Traton SE (8TRA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome at the TRATON SE conference call. This conference will be recorded. [Operator Instructions] Julia Kroeber-Riel will now begin the conference.

Good morning, and welcome to the presentation of our annual figures for 2020 a year that we will all certainly remember for a long time due to the pandemic and its effects. Today, however, should not only be about looking back. But above all, about our way forward. You've already been fully informed about the figures for the COVID year 2020 on March 10. This is why we'll keep the figure section a little shorter today. However, you'll find additional slides on the results of our brands in the appendix of this presentation online, and you can already find the annual report and the press releases on our website. Our CEO, Matthias Gründler; and CFO, Christian Schulz, will lead us through the presentation today. Matthias Gründler will first discuss the general condition that shaped the cause of the year 2020 for TRATON. Christian Schulz will then take us through the group's key figures and will explain our outlook for 2021. And then in the end, Matthias Gründler will conclude by explaining a few key topics that we are currently dealing with at TRATON quite intensively about e-mobility. We have already sent out a press release today. And with that, I'll directly hand over to you, Matthias.

[Interpreted] Thank you very much, Julia, for the nice introduction, and also welcome from my side to the presentation of our financial figures for fiscal year 2020. I'm very pleased about your interest, and I would also like to jump right into the first block of topics. Let's take a look at the political and economic environment in which the TRATON Group operated last year. The main issue of 2020 and unfortunately, also the current year is the COVID-19 pandemic. The necessary containment measures have had a major impact on the economy, and that's also on TRATON. Even before the outbreak of the pandemic, a decline was expected for the European commercial vehicle market, the pandemic has exaggerated that situation even more. However, after a sharp drop in the second quarter, the market was able to recover steadily. In the fourth quarter 2020, the European truck and bus market was above -- back above the level it had before the outbreak of the pandemic. The global economy is recovering from the COVID shock, but it's still under pressure. In addition, the rapid recovery after the slump is a major challenge for supply chain, and the pandemic is still with us. So we -- it's -- we still have to be very vigilant. This applies to the protection of the health of our employees and also to our cost management because no one knows how the further cause of the corona infections will develop on a worldwide scale. In the political environment, the European Green deal and the change in the U.S. administration stand out in particular. For the global economy, the forecast of the international monetary funds are -- regarding the gross domestic product indicate a significant upturn following the corona slump. The latest forecast was for a growth of 5.5%. However, this recovery is likely to vary in speed and strengths across the regions. You all know that China has already found its way back onto a growth path very early on. The European zone, which is very important for us, is recovering much more slowly. And the IMF has already had to revise its expectation significantly downward. In June 2020, growth of 6% was still expected in the Eurozone in 2021. In January, only a plus of 4.2% was expected. So therefore, it will not yet be possible to make up for the corona decline in Europe in 2021. In Europe, vaccination is slow and viral imitation are spreading rapidly. This shows that we can expect growth in 2021, but the economic environment is still extremely fragile. If we look at the registrations of trucks over 16 tons in Europe, this overall economic trend is concerned. Things picked up very quickly after the corona slump, but after that, growth slowed sharply. Although the European market for heavy trucks has recently turned positive again in a direct year-on-year comparison, it has not yet reached the level of the previous year. A look at our political environment. Alternative drives currently face a challenge of not yet being able to translate their societal environmental benefit into a business benefit for our customers. In order to convince our customers of the benefits of alternative powertrains, political support measures are necessary. This will reduce the operating cost of alternative drives relative to diesel trucks. This will pay off twice over in safeguarding jobs and lowering environmental impact. This is why we have paid investment incentive programs such as purchase bonuses and tax measures and a CO2-related graduation of a truck toll and an ambitious CO2 price for fossil fuels. In parallel, we need a demand-oriented and affordable charging infrastructure to ensure predictability for our customers. Finding targets for investments in charging points are needed by 2025 at the latest throughout the EU and the number must increase significantly by 2030. Currently, there is no European legal framework for autonomous driving. In Sweden, Scania is already conducting autonomous test drives with TuSimple. The government in Germany has also agreed on a law to enable the use of driverless vehicles in defined areas of operation. This law is now being negotiated in the Bundestag. It should be passed before the federal election. Our industry is an international industry globally, networks are dependent on a functioning trade order. We therefore, welcome the European Commission's objective for the realignment of European trade policy. We support the clear signals for multilateral corporation contained therein. Now if we look at our sales figures and order intake, we see a year with 2 phases. The significant decline in the first half year of the -- was followed by a marked recovery. This recovery has been faster than expected. In the fourth quarter, both order income and sales were above the pre-corona level. And Christian Schulz will now give you an insight on the performance of our group as a whole. As mentioned by Julia at the beginning, you will find the detailed data for our brands in the appendix this time. So Christian, floor is yours.

