Hello, and welcome to the Ebusco Trading Update Q3 2023 call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Björn Krook, Director of Investor Relations, to begin today's conference. Thank you.
Thank you, Laura, and good morning, everybody, and welcome to the Ebusco Q3 Trading Update 2023 webcast. As Laura said, my name is Björn Krook. I'm the Director of Investor Relations here at Ebusco, and with me here in the room are Bob Fleuren, our COO, Jurjen Jongma, our CFO. Our CEO, Peter Bijvelds, is attending from an external location at Busworld, and each will take you through part of the presentation. On the next slide, you see the disclaimer, which you should all be familiar with. Turning to page four with the agenda. Peter will first take you through the main events of the third quarter. After which, Bob will give you an update on the production strategy and the ramp-up.
Jurjen will talk you through the funding and liquidity, and Peter will wrap up with the outlook and the key priorities for the rest of 2023. With that said, Peter, please go ahead.
Thank you very much, Björn. Good morning to all of you, and, let me indeed take you quickly through a number of important events that we had, and activities in the third quarter. We have continued to ramp up our Casco production in Deurne, as well as to build the first Casco with our assembly partner. We are simultaneously setting up production in Rouen, expecting the first Casco to leave the factory already in Q4 this year, 2023, together ensuring an increased Casco output. While ramping up our Casco production, we have also made strong progress with our bus assembly partners. Multiple projects have been started on their assembly line, and the first shipments of buses are expected already in Q4 this year. To fill these assembly lines, we have signed several orders, including a large repeat order from the City of Munich operator, SWM.
This is our seventh order from the City of Munich and validates the quality and performance of our product. In addition, we also created opportunities in the new market with the sales of buses to Fraport, opening up the airport transportation sector. Here, I also want to mention the extension of our partnership with Deutsche Bahn, which now runs until 2026, and again, validates the relevance and performance of our buses. We're also seeing strong interest for our Ebusco Energy Solutions, which albeit relatively small, is an interesting business to be in as we leverage our deep knowledge on heavy duty batteries. We delivered already our first battery system in Q3. Regarding deliveries, we have delivered multiple orders within the Deutsche Bahn framework and have delivered the 2.2 buses for the City of Munich.
The deliveries for the 3.0 buses for our client, Transdev, have continued steady pace, and we have started the vehicle acceptance phase for the Ebusco 3.0 buses with Keolis and Nobina, who will welcome the Ebusco 3.0 in their operation already this year, Q4 2023. We think the Ebusco 3.0 will be a welcome addition to their fleets as we continue to see strong operational performance of the buses driving in the line. With a real world energy consumption of 0.65 kWh per kilometer, while driving 500 km on a single charge regularly. As you can see in our order book, we have been able to record a slight increase compared to the first half year as the balance between deliveries and new orders remained positive.
We are now over 1,800 buses, which is a strong position to be in as we execute our production plans. We continue to see strong tender activity as the front-runner countries in Europe continue their transition to zero emission public transport, while countries that might have been lagging behind a bit are catching up now. Now, I would like to give the word to Bob, who will give an update on our production strategy.
Thank you, Peter. Let me first reiterate why we have chosen to start working more with external assembly partners. Firstly, to expedite the ramp-up of the production of the Ebusco 3.0. Furthermore, to improve our delivery reliability, to de-risk our supply chain, to have access to a deeper pool of skilled labor, and to improve on our vehicle contribution margin. To support these external assembly partners, we continue to invest in our facility in Deurne, where we have installed additional tooling to supply our assembly partners with complete Cascos and Casco parts. We have also commissioned tooling at our Casco assembly partner, and the first Cascos have been successfully completed at their location. We are currently delivering complete sidewalls and frames, but in the near future, these components will be locally produced.
The structural carbon Casco parts will always be supplied from our Ebusco-owned Casco facilities in Deurne and Rouen to secure our intellectual property. These Ebusco locations will continue to make entire lightweight Cascos as well. Also, on this slide, there is a more graphic reflection of the production setup that we have been discussing, showing the different steps and where each activity is set to take place.
... This setup will lead to a higher reliability with less supply chain and personal shortage risks. For us, and I think for you as well, it is important that we have known these partners for many years, which allows us to scale up quickly while we retain our intellectual property. Based on all this, we expect the first completed buses from our assembly partners to be shipped to Deurne in the fourth quarter of this year. From here, Jurjen will take over and will elaborate on our funding and liquidity.
