct and an indirect economic-wise effect. And how much do you rely on component and powertrain imports from Europe to the U.S.? And with this regard, if you import also from Germany to the U.S. parts and your remarks on the future of the component production footprint in Germany. I wonder because you said you consider to relocate a part of today's volume to alternative production locations outside of Germany. Does this mean that the production in Gaggenau and I think in Kassel have also parts production will shrink?

Thank you, Ilona, for your question. I'll start with the U.S. tariff impact. So it's both. It's obviously the impact that the tariff discussion has on the macroeconomic environment, and the uncertainty that causes just our customers being in this wait and see mode and not ordering, but then also we do have tariff effects. They have been rather minor in quarter 1, but we have considered them in our planning and guidance for the year. And these are not tariffs. When we then ship the assemble trucks from Mexico into the U.S. for the trucks that we produce in Mexico because we're there, we operate tariff-free under USMCA. But we do have tariffs on imports on steel, aluminum, copper. We have, of course, the China tariff for China materials mainly in our supply chain. And then we have the reciprocal tariffs that have been set to 10% now for 90 days. And this is in our supply chain, but also we do ship some engine parts from Germany to the U.S. This is rather minor, but of course, it's also an impact where the costs are increasing now with the tariffs. And while we really have a very high value add on the powertrain in Detroit, some parts at the moment we get from Europe. And we do have a foundry in South Africa, where we do get engine blocks into the United States. So those are the major effects that we have on the value chain into the U.S. And then your question on Gaggenau and Kassel of course, we also have Mannheim from a powertrain perspective, and we have [ Fürth ] from a truck assembly perspective. What we have agreed as part of the Cost Down Europe agreement with the General Works Council is that, of course, we will closely look at what are the core value-adding activities that we will keep in production in Germany, but we will streamline that more, and we will generally ramp down our production volumes in Germany.

[Operator Instructions]

No, again, there is another one, Christiaan Hetzner from Fortune Magazine.

Two I had. First of could you talk a little bit more about your electrification efforts. You mentioned the Amazon deal for the eActros in Europe. Can you talk a little bit more broadly about what trends you're seeing in that side of the long-haul electric truck market also perhaps in the U.S., given Tesla should be coming next year with their Semi? Secondly, just on the tariff issue, once again, I was a little bit surprised you had said during the analyst call that actually the underlying market remains solid, resilient. And once the uncertainty is over, you seem to suggest that demand would immediately bounce back. Did I understand that correctly?

Maybe I'll start with the second question, and then I go to the first one. So what I outlined during the analyst call is that when we look at the pre-tariff scenario, when we also looked at the year for the first time, we expected a Class 8 truck market in North America, around 300,000 units in the midpoint, so really extremely strong, and then the uncertainty came in once tariffs had been announced. That's where we say that we see an underlying momentum that was positive as we started the year, which we could see in our order levels in quarter 4 and the beginning of quarter 1 until tariffs were announced then in the discussions started. So we do see that our customers have a need to renew their fleets. But of course, at the moment, they're in that wait and see mode that I have explained. And now we have to see how that will continue in the next couple of weeks. And then on your first question on electrification. So we believe we've done our homework. We're very well on track. We have 11 electric trucks and bus models in serious production that Amazon deal, where we sold 202 eActros 600, we believe is a strong testament to the fact that we have and we believe the best long-haul heavy-duty truck in the market in Europe with the eActros 600. We won the Truck of the Year award for it last year at IAA Transportation. Fuel efficiency is extremely strong, and we do see also with our long testing tours that we have done throughout Europe through various climate conditions that we have an extremely attractive product there. When we look into the U.S., we do have an electric Cascadia, so an electric heavy-duty on-highway truck. It doesn't have the same efficiency right now that our eActros 600 has. The reason is that would come within next generation. But to be frank, we also have to see now how much of investment we will allocate to that, given that the market momentum in the U.S. is fairly low right now when it comes to electric trucks, unfortunately. When it comes to Tesla. Well, we'd love to get our hands on a Tesla Semi and really test it. We haven't been able to, cannot be ordered yet. So we keep hearing that it's supposed to be next year. And yes, once it's there, we're interested to have a look.

Okay. So much for the semi. Currently, there's no one in the line. If that is the case, still -- Christian has another question, right?

I appreciate the chance to ask a follow-up question. Just in terms of the eCascadia, did I understand that correctly that a second-generation was initially planned now that's looking a little bit uncertain given the market isn't responding as you hoped it would? And just on the Amazon deal, do you think at least for the European market, is that creating some sort of follow-up demand? Does that unlock other customers thinking of Amazon's ordering these? Why don't we do it as well?

Sure. We do think so, and we do also believe that one large the fleet have the opportunity to test the eActros 600, then orders are going to come in. At the moment, as we're still ramping up production, we are also not able to give out so many test vehicles yet because most customers also want to try it out before they place an order. So we're getting to that over the next couple of months, and we do believe we will see that in the order behavior once our customers have tried the truck and have seen how well it performs. I just want to repeat what I said in my speech also, of course, the infrastructure is the bottleneck. The truck works great, but we need to make sure that the infrastructure is built up to then really create a compelling case for our customers to purchase electric trucks. On the eCascadia, it's too early yet to say that, of course, we have clear plans to continue improving that product. We very much still believe in decarbonized in trucking across the world. It's important for us, it's important for us for society. But of course, we're currently looking at how is regulation changing in various parts of the world, and we see some movements there in the U.S. and there, we just need to see when exactly is the right timing. And when is then the right timing for them a true new model to hit the market. We're always talking about multiyear development cycles here. And that's what we're currently doing.

It looks like we have reached the end of today's conference call. Thank you very much for your participation. The recording of this session will be available on our Daimler Trucks website. If you have any further questions, of course, please do not hesitate to contact the Daimler Trucks Communications team. We will be at your disposal at any time. I wish you all a good day until the next time. Thanks a lot.