[Interpreted] Thank you, Matthias, and hello from my side. TRATON and our brands have experienced intense months in 2020. And the decline in demand in connection with the COVID-19 pandemic, in particular, in Europe and South America, had a negative impact on all key figures in 2020. However, a noticeable recovery was visible in the second half of the year compared to the first half. Our key figures show that we have come through the corona crisis relatively well. This is reflected above all in order intake, which decreased by into 5% to 216,251 vehicles in total. The book-to-bill ratio improved by 0.2 percentage points to 0 -- 1.14. Unit sales, which follow order intake with a time lag of up to 6 months, by the end of the year amounted to minus of 21% and reached 1 -- 90,180 vehicles. Truck sales, including MAN TGE, also fell by 21% to 124,006. In the bus sector, 16,174 vehicles sold represented a decline of 1 quarter. Next slide, please. In 2020, the group's sales amounted to EUR 22.6 billion, that's 16% less than the year earlier. Cumulatively at the end of the third quarter, we were still at a minus of 21%. So you can see from this that the recovery continued in the fourth quarter. The adjusted operating profit of TRATON Group decreased to EUR 135 million. The adjusted operating return on sales to 0.6%. In addition to the volume-related decline in sales, the operating profit was impacted by a cut in connection with the launch of MAN's new truck generation and a more difficult, the used vehicle business. In addition, the measures taken in response of the pandemic, in particular, the temporary plant closures in the first half of the year 2020, impacted operating profits. TRATON took countermeasures at an early stage to contain the consequences of the pandemic. Our production site worldwide were closed from the second half of March until the successive resumption of production starting from the end of April. Temporary labor was reduced and short time working and similar measures were used to cut personnel costs. We've made consistent savings in material costs. We postponed or completely canceled project and events. In the segment of the industrial business, as in the group as a whole, sales decreased by 16% to EUR 22.2 billion, mainly due to a decline in the new vehicle business. Business with workshop services and spare part proved relatively stable. Aftersales turnover decreased by only 6%, the adjusted operating profit in the industrial business was at EUR 28 million. The adjusted operating return on sales was 0.1%. That is a 6.4 percentage points below the previous year. Capital expenditure for property, plant and equipment in the industrial business in 2020 were level with the previous year at EUR 992 million. Primary research and development costs were reduced by 15% to EUR 1.165 billion. This was mainly achieved through the targeted reprioritization of projects. In the previous year, R&D expenses were also incurred for the development of MAN Truck & Bus's new truck and bus generation. Net cash flow in the industrial business was EUR 676 million. In the comparable period, the figure was EUR 2.7 billion. However, 2019 included a one-off effect of around EUR 2 billion from sale of the Power Engineering business. Net liquidity achieved EUR 27 million compared with EUR 1.5 billion at the year earlier. In the Financial Services segment, sales were less affected by the impact of the pandemic, falling by 3% to EUR 820 million. The operating profit decreased to EUR 107 million compared with EUR 142 million a year earlier. The decline in earnings was due to higher provisions for future bad debt, lower margins and negative exchange rate effects. The outlook of market of service suggests an upturn in 2021. However, this will be uneven in the markets that are important to us, an increase of 10% to 25% is expected for the European market. For South America, an increase of 10% to 40% is seen. And experts estimate that the North American market will grow by 5% to 20%. As you've already seen from our press release as of March 10, we now expect a strong increase in sales volumes for 2021. Following the decline in 2020, we expect a significant increase in sales. The operating margin should range between 5% and 6%. We expect the cash conversion rate to be between 25% and 35%. Our forecast for 2021 does not include any expenses from the MAN Truck & Bus restructuring program or the planned acquisition of Navistar. The forecast is subject to a further increase in the number of inspections as part of the COVID-19 pandemic and the associated countermeasures taken by the respective countries as well as possible effects on our production and supply chain. The fact that we are optimistic about 2021 is also due to the strong second half of 2020. As Matthias said earlier, 2020 was a year of 2 phases. Even through the -- even though the pandemic is not yet over, there has been a clear upward momentum recently. Order intake in the second half of the year was almost 1/2 stronger than in the first half. Sales increased by 45% in a half year comparison. Net cash flow in the industrial business reached just over EUR 1 billion, a EUR 1.307 billion, higher than in the first half. While an adjusted operating loss of EUR 220 million was incurred from January to June, we, again, achieved an adjusted operating profit of EUR 355 million from July to December. The year 2020 was more than just corona for TRATON. We can look back on numerous strategic and product highlights. This definitely includes Scania's decision, an important one for the entire group, to set up production in China. As a first, Scania is investing in a truck production facility, 150 kilometers northwest of Shanghai. To be precise in Rugao in the Jiangsu Province. Serious production is scheduled to start in early 2022. Scania's long-term substantial investment in China also include the establishment of local research and development. We also have come to an important step closer to our goal of expanding our global market taxes by agreeing to a merger agreement with the American commercial vehicle manufacturer, Navistar. Matthias will come to this in a moment. We also achieved 2 important successes in the future technologies of alternative drive systems and autonomous driving. This is illustrated by the launch of our e-mobility joint venture with the Toyota subsidiary, Hino; and the global partnership in autonomous trucks with TuSimple. 2020 was also a strong year for our brands on the product side Volkswagen truck and bus in South America is meeting the needs of customers precisely with the just unveiled Frank Witter, and it will use the new truck to further expand its market position in Brazil. Scania has unveiled its future electric and plug-in trucks. Scania has already agreed with Norwegian food wholesaler ASCO to supply a total of up to 75 battery electric trucks by 2022. For MAN, we already started with a highlight when the new generation of trucks was presented for the first time in the Port of Bilbao. The new truck generation is highly efficient and with a reduction in consumption of 8%, shows that we are also sustainable -- as sustainable as possible when it comes to diesel truck drives. With that, I'll hand over back to Matthias, who will now look ahead and explain how the TRATON GROUP and its partner brands are heading into the future.