Yeah, thanks a lot, Bob, and good morning to all. Given our performance update to the markets in August, we wanted to inform you about what it is that we're doing to manage working capital, what it is that we're doing to contain costs, and how we manage our liquidity position, as you can see on this slide also. So first, with regards to working capital, there is three elements that are important. First, because of the acceleration of bus production, both in Deurne and with our partners, it obviously consumes existing inventories. And as we see that bus deliveries to our customers are picking up, also the conversion of contract assets and receivables into cash is gaining traction.
We're actively addressing with our supply base the terms where we can so that we can benefit from better financing terms with suppliers. Secondly, we're actively reducing discretionary spend, and of course, balance our direct workforce, also given increased production with our partners. When it comes to liquidity, the EUR 41.5 million of credit facilities that are in place since August are fully available to us, and they remain undrawn. We continue to have access to letter of credit facilities that help us finance working capital. With that, I turn back to Peter, who will briefly update you on our outlook for 2023.
Thank you very much, Jurjen. Indeed, the final slide that you are used to. At this point, we are confident to provide you with the guidance as set on the page. 250-300 buses contributing to revenue, EUR 145-165 million in revenue, and a significant improvement in EBITDA in the second half compared to the first half. The changes that we have implemented should start to become visible already in the remainder of the year, but most of the upside should come in 2024, which is the basis for which we are confident that we will be EBITDA positive in 2024. The times remain challenging, which is why we need to keep full focus on our key priorities. One, ramp up the bus production and delivery via Ebusco's assembly partners. Two, increase more Casco production.
Three, improving our operational results, including right-sizing working capital. As written in the press release, we are not where we want to be in terms of operational performance, but with the work that we have done and the changes we have made, we are moving in the right direction. Now, operator, you can open the floor for the Q&A.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from Luuk Lindbeek of Jefferies. Your line is open. Please go ahead.
Yes, good morning. Couple of questions to start with. You mentioned that the Casco production in Deurne is ramping up. Can you give a kind of run rate that you expect to be at in Q4 and how you expect that to develop next year? Something similar for the location in France, in case you say something about the progress there on the supply chain with Portugal. Second question is on the challenging landscape that you mentioned in the press release. Can you be a bit more specific on what are the main challenges that you see in the landscape? Is it still the supply chain, or are there any other things that make life difficult?
And my final question for now is on the energy orders. Can you give some kind of guideline how we can say translate the order book and the orders into euro amounts? So how big is that for you at the moment?
Okay, thank you for your questions. Let me start on Casco capacity. Good to inform you that here in Deurne, we are now working into a two-shift operation, so, we fully scaled up from a manning point of view. And in the second year, we will be at an output of two Cascos a day. So that's where we need to be. If we look at Rouen, there we do expect that the first 20 Cascos will be manufactured this year in the facility of Rouen, and then we will continue to grow like we did here in Deurne. So, Rouen will follow the same growth path. Your second question was on supply chain. We do see light at the end of the tunnel.
We also see that the chip shortages, for instance, are sort of behind us. However, we still see that parts containing electronics, wiring looms, connectors, but also sometimes specific brackets or rubbers, et cetera, do show longer lead times. What we also see is that, let's say, reliability of the supply chain sometimes remains to be troublesome. There's definitely improvement compared to the situation a year ago, but we are not out of the woods yet.
... And what you also see is that obviously, the shipments from the Netherlands to our assembly partners is also a significant task at hand. And that's also something that we are focusing on heavily, heavily.
Yes, and the,
Yes, I will. Sorry, yes?
Yeah, no, go on.
I wanted to answer on your last question on the energy, energy systems in total. As you have seen, this have had a huge ramp up. We have now in total 74 MWh, a little bit over 74 MWh on order, with in total 40 energy contracts. This is split up in energy storage system, land-based, let's say, that is used for balancing the grid. Meaning, yeah, the more solar power comes down, the more wind power, these things are used to balance the grid. They also can be used when companies don't have enough, let's say, capacity from the normal supply, and they anyhow want to do, let's say, their thing with electricity, meaning that there is too much congestion in that area.
