Mercedes-Benz Group AG (MBG) Earnings Call Transcript & Summary

Hi, everybody, and welcome to the first ever Mercedes-Benz strategy update that's fully dedicated to Mercedes-Benz Vans. For more than 18 months now, Mercedes-Benz has been a pure-play cars and vans company, which means Vans is an independent yet fully integrated business unit within Mercedes-Benz. They have the freedom to make all the decisions necessary to cater to the individual needs of their vans customers. At the same time, they have full access to and it benefits from technology and innovation sharing with our Cars business. This includes exploiting synergies between the 2, for instance, by using common parts and harnessing the purchasing power of the Mercedes-Benz Group. Unlike Cars, the Vans business serves 2 distinctly separate sets of customers with different demands: luxury private vans and premium commercial vans. Our vans division is perfectly positioned to outdeliver to both. On top, there's a very rational business side to it for us, too. Today, the vans already make a significant financial contribution to our overall business. In 2022, the van division reported a solid 8% growth in sales and a stunning 66% increase in EBIT, just to mention 2 highlights. And Q1 clearly speaks for itself. These numbers are one part of the reason why I like to call Vans are pearl. I am convinced that there is so much additional room for growth in the field. And today's event is designed to show you why and how. First of all, our aim at Mercedes-Benz is to build the world's most desirable vehicles. That's true for cars and vans alike. And desire also is our shared strategic baseline. Let's look at luxury private vans first. They drive just as easily as a passenger car and offer that desired extra space that so many of our customers appreciate for their families, hobbies, travel and everything in between. And there are fully electric versions, too. Now what about their light commercial vehicles? This part of our business is all about fuel efficiency and quality to get the job done in the most economical and most convenient way possible. A capable and durable work van is yet another high-end tool for professionals, which, of course, has to come at a very competitive total cost of ownership. Here again, our commercial vans fully benefit from the innovation and scale of the Mercedes-Benz brand. And let's not forget the bigger picture. The world runs on our vans. There is an almost infinite number of use cases and applications. Whether you're waiting for your online shopping to arrive, for the ambulance to come to your aid or for a maintenance worker to fix something around the house, our vans are system-relevant products. And whether you're excited to head out to your next camping adventure or be shuttled in style to your nice hotel, our vans are at your service. Still every now and then I get the question: Ola, does it really make sense to keep the Cars and the Vans business together under one Mercedes-Benz roof? My answer is clear. Yes, it does. First, vans complements our lineup of the world's most desirable vehicles. Thanks to different product cycles and market mechanisms, it makes our business more resilient. Second, we're able to take advantage of lots of synergies between Cars and Vans as well as between private and commercial vans. And third, vans makes a significant financial contribution to our company's business. I'm sure you'll find many reasons to agree during the course of this event. Thank you very much. I will see you later for the Q&A session. And with that, please allow me to hand it over to Mathias Geisen, Head of Mercedes-Benz Vans. [Presentation]

