Knorr-Bremse AG (KBX) Earnings Call Transcript & Summary

Good afternoon and welcome to Knorr-Bremse's First Capital Market Day. I hope all of you are healthy and fine in these special days. Shaping the future of sustainable transportation. This is the overarching title of our Capital Market Day. The world is changing, not only driven by the pandemic, but continuously by global megatrends. Four of them are shaping Knorr-Bremse's future mostly: sustainability, mobility, urbanization and digitalization. In the next 3.5 hours, you will learn more about those trends, how Knorr-Bremse wants to tackle them, how we want to benefit from them and as well, also you will benefit from them. I believe we have put together a very exciting agenda. We will start with 2 presentations by the CEO and CFO, followed by the first Q&A session. Thereafter, we have the divisional deep dive, followed again by a Q&A session. At the end, Dr. Jan Mrosik, our CEO, will conclude the presentations with final remarks. All presentations are prerecorded to be on the safe side. Nevertheless, the Q&A session will be live. It's a virtual event. Nevertheless, all participants are vaccinated, have recovered from a pandemic disease, and we are all tested. In the presentations, you will find forward-looking statements. So please bear some time to take a closer look to our disclaimer. We have a full agenda, so don't waste time and we let's kick it off with the first presentation of our CEO.

Thank you, Andreas. Welcome, also, from my side to our Knorr-Bremse Capital Market Day 2021. We, as Knorr-Bremse, are shaping the future of sustainable transportation. What I would like you to take away from this Capital Market Day is, first of all, Knorr-Bremse is in excellent shape. We outperform even in challenging times that we have these days. Knorr-Bremse capitalizes on favorable megatrends that shape and drive our markets. Sustainability is the core of Knorr-Bremse's markets, products and our organization. And we will continue our profitable growth path through technology leadership that we acquired in the past and that we are going to expand into the future. We drive operational excellence to create shareholder value. And all in all, we will continue our successful strategy of the past into the future and expand our market leadership. I started as CEO of Knorr-Bremse on the 1st of January. And it has been an intensive 11 months so far, including the unexpected passing away of Heinz Hermann Thiele in February. But it has also been a great journey. I met many people from inside the company and intensively got to know our business in truck and rail. I traveled to various destinations in Germany and abroad, and I met employees, partners, customers and other external shareholders. Coming from Siemens, I'm surprised and excited about the dynamics in this company with technical capabilities, the products and the potential. This is a resilient company from its core, including market leadership, profitability, innovation edge, a strict focus on cost and operational excellence. The business has a strong foundation for the future with opportunities, but also the one or the other headwinds like they are normal in this kind of business, but we have clear strategic priorities how to leverage the opportunities and counteract the headwinds. We have a strong local-for-local approach, allowing close relationships to customers all over the world. And therefore, also a very resilient value chain. We have highly motivated and passionate employees with a strong entrepreneurial spirit and a high-performance culture. And there is a strong and collaborative management team who will capture the opportunities and tackle further headwinds. In the last couple of months, we went through our strategy and also had numerous discussions with the financial and capital market. The result is that we will continue with our successful strategy, there's no significant changes in strategic direction required because this company works, except for maybe the one or the other smaller ademption that does not change the general direction. So we have all the best prerequisites to further develop Knorr-Bremse. Let's have a look at the current status and situation of the company. We are a market leader in both rail and truck. We've had a long track record of market outperformance above industry growth. We are the innovation leader in our business. We are shaping industry trends. And in fact, most of the innovations in this market are coming from Knorr-Bremse. We are in a business with higher safety requirements. Here, quality matters because it's about lives. And therefore, this is a market where people think twice who to use as a supplier and Knorr-Bremse is very well positioned here. We have a resilient business with a strong aftermarket share, a well-balanced portfolio between rail and truck with different cycles and a worldwide reach and very cost-efficient operations. And for this, Knorr-Bremse is a highly profitable company with an average EBIT margin of 16% in the last couple of years pre-COVID, and we focus on attractive rail and truck markets and segments where, specifically, a high level of profitability can be reached. Overall, sustainability is part of our DNA and that's something we, as a company, are embracing very strongly. Knorr-Bremse has maintained and expanded its market-leading positions over time. In rail: we are the #1 in brake systems; the #1 in Entrance Systems; in HVAC systems, as we've been increasing the market share over time in lots of regions and businesses and in our biggest business. In global brakes, in rail, we're still maintaining a market share of 50%, which is way ahead of the competition. In CVS, the situation is quite similar. In brake systems and vehicle dynamics, we're the #1. Energy supply and distribution, again, the market leader, where we increased market share by 8 percentage points since IPO. And in fuel efficiency, we increased by 1%. In brakes, again, we have a very, very solid and leading market position, where we've gained 2%, that's why we -- that's what we are forecasting in 2021 and are going to be even further ahead of the competition in that field. Knorr-Bremse is a company that embraces sustainability because our products and what we do is close to CO2 reductions and sustainable activities. RVS is active in the field of trains, which is the least CO2 emitting means of transport and mode of transport that we can think of. And even today and every day, more than 1 billion people worldwide put their trust in KB systems when they're using trains, when they're using public transport. Same thing is going to happen on the CVS side because in the future, the future of commercial vehicles is going to be electrical. It will start taking up in 2025 and then have the majority of the newly -- of the new heavy-duty commercial trucks. And we, as Knorr-Bremse, are going to enable CO2-neutral transportation even in commercial vehicles. We promote efficiency and total cost of ownership improvements via automated driving and ensure higher safety standards so that people are doing their business in a safe way. CVS is a growth and electric vehicles is a growth opportunity for us. We have only minor parts of our business that are dependent on the internal combustion engine, but huge opportunities in the field of electric vehicles. Innovation is the basis of Knorr-Bremse's technology leadership, and we have 3,800 R&D employees that are working in 5 global R&D centers, 3 of them, by the way, co-located where rail and truck are coming together in order to leverage synergies. And we have 740 , and the number is increasing, software engineers tells you something about the digital nature of the Knorr-Bremse business. We implemented agile R&D methods, have extensive partnerships with companies in the innovation fields like Railnova, RailVision and auto brands, start-ups that contribute their technology to our offerings and our solutions. And for e-mobility, we founded the in-house incubator called eCUBATOR. We're in an agile way, a small team of engineers and of experts is transferring our portfolio into the edge. So all of this results in stunning innovations. On the RVS side, the digital automatic coupler of freight, where efficiency for the freight business and freight transport is going to be leveraged from. There are producible braking distance that increases capacity on railway tracks and the LIFEDrive sliding doors that are redundant and open and close faster so that again, capacity can be increased. On the CVS side, we are going to introduce the electrical power steering that will enable autonomous driving, the electronic parking brake as well as eCompressor with 35% less weight and 30% less space compared to conventional solutions. In long term, we are going to spend 6% to 7% of our turnover in R&D and that's way above the market. Knorr-Bremse has been a very successful company for decades, and we managed through the times to increase our business to grow above the market and to grow the EBIT margin at the same time while investing in our new portfolio. And we continue in the next 5 years and beyond to outperform the markets to master external challenges like the COVID situation today and the supply situation which is quite difficult to handle but we have been mastering -- we've been mastering that well, and we will focus on profitability while continuously investing in our portfolio. Our markets and our business are being driven by megatrends, strong megatrends that transform the economic environment and society. The first 1 is mobility. The number of people on earth is growing, and therefore, the demand of mobility and transporting goods is increasing as well. This is being even accelerated by the trend to urbanization where people are going to move into cities and where traffic needs to be condensed in very small and efficient ways. Sustainability is another topic that gains more and more momentum because we have to reduce CO2 emissions. And at Knorr-Bremse, we are at the heart of these CO2 reductions. And digitalization will help us to make this efficient and create new business models. So these 4 megatrends are true tailwind for us. There's more influencing factors like automation, both rail and truck as well as logistics because people order their goods more on the Internet, and therefore, the demand to move goods around is going to increase continuously. That will result into very positive trends with regard to our markets. In rail, we see a long-term growth supported by these megatrends that I've been talking about as well as governmental initiatives like the EU Green Deal, U.S. stimulus programs and EU Shift2Rail, and we forecast this market to grow in the long-term sustainably by 2% to 3%. Aftermarket is a continuous growth driver also in China, because the traffic decreased the number of riders on the trains, but still traffic and trains on the tracks have been maintained as much as possible. So that's a resilient business. And new technologies to improve the availability and cost of operations of a train are going to come in and kick in and provide new opportunities and additional opportunities to us. The OE China business is, due to political reasons, going to face some headwinds, but there's also opportunities, for example, on the doors, HVAC and export side of things. So there we see that we have headwinds but also opportunities in aftermarket and in the said areas in China that will somehow balance. All in all, we forecast this market to grow by 4% per annum between 2000 and 2025, a little bit of a stronger growth because we rebound after COVID once the pandemic is under control, and then this will get into a sustainable growth path of 2% to 3%. On the CVS side, things are quite similar. Here, the content per vehicle will grow through regulations and new technology that's going to kick in, like ADAS, like e-mobility, like emission reduction technologies. We will shift to higher technology standards in emerging markets like China and India, the air disc brake will be introduced there, AMT and also, again, driver assistance systems. The increase of the installed base of trucks will serve as a basis for growing aftermarket business. We see, however, a limited growth of the truck production rate going forward and intense -- more intense competition. In the short run, supplier shortages are going to present a challenge for the whole truck market, and that's still going to be as for a while. In summary, TPR is going to stay more or less flat. The market will grow by 3% per annum because of the content per vehicle trend and will have an extraordinary effect between 2020 and 2021 because truck production rate shifts from China into Europe and North America, and that creates an extra momentum that causes the number between 2020 and 2025 to increase to 6%. But the normalized rate then thereafter will be 3% per annum. With this market, the megatrends and the market development in mind, we have very clear strategic priorities as Knorr-Bremse. We're going to systematically develop our base portfolio and use all opportunities there. We'll focus in addition on attractive segments for future outperformance of the market in both rail and truck. We'll drive as the third pillar, innovation and digitalization. The fourth pillar is a clear M&A strategy. The fifth one, operational excellence; number six, ESG and sustainability; which will then all yield into number seven, strong financial performance. Let's start with the first one, and let's start with the base business. With safety and mission-critical vehicle system, we established a very strong foundation of our business with a leading market position, above market growth rates and a resilient profitability and this space is the brakes, the doors, HVAC systems and steering. And this business has been introduced, has been growing quite strongly in the past. In the future, of course, the adoption rate is going to saturate and then we'll have normal market growth in these areas. If you want to grow beyond and outperform the markets, we need in addition to the optimization of our base business move into new growth markets. And these growth markets are all around digital services in both rail and truck as well as automation in both fields and energy and eco-efficiency, and these are the growth markets of the future that we are going to invest in, in order to outperform. Let me give you 2 examples as far as the base business is concerned and the development and the opportunities that we still have in this portfolio. Let me start with the KB valves, which is the control valves for the pneumatic brake system, started as a mechanical product and was done and evolved into an electronically controlled pneumatic brake with increased functionality and diagnostics on mechanical systems with electronics on top. And now in 2023, we are going to introduce our smart brake control, also called CubeControl, which is a brake control with digital applications. For example, break disc temperature calculation, external connectivity, condition monitoring and also prepared for a reproducible brake distance feature that is one of the growth areas that we are currently investing in. On the truck side, we have the air disc brake that started also as a mechanical product with 40 million installed systems globally. And that was then enhanced by an electronic system and a vehicle dynamics model into an ABS and EBS system. And now we are about to introduce our Global Scalable Brake Control and redundant Global Scalable Brake Control that will be the future-ready platform to support the upcoming ADAS and HAD, highly automated driving features, of the future. Looking into the new business that we'll introduce as a next step beyond the base business. It's about digital service here, automation and energy and eco-efficiency, as I said before. In digital services, it's all about availability of trains and about life cycle management. And the availability can be improved through condition-based and predictive maintenance. And there are some examples in the field already like an European train operator that's using HVAC monitoring and energy saving in order to optimize the availability. And here, we're working together as a company that we invested in with Railnova, which was a start-up, was actually active in the field of condition-based and predictive maintenance. In the aftermarket, it's all about reducing cost for the operators. And here, our rail services unit provides a rail services portfolio to optimize the life cycle cost of a train of -- and therefore, provides benefit to the operators. It's the optimization for overall cycles and spare parts management. Automation aims for increasing transport capacity on a given infrastructure that is available, and our reproducible brake distance allow for increased train density because the trains can be stacked closer together, can drive closer together, and therefore, the rail tracks can be used in a better and more efficient way. And our solutions for environmental sensing with RailVision allows for operation of shunting yards in a much more optimized way. When it comes to energy and eco-efficiency, eco-friendliness and CO2 savings is the topic. Our drive advisory system allow train operators to operate these trains in a more efficient way because they give guidance when to accelerate and when to brake, and that does a great deal in terms of energy consumption reduction and smart metering makes that transparent. On the CVS side, there are similar effects. Digital services around connectivity and digital truck are being introduced. And an example would be driver safety management where with our Safety Direct solution, we are collecting safety data and video for coaching and evaluation of drivers' performance, predominantly in North America. Automated driving is the trend in the field of the commercial vehicle industry. Advanced driver assistance systems are being provided by Knorr-Bremse, for example, lane-keeping, emergency brake, adaptive cruise control. And that, together with Continental, who are providing us with the sensors, and we add the software and, of course, the whole logic around this, including our core portfolio. In highly automated driving actuation and motion control, we're going to focus on combining steering, braking and motion control, and that's a growth market for us. e-mobility and emission reduction are the other megatrends in that industry. And automated manual transmission, recirculating exhaust technology are major contributors to emission reduction and our growth business. In the internal combustion business, that engine business that we're going to see for a while and that will still provide opportunities in that field. But sooner or later, as I showed, electrification will be the future of the commercial vehicle industry, and we are strongly positioned as Knorr-Bremse to innovate products for the e-mobility edge in both battery electric vehicles and fuel cell electric vehicles with our eCUBATOR that I talked about. And again, only minor parts of our portfolio are affected by electrification. This is a big opportunity for us. All in all, Knorr-Bremse with this background and with this strategy, will outperform the markets quite strong. We foresee the RVS market to grow by 4% per annum in the next couple of years until 2025, and we aim for an outperformance of 1 to 2 percentage points. And this on the back of developing the share of our current products and our base business wherever we can, and we drive this very, very strongly, will drive growth in the aftermarket business and innovate, as I said before. In the field of CVS, we see the market to grow by 3% per annum and will outperform by 1%, with the specific effect that I talked about between 2020 and 2021, the numbers will be 5% to 6% and 1 to 2 percentage points, respectively. Here, we also aim to gain market share with a particular focus on our growth markets like North America and Asia. We drive the content per vehicle growth. And this also on the basis of our new portfolio that we are going to drive in order to foster our technology leadership. Digitalization is the third pillar of our strategy. We will introduce digital products and services, that's the first leg from mechatronics to smart and connected products, and I showed a couple of examples there already, will add new capabilities to Knorr-Bremse as a company and then on this build digital business models. So we start with product enhancements and digital technology like condition monitoring in the beginning, and then move on to more complex business models like predictive maintenance. The second leg is internal digitalization. And there, we're going to standardize the end-to-end processes of our in-house operations and digitalize them subsequently in order to leverage efficiencies. We have a clear M&A strategy defined, and we understand that in the past, some questions came up about our M&A strategy, so I would like to clarify what we're aiming for. Our priorities are to pursue attractive and selective segments in rail and truck for future outperformance of the markets. We're going to focus on bolt-on acquisitions in both rail and truck, and there's no focus on a third pillar evaluation and action right now. We'll strengthen our core business with new capabilities that we need to add for the challenges and the opportunities of the future. And whenever it's required and the business doesn't fit with our strategic and financial criteria, we also actively invest and do portfolio management, like our power tech divestment that we did in the past. We have clear strategic principles. As far as markets and segments is concerned, we go into highly attractive growth segments with strong entry barriers like aftermarket, like digitalization, like automation, and fields with technological differentiation. We go for robust business models, leading market positions and our leading technology, a sustainable competitive advantage and resilient business models. And last but not least, these businesses that we are looking at needs to have clear synergies with our existing Knorr-Bremse business, there needs to be a clear best owner principle, synergies need to be there by numbers, and it needs to be easy to integrate with a high cultural fit. And our latest investments in 2021 are really a proof of this concept and of the strategy. EVA train is the world leader in sanitary systems, a business that fits very well to us. Autobrains, a self-learning AI start-up company from Israel where we took a minority share. And DSP Components, a Danish-based rail service company, which is still subject to merger control at this point in time. As a fifth pillar, we are focusing on operational excellence. Operational excellence is the clear commitment of the Knorr-Bremse management. That consists of high-performance culture, entrepreneurial mindset, HR excellence, a lean group setup that we've had and that will continue in the past, and cost and efficiency focus. We've built global platforms, and I've been talking about GSPC and group control already, process digitalization and standardization. Footprint optimization, we are currently undertaking an optimization from the U.S. into Mexico in our rail business and a continued local-for-local setup and value chain along with cost improvements that we're going to continuously drive. Knorr-Bremse has a strong commitment to ESG and sustainability. And as I said before, we are shaping the future of sustainable transportation and with our products and our business, we are naturally in the midst of the sustainable development and CO2 reductions. But on top of this, we have clear plans and a clear strategy in terms of environmental where we have a 2030 climate strategy outlined, we will be carbon-neutral by end of 2021 and half our CO2 emissions until 2030. In the social field, we're embarking on social projects and our employees worldwide are volunteering, together with Knorr-Bremse Global Care that is active in education and hygiene topics. And with regard to governance, ESG targets are part of our management incentive and underlying the full commitment of the Knorr-Bremse management into ESG topics. All in all, we have clear ambitions for 2021. On the basis of our favorable megatrends in truck and rail that are fully intact, we will focus on a 2-pillar strategy in rail and truck and capture market share as I outlined through innovation. With the result of profitable growth and a strong ROCE, and our ambition for 2025 are -- and the revenue band of EUR 8.1 billion to EUR 8.6 billion and an EBIT margin, return on sales between 14% and 16%. And with that, I would like to hand over to Frank, who is going to guide you now through the details of the numbers.

