Traton SE (8TRA) Earnings Call Transcript & Summary

Welcome to TRATON CMD. Welcome to Munich. Welcome to the MAN Truck form where customers come to collect their vehicles, vehicles which were produced at the production plant you've just visited. We have a fantastic collection of vehicles here for you on-site. Please feel free to take a closer look at them between the presentations. These trucks literally move the trade and share price. Talking about share price. My name is Ursula Querette, and I'm Head of Investor Relations at TRATON. Welcome also to those who follow us online today. Some quick organizational information, the agenda. We will start with the CEO presentation, followed by the brands. We will then get an update on TRATON Financial Services, and we will close with the CFO part. There will be 2 short coffee breaks and 2 Q&A sessions. The first one after the brands and the second one at the end with more focus on financials. We will only take questions from those who are present here in the room, and please note that the presentation material will be made available for download on our website at 1:00. Now let's quickly turn to the disclaimer slide. And with that, I'm handing it over to Christian Levin, our CEO.

Thank you, Ursula. Great, transforming transportation together for a sustainable world, our purpose and in the coming 3, 4 hours, we're going to take you through our journey, and we're going to show that we believe that we cannot only make the world a better place, but we believe that we can create a better workplace that we can create happier customer and that we can create more satisfied employees. To help me to tell this story, I brought some of the awesome TRATON track board team with me, and I would like to start with Catharina. Catharina, will you stand up. Catharina is managing our product management, the so important role to make sure that the demands from the markets for all the brands are fueled into future product road maps. I also have, who's next? Well, our host, of course, Alexander. You're not only hosting us here today at MAN, but you're also the man who turned around MAN and showed what the real realignment program actually means. And then let me go to Brazil, Roberto, our who shows the rest of us that you can do really a lot with really a little, which you show every day of the week. And moving on to Mathias, you shocked us all by getting rid of Navistar. So the last time you'll hear about that was actually today because from now on, it's International Motors. You won. Where are you? You are transforming TRATON financial services into real finance powerhouse, and you're going to tell us more about that in a while. And finally, last but not least, Michael, who knows every tiny detail of our results and balance sheet and you're going to talk about the financial ambitions and our financial strategy. So let's get going quick recap, what is TRATON? I know many of you already know this. We say we are a transportation powerhouse. We are, of course, 4 powerful brands that you all know about, and we are also a financial services arm. When we go back to our Capital Markets Day, I know many of you were in sort of tell you 2 years ago, you could say that we were merely a collection of brands who had agreed that we needed to collaborate. But today, I'm really proud to say that we have decided and we have started to transform into a real group, a trade-on group where we deliberately decide where does it make sense to collaborate and hence, create group functions and where does it not make sense because we want to keep our brands well differentiated and especially in markets where we have geographical co-location. So based on this, we're going to talk about, for instance, a common R&D, which is a huge thing. More than 10,000 people are going to change from their brand to being part of all brands and being part of TRATON GROUP. I'm really proud of that, and I'm sure that's going to create a lot of value, but we're also very clear that we're safeguarding the brand's uniqueness and you're going to hear from all the heads of the brands, how we do that in order to maximize the value that we create in the end with our customer that is always related to one of our brands. Okay, size matters, right? We are one of the biggest OEMs in the world with our numbers here, 340,000 roundabout delivered vehicles last year. EUR 46.9 billion in revenues and a decent return on sales much improved, 8.6%. And then you have the fame to claim here, the claim to fame from all of our brands with some numbers, I will not go through them. I know that you already know them by heart. But what I always want to underline is that we are purely and only about commercial vehicle. That is we're only into business-to-business. We're not selling anything to consumers, just to have that said, for those of you also on-line. All right. Last time, we talked about adding a bubble or a circle to our strategy. That's that little white thing in the middle. It says strategy execution. When I started at TRATON, and that's actually -- you reminded me, Johan, exactly 3 years ago today. I added that to the strategy. Strategy was perfect. Now we also start to execute on the strategy. And trust me, there will not be a new strategy launch today. What we have set out to do here towards 2030, we're still determined to do, and we're going to tell about what we have achieved, but we're also going to talk about what do we need to achieve more. But it's really all about execution. Let me take you right into what we believe are the main reasons to invest into TRATON, and we call them our 7 investment highlights, starting with where I ended the last slide, we deliver what we promise, and I'm going to take you through what we promised last time and where we stand. But let me run them through quickly. We believe that our clear commitment to sustainability is to do or die factor in our industry at 1 point or the other. Where there is not about the customers in the first place, it's definitely going to be about attracting employees and attracting capital to the company. Electrification is going to be the ultimate, but not midterm, but the ultimate solution to decarbonization of the transport system, and we believe that we are very, very well placed to take advantage of that huge shift that is happening in our industry. Fourth. TRATON is about growth. And we're going to show you how we believe that we can outgrow competition in the coming years. We are on a great transformation journey also when it comes to technology. And as I was into, we take the advantage to also merge our forces come on to one product system, which we will talk a lot about today, but also change in the organization to support it. We're building resilience in a completely different way compared to 2 years ago. We're going to show you how we do that. And we are, of course, and this is maybe the highlight for any of you, setting up a clear financial framework, where do we want to be in the coming years. You remember, we promised you a certain level for '24 and they will, of course, have to be a next step. Right, we deliver what we promised. Let me take you through our promises quickly. We promised you we would have better electric vehicles into the market, and we have battery electric vehicles into the market. I admit, they're not sold in huge quantities, but there are solutions from all of our brands in many of our applications. We promised we would finalize the realignment of MAN. This was not the first attempt. It was many attempts. And as I said, Alexander you and your team made a remarkable job to actually carry through everything. Last time we talked about whether the Steyr plant would really have to be abandoned or would it be abandoned? Yes, it was abandoned, middle of your last year. And when you look to this year's results, it is really a clean result post realignment. And I think you've all noticed that MAN has shown that they can really make money. All the last 3 quarters, it's based on a lower breakeven point, thanks to the good job done here. All right. Mathias, you will talk a lot about this, but we did promise to scale the so-called common-based engine #1, the CB1 with its gearbox and adjacent components. This was launched in the Scania as Super back in '21. It was launched in Navistar -- International in 2023 and we have been scaling that up through this year. And the feedback from customers so far is just close to amazing. We promised the start to build the TRATON Modular System. Of course, the common base engine, to some extent, is part of that a modular system, but there's much more to a modular system, but we have clearly set the pace to move in that direction, and I will show you much more about that later. We promised to set up a common financial services company based on what we had in the Scania brand. And we can conclude that we are on plan, Johan, and you will go into detail here, but we have been doing exactly what we said meaning that we are gradually taking over the MAN business from the Volkswagen colleagues on the [indiscernible] site. We have started up at International offering retail services or retail financing, and we will follow according to time plan also in Brazil. So super important toll in order not just to make money on money, but to actually sell more and sell better. We said we would go to China, and we went to China. We had a bit of trouble getting started with the pandemics, but since then, this is moving at China speed. And everything is pointing towards the promised SOP in the fourth quarter of already next year. And I'm going to go there in a couple of weeks, and I really look forward to seeing some. I think this is a live photo from last week, but we're going to see even more progress, and we're currently installing the equipment in for the assembly lines. We also promised to keep a policy of generous dividend. And we think with a 30% to 40% that we found an attractive yet balanced level, paying out EUR 1.50, which was highly appreciated last -- or based on last year's results, which was more than a doubling from 2022. At the same time, thinking about our difficult starting point when it comes to our balance sheet and working relentlessly to the leverage, and we will talk a lot about cash flow later on. But I think we have found, based also feedback from many of you, a fair level here of doing what we promised and at the same time, move towards a better rating, which is so badly needed not least for you Johan's business. Wrapping it all up, saying we set out to do a 9% return on sales in the calendar year 2024. It's not over yet. You know that we are over target with the half year results. We stick to our target, and we concluded, of course, an 8.6%, which was already good and a big step up from last year. But let us come back on that, of course. But that's the first investment highlight. We do what we say, we don't over-promise. Secondly, we have a clear commitment to sustainability because that's a do-or-die in this industry further or sooner. We have identified 3 main impact areas. The first one, of course, by far the biggest that's the decarbonization of our industry. We need to find a way to decouple from carbon dioxide emissions. We need to find a pathway towards maximum 1.5 degrees global warming. We know that we're 5.3% as an industry of the emissions in the world, which is huge. And we are supposedly a sector that is difficult to decarbonize. But from the product point of view, we have already what is needed. And every time I talk about this, I take the chance to call out to people around us in the ecosystem, including you representing the financial industry, we need help. We cannot do this on our own, even if we are the guys who are going to pay fines if we don't live up to the EU legislation or the American one. But we need here what the customer tells us 3 things. We need to get a good business case for customers to change over. We need charging infrastructure. And we, of course, need availability of green energy, green electricity in the places where we sell this product, otherwise, it does not all make sense. Circular is becoming more and more important, especially when we move into battery electric vehicle that carries so much raw material in the battery cells, raw material that is not of an indefinite availability. So here, we need to think different, and we are thinking different, we are already much more into doing remanufacturing, but more importantly, this needs to start from R&D. So for every new project, we look into what is the circular strategy on this specific project. And finally, as we go more global, as we need to have better control of the supply chains and especially in the battery electric space, we need to make sure that we're 100% top of the human right issues that emerge going more global. All right. Third investment highlight, and this is about electrification. Here, you have a nice collection of photos representing products from all of our brands that are actually supplied in the market right now. Those of you who were at IAA saw that both MAN and Scania in the European space are expanding the offering and MAN is now going into 40 tonne and the on-highway long haulage operations Scania is there, but is expanding with more performance steps. Now, International have managed to deliver its first EMV vehicle and Roberto, you are the first in Latin America to have a factory, which is here and producing battery electric vehicles with the e-delivery. We, at TRATON GROUP, of course, fully believes this is the long-term solution. It's in any -- in any, however, you calculate, you come to the conclusion that the only viable business case for the customers is battery electric. Said that, we see that this is moving too slowly. So however much we would like to see those volumes grow, we need to realize that we need to work with intermediate solution. The best protection we have here is that we have already the new driveline, which is the world's most modern combustion engine, which could be fueled by alternative fuels such as biofuel and later on also biogas, which could either be compressed or liquefied. We are developing hybrid solutions in order to cope with this. We are looking into hydrogen and they saw hydrogen combustion engine from MAN at the IAA, but ultimately, we see that the only thing that will really make it from both a CO2 point of view and a business case point of view will be the battery electric vehicle. Services. This is something that is boring to talk about -- I love to talk about it. This has huge impact on our bottom line. This is really what is creating resilience in our business. And this is where we see much more potential to grow. But let me start as the slide is starting on International, which is probably our biggest growth lever. If we do this right, if we can bring International, but I lost a pen bet, he promised me a nice International Motors pen if I did not say Navistar. I already lost it. If we can bring this brand back to its historical heights, which would be market shares in and around 25% in Class 8 and around 50% in Class 6 and 7 with proprietary services, we see that we could do a miracle in terms of bottom line profitability. We all know that we are operating in the world's biggest profit pool, i.e., the North American space. A lot of weight on your shoulders, Mathias. When we met last time, you saw that our presence was not terrific in the Asian space. It's still not. It's around about 5% of our revenues is coming from that. We never -- either of our brands had industrial presence there. But with the investment in China, we are opening up. We're going to China because it's the market where you have the supply chain. We're going to get behind of the trade barriers. And we're going there for many more reasons that I'm going to come back to. But it truly gives us an industrial footprint on a continent where closeness to customers, closeness to technology and closeness to trading systems and open trade system is of the utmost importance. So we're going to China. Now I come to Services. Let me see if I find my supporting slide on that one. All right. So let's divide this into 3 parts. I actually have a slide on this one. So what is this about? Well, it's about capturing maximum amount of value on the rolling population. We do that with going more and more into portfolio management. So we increase every year, the penetration. We work in all our brands to get customers to sign up to a fixed cost contract, at least on maintenance, but also on repairs. With connectivity, we add up a lot of more intelligence to these offerings. We can think of AI, and we can add even more intelligence and we can go into services that become proactive instead of reactive, protecting uptime for customers. That's happening. However, as the landscape evolves, we believe that this is not where we can grow compared to a total share of sales, but we think this is rather going to be flat as we see battery electric vehicles coming into the market. E-mobility services around the battery electric vehicle, however, has a huge potential to bring new revenues to us. Basically, all customers that buy battery electric vehicles today ask us at least about charging, which gives us the opportunity not only to make money on charging equipment, but also to sell uptime services on that very same equipment because in this game, it is all about uptime. And a battery electric vehicle that is not charged in the morning is not going to do the job. It's not going to bring the revenues to the transport companies that it's serving. We think of charging in 3 different ways. It's the depot I just talked about, it is being a mobility service provider that is safeguarding that our customers can charge also at other people, if we call it like that, other people charging stations with a fair pricing and good availability. We're building that up as a TRATON backbone as a company, but we're going to deliver that through the brands and the different brand names. And if I'm rightly informed, Alexander, I call it charging go. Scania calls it charging access. It's the same time of services, but it will completely be branded by the net. It makes sense to share the investments here on software. And then the third thing about charging is the on-highway. That's what you hear most about. That is what is lacking. That's where we called out for politicians to act. And here is why we created Milence together with Volvo and Daimler to make sure that there is a build-out along the highways. That, however, is only going to represent somewhere around 20% of the total charging needs. But anyway, a great way to expand our offering and make more money on services. Finally, if you think even further ahead and you come into the world of Truck-as-a-Service or real autonomous solutions where we take over the responsibility of what today is a typical responsibility for the holding company. And here, of course, the sky is just the limit. But is it happening? Yes. I will talk about Juna, one initiative in the group later on. And yes, we have started to sell the first autonomous vehicles, and they will be delivered actually next year. All right. Growth lever #4, Financial Services. I was already into this. But of course, it's going to be great to see if we can duplicate what we have done in Scania over the last 20 years and offer that to all of our customers in all of our brands and not only financial services as a basic leasing product, but all the tailor-made solution that includes and enables bundling because bundling is really the name of the game, and that is what our customers are asking for: one invoice solution, where you have everything included from your brand on it. It will be different, however, delivery models depending on how we work at the front end, and I think that's really good because we are in competition on the front end. So it's going to be branded by the respective brand on the front, and it's going to be run by organizations that are separated on the front end, but there's going to be a uniform system in the back, where we can hopefully also gain some scale on, for instance, IT systems, but of course, on the so important funding. But Johan, I will not steal your show. You're going to talk much more about that in a while. And then where I could spend a couple of hours, the transformation into becoming truly modular. And I can just urge you to have a look on the station if you didn't already do it out here, where we explain more about how this works. But let me take you a little bit back to where we're coming from. When we first started, and you can say, even post or even pre-2019, we were really looking into, can't we get scale by buying the stuff together? Buying stuff together does not give you any scale unless that stuff is exactly identical. We did find a few things. We did find that steel is basically steel. And you can, by bundling, gain some volume up to point, by the way, because when you become too big, you're not -- it's not interesting to negotiate prices anymore because you take too much of the base capacity from that steel mill, but nevertheless, rubber, tires, stuff like that. But it didn't really -- it could not really be measured bottom line. So we realized we had to develop components together. And we started with a famous CB1. I think we started to talk about that project already back in 2018-2019. This was a big invest. It was carried by one of the brands back then Scania, and then it was supposed to be licensed to the others. It has become a fantastic success, as I was into. You find it in Scania, you find it in International. It was launched in MAN during the IAA. You saw it under the name D30, but there was one problem. This driveline was supposed to be integrated into different chassis under different cabs and most challenging into different software architecture. And then integration costs occur. And what you gained a scale on having that same basic engine, you start to lose by having huge efforts put into integration and adaptation either on the driveline itself or on the interfaces in the chassis and the cabin software. So from that, we draw the conclusion that, okay, it was the right thing to do. We could not have afford to develop a completely new combustion engine driveline this late where others are talking about sundowning. So that was good, but we have to be even smarter. And that brings us to the decision, and I'm so happy that we could finally agree on this, that we need to step into one product system, i.e., what is called the modular system. It is, you should think of a LEGO play box where basically any component can be combined with any other component. There are 3 basic principles around modularization. I think they're also on the wall over there with our experts, but it's really about getting common interfaces. If you have common interfaces and if you stick to the principle that the same need needs to be using the same identical solution, and then it's just a game about how many performance steps do you need on this particular component. If you think right around that, you get trillions of combinations. You can tailor make on the rich end to customers, but you still have limited amount of components -- limited number of components. And on these components being identical, you do get scale, and that's where you can save. So on one hand, you can charge more because you can come closer to the demand. On the other hand, you have cost advantages; and that's just in the industrial setup. If you then think downstream, what this means for every service workshop, if there are only 3 windscreens, you only need to deliver and store 3 windscreen to guarantee uptime to our customers. If you have 15 windscreens, you do the maths. So that's how it's working, and I think we have an animation on this, right? This is not today, but this is the endgame when we have worked our way through not just the combustion engine driveline, but of course, the electrical driveline; of course, the chassis; of course, the cap structure; and most importantly, as I was already into, the software and the electrical architecture of the vehicles. So we have projects in Catharina's road map that is addressing all of this with, of course, different time spans. And you can see how you -- with the main components here and here, we're in the electrical world, the battery electric world, we'll be able to basically compile any other vehicle basically from any of our brands. I think you get the concept. If I take one example, which was also show casted at the IAA 2 weeks ago, the so-called CCD. So that's a propulsion unit, what you have here. That's electric motor integrated with gearbox and with power take-offs. We're creating that in 7 different power and tour classes. It's going to come as a 2-speed. It's going to come as a 4-speed. And they can be combined and they will have the exact same interfaces to fit into all of our future vehicles. As a result of this, and as I said, we also realized we have to have the engineers working together on this. It does not make sense to work on 1 product system and have engineers in 4 different brands. So we started the project with the aim to finalize during next year to have a global R&D organization with more than 10,000 engineers. And that's going to be headed by Niklas Klingenberg. He is not here today, but it's part of our truck board and he's having an off-site with the leaders who have been appointed by technology area around the world, by the way, because this covers all of our sites, whether it's Munich, Nurnberg, close to here or whether it's, I would tell you, Chicago, Resende or somewhere else in the TRATON world, including China. I get too enthusiastic talking about this. I need to speed up. All right, 6 investment highlights. We're creating resilience. Here you see our dependence on the different regions. And by moving into North America with International, we're covering that in a good way. We just need more volumes. We are covering Asia then with our investment into a factory with a production capacity of 50,000 units, but we are also becoming resilience through the expansion of our product offering. Recovering from the smallest 3.5 tonne Roberto, all the way up to the heavy Scania is in our mind, is up to 250 tonne plus buses, plus everything we do on Services. And the more successful we are on Services, the more resilient we become because Services are not moving in a cyclical way that new vehicle sales are doing in our industry. Okay. So to the highlight of the day, what are we then set out to do as a management team? Well, we are going to bring you growth, we're going to bring you profitability, we're going to clean up our balance sheet as quickly as we can, and we're going to make sure that shareholders are rewarded. So if you start from the revenue, and it's a span, but we believe towards 2029, so we put a 5-year time frame to this, that we can grow revenues with 20% to 40%. We believe that we can up our return on sales margin to the double-digit territory, also here showcased as an interval. We work relentlessly to take down our net debt, and we believe that the year 2027, we should be able to get that to 0. But in any case, we should be able to manage it during this period. And we have decided to stick to our dividend policy and continue to offer the 30% to 40% that we have been able to stick to so far. I know you have many questions on this, and I know that there are many details to be digged into, but we will have to wait for Michael's presentation when you will cover that. And in the meantime, I'm going to invite on stage Alexander to tell us, you, about how you are planning to continue to contribute to the growth story of TRATON. Welcome on stage Alexander.