[Interpreted] Thank you, Christian. The global Champion strategy has set the direction for TRATON from the very beginning. When after the successes of the past year, we can certainly say that we are now in the middle of the implementation phase. We have recently made progresses in many of the areas, which have -- which we have been working on since our launch in 2015. A good example of how major developments are easier to work on in solidarity is our joint 13-liter engine for the group, the common base engine. Scania will be the first TRATON brand to introduce this modern drive system in Europe in the second half of 2021. The following year, it will also be introduced in Latin America. MAN will start introducing the CBE in 2024. And from 2025 on the jointly developed 13-liter engine will be in roundabout every second heavy truck of the TRATON brands. This is associated with high synergy potential as the majority of production costs for a truck are attributable to the powertrain. The CBE will also be a success for our customers. It is more fuel-efficient in lighter, and it requires less maintenance. This reduces the TCO. So the operating costs of the truck, the key argument in our industry. The CBE is a sensible further development. It will give our brands an excellent position in a diesel drive as long as our customers demand this drive. Nevertheless, we are firmly convinced that the future of the truck will not be shaped by diesel. Instead, this will be electric trucks. This firm conviction is leading us to significantly expand our research and development budget for e-mobility. For the period up to 2025, we now plan to spend EUR 1.6 billion. Up to now, we had planned for around about EUR 1 billion. This increase is possible because all brands are shifting their budgets from conventional to electric drivers. This will double the share of product development for electromobility by 2025. In return, less than 1/5 will be spent on product development for conventional drives. TRATON goes electric. Not overnight, but step-by-step, sustainably and in harmony with the necessary grid expansion because it won't work without a charging infrastructure. The trend towards alternative drivers can no longer be reversed. TRATON positioned itself early. We want to take a leading position here, and we are committed to climate protection without any ifs and buts. Electric buses from Scania and MAN have already been on the road with joint electric drive systems since last year. Our brands have each set themselves clear target for alternative drive systems. In 2025, e-drive vehicles will account for around 10% of Scania's sales in Europe. But the same -- at the same time, half of MAN's new buses will have an alternative drive. In 2030, every second vehicle sold by Scania will have an e-drive. At MAN, at least 60% of delivery trucks and 40% of long-distance trucks will then be emission free. Currently, 2 technologies are being discussed that could replace the diesel. Battery electric drive and hydrogen technology, mostly using fuel cells. We have intensively analyzed both variants and see perfectly sensible areas of application for hydrogen propulsion. However, our analysis has produced a clear picture. In truck traffic, especially for long distance routes. Pure e-trucks will, in the vast majority of cases, be cheaper and more environmentally friendly. The hydrogen truck has a serious disadvantage compared to battery electric e-trucks. Only 1/4 of the output energy flows into the drive at the end. 1/3 is lost from the energy source to the road. With e-truck, the ratio is reversed. The frequently expressed opinion that hydrogen trucks are something for the long-haul and e-trucks are only for the short-haul is untenable from our perspective. It is a fact that for the economic viability of a truck and the amortization of its batteries is rather regular intensive use. This is particularly the case in long-distance, heavy-duty transport. That's why we are convinced that hydrogen drive has its justification in niche and under special circumstances, but the future belongs to the electric truck. Another future technology for which we are already preparing in numerous ongoing and planned projects is autonomous driving. We have already started in 2018 in Western Australia in a Scania -- for Scania project to gain initial experience in a clearly defined area without passenger traffic. The project is running at a customer's salt mine. MAN has other projects in defined areas. For example, the Port of Hamburg. Another one is in preparation in this year for a container port in [ Ueno ]. We now have reached an important next milestone with our test drivers on the Swedish highway between Södertälje and Jönköping, which is to be extended to Helsingborg. Since end of 2020, we have been the first truck manufacturer to test autonomous transport between 2 hubs, so main junctions on public roads in Europe. Of course, a safety driver is always onboard today. The use of autonomous driving in this scenario is likely to become this significant one for the commercial vehicle