Welcome, ladies and gentlemen, to our strategy update vans. As Ola mentioned in his introduction, for many people, our products are part of their day-to-day lives at home, at work and beyond. Mercedes-Benz Vans makes an important impact on so many aspects of society and life. We are both the founder and innovator of the light commercial vehicle segment, the segment that bridges cars and trucks and which originated with the first delivery vehicle back in 1896. And thanks to that history, our record of outstanding products and our brand, we have a truly unique place in the LCV business. That's what I want to emphasize most today: our unmatched high-end position with the industry's best mix and best pricing by far. To give you a better idea of what that means, let's have a short look at our portfolio today. Some 30 years ago, we created the Sprinter segment, today, our flagship. It is our leading light commercial vehicle with many features and functionalities incorporated for Mercedes-Benz passenger cars. The Sprinter is by far the most valued vehicle in the class, favored by commercial buyers, drivers and, of course, on the used vehicle market as well. It defines the segment. The Sprinter contributes around 50% of our sales share; the midsized Vito, approximately 30%; and the private V-Class, around 15%. We have continued to set industry standards since the launch of the Sprinter in the early '90s, for example, by introducing advanced safety features and connectivity into the LCV segment. Today, we are the world's leading premium light commercial vehicle manufacturer, having delivered over 400,000 vans and events worldwide in 2022. Looking at the LCV segment in total. We operate in a highly profitable and attractive industry. Many of you joining us today are industry experts, but perhaps the exceptional overall profitability of the vans industry is not common knowledge yet. For a number of reasons, the LCV segment is one of the most attractive segments in the broader automotive industry. Let me explain why. Markets remain strong and are growing, and the competitive environment is stable and concentrated. This stability is supported by very knowledgeable and loyal commercial customers. Due to long life cycles and a cost-driven approach with focus on reuse, the industry is less capital-intense than other automotive industries. So historically, the light commercial vans have been very profitable for our industry. But now let's look at Mercedes-Benz Vans' unique position within this industry. We have an exceptional top-end product identity being the market leader in the large van segment in Europe. And looking at the premium segments of all light commercial vehicles, we are in a clear leadership position. This is thanks to our attractive product and service portfolio, our strong mix and residuals as well as a very favorable channel structure. We enjoy highest pricing power with significant premium. We additionally benefit from a balanced market coverage with Europe as our core market, followed by the United States and China on third position. But most important, our customers highly value our products and services, resulting in an industry-leading 74% repurchase rate for the Mercedes-Benz Sprinter in Europe. And let's not forget one crucial aspect: we have a strong partner in Mercedes-Benz Cars. Together, we are able to leverage significant synergies; a component commonality rate of up to 50%; economies of scale in sourcing; lean and aligned processes from development to governance; technology sharing; and improved time to market for innovations in crucial areas like automated driving, car software and electric/electronic architecture. All of these factors have played a role in our strong double-digit return on sales results adjusted 11.2% in 2022. However, there are more opportunities ahead for further growth. We will cover those topics comprehensively throughout the presentation today. But let me emphasize one important topic. With our strong position today, it is our clear ambition to lead the industry to an all-electric future while simultaneously keeping a clear focus on the most profitable segments. But now let's talk about our way forward. We want to offer the world's most desirable vans and services today and in the future. And most desirable for our demanding customers and for us means focusing even more on the premium segments with the highest profitability. And of course, that starts with our products. We want to offer the best products in each segment, and we will continue to cater to the needs of both private and commercial customers. Let's start with our private customers. Our V-Class uniquely combines the functionality and cost efficiency of a van with the luxury appeal of our Mercedes-Benz passenger car. This exceptional positioning translates into a very attractive profitability. To build upon this strong foundation, we will be presenting the new V-Class later this year. Here, you see for the first time a glimpse at how we are planning to serve our status-oriented private customers. A totally revamped exterior and all new interior featuring the latest infotainment and assistance features, that's how we define van luxury. Now to our commercial customers. We will continue serving our commercial customers with a high level of dedication and highly specified premium vehicles. Currently, we are seeing a lot of focused discussions and new entrants into the courier express and parcel industry. For sure, this will be the one to electrify first. But this is by far not the largest and not the most profitable industry. Let me be quite clear. We want to maintain our strong position in this industry, but our customers range from lower-priced industries through to premium RVs, meaning the camper business. What I want to emphasize, there are other highly attractive industries that offer us great opportunities to focus on. And our strategy is to have a strong footprint in the premium segments of all industries. More about this from Klaus Rehkugler, our Head of Marketing and Sales, in a couple of minutes. But now let's talk about our sustainable future. We are a vital part of the group's sustainable business strategy. That means that we are fully committed to our ESG activities within Mercedes-Benz AG, including our Ambition 2039, a net carbon-neutral fleet of new vehicles by the end of the next decade. Our target of up to 20% BEV share by 2026 and more than 50% by 2030 goes hand-in-hand with a significant reduction in CO2 emissions across the entire life cycle in new vans. And by offering fully electric vans for the transport of people and goods, we are also contributing to more livable cities. The transition towards electric-only is ambitious as we have to fulfill different customer needs in parallel. As existing ICE models will continue to serve us well beyond the end of the decade, we have to keep them attractive. In parallel, we have to ramp up electric vans to handle this challenge. We are driving a substantial complexity reduction of the existing ICE portfolio and a streamlined offering for the new electric vans while still addressing the customer use cases of the premium segments. Mario Boehme, our Head of Finance and Controlling, will share further details with you in the further course of the event. Our future is electric-only, and our roadmap towards reaching that target is clearly defined. Indeed, we started early. In 2010, we introduced our first electric series production van, the Vito E-CELL. Today, our complete portfolio is electrified, leading to a market share of over 20% in Europe in 2022 for the electric large and midsized vans. And we are targeting strong growth in the electric segment. To reach that ambitious goal, we will start introducing our all-new purpose-built EV architecture VAN.EA 2026. VAN.EA is our newly developed innovative, modular and scalable architecture. According to the electric-only strategy, VAN.EA has been developed from scratch as a purpose battery electric architecture fully utilizing the advantages of the new technology. To keep complexity and costs under control, this architecture will be the shared basis for all midsized and large vans from private V-Class up to commercial Sprinter. To make it clear, for us, electrification goes hand-in-hand with a massive simplification. Of course, all of our product offerings are accompanied by an attractive portfolio of services and digital extras. Andreas Zygan, our Head of Development, will share further details with you later on. We are one of the most profitable LCV businesses in the world, and it is very much our intention to remain at the highest levels, not just in 2022, which was a very good year despite tough conditions if you look at those numbers. In Q1, we were able to increase all KPIs compared to the previous year, resulting in a return on sales of 15.6%. With the transition to electric drive, we will continue to targeting profitable growth. But while we have strong financial results, we cannot be complacent, particularly when we have clear opportunities to improve on the cost side. I would like to explain this. Let me be candid with you. I've talked about Mercedes-Benz Vans having the best mix and the best pricing in the industry. That's a very nice position to be in. But while we've been strong on product, model mix and pricing, we have to admit that we've been less strong on cost, but that is changing. With our leadership team, we are going to target cost in an even more systematic way using openness, honesty and industry benchmarks as our reference point, especially in the areas of product and technology, manufacturing as well as fixed costs and overheads. There are many opportunities, and we are well advanced with our plans to pull costs out of the business. This includes rethinking our production footprint. The decision to locate our first pure electric light commercial vehicle factory for VAN.EA in Poland clearly demonstrates our stronger focus on costs. We have additionally identified other levers to further improve our financial performance. You will hear more on this from Mario Boehme and Francesco Ciancia, our new Head of Operations. Francesco brings excellent expertise in lean manufacturing from an efficiency-focused volume OEM. To be clear, we have long had the industry's best mix and pricing. We fully intend to maintain those strengths and even expand upon them. But if we can combine these powerful revenue drivers with an intensified focus on cost competitiveness, then things get really interesting. So let me sum it up. We are uniquely positioned in an attractive industry and intensely focused on value creation. Our success factors are an exceptional portfolio angled towards the upper segments, the very highest pricing power and brand attractiveness and customer loyalty, a clear focus on the most profitable markets as well as renewed very serious focus on cost, and then a clear way forward with a highly ambitious technology roadmap to lead the industry to an all-electric future. Now how do we leverage our unique assets? We've implemented a new strategy based on our 4 strategic pillars. We will target premium segments in terms of regions, channels, products and industries with high margins. For example, we strongly reduced the sales to less profitable industry segments whilst increasing our focus, for instance, on the camper segment. We embrace our customers. We already have the most loyal customers in the market today, allowing us to grow lifetime revenues across all industries in the future even further. We aim to lead in electric drive and the digital experience with our all-new VAN.EA and our MBOS, our Mercedes-Benz Operating System. And we will continue lowering our total cost base and improving our industrial footprint. Our strategy is underlined by 3 guiding principles: sustainability, digitalization and our highly motivated team. I took over as Head of Mercedes-Benz Vans beginning of 2022. I'm well aware of the considerable strength of the business that I now lead. But I also know our weaknesses. In the last months, my team and I have worked intensively to develop our strategy and build a plan that will better position us for the future. We are privileged to be part of Mercedes-Benz, a badge of honor to have the 3-pointed star on our vehicles. But with that privilege comes responsibility, and that includes delivering a very strong level of financial performance with margins that are within close range of Mercedes-Benz Cars average. That is the goal. That is the mission. We've already proven that it's a credible objective with our recent financial results. With this clear strategy, our high level of ambitions and our focus on execution, I'm also confident that we will continue to demonstrate it going forward. I'm fortunate to have a great team at Mercedes-Benz Vans. You will now meet a number of these key leaders who will present our strategy in more detail. Klaus Rehkugler, our Head of Sales and Marketing, will start.