Thank you very much, Jan, and a big welcome from my side as well to our very first Capital Market Day at Knorr-Bremse. Coming to my part, the financial strategy of Knorr-Bremse AG. And for me, it's very important that you basically get 3 core messages out of my presentation. First of all, where does Knorr-Bremse stand today? And what are the ingredients of its business model going forward? Second, it's very important that you understand what you can expect from Knorr-Bremse as we move along in regards to the business drivers and to the financial performance in the future. And third, basically, how to get there? What are our focus topics and what are the measures that Knorr-Bremse is going to implement in order to get along in the future. Starting basically with what we call are the ingredients or the DNA of our business model at Knorr-Bremse. This has been that way in the past, it is today, and it will be in the future. We are in perfect markets basically placed with our business. We are having supportive growth markets. We are within that markets in very attractive product segments with our innovative products. We are a technology leader in the foremost of all our product segments that results in the end in strong market share positions, and we are market leader in basically all of those dimensions. We have enough pricing power and with a strong execution and basically cost focus that the whole Knorr-Bremse team has, we are going to harvest in future on all those things in order to make our profitable growth also valid in the future. In the end, this all has to result in great figures, in great financials and what you can see as of today in regards to financial excellence of Knorr-Bremse, we are there in certain dimensions already. In regards to the P&L, we have to say on the top line side, we have been outperforming the market for quite some time, and we are currently doing so. We have a high resilience due to our high aftermarket share with 37%. We are profitable in every dimension when it comes to sales, KPIs, when it comes to the return on invested capital, or how we call it ROCE, we are excellent. And even below the line, we are focusing on financial results and tax as well so our earnings per share are also outstanding. Free cash flow, I think we have proven in the years of the COVID crisis that we can really turn EBIT into cash flow, and we have achieved cash conversion rate of above 100% already. And looking at our balance sheet, I think that is -- can be said as rock solid. We have a high liquidity, gives us a lot of flexibility going forward. And in regards to our net leverage or even the gross leverage, I think we're in excellent position as well. And just recently, also Moody's graded us up to A2 stable again, and I think that is a great result. So basically, looking at all those dimensions, this is what KB stands for, high profitable business and a very flexible balance sheet with a lot of headroom for us moving into the future. Now coming to the CFO agenda. Those are basically the 5 points that are of utmost importance for me. First of all, continue profitable growth. Profitable growth, and what does this mean for Knorr-Bremse is to increase our top line over the years to come and as well increase our profitability. Second, further enhanced cash generation. That basically means driving utmost of cash out of the EBIT performance that we are achieving. Cash is king. You know that, and we are set up to achieve that. Third, financial policy of resilience and robustness. Actually, this is not only about aftermarket share increases. You have heard about the great numbers that we are having, but it's also about focusing on excellence, focusing on cost going for continuous cost improvements and they are supporting the bottom line in the future. Efficient capital allocation, not only when it comes to our internal processes and products, but also when it comes to inorganic growth and basically, when it comes to the shareholder relationship with regards to payout ratios. This is what I'm going to show you in a second. And fifth, last but not least, fostering ESG and benefiting also from that global profitability, global sustainability push that's going on currently. We are a company that is having a sustainability department since more than 10 years, and this is something that we are authentic at, and we are intrinsically striving for ESG improvement along the way. Let me start with profitable growth and what does this mean in the end for our businesses. We have given ourselves in the 2 business fields clear targets along the way, and now it's about executing and delivering up on those. Let me start with the rail division. Rail division is currently still in the midst of the COVID crisis. As you know, we talked about that for quite some time. Nevertheless, looking at the markets we are in, we are in a very supportive growth environment. Basically, all the markets along should be growing over the years. And also our aftermarket share, due to the installed base and the business expansions that we are driving, should support our growth going forward. The only market where we are fighting an uphill battle and you know that is basically China where the market is on a rather flattish side and also on the market share side, we are let's say, facing challenges ahead. All the other ingredients that it takes in order to show growth going forward are intact. And we are currently confirming with a CAGR of 5% to 6% on a yearly basis towards 2025, a revenue of EUR 4.2 billion to EUR 4.5 billion in '25. When it comes to the profitability, needless to say, also here, not only tailwinds that we are having along the way, there are also some headwinds that are coming up. If I may start with those first, actually, we do have due to the stronger growth that we are experiencing in other parts of this world a slight downside due to the fact that just the revenue share of China is getting smaller, and the business in China is rather accretive to our margins. So this is one thing. On the second hand, as you know, once you are in markets or in products that have a very strong market share, it's tougher to basically gain market shares going forward. Based on that, so to say, over the years, we do see a slight product mix burden that we will have, and we will be growing faster in the non-brakes business, especially in APAC region that gives us a certain headwind going into the future. But we have a strong operating leverage going forward with a strong financial discipline of Knorr-Bremse, strong growth on the aftermarket side and margins out of that very accretive business, and of course, countermeasures that I will explain in a second a little bit more further, should bring us up to 18 to 19.5 percentage points of EBIT margin along the way for rail. Coming to the truck division. Truck division has shown quite a significant growth over the past, has been strongly hit in the year 2020 by COVID but should improve the top line with a CAGR of 7% to 8% over the years to come, EUR 3.9 billion to EUR 4.2 billion revenues should be the result in 2025. Basically, all the markets should be supporting this market share growth in basically all the regions of this world and continuous content per vehicle that we are targeting of around 4% on a kind of normalized basis in the years to come. Needless to say, also here, like we expressed many times, also that we think the TPR in China should be rather going down over the years to come. So that is basically the only major market-wise headwind that we are facing over the years to come when it comes to the OE business. In terms of profitability, you see there is a tremendous increase that we plan for the years to come. And this is basically coming out of the operating leverage that we are going to drive out of the top line improvements, accretive margins in the aftermarket, and we are basically countersteering inflation increases and R&D increases according to our product portfolio with the respective countermeasures in order to ensure a significant improvement on the profitability side, up to 12% to 13.5% of EBIT margin in 2025. Just to explain to you somehow about our profitable growth plan and what are the key levers and key measures we are going to take in order to get our EBIT to the next level. But there are also other things when we talk about basically our cash flow improvement, there are certain other levers. One, fundamental kind of prerequisite is basically to bring free cash flow as the key KPI for us here into the minds of everybody at Knorr-Bremse, and that's why we have chosen to implement free cash flow as one of the key KPIs of this company into the management compensation scheme as of 1 January of 2022. Second, I think CapEx. Capital expenditures is an important thing basically to go for in the future with a clear prioritization and optimization of all our projects that are at hand. Working capital is the third big pillar so to say, and we are striving with clear targets for all the regions and with clear targets for scope of days in regards to how long the respective capital sits on our balance sheet. And in addition to that, needless to say, there are also other elements turning up into the free cash flow. It's part of the financial result and tax we are striving for improvements there as well. That all together should bring us to cash conversion rates of 80% to 90% towards 2025. And basically across the cycle, and we always said that we can't really imagine a time or a year where Knorr-Bremse should perform below 70% of cash conversion rate. So somehow as a kind of floor to it all 70% would be the minimum that you can expect from Knorr-Bremse going forward. Not everything that we are facing in the future development and environment is tailwinds. We're also having some headwinds. I tackled those already briefly. We do think that the supply chain constraints somehow would linger on for quite some time when it exactly will end. We are not pretty sure but definitely throughout the year 2022 and inflation is coming up again. So we do see increasing material costs. We see increasing energy costs and we see higher labor cost. But Knorr-Bremse is proactively responding to that. We have been defining already continuous improvement programs and cost improvement programs with roughly a basket of EUR 100 million per year that we intend to save in order to compensate for those headwinds that I've basically just outlined. We are focusing on variable cost, material cost savings, plant productivity along the way, fixed cost improvements with structural measures and closed link of our white collar and fixed cost increases to the revenue growth and limit that to roughly 25% to 40% along the way. And of course, we are also prioritizing and optimizing in regards to our capital expenditures and R&D and the sheer size of the projects coming up over the years in order to drive our products to innovation and technology leadership going forward. Having that said, mid- and long-term growth drivers for us are still intact and in combination with our clear aspiration to drive that innovation and technology leadership. We have to invest, and we have to invest in our footprint in order to ensure that we basically take all the opportunities out of the market growth that is out there, but also to invest in our IT, to invest in digitalization, and that should lead to a roughly 5 to 6 percentage points of CapEx in regards to revenues. And also our product portfolio and R&D will grow in the future, especially also on the CVS side, and that should also lead us to a higher ratio of R&D in regards to sales. We do think that this range would be in the amount of 6% to 7% of revenues as well. And nevertheless, I think capital employed is then the result where basically all comes into play. And we are going to have capital employed under good control. And this is, in the end, reflecting in the ROCE, return on our capital employed of at least 30%. That's what we are going to pursue in the future. And with all those investments, needless to say, we are striving for technology leadership. This will bring us, in the end, higher market shares. And with our pricing power in the end, will bring us better margins and this better margins in combination with the sheer top line growth will bring us profitable growth. Many times, a discussion point between you and me over the past month was the capital allocation and how do we see our priorities here in that field. And I think that chart is as clear as the answer to that. Our very first priority lies on organic growth. We truly believe in the excellence of our products, and that's why we want to spend 6% to 7% in R&D, 5% to 6% in CapEx, and we will spend 40% to 50% of our net income on dividends. This is clear priority #1, drive organic growth with those kind of principles. Second is then bolt-on M&A. So basically foster our inorganic growth in the future. As you can see already here, kind of we are on a rather opportunistic approach in regards to M&A. We're not kind of in a desperate or too aggressive mode when it comes to M&A, it's second priority for us. And third, only if we have basically no ideas left on internal organic growth and M&A, we think about basically share buybacks, which is low priority for us. In regards to M&A, of course, Jan outlined some of the strategic action fields that we want to focus on when it comes to expanding the business in rail and in truck in adjacent fields with bolt-on acquisitions. All those acquisitions that we are striving for have to be value accretive for Knorr-Bremse. They have to have a strong cash generation, high cash conversion rate. They have to be highly profitable in regards to return on sales and in regards to ROCE. They have to consist of a high aftermarket revenue base and must pursue an asset-light business model. That's what we are looking for. With our excellent post-merger integration processes, we are supporting when the integration of those acquisitions. And we are also not shying away to say that clearly, from any kind of divestments that would be necessary, in case. Now coming to the fifth point of the finance agenda, and this is ESG. And I said already that Knorr-Bremse has the sustainability department since more than 10 years, and we can definitely say that we are authentic in that regard and that we are intrinsically striving for optimizations in ESG along the way. That's why we also put ESG into the management compensation scheme with a rate of 20%. So it's quite a significant amount of the compensation of the management in future that will depend on the delivery on our ESG commitment into the future. Basically, the top 5 rating agencies rate us among the top 25 percentile of all the companies out there, and our clear target for the future is to at least stay in that top 25 percentile. As you can see here, we have given ourselves certain focus areas, certain pillars within our ESG strategy, starting with climate strategy, our carbon neutrality target that we will already be achieving by the end of this year. We will triple on our own photovoltaic capacity until 2030. And we will also extend to Scope 3, to name a few, around our climate strategy. But we will also increase the amount of business with our remanufactured products or recycled products. And there, we highly contribute to the circular economy targets. But other things as well like diversity or safety at work and compliance improvements earlier reporting human rights focus over the years to come. These are some of the elements that we are striving for moving into the future. For the sake of completion, I added basically the second chart that I have shown at the quarter 3 presentation as well. This gives you an indication of where do we sit with our guidance of 2021 and what are our first indications for 2022. It's totally confirmed what I said just some 2 weeks ago. I added some more details in regards to the division to give you more feeling for the divisional aspects of things currently. We do think that for 2021, both divisions should be on the same level when it comes to top line. RVS should be then on a profitability level of 17.5% to 18%, and CVS, 10.5% to 11% when it comes to EBIT margin in this year. For 2022, the concrete guidance we'll be giving to you at the capital -- at the annual press conference that we are going to have by the end of February 2022. So now coming to potentially the most important slide for all of you. So what to expect from Knorr-Bremse as we move along and basically taking into account what I have said. All signals are set for continuous profitable growth of this business. And as you can see here, we do intend for the whole group to basically grow our top line by 5.5 to 6.5 percentage points, and this should lead Knorr-Bremse to revenue levels of EUR 8.1 billion to EUR 8.6 billion over the next 4 years. And as you can also see on that graph, basically, this is not back-end driven, as we are moving along rather simultaneously over the years somehow. On the profitability side, we do think that Knorr-Bremse can achieve 14% to 16% of EBIT margin. And in terms of EBITDA margin, this would lead to 19% to 21%. And if you somehow take the midpoint of these ranges as kind of the realistic one, then you have to say that achieving 20% of EBITDA margin along the way is, so to say, similar to what we have said at the IPO, taking into consideration that there has been a certain time delay due to the COVID situation that we all have been in for the last 2 years. Some additional key facts, just summarizing what I said before in regards to the divisions: 5% to 6% growth on the RVS side; 7% to 8% growth on the CVS side; and profitabilities of 18% to 19.5% EBIT margin for RVS; 12% to 13.5% for CVS. And coming back to the group level, ROCE of above 30%. So our clear target into the future and the cash conversion rate over the cycle from roughly 80% to 90%. This is our financial excellence program moving into the future. And with all that said, I'm happy to discuss any further questions that you might have. And thank you so much.