industry in the short term. Our customers can use it to reduce transport costs and address the problem of driver shortages. Overall, we believe that automated transport solutions can significantly increase road safety. We have made important progress in the realignment of MAN Truck & Bus. The employer and employee representatives have agreed on the basis of the realignment in the key issues paper. Cost-cutting measures of up to EUR 1.7 billion were agreed upon for the necessary investment in the future. The improvements include reductions in staff and overheads, material costs and positive sales effects. All areas of the company are affected by the realignment. The production and development network will be set up with a view to the future. Across all areas, around 3,500 jobs are to be cut at the German sites by the end of 2022. A buyer has already been found for the power plant. The Thuringian special vehicle manufacturer BINZ is taking over all employees. We are still currently looking for a solution for the Austrian plant in Steyr. Overall, we expect the restructuring cost for MAN's realignment to be in the high 3-digit million range. This will ensure a higher return on sales and a stronger cash flow in the future. Production accounts for around half of internal costs. Significant improvements are therefore being sought here. The number of plants is to be reduced from 10 to 8. As I just mentioned, we have reached a good solution for plant and are in talks with a possible investor for Steyr. Our clear goal is to transform MAN from a hardware supplier into a leading provider of intelligent and sustainable transportation solutions. The transformation of MAN Truck & Bus is not an austerity program. Rather than necessary restructuring is the basis for massive investments in future technologies. Munich, the site will remain MAN center of excellence for competitive vehicle development for trucks, software and electrics -- electronics. However, Munich will also become an innovation center for electromobility. Munich will take over selected production and development from the Steyr site. In order to create capacity for the production of trucks with alternative drive systems, some truck production and cap equipment will be transferred to the Kraków site. Nuremberg will become MAN's center of excellence for the development and production of new drive technologies. Nuremberg is also the lead plant for the production of conventional and alternative drive systems. The site takes over selected development of [ Steyr ]. In order to be able to devote more attention to the new drive technologies in the future, development capacities for diesel engines will be scaled back. And part production, that does not relates to a core competence will be outsourced. A very important topic for TRATON in 2020 and far beyond is the planned acquisition of Navistar, after both sides agreed on a merger agreement in November 2020, a clear majority of shareholders voted in favor of the takeover at Navistar's Annual General Meeting in early March. The transaction is expected to close in mid-2021 and is subject to customary closing conditions and regulatory approvals. We have all experienced an exceptionally challenging 2020, personally and economical. I'm proud that our team at TRATON succeeded with strict cost management and a lot of energy in ultimately achieving an operating return on sales of 0.4%. And we want our shareholders to take part in this success. And therefore, we propose at the -- to the Annual General Meeting on June 30 '21 that a dividend of EUR 0.25 per share is to be paid for the 2020 financial year. For 2021, we expect a return on sales of between 5.0% and 6.0%. Following agreement on the key issues paper for the restructuring of MAN Truck & Bus, we will swiftly begin to lead the brand into a strong future. And with the closing of the Navistar acquisition expected in the middle of the year, the entire group is moving into the important North American market. This will give us access to a further 35% of the global profit pool. We have a clear answer to the important question of the drive systems of the future. For trucks, especially for long-distance routes, it will clearly be the battery electric drive system for TRATON. A typical regularly used e-truck in Europe can be ahead of a diesel truck in terms of total costs as early as 2025. And that's especially true for long distances. By 2030, the cost average -- advantage could already be in the double-digit percentage range. Given the narrow margins in the transport sector, this will lead to a shift away from diesel toward electric drives. As you can see, 2021, promises to be an exciting year for TRATON GROUP with important decisions to be made. I'm looking forward to moving the company forward with together with my team, and I'm particularly pleased to be able to welcome many new colleagues in the U.S.A. And we are heading toward a strategic realignment of the group, which should make us even more powerful in the future. And with that, I would now give the floor back over to you, Julia.