Thank you, Mathias. Let us start with the first pillar of our strategy: target premium segments and focus on profitable growth. We define our premium positioning by unchallenged leadership in 4 areas: brand, technology, customer focus and sustainability. Mercedes-Benz Vans has a strong brand, one that is built on trust and our superior product substance. This is the #1 reason for our undisputed pricing power in commercial industries, consequently translating into significant double-digit transaction price premium over all competitors. In some cases, this transaction price gap is substantial. These industry-leading price premium are at the same time accompanied by an outstanding 50% Mercedes-Benz Vans share in the German premium segment. Based on this premium positioning, we derive 4 areas of attack to further improve our profitability in the future. We are aiming for further profitable growth in our most important regions. Today, Europe already comprises our strongest market with a 60% share of total sales worldwide. We want to strengthen our position here. In the U.S. We have doubled our market share from 8% to 16% since 2018, which ensures us a strong market position as well. In China, our 9% V-Class market share in the NPV market segment secures us a relevant stake in a segment which is deemed for further growth in its other price bands. Our sales channel mix split into a 70% share in the highly profitable retail and small fleet business and a 30% share in the larger fleet business in Europe. This channel mix strongly supports our ambition to continue to grow profitably. We see significant potential for further profitable growth in China and North America. In the U.S. we aim to substantially increase our sales by 2030. Therefore, we will be extending our product portfolio by adding both VAN.EA commercial vans and for the first time, a VAN.EA private derivative to the U.S. lineup. The purpose-built, all new electric V-Class will have an unparalleled luxury positioning to cater stronger than ever before to the expectations of our sophisticated customers in China and the U.S. As a multi-industry player in the B2B business, we serve many different industries and are well positioned in their respective upper-end price bands. Together with our upfitting partners, we offer well-equipped, tailor-made vehicles that provide our customers with vans and services best suited for their specific commercial purposes. Today, more than 75% of the commercial large vans that we sell are upfitted. The majority of these vehicles are already well equipped, and therefore, represent profitable specifications. In 2022, our professional expertise and partner focus with then upfitters was ranked at the #1 position amongst all OEMs. This close cooperation with our van solution partners is also reflected by the fact that all of them have already signed the Letter of Intent, declaring their willingness to participate in our sustainability Ambition 2039. The broad range of industries we serve makes our business resilient, which is a strong competitive advantage. Today, we serve 9 commercial industries. And while each one has its own specific requirements and demands, they are all important for keeping our world running smoothly. All 9 commercial industries are strategically important for Mercedes-Benz Vans. For example, service and craft is the biggest industry in Germany and, of course, also in our portfolio. Camper business is the fastest-growing industry and the CAP, the courier express and parcel and logistics, has the highest request for all electric drive. For example, in the camper business, we have seen tremendous growth in recent years due to the growing desire for individual and independent traveling. However, there is still room to grow. That is why we want to expand our portfolio of X factory camper vans with a new model line of fully electric campers based on VAN.EA. We aim to define the next industry standard with our international camper business partners all around the world. But we also see profitable growth potential in other industries, such as in the CAP segment. Therefore, we plan to offer a VAN.EA, CAP-specific, ex-factory derivative for the first time ever. This solution is being codeveloped with the expertise of our CAP business partners. Coming to our second pillar, embrace customers and grow lifetime revenues. The customer is at the core of our business, and we have the most loyal customer base. In 2021, our Sprinter repurchase rate equaled 74% in Europe. Our service retention rate in the first 4 years amounted to more than 70% in Europe. But now let's have a look at the whole customer journey in more detail. All of the following initiatives are aiming at further improving the business efficiency of our TCO-conscious customers. First of all, we are in the process of shifting our business model towards a direct sales model, a model in which our dealers will act as sales agents in the future. This will enable us to manage discounts and eliminate intra-brand competition to ensure fair offers to our customers and reduce sales costs at the very same time. With this, we are targeting by 2026 more than 20% in online sales, more than 75% direct sales volume in Europe and the go-live of our direct sales models in 20 markets globally. Within the purchase phase, we offer a superb point-of-sale experience with our trained and certified retail team, qualified consultation also considering the best upfitting solution to meet each customer's individual requirements. And on top of that, the consultation includes services for our customers' transition to e-mobility and tailor-made charging solutions. We are aiming to boost our already strong customer satisfaction rate of 4.5 stars even further. Coming to operations. I want to turn to a really crucial topic in the commercial vehicle segment, which is connectivity and digital extras. We are absolute believers in the value of data and the opportunity for software to help commercial customers. At Mercedes-Benz Vans, we have been working on vehicle software and digitalization for many years. We have numerous products already in use. Building on this experience, our digital strategy follows a straightforward yet comprehensive 3-layer approach. In the first layer, we offer vehicle-related functions. We are already at a quite advanced stage. In 2022, in our core markets, Europe, the U.S. and China, 70% of all new vans were connected to our Mercedes-Benz digital ecosystem. Our second layer consists of customer-specific digital extras provided by a unique steering device that we developed in-house, our onboard logic unit and absolute USP. This solution enables our customers to integrate our products into their specific digital infrastructure. Our third layer will extend our offering with a selection of commodity services and third-party applications integrated into MBOS in the future. So I would like to leave you with this takeaway: Mercedes-Benz Vans is at the forefront of LCV-focused software systems and digital extras. These will make our products even more attractive, some we will be able to charge for. Hence, our target, we are aiming for a relevant incremental EBIT contribution in the mid- and long-term future. But I also must sound a note of caution. While software is becoming increasingly important to our customers, most fleet operators run a multi-brand fleet. They do this for reasons of scale, of flexibility and function. Large fleets are therefore highly unlikely to want to use or be able to use a single OEM software platform. We know our customers very well. And it's absolutely clear that while they value software, predictive maintenance and route planning, what they want is the ability for a vehicle not only to offer a proprietary software platform, but also to support independent specialists as well as customized software products designed to operate across their whole fleet. So that fact anchors our strategy. While we have developed excellent proprietary software solutions and will continue to improve them, our vehicles are also designed to support other software products for our customers. That is why in the future, we will extend our offering with our third layer integrated into MBOS, including commodity services and the possibility to integrate Android-based productivity applications. We believe this is most likely where the industry will go. And while it will improve profitability and efficiency for LCV operators, it is unlikely to drive a total revolution into the segment. More about the technical specifications in a minute from Marie, our Head of Electronic and Electric systems. Furthermore, we are supporting the EV ramp-up with tailor-made charging solutions. Alongside the existing and growing IoT network, our commercial customers will also have full access to the all-new Mercedes-Benz high-power charging network that will consist of up to 10,000 high-power chargers worldwide by the end of the decade, which will fully reflect the needs for our van customers as well. We will offer our digital service Mercedes me Charge B2B for Van customers as well with our new eSprinter, giving them access to 300,000 charging points in Europe. Mercedes me Charge is one of the largest public charging networks in Europe. Our outstanding commercial customer service is the backbone of our business today and will become an even bigger differentiator for us tomorrow. Our core KPIs reflect our outstanding performance and proximity to our customer. With more than 4,200 Mercedes-Benz retail locations, we ensure an average drive time of approximately 30 minutes in Europe. In other words, we're close to our customers. We further supplement this proximity with our mobile repair service on customer premises or field technicians for complex repair cases, and we'll continue to expand these offerings. This pays off. With every second new van sold, our customers purchase a service contract for an extended service partnership with us. Our customer service promise focuses on maximizing vehicle uptime and managing unexpected downtimes. Based on this mission, we have already rolled out a connectivity-based product, EG Mercedes-Benz Vans Uptime. Already today, 160,000 service center visits per year are being triggered digitally. This secures vehicle uptime and customers' loyalty. And last but not least, we're making repurchase easier than ever. Our options for reordering retrieval, already allow our commercial customers to purchase their next Mercedes-Benz van as quickly and as conveniently as possible. With Mercedes-Benz Mobility, we accompany the customer journey with a wide range of financial service offerings, ranging from leasing over financing and rental to subscription. The offer of commercial rental services helps our customers staying flexible in their operations by buffering peak seasons with rented Mercedes-Benz Vans. So let me wrap this up. We target premium segment positioning for commercial vans and luxury positioning for private vans. This will allow us to focus even more on high-margin regions, channels, products and industries. Our business remains robust due to the strategically wide balance positioning in 9 core commercial industries. We embrace our customers, and they reward us with the highest customer loyalty in the LCV segment. We are transforming towards a direct sales business model to lower costs and to make our sales processes leaner. With our 3-layer offer of digital extras, we are creating software-enabled recurring revenues. And with that, I would like to hand over to Dr. Andreas Zygan, Head of Development. Andreas will provide a more in-depth look at how we are leading in electric drive and the digital experience.