Hello, and welcome also from my side to our Capital Markets Day. I will host you through the Q&A sessions of today, live from our Knorr-Bremse forum. The first Q&A session with CEO, Dr. Jan Mrosik; CFO, Frank Weber; and member of the Executive Board, globally responsible for Legal and Integrity, Dr. Claudia Mayfeld. We have listened to 2 presentations already, all under the big topic, green mobility, green transportation. We all know about the importance for sustainable solutions. And you will hear more about the important role of Knorr-Bremse's for sustainable solutions. Before we start with the first Q&A session, I have some practical information for you. [Operator Instructions] As a reminder, all people in this Knorr-Bremse forum are either vaccinated, recovered and/or tested against COVID and follow local requirements. In order to give you some time to dial in, I have prepared a first question for Jan. You outlined your strategy regarding digitalization before. How do you want to drive digitalization within Knorr-Bremse?

Yes, Sophia, thank you very much for this very, very important question. Our digitalization strategy for Knorr-Bremse is actually based on 2 pillars. The first one is the digitalization of our products and the building of a digital business on top of this. And how is this going to work? Our products have evolved, and I showed that during my presentation using 2 examples, from a pure mechanical background into electromechanical and then into a platform-based kind of approach that where the products are digital-ready, so they can emit data, they can connect to the world. And that's the basis for digital business models as well. With these products that have been enhanced and enabled for digitalization, we can run the first business models like condition monitoring, for example. And then we'll add additional competencies to Knorr-Bremse, for example, in the field of AI, where we already have quite a few experts in order to then move ahead into condition-based monitoring and new business models that are around digitalization in both truck and rail. As far as the second leg is concerned, it's all about digitalizing our internal processes from an end-to-end perspective. And there, first of all, we need to evaluate, and that's what we've done. What kind of processes need to be standardized. We developed kind of a north star that is a blueprint how digitalization within Knorr-Bremse should look like. And now we, step-by-step, implement this standardization and digitalization. And with these 2 means, we are going to embrace digitally -- digitalization in its entirety and going to take all the benefits that we can reap out of digitalization for Knorr-Bremse going forward.

Okay. We now start with the first question, which comes from Sven Weier, UBS.

My first question is for Jan. And that is basically following up, I think, shortly before you joined, but shortly after you joined, I think we talked about the things that could still improve at KB. And I think -- and you just talked about one aspect, digitization. I was more curious about the aspect of automation inside the factories of the company and also the integration on the previous M&A deals that you have done. I think those are 2 areas you said there would be also upside. Maybe you can shed some more color on these. That's the first one.

Sven, thank you very much. Talking about automation. It's also part of the digital journey that Knorr-Bremse is undertaking. And we are active in a lot of areas in our factories to employ automation cases. Automation is something that is not something that needs to be done because we would like to do it because the investments that go with it have to be carefully selected. And therefore, we are looking at individual use cases, and we systematically build up automation wherever it makes business sense and wherever it gives us a return of invest. For example, in Berlin, in our factory, in our RVS factory and also in CVS, we are already starting with automation activities where robot is going to replace the manual picking of certain parts. So we do it in a very sensible way. We do it looking at the investment in a very, very focused way. The integration of activities here, we are, with our undertaking of standardizing processes and putting digitalization in place, the north star that I've been talking about, going to systematically also through the acquisitions of the past in order to integrate them in our overall Knorr-Bremse approach. And as I said before, this integration is happening in a very systematic day -- way. Integration has been happening in the past already, but we add now the digitalization and process aspect to it.

Okay. And the second question is for Markus regarding the CapEx outlook because when I take the ranges you give for revenues and the CapEx ratio at the higher end, we could land at a CapEx at above EUR 500 million, which would be more than a 50% increase where you were in the past. On the other hand, you said you would be very disciplined about capital spending. So can you elaborate a little bit more on the focus area? Jan has already mentioned selected automation. But on the other hand, it could be quite a bit of an increase. So yes, I was just wondering there the highlights, and wouldn't that also then have a certain benefit for your earnings bridge?

Frank?

Yes, thanks, Jan. Thanks, Sven. And, yes, you are right, we have indicated some 5% to 6%, that basically means over the cycle. And there could be years depending also on the respective revenue in those years where it's rather on the 5-ish side or other years where it's on the 6-ish side, just purely mathematically, you are right. We do have seen in the past also some bigger capital expenditures on the production footprint side in order to cope with the growth that's basically out there. We intend to do that as well in the future. But we did have some real estate investments in the past that will not occur to that extreme anymore in the future. Basically, that's behind us already. So most of the CapEx that we are foreseen in the future is driven by the maintenance issues. It's driven by supplier tooling. It's driven by information technology. It's also driven by digitalization aspects. All these things will come into play. And basically, in order to reach the 6-ish kind of figure, it has to be a culmination of basically all those things. So I would rather say, it's in that range across the board when we come to the next years until '25.

The next question comes from Akash Gupta, JPMorgan.

I have 2 questions as well. My first one is on your software strategy. So when we think of Knorr-Bremse, it comes across as a product company, yet you have more than 700 software engineers at the company. Can you tell us more about what kind of projects your software workforce are working on? And maybe if you can provide some split of new businesses versus legacy businesses and also your strategies to monetize the software offering that you're developing in the company.

Yes, Akash, thank you very much. Indeed, we have 740 software people actually working for Knorr-Bremse, and they're exactly in the field that I've been describing during my presentation. So remember that we, as Knorr-Bremse, are combining a very strong know-how knowledge and basis in the space of mechanical products with electronics and then software that runs on electronics. And we, in a more and more accelerating way, working on adding models -- the dynamic models of vehicles to our products and this happens actually on the basis of software-based modeling. So that's something that has been enhancing our products in the past already and is part of new developments. And on top of that, will now go the next step in terms of defining digital business models where data is being taken from our products, where these data are getting analyzed obviously through software and artificial intelligence in order to get conclusions drawn out of this. Either in the monitoring space, or in the predictive maintenance where one predicts from the data when, for example, a door is going to fail, when a brake needs to be maintained, how a driver should be driving either a train or a truck in both fields. So we have examples here. And this is, obviously, all products that are being implemented via software. How is the monetization going to work? It depends on the product. It's either part of a system or it can be part of a continuous contract in the case of predictive maintenance or condition monitoring just depends on the use case where the software is being applied.

And my second question is on leverage. So at the time of IPO, you provided leverage below 1x EBITDA. I'm just wondering, there was no mention of this target in today's presentation. So is this target still on the table? Or what's -- any thought on that?

Frank?

Akash, thanks. You're right, it was not mentioned in the presentation. We do still hold true to this statement when it comes to the net debt-to-EBITDA ratio. We do think that we have enough leverage and headroom and flexibility as well going into the future with below 1x. That's absolutely right. Akash, holds true.

The next question is from Gael de-Bray from Deutsche Bank.

The first question is for -- well, is in relation to CVS. You mentioned Slide 14, the changing Tier 1 supplier landscape. So could you talk a bit about the competitive dynamics for CVS? And, specifically, could you indicate the kind of price pressure assumption that is embedded in the growth guidance by 2025? This is question number one. Question number 2 is about RVS. If I take the revenue target of between EUR 4.2 billion and EUR 4.5 billion, it implies revenue growth of between 6% and 7% per annum over the next 4 years. And with China expected to be flat, it means you need to deliver growth of between 7% and 9% in Europe and North America. So I'm just wondering what's driving such confidence in RVS market growth dynamics.

Right. So CVS, the competitive landscape, there is, obviously, a situation that happened in the market a little while ago where 2 companies got together. And there, obviously, a competitive landscape is getting more dynamic. There is also competitors in China that's coming up at low cost and competing with us. On the other side, we believe very strongly in our strategy. First of all, in the field of the current business where we're experiencing market share gains throughout the board, and I presented that during my presentation. So we are very, very successful even in these difficult and increasing competitive landscape situations. And we'll further intend to grow. That shows you the outperformance that we are aiming for in the market. In RVS, there is the situation that, indeed, the market is going to grow by roughly 4% past-COVID. So there's going to be an extra growth that after the pandemic will be over, we expect in the markets to happen, before then a normalized growth of 2% to 3% is going to apply again. And we intend to outperform this by roughly 2 percentage points. And that's, obviously, something that we would like to do, and we are aiming to do while increasing our market share in the existing portfolio, that's predominantly in the areas where our market share is less today, that stores, it's HVAC. But over and above that, in those additional fields of digitalization, digital services, automation and sustainability-related products as well. So we are very comfortable that we are going to -- this is ambitious targets on the one hand, but on the other side, we are confident that we are going to achieve this.

Can I just follow up on this point about market share gains at RVS. So you said about 2 points per annum. I mean in brake systems, which is the global market share of about 50% you already have and whereas the competitive dynamic in China being pretty tough still, I guess, it does imply, right, that most of the market share gains will be in the rest of the portfolio indeed. But then that would imply for doors, edge back systems and the likes, market share gains probably around 3 to 5 points? Or am I wrong in this analysis?

So we said in my presentation, if you just refer to my presentation here that it's 1 to 2 percentage points above the market. The market is going to grow 4%. So that gives you the range that we see and forecast and we are aiming for. And it is absolutely right. The increase of market share in areas where the market share is already quite high is certainly difficult to make and to implement. So therefore, growth activities will mainly go into the 2 fields that I said before. First of all, HVAC and the doors where our market share is less compared to today, for example, TCMS and others. There, we also have market shares that can still grow. And then we go into these fields that I talked about that will be growth fields for us and where we can increase the share in the market from our side quite substantially. So these are the additional growth areas that we're going to tackle.

The next question comes from Vivek Midha from Citi.

So I just had one question on the midterm outlook and the margin targets. So you highlighted in the waterfall chart, continued pressure from supply chains and you highlighted that there's a limited participate on when that reverts. So my question is what exactly are the scenarios embedded in the midterm margin targets? Are we -- should we think that at the lower end we have very limited improvement by 2025. How should we think about the different sensitivities within the range?