Thank you, Christian. Good afternoon, ladies and gentlemen. Well, me and my team, we had a plan to realign MAN. And we executed upon this step by step. This is what we promised to you 2 years ago at the Capital Markets Day in Solutelia. And here we are, we can show you that we have kept our promises and are even more robust and resilient as well as also flexible to deliver on the future. A very warm work also from my side here, hosting you in our hometown of our headquarter here in Munich, where here, we have the heart of the sales and services teams, we have the heart of our engineering, we also have the heart of our purchasing and as you've been showing today and good experience, also where we have the heart of our production, where actually on the same production line, when we speak about flexibility, we are producing here our full line of ICE vehicles, but also on the same line, very lean investments producing the battery electric lineup as well. And you actually also have experience then the ready trucks with already the TRATON components in. When you came up here up the hall, we have the D30 power line, and the power line driveline is giving more power, more torque and more fuel efficiency to our customers. And that is what we need. We need satisfied customers, investing in our products, investing in the MAN brands. When you work up here, we have here our electric truck, battery electric truck, which we showcased here in the IAA in Hanover last week. And we not showed only this truck. We showed actually a whole lineup, a whole lineup of applications from 12 tonne to 50 tonne gross drain weight. Why? Because customers not electrifying only in the long haul, customer electrifying into various applications, and therefore, you also see here a crane tipper unit, which is also electrified. When it comes to fuel lining, we are sticking to that plan. So MAN is and will be a fuel liner from 3.5 tonne transporting goods and people up to 250 tonne transporting the most heaviest goods you have on these planets even in the so-called train combination. When it comes to electrification and our experience, the buses you see behind me actually made a great success and an impact in just 2.5 years after launch. In 2.5 years after launch, we became Europe's #1 in electrification on city buses. And this well spread from Northern Scandinavia to South of Spain as well as even where last year, we announced the electric chassis for South Africa and more international markets to come. So this, of course, we have been taken into our plans how to actually grow and accelerate on our battery electric trucks. And this is for the future to deliver on. And here, we love to actually soon, on the 15th of October, deliver the first battery electric truck than to our customers to go in operation. Our customer, Drexel Meyer from Stuttgart, is taking this truck to the area of Leipzig where in a hub-to-hub 24/7 operation, 3 of these trucks were actually sustainable transport, the batteries for the Porsche Macan factory. And this is actually how our customers are also challenging us and saying, how can we get trucks 24/7 to actually amortize these higher investment in battery electric trucks. And here, we can bring solutions to our customers. Ladies and gentlemen, before actually talking about our future plans, let me also recap what happened. Since we met more than 2 years ago in Solutelia. Remember, the COVID pandemic was just followed by the Ukraine war. And here at MAN, we were heavily hit because we got some of our cable beams from Ukraine, but we're stick to that. We had a production stop for 6 weeks, and we actually also mobilize not only our teams, but also our customers to stick to that. And they actually signed it up and continued to hold on to the order book. That, of course, gave us a quite tough 2022. But with the realignment already going on, we managed actually to still have a good black 0 in 2022. And then we were breaking up in '23 to actually deliver on our realignment program. And in 2023, we managed to get over the year finish line with 7.3% return on sales at EUR 14.8 billion. This, ladies and gentlemen, was a result, which has not been delivered by the MAN team in the last 15 years. And we are super proud that we did it and we made it. However, of course, we have to continue. We have to continue on the deliverables, which we actually are teaming up here. So since we last met, we also have been growing, of course, in our truck deliveries. However, then also, at the same time, working on our resilience, and this is what we've shown to you in the first half year. In the first half year, we actually have been over peaking over our top 8%, which we informed to you to deliver at the Capital Markets Day in '22. What we delivered was 8.2% in the first half year, even with 22% fewer trucks delivered to the market. So here, we are delivering. When it comes to our van business, which is really topping up our fuel lining, not only on the vehicles, but especially also on the Services growth, by the way, we started this business only in 2017. We grew even here in the last 2 years with another 59%. And really, customers love not only our vans and application solution knowledge, which we take from our trucks in, but also they love really our service operation 24/7 available for van business. In the buses, I already mentioned here, we strongly have a good lineup. But at the same time also coming out of the COVID pandemic, where the demand for buses and coaches was pretty low, we also made a turnaround plan and also actually moved more efficiency in our bus operations. And of course, we also have been more determined to connect all our vehicles. We actually stepped up and said we want to have our customers connected to operate their vehicles better, but also operate and engage within our services operation better to provide them more uptime, and to provide them best data to operate more efficient for their existing vehicles, but also for specifying the vehicles to come. And this is, of course, to connect to our service operations, but also to support our customers' drivers to take out the best from these great trucks and buses we deliver, but to get there, we, of course, had to invest in the execution of our resilience. As said in the beginning, as a team, we kept our promises, and we delivered at 8.2% for this first half of the year and showing the resilience. However, over the second half of the year, the current market environment will not allow to maintain this level, but again, we've shown resilience already in the first half of the year that with fewer trucks, we can actually deliver better because our bus business is there, but also our services operation has a strong growth as well as also we are looking on the efficiency of our footprint in the company when it comes to cost discipline, when it comes to driving our services and when it comes also to retail management. Secondly, we successfully executed the realignment program. And just to recap what does it mean? Actually, in sum, we reduced 30% of the production costs for trucks. We lowered our breakeven point significantly that made us much more resilient, as already presented, and the production and engineering footprint was also separated, but connected through different locations where we use now Pune and Ankara as engineering as well as production locations and also Krakow. We carved out Steyr, and by that, also having less production site, we also optimize very much our logistic movements along the line. Further, we worked also hard on our portfolios, not only taking out the different variants in our products, which actually were overengineered, but at the same time, also making sure that we are working through product cost optimization and also copy-paste what we know and have in the group. So Tratonize our thinking on the modularization more. This realignment now led to this robust setup. However, we also had to work on our portfolio. And in the realignment program, we had a quite harsh portfolio shrink. This we challenged. And we challenged how can we keep to have the portfolio open, but still deliver on the results you and we ourselves require. This we managed as well, and Christian already mentioned, we introduced a hydrogen combustion engine to deliver sustainable, the heavy transportation of goods. And then we think about goods transported up to 120 tonne, but also as to really live up as a fuel liner, we managed to electrify our ETGL with the fantastic components you'll find here on the brand. And last but not least, we also focus very much on accelerating on our services business. Nothing sells better than a dedicated service organization. That is clearly how you actually bring customer satisfaction to the markets, but also how you actually make sure that customers stick to your brand and your operation. And this we do with all our 280 workshops we have around the globe. But at the same time, we are working through this program with our dedicated service partners because also they, of course, living and breathing the MAN brand and that makes customers to stick. That is how we make sure to bring a robust company, MAN Truck & Bus going forward. Now, it's time to continue, continue on the road map you see here behind me. Going forward towards 2030, we will maintain and take our lessons learned from our lean international setup. We continue to challenge ourselves on our industrial footprint. And when it comes to the industrial footprint, we do this also hand-in-hand with our work councils and unions. We managed together actually to invest and decide in a factory -- battery factory location where we produce the batteries you see on the trucks here in our factory in Nuremberg. This is the second factory in the TRATON GROUP located in Nuremberg, and it goes into series production from Q2 next year, important to ramp up our e-mobility portfolio. We will also very much take the lessons learned from our production system and realignment of the footprint as well as the engineering realignment and tackle our SG&A costs because basically, the same production flows you can see also in the administrative world. And we will now take this -- take it into one global shared services organization and also make sure we have them at the right efficient spots where the competence and the right cost balance meets on the globe. And of course, we engineer -- we further work on our engineering footprint. It's based on our sites in Lisbon, Pune, Ankara and Munich or in Nuremberg, but also here, we will Tratonize these teams to make sure actually we can, through the bundling of capacity, drive more efficiencies out of it and also share there the knowledge for the way to go. Then, of course, it's all about continuing enhancing our business areas, driving the strategy for the different business segments when it comes to van, when it comes to trucks, when it comes to bus and also when it comes to external engines. The external engines, which you also see proudly operating in different brands in the agriculture industry like with AKKO Group on vans, tractor units or also class agricultural machines, this is where these customers love to have our brand on these engines because that's a sign for quality, endurance and a sign for having service, even now following also with the van brands from AKKO Group in the Americas. In our operations, we clearly have per unit a strong return on sales and KPI follow-up, where actually also, we have an end-to-end focus and end-to-end organization for our business segments in place. What does it mean? The head of trucks at MAN moved the flow from product requirements to product development to production ramp-up of new products to actually the service operation and even to the used truck business. And this end-to-end dedication is the cultural rechange we have in our company. This, we're now driving more forward into our retail excellence, where both service excellence and sales excellence is now key. And in most of our countries, we're actually driving direct sales and with, of course, the digitalization of sales processes, we can also benefit from this process accordingly. Last, but not least, you can see it here, but you can even experience it here in the room, it's all about making sure we are driving the common technology. And as Christian announced, the bigger products you will see by the end of this decade coming out of this, but still with a dedicated MAN branded and flavored, but we're already today using the TRATON Modular System, where the common base engine was first installed at Scania, then at International, now you see it here lined up as well as also you see the common components in our battery electric trucks, where, for instance, software, Christian mentioned it as well, the battery management system is a TRATON GROUP battery management system. The charging system is TRATON group-wise, and here, we are step-by-step actually embedding our TRATON components. And this, of course, with the group function integration, bringing our R&D teams, our production and procurement teams together, this is how we can lever and actually strengthen more the MAN brand to simplify the business for our customers because transforming is and will come to the transportation sector, both in the U.S. but also here in Europe, where MAN plays a big role, we will see that transport demands will also have CO2 reduction demands. And this is what more and more of our customers will require. This means we need a strong services portfolio, including also captive finance, making sure we have the right fit on the components. We have to partner up, which we, in our industry, have not done so well in the past, connecting even more of the vehicles of the software and the hardware, making sure to get that connected with the services, and ultimately, going to the next step when it comes to driving autonomous. When it comes to financial services, Johan will tell you more about it, but we are rolling out our MAN financial services unit since the beginning of this year under the TRATON umbrella. And this is really where I can tell you that our customers love it. I interacted with many of our customers at IAA, one of the customers, he is big in Europe when it comes to air cargo transportation, he really love to hear that, "Okay, great, now I'm working again with one MAN team with a strong background of TRATON financial services." They do and they want to do one-stop shopping. Why? Because the transformation to sustainable transportation for them is already complex enough. And there, they want to have one partner with actually one portfolio of solutions accordingly. Well, this is also important on the technical side, making sure we can modularize our products. And this we do by the components presented, but then having the application in place. And here, we do the same actually as we've done with our city buses. Yes, we were not the first on the market, but we are ones with the broadest availability and application fit. This is how we actually tackle that future of e-mobility. Coming to that, there is one important lever, and that is when it comes to infrastructure. No battery electric truck will actually move when it's not charged. And here, it's not only about the infrastructure, you have to partner up with the suppliers of the charging, but it's also to bind up and use the strength of a company like E.ON, a large utility provider in Europe, where together in 8 countries where they operate, they operate the power plants, they operate the network. And actually, we said, well, but trucks needs power as well. So let's make sure we are connecting your power, your grid through our surface locations and have their 2 or 4 charging stations available. And this is what we are rolling out now. 3 locations already up and running since June this year when we announced it, and this goes with the lightning speeds and you have seen the trucks coming out of the factory plan electrification, here we go. But what is powered up has to be paid as well and that's clear. And this, again, we do with actually the installed connectivity. This is where we relentlessly now said since 2 years, I want to have all our vehicles connected. And now we have the application, simple pay with some of our smart brains actually developed. What does it mean? The driver just connects and actually, automatically, the vehicle and the infrastructure, whether it is the charging infrastructure or whether it is also a normal diesel station, for instance, like with BP Pulse, we can actually charge up then also the invoice. Yes. And last but not least, when it comes further into the future, we're also exploring and developing our autonomous vehicles. We do this step by step, and we've been very much operating in combined areas where together, for instance, with DB Schenker, we show that autonomous solutions in confined areas in train-to-road terminals can actually get efficiency gains of up to 40%. Now, we actually got approval to test it as the one and only manufacturer here in Germany to test it on the highways approved by the Minister of Infrastructure in Germany since April this year. At last, let me wrap it up. We foresee first growing customer value through the collaboration and the full integration into the TRATON modular system. We will, secondly, rebuilt, secondly, further on leveraging on partnerships, on partnerships, especially in e-mobility to make sure we do this efficiently and scaling up, but also with a CapEx-lean model. I think we've also shown that we have done our homework, driving down our SG&A costs with a lean and efficient setup to be installed, and this will further ensure resilience and profitability of the MAN. And fourth, it is all about being profitable in all our business areas. Truck, bus, van, external engines and then supported by a strong service growth, where actually we are building not only the profitability, but also the customer satisfaction and the customer loyalty. And this plan will then lead us up to a targeted return on sales of 9%. Thank you. Now you heard me, you heard Christian, it's possible to win a pen today. So I'm very glad to hand over now to over actually the Atlantic Ocean, but he is still here, the CEO of International Motors, Mathias Carlbaum.