Thank you, Klaus. To embrace our customers means providing them with sustainable products and services. Mercedes-Benz Vans pioneered electric in vans with the 2010 launch of the Vito E-CELL. The world premiere of the second generation eSprinter was this February with a strong and positive resonance with both the media and public. After the efficiency drive last fall in Germany, our new eSprinter just successfully completed a special test drive from Las Vegas to Long Beach, California, 275 miles or 443 kilometers without recharging the 113-kilowatt hours battery. If you have ever had the chance to experience this particular route, you will know how demanding it is. Coming back to our current electric portfolio. We have already sold more than 40,000 e-vans. By the second quarter 2023, we will be fully completed with an electric version of each model we sell. We lead in electric drive today and aim to lead tomorrow. Starting 2026 onwards, we will introduce our own new purpose-built EV product portfolio on our van electric architecture for both private and commercial model portfolio. We are targeting NAV share of more than 50% by 2030, whenever market conditions are low. With the new van architecture, we will secure our ambition to lead in electric drive based on really clever engineering. With VAN.EA, we will increase overall efficiency and performance in every aspect of the vehicle, including aerodynamics, drivetrain, tires and chassis. Efficiency is a key criteria for electric vans. The goal is to achieve a higher range with an optimal battery capacity, which is directly related to vehicle weight and cost. The development and launch of VAN.EA underscores our strong commitment to sustainability and is an important milestone on the road to achieving our Ambition 2039 goals. Let's head over to Stephie Schmitz, strategic project lead VAN.EA, for deep dive into our new electric architecture.

Starting 2026, all newly developed vans for Mercedes-Benz will be based on just 1 single innovative, modular and scalable architecture. According to the electric-only strategy, VAN.EA has been developed from scratch as a purpose battery electric vehicle. VAN.EA is short for van electric architecture, all future midsized and large vans will be built on it, both commercial and private, whether in commercial use as a versatile premium all-around or as a private luxury van, VAN.EA-based vehicles will focus on added value for our customers and their individual needs. A modular and scalable architecture also means a high degree of scale effects as well as maximum synergies through leaner, simpler and faster processes, a maximally efficient use of resources and development as well as in production secure sustainable profitability. The 3 modules of VAN.EA helped to achieve these targets. First, the front module consists of the electric powertrain and the front axle. The module is the same in all VAN.EA variants in an optimized common part strategy. The differentiation relevant to the customer takes place in the 2 other modules. Second, the center module scales the vehicle length. This is also where the standardized battery case is placed. High-voltage batteries with different capacities are installed within the case. Third, the rear module will be available in 2 versions with an electric motor for all-wheel-drive variance of VAN.EA and without electric motor for the front wheel drivers. Based on these 3 modules, VAN.EA, allows for clear differentiation between privately and commercially used vans as well as maximum synergies. VAN.EAP stands for privately positioned vans in the midsized segment, whether for lifestyle-oriented customers with high standards as a VIP shuttle, as a locally CO2 emission-free office or for leisure active families, thanks to the innovative Mercedes-Benz operating system, MBOS, VAN.EAP is always on and masters all everyday challenges. And with planned WLTP range, well over 500 kilometers, it is perfectly suited for all kinds of adventures, even outside cities. VAN.EAC stands for commercial vans in the midsize and large segments. It is the ideal base for customers who value efficiency, reach and payload. VAN.EAC large offer space for almost every commercial need even for customers who need more space than average. With its modular and scalable design, the architecture is tailor-made for different configurations and upfitted solutions from courier express and parcel delivery vehicles to ambulances or e-grocery vans. From Municipal vans or flatbeds to lifting platforms or campus, almost everything is conceivable. With VAN.EA, Mercedes-Benz Vans accelerates its cost towards a fully electric future and its commitment to sustainability and the goals of Ambition 2039. Maximum added value for customers with sustainable profitability at the same time VAN.EA clearly underscores the aspiration of Mercedes-Benz Vans to be lead in electric.

As Stephie has just shown us, starting 2026 onwards, this new technology will enable us to consolidate our mid and large van portfolio down to only one architecture to reduce the overall complexity of our product portfolio. But it's not only about hardware. Digital features and the overall digital experience are a crucial factor in our customers' purchase decisions. Lead in digital experience will be indispensable for us and not just meeting but exceeding our customers' expectations. How to do that? Please allow me to hand over to Marie Le Neillon-Quesseveur, Head of Electric/Electronics Systems.