Thank you, Christian and Matthias, for your explanations. I would like to open the Q&A session right away. So I pass the floor back to our operator.

[Operator Instructions] Here's the first question from Christina Amann from Reuters.

[Interpreted] I've got more than 1 question. The first question is about the forecast for the ongoing year. You talk about a clear increase in sales and distribution? And can that be somehow -- can you be more clear about it? And then when will we come back to the level of 2019? And the second question is about e-mobility. [Technical Difficulty] So the second question was about the development of the e-mobility, Daimler has already taken to the engine business, and they said, okay, we will not do that ourselves anymore. Are there similar considerations at TRATON? So when will the last diesel engine be developed? And when will the last diesel bus or truck be sold?

For the first question with regard to the forecast, I would ask Christian Schulz to answer.

[Interpreted] Well, Mrs. Amann, well, beyond what I said, there's not much to be added regarding the forecast. It's rather difficult for us. We had very good order intake in the second half last year, and it seems that, as I said, we can see clear improvements here. However, we have to say that in the second quarter, with -- now with the third wave, we don't see -- or we don't know yet whether we'll reach the level of '20, 2019. So I'm sorry, we cannot add anything to our forecast.

[Interpreted] So I can take over Julia for e-mobility.

Yes.

[Interpreted] Currently, we don't have any concrete plans to sort out our classic engines. But of course, we are always considering everything. Regarding the new engine generation, we just had our -- a new main engine, the 13 about to be launched. That will be the last big project that we will do here. But of course, we still have to see what the law is for conventional drives. And with Euro 6, we are now preparing ourselves and we will have some adjustments in the course with the regulations, but we will not launch a new generation of engines here. Then you asked when the last diesel engine will be produced. That will be produced when the last buyer wants to buy it. For some export markets and so on, we will have to produce diesel engines for quite a long time. I hope that answers your question.

The next question is from [ Christoph Halbig ] from [indiscernible].

[Interpreted] From Frankfurt. I've got 3 questions. Mr. Gründler, in the beginning, you talked about MAN restructuring, and you said that there was some talks about Steyr still and that there's an investor preparing themselves. So that is that secret was? And when do you expect an agreement regarding the future of the site of Steyr? And the second question about e-trucks. Where in the long run, do you think you can get the batteries from? Is that because the volumes -- is that the volumes you communicated in the group regarding purchasing batteries? Or do you have any expectations regarding the purchasing of batteries? Now the third question is about China. You said that this project for Scania with the local production, what will be the next steps for MAN here? How about the cooperation with Sinotruk? And what will be the future of this project?

Matthias, I think you will answer all 3 questions.

[Interpreted] Yes, I would, just wanted to start. Thank you, Julia. Regarding MAN restructurings. There were several investors that were interested. We are currently discussing 1 concept in more detail, and I do not want to mention the name. We like the concept, and we could imagine that this will bring the factory into the future. You -- I think in the next 4 to 6 weeks, we will know much more. Then you asked about the prospect for the battery sales in the group. Yes, in the future, we will, of course, use a lot of efficiencies, together with the group out of electrification. That's from the battery cell up to recycling. And here, we will use the opportunities that we have within the Volkswagen Group, and we will work together with the colleagues from the passenger cars. Well, the strategy in China, yes, Scania is taking the first steps, but I'm sure we will clearly expand this, and we will have a more or less whole holistic TRATON strategy here for the brand -- for the market. And Sinotruk is working quite well with the product CSO. We see here good collaboration.