Well, good afternoon. I'm very excited to be here with you all today to share with you the International journey. It's a journey that goes way back in the past where the company was founded in 1831. And a company founded close to 200 years ago has undergone many transformations. If you look in the 1920s, it was a leading company in the agriculture business as international harvester with 85% market share and the fourth biggest company in North America. Fast-forward, we go to a promising future, promising future as already today, the biggest profit pool in the world and future studies show that will continue being so and even growing as importance as profitable particularly the growth that we will see in the Service sector. And between these 2 stages, the past and the future, it's my team and I at International that are at the watch. 16,000 associates in International and 30,000 in a vast dealer network are very committed and convinced that we will take part of this huge profit pool and grow. Well, it's clicking very much on the front here, but not on my back. So let me try again. It was such a nice handle by Alexander, but you missed on the clicker. Let me see, Capital Market Day. Well, this is the Square yesterday. We got there 1 minute exposing this name change, more difficult for some than for others. For International. International is as we're known on the market. It's our customer-facing brand. It's our dealer brand. So the Square yesterday and here today to show you how we are going to tackle the future in 3 different stages. What we've done until today, what we're about to do now and what comes in the future. So first of all, we did the small, small step, but focusing on International. That's where we have the brand equity. And to share that with you, I have a short little clip of a minute here of who we are. [Presentation]