At Mercedes Benz Vans, we are constantly moving forward with our strategy, lead in digital experience in the private and the commercial van segment. Our goal for the Commercial segment is simple, ensuring the full digital integration of our products into the activities of our customers. In brief words, we will make the van a fully integrated part of our customers' businesses. We started our journey some years ago and have a lot of value-added offerings already in place. Backbone for our digital offerings are data sets. We are able to retrieve data sets and load collectives from roughly 4 million veins in the field, resulting in several billion potential data insights, enabling us to enhance our future products and further improve their robustness and usability, of course, all with the explicit consent of our customers towards Mercedes-Benz AG. Let me briefly give you some technical details. On the first layer, Klaus mentioned earlier, we offer around 30 digital extras. For example, a specific navigation for oversized vehicles like campers that need special rooting due to the road limitation for large vehicles. For our private customers in the Camper segment, we have developed our Mercedes-Benz advanced control, in short, MBAC. MBAC enables digital control of the living space via MBUX or a smartphone app, for example, functions like opening and closing of the pop-up roof or activation of room lights and other camper specific functions in the van. For our commercial customers, another service with high value is Mercedes-Benz providing predictive maintenance using a rule-based approach to reduce downtime of the vehicles. Uptime is money. And the uptime is based on more than 900 rules with 4,000 data points to cover the diagnostic codes of the vehicles. With MB uptime, we detect anomalies before they turn into failures, allowing scheduled maintenance before the equipment breaks down. On the second layer, we offer even more customer-specific and highly relevant B2B extras. One example is the individual intelligent charging management we developed with and for DPDHL. This digital solution is based on our dedicated onboard logic unit, OLU, which gives us the unique ability to integrate our electric vans in the existing enterprise system of DPDHL in a seamless way. Hence, DPDHL can realize intelligent charging for their old fleet. So OLU is hosting an in-house developed vehicle abstraction software layer to run third-party solutions, like the concept of an API for the Cloud. It even allows connections to the external back ends of our customers. Additionally, feeder solutions can be integrated into digital services. To give another example using the OLU, it will be possible to sense a temperature in the back of an e-grocery van and display it to the MBUX screen to the driver while en route to the next delivery. The fleet manager will also receive the same information in parallel to provide state-of-the-art car IT security and what we call controlled openness. So OLU comes with a dedicated in-house developed back-end platform for managing and monitoring OLU devices in the field as well as rolling out software updates. With MBOS, the OLU functionality will be an integral part of the EE architecture with more high-performance computing units and an advanced set of sensors and actuators, MBOS will enable us to offer even more specific commercial application for the customers. And for the third layer, for the first time with MBOS, we will offer a whole range of new and existing Android apps relevant to our commercial customers and most important industries. These Android capabilities allow us to fulfill our customers' needs for multi-brand solutions. So those applications will be seamlessly integrated and drivers won't need to juggle smartphones or other handheld devices while driving our vans to carry out their jobs. To sum up, ease of use, efficiency and safety for our customers. All in all, with our free-layer approach, we will fulfill customer requirements for off-the-shelf solutions as well as highly individual functionality. Last but not least, based on MBOS and its technical capabilities, we want to achieve Level 3 for our private customers by end of the decade. And while we will offer an entry-level set of driver assistance systems for our cost-driven commercial customers, we target to realize Level 4 automated driving starting end of the decade to address the business potential of driverless transportation as part of the Mercedes-Benz AG, we benefit from strong partnership and cooperation. These features are a glimpse into the future. But our customer will not have to wait so long to experience our automated driving in the commercial fleet. From mid-decade, we will already provide L2 capabilities for VAN.EA.

Thank you again, Marie and Stephie. To give you all a quick wrap-up, Mercedes-Benz Vans has a long history with an experience in the field of electric drive. Moving forward, it's our clear ambition to lead the industry into the electric era. With VAN.EA, we will introduce our purpose-built EV architecture producing and launching all new midsized and large-size van on only one architecture. With VAN.EA, we will also introduce MBOS, the Mercedes-Benz Operating System. MBOS will allow us to offer even more digital extras, software-enabled upgrades for our commercial customers, including access to third-party apps. By using the same EE architecture as Mercedes-Benz Cars, we benefit from common technologies and are able to realize maximum synergies in automated driving. For the road ahead, we have a clear target for automated driving, offering for private customers SAE Level 3 by end of the decade. And for commercial customers, we target to realize Level 4 starting end of the decade to address the business potential of driverless transportation. With the launch of VAN.EA-based vehicles, we will provide Level 2 capabilities. With all of this, we want to secure our goal to offering the most desirable vans and services. To effectively tackle this huge transformation we also need to address the bottom line when it comes to controlling our costs. Mario Boehme, our Head of Finance and Controlling, will now give us a closer look at how we are approaching our cost structures within our transformation.

Thank you, Andreas, for providing a glimpse into our technological future. Now I will explain how we are going to translate this into our objective, industry-leading profitability. First, let's talk about costs. We are tackling costs on all levels. Our strategic pillar lower focuses exactly on this. We have set up a comprehensive efficiency program to drive down costs at company, operations and product level. Let's have a closer look into what we plan on the company side. First, we will reduce fixed costs, especially by streamlining and digitizing processes. We are aiming for around 20% fixed cost reduction by mid-decade compared to 2019 actuals, and we are well on track. Also, we will continue to harness the power of synergies with Mercedes-Benz passenger cars. We are enjoying a competitive advantage from commonly used resources and technical know-how of Mercedes-Benz. This leverages our objective industry-leading profitability. Next to our company goal, efficient operations are a must to lower costs. That means we have to focus on an appropriate capital allocation and an optimized fixed cost structure. Therefore, we will reorganize our global industrial footprint. Let me hand over to Francesco Ciancia, Head of Operations. Francesco comes from an efficiency-focused volume OEM, bringing new ideas and an ambitious cost mindset to vans. He will tell us more about that.