Frank?

Yes, Vivek, thank you very much. I mean, we do think, first of all, having to say this that our guidance is a realistic one. We don't think it's a kind of send back one or too aggressive one. We do see plenty of effects coming up for us into the future. I did elaborate, you're fully right, in regards to the supply chain constraints. I do think or we all do think that they will linger on for quite some time, at least throughout the whole year 2022. That is what we currently see with all those effects on the cost side as well. Naturally spoken some of the extra costs that we have been facing right now, will somehow go away just due to the nature of the thing, for example, looking at the semiconductors that we are purchasing on the broker side, this will somehow naturally come to an end. But I think with all those market support that we will be having, except for maybe China, there on the rail side and also the Chinese TPR on the truck side, we are having quite a lot of supportive effects that we will be facing. Needless to say, we have our countermeasures in place. Also, we are proactively countersteering to whatever cost increases come ahead out of inflation as the typical of a cyclical company. So I do strongly believe that what we have given you is a realistic kind of guidance in regards to the top line as well as the bottom line.

[Operator Instructions] The next question comes from William Mackie, Kepler Cheuvreux.

My first question relates to the strategy to expand your technological capabilities and market positions, utilizing an inorganic pathway or a partnership route. Could you please provide more detail on the types of partnerships and the methods of expanding your partnerships to benefit the overall technical or market positions of the group, and also the processes that you've adopted to build the M&A pipeline and where you see the greatest opportunity around that pipeline.

All right. Thank you very much, William, for this question. So first of all, I would like to also emphasize that a lot of these activities towards new businesses and new business models will also be organic -- of organic nature. So it's not that everything is going to be M&A. But what we are going to do is on the basis of what we're organically doing. We are also looking into options and opportunities to further enhance our capabilities, and that can be, for example, with bolt-on acquisitions. Partnerships. The partnerships that we are currently embarking on and that have been in existence for quite a while, for example, in the field of automated driving and driver assistance systems, where we are working together with Continental, we provide the steering, braking and in the future, in highly automated driving also the truck motion control and all the kind of stability programs and vehicle dynamics competence as an overall package into either the ADAS systems and into a highly automated driving. In ADAS, we are a full system supplier, for example, for emergency braking, for lane keeping, and for other kind of driving assistance systems, where Continental gives us the sensors, and we provide the software and all the functionalities in the actuation space that I've been talking about. In the future, for highly automated driving, it's going to be different. We're absolutely convinced that consortia will be formed in order to provide overall highly automated driving solutions, highly automated driving consists of the perception layer, the decision layer and the actuation layer. Knorr-Bremse will focus on the actuation layer, decision layer and the truck motion control right in between the decision layer will come from specific and specialized companies that are active in the artificial intelligence field. The high-performance computing platform will come in this case -- in our case, from Continental as a partner and also the perception layer will come from Continental as a partner. And therefore, we are going to be able to provide either the actuation layer as such as Knorr-Bremse overall in its entirety or with partners, either the perception and the actuation or even the decision layer in between. So that's the kind of partnership approach that we are taking in CVS. And in RVS, there's companies that we invested in like RailVision, Railnova that we took a share and that are contributing their technologies into our digital solutions. So there is this own development and also than kind of a partnership approach because in these very complex environments, one needs to work together in order to provide overall solutions.

Jan, if you allow. William, you -- I think you asked in addition to our process in regards to how we come up with respective M&A targets. I mean our headquarter is significantly below 150 people. We have a small strategy department. So basically coming to the point, our M&A processes are bottom-up driven. Basically, the pipeline consists of all the proposals that are coming up from a bottom-up perspective to group level, it's nothing basically that's coming from a top-down perspective. So I think that's maybe also important to understand. So basically there -- where the people are located in the markets where they know their customers, where they know the business, they basically bring up the respective potential targets. I also understood from Andreas that Gael, we missed out on one remark that you had in regards to the CVS price -- pricing pressure, so to say, year-over-year and how that is baked in the guidance. Needless to say, it's, of course, to the best of our knowledge baked in. It's part of the industry, part of the supply business that you have this kind of annual OEMs trying to save some money on the procurement side. We are working on that with countermeasures each and every year for decades, so this is nothing new for this company. And to the best of our knowledge, what's going on in the industry, what Jan just outlined, we are, of course, baking that in on the revenue side as well as on the respective profitability impact side.

Can I ask my second question, please, which would build on -- well, some of the questions Gael asked actually. But could we just go back to China, and can you perhaps step through specifically your working assumptions around China's outlook within RVS with respect to the progression on the OE side and also the evolution of the lower-weighted pickup in the aftermarket side of the business over the forecast or the strategic period to '25?

Yes. As far as the China market is concerned, we believe that in the medium term until 2025, the markets on the RVS OE side will decline very slowly. So there's not -- it's almost kind of a flat lining with a soft tendency. That's how I would call it. And this is due to the fact that the Chinese government has decided to put in kind of a consolidation step right now. There has been exorbitant build out on both the high speed as well as the metro side in the last couple of years, and this is going to kind of normalize now to consolidate and optimize the use of assets in the Chinese rail and metro environment. Having that in mind, there's also the autonomous policy that, to some extent, it's going to kick in. The countermeasures of what we're doing here are also quite clear, localization, decentralization in order to be close to the customers. And we see in a nutshell that metro is rather going to consolidate right now. We see opportunities on the high-speed side, and we see opportunities in those in HVAC and other systems where our market shares today are not that high. And we see particularly an opportunity in the aftermarket because the installed base is increasing, and therefore, over time, also aftermarket and service requirements are going to increase, and we're going to tackle these while these decentralization and localization efforts to be close to the customer. And that's why we believe in the medium term, our turnover and our volume in China is going to be flatlining and going to be as a result of all these different elements and market influencers is going to stay stable.

The next question comes from Iris Zheng, Credit Suisse.

My first question is around the R&D expense. Now if I compare the new guidance, which is at 6% to 7% versus the previous midterm guidance at -- which was at 5% to 6%. So it is now arguably a bit higher. Now admittedly, that the purpose guidance was guided in the different management team. But I still wish to get some understanding around maybe which are the areas that you feel now that might be worth more R&Ds that needed than maybe previously expected by the previous management team. And also, if you could give a bit color on the allocation of the R&D budget between the 2 divisions?

Yes, I would like to give some key points first before then Frank is going to step in there in order to go into the details. R&D increase is mainly caused by the fact that we're moving into these new fields in digitalization, in automation and in sustainability. And this both in rail and truck and these new fields need investments where we need to get the new technologies on board now in order to implement them the product into the products that we would like to grow with then in that wave that I've been describing. And secondly, R&D is also associated at least adaptive R&D with customer contracts. And the more we grow in specific business and the more we capture contracts with customers, the more we also have to spend and invest into adaptive kind of developments for these customers. And let me give you an example. We just recently won a tender on the electric power steering side where a customer very -- in a short period of time, wishes to implement this into his products on the CVS side. And for this, we need to do an accelerated development, just one example where we are very successful, but we need to also fulfill these requirements now and get therefore, R&D going. Frank?

Thanks, Jan. Basically, everything answered there. I mean only thing that somehow left is, I would say, in rather 60% CVS side and 40% RVS side, if you talk about the split, so to say, between the 2 divisions that we are having, and that's valid as of today somehow, and we don't see a significant change moving into the future. Hope that's fine, Iris?

That's very helpful. And if I could follow up with a second kind of still touching on the China rail market. And it's very clear that you've mentioned maybe you expect the market to be rather flattish or maybe slightly down in the midterm. And then could you touch a bit on the market share side? And I mean, because you've already gone through a very significant period of market share loss because of the autonomous policy. And do you expect further pressure on the market share going into 2025 from the current basis? Maybe because of the further kind of localized required by the Chinese government. And also kind of -- is it only on the OE side, what's about the aftermarket? Do you see any challenges to the aftermarket side as well?

Yes, Iris, thank you. That's also a very important question. I would like to highlight that in the past, our market share in high speed used to be very, very high. And then over time, through decisions within China, the market share there went down in the OE business. Aftermarket, the installed base is still there, and therefore, we are benefiting from the aftermarket business here. But at the same time, we've been increasing our market share quite strongly in the metro field as the metro market grew, and we established a very solid position there as a supplier. And therefore, all in all, I would say there was a strong growth momentum in China also combined with market share increases, but structurally, it changed. How is this going to look like in the future? We -- that in the OE markets in metro, there might be a kind of headwinds that we are going to face. But on the other side, we see, in general, in those, in HVAC opportunities going forward and as well in the aftermarket where our installed base is going to grow with each and every contract and where we believe that will result in this kind of stable turnover development that we're going to see in the future. And as far as metro and high speed is concerned, there is totally different market dynamics. You can imagine high speed as 1 very big project, gigantic project in China where very centralized decisions are being taken. In metro, it's different. They are the local authorities, the cities are deciding what kind of system they want to employ and what kind of systems they want to use. And therefore, we believe that the market there will be more resilient that we'll have more opportunities there. It's not going to happen like in the high speed case that very suddenly the situation will change dramatically. And that's why we come to the assumption that this market will be more resilient for us. And therefore, all in all, we are going to see a stable turnover and top line development in China going forward.

Okay. We now conclude our first Q&A session and look forward to the divisional presentations.