The next question is from Marco Engemann, DPA-AFX.

[Interpreted] My question is about Navistar because we will soon come to the point in the few months or month -- weeks to that point. So what will be the first step that you plan to perform now when you can actually do it more or less by yourself? And what's the strategy for the market? Do we first -- will you first focus on kind of savings? Or are you wanting -- is your plan to grow?

[Interpreted] I can't tell you so much about that because I would be very motivated to answer your question, of course. But Navistar, they have a strong team onboard. And there's a clear picture where they want to go with their company, and we like that very much. But of course, we will discuss that afterwards regarding the component strategy and so on because the transparency will be much better after consolidation, of course. And on the product side, I'm sure we will have to start thinking and how we -- with the portfolio of the whole group can give support here, but we have a clear plan what we're going to do in the United States. And of course, we're going to grow. That's what we want to do.

Next question is from [ Johan ] [indiscernible].

[Interpreted] I've got a few questions, actually. One is about the whole topic of investment in e-mobility, Mr. Gründler, why are you increasing the investments now by 60%? Is that due to the fact that in the past months, you got more certain that these drives will prevail over fossil fuel or combustion engines? And second question, did you invest in alternative drives last year too? Or is that a completely new program this year? And the third question is, well, you mentioned quite -- you mentioned the target for 2025 and 2030, which is the share of e-drives in Scania and MAN Truck & Bus vehicles in total. What is the share currently? Is it so low that you are not even mentioning it? And the last question goes to Mr. Schulz. You described your guidance with strong significantly, clearly and moderately. Can you maybe elaborate a bit on what is what percentage-wise?

Matthias, maybe you can answer the first 2 questions.

[Interpreted] Yes. That's -- you hit the point here, of course, we have very smart and advanced models, how to predict the cost development regarding electrification in the future. And we have more and more sound forecast regarding the years 2025 and 2030. If you look back 5 years back, we clearly went wrong with our estimations regarding the performance of the battery. As a rule, they were 30% better than what we considered at that time. This is why our models are very clear. E-trucks will be more were cost-effective for the future. And then we think that will develop in 2025 and after that. And this is why we have put some more budget into this. And this year, we have launched a hybrid as well as a battery electric truck at MAN. So we will develop more versions in 2024, 2025. And we will be ready because we think this is when the tipping point will come. And then companies want to have electric cars because they can, in a more in a cheaper way, do the transportation, than with the diesel engines. And this is why we focus on battery electric trucks. And yes, you're right. We just launched it. Even in buses, the share is still very low. And this is why we cannot talk about the unit sold yet. It's not worth it, but we are on the market, and we expect to sell more and more. But currently, the sales is going in projects because currently, a diesel vehicle is better for the customers. And this is why they're interested in buying diesel vehicles still because that's best cost-wise. Now Christian, you will answer the next question?

[Interpreted] Yes. Well, I -- regarding your question. If I could have given more trends, I would have done it there is some volatility, right at the moment. On the one hand, we see very positive order intake, which gives us the possibility to say that we see a strong increase in sales and in revenues. But the insecurities because of the third wave of COVID pandemic and the current situation in Latin America is in a way that we cannot actually give you percentages that, please, you have to understand that.

[Interpreted] Yes. But what I meant is that you probably, on Page 63, in your annual report, you say either strong or moderate are significant. You seem to have some ideas, but you don't want to say more, right?

[Interpreted] Yes. I tried to explain how we get to sales through order intake and so on. And otherwise, we have to see quarter-by-quarter what's going to happen, and I don't want to say more in this respect right at the moment.

Next question is from [ Matthias Hartmann, ECM Publisher ].

[Interpreted] Two questions from me regarding your strategy towards battery electric trucks. Also for the long haul, how do you want to realize the reach you need fast charging stations and you expect batteries will have some more innovation here? Is that what you think? And the other thing is hydrogen fuel cells for drugs? So you probably -- we will probably not see a serial production truck by Scania MAN because they have Scania, for instance, and others have some prototypes.

[Interpreted] Julia, I would take the question.

Yes, thank you.