Hello, I'm Francesco Ciancia. I joined Mercedes-Benz Vans in 2022 to drive the transformation of the cost base in manufacturing. Coming from a company that is known for its efficiency, I'm excited to be part of the Mercedes-Benz Vans team as we move to combine best-in-class vans with a radical improvement in cost structure. We are actively transforming our global production network to make it more efficient, flexible and geared towards an electric future. We are expanding our network with our first pure electric light commercial vehicles plant in Jawor, Poland. With this plant, we aim to set all new standards for productivity, lean operations and sustainability in the manufacturing of premium ELCVs worldwide. The following short animation will give you a first impression of what it will look like. Of course, Jawor will be net carbon-neutral just like all the factories we own. However, we are targeting the use of 100% green energy for the first time through maximizing our use of sources like solar panels. The plant will also be modular flexible and scalable to cover increasing demands In Jawor, we will exclusively produce purpose-built eLCVs. This allows for lean and cost-efficient production and will go hand-in-hand with other significant changes in our manufacturing footprint. We want to build VAN.EA in our plants in Vitoria, Spain; Düsseldorf, Germany; and in other countries as well. This will be accompanied by transformational changes that enhance productivity. Our multi-site footprint also maintains our ability to react to rapidly changing market conditions, while optimizing our cost position. Our plant in Ludwigsfelde, the second of 2 plants in Germany, will continue to produce Sprinter and eSprinter and will also become a competent center for eVan customization, for example, camper vans. With our highly skilled and motivated workforce, we will significantly improve our production processes and lower our production costs. Our increase in performance will be driven by dramatically reducing the complexity of our product portfolio, focusing on efficiency in the core production processes by reducing hours per vehicle up to 25% by 2025 coming from 2019, optimizing our energy consumption and using digital technology to increase efficiency across all our operations. These efforts will result in a significantly leaner cost structure, and we laid the groundwork for our 100% profitable electric drive portfolio in the future.

As I said before, we run a comprehensive cost efficiency program addressing all levels: company, operations and products. Now let's have a look at our product costs. As of today, we have already started to optimize the complexity of our current vehicle portfolio. By mid-decade, we will reduce our portfolio variance by 30%, but still covers the same use cases for our customers. To face transformation beyond 2025, with the VAN.EA 1 architecture strategy, we will achieve further complexity reduction translating into significant economies of scale. Also, we will apply a flexible sourcing concept. That means we are sourcing components, either Mercedes-Benz internally, or externally as off-the-shelf solutions. We will choose whatever is best suitable for us, especially in terms of cost. Now let's have a look at our financial KPIs. As Mathias said at the beginning, we are currently in a very strong position. After a very challenging year in 2019, with topics like litigations, discontinuation of X-Class, et cetera, we have achieved a remarkable turnaround. Since then, we have improved continuously and delivered strong results over the last years, most recently in Q1. We achieved exceptionally high figures with 15.6% adjusted return on sales. I think the figures speak for themselves. The success today is crucial to fund our investments into an all-electric future. So let's have a look at our indicators of change. These figures show successful first steps through our transformation. We already realized a 24% increase in our average sales price compared to 2019 with strong net pricing and a very favorable mix. Our R&D spendings remained consistent with previous years, focusing on our new BEV models and investing in our future. PP&E is down 17% by reusing existing assets and structures. Last but not least, we reduced our fixed cost by 7% since 2019, by building a leaner organization. Unfortunately, headwinds caused by inflation, hence the limited availability of parts, have eaten up 2-digit savings compared to previous years. However, for this year, we expect a step in the right direction towards our goal of around minus 20% by mid-decade. And this is just the beginning. Now let me give you some examples for the application of our strategy in upcoming years. Our resilient business is based on our strong revenue streams. With the strategic pillars target and embrace, we aim to achieve a further push in product mix and net pricing. This results in a significantly growing average sales price until end of the decade. This goes hand-in-hand with a substantial content enrichment. We intend to keep our premium position for commercial vans and luxury position for private vans. With this, we serve a wide range of customers with a strong product mix. The shift to a direct sales model brings us closer to the customer. It enables us to manage discounts and eliminate intra-brand competition. Additionally, we expect digital extras, so-called software-enabled upgrades, to generate a relevant incremental EBIT contribution. On top, we have a strong customer service and parts business. Combining this with profitable growth in regions, channels, products and industries underlines our objective industry-leading profitability. Ramping up our EV portfolio by introducing VAN.EA, including MB.OS, and our new low-cost plant in Poland, we will require additional investments in our electric future. At the same time, we are reducing our ICE investments by 70% by mid-decade compared to 2019. To be clear, while we will be intensely cost focused, absolute CapEx and R&D will increase in the next few years. Please recognize that CapEx and R&D levels have always been intermittent in the LCV industry due to long platform life cycles. Even in the past, we have had short periods of higher investments. These are followed by longer periods, reapings, benefits of that investment with the product in the market. We will see this again in upcoming years for VAN.EA. We expect annual CapEx and R&D to increase to a peak of about EUR 1 billion for BEV in 2025. While this marks a substantial increase on recent levels of roughly EUR 0.7 billion for all R&D and PP&E spendings, it is essential to make this investment. Based on our latest planning, we will be able to reduce spendings again after 2026. It will set us up for an ongoing success in the market with the best possible BEV product and the best digital services. We also tackled our fixed and variable costs at the company, operations and product level. The key levers for the around 20% fixed cost reduction by mid-decade are streamline and digitize processes, bundling of cross functions and synergies with Mercedes-Benz cars like joint sourcing and common development. A lot has been achieved already, and inflation further increases our ambition. Our variable costs will decrease, mainly through the reorganized industrial footprint, HPV improvements, complexity reduction and contracted battery cost improvements, making our objective industry-leading profitability viable also in the BEV world. All of these efforts support our financial ambition till end of decade, double-digit margin adjusted at Mercedes-Benz Vans. Departing from today, we guided 11% to 13% return on sales adjusted for the full year 2023. We indicated to see ourselves at the upper end of this range for this year. We believe that we can hold the margin range until mid-decade. An EV share of up to 20% is compensated by ongoing strong industrial performance, lower fixed costs, and slight volume growth year-over-year. Beyond that, end of decade, we assume an EV share of more than 50%. In addition, the depreciation from the VAN.EA project and the reorganized production footprint will influence the margin. However, we believe we can hold the margin also at double digit, probably closer to 10%. Over the investment cycle, we see a cash conversion rate adjusted in the vicinity of 0.8%. During the investment phase, we might be slightly below our current guidance. In the following years, we expect CCR adjusted to be on the level of 2022. Our clear ambition is to assure weatherproofness of our van business. A resilient private and commercial van business is core to master the transformation towards BEV successfully. With this, back to Mathias.