That's also what energy storage are used for. The other side, we deliver more and more to the marine sector. The contract that we signed the thirty-first of May, this boat, this fuel cell boat with a battery from over a megawatt, is already a test going. So, it's already in service. And also, the other maritime batteries are picking up very fast. So there is, yeah, a steep growth.
Can you give any indication about the size of the business in euros for you?
Yes, as you can see in the order book, for example, for the maritime batteries, they are in sales price higher, because there is more certification necessary. You see, for example, 20 of the mobile energy containers, you should at least look at over EUR 1 million each in turnover. Also margins are good. If you look at the normal energy storage systems, and the total amount of megawatt hours is a little bit lower, 4.4. You look at an average sales price from around EUR 300-EUR 400 per kilowatt hour.
Okay, that's very helpful. Those were my questions for now. Maybe I'll come back later with more.
Thank you. We'll now move on to our next question, to, from Tijs of ING. Your line is open, please go ahead.
Thanks, operator. Morning, gentlemen. Yeah, the first question is, are you willing to give a little bit of feel for the growth margin levels in the third quarter? Maybe also what you see in the fourth quarter, and therefore, the second half. In the past, we have seen quite some one-off negative effects in the growth margin. How is this at the moment? So if you could give me a feel for that, it would be much appreciated.
Okay, I think that question is for me. We will see in the second half, as we also disclosed in the press release, that we expect our bottom line to significantly improve. However, at this point in time, I'm not able to give more details around it. But obviously, you know, an increase in EBITDA margin is driven by an increase in gross margin. So, you will have to base your projections on that.
Okay. Yeah, because my follow-up question is on the OPEX. I assume that the OPEX levels have increased in the second half, also compared to the first half, or are you, let's say, reducing already employees now that you are making more use of external assembly partners?
Now, what we'll see in terms of OPEX is that well, your expectation may be a little bit too pessimistic. And so we're projecting for a slight increase in OPEX in the second half, so relatively stable. So what you see is that let's say the sharp increase is slowing down. And that is what we have included in our modeling.
Yeah, now that's helpful. Yeah, and then also, basically, also on the question from Luuk, what is at the moment, let's say, a kind of a conservative view on the possible production of buses of the total of Ebusco, so taking everything into account? And where are then the bottlenecks for, let's say, the ramp up going forward?
You mean in terms of, of capacity, right?
Yeah. So how many 2.2s, 3.0s in Rouen, in Deurne, in China, in Europe, what is the, let's say, a conservative view of the total number of buses Ebusco can do today? And then if you can also give us a bit of a feel for, yeah, let's say, the next two quarters, mid-next year, end of next year, so that we have a feel for what the, the kind of, yeah, what your, your plans are with, with, with the ramp up, given that it is now quite different from, what we heard during the, during the IPO?
Yeah. So let me take the first part of the question, and then refer to Bob to, let's say, theoretical capacity that is there. As we've also said in our press release, we're planning to update you on our outlook for 2024 towards the end of the year. You know, our first priority now is to get our current, let's say, inventory of buses out of the door. So that is super critical in our PDI, our pre-delivery inspection in Venray. There's multiple buses waiting for delivery to the final customer. That is our prime focus.
And then towards the end of the year, we plan to update you on our, let's say, assumptions and outlook for 2024. So Bob, on capacity, let's say, both in-house and with our partners, you can potentially give also some information.
Yeah, for sure. Thank you. So the end state on the short term will be, is that we will have three locations where we will have Casco activities. So we have Casco activities in Deurne and in Rouen, and we have Casco assembly activities, final assembly activities, at our assembly partner. And, for sure, you have to assume that each location at least will have a capacity of 500 units a year. If we then go to bus assembly locations, we will have four bus assembly locations, will be Deurne, and it will be three assembly partners internationally. And also there, you have to assume that every location will have at least 500 capacity per year on bus assembly. So that is for now, the equation that we are working towards. So hopefully that gives sufficient guidance.
Yeah, and it doesn't matter for these external assembly partners, whether it's 2.2 or 3.0?
Well, it does, because obviously for the 2.2 will be gradually phased out and the 3.0 will be phased in, because obviously there's a fierce demand for the 3.0. Our existing assembly partner for the 2.2 will remain the existing assembly partner for that.
Okay, yeah, and-
But that's sufficient to meet the demands. These are, let's say, communicating barrels, and these are sufficient to meet demands for the 2.2 at this moment in time.