[Interpreted] Yes, you're right. And we expect that starting with 2025 until 2030, it will be necessary to have charging infrastructure in Europe. And the fast charging network is very important to us. So we need some investments here. We're firmly convinced that the fast charging network can be implemented at a much lower cost than the hydrogen network. Yes, we think the battery technology will improve significantly and the Regis will be longer. Currently, we've got anyway the necessity to make brakes for the drivers after a while. And then I think charging will be possible. So there will be possibilities of reach of 800 to 1,000 kilometers. We're quite sure. Yes, hydrogen. We are dealing with that technology. We see it. And there will be variance and customer requirements for certain application where it will make sense to use the hydrogen technology. For instance, if you have a certain cars like a cement mix. I'm sure here, hydrogen would be a good opportunity. If you've got routes that you kind of really planned for and vehicles in the shore distances, 4 days a week, and then they go on long-haul for just for once. That's something else. And if you always do long haul. And there are some possibilities here for hydrogen where it will make sense. And we will, of course, take you to that.

[Interpreted] But you're not going to tell us the time schedule that you've got or what measures you will have.

[Interpreted] No. This is more about '20, 27, maybe or 2030 because first, we have to have green hydrogen in an amount which makes sense before we do that. I think if steel industry is investing in hydrogen, and that makes sense in order to produce green hydrogen, then they will need huge volumes, and we'll see how much is left for trucks actually. And this will -- there will be a resolution. There will be regional solutions. If you look at the U.S. and see how hydrogen is used there, but right now, where we're dealing with the technology. We understand the technology, and we will be able to implement it. But there are a lot -- many of the components besides the drives are the same anyway.

The next question is by [ Martin Prim, Minchan Aqua ].

[Interpreted] So I have 1 question that is linked to electromobility. You have other expectations to infrastructure as, for example, an electric car. So maybe you can elaborate a little on the challenges that exists and how does that work in countries like Eastern Europe, Russia, Brazil. There are other different distances and there's another infrastructure in place or maybe a bad infrastructure. So maybe you can elaborate a little on that, what the challenges are here and what you want to -- what do you expect from politics?

[Interpreted] Julia, I would like to answer to that. So yes, infrastructure is the biggest challenge because we need the possibility to have 1,000 kilowatts charged quickly. And beyond that, we need the space. So you cannot use a car charging station in order to charge a truck. That's why you need different prerequisites for the year. For -- well, the parking lot situation and the charging situation, Eastern Europe will work rather quickly, the same as in the rest of Europe. So I don't see a big program here, at least at the main routes. There will be the possibility quickly in Brazil between the biggest cities, we will have the charging opportunities, too, if you think about sugarcane, for example. So things that are not in the vicinity of bigger cities, we will need to find solutions then.

And the next question comes from Michail Paraskevopoulos, Marktfeld.

[Interpreted] I hope that can everybody can understand me well. So I have got 2 questions. One concerns the possible synergies when it comes to battery cells. So maybe you can go a little more detail here. That seems a little difficult to me right now. I know the Scania and there's the project in Sweden. And they receive first cells from 2024 on. But what the group does right now. So we have these unified sales, especially for cars. Maybe you can explain a little more about that. Where you will receive truck cells? Maybe they are the same? I don't know. The second question is, again, for the hydrogen truck. This sounds a little like plan B, we will need to stay on track with the technology if plan A, electron mobility does not work well because in the end, if I understand it correctly, these are only smaller series and really, production is not really worthwhile.

[Interpreted] Julia, I would like to answer this directly. So I would not say we have a small series here. Most of the components of electrified vehicles are the same for hydrogen vehicle as for a battery electric vehicle, they're not different. It's -- you have battery stacks and fuel cell stacks. So this is not an entirely different technology, but they have lots of components that they share. Only the means is different. So we will take part in [indiscernible] program wherever it makes sense. And we will have big synergies here. And we will -- so where we are -- where we work with trucks, cars are concerned, too. So battery cells for trucks and for cars are developed at the same time. So it's the same with Norfolk. We are trying from the beginning on to create synergies in the entire process. And this is also about other things like, for example, recycling to do this together. And this is, for me, it goes without saying that we do this together, and we are lucky to be part of [indiscernible] here because we can participate in their efforts.

[Interpreted] Okay. One follow-up question. One question concerning hydrogen. So if we have a kilogram below EUR 3, maybe then also the hydrogen vehicle compared to diesel, will have a lower TCO. And nevertheless, battery electric vehicles will be cheaper, but hydrogen will be interesting for our customers from a certain point in time on. And the question is when we will receive green hydrogen for a price of below EUR 3. Okay. One follow-up question concerning battery cells. So are these the same cells that are built in trucks and cars are only bigger ones? Or are they different?