Welcome, everybody. I've been almost for 20 years in the rail industry, and I can tell you that the significance of this sector, the importance for society and also the market development was ever sense getting better and better up to today. And while it also will continue in the future, I would like to share with you during this presentation and also what were the success factors of Knorr-Bremse in past up to now and also will carry us into the future and then on top will be additional growth opportunities that we see over the next years and even decades to come. So let's start with the strengths of Knorr-Bremse and the strength in the rail division, particularly. We clearly can say that we are the market leader in what we are doing. Not only in brakes, but also in doors and HVACs, we are the clear #1 worldwide in our market. We were very strong in terms of technology innovation, and we are very strong in technology innovation also currently, and we have set up a lot of programs that go into the future and make sure we stay at that position also in -- for many years to come. R&D investments is very important on our side. Even during the crisis, during the COVID crisis, we were strong in investing into R&D to keep that position, and we will do so as well in the future. Now there is -- it's not easy to enter our field because there is all kind of different standards around the world. We are the only company that master all those standards in the different regions in the world. And that's why we are strong in each and every region in the world with our rail systems business. Resilience, the crisis that we just see, the COVID crisis, is a proof point. Of course, we were suffering a little bit like most of the companies do. But we also saw that with our very high aftermarket share we could master this crisis very well. Even though the trains were not fully occupied, the trains were still running. They need service, and we were there mastering the supply chain to serve our customers and be there when they needed us, and that led to a high resilience of our business even during that crisis. And that all leads to benchmark profitabilities. I really believe we can say, we are the benchmark in our field, in our industry when it comes to profitability. And since we further invest in technology and innovation, our aftermarket share will further increase. This is what we also see in the future. Now better than any strategy is long-term trends because they don't change. They are very reliable. And those trends are very clear, urbanization. In 2050, about 2/3 of the world population will live in cities. The need for mobility will ever increase. If you ask people in the world decision makers, then you get the answer that the need for mobility is even stronger at times than the need for clean water. And that's a statement. And sustainability is something that comes on top, that comes goes hand-in-hand with the mobility needs. We all know that CO2 reduction is something that is at our heart. That is our heart -- that is at the heart of the society. The COVID crisis will go away, but the discussion about sustainability, CO2 reduction won't, and we will have a great contribution towards that unavoidable trend. And then digitalization is something that we'd see also in the rail industry to come, and we can contribute in order to generate additional value added for our customers in terms of digitalization. And that's what we just have set up also organizationally, our organization in the rail division in order to serve those trends. And you can see that those trends are supported. They are accepted by society. They are supported also in the crisis by programs. There is, of course, climate-related regulations. We had this year, 2021, we have the year of rail in Europe. The Green Deal supports it. And also since the operators were suffering and big investments for the future are needed, government programs were set up to support the suffering of the operators, especially stimulus programs were set up greater than EUR 100 billion that we see, for example, and then also COVID compensation. So to make sure that those trends also run during this crisis, and that shows how important rail traffic is even going through those prices. It's not something that goes up and down. It's something that will stay, and there's a lot of emphasis for that. And that helps us also in the future to conduct our business in a very reliable and crisis-resistant matter. And here it is, here you can see that basically, there's no way around rail. We have set targets in the '90s already for different sectors for CO2 reduction. And many sectors have more or less achieved some of those targets. We can always discuss whether they are aggressive enough, and we need to have that discussion. But 1 sector is still a little bit behind, and that is the sector of mobility. And if we look at the different modes of transportation, whether it is in rail or in freight, rail is the mode of transportation that delivers a kilometer per person or a kilometer for tonnage of freight with the lowest CO2 footprint. And therefore, if we want to achieve our targets, and I don't think there's any disagreement that there is no way around to basically achieve those targets, then there's also no way around rail and that will support our business for the upcoming years and even for decades to come. Of course, the current COVID prices also impacts our markets a little bit. We have seen a higher market in 2019 and to be honest, we have expected last year a V-shaped recovery because the market went a little down in 2020, and that recovery is a little slower than we have originally expected. But the mid-term trend, if we look into the mid of the 20s, is fully intact. We will cross those lines in terms of looking at the market that we had even before the crisis. We will get back on to that trajectory. That means that generally, we have around a 2% CAGR in the market long term that's fully intact. And in the next few years to come, because we saw a little bit of a dip in the market, we even see higher growth rates than those 2%, let's say, until 2025 and then we will continue with the steady growth of that market, basically in all of the regions with some differences between the regions. I will come to that still during this presentation. Now because of that dip, we have all noticed that we also see somewhat a little bit decline of order entry in the past quarters on our side. And I can show you on this chart why that is really. The reason why that is, is that there is, of course, when the big car builders, the OEMs get a contract, they don't, at the same day, give us the contracts for doors and for breaks, they can't, because they first go into a design phase. The design phase takes at times 9 to 18 months depending on the project. And only if the design is basically stable then they can give those orders to sub-suppliers and system providers like we are. And therefore, you can see here that there is ups and downs in the order entry of the OEMs. During the crisis last year, they were also at a rather low point, and that's what we are a little bit seeing the impact on our side when we look into our order books but we have recently seen that there is a spike up basically for those car builders since larger projects are back on the market. Tenders were basically postponed during that crisis. And we always see like a year basically roughly 9 to 18 months, it's a little bit smeared out after we see a peak in order entry at the that we see such peak as well. So we saw that, for example, with deep tube for London, we won the biggest contract for doors in our history. We saw that roughly 12 months after the car builder got the order entry, and we will also see that now in the future quarters to come that we follow despite of the carbons, especially next year or middle of next year, it will come. Now we already will see quite a big increase in order income in our fourth quarter. That also has something to do that orders were a little bit postponed in the past, and now we see a little bit of a spike in Q4 compared to the quarters that we have seen before and then for the next year, especially for the later quarters based on what I just shared with you. I'm very optimistic that our order income will be back at levels where we want to see it. So in total, what we have done in the past very successfully, we have entered into the right portfolio, a portfolio that comes with a great deal of service business, and we have mastered to increase our market shares in the individual segments, brakes, doors, HVACs, power electric, all our business units that we have ever since. And that is, of course, a model because of our market share that increased so much that, especially, as you can imagine, for the brakes, is maybe flattening a little bit. On the other hand, we have great opportunities in the other business units to increase our market share because we are not there yet where we are on the brake side. And therefore, we also need to enter new growth markets. And I will come to that in a second. You see here what I just explained. The -- in the individual business units, we have, on the order -- on the OE side, on the car builder side, basically, the original equipment, we have seen that over the past 10 years, we have grown quite a bit. But what is even more important, this growth comes with a great deal of growth on the aftermarket side that is basically partially still to come in the future because the installed base calls for aftermarket business that comes afterwards, spare parts, especially on the brakes, friction material that it needs to be replaced regularly. The maintenance cycles of trains, it's almost like with cars, just the cycles are a little longer. On trains, you need to do major overhauls at certain points in time, which is very predictable because we know each and every train almost in the world, and we know where it's running. We know how frequently it's running, and we know precisely when those trains go into the overall, and we are in close connections with our customers to benefit from this overhaul procedure and supply our spare parts and our services for maintenance and overhauls. And that is an extremely successful business model that we have increased our market share in the past by a great deal. And here you see the result. We are the #1 in brakes. We are the #1 in entrance systems, and we're also the #1 in HVACs. And you see that even since the IPO, despite those high level of market shares in some of the regions, we could even increase our market share in those different segments to even grow our position stronger. Now the aftermarket meanwhile grew to a share of 45%. And that is a good share. That makes our business, as I explained before, very resilient because even in crisis modes, that is the one that sees -- even during the COVID crisis that sees less reduction than the OE business because it's a constant business. As long as the trains are running, you could say, they need to stop, they need to break and therefore, we come into play with our reliable systems. The long-term goal is to even increase the 45% share a little further. Of course, we benefited in that share in the past few years because the OE share was a little dropping because the market was dropping a little bit. But even so, until 2025 and beyond, there's further opportunity even though with a growing OE share that the aftermarket share will further increase. Of course, we also face some competition by the car builders. This is a field that everybody wants to be in. But when it comes to our subsystems, we have the domain know-how. We are there to serve that -- that's also what the operators want. They want to have a direct contact to us in order to keep their fleets -- their expensive fleets running and not have any failures. You can imagine, if a train doesn't run, it doesn't create any revenue that refers to locomotives on the freight side and passenger trains on the passenger side as well. And therefore, there is a great benefit for the operator if there is companies like we are with our expertise that keep their trains running with those major subsystems that we supply. Here then you see the resilience of our business. While during the crisis, we have seen that the ridership basically was going down at times to 40%, 35% on average, maybe 50% over the last year. And this year, at times during the high times of the COVID crisis, we see the same. But on the other hand, the utilization of the trains is still much higher. And as long as they are running, basically, they need service. And that basically is the principle behind the resilience of our rail business. Let's talk a little bit about the markets. There is markets in the world and regions in the next few years, especially in Europe, for example, that are growing very fast compared to other regions. You might always think of Asia. But in this case, there's so much replacement needs and also the policy in Europe with the Green Deal getting more traffic to rail. We see, for example, a good spike in the freight business just recently that we see in selected markets that we even outgrow the overall average numbers on the markets that you have seen before. And the good news is, in all those markets, we are very strong. We are present. We are close to the customers. And we have our locations worldwide exactly in those locations, and we are the #1 in those key markets, as you can see on that chart. On the other hand, in China, there's a little bit of a reconciliation going on. The markets are not growing. The market in China is not growing as fast anymore as we have seen that in the past. That has something to do that there is also some savings need that there was a great deal of putting those systems into place and growing them quite a bit over the last decades now comes a few years of gaining efficiencies. And therefore, the market is growing slower than in some other regions. And let me deep dive a little bit into the Chinese market because I know there might be a concern of some of you and questions might raise on that market. There was this phase in China roughly at the middle of the past century when their systems expanded by a great deal. They imported foreign technologies, also our technologies, and we had a great time in defining our footprint in the market. We were almost the exclusive suppliers on the brake systems in key trains, and we are still benefiting from that footprint that we have created back then. Then came a phase when the Chinese really defined or leaned more towards what is called an autonomous and controllable policy. They wanted to control their own destiny, and they were successful with that. They created their own platforms in the high-speed arena, a very successful platforms. And of course, they were leaning more towards local suppliers. We are still on most of the trains, even on the high speed trains, but with some less content with not the full system, but we have joint ventures -- local joint ventures where we still feed those trains. But our business on the high-speed arena during that time was decreasing a little bit. At the same time, the metro market was taking off, and we also were very successful to benefit from that in a great deal during those years. And then comes to the aftermarket business that comes years afterwards,with the overhaul business that we see also in the aftermarket. Same in China than in other regions, I explained that earlier. I don't want to repeat myself. And we are still benefiting from that. So now for the future years to come, even though the Chinese are also looking in their own like they did on the high-speed side, into their own metro platforms, they intend to go the same way. But this process is much, much slower than on the high-speed train side because you can imagine high-speed rail is more centralized. Central decisions are made. Metro is local because you have, in different cities, the authorities that run their own metro. And wherever you have a local decision-making, this trend is much, much slower than on the high-speed train. Nevertheless, we see a little bit of a decline our side and especially in the OE business on the metro side because of that trend. We believe that we have seen the bottom on the high-speed trains. And with new technology, we can even increase our market share in the few years to come. And we also will increase our market share further because we managed to have this essentially installed base in the past on the high-speed train side and also on the metros and locomotive side. So we will benefit for many years to come from a good service and aftermarket business. In total, though, we have to say that our business in China is staying rather flat. We won't see big spikes like we have seen it in the middle of the past decade, basically. But we also won't see any decline or a sudden decline or something like that because, like I said before, the aftermarket side is very predictable. We can predict it for many years to come and also what our role will be in there. So that's basically the situation in China. A big development, movements also for the future, but our footprint out of the past and our new technology will help us to stay more or less where we are. And of course, we have a whole set of actions to defend our market share there. As I said, I mentioned a few already, new technology, especially on the metro side, on the high-speed side as well. The aftermarket business, we are even investing to a certain extent into that market because we want to be local. Metro is local. We need to be with depots where our customers are. Locally, we need to make life easy also for the local authorities and help them to keep those trains running. So we are expanding our service footprint, our aftermarket footprint in China. We have made the decision, and that will help us to basically defend that market share. And since we are not, we were so used to a growth in the middle of the century because of that market development in China, of course, that is flattening a little bit. And we are fully aware of that, that we need to use each and every opportunity to also become more efficient, to decrease our cost position, and that's what we also have set up a global program for the first -- for the next years to come. Now to develop future growth that goes beyond that, we basically tap new markets and we create new markets. We create new benefits for the customers that even today nobody might think of. And it goes into -- it comes from the overall trends that I mentioned at the beginning, and we translated those into our industry trends that we follow and that is a long-term stable development, and those are increase the availability. Imagine if you buy a high-speed train for -- depending on the length between EUR 30 million and EUR 60 million, that train needs to be available. It's almost like with power plants, where you invest so much that you cannot afford that they fail. So wherever we support the availability, we create additional benefits for the customers that they pay us for. Same is with life cycle cost management and life cycle management overall, make sure that spare parts will be there for 30 years. Somebody who has been in business for so long, like we do, customers trust us that in 30 years, they get the spare parts of today. And that is very important. That is a decision criteria that they make when they buy subsystems for those trains because those trains are expensive and they need to stay in business for a long time. And I can tell you, the decision criteria is to award contracts is not being done by the initial price anymore. It is done by an overall life cycle consideration in that place right into the aftermarket arena that we are strong in and that I explained before. And then with all the discussion of putting more freight and more traffic basically on to the rail, transport capacity is key. In China, we might be able to increase the high-speed lines by a big deal. But essentially, in Europe, you all know how difficult it is to build new tracks basically through wherever it needs to be. And on top of that, it's very expensive to do so. So wherever we can buy smart technology, increase the capacity of the rail network, will create a benefit. And then eco-friendliness goes without saying. So those are those trends that we serve and where we create additional benefits for our customers. And I want to give you some examples. One example that plays into the capacity, as I just referred to, is, for example, reproducible braking distance management. We are able with our future technology to reliably reduce the distance -- the braking distance of trains. I'm going to give you 1 example. Trains might stop after 600 to 800 meters, depending on the velocity when it's dry conditions. But like now in fall, when the leafs are falling, when it's wet, this distance might double to triple. And you can imagine to have a safe operation that basically there needs to be enough distance between the trains to account for that under each weather condition. This technology targets that to guarantee under all conditions, a lower braking distance. Once you can do so -- it's like with your car when you're running on the highway. If you have a smaller distance, you can reduce the gaps between those trains and therefore, you have higher capacity and a higher throughput through an existing steel and concrete structure of rail lines, and that saves real money for the customers. That's where we are going. That's where future opportunities, and that's where we create new markets. Another example, entrance systems. You might think of doors. We don't call them doors. We call them entrance systems because they are more sophisticated than doors. I mean there are so many things to be considered with that if doors are essentially not really working on a platform, you all know that. You have been on platforms where it is crowded. And then if the trains come in and exactly that door doesn't open, I'm sure you experienced that. You don't like it at all, yes. Nobody likes it, and you need to rush to next door and get into the train. And that takes time. That it also takes time for the operator, the train can leave later. Even if it loses like 50 seconds like here, that makes a big difference in the overall schedule of rail network. And therefore, we have technologies where we have redundant technology, so to say, if you have 2 door wings, if 1 fails, the other 1 still opens, that is not the state-of-the-art today. So it's a great improvement. And also from an engineering point of the car beta, we have space that essentially is very limited to install the doors into the train, which is very important for the engineering departments of the train builders. Another example is digitalization. I have only 1 example here. There's a lot we could discuss about that. But freight trains, for example, especially in Europe, they are still out of the past century. There is no electricity line. There's just a pneumatic line into those freight trains. And there's a lot of discussions about digital, automated couplers. We make the decision to invest into that product because we believe that there will be a great deal of refurbishing 450,000 to 500,000 freight cars in Europe towards digital, automated couplers, and we are the perfect player in the market to do so because the benefit is not only this automated coupler which today is a manual process, but it is also that the brake test that needs to be conducted each time before a freight train leaves somebody doesn't need to walk the train up and down, which is the case today. But with this coupler, we can automate this brake test, of course, it goes without saying that we are experts on that. So we bring those 2 things together and that's where we can digitalize the rail freight traffic across Europe, make it much more efficient and support the shift from road and other means of transportation to rail to improve the CO2 footprint that is so needed. So in summary, we have our classical business, which we continue to do, bread-and-butter business. And on the other hand, we have those trends, and we create additional benefits for the customers, and therefore, it goes with increasing the market size. In summary, those are the key takeaways. We are the #1 in brake. We have a very strong market position there. Of course, we also have to say that the future opportunities are more on the other systems. They come in with a little bit of a lower profitability than our brake systems. But on the other hand, we have still future opportunities to come on the aftermarket side to increase our share in the years to come, which is a very profitable business. And it goes without saying, ask any car builder, operator, Knorr-Bremse stands for its quality, for its service, for its technological leadership. We never let out the customer in the rain. That's what everybody knows that what reduces the risks of the car builders and also the operators. And that's why we are the choice for what we are offering in the market. Thank you very much.