Okay. And, that's, that's quite helpful. Still also have a question on your remark in Venray. I mean, the number of deliveries, we have to think about 20 buses or 50 or maybe 100?
In what perspective? What do you mean exactly?
Yeah, I mean, these deliveries have been delayed throughout this year, but I mean, I'm feeling that you're close by to delivering a lot of these buses. So what kind of number I have to think of in Venray?
Yeah, so stated in the press release, we are rigorously working on the Transdev order. Every week, buses are being delivered to that customer. And in the fourth quarter of this year, for two other customers, so the buses will also go into service. So at this moment in time, in Venray, we are working rigorously to get those 3.0 to our customers. So yeah, I think you were seeing those numbers in the press earlier. So we have the 34 buses for Keolis. We have the 19 buses for Nobina.
We are working in Venray on the 21 buses for, for Barcelona, the remainder of, City of Munich, and obviously the remainder of the Transdev order for the Netherlands, and also obviously, Nobina, also, which is, coming. So these will be the projects at hand, for the fourth quarter of this year.
Yeah. So that's, that's indeed quite a lot. And, and in terms of, the revenue recognition, and now that the mix includes more 3.0, so the revenue recognition on these movements in these buses is also more, smoothened out?
No, the answer to the question is twofold. So one is, you know, as far as it contains production that we have in-house, and we do recognition basically, you know, fully on the basis of completion of the bus, so over time. When it comes to production that we have outsourced to our partners, it comes much closer actually to point in time revenue recognition, where we assume to take 90% of revenue, approximately, at the moment of, let's say, taking ownership of the bus from our partners.
Okay. Are you planning to give us, let's say, updates on that when there is a significant impact on that in quarterly numbers or a half year numbers?
How do you mean that? Can you elaborate a little bit on the question?
Yeah, I know it's all kind of volatile. So in order to understand what's going on, it makes it quite difficult because basically, there are two different models being reported to us as one. So that makes it, yeah, difficult to see exactly what's going on. And also-
No, I-
Take into account all these delayed deliveries.
Yeah, I don't think, actually, that that is the case. And so for all of our deliveries, we use, let's say, percentage of completion as, let's say, our way of recognizing revenue. The fact of the matter is that, you know, when we outsource production, obviously, the moment in time where we recognize revenue changes a little bit, but there's no, let's say, revenue recognition systems that are, you know, existing in parallel. They move at the same pace, but indeed, when we recognize revenue with regards to buses coming from third parties, yeah, it happens at a later stage.
... Like, one final question. I mean, your order book is now, yeah, quite well filled. Are there, let's say, big differences in underlying profitability, challenges per order, or is it all more or less, let's say, in line with what you have budgeted?
In terms of price, in terms of prices, you mean?
Yeah, cash flow, whatever. Are the orders more like quite common to each other, or are there big differences in return?
I think Peter is the best suited to answer that on the content of orders.
Yeah. So what we see, Tijs, is that over the last periods, the average sales prices are going up. So if we compare that with last year, we see that average sales prices are really going up. We have seen that, let's say, the roll on, roll off, with the extension of the export of passenger cars of China, for example, is growing. It's staying stable. But if you look overall, the average sales prices for sure are going up.
Yeah. And in terms of risks?
In what, in what part do you mean risk?
I mean, these clients all have, let's say, a specific tailor-made demands, or maybe they are very harsh on certain, insurance conditions. I don't know. But are there many differences within the different contracts, 20 buses, 30 buses, 15 buses, in terms of potential risks, returns, et cetera? Payment-
Let's say, of course, we are... We still have a supply chain issue, like we explained before, it's getting a lot better, but it's still there. The good or the bad thing is that it's industry-wide. What we see is that a lot of customers, of course, buses need to be on time. This is an important thing, but at the moment, this is nearly impossible. Everybody cooks with water, as we say. It doesn't help us immediately as Ebusco, but it's an industry-wide problem.
Okay. Thank you.
Thank you. We'll now take our next question from Usama Tariq at ABN AMRO / BHF. Your line is open. Please go ahead.
Hi, good morning, team. Thank you for your time. I have a small question with regards to the late delivery penalties. Could you kindly give a little bit of color on it? I understand that you adjusted in the top line. What is your, let's say, guidance, going forward, for the rest of the year and the year, upcoming 2024? If you could provide any, then I'll probably go for the next question. Thank you.