So the 3 stages. First stage is important to deliver on what we promised. I'll go through that. Again, next stage is where we are right now, tell you what's happening right now that's setting the foundation for the coming years that we see ahead of us. So what have we done so far since mid-2021 when the company was acquired? We have increased our market share at a growth of about 1% per year. At the same time, you don't grow without following, of course, on the return on sales, also grown 50%, 46% to be exact. We are setting the foundation for the future in bringing the proprietary common-based engine, as we call this S13 integrated, to North America. More to come on that. And we are spearheading at scale already into school buses. So important segment and is a proof case that technology, business model and adoption can be scaled. Looking into some highlights. CapEx was early addressed into this venture. We have invested into production facilities, both for the S13, producing it locally in the United States, but also into a production footprint in Texas, that's giving fruit already today. R&D. 2 to 2.5x R&D investments per year are showing up that we are launching now projects on a continued basis, 3 product platforms so far and more to come now in '25, '26. Easily forgotten underestimated, but acquisition, emerge often fails around culture and leadership, emphasis from day 1, what kind of culture and leadership we want to build on? Influenced by exchanging people across the group and building a solid foundation of what is real winning company culture leadership. Service, a huge potential. I mean, the business model of service. I'll come back to that, but how we're dealing and exploring on that. As I mentioned, the huge profit pool for North America will just grow and particular in this. And this is an area where the untapped potential is huge. There's a lot to learn is to bring from Group into this, and we have our dealers and many customers on board on this. Last, but not least, as mentioned, how do you rebuild a brand from the bottom up? Rebrand is one part of it, but give a foundation to, let's say, to solidify the new brand. Check, incremental market share gains, some of you might say that this past -- the quarter 2 was below for sure. That's coming back. Now we're delivering heavily now in Q3, so the market share journey is continuing. ROS growth 5.5% compared to when we started and in net cash, $1 billion positive compared to the first year operation. These are underlying strengths that will just continue when you see to our capability of grow ROS and generate cash. Finance company come back slightly to that, but also, as mentioned before, started October last year, increasing portfolio very firmly with close to 70% growth on a monthly basis. And as said, the foundation on the product side, which will lay foundation for future, 3 out of 5 platforms are renewed and the other 2 will happen in the coming 2 years. So most important, perhaps, proof points of the past are good, but what are we doing right now to really leverage from the market and grow into it. Let me focus on 3 main areas: starting with the S13, integrated. The S13 is appealing to all the stakeholders we have out there. If you look from the owner's perspective, the TCO, I've been through many platform launches in my career. This one, the step change that we're doing with this is just magnified. It's the appeal to the owner with the vehicles that we have out there in the field for more than 1.5 years, trying demos, et cetera, are now starting to scale. Huge savings for the owner, the driver performance, power, the gearbox, all of that, the driver likes it. The driver has more and more say into purchase decisions. And last but not least, the technicians, the people who service it, it's simple to service. It's data-driven. It's predictive, brings a lot of advantages that we tie in a lot of services to bundle. So we do the modeling of service subscription into the offering to this product, something not available previously in the United States. We're bringing it to market, has been well received. We see a potential in our segment of the 13- to 15-liter heavy engines from today's 15% participation are proprietary to go up to 60 in our sales, and that is over growing top line in which we will capture market share for this. Secondly, operational excellence, our own performance, how do we do? How do we -- how are we in charge and accountable for our performance. Quality needs to come first, second, third, not always the mindset in our company where time and costs could come before. These 2 are important, but nothing comes ahead of quality. Let's not forget the focus of lean and cost efficient, a trademark for U.S. operating company and so also for International. We are lean and cost efficient in our structure. Resilient through good and bad times. How can we cope with markets that are going up and down, flexible in our cost, in our efficiency as we now go through these rapidly changing stages in North America. That is underlying. So again, growing top line and keeping our cost structure in place should give leverage on the so important RoS. Last but not least, where everything starts is with our customers. Our customer-facing are the dealers. We are consolidating dealerships in North America. We've gone from 150 to 100. That comes with a lot of investments. The dealer body in the past 5 years have invested more than $2 billion in acquiring dealers from each other. Growing, they believe in the future of International. The asset value for dealership today compared to pre-merge is a factor 3, and it's increasing. The fittest are winning and taking. These are the ones we build the future on. The subscription model that I talked about, how do we go out there and not sell parts over counter at low margins, competing with everybody, create value for the customer, driving up time? We see today benchmarking within group that geofencing vehicles coming into retail that they spend 3x longer than the best case in the group. Releasing that drives value for our customers and gives us opportunity to charge for that. So there, we see already targets clearly an uptime through this contracted bundles, subscription models, driving value for our customer. Everybody is talking about electrification. I will not repeat what my colleagues have said. It's also, of course, happening in North America. It's happening in a very structured, good manner. What do I mean with that? The greenhouse gas 3 coming into place 2027 has been done very cohesive and working the sector together with authorities. What is feasible, what is ambitious, how do we reach the target stepwise, how do we tie that to infrastructure build-out? So we see that what's happening from the years from now to '27 already counts. So the more that we do today counts into credits for the regulation. And then from '27 and on, there is a growth into this and mainly after '30. So it's a little bit skewed in time, but the ambition is to go through this. And what happens in North America, U.S. today? Electrification is going to happen. It's going to drive it. It's going to win the business case on TCO ultimately with some help, everybody doing it together, but even so more interesting is that a lot of this modeling will happen also combined with autonomous. Autonomous is coming first in the U.S. It's coming in the south part coast-to-coast and if electrification is evolution, the combination of autonomous and electrical is revolution. We're working with strong partners on both sides, and we're prepared as TRATON to go U.S.-first autonomous. Moving over to the stage, next stage is '27. You see, if you look, well, quite self-explanatory, but where we are today, there's been significant launches into products, medium vehicle, the bus, which is about -- was 20% common parts with the truck before is today 80%. So we go towards simplification modernization within International almost and add to that the layer of modernization within TRATON. So it's a twofold year. S13 enough said at this point. We come with a full range offering now, school buses, medium and heavy coming up next year for battery electric and exceptionally important coming up, you don't see an exact date for you, but you can count yourself. We come with the revamp Class 8. Class 8 is where we have most market share to gain. Most growth. Of the 400,000 market on-road Class 8 is about 200. Look into the stats. That's where we are, the biggest growth potential for us. The combination of the Esther team with the revamped cab, e-architecture technology that comes on board on this will be the huge driver for growth for us, add services and all of that, it comes together at this point. So we're building this foundation to really take off here. Until then, we grow, but this is the big lever. Ultimately, not last -- not least, but last year, we see coming together the trait and modular system solutions directed very much to common battery platform, which will come well in time to, as I said, end of this decade when we see electrification really taking off. Starting off in our case, like anywhere else, in the medium range where we are -- have today a huge participation in, in the range of a little bit more than 20% with growth potential, but the medium range for us is significant. It's about 100,000 vehicles. And there, we come, again, with a strong offering on the BEV side within this time frame. So 4 blocks here for the Excel phase, the service solutions, the contract portfolio, resilient and good and bad times, capturing value rather than cost plus some parts pricing. Captive finance, how to get all this together, leasing model, finance the bundling, finance the residual, bring this together and drive it data, data driven. We see a potential here of today's 21% of sales revenue for our services grew up to 30%. Not only is that important as part of sales revenue, but it's also, as I mentioned before, it's more profitable than selling parts over counter, which today is more than 70% of our sales. Dealer excellence. Again, the asset we have there, together with the dealers, extremely inspired for what they've seen, what we can do proof case of today, how we work on digital, create value for them. And again, drive up time for our customers by being proactive, bringing down the cost of serving the customer, but bringing up at the same time the value. And so we all dealer, customer and OEM International share that part. The International way, let's not take this for granted, the culture and leadership, continue emphasizing on that, exchange talent from the group. We are today close to 100 people from outside, from being 0. Well, 1, me first at International. Today it's 100 coming from group and also the biggest amount of people from group working somewhere else, exchange, learn, drive this, prioritize healthy leadership and a common way of working within International and within Group on the fundamentals, driving operational efficiency and employee experience. Last, but not least, you heard about it, product deployment. Don't forget school buses in our case. We're market leaders. It's close to 15,000 units. It won't be less. It's there to stay. There comes first, electrification, data-driven. We are leaders there and intend to stay so. Class 8 revamp touched upon Group BEV coming also in place in this time frame. So this is the foundation for our growth to the 20%. What do we commit to as steps for the future? Well, continue, drive, enhance the journey from being hardware-oriented transactional to become digital-enabled solution-led company focusing on driving customer value. Drove the S13, the spearhead, the biggest potential to grow at is around the S13. Continue driving. We drive, we want. We want group integration. This brings technology to us, accelerates our journey into this growth and capture the scale benefits. And last, but not least, bought into the biggest service network in North America. Here, we can leverage. We learn. There are group companies doing great things, pick the resins from that, deploy and make the service network become the best network in the United States. So all this adds up to, we come from last year, 6.6%. We'll do slightly better this year. We aim for 11% to double-digit here, and this journey is, we're not at the end of it. We're just at the beginning. There's a lot to come. We are committed to it. We believe very much in the brand, in the future for International in North America. Thank you. I'm now to introduce, not the next speaker, but the so weighted coffee break. So let's take the opportunity to say it's short, we know it won't be as short as they're hoping for, but make it 10-15 minutes. I think I'm ish on that. So we're over here, taking coffee and can continue the discussions there. Thank you very much. [Break]

Still waiting with everybody finds their seats. Welcome back after the coffee break. Let's continue with our next speaker. Welcome Roberto Cortes, who will present Volkswagen Truck & Bus to us. Roberto.