Welcome to the Commercial Vehicle Systems presentation. I'll take over the responsibility in an intermediate capacity from Peter Laier on January 1, and that's why I'm holding the presentation today. CVS is a market and technology leader, and we see that from a lot of points that are depicted here on this slide. CVS is a market leader, a global market leader with an increasing market share up to 25% for brake systems and vehicle dynamics. 40 million Knorr-Bremse disc brakes have been installed since 1992. And the brakes are used by almost all major OE manufacturers. We've been strongly growing throughout the years with a CAGR of TPR growth between 2012 and 2019 of 3% we outperformed at 7% growth. CVS is a technology innovation leader and with a continuous above the market investment and that yields to the fact that most of the innovations in that business and in that market are coming from Knorr-Bremse today. Our business is into high safety requirements products, where we are a key supplier that our customers trust in. Our business is highly resilient, with a strong aftermarket share of 26%, cost-efficient operations, regional diversification. And it's because of these reasons and the technology differentiation highly profitable. CVS has been growing between 2012 and 2019, very, very strongly and outperformed the market by 4% measured on TPR growth. Fiscal year '19 was the highlight in terms of performance. And then, of course, there was the sharp decrease that we all experienced due to COVID during the pandemic. But since then, a sharp recovery in the V-shape has started, and this is unfortunately set back by the semiconductor and raw material shortages that we have. So the demand is higher than what can be delivered today. Until -- between 2021 and 2025, we have a clear expectation that we're going to continue to outperform the market with 4% CAGR, and this is being driven by the content per vehicle versus the flat TPR development that we are going to expect in the same time frame. CVS is the market leader in all major product fields. It starts with brake systems and vehicle dynamics where we're enjoying a market share of 25%, and we've increased this market share even since 2017 by 2 percentage points, and this despite the highly competitive market environment that we're in. In the energy supply and distribution field, we have a market share of 49% and that's an increase of 9% since 2017. By the way, in brakes and energy supply and distribution, we are the number worldwide in the different regions as well. As far as fuel efficiency is concerned, the market has increased dramatically from just shy of EUR 1 billion in 2017 to EUR 1.4 billion right now. And here, we have a market share of 23% are worldwide the #1, and this market share has been unchanged since 2017. We've shown as a clear business strength or resilience during the COVID pandemic. The truck production rate decreased globally very strongly in quarter 1, 2020. But we could rely on the power of the company and the power of the division with its regional diversification, with strong market position in China that balanced out the market decrease that we had in other regions and with a diversified production footprint that helped, for example, overcome the closures that we had in India by just moving equipment from other parts of the world. We have a strong aftermarket with a stable revenue of 25% to 30% that balances even in difficult times and a strong dealer network that supports our aftermarket business model and clear countermeasures that were immediately being put in place in order to overcome cost and volume issues in early 2020. All in all, we achieved a positive EBIT margin even during the crisis and the fast recovery of demand in the second half of 2020 was well managed. We had to go in a short period of time from short-term work to extra shifts and that was managed fantastically by the team. And during that time, we could -- because we could perform very well, we achieved market share gains. Another challenge is the current supply challenges that we are facing. The biggest one, obviously, is the semiconductor shortage that we're facing all over the market right now, but there's others like the raw material tightness in resin, for example, and in steel. The freight market crisis adds to it, and there are further local crisis that we're also facing like the China power outages and COVID-related lockdowns around the world. This very difficult situation has been managed extremely well by the team so far. Today, a V-shaped recovery of customer demand is coming together with supply challenges that created this balance between demand and supply. It causes inbound delivery times to KB to be prolonged on a global scale, and we are facing currently a net cost burden for fiscal year '21 of roughly EUR 60 million. What were the countermeasures? Immediately a task force with 200 employees was set up. It was a close collaboration with suppliers and customers initiated, and we define the short-term pass-through for price increases, which is in place. In the midterm, in 2022 and the following years, the tight supply situation, at least, for the foreseeable future well into 2022 will continue to exist. And we expect further shortages, for example, for aluminum. Long term, the price levels that are currently elevated will stay there for certain components due to sustained bottlenecks that we're expecting. And that means that a higher cost basis for 2022 needs to be managed and that we need to intensively talk to our customers. The countermeasures that we've initiated is review of product designs or wherever other chips, other electronic components can be used, we'll review that and put this into operation in order to have alternatives. We'll review the sourcing strategies as well and that's ongoing, for example, increased dual sourcing will stay continued in offshore, but we'll look at having alternatives, both on onshore and nearshore. And we'll implement a pass-through mechanism for material price increases in the contracts with our customers so that beyond raw materials, also logistics and semiconductors are being accounted for. Another business strength of CVS certainly is the potential in the Chinese market. The Chinese market is maturing with a higher content per vehicle and that means it's coming from regulations in the traffic safety and emission reductions, trends towards digitalization and automated driving and a trend towards zero emission and energy savings that increases the content per vehicle and the vehicles are also getting a higher value. The lifetime is being extended and a changing end customer structure with an increasing number of fleet customers is being put in place. I would like to give you some selected examples for a technology shift, so the manual transmission is going to be changed gradually to automated manual transmission, and this AMT growth is going to stay with us until the end of the 20s because it's increasing fuel efficiency. Midterm, the air disc brake will replace the drum brake. So another technology change. And all in all, our CVS story in China is impressive. We are there local for local with 6 locations, 4 plants and more than 1,700 employees. Our revenues climbed from EUR 140 million in 2015 with a CAGR of 29% to EUR 490 million in 2020. And at the same time, our market share increased from 14% by 10 percentage points to 24%, and we intend to further grow in China by bringing the technologies that were first launched in Europe into the Chinese market like e-compressors, EBS and ESP, talk overlay steering and air disc brakes. The high and advanced technologies are also creating a barrier to entry, which means that it's not that easy for the competition to get into the business with these complex products that we have and that provides a competitive advantage to Knorr-Bremse as a company. We have strong partnerships with Chinese top OEMs like Dongfeng and FAW. We'll strengthen our local R&D capability even beyond in order to be able to provide applications R&D locally, even more than we're doing it today. And we're going to expand our local footprint and strengthen our local supply chain even further. So how is the growth in the future going to look like? And how is this going to happen? And I'd like to refer to the mega trends that we already talked about before, organization, sustainability, digitalization and mobility and they, in turn, translate into industry trends that's going to drive our markets and drive our growth opportunities going forward, traffic safety with advanced safety systems and the reduction of human error risk. The big theme and trend of emission reduction and e-mobility where battery electric or fuel cell vehicles will account for more than 20% of new commercial vehicles in 2030 and have the majority or almost all of the vehicles by 2050. Automated driving, another key industry trend where we believe that autonomous trucks will be the first vehicles that have autonomy and highly automated driving with a more than 15% share by 2030 and then the trend towards connected vehicles, improving operations and maintenance of trucks. The growth opportunities of CVS going forward will be driven by higher content per vehicle rather than truck production rate. And we see in the first line that the production rate in the midterm and in the long term is going to stay rather flat. In Europe, a little increase. In China, there will be a decrease. So all in all, more or less flat. The growth for CVS and the markets will come initially from traffic safety solutions that we already have in our portfolio that will grow predominantly in China and North America, where the adoption rate is still climbing. And in the long term, this will equal out and become kind of a saturated growth path, but new technologies and new offerings are going to kick in around automated driving, e-mobility and connectivity and these will grow across the board in the mid and in the long term. And that will yield to a growth pattern that we're seeing on this chart here. So traffic safety is going to be the area where some growth in the future is still going to happen well beyond 2025. And there, we are the world's leading supplier, and we are very well positioned. In the future, beyond that point in time, we'll grow in our current portfolio and generate new business in the new fields that will take us even further in terms of growth, automated driving, emission reduction and e-mobility as well as connectivity. And in the following, I would like to go through in-depth automated driving as well as emission reduction and e-mobility in terms of a deep dive. When it comes to automated driving, there is an SAE scale that gives us 5 different segments of degree of automation. The first 3 are areas where the driver is fully responsible and were assisted driving takes place. Then from 3 to 5, the driver does not permanently take responsibility in increasing degree and on Level 5, the vehicle is completely driverless. Today, both commercial vehicles as well as passenger cars are mostly on Level 2 partial automation, at least the new cars, and they are quite close together. The commercial vehicle may be a little bit behind. In 2025, it's going to be completely different. Commercial vehicles are going to operate at full automation and the passenger cars will be a little bit behind. And why is that so? Why do we think that this is the case. First of all, there is a business case behind automatic driving for commercial vehicles. 1/3 of the cost of a commercial vehicle is represented by the driver and efficiency needs to kick in there and their automation helps, Clear business case. And over and above that, there's a driver shortage. Right now all over the world in Europe, and we've seen that recently in the U.K. where bottlenecks on that side caused also bottleneck in the provisioning of fuel. In commercial vehicles, we have easier use cases, hub to hub connectivity. Autonomous yards where automatic vehicles can drive in a controlled environment where there's no opposing traffic, no pedestrians, no bicycles and the likes. And we believe that this development will at earliest, take place in China and the U.S. and then later on spread into the rest of the world. As far as automated driving and driving assistance is concerned, CVS is well positioned. In driving assistance, so means the Levels 1 and 2, we are positioned as a system supplier, providing braking, steering, sensors via our partner Continental, and the Level 1 and 2 functions in terms of software and programming on top of that. So the whole package comes from Knorr-Bremse. Level 3 to 5 are going to be a little bit different. There we specialize on CVS as a vehicle dynamic supply in a consortium and partnership approach. We concentrate on braking, steering, vehicle dynamics and the related redundancy features. These are the areas where we come from, and that's what we really understand and know and do best. If you look at the overall field of automated driving, it consists of 3 layers. The perception layer on the left-hand side, where the environment is being tracked and the perception is being generated by software and sensor hardware that comes from partners. The displayer done is the driver stack that comes from specialized companies like to simple. The hardware, which is the high-performance computing platform comes from our partner, Continental, for example, and that's the layer where the decisions about driving are being taken. And then we have the actuation layer where the steering and braking happens. And there it's about the coordinated interaction of actuators for vehicle dynamics, and this is the area that Knorr-Bremse focuses on together with the truck motion control that coordinates the interaction of steering and braking. And overall, there is a redundancy system required on top because these systems need to have a fail-safe functionality and the overall integrator of these 3 layers is going to be the big OE or a specific system supplier as an integrator. So that's the overall picture, and Knorr-Bremse has, coming from their routes and coming from their expertise in braking and steering and vehicle dynamics, a very important part to play in these scenarios. We come from the brake system where we introduced the braking itself, the stability control on top of it and then the longitudinal control as a driver assistance system. On top of this, we went into steering via a string of [ players ] strategy, by a few acquisitions, and we have a clear steering innovation path and vehicle content growth path base steering gear, through torque overlay steering for ADAS functions and automated driving then yielding into electric power steering. So this increasing value add and increasing preparedness for ADAS functions and automated driving. With this, we are providing lateral control as well as a further drive assistant feature. And combining all these functionalities, braking, steering, driving assistance and control functionalities, we have the system competence to bring together brake control, steering and the truck motion control for automated driving functions. And this is where Knorr-Bremse comes from and where we are going to be positioned on a very successful path towards highly automated driving. All in all, this overall landscape requires consortia to be formed, requires partnerships to be built. We, as Knorr-Bremse, can and will deliver as 1 scenario actuating truck motion control and redundancy supplied by CVS. In a partnership or as a consortium, we can deliver more. We can deliver the system that I've just talked about, actuation, TMC, together with perception and hardware for the decision layer together with Continental as a sensors and hardware partner. And even the complete system is possible to be delivered, including the driver stack in collaboration with an AI partner in addition to what the package that I told before. But regardless of what the package is going to look like, it means an increased content per vehicle for Knorr-Bremse because redundancy ensures the safe vehicle movement as it's going to be more complex electric, electronic system that increases the content per vehicle and torque overlay steering. The addition to our portfolio adds content per vehicle as well because this is a more advanced steering solution and the value of this is obviously higher. Let me now come to a second growth field, which is the electrified trucks. Looking at a conventional truck with internal combustion engine, 1/3 of the drivetrain roughly -- of the value is roughly the drivetrain and another 2/3 is the remaining components, which we call the other systems. In a battery electric vehicle, this is different. The value of the drive train goes down, the other systems are going to be more or less of the same value, but energy storage will come in as a major contributor and part of the value of a vehicle and that means something for us. The shift from internal combustion engine to electric vehicle offers first mover advantage that we are going to capture. And first examples are the electric power steering and the Rotary Vane compressor where we, as first movers have captured contracts already. There will be a more complex electrics and electronics architecture in electrical vehicles compared to the conventional trucks, and that will increase the content per vehicle for us by nature. Our KB products and other systems and in energy storage are going to be translated into the electric area and offer growth potential for us. And the good news is that the value reduction in the drivetrain does not affect us significantly because we are not into it. Only a minor part of our business is related to the combustion engine and dependent on it. Potential content per vehicle increases are also there via the electric vehicle adapter products and completely new fields that we are about to develop and that I'll talk about in a minute. Our role in the environment of e-mobility is very clear. There's on the one hand side, OEM in-house systems that are being provided by the commercial vehicle manufacturer. There's carryover products from passenger cars that find their way into electric commercial vehicles. And there is the commercial vehicle specific system space, and this is what we are going to focus on as Knorr-Bremse CVS. In order to make that happen, we founded the eCUBATOR, which is an agile group and team within Knorr-Bremse that prepares the portfolio for the ability. The task is the adaptation of existing product portfolio elements towards electric vehicles, the definition of new product fields and the first product concepts are already transferred into the CVS business units. And this group that has been founded in 2020 already applied for 52 patents that have been generated out of the eCUBATOR until today. We are offering a broad portfolio for electric trucks. On the one hand side, our adapted portfolio that has been translated into the electric vehicle world. For example, the e-compressor where the electric screw compressor is already available. The so-called Rotary Vane compressor for mid air demand is currently already just before market launch. And a low air demand compressor for future requirements is under development and is actually a carryover from rail from a technology perspective. In the past, we've already been providing blending mechanisms for internal combustion engine-driven commercial vehicles. We'll extend that into the future and provide an optimized and scalable holistic electrical vehicle motion control that also includes the important energy recuperation functionality. But there are also new electric vehicle product fields that we're tackling. And there's a couple of examples. The redundant power management system is essential for e-vehicles. An EV brake resistor is needed when the battery is full, and both products are currently under development. And over and above that, we're looking for new opportunities for example, in the fuel cell electric vehicles that are in assessment right now. And 1 of the areas we're looking at is the air circuit where we already have a high level of expertise in Knorr-Bremse. So what are the key takeaways? The increase of content per vehicle in all markets is going to mitigate and overcompensate the TPR stagnation that we're going to see in the markets, in other words, the markets are going to increase. Over and above that, we'll go for market share increase in growth markets. We'll foster our technological leadership through consequent investments in innovation and R&D. I've shown you a couple of examples. Our business is resilient, and we pursue operational excellence as 1 major focus point. We target as 1 example here, cost optimization programs, to protect our margins even in difficult times. We have excellent customer relationships and a strong focus on managing the current challenges in supply chain and logistics. CVS is market leader in their field and in their business, and we are well prepared for the future. Thank you very much.