Yes. In general, without going too specific, as I just mentioned also to Tijs, is that there is almost like a gentleman's agreement between the industry. This goes from PTAs to PTOs, and this also goes from the PTOs and the public transport operators towards the manufacturers, that everybody tries to stay away from fines. Of course, this is not always possible. That's why you can see that we have taken provisions in our first half year, and we see that we have, with all our customers, very constructive talks how to mitigate these problems, and of course, to also mitigate, let's say, that we need to have the provisions that we already took in the first half year.
Okay. One follow-up question. It has been discussed already quite a lot of times. You do have a guidance for positive EBITDA in the next year. Could you give a little bit color on... Of course, it's based on the gross profit, you know, the gross margin. Could you, again, probably give a little bit of color on how do you expect to achieve it? Is it anything that you can disclose on that part?
Yeah, we have obviously anticipated the question, which is why we also said that, you know, we will give our specific guidance towards the end of the year. The one thing that I can say and will say about it, that you know, obviously, the step up in profitability to a large extent is driven also by a step up in expected volume. But again, and I reiterate again, you will have to wait for the end of December for us to become really specific on 2024.
Thank you.
Thank you. We'll now move on to our next question from Auguste at Kepler Cheuvreux. Your line is open. Please go ahead.
Hi, good morning to all. Auguste from Kepler Cheuvreux. My question is on the subject that we just addressed, but I just want to have a better visibility on what can be the top line for next year. The consensus currently implies the contribution of about 800 buses over the year. And this is more than two times what you are expecting for this year. And if we look at the other intakes, about 50 buses, this is only slightly above the average deliveries for the year, this year.
I don't see an except, a big growth in the order intakes that could justify the massive delivery increase from this year to next year. Do you think that delivering 800 buses next year is realistic? This is my first question, and the second one is on the EBITDA margin. Do you have some view on the deliveries that you need to reach to meet the break-even EBITDA guidance? Is there a minimum deliveries to reach the economies of scale to ensure the break-even on that? The two question.
Yeah. So, let me comment on this, and I reiterate once again that we'll come with an update on this towards the end of the year. Like I said, you know, also in my previous answer, is that you know, important driver for profitability obviously is volume. We do not generally speaking, comment on any consensus that is out there, but next to volumes, it is obvious that the major blocks in our P&L, not different from any other P&L, is cost control and gross margin protection and development. So those three elements, cost control, margin protection, volume, all play a role in profitability for next year.
In your modeling, obviously, you have a good view on the quality of our order book. So, I would take that as a basis for your assumptions. And again, we'll update you in detail towards the end of December. When it comes to a view on break even, yeah, obviously, we have a view on that, so we know what is needed to do that. Again, it is, you know, driven by those three elements that I mentioned before: volumes on the one hand, quality of margin, and cost containment on the other hand.
But obviously also from an operational point of view, I think we have seen the first signs of you know, us being able to successfully initiate, let's say, a launching bus production with partners. Yeah, that we will have to see through in the course of 2024. I honestly think we you know, made some important steps now in Q3. We'll have to continue on that path in Q4, which is also the reason that now, for us, is not the time to comment in detail on 2024. We're focused on achieving 2023, which is a super difficult year, as you're all aware.
And again, we will be ready to update you in more granular detail on 2024 towards the end of December.
Just, maybe if I may, so to be clear, you still think that delivering 800 buses next year is achievable?
Like I said, I did not comment on volume, so any assumptions in that respect are yours.
Okay. Thanks a lot.
Thank you. We'll now take our next question from Eric Wilmer at Van Lanschot Kempen. Your line is open. Please go ahead.
Hi, good morning, everyone. Thanks for taking my questions. I'll ask them one by one. First question, I think it seems that following the presented product assembly strategy, as you mentioned on slide eight, you will need to manage a substantial amount of product and component flows between facilities, various facilities in Europe, and China, and even on an individual bus level. Could you give some clarity on how you plan to execute this on an operational level? And is the current setup you have basically in terms of staff, is that sufficient, or do you need to make any changes there? That will be my first question. Thanks.