[Interpreted] The modules are bigger and we try and go both ways. So we are trying to use -- where we try car sales for trucks, and we see how car sales work in real life, so to say.

The next question is from [ Thomas Anam ].

[Interpreted] So I've got 3 questions. So Mr. Gründler, if you say that by 2025, the electric drive for trucks will be cheaper than diesel, do you mean operating costs or also purchasing? So I would also like to know so how many trucks or buses will Navistar sell or do they sell? And what kind of market shares do they have in the crisis now in the year 2020?

[Interpreted] So Julia,I'll just do the costs and then hand over to Christian. So it's very clear. So the operating cost of our customer. That is what we concentrate on. So we need to understand how our customer works with our products. And if they see at the cost for battery electric vehicle are cheaper when they have the possibility to recharge the cost, they will buy the vehicle because they will make more money in their business. And that's why purchase costs will be way higher for a battery electric vehicle than for a diesel vehicle. But the operating costs from our point of view, will begin to be lower from 2025 on.

[Interpreted] So can you give us an estimation? 2025, how many more electric trucks will you sell in compared to diesel?

[Interpreted] I cannot tell you that from the top of my head.

[Interpreted] What's that right now?

[Interpreted] Right now, it's way more. So double more -- more than double. Christian?

[Interpreted] So when it comes to your question to the market shares. In 2020 and heavy-duty also in Scania, we have had a reduced market share. This was part of our planning, though, because we said we will have a higher-margin before quantity. So we need to stay stable here. If you remember, in 2019, we had a -- what we needed to speed up. And then we had a market share of more than 19%. And here this -- we adjusted this, and we need to say that. In the market feels -- the only really real effect that we see is that at Scania, and that was intentionally in order to secure margins. When it comes to Navistar, this is a company that works within -- that has 85,000 to 100,000 vehicles per year, in a non-COVID year. And so we are really happy to work with Navistar. We will add around about 30% to the TRATON Group with Navistar.

And the next question is from William Boston, Wall Street Journal.

[Interpreted] When it comes to Navistar. I have 1 question. How do you see the position of Navistar in the American -- on the American market. And when it comes to further -- and what do you think about further consolidation on the American market, and then when it comes to hydrogen, you have -- you have already answered a lot of my questions before, but I would like to know in a sort of summary, why? Why you opt rather for battery solution than for hydrogen. What is against -- what speaks against a force development of hydrogen? Has your competition does? Does it? And another question concerning batteries is of how heavy because this is always an argument that your competitors bring about because a big truck with a battery is just too heavy. Maybe you could answer that.

[Interpreted] Matthias, I would like to ask you to answer the questions. [Technical Difficulty]

[Interpreted] Sorry, I was muted. So in the medium duty, we're in that there are a couple of components that we could improve also in heavy duty, and we're happy to support them there. So we are really happy with the position of Navistar and the American market. We don't see any need for consolidation there. And then you asked why no hydrogen, it's very simple. A calculation say also for the long haul. That are -- for our customers, it is cheaper to do long hauls, given an existing charging infrastructure to do that with a battery electric vehicle because it is just cheaper. The cost per kilometers are lower when using a battery electric vehicle compared to hydrogen. Here, the hydrogen price needed -- would need to go down that much in order to get down to the same level. So we don't think that this is realistic. At the same time, the creation of the charging infrastructure for electric vehicles is way cheaper than the construction of an infrastructure for hydrogen. And then we take our customers' positions and ask what does it cost to operate that vehicle. And this is our driver. Regarding the weight. Well, 2 regulations, we got about 2x more because the whole diesel engine, but the whole diesel engine cannot be put back. So we think that by 2025, we'll be able to keep in line with the regulations. Thank you.

There are no further questions now, I pass the floor to the speaker.

[Interpreted] Thank you for all your questions, we had a kind of decentralized call here we were in 3 different sites, and I think it worked quite rather well. I'd like to point out again that the press releases in the presentation plus the additional slides and the annual report can be found on our website. So we would close the call now. We would like to wish you a successful week and stay healthy, most importantly. So till next time. Okay. Goodbye.

Thank you for participating. The conference has ended now. Please -- the lines will be switched off. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]