Thank you for the very interesting insight into both divisions. We will now start our second Q&A session. Now with the whole Executive Board including Dr. Jurgen Wilder and Dr. Peter Laier. Same process as before. [Operator Instructions] Jurgen, Jan, what currently is the biggest risk and the biggest opportunity for RVS and respectively, CVS?

Well, we are currently, as we go through the COVID crisis, living in a little bit of uncertainty, of course. And some people might ask the question, what do you do if travel patterns will change, if people don't come in the mornings at 8 to work and go home at 5 or 6 or 7. And will that have an impact also on the rail sector? And we don't know exactly what that impact might be if it comes, but I can also tell you that I'm not too afraid of something like that at all. Because I truly believe that the need for mobility will increase also after this crisis. The pattern might change a little bit. People might go to the office at different times or might do some more home office, but I've talked to so many operators last year that they all said when the measures were loosened a little bit, people might not have gone to the office, but travel went up quite a bit on the leisure side, for example. So if people don't travel for work, they travel for other reasons. The need for mobility is there. So I'm pretty convinced that in the future, this need for mobility will constantly grow. And even if it is smeared out a little bit, not in the mornings at 8 and at rush hours, and that might even be an opportunity at the end of the day for the rail sector as well, because the capacity that needs to go on the tracks in order to have CO2 reduction that might be even easier to manage. And if more trains are running at other times, that also helps us in our aftermarket business. And you also asked for opportunities. I think it's obvious we are still -- we are already there. I mean the COVID crisis will go away. The CO2 discussion won't go away. That will come up even stronger than before. And we will see times when the need for shifting more traffic to rail will ever increase. And you can see that not only on the passenger side, also on the freight side, for example. We had an example in the talk earlier. We said automation of freight, for example, to get more efficiency -- to gain more efficiency and to get more freight onto the rail from other mode of transportations. That is what we need to do. Same on the passenger side or we'll miss our CO2 targets. And I think with our product portfolio, with our technology going into the future, that is what we can serve, and that's a great opportunity for us.

Yes. On the CVS side, the biggest risk at this point in time, short term -- from a short-term perspective is certainly at the supply situation. We have put together a team of 200 people that have been managing this extremely well in the recent past. And as far as opportunity is concerned, I think everything around digitalization, e-mobility and automated driving and how only automated driving as well as driving assistance is a major topic. But Peter, why don't you want to add to this and also give us the insights that you are seeing?

I think you summarized it, Jan. I think besides the material shortage, specifically on semiconductors, but as well on others. Logistic cost will be a significant issue in the next year. And that will not go away too fast. Regarding the industry trends you have mentioned, I think, for Knorr-Bremse, and we have shown that in the presentation before, the growth in automated driving is for sure there. And we have, I think, here, defined the right setup. We have opportunities to grow in steering for sure, which is partly related to the component itself, partly related as well to the trends like automated driving. And for sure, we have E-Mobility. And in E-Mobility, I think we have only -- or we have reached only the tip of the iceberg. There's much more growth opportunities for this company. So I think the chances are really big.

Thank you. We now start with the first question, which comes from Lucie Carrier, Morgan Stanley.

The first 1 is around the opportunity in aftermarket in rail. And I think we -- it would be helpful for us to understand how you think about your installed base in China? So what is currently the installed base? And when you think about aftermarket, how do you think about your conversion rate? What is really forcing operator to work on the aftermarket side with you rather than maybe kind of in sourcing or using local supplier? So how should we think about that in terms of opportunity for, generally speaking, for aftermarket, but more particularly in China, please?

Happy to answer that question. I mean the way you need to think about it is, as we have seen also in the chart that was shown previously, we had a very, very strong base and business in the high-speed trains, for example, in the mid of the last century. Now -- and on the Metro, it was growing after that. Now when you think of aftermarket, then of course, you have different components. The most attractive component is spares that we sell. We sell them to a certain extent constantly, but you also see spikes in major overhauls that we have. And once our systems are in those trains, and we have said before that almost in the high-speed trains in the last decade, basically, we delivered to almost all of those high-speed trains. So we have a very widespread footprint. And by having that footprint now when those trains get into different overhaul cycles, which is very visible into the future, because we know when they need to be overhauled, it's not just when a plant has a capacity or something like that, that is defined points, then we deliver our systems once again into those trains. And that applies to the high-speed trains, that also applies to the Metro trains, of course, as well. And I think you had a second part of your question was, is there a local competition. Of course, there's also competition. There's also a constant thinking of how much can be done in-house, is the domain know-how that we have on our subsystem is that sufficiently in-house. Sometimes it's not -- very often, it's not, actually. And what we are doing is service as local. We -- despite the market development in China, we made the decision to increase our local footprint also in China in the market. So we are close to the customers. We are there when they need us. We are -- we have shop-in-shop concept. So where we are directly there where the trains are overhauled and repaired, and that helps us a lot in order to benefit from that OE market share that we have built up, especially since the mid and beginning of the last decade. And even now, continuing, to also benefit in the aftermarket arena. I hope that answers your question.

Partially, I guess. Maybe before I go to my second question, when you say because you have the installed base, you would benefit about overhaul cycle and so on. Is this contractual? I guess my question is, what gives you the guarantee that you will be effectively serving your entire installed base?

Well, there is example where that is contractual, but you cannot think of that everything for the next 40 years is under contract. But at the end of the day -- it is, at the end of the day, also our domain know-how. The pairing, for example, of the friction, the overhaul system that defines the brake rates. And with those brake rates, you get those trains homologated. If you mess around with those, then that you might damage those things. And then you might run into a risk that is very difficult at the end of the day to maintain, and that puts us into a prime spot when it comes to overhauls in order to also serve that business.

My second question was around the margin mix across the division. I appreciate China was a historically quite high margin, and you expect kind of more flattish growth, but I think it's been probably the case for the past year or two already. And you've also highlighted you expect the share of aftermarket to increase across the portfolio, I mean, not only in China, but also for the rest of the division. So wouldn't that kind of offset or actually benefit to some extent, the margin mix from here considering China has been already a little bit weaker for the past couple of years. And now if you are increasing aftermarket sales as part of the total mix, which we assume -- but maybe correct me if I'm wrong, which we assume is higher margin than the OE business.

I mean the aftermarket business helps us in our margin mix, especially also when it comes to, for example, spare parts, which is the bulk of our aftermarket business. There's also other aftermarket business that we wanted to grow into. There's modernization and there's also new service models in connection also with digitalization, preventive maintenance, where we grow into business models that are not just basically selling spare parts, but also creating a benefit for the customers. Being more reliable -- make those trains more reliable. And sometimes, we even enter into a performance management regime, so to say, in order to share the benefits with our customers. That also happens. So there's also a wide range of profitability even on the aftermarket side, as you can imagine. But what also determines our profitability as a division overall is not only the growth that mostly comes out of the aftermarket, that is where we get a good chunk of the growth from. But also that we have more opportunity to grow in some non-brake businesses rather than in brake businesses because -- just because of the market shares. We have still lower market shares in those other systems than in the brake system. And there's also a little bit of a different margin regime there. Meaning that the -- those other businesses are not par and par in terms of margins with brakes business. And those components, I would say, will define our margin development also in the future.

The next question comes from Sven Weier, UBS. Sven, please go ahead.

The first 1 was on CVS, and you talked a lot about the content per truck, the transition to battery trucks. I was just wondering, you haven't mentioned anything at all regarding new braking system, electromechanical braking system. But does that mean you're still not really convinced that this is going to take off and what are maybe the latest developments you see on that side?

Yes. That is always an interesting question we are receiving since years. Specifically, when it comes to E-Mobility trucks or fuel cell trucks. Everybody is saying immediately, then the brakes need to be electromechanic as well. We don't think so. Why? Because at first, we need to understand that in a truck, the pneumatic system is a second energy system used for a lot of different energy actuators. That's not only brakes. It's for coupling truck and trailer. The trailer itself needed -- for the air suspension for lift down, lift up of the truck. So a lot of things which are using compressed air. That's why we still believe in compressed air as well in the new vehicle generations. And that's why, by the way, we developed as well those compressors with rotating compressing principles. But for sure, we develop in parallel as well, full electromechanic brake systems. We see there an opportunity of usage in specific types of trucks. But all around that, there is as well growth in the core area of our brakes as you have seen in the presentation. So it's about those new compressor systems. It's about having a more complex brake control system, where recuperation is needed to have an efficient E-Mobility truck. So a lot of opportunities in the brake arena itself and as well the brake will not stay exactly the same in E-Mobility trucks as we see it right now.

And if I may, just 1 follow-up on the truck side regarding the situation that with Bosch. I think 1 of the trials was obviously sorted. So what's the current situation there on the payment and also the situation, I think, on the second trial that was going on.

Claudia, would you quickly comment on that?

Thank you, Jan. So thank you very much for your question. As you know, the process, the arbitration procedure is still running. We have booked a financial liability of EUR 380 million. We tried in the summer months to settle the arbitration procedure, but we did not get a final agreement on that. Therefore, Bosch has started again arbitration proceeding in order to receive an award regarding the purchase price of EUR 379 million. In addition, and perhaps you know that as well, there is a second arbitration procedure regarding the delivery of components. That has been started in 2020. It has been suspended on mutual terms in May of this year in order to try to settle the issue out of court. Since these discussions failed in October, the procedure has been continued now. And we are, and this we want to explain our continuous talks with Bosch regarding different topics, among other things, securing our supply of components.

And just 1 additional information from my side. This EUR 379 million is absolutely the same amount that we have been actually having in our books for quite some time. So we do think this is the upper limit that should come out of that.

Okay. Thank you for that. Can I just ask 1 more question on rail or...

Very quickly.

Yes, very quick, just on the automated coupling. I saw in the coalition treaty, the new German government is actually mentioning their technology. So maybe a question for Dr. Wilder. Is there anything concrete now coming from the German government that you can have kind of a first trial with Deutsche Bahn? Or what are the next steps here?

Yes. Thank you for that question. I tried to also in order to not get into conflict with Sophia, I'll try to give a quick answer here. Yes, there's pilot trains out there. There is a lot of tests that are going on. We are full speed in the development of those systems. There is not a final decision made. I think this needs to be a European initiative overall, because it doesn't make sense to refurbish all those freight cars in 1 country, because they go across border and they mix and match to each other. So this system needs to be implemented. So there's a lot of political lobbying going on, including with the support of Deutsche Bahn and in different countries that there will be also European subsidies, which has been discussed in the past already in order to kick this off. I truly believe this will be kicked off. This will need to be kicked off. It is crucial for a freight in the future. I think by now, everybody understood that. A little political push in Europe will bring it over the line. And then in the next few years, we'll hopefully -- will start to implement such a system.

The next question comes from Akash Gupta, JPMorgan. Akash, please go ahead.

My first 1 is for Dr. Wilder. It's a follow-up on China rail aftermarket and from earlier question that Lucie asked. My follow-up is, if you look at the scope of your aftermarket business in China on high speed and compare that scope to what you normally do in European market, can you tell us whether it's the same or like how different in size and what is covered, what is not covered. And then maybe on the same topic, if you look at the scope in rail aftermarket in China, how that has moved over the last 4 or 5 years, is it same or like maybe any comment on that? And then I have a follow-up.

Yes. Yes. I mean there is, of course, different kind of regimes, but some, let's say, historical rail operators that have been around for a long time have competences in-house in terms of overhauling. So there are minor differences between, let's say, different regions there. But what we have seen in China really is that we -- that our aftermarket share was growing. Meanwhile, it is still lower than our average that we sometimes stay, like the 45%. That's why we believe we have some catch-up to do there. And that's why we are also saying on the OE side with a market that is over the next few years, a little flattish, not in the long term. In the long term, I'm sure it will [ roar ] again in China as well. But over the next few years, a little flattish. There is a growth in the -- on the aftermarket side that we also can benefit from, because it refers to our systems basically. Now there was -- was there a second part of the question?

Scope change.

Aftermarket development over the last couple of years.

Yes. But as I said, the aftermarket business grew also in terms of our share of wallet in China, and it will further grow.

And my second question is on truck business. So first 1 is when you guide for a flattish truck production rate, is this based on your geographical mix or based on overall market, which is skewed by China given it's quite big in size. And then secondly, on the same topic, this partnership with Continental, can you talk about exclusivity from both your side as well as from Conti's side?

First to TPR. That's global TPR, global truck production rate, which we are seeing developing flat, but with differences in the different regions, you hit the point, Akash. We had an absolute record truck production rate in 2020 in China. And we don't foresee that, that will be repeated. So we see China a little bit going down to a normal level in the course of the next years, while truck production will slightly grow in other regions. And as explained before, we have different content per vehicle in the different regions. So this overall mix has 2 opportunities. Short term, we will grow with more truck production in Europe and North America, because actually, the content is higher there. But we have significant growth chances in the content in China. So that's a second part of the chance for Knorr-Bremse. In regard to the second question, Continental as a partner. Yes, we have a partnership with Continental. This partnership is seen for us as a success story, and we will continue with that partnership. We think the technology which we are getting from Conti is superior on the radar and the [ camera ] side. We are getting the hardware, as you know. The software is then released by us and developed by us. And that we are developing then the functionalities and the systems. The contract is made in that way is that Conti need to be competitive. And then we will cooperate with Continental. If the competitiveness is not there, we have the freedom as well to go with other partners.

The next question comes from Marc Zeck, Stifel.

Just 2 questions on RVS, this is for [ May ], 1 short-term question. A couple of weeks ago, you gave a sneak preview on the October order volume for RVS. Any chance that we get an update regarding November volumes. It was November better or worse, October, this is my first question.