Yeah, thank you for the question. Indeed, the operations becomes more logistical than it was, between the various entities in that. Obviously, we do already have experience in this bus biz model because it's similar to the biz model that we are running for the Ebusco 2.2. But then obviously the volumes are a tad higher. Currently, we are also ramping up at our warehouse facility. Also on the receiving end, we also have boots on the ground from Ebusco-owned people. Both on the sending end as well as the receiving end, we have Ebusco people in place, and we rely heavily, at set, on the experience that we already have on the Ebusco 2.2.
Okay, thank you. Maybe a follow-up to this specific question: What's the reason why you chose for two assembly partners in China and not just the one that you already had?
That purely has to do with a capacity point of view. So the existing assembly partner runs both the 2.2 as well as 3.0. And you don't want to put your eggs in one basket. So we have deliberately chosen to also from a risk mitigation point of view, we have chosen for both the European assembly partner as well as two Asian assembly partners also from a vulnerability point of view. So that's the reason. So the second one in Asia is purely focusing on 3.0, whereas the first one is doing both 2.2 as well as 3.0.
Thank you. That's, that's helpful. Next question is on your, still on your assembly partners. As they obviously will be ramping up, and you will continue to be supplying them with a wide range of components, because I think you have a high sourcing, yeah, requirement from, from Europe, or parts components requirement in your, in your buses from-- coming from Europe. Should we expect inventories to remain elevated, in H1 next year?
Now, yeah, I sometimes remark that fortunately, we have a lot of inventories, which means that, you know, we're now also able to accelerate ramping up with our, let's say, external partners. I think we've all seen that our inventories were at a level of EUR 85 million in our half year numbers. Clearly, that is, you know, twice the level of turnover that we had at that point in time. Obviously, that is way too high. It is also on the back of the imbalanced supply chain that we mentioned before.
What we see now is, you know, that we have to deal with, on the one hand, increased demand and increased consumption, which has a, let's say, decreasing impact on inventory. But also you see that towards the end of the year, of course, you know, both production and deliveries are increasing, and so we're actively trying to balance that. But it is clear that, you know, levels of inventories that match the level of turnover that we have is way out of, you know, the boundaries that we typically set for this. We will see that, you know, inventories have an increasing trend because of a longer supply chain.
However, we were also able to finance that, with the LC facilities that we saw, earlier. Over time, we're expecting that, you know, particularly the European supply chain, will normalize over time.
Okay, thank you. Next question is also regarding working capital. So I think on a sequential level, at your H1 print, both receivables and payables seemed, yeah, somewhat favorable. Do you expect some reversal in H2 versus H1?
In terms of payables and receivables?
Yep.
Receivables is a bit of a, you know, strange animal in a sense that, you know, you should look at receivables and contract assets basically in combination. And the contract assets we build up as we recognize revenue and data and convert into receivables at the moment that we deliver buses. Typically, with our customers, we have relatively short payment terms. Unfortunately, they only pay at delivery. Given increase of deliveries towards the end of the year, you can also expect for receivables to increase towards the end of the year compared to our H1 levels.
When it comes to payables, you know, something that we actively monitor, our spending levels, on the one hand, are relatively stable. On the other hand, like I said, we're also actively speaking with our suppliers to see, you know, whether they can take a bigger chunk in financing our inventories.
Okay, thanks. Two very small questions, and I'm sorry to drill on this. I believe you delivered around 30 buses in Q3, and on average, roughly around 50 in Q1 and around 50 in Q2, on average. I was wondering, yeah, and I know this has been asked before, but still, how many buses do you expect to deliver roughly in Q4? Or maybe a very wide range of what you expect for Q4.
Yeah. Maybe, two remarks on that. And so one is Q3 obviously also includes the holiday period, so that is one. Again, you know, I'm not going to be super specific on the numbers of deliveries that we expect for the full year. One pointer, of course, is that to date, we delivered 138 buses. You can read for yourself also in our press release how many buses we calculate as part of our turnover, you know, contributing to revenue. So from that, you can deduct, to a large extent, the number of buses that we expect to deliver in the second half of the year.
Okay, thank you. And then maybe last question, when do you expect your Rouen facility to be fully operational?
It will be fully operational in the fourth quarter of this year. We are now installing the last tooling and equipment. Buses are already sent to Rouen for assembly purposes.
... So already, at the coming quarter, it will be fully operational.
Thank you very much, gentlemen. It was very helpful. Bye.