Thank you, Ursula. Good afternoon, everyone. I am really happy to be here today with you to present the development, the achievement of the Volkswagen Truck & Bus brand since we last met in May 2022 as well as show you our further growing plan. A good example of the achievements and also the potential for the growth plan is this beautiful picture. You can see our brand new Volks bus that we start series production of this model this month after being the pioneer of the electrification in Brazil with the launching of the e-delivery back to 2021. Now, we continue our journey towards this decarbonation with this vehicle, which, by the way, already utilize group components in its production. So I'm very proud and excited about this. Before we go through the achievements and the future plan, let me quickly remind who we are. So if we start here, we are a value-for-money specialists. Our motto is less, you don't want; more, you don't need. So that shows our value for money. For developed economies, we are -- our strong market presence are in Brazil, which is a good emerging markets, and we have strong presence in other emerging markets with efficient business model, which is based on the asset-light concept, where we share the production system with our major suppliers in the -- not just on the supply of their parts, but also in the production of our trucks and buses. Compared to our fellows, Blender that we heard 260, 200 years and so on. We are a young truck and bus company with a little bit more than 4 decades, but very intensive 4 decades. We are present in over 30 countries in whole Latin America from Mexico to Argentina, in several markets in the Africa and starting testing the Southeast Asia, where we are present. We have 5 production sites. The biggest one in Rio de Janeiro recent, where we have our production concept consortium modular production again, where we produce our trucks together with our main supplier, and by doing that, we share exposure with them. So we are a full-liner of truck and bus vehicle going from the famous 3.5, we go into 123 off-road vehicle. You guys go 200. We are a leader in Brazil, 1, 2, 3, 4 years, no, we are nearly for 20 years in Brazil and vice leader in buses and leader in school bus, the biggest in school bus producer. We are seen as an innovative company, our pioneer in the electrification, our pioneer in the consortium modular production system shows this. And we aim it to be a collaboration of people and the execution is our core. And last but not least, we achieved 8.8% return on sales exceeding what we promised in the last Capital Market Day, which was 8%. By the way, we have not delivered just the financial results, but we deliver a lot of other good things and I'm going to list the 5 biggest promise -- deliver that promise that we have made. The first one is our strong revenue grow in Brazil, and this is measured by per unit, not to be adjusted by volume. So this is pure pricing and how we achieve a 25% price increase. With the introduction of Euro 6 last year, we improved quite substantially the productivity and the full economy of our trucks, which we were able to price. We are improving the mix by introduced extra heavy trucking in our product line with Meteor and also introduce the add value electric vehicle, which make us to increase the revenue in a such percent. Second achievement, we talk about internationalization last time and we divided the internationalization in 3 phases. One is growing where we are; second one is growing Africa and Mid East, the next continent; and the third phase in Southeast Asia. This, I bring to you the achievement in the Phase I, where we said we needed to further grow in Argentina and in Mexico. As you can see, comparing the first half of 2022, when we last met and first half of this year, we increased our volume in Mexico and Argentina by 52%. And the main reason for that is because we're launching a CKD production in Argentina and most of that increase comes from that, but I will be back on this subject. We continue our journey in terms of decarbonization, increasing our product portfolio, new versions of the delivery and the e-Volks bus, and we are entering in new markets with this electric concept primarily in Latin America and also in some countries in Africa. Fourth, we say that we needed to strengthen our services that may be the big room we have to improve is on the service and the achievement also on the service growth shows our potential. We grew in service by 55% in 2 years. And as important as is every opportunity we have to follow our friends, other brands, we are expanding the group components. In the last 2 products -- programs that we had the opportunity to do that, we did was in the electrification and in the Euro 6. So important to mention, this developed associate with this efficiency business model make us being in the first half of this year and a very good return on sales achievement of 11.8%. Talk a little bit about starting the future following the strategic priorities of the TRATON GROUP, we also have 3 pillars, the responsible company, value creation, TRATON accelerate pretty much in line with the TRATON on the responsible company is our journey towards decarbonization and also on the greenhouse reduction and scope 1, 2 and 3 is basically the ones I present, we are also working on the 1 and 2 and the social programs to improve the situation of our communities and bring diversity and inclusion. Value creation, I mentioned big opportunity on the service, but the bigger one is still in the internationalization. We are very strong in Brazil. We should replicate this business model, this concept in other parts of the world, and that's what we believe we can grow from almost 10,000 to 25,000 in the future. Always in the value creation, utilizing the group components, primarily the TMS. And the last pillar is related to TRATON accelerator is pretty much shaping our role in the future logistic ecosystem and providing more services, again, through digitalization and utilization of their consortium when we launch day delivery, we had created a consortium and we are strengthening that with new partners like [indiscernible], and so on. So those are the 3 pillars that we are focused in the future expansion. Now dipping a little bit on the internationalization, I bring here the example of Argentina. We took a look at what's happened in Argentina. Why we are market leader in Brazil? And we have 3% market share in Argentina. Good product, good dealer net, Volkswagen brand is a good brand in Argentina, good people. What was missing to have dehiscent of success in Brazil was a production plant. Didn't work on the import/export. So we build a CKD plant and here, you can see in few months to almost triple the market share, and this is just the beginning. We see in the coming quarter, we keep growing this market share. So together to grow where we are, we are also taking new markets like Togo, Jordan, Qatar and you name it and our markets in Latin America. So now get to the end of my 10 minutes show here for you guys just to finalizing saying that take advantage of our unique set value, which I mentioned to you regarding our production concept, our potential to even further in the Brazil where we are a market leader, but we believe that we can further grow in the market share, although we have 25%, 26%, we can go at least to 30%, and that's what we are aiming to utilizing our expertise and be the pioneer in the electric to leverage from that. We have the major customer in Brazil with us like in BEV and some others and we wanted to leverage from that. Always looking to benefit from the TRATON Modular System and TRATON GROUP. Our track record show that we can do better than 8%. We set ourselves less strategic target, and we are ready and committed to go from 80 to 10 from now on. And we have proven that we are able to achieve that now is just to keep it up. Thank you for your attention. And I hand over to Christian to tell us about the Scania brands. Thank you.