Thank you, Mario. Thanks to everyone for today's in-depth look at our strategic goals moving forward. Let's summarize our 4-pillar strategy and how we want to build economic value and create future profitable growth. Our emphasis on luxury private vans and premium commercial vans will sharpen our ability to grow high-margin regions, channels, products, and industries. We are strengthening our customer-centric focus for stable profit streams, offering customers products and services they desire. VAN.EA, our innovative, purpose-built EV architecture, with latest autonomous capabilities is our way into a fully electric future. Mercedes-Benz Vans digital experience will be based on MB.OS, extended by B2B extras and including access to third-party apps. A more cost-conscious approach to our company, operations and products will facilitate long-term profitability of the van business. That is our plan, and the entire van team is committed to making it happen. And to see what makes us excited about the van business and how we are keeping the world moving, let's take a look at this video now. Thanks for joining us today. [Presentation]

Hello, ladies and gentlemen. This is Steffen Hoffmann speaking, and I'm heading Investor Relations and Treasury. I'd like to welcome you to our Q&A session of our Vans strategy update. For this Q&A session, we are happy to have with us Ola Kallenius, our CEO; Harald Wilhelm, our CFO; Mathias Geisen, Head of Vans; and Mario Boehme, Head of Finance and Controlling Vans, who you have already seen on stage. You probably all joined the presentations right before. Just as a quick reminder in advance of our upcoming Q&A session, we would like to politely ask you to focus your questions on the presented matters. Thank you for that. Ladies and gentlemen, you may ask your questions now. I will identify the questioner by name. However, as always, please also introduce yourself with your name and the name of the organization that you're representing, before asking your questions. A few practical points. Please ask your question in English. And as a matter of fairness, please limit the number of questions to a maximum of 2 to give everybody on this call the opportunity to ask questions. The operator will now explain the procedure.

[Operator Instructions]

We start the Q&A now. And the first question goes to Patrick Hummel from UBS.

It's Patrick Hummel, UBS. Thanks for the presentation of your segment. That's definitely very helpful to better understand the business. So I'd like to go for two questions, please. First one is on the manufacturing side and your focus on efficiency. Not too long ago, you were looking at establishing a joint manufacturing plant together with Rivian, which did not happen. So I'm just wondering to which extent scale and partnerships with other van producers are an important element to safeguard profitability in the long term? I assume this plan that you presented is based on a stand-alone kind of manufacturing footprint, but any color you could share in terms of how much you're going to pursue manufacturing synergies with others would be appreciated. And my second question is, it ties into the ADAS topic. And you said at the beginning of the presentation, the industry is very stable, and that's one of the reasons why it's so profitable. If you think about the arrival of autonomous vans, whenever that is, that would probably be the exact opposite of stable. And you have some very powerful players looking at achieving that autonomy, be it Amazon with Zoox, be it BrightDrop of GM, and Tesla talked about Robovan. So is your road map for ADAS, which is, I would say, more or less in sync with passenger cars, maybe even with a bit of a time lag versus passenger cars, is that ambitious enough? Or are you taking the risk here of massively losing out in the long run whenever autonomy is really ready for prime time. And we all know that time lines got pushed out. But to me, it sounds like your plan is not really to have a fully autonomous van for logistics, for deliveries over the business plan.

Thank you, Patrick. Mathias, I suggest both for you, efficiency partnerships and ADAS road map.

Yes, absolutely. So then let's start with the efficiency topic first. Based on our van ER architecture, we have decided that we will definitely have our independent architecture and to make sure that we can use the advantages of the new technology like eMobility, we have decided to merge our full midsized segment and our large segment onto 1 platform, VAN.EA, which gives us the corresponding scale to be independent so we don't need to be in a partnership. And this is the basis. Then we also decided last year that this VAN.EA platform will be built also in our brand new factory, which will be focused on electric drive only indeed. And getting to your point of Rivian, that was the original plan that we build this factory a big larger because the original plans were that Rivian would also come to Europe with their operations. That was the original plan. Rivian has decided to focus on the U.S. market, which we fully accept. So we continued with our original plan to build this factory for VAN.EA on our own. And as I said, the scale effect is pretty massive because of us merging basically everything from a V-class up to a Sprinter on one platform. So that's on the efficiency piece. Let's come to the other piece. I mean one of the things Ola mentioned in his introduction as well was that we share the corresponding synergies with our strongest cooperation partner, which is Mercedes-Benz passenger cars. So VAN.EA will be fully based on the electric-electronic architecture of our passenger cars. And so we also have full access to the autonomous functionalities accordingly. And our clear plan is to have Level 2, Level 2 plus in the market launching VAN.EA, then to move towards Level 3 on the private luxury side, and that will kick in whenever we are right and prepared in this segment. And coming to your point of the commercial segment, there we believe that Level 4 will play a role absolutely. We have made sure that based on our architecture, we have the corresponding installation spaces, the redundancies, everything we need to also fully operate on a level field basis. But I also want to be clear here, we believe that this is a technology which will rather kick in end of the decade, beginning of next decade. And if you look at our segmentation, I showed in my introduction as well, this is only a very small piece of the overall industry. So we have a very, very strong and resilient footprint because we cover comprehensively all 9 plus 1 industries, and the industry, for example, for hub-to-hub transportation, which met us most here, especially the last mile, which is by far the biggest one. So we will be prepared for that, but we also have a basis in all the other segments.

Thank you, Mathias. Thank you, Patrick. From Zurich to Frankfurt, Tim Rokossa, Deutsche Bank.

I think Patrick was just trying to clarify something. But then I go ahead. Steffen, I hope this is still in line with the content delivered. I think, first of all, this was a really good presentation number strategy, what better we can ask for. And certainly, vans does not get the credibility that it deserves. But I think you dodged what is probably the most important question to investors. And you hinted to that in your intro actually. The key question is not if this can be a good business. To be honest, I think we never quite understood why it wasn't as good as it is right now with your positioning and pricing. The question is, if you are the best owner of this asset and the V-Class clearly is the premium asset, but it has a lot of commercial customers as well. Certainly, your Sprinter product does have. And it's very different to those that you are attracting with the presentation that you had in Monaco. So whilst this was a very good presentation, I think we've heard almost nothing about why this is a very integral and important part of the Mercedes-Benz Group. I see that software has won, obviously, a few hundred thousand units as well, but Ola and Harald, maybe to you, can you please clarify why you think Vans should remain part of Mercedes going forward? And then secondly, looking just a bit at the past because we have seen the pattern of substantially better profitability over the last 3 years in many other instances in the automotive world as well. You had quite disappointing times between 2018 and 2020. Can you maybe nail it down to a few points that you really changed that made you as profitable as you are today versus those 2, 3 relatively dark years that we've seen to give us confidence that you will remain as profitable going forward.

Ola, are you the right...