Yes. I mean we don't have final numbers for November yet, as you can imagine. But I can tell you that also without naming them now, also on some of the large orders -- larger orders that are in the market, I mean, the structure in our case is, there is, of course, some few large orders. And there's also many, many smaller orders. There is quite a few that we have -- that we could also book in November, although I don't have the final number yet. So I don't want to comment on that. And as you know, it is always very difficult to see, does it cross the line towards the next booking months or not. Yes, that is something I fully understand that is -- some people are asking that question for me personally, that is not that important. I truly believe that on -- for the fourth quarter that we see an order entry that is much stronger than we have seen in all the other quarters, and that is in line with also what we guided. We look at it regularly, see where those orders are. And give or take a little bit, which you never can see, does it come in January, December or things like that. At the end of the day, for the business, it doesn't matter either. But give or take, it will be in that ballpark.

The second question, more long term one. I understand that basically, China will be flat, and I guess that the Joe Biden infrastructure plan, Amtrak, whatever comes over there, that this will only happen by 2024 or 2025, at the earliest. So most of the growth you assume in RVS then in Europe. And in Europe, you [indiscernible] now basically used to like all the hopes that we cross and it may resuscitate some, let's say, pre-pandemic orders, but it will only pull us through probably through 2022 and 2023. And I actually see that reflected in your slide on Page 46. And over there, I see then for 2024, a bump in APAC volume that looks like it's there to make the growth rate correct, could you elaborate why you think that APAC will all of a sudden then grow strongly in 2024 -- and what is happening like in Europe in 2024 and 2025?

Well, first of all, those programs and those support programs, whether it is in the U.S. and in Europe, we always need to very, very closely look what they are intended for and how they will be spent. I mean the vast majority of those programs is really more on the infrastructure side than short-term additional trains, but they will, of course, follow. Because it's all about increasing the capacity in the rate system that is for us of a great benefit in the mid- to long run as well, because that only will be possible if trains are either more available, if there are more trains and things like that. But the vast majority of those spendings first of all, whether it's in the U.S. or in Europe, goes more into the infrastructure side than into the pure additional vehicle side. And that's also normal, because first, the capacity needs to be there, before then, essentially, the number of trains really can increase. But it is a confirmation basically of what we expect into the future, more shift of traffic to rail. We need to prepare ourselves not only in Europe, but also in other regions of the world. That is greatly funded by the governments. That is basically what they also understand that, that is necessary. That's a proof point for our long-term strategy.

Maybe a quick follow-up question here. Are you kind of afraid of the new FTP finance minister in terms of debt breaks and more spending conscious mindset?

I'm not sure whether I got that question.

It's about the FTP, the liberals, the party. And the question is whether the new finance minister makes you afraid of their policies that might come.

No, he doesn't make me afraid. I think there's overarching trends that is good. I mean you have also seen that at the end of the day, the -- what is in the -- from what I could see in this coalition contract that they hammered out, that there might be some changes also, for example, in the structure in Deutsche Bahn in Germany, but not as much as was announced before or some parties we're thinking of, whether it was FTP or [ Gruner ]. It will -- there was this -- this was up for talk that will be different. But I think that goes vastly into the right direction, and it doesn't scare me at all. I appreciate, actually, maybe I should say that, I appreciate that there's so much emphasis on funding the rail sector and also the goals of putting more traffic on rail. I believe that will need to happen, and that is also written down there. So that's good.

The next question comes from William Mackie, Kepler Cheuvreux.

Two questions on rail, first of all, coming back to the aftermarket business, when we look at the industry, we see the OEMs increasingly, and I'm talking about Western Europe, signing multiyear service agreements and the OEMs invariably take the responsibility for the performance at uptime and of the vehicles in operation. So it seems that contractually, they take the prime responsibility and must source parts and additional services from third parties like yourself. So I'm just wondering, can you give us a sense of what proportion of your business goes direct in contracted business to the customers, the rail service operators, and what proportion goes towards OEMs and -- or via OEMs? And is it fair to say that there is a trend towards, if you like, a disintermediation between suppliers like yourself and the ultimate customers, i.e., is the train maker coming in between and taking ownership of the data that provides the reliability and the performance of the vehicles?

Yes. I mean, first of all, of course, the aftermarket is an attractive business arena. It's not just that we have discovered it for ourselves. There's also others, who cover that for themselves. But that is nothing new. That has been going on for a long time now. And it's also not the case that our customers, as you correctly stated, is the operators only. It is much more so that we -- as there is increasing long-term maintenance contracts that the OEMs, the car builders, so to say, negotiate with some operators, and that is, again, different in different countries, depending on what model there is. But it also is coming up, for example, in Germany. There is examples for that. But as that share increases, our share in the service business also increases with them. We have our domain know-how, and it doesn't mean just because they sign a long-term maintenance contract that we cannot add any value there. It's the opposite, actually. We also have partially very long-term contracts, same thing back to back with those car builders. And that's where we also then benefit long term. And there's even examples on the additional benefit side, on the digitalization. When it comes to, let's say, energy consumption, whether it is in HVAC, because HVAC is the biggest energy consumer in the train besides the traction. Then we can supply actually our know-how and build also long-term contracts with the OEMs in order to generate benefits for their customers or we do it directly with the operators. And we have examples of all of those. So that is a trend that happens, but that does not mean that somebody gets in between and our customers. We have a healthy competition there and the OEMs also on the service side are also our customers there.

That's insightful. The second question relates to CVS. And again, difficult to -- I want to approach the question of the evolution of the automated driving sector. It seems that many OEMs who ultimately will take the regulatory or the legal liability of autonomous driving are partnering in the perception or decision-making segments of the evolving value chain or systems. And so -- and at the same time, you have a competitor you mentioned earlier, who has a fully integrated suite of capabilities in actuation and decision-making across electronics and also is able to provide bundled offers around transmission and other areas to OEMs. So there's two things I'm thinking about, your partnership with Continental, maybe you can help us understand how the -- you see the success in your positioning on future platforms evolving, given that it seems that the OEMs are taking an active interest in perception and decision-making and your competitors are offering your customers complete platform. So how do you kind of bridge that? Because at the moment, you seem to be stuck within actuation and some perception, as you describe it, and I wonder how you break out. And also, do you have any success proof points of platform wins. I mean 2025 is like tomorrow for developing a platform in the truck sector. So what successes have you had with your partnerships with OEMs on developing autonomous driving systems? Because I see some from your competition, but I don't see many from Knorr-Bremse.

Yes. At first -- as you mentioned, automated driving is a very complex task. The most of the OEMs have now decided to realize that in partnerships. Usually, it is the case that specifically for what is called driver's tech, so that's the artificial driver in the decision level, the OEMs are partnering up with AI companies like Waymo or TuSimple or [ Plus AI ] or Inceptio and you name it. And our role in this constellation is to be the vehicle dynamic partner. So we are supplying brake control, steering and the related redundancy technology to that. And here, we have since years, a very positive feedback regarding our redundancy concepts. And we are in intensive discussions with OEMs. We have already a first award for that, and I'm quite sure there is more to come in the future with the discussions which we have right now. So I would see us here on a successful path right now. So we have maybe more flexibility than the 1 or the other competition here. Giving to the market the offer of our actuators and track motion control vehicle dynamics, and we can partner with different partners and different setups to realize according to the OEM needs. As you mentioned, in most of the cases, we know in the market, the OEMs are taking the system responsibility, and they decide whom they want to have in their consortium or partnership, you name it.

Sorry, following up from that. To what extent is there a standardization of protocols between the perception elements, the decision-making elements and the actuation elements? Once you've made the decision and then you're communicating the decision to your actuation functions, is that already a standardized environment? Or is it very bespoke platform by platform? Is this still evolving? Where are we on that development path?

It is clearly individual, or as you call it, bespoke solution per customer. Every customer is solving that differently with his own requirements. For sure, the long-term future maybe has the target to standardize that to a certain extent, but please have in mind the OEMs need to have differentiation opportunities as well in the future to show their DNA and to provide a specific offer to the customer and how to realize automated driving with which kind of approach, which kind of functionalities. That is a very good differentiation factor. That's why the OEMs want to keep that as well in a different way of realizing it than having here a standard approach.

We'll now go ahead with the next question. Vivek Midha from Citi.

I had yet another follow-up question on Lucie's aftermarket question. So you highlighted the importance of your know-how. And I was wondering if you're seeing a material difference between your aftermarket conversion rates in China in high speed versus Metro.

Not too much, I would say, yes. The aftermarket business there, it more would need to be really at the end of the day, subdivided into what kind of aftermarket it is. Is it spare parts? Is it overhaul? What is it in terms of aftermarket and that's where -- that's the -- in general, the more meaningful separation into those. That would be my answer to your question.

Understood. And I had another question on China. So you discussed in some detail the standard Metro issue in the Metro segment there. But if we just go into a little bit more color there, what sort of time lines do you see as likely for this to start becoming meaningful? Where exactly is this project and what status it has? That would be helpful.

Yes. I mean, that's a very good question. There is, of course, activities that should define prototypes right now. Prototypes of -- on the Metro side, there's different platforms. There's A and B platforms, and there's different speed limits on those platforms. That's of course what's going on. But different from the high-speed train site that we have also seen from a few years ago, that very rapidly went into the direction of a standardized platform. We don't see that here that fast, because -- and the key difference is there is no centralized decision-making on the Metro side. The local authorities decide that themselves. And there's also, again, deviations from certain standards and things like that, whereas on the high-speed rate side that are procured centrally, more or less 1 system or 1 product. You don't have that on the Metro side. And that's why it would take many, many more years than what we have seen on the high-speed side.

Could I quickly follow up on that. I understand what you mean about you being less centralized. If it's valid to say that you've also seen the Chinese and your local players, they've been able to get some adoption in high speed, which technologically may be more advanced. Does that have any bearing on the speed at which Chinese -- the local solutions may be adopted in Metro?

I'm not sure whether I got that question. Did you get it?

My understanding was that the fact that highly complicated systems in high speed have been adopted there already by local players. The question is, what does it mean? Does it also mean an accelerated adoption of Chinese technology in the Metro?

No. Okay. Sorry, I mean it's the connection that I had some trouble, we're sorry for that. No, no. I mean, I don't see that too much. I mean there's totally different platforms. And it started really on the high-speed side, and there's also -- I mean, Metros and high-speed trains are rather different from each other. That now Metro will be accelerated because that happened on the high-speed side first. I don't see that. I think the more overarching principle is what I just said, that is the principles, how will it be decided, whether it will be centralized or rather locally. That is the more important trend, so to say, in this development.

Okay. Coming to the last question of today. Gael de-Bray, Deutsche Bank.

You show Slide 22 that the market growth for CVS will be only 3% from 2021 onwards. So it seems you expect growth in the content of vehicle associated to traffic safety technologies to decrease somewhat gradually, at least compared to what it was in the past. So my question is, at what point do you expect the CPV growth to reaccelerate again? And what do you expect it to be in the longer run given everything that's going on in terms of E-Mobility and autonomous driving?

Yes. I think we have to approach that again from these 3 growth factors, which are driving our business in regard of top line. The first is truck production rate. We said truck production rate will remain more or less flat for the years to come. Second growth driver is content per vehicle. In regard of content per vehicle, we will grow further, somehow 4% per year. We see here different opportunities. We need to look a little bit short and mid -- long term. Short term, we see further growth opportunities with technologies on traffic safety, further introduction of regulations, specifically in Asia, which foresee an ESP, driver assistance functions and things like that, as well ADB is about to come. ADB in North America will further grow. That will somehow drive us in content per vehicle until the second half of this decade. Then we see more maturity in there. But at that point of time, you have the kicking in of all those new industry trends we have talked about before, automated driving, E-Mobility, connectivity, digitalization, where we have then further content per vehicle growth opportunities. And the third lever for growth in CVS is always market share gains. And you have seen in the presentation in 1 chart, how successful we were in the last 5, 6 years to gain market share in China. And I'm still convinced we have here further growth opportunities, and there are other markets where we have as well still growth opportunities, specifically in Asia. So that is what is driving our growth in the future.

Okay. So just to be clear, so actually, the content per vehicle growth you expect is expected to be around 4% per annum throughout the entire period going into the end of the decade?

I would say it's at first clear that we have this content per vehicle growth out of the mentioned sources until somehow the mid of the '20s. After that, it depends very much how fast these new technologies on E-Mobility and on automated driving will come into the market. There, I would even see with the technologies, which we are developing right now that we are at least on that level, if we are stepping into that. And as we have shown, we are here on a very good path.

Okay. We now conclude our Q&A session. Thank you for participating. In case of further questions, please reach out to the Investor Relations or media department anytime. I will hand over to Jan now for final remarks.

Thank you very much. So in summary, KB is and we are, as a management team, deeply convinced and I hope we could convey this conviction to you as well and to assure you that this is the case. KB as a company is in excellent shape. Our business is in excellent shape as well. And we outperform even in the challenging times that we have nowadays. And here, I would like to specifically thank the whole Knorr-Bremse team, all our employees worldwide, for their dedication and for the power that they're putting into this business and their expertise that make us so successful. We are in growth markets. We are going to grow from our markets perspective in the medium to long term, and there's lots of opportunities for us out there that we can capitalize on, based on the megatrends that surround us, mobility, urbanization, sustainability and digitalization. All of them are major trends to solve the biggest issues of worldwide societies. Sustainability is at the core of our markets, our products, our organization and everything we do. We, as KB, are going to continue our profitable growth path through technology leadership that we have acquired over decades and that we're going to build out and build on. Knorr-Bremse drives operational excellence to create shareholder value, and all in all, we're going to continue our successful strategy. We're going to add to it in order to enhance the growth and outperform the markets, but it's not about a big change in strategy. It's about continuing what we've been successfully doing for a lot of -- number of years, but modernizing it and evolving it. Having said that, thank you very much for your participation. Thank you very much for your interaction and see you soon.