All right. Before I start with Scania, I still keep my TRATON CEO hat on, and I just wanted to say how happy and proud I am with what we have seen here from the colleagues. We're really building something together here and not just the results, but also the efforts put into, on one hand, delivering in the brands. I think you see on the numbers that we're doing progress, but also how they're shipping into the TRATON story by supporting common values, common leadership principles and really creating something around TRATON as a company. Good. I now change hats, again. I've become the CEO of Scania. And I know what you're waiting for. I'm going to spoil that right away. What is the return on sales target was Scania? Well, it's 15%. So that's what you'll see on the last slide that maybe already saw in the material, but that's what we agreed in the Scania management that we're going to in for. We've had 12% as our target so far. And we think that there is enough of more gunpowder in the company to shoot towards 15%. Let's have a look at what we have achieved over the last couple of years, and we've seen some pretty strong progress even if it's been a bumpy road, but I think it's been mainly up. And if you look to the revenue generation, as you can see here, we have increased sales by 50% over the last 6 years, but if you look to the bottom line, we have doubled, it's a 2x profit increase over the same period in time up to EUR 2.2 billion last year. We have another figure here, which is not so much perhaps known outside of our company, but it's at the core of our operation and especially at our dealer operation, that is absorption rate. That is how much of the service profit that can cover the service operating costs. So typically, you think of a dealership and you think you need to sell X number of vehicles in order to stay profitable. But if you have an absorption rate above 100, it means that you can basically make money on that dealership without having any contribution from the vehicle sales provided you have no costs for salespersons, which are typically put on variable pay rate. So having gone here with the industry is typically well below 100, we have worked ourselves this year up to 120, and we see that there is so much more to do if we work, and I'm coming back to that if we work in a more structured way also there. EUR 1 billion has been invested as evident, EUR 2 billion on TRATON and one of that is on Scania, to drive the modular system for battery electric vehicles. A few highlights. We won the Green Truck Award. We won that award, again. It's the 7th time in 8 years. It means that you have the truck that consumes less fuel. And of course, that is one of the drivers for TCO, perhaps the most important driver for TCO. We're very proud of that. And the coolest thing in 2024 was that it was not only the one consuming less fuel, it was the truck that had the highest payload. So they lose weight, but it also made the test track in the shortest time, meaning the highest average speed. So that's something for the Scania team to be really, really proud about. And that is based on the super driveline, ladies and gentlemen. What are you going to find in the other brands coming up where results will be probably as good as Scania's? Market shares have been growing. We see historical high level 17.9% in Europe as we closed August. We're seeing 18% in Latin America, we're seeing 20% in Brazil, which is our biggest market in the world. And if we look to the extra heavy segment that you're not really present in Roberto, we have 30% market share, which is really remarkably high figures. And we, of course, intend to stay up there. I also want to mention Mexico, a market where we sold vehicles in hundreds, but a couple of years ago, we really invested into Mexico, and we saw last year 2,500 units, and we're aiming at a similar level when the market is actually down this year. So Mexico starts to become a really important market to us. Servicing the ruling fleet is at the core of Scania. We are releasing all the time new services using the rolling population of 10 years almost 800,000 trucks to put more and more emphasis into broadening Service portfolio. It's a win-win. It's about offering up time to customers or minimizing downtime and charging for the value creation rather than just charging for repairs. On the BEV, we're doing some pretty cool piloting in order to convince the world in a way that battery electric is, what I said before, the ultimate solution. Here's a picture of a Schenker. You see it's a Nordic combination. So it's truck and a trailer. That's what is allowed to go all the way up to 25 meters and 74 tonnes, showing just that it works. We have a good example down in Portugal with a customer driving for IKEA called KLOG who are doing tests now on the 40-tonne tractor combination that also works. And we have the LKAB tipper up in the north, doing 80 tonne that works. We have the SCA forestry, while SCA company is doing paper and pulp, but they cut down trees and transform the trees into the paper and pulp mill factory, 74-tonne off-road arctic conditions, that is working. So I think by doing all this pilot stuff, we want to just show that there is -- from a technology point of view, nothing that hinders us from transforming our industry into battery electric. What have we achieved since the last CMD? Well, we have launched the super, I already was into that, but to cut -- to bring some more flesh to the bones, just take 1 customer example, 1 of our mega fleets in France, operating out of Paris region distributing food, have 1/3 of their fleets now change from the DC 13, the old Scania engine platform into the super, they get 11% confirmed by our data and approved by the customer. You can imagine what that does in terms of savings on the bottom line. So truly remarkable. I was into Services. We have improved the Service revenue with 60%, at the same time as we have increased our total revenues by 50%. So Services growth in Scania continues to outgrow the company, and of course, that's something we would like to continue to do. It's a lot based on digital solutions. I will mention 3 examples. One is the digital dealer, something that Mathias initiated in his time in Scania. It gives the service adviser, the person that receives you in a workshop, a world of data presented in a very smart way. So it gives all the history of the vehicle. It proposes activities you should do proactively on your vehicle, and it gives you all the commercial campaigns that you should upsell to that customer exactly at the time when it's needed. We have something called Procare. We already have 4,000 customers subscribing to that. That's where you stop just selling your repair and maintenance contract at a fixed cost, and you move that into saying we take responsibility for uptime, i.e., we make sure that we repair the component before it breaks, thanks to really good big data, really good sensoring on the vehicle and of course, connected and based on the experience that we have from that customer that driver in particular. Finally, we launched something called Services 360 at IAA here in September, which is a way to further modularize the Services portfolio to the customer. So to really adapt the service offering exactly to the specification that you buy. You tailor make the vehicle with 1 billion different choices, it will be the same on the service side. It will follow. Hard to explain like this, but it will be something where we think we will really further increase the Services sales. On the BEV journey, we have invested heavily. We did, together with MAN, win the first trade media real on-road testing of battery electric vehicles. There was all the big brands. There was Daimler, there was Volvo, there was Iveco, there was MAN, there was Scania, there was DAF. Was there DAF, I'm not sure, to be honest, disclaimer, but outcome Scania and MAN as the 2 best products in the battery electric. I think that's a proof point that we're doing the right things. And as you're into Alexander, we're sharing, battery management system and also some hardware components on these trucks already. And finally, start of sales in the first order received on the autonomous. Yes, it's true. So you asked me last time 2 years ago, will that technology ever hit the market? It has hit the market. We will deliver next year. It is not to Rio Tinto, where we have been doing development together. They have not ordered commercial solutions from us yet, but it is another customer called Re.Group, also in Australia, also doing mining who ordered the first 11 fully autonomous trucks Gustav to be delivered end of next year. And what is more interesting is that this is just the first in a very long pipeline of mining companies who see the great potential in bringing the driver out. You know the cost side of that, 3 times 3 shift or rather 3 shift, 3 times drivers, AUD 60,000 to AUD 70,000 per year is what you save, 4 years, 5 years lifetime of the vehicle, and you can make the math. And then customers are prepared to pay quite a lot. And on top, of course, we get all the other services that are connected. All the traditional services are following suit. Right, so how are we supporting TRATON, maybe that's a given, but just a few examples on the responsible company. This is -- that is part of the DNA of Scania since 2016 when we set out our purpose to say we're going to drive the shift towards sustainable transport system. This has been with us. We have developed a number of products from the alternative fuels into hybrids, into battery electric, and we are experimenting on the fuel cell as well. And of course, this is made available to the TRATON GROUP. We're doing good on our decarbonization journey on scope 1 and 2 where we promised to reduce 50% until 2025. We're struggling when it comes to scope 3, where we have promised a 20% reduction for next year because of the lack of deliveries of battery electric vehicles. We have not given up. There's a lot more we can do in terms of fine-tuning specifications, in terms of selling more alternative fuel vehicles and in terms of training drivers even more extensively. On circular, I think I was already into that, how we are thinking. But to give you a cool example, we're now tested to assemble a gearbox on the assembly line based only on remanufactured component, and it worked perfectly on the first trial. So more is happening also there. On value creation here in the middle, it's a lot about Scania's culture, always putting the customer first, whatever happens. It's about excellence in core and the Scania way. I will talk more about that, our culture. And it is also about driving programs of efficiency. But we don't call them like that. What we do is that I as CEO of Scania, I launched so-called key yearly challenge as part of our strategy process. So each year, I threw a challenge to the organization. Two years ago, it was about working with our delivery precision. We had tremendous problems, as you remember, with the supply chain challenges and also industrialization internally. Starting a complete end-to-end project to up our precision. We're still not there. So we had to prolong that challenge for another year, so we're into the second year now. But that is a way to structurally improve the company. Second challenge that is running since 1 year or since this year is cost and cash. Here, of course, Johan, our CFO, is deeply involved in transforming our thinking because this was always the case in Scania, away from only making EBIT margins into really releasing cash in the company. And I think we've had a tremendous development and are up and above 80% of returns over net profits. So really good. So we do that as well. But what is then Scania really all about? What is the secret sauce? Well, this is how I explain it when I get the question. It starts with modularity. Since the 1940, this has been at the core of the company. And I will not bore you with explaining it again, but I will say that this journey is never over. You can always go deeper. You can go down to bolts and nuts level on the hardware and make sure you have just about the performance steps you need and that your standard dies that over the whole product portfolio. But you can also do it in software. There, we have more to do and more to learn. And you could do it on anything. You can do it in the software that supports sales. You can do it in the way you put together the lunch menu in the cantina, but we are crazy about modularization. We want everything to be modular because we know that brings scale and at the same time, that brings multiple choices. That's one pillar of success for Scania. The next, I would say, is what has become the Scania way, our management system. That started with a journey together with Toyota to try to understand Toyota production system, TPS. Back in the mid-'90s, we made the first experiments and created something we call Scania Production System. That system has evolved to go beyond what is just production and logistics and move out into all parts of the company. And it's a structured way to continuously improve what we're doing in all our processes. It's been very successful, I must say, and I'm super proud to see all around in the big Scania world that this is a living thing, which involves all the employees and creates a lot of motivation in terms of improving our company together. And you have heard a lot about things coming out of this. There are principles coming out. You will hear a lot of deviations. That's one of the holy grails of the Scania way, meaning that we don't love to have deviations, but when we get them, we love them to death and we make sure they're not coming back. So that is also part of the secret sauce of Scania. And then closeness to customers, and that's the last and the third pillar. By having more than 620 dealerships, by living our value of customer first, there is -- it is like having the factory gate at the dealers yard or rather at the customer to make sure we get the understanding what the customer really needs and bring that into Scania in a structured way, which is very hard to replicate. And based on that, we have created a culture, we have created a kind of Scania family filling where today, the colleagues in commercial operation talk about customer obsession. They're prepared to do anything to satisfy customer. The way to measure their success is through the Net Promoter Score, where this year, the target is to come up to 80, 8-0, those who are familiar with the Net Promoter Score, we are counting on 79, know that it's very, very hard, and it's a measurement on customer loyalty. Would you recommend this supplier to some of your competitors or colleagues. So super proud to see these achievements? And of course, that is bringing that service offering is bringing resilience to our brand. Shortly on the BEV, I think we've been into that, but of course, we're doing a lot to enable BEV services. It is on the product. We're expanding the modular system towards somewhere '26, '27 have a complete system that can serve all segments which we can today serve with a combustion engine, but it's also about performance. And again, to bring you a customer example, Italian customer Chicago, 180 vehicle fleet, doing Italy, Switzerland, recorded and again, verified with the customer 102 kilowatts rounded figure per 100 kilometers. Those of you who drive battery electric cars, are there any who have upgraded? There are a few, yes. What do you manage, 20, out of 25, I should be ashamed. But if you think then of 16.5 meter long heavy vehicle doing just 4x that of energy consumption, you realize that is really good. And I think this is, of course, where the competitive game will stand. So you have to be the best on energy consumption. I think we have a fantastic starting point there already. We have a captive network. Of course, we are preparing the entire network, not only the captive being close to the customers who acquire the battery electric vehicles, we train and then we do charging. Charging is 3 things, and for Scania, that means depot charging and destination charging through our own company, Erinion. So we have chosen a different path compared to the sister brands in the group. That's good. This is customer frowning. This is a way to hedge in the group, but to make our brands different and very bold ambition, 40,000 charging points for 2030 already. And then that's something we can also make a lot of money on. Then it's to be that mobility service provider, which we already talked about. And then, of course, then it's along the highway charging where we use Milence as we do for all of our brands. Looking forward then and thinking where this industry -- business model adoption. I promised to talk to you about Juna. So Juna is a joint venture together with digital forwarder sennder which is based here in Germany in Berlin. And what we do there is we try to take away the hurdles for customers to step into the battery electric world. So you actually pay per day or per kilometer. You get the battery electric vehicle from us. So no upfront investment, no risk, you decide the time frame. And if you want, thanks to sennder, you can also get the cargo, the load with a known price level. So here you go. Their carrier, you get the equipment, you get your cargo in your destination and up to you now to transport this in the best way to the destination. Very popular. We do not have enough vehicles to satisfy the demand, unfortunately. But this is one way how we can transform this industry, going more subscription-based and starting to work with assets. And of course, very important that we then have the financial services arm to support us. That brings me quickly into the future, what will all of this bring? What is there more to take out of this market? We go more electric, we go more digital, we go more expensive on the assets. Logistics is becoming core also of our operations. Is there something we can take out of this as a business opportunity? Yes, for sure, there is. And I just shoot a few numbers at you. If you think of the charging market and you just take the 80% that consists of -- that will be the total market share of charging in depots and destinations, that's estimated to be worth EUR 30 billion by 2030. If you take asset management such as in the Juna case, you would estimate the total value of that, which will be more and more of the business model as we move towards autonomous to EUR 50 billion by 2030. And then if you look into autonomous technologies and American studies were in U.S. dollars, EUR 88 billion worth of market by 2035. Can we tap into that in any way? I think so. I think for sure, there is something where we can benefit. So back to our 15% promise. I hope I convinced you 4 proof points, continue to roll out the Scania Super, it's above 50%, but it's not all of it yet. We get EUR 3,500 extra in Europe average. We get EUR 7,000 extra in Latin America for this product. There's more to go. We're going to not going to sundown this product until 2026. We have the captive service network, which has gone from a net consumer into a net producer of profits. We are '23 on a 2.8% uplift on our average EBIT. That's good, but we know we can do so much more there. We have the BEV journey, where we're sure there is more money to be earned when the transition is done. And finally, we have what is the most valuable in Scania excellence in core, the Scania way and our focus to the Scania family and to always do what the customer would like. And I think that, ladies and gentlemen, should be enough to convince you. Hopefully, that 15% is not of a too high ambition for Scania. I stop there with Scania. I cannot click, but I can say that with this, we are moving into our first Q&A session, and there will be -- we will all be here for you. So hold your horse 1 second.