Yes. I'll Tim. Happy to do so. As we saw in the presentation with Mathias and the team, the van business in its own right is a profitable strong business. It underlies slightly different market mechanisms than the classic passenger car business with different market cycles, but also different regional footprint. So in a way, the strong division inside Mercedes provides a resilience factor, a little bit of a hedge to the cycles that you would have on the passenger car side. But I think one thing that's very important to consider here, which is very different from what we did with Project Focus with our truck business, is that if a car company is the tree, the van business is a branch. And I'm not aware of any large van player that does not have a tree to attach to. So the synergies between a car company and a van company is much, much bigger. I think on the bill of materials side, we're at or above 50% of the bill of materials. So a stand-alone van business is certainly a less viable proposition. Then you go into the intersection here between the two. I'm looking at this EQV to my right here. This unique segment that we have built over years with a strong price premium for specific customers that are looking for a larger vehicle, a people mover or some kind of a space concept for specific customers or for a specific period in your life. That has been a significantly growing and important segment for us. And I think we haven't seen the end of the road of this. On my recent rather long trip to China, I saw more vans than I had expected, many of which were Mercedes, which, of course, made me happy, but many of which were even volume producers that sell vans in that class for above EUR 100,000 piece. And I was thinking to myself, VAN.EA opportunity. And that goes further, I think Mathias alluded to the RV segment in the U.S. and so on. So even in the market, one profitable segment of the vans actually does fit quite well to what we're doing on the passenger car side. So I think there's a whole host of reasons to say we have a large passenger car business, but we also have a very attractive van business that provides resilience for our overall business model and the purpose of today was to lift that out of the shadows a little bit because we seem to talk only about passenger cars when we usually meet.

Thank you, Ola. And Mario, on the profitability, kind of what has sustainably changed since the more challenging times?

Thank you, Tim, for the question. We managed to turn around, coming from 2018, 2019, mainly because we focused. We focused historically on a profitable growth, not only on product, we also focused on the profitable growth on the products and regions, channels and other industries. That means, as you could see also on the slide, the ASP was growing up in the last years by 24% compared to 2019. But also on the cost, we did a very good job. We focused also to reduce our fixed costs to optimize our operations. As we saw also, we had a clear target for reduction of our HPVs. And also for the product costs, we focused, and variable costs. I think we are really focused now on the revenue side as well on the cost side to optimize our product and also our product portfolio. For example, also our complexity, what we mentioned in the slides beforehand.

I can just add one thing. I mean you picked 2018 and 2020, which makes a lot of sense. But let's also look at the whole decade. The whole decade we have basically operated at very, very healthy margins. They may not appear to be too high from today's perspective. But if you look at the automotive industry back in these years, also the van business in those days was a very strong business. But you picked exactly the right years. And I think Mario could explain well the reason for that?

Harald?

Maybe, Tim, a point I would add is, I think you will not doubt or contest the belonging of the V-Class to the Mercedes side of things, to the private use side of things, as Ola pointed out, and you, Mathias. But I think there is an important point, I mean, to do the investment into the platform, you need to have some scale. And probably the private use case is not big enough to have the economics at scale you need to command. Therefore, you need to have the commercial side of things. And in return, you couldn't do the commercial side without having the private use. And I think, therefore, I mean, this is a key point, which we discussed intensively as part of our capital allocation over the last 24 months, where we have come to the conclusion that obviously next to a decent profitability, as you can see, it is also a meaningful thing in terms of optimizing capital allocation.

Thanks to all of you. Patrick, I'm sorry, if you had a follow-up question, we didn't hear it. If you want to go in the queue again, then just dial the star and the 9, if there is a follow-up question. Now from Frankfurt to London, I have a few questions coming out of London. We start with José Asumendi from JPMorgan.

Thanks for the very detailed presentation. A couple of questions, please. Can you comment a little bit the peak to trough margins in the business? I'm trying to understand, with all the cost actions you've done in the last years, with everything that's coming up in the coming 2 to 3 years in terms of the reduction of fixed costs and continued improvement of the product, what do you think margins would be if volumes would be down 20% to 30%. How do you think about this peak to trough margin thesis in the next cycle? And then second, Ola, I would love to hear a little bit more strategically, why is the pickup segment not strategically a segment that is of interest for you, especially when you think about -- you have ultimately a brand, a technology and the platform. So why would this segment not be of interest for you strategically in North America?

Okay. Mario, on the kind of margin downside in a downturn market scenario?

Yes. José, thanks also for your question. I think we focus on the value growth, not on the volume growth, what we currently have in our plan. It means even if the market goes more from a sunny scenario to a cloudy weather scenario, we are a very resilient business case because of we have this comprehensive cost efficiency program at all levels. And here, we see a very good situation in our planning currently. And therefore, we also guided you with this 11% to 13% ROS 2 weeks ago -- or 4 weeks ago. And we are very convinced that we can hold this margin also for this year, for sure. We also indicated that we will stay in the upper end. But also when we have a look forward in the BEV world, we also said we will keep the double-digit margin there.

And maybe, José, it's new to me that you love the weather torch so much. You might have noticed that we took it away.

We only have one weather.

Exactly. We're just used to sun. No, I think, I mean 2022 in terms of volume was not really a great year, right? And you guys, I mean, did a fantastic job, and with more improvement to come, I think more resilience to come, you can also weather lower volumes. And again, I mean, the proof has been demonstrated.

So to your question, José, on pickups, if you look at the world of pickups, I would say there are 2 main markets. The one that is by far and away the most profitable one is the full-size pickup market in the United States, dominated by traditional players, but of course, new players that are entering in. To be in that market, you would have to go all in. And in fact, we don't have an architecture for a full-size American style pickup. And there, I'm not so sure because that would then be more on the passenger car side in terms of where you would position that from an image point of view. I'm not so sure that Mercedes is the right play for that. The other pickup that you have in Asian markets or you have it in South America or you have it in South Africa or a little bit in the craftsman world in Europe, but not so big, is more what I would call compact to normal large to mid. That's a cutthroat business. It certainly doesn't fit to our brand image. We tried it. That was, by the way, part of the not so fantastic financial results in 2018 and 2019. So I think we gave that a go, but we quickly realized that, that was not something that's going to be long-term financially successful for us. So we cut our losses and we stepped out of it and we have no plans of coming back in again.

And we've also talked briefly about capital allocation. And I mean, we have a lot of ideas what you could do based on VAN.EA, but we also have a very clear focus, and this focus is clearly in our home turf. And our home turf is medium to large vans that works perfectly well from commercial up to private, and that's what this platform is made for. So clear focus on those 2 segments of the market.

Thanks, José. And we continue with George Galliers from Goldman Sachs.