Thank you, and we'll move on to our next question from David Kerstens at Jefferies. Your line is open. Please go ahead.
Good morning, gentlemen. A couple of questions from my side as well. First, on the order intake, how do you feel about your market position based on order intake year-to-date? Do you feel you're gaining ground or losing ground? I count 384 buses year-to-date. I think that's down 65% year-over-year. But last year, of course, included the Deutsche Bahn framework agreement for 800 buses. But what does that imply for your market share? Are you moving up in the right direction to your target market share of at least 16%? That's my first question. Then the second question is related to the Deutsche Bahn framework agreement, which you published yesterday.
You said, you expect orders to come in, bringing the total number of buses under that framework agreement to over 100. Why would you leave it in the order book for 800? Is that still a realistic assumption? And then final question on the production of Ebusco 3.0 in China. How many Ebusco 3.0 do you expect will be manufactured in China? And how does that affect order intake in view of the argument that your customers want a locally produced bus and not a Chinese bus? Thank you very much.
Okay, thank you for your question, David. First of all, the DB, the Deutsche Bahn framework agreement, we have said that in the short term, we have visibility on 100 buses. As you know, this framework means that if Deutsche Bahn purchases an electric bus, we are the first, let's say, exclusive partner, where they procure this electric bus. Meaning that if they would not win any tenders, then we would not have any buses. As we see now, we see that, especially also the subsidies that have been given, at 80% over the more price, that is subsidized in Germany, it's really picking up fast, as we said, now, already in the short term, over 100.
If you then look, what we think and we see is very big, what we extended yesterday for 2025, 2026, that will be hundreds of buses, more only from Deutsche Bahn. Especially that we have also visibility on that they have already received the subsidies to order these buses.
In the near term, over 100, but then in the medium term, hundreds of buses in addition.
Correct. Correct. If you look in general on the order book, of course, we are busy with some big tenders, and what helps us the most is that we can show by facts and figures what is our operational data from the 3.0. This really, really, really helps us. We are now in Busworld, the biggest bus show in the world, in Brussels. Yeah, this operational data for sure will help us in the future orders. Of course, I think maybe it's a personal thing, but we are, of course, very proud that in the first half year of 2023, we were number one in Germany, you know, above Mercedes and MAN.
This is, of course, maybe it's only for me personally, but this is quite a big thing. If you then look overall, we are almost back now at the 5% market share within Europe.
Based on your experience being at Busworld, do you see your competition catching up in terms of total cost of ownership metrics?
I don't want to sound arrogant, but, let's say... No, I think we are still gaining advantage on that because the things that we put on, we have also put a lot of effort on, on ESG, on LCA, and, so recyclability, reusability, you see, especially the Scandinavian countries, they are very happy to also see these improvements. And I think also there, I even dare to say we are ahead of the curve, but especially, let's say on the 3.0, the facts and the figures we get out of the data, on performance, this is, of course, huge. This is really, really important, and this for sure will help our order book.
So would you say that-
We are also, we are also, sorry, we are also showing the live data. We have always been a very transparent company, but we show, understand the live data. Yeah, this is of course, extremely important. Because, from a TCO point of view, but also where we focus on, on a footprint point of view.
Would you say the reasons maybe somewhat lower than expected order intake is not really due to demand for Ebusco 3.0, because most of your orders were for Ebusco 3.0? Would you say that's mainly caused by your production constraints that you had in Deurne or?
Yes, let's say, let's say, if I-- and let's say, of course, we have on all different sections, we have a growing issues. Let's say, let's say my lowest worry is the order intake, for sure.
With now Ebusco 3.0 manufactured in China, is that not affecting your, your key selling point of, of being a European manufacturer?
No, because we, let's say the most important is that we get production up. Yeah, so in fact, we also see that now the operational data gets available, the switch from 2.2 to 3.0 even comes faster than we expected. The bus business is in general quite conservative, so we thought that, as the 2.2 is performing extremely well, even also compared to the competition, we thought it would be more bigger share between 2.2 and 3.0 on the 2.2. But we see now really that the 3.0 is picking up faster than we also expected. And, let's say the battery, of course, already comes from China, so it's for sure not that we stop in Europe. This will also continue.
We are only getting the flow a lot better.