We're bringing Catharina as well to take the Product and Technology questions plus the brands. So the idea is that we take the Q&A now on our strategy and on our different brands. And there are lots of hands. So I don't want to be the bad guy, so I leave to you, Ursula, to...

Yes, I'm -- no, I didn't see who was first. Who was first? Klas is always first. Let's take Klas, please.

Okay. There will be time for all of you.

Klas at Citi. So I first had a question on the targets. We spoke a little bit about it in a break, but it just want to raise it, again that it's a 100 bps improvement from where we are today at the midpoint of 10%. But on Slide 66, the brands and the strategic targets that were in line with me, I guess I was lucky. But if we add them together, we get to 12. So my question seems to be a cushion here of 200 basis points. And my question is, is this price cost normalization? Are you thinking about cyclicality between different regions? Is it linked to the R&D function? Yes, I just want to understand that sort of how we get from 12% to 10% on that.

Although, Christian, I think that's really a question for the second Q&A session because we want to hear Michael first, and it's really because it's -- you're really asking about the TRATON targets. So let's concentrate here on brands, product, strategy and then take financial questions later. So...

And is that also linked into growth that you want me to ask about growth later because I have another 1 on growth?

Anything which is on the brands and the strategy and brands targets, happy to take them.

Okay. I'll squeeze in on growth and I sort of tilt it to the brands, it's a 5% CAGR at the midpoint roughly, and truck OEMs typically grow 2% to 3% historically. So it's an ambitious growth target. You're baking in caution on margin, but you have a lot of growth coming, which is great to see. On Slide 61, North America goes down. Europe is flat. Other regions are growing. You had a lot of strategic growth initiatives, Christian. So amidst out of all these brands and initiatives like what gives you the confidence? I'm sorry if that was part of this session.

No, that's fine. I'm sure Michael can complement later, but I think -- but strategically, I think we are set to grow. And as I was into the 4 growth pillars, of course, and I will let Mathias talk about International. But I think that's the most imminent growth opportunity we have. I mean if you see to where we were, if you pair the technology we bring with the fantastic iconic brand and the good dealer structure, there is growth, definitely. And then it's Asia. It will all be about execution, of course, but we will get a foothold there, which will enable execution. And then there is growth potential in Europe for both Scania and MAN to be grabbed. So we want to be bold on growth. So I think you spot that perfectly well. You add financial services, which is a missing link. I mean, Scania always had it, but it is a missing link for the other brands, and that makes you ultimately stronger in you're -- doing your sales better. So I think all of that added up, I feel really confident about the sales. But I should let in Mathias because what I really lean on is here to up our average because you're right, 2% to 3% over cycle is what our industry typically sees. Mathias?

Yes. Well, there is a correct, Klas, you saw some kind of market figure 5 years away from that caught a little dip there, right? Some pre-buy effects. And it's a bit too mathematical perhaps to that the U.S. market over time will shrink. We'd rather see it, let's say, on a stable path with some, let's say, over time, of course, some potential growth on the top. But the main growth driver, of course, is in our own performance. I mean trying to show you an ambition built in for this period of time of a 5-point market share growth and if you think 5% growth the main growth will come really on the heavy Class 8 on road. So if you -- it is a multiplier effect on a more, let's say, on a higher asset price, a 5% over 15%, goes 20%. And also, as mentioned, we do see huge potential also on the service side to grow. So yes, we put a lot of weight on our sales, but we see a lot of potential, as I explained before, on the growth capacity there. And again, does that add up to the whole TRATON growth? It's a big part of it, comes from North America.

Very quick final one. Promise, will be super quick, is on the R&D that Scania is basically carrying quite a lot within the group and you want to move into sort of common group. Out of the 15% ambition, which is I think, a new truck-leading benchmark at least from a global level, not North America. How much of that is sort of contributed that R&D starts to sort of be more allocated to rest of the group?

Yes. It's just going to question in a way, but it's also related to our financial model and we are set to change or rather we have decided we will change our financial model. We'll change it this calendar year, but we will not communicate that externally until next year. But I think, I'll leave to Michael to elaborate a little bit on that as well, because that -- but that's really important because it's also governing the group. Good question.

Let's take the question there, and then Nicolai.

Handelsbanken, Hampus Engellau. I have 2 questions and they are linked. In this TRATON Modular System, what kind of a commonality between the brands are you aiming for? And the question linked to that is what risk do you see in having a premium brand, a value-based proposition and also midterm segments in terms of maybe over-engineering a value product and maybe cannibalizing on a premium product?

Super good question. I think, Catharina, would you like to start?

Well, I can start. So what it's all about is, of course, to create a platform, an architecture, both mechanical, electrical and software. And what we're going to use then is what we have used in Scania for many, many years, standardized interfaces. And on those standardized interfaces, we can put them different performance steps. So for example, the new powertrain that we have for the electrical drives, that will come in, I think you said 7 different power ratios. And MAN has said that we will use 4 of those. Scania said that they will use 5 of those. So there are, of course, some overlapping, but we will use the performance steps on the base engine, so to say, to differentiate. On top of that, of course, it comes differentiation. We'll have different cab interior, different cab exterior, the servicing portfolio will also be different. So we strongly believe that the brands will be able to continue to serve their customers and keep their heritage on their brands.

Alexander?

Maybe how we do and anchored is in the brand is that MAN as a full-liner is offering from 3.5 tonne with our vans up to light-duty trucks, medium-duty and heavy-duty trucks. And there, we are differentiating very much there where we are on the same regional turf as Scania. And this is where we find also customers who wanted this together with their service portfolio and the service offering, but at the same time, to afford this full-liner approach, of course, we need to be more precise on the number of variants we take in. And this we performed very much also actually, as lessons learned when we developed our TGX model. So from the 2020 launch to actually now, we have reduced 25% of the variations out of it and by that delivered on our product cost program. And actually, we take this now as a calibration to want more do this over the whole line. And this is how we, let's say, definitely from technicality to commercial proposition are bringing this forward.

Yes, but is it still fair to assume that if you're sharing electric architecture drivetrain gearbox frame and all that, that you will increase the quality in some of the brands within the group?

I think many of our customers, they really love the quality of MAN. And of course, this is also where we have to adhere to, especially also in the different segments where we operate. I mean we are very heavy in Continental Europe when it comes to the, for instance, construction business as well as into the medium and light distribution. And this is, of course, where we need the quality. And I think there, we all to provide this competence from the group R&D into our customer averages as well because it's not only -- I mean, the cake is much bigger than adding MAN Scania together, for instance, in our turf here in Europe. The cake is to fight, of course, the rest of the competition.

Can I do one more question, and it's a brand-related question, and I pushed this before, Christian.

Of course.

Is the Scania V8 engine, what's your thinking on that on International in the U.S. to maybe fight a bit on the market share?

Yes, that would be beautiful, right? No, we do not, in our road maps have V8 for the U.S. We need to realize that also in the U.S., the combustion engine is going to be sundowned. Again, not saying it's impossible. Once we move over to a common interface, it is, of course, the lower integration was possible, but it's not in our plans currently. Let me also comment to complement Alexander because this is a really important question. I mean, we work, of course, really hard to make sure that we are not creating more overlap, but we're creating less overlap. So we want to grasp as much of the European market together as possible. We have between 30%, 35% market share together today. The target must be that we can cover basically 100% of the market and get, of course, maximum result out of that. We have tomorrow a design run through, we'll have some upgrades to the common modular system, and this is very much the target for both of us.

Nicolai is next.

Nicolai from Deutsche Bank. My first question is also for Scania and Christian this one is for you. We appreciate the direction and that you are so ambitious on electrification, but I do miss the targets, and I think we got some electrification target shared 2 years ago. Is there any reason why we don't get them this time around? And what kind of BEV dilution do you kind of factor in, in the 50% target?

Yes. So we actually stick to the targets, believe it or not. We realize it needs to be a hell of an acceleration to reach 10% in 2025, which is the target perhaps you referred to a 50% in 2030. And I think it's important to stick to that also in the discussion with policymakers because we've always said that this can only happen provided that there is a positive business case for customers charging, et cetera. And we cannot solve all of that. But we're going to make our outmost Scania, by the way, as TRATON GROUP, to make sure that at least the products are available for that type of growth, including the industrialization of these products. So we stick to it, albeit realizing that, of course, as it looks now, it's a tough journey. And we're, of course, going to be in Brussels with a new commission to talk about, I mean, what we can do to still stick to these targets but do that together.

Okay. And if I can squeeze in my second one, that would be for Navistar or International. You did mention that '24 could be better than '23, that would imply that H2 must be much better than H1. Do you see supply chains stabilizing? And can you also remind us on what's the current share of the new powertrain? How is the rollout progressing?

Yes. Well, you did your math right, H2 is better than H1. And we had built up a huge inventory of, let's say, semi-finished. As you know, it's not only a market share but tied-up, let's say, capital for group we carried with us into Q3, which is now being released through the Q3 faster than anticipated because we see supply chain much more stabilized. And on top of that, I think when these things happen, of course, you -- it's hard to prevent force majeure as a fire at the supplier. But we are -- we take this as a very sharp opportunity as to become better in our own, let's say, processes end to end. So we are working into a much more stable supply chain and improving our processes. So we can, let's say, when the market picks up again, becomes, let's say, more resilient. And your last question there on market share on the S13. Well, we do have -- I gave you the figures, what we've delivered so far this year. And if you look into our production, let's say, order book, it's around 30% of the total right now. So remember, we came from 15% with the prior proprietary and already in this year, let's say, this is not annualized, it's in our current order book.

I saw Daniela's hand up next.

I also have 2. One is sort of a follow-up on Navistar and then the other one, I'll ask -- International. And the other one I'll ask afterwards. But you clearly -- I mean you've gained 1 percentage point of market share already, and that's what you continue to aim. But at the same time, we also have now a couple of competitors also launching new drugs in a tough, maybe shorter-term markets looking at the plus 8% at least. Can you sort of develop a bit more on to exactly why do you think your train -- your truck is superior to these new launches from your competitors? And exactly how can you gain market share and also show better margins at the same time, sort of what pricing assumptions do you have in there?

Yes, key question, of course. Well, I think there's a number of drivers that favors us. First of all, when we do our product introductions now, it's very much we are in some aspects, it's more than a step performance. It's a huge step we're doing in, let's say, the product attributes that we're bringing to market now, especially the ones I showed you in the time frame moving forward in this window of '24 to '27. So it's a huge incremental, let's say, improvements that we're doing. We have also, with these opportunities with coming through, as I call it, a total solution with bundling services, captive financing, we're also able to start to address a new customer segment. Historically, international has been very dependent on huge fleets, on leasing companies, et cetera. And we find now through our retail channel, opening doors to medium and small operators. So that's our playbook. And we are ready with all the installed capacity already, both when it comes to driveline production and assembly and with current infrastructure, so to say, we are able to leverage on this growth. So we're kind of prepared on that.

And my second question was regarding China and the expansion in China. And just I think from when you originally announced it, to now geopolitics have developed. We are seeing also very fast on electrification there, at least on the car side, I know it's different. But can you talk about the timing and sort of exactly what you're going to produce there? Are you going to refocus it more maybe towards electrical over time? Or...

Yes. So you're right. Of course, geopolitics are changing. And with that, you could say that the argument to be in China is in a way, strengthened -- so if you take the background, we said, let's go to China, we need capacity, and we need to cover Asia. We cannot continue with the Scania brand to deliver from Europe because of lead times, which leads down to standardization, which is not what we're good at and it leads to tied up capital, which is also not good. But we need to be in Asia. China logical choice because that's where the supplier base is. By the way, it's the biggest market in the world. We think that will continue to be, by the way, even if we will not see 1 million anymore, but let's assume we see 600,000, 800,000. So let's go to China, let's build capacity. What has happened in the meantime and especially during the pandemic is, I think that the Chinese technology has evolved very quickly. It's not so much related to combustion engine products. True, I think, both for automobiles, which I don't know very well, but certainly true for trucks. But on digitalization and electrification, there is a very strong knowledge base in China today. Based on the long-term strategy with research universities, suppliers, OEMs that have developed this. So I think it's very good for us to be there with the whole industrial setup. So that means we have now R&D in China. We have procurement in China. We have, of course, production with a big factory, the big plant. And we have our own sales organization in China. So we kind of become part of that ecosystem, meaning that we will learn and source and work together with suppliers, research to Chinese engineers in order to actually cope with that competition that eventually will hit not China, but what we see partly in Europe and specifically in Southeast Asia. So -- but it's a long answer, sorry, to a short good question. But I wanted to expand also, say we have 50,000 capacity maximum allowed with our production license. And of course, we see that as a TRATON production capacity. And of course, we are starting there with Scania, but it's not impossible as the modular system evolves over time that we could think of also bringing other products out of that factory. And it will, in any case, for Scania, not be China for China. It will be China for, I won't say the world, but it will be China for the Greater Asian area, probably including ASEAN.

And if I may just follow up on the China topic. Why go it alone rather than get a local winner on electrification, for example, as a partner, what was the...

Yes. Look, thanks. I did not answer on your electrification question properly. Of course, we would have to have an electrification strategy ready whenever the Chinese government decides what is the technology that will prevail. We currently see all sorts of experiments going on in China. You see swap batteries. You see hybrids, you see hydrogen in different shapes and forms. And once the path is chosen, we will, of course, be there. And with the modular system, I think we have a great opportunity to plug in either our European way of doing it, if it fits, or going with partners on the electrification side in China, where there is very strong suppliers and partners available.

Yes, there's two more questions in the first row. So maybe you can just pass on the microphone, please.

Miguel Borrega from Exane BNP Paribas. So the first 1 on international, I guess, moving from the previous target of 9% to 11% without ever achieving the 9% is quite ambitious. We obviously understand the current issues, but can you give us some clarity on the assumptions behind that? If you would have to split the contributions to the 11% margin by pricing, market share and lower production costs, please?

Yes. Okay, I won't give you the exact cut down because I think that's your job -- but in big picture here, you see that the drivers for, let's say, both favor top line and, of course, let's say, the leverage on the bottom line, coming back to, again, Class 8 with our S-13 integrated is a driver for both these. I mean, we do -- we do benefit from, let's say, our own, let's say, margins both at the sales moment and more so important over the life cycle of the vehicle on the service side. So I think that's very important to remember. We do have, as I also mentioned, the same these volume growth are -- we talk about 5% market share. I mean over 400,000 markets, it's plus/minus that. I'm not saying that's a high market. But give or take, it's 17,000 to 20,000 units, I mean, depending on the size of the total market. And this is units that we're able to assemble and produce proprietary driveline to with today's installed capacity. It's to add just to labor, well, not just, but to add shifts to labor. So there's a good leverage on that side. So I think these two -- I mean, three rather say the top line growth driven by Class 8 on-road. We do have strong products. We've been having struggling in, let's say, ramp up capacity and deliver on that, but within the severe segment, which is strong in North America today, and we believe we prevail so for a considerable amount of time, driven by IRA and infrastructure investments. So there is a foundational strong market there in which we believe in the heavy side that we have good potential. And so vehicle parts and leverage from installed capacity.

And then switching to MAN. Obviously, higher prices played a big role on an improved profitability over the last 2 or 3 years. Of course, the realignment program also played a role, but what do you think will be the next leg? Maybe give us some color on the potential for SG&A reduction now that we are in a slower market? How much would that would contribute to the 11% margin?

Well, SG&A clearly is now a next step for us to actually change the footprint, and we're going into that. So well, you have listened to the building blocks actually, what we have done with the pre realignment. So part of that similar roughly also goes into SG&A steps. And here, you typically can see, okay, where you move your staff and competencies within Europe or even utilizing India. So then basically, you can backtrack the mapping. But what we clearly will do, is that we keep our own competencies there. So that is what we what we really focused on when we discuss SG&A. And this is both then, not only on the financial side, but it's also on the sales side and also on the services side, where we have the different assistance services towards our customers and towards the different service workshops, either our own 280 or our private partners as well, which we are serving as well. So here, we see that by utilizing the knowledge on the footprint by maybe even going there, where we are in Ankara with our development center or utilizing our Polish hub more, where we already are in Poznan, that is where we work on.

We should also not -- I mean, that's an framed we should also not underestimate the value of MAN's contribution to the group's volumes on components. So now that MAN starts to deliver the D30 engine, we immediately get up scale on the compaction in the gearbox, et cetera, and the components they're in, which goes for anything that we do in common. And that's a great volume contribution that supports all the other brands more and more over time, right?

And the other contribution is in our presentation, it is to drive more performance when it comes to our retail management, but that also together with our partners, with our private capital dealers, also making sure they are loyal to the brand and also that they can deploy repair maintenance contracts and services through our systems. This is also actually then providing better customer solutions but at the same time, also supporting profitability and then, of course, also driving towards absorption ratios, which actually Christian presented. So here, we also on the service side, learn from each other in that sense. But then in the background in the backlog.

Well, we have to manage timing a bit, but we had one question here, one -- second one there. Is your finance related or for this -- then let's take the three and then let's continue with that.

A couple of quick ones. On MAN on the brand, in the light of the weak order intake and the comments from Hanover Fair, where we're going to hear very positive notes -- if the market in Europe will be down 5% to 10% next year, what are the key actions you're looking to take to improve the profitability or maintain margins in '25 versus '24? And then on to Roberto on Brazilian market, which has been incredible in the last 10 years, right? This goes back to when you presented at the Capital Markets Day reagent like 10 years ago or so. But the landscape is changing, right? We have now Chinese OEMs entering the market. So can you talk a little bit around electrification trends in Brazil and how you're getting ready to maintain market share when Chinese competitors are clearly very keen to take market share in the bus segment and then they will continue across the other segments.

Alexander, you start with MAN?

Yes. I can take on the MAN side. And there are four key drivers actually now -- we have, of course, with the realignment and changing of the footprints, we also have much more flexibility in our production system. And this is now what we are utilizing going forward. Secondly, when it comes to SG&A costs and cost discipline here, we're, of course, accelerating now on this program. Thirdly, it is, of course, staying close to the customers. So as you also have seen, yes, we have been also jeopardizing on some market share in Europe when it comes to the realignment program. But now we have retail excellence in place, and we are working more with the sales staff to actually improve our funnel management and definitely leverage more out of the markets out of the German, Switzerland and Austria organization. And fourthly, it is, of course, to drive up with our fantastic lineup for e-mobility to actually stick there to the market.

Roberto?

Okay. I will answer your two questions. One is regarding the electrification. Different from Germany or the U.S., there is no regulation. There is nothing that you have to comply in terms of volume you are -- what we feel is that there are some companies, I mentioned here, is the biggest company in the world. They are looking for sustainability, and they are buying electric vehicles. So -- this is more those that are awarded with the ESG than TCO or so in terms of productivity, combustion engine is still the better solution. Regarding the Chinese, we are worried about Chinese, but Brazil is a continental counter. I mean going from down Brazil until North is difficult to have servicing network to cover how the eventually in these assets. So Chinese is a threatening but more on the long term, primarily because of this advantage we have that we have -- I mean, the actual players are very well set up. And we feel a little bit the danger of Chinese spotted use. For instance, 100 units of electric bus in Uruguay or in Chile, but to be a base and competing the truck business in Brazil, they have to make some accounting before getting there. And we are giving hard time for them to think twice.

I can add also from the heavy segment in Scania in Brazil, we really see biogas as growing strongly in Brazil, and there are plans in Brazil to become the world's biggest producer of biogas as electrification will be difficult with the distance with the existing grid and at the same time, they want to follow their pathway towards the 1.5 degree. This is probably going to be an important part of the mix, and it's important to have products geared for that, which we have.

Christian, what should we do? We use our 30 minutes. We are already a bit out of time should was... We take two more, and then there is another Q&A. [indiscernible].

So two questions, Dan. First, on Scania -- how concerned should we be about disruption in the supply of batteries from North Vault? And how much capital would you be willing to directly invest in North Vault to avoid that? And then the second question on MAN, when you look to the other brands in the group, what's the main variable keeping you from a double-digit margin?