Yeah. Makes sense. Maybe a final question, if I may. You mentioned earlier that you see prices going up in the market. If you look at the updated guidance that you provide now, that I think implies an ASP below EUR 500,000 per bus. Is that correct? And is that looking-- is that implying an increase in price or a decrease in price?
No, as I mentioned before, I think you will see this year that the prices, the average sales prices are going up.
Yeah, maybe also important to recognize that, you know, it's difficult to you know make a direct comparison between prices and revenue because of our percentage of completion revenue recognition, and so important disclaimer to... Yeah.
Thank you very much, gentlemen.
Thank you. And we'll get our following question from Luuk Lindbeek of Jefferies, a follow-up from him. Your line is open. Please go ahead.
Yes, thank you. One follow-up question about the order intake, and specifically about the importance of the efficiency for your customers, because I noticed, for example, this week with the order by Multiobus, that they still chose the 2.2 for because of their specific requirements. So can you discuss what types of other considerations you see at customers for choosing the 2.2 or maybe a competing bus over the 3.0? And then to what extent you see that also in your competitive landscape, that other factors are helping your competitors?
Yes, we can answer that quite easily towards you. The 2.2 has still more options available on this platform than the 3.0. Some options are very critical for customers. We have also proven that the 2.2 is ahead of its game, eh? We have seen this, for example, also in Berlin, where we could drive even in line, in a real city line, at one average speed, 12 kilometers per hour, over 400 kilometers. Compared to our competition, this is more than double. It's performing well, the 2.2, and outside that, it has more options available that are crucial to some of our customers, and that's why they also choose a 2.2.
Do you intend to add those options for the 3.0 rapidly, or is that something that takes more time?
Yes. So that's of course where our engineering department is working very hard on. So over time, and already in the next six months, we will have a lot of more options available that till now are not available on a 3.0, but will in the next six months, will be available on a 3.0.
Okay, so that could also accelerate the shift towards the 3.0 . And then, a question on your cost savings, because on the one hand, I understand that you're optimizing your costs at the existing plants. At the same time, you are ramping up, especially in France and increasing production. So on balance, should we expect an increase in the absolute cost level next year, or would it be fair to assume that you are able to save more than the ramp-ups are adding?
Yeah, I think many of you are trying to sneak in questions about next year, which I fully understand. But once again, we'll provide that update in more granular detail towards the end of the year. So, we try to listen to you quite well and provide more guidance on our outlook for the year, but it's really one step at a time, so I choose to not comment on your question.
Okay. Well, those were my questions for now. Thank you.
Thank you. And we'll take our next follow-up question from Tijs Hollestelle at ING. Your line is open. Please go ahead.
Yeah, thank you. Yeah, and a follow-up question on the remark about the delayed delivery penalties and the provisions. Where do the provisions show up in the balance sheet end of June?
...Now, yeah, so, so I think the provision, let's say it's, yeah, if you want to see it in the balance sheet, then, as some of you already commented, then so we take penalties as a, you know, from an accounting point, as a, as a kind of a discount on our selling prices. And therefore, the provision, if you will, is reflected in a lower amount of contract assets.
To understand it, and what was the restatement of all our current liabilities in the June balance sheet?
Yeah, the other current liabilities in the June balance sheet, I think the question was explicitly asked, but it has to do with what we call in good Dutch, overlopende passiva. So it means, you know, goods received, invoice not received, basically.
Okay, it's not showing up there?
No.
And did those provisions materially increase versus the end of June situation?
I think, and therefore, it is best to take on also Peter's comment on, you know, how we're dealing with penalties in general. So, you know, what we said on penalties and penalty provisions in our H1 release remains valid. Obviously, we're trying to minimize the impact over time as much as we can.
Okay, and clients are basically understanding how difficult the situation in general is, so it's not an outright war with lawyers and?
Oh, no. So from a legal point of view, you know, of course, like everyone in the industry, we have our trials and tribulations. But generally speaking, our discussions with our customers, you know, are constructive.
Yeah. Okay. Thank you.
Thank you. There are no further questions in queue, so I will now hand it back to Björn for closing remarks. Thank you.
Okay, thank you, everybody, for dialing in. As you know, we're always available for any further follow-up questions that you have in the coming days or weeks. And we look forward to speaking to you again, at least for our update in December on the year 2024. Thank you very much, and have a great day.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.