Hello, everybody. Thank you for attending our first Sogefi technology presentation. Yann Albrand, Sogefi Group CFO, unfortunately could not be here with us today, but is going to join us during the Q&A session. Presentation will be held by CEO Laurent Hebenstreit. Please, Laurent, go ahead.
Thank you. Ladies and gentlemen, a warm welcome to this technology presentation. I'm the amministratore delegato of Sogefi, and I have a passion in life for science, technology, and business. I started my studies as an engineer from École Centrale in Paris. I have a master's degree in solid state physics, and I started working for the first five years of my life in a company developing, producing, and selling batteries. As batteries will be one of the topics we'll discuss today, I can tell you that I have a direct hands-on experience for five years in this business. I entered the automotive industry. I joined Valeo in the starters and alternators business. I was Research and Development Director at Valeo for starters.
At the stage, I worked on the early versions of the start-stop, which was one of the important innovations which Valeo subsequently developed and brought to the market. Throughout my career with different automotive supplier companies, I've worked on many different innovations, and I've seen over time how they were successfully rolled out into the market. Let's first start with the agenda for today. I will first give you a brief introduction, then we'll go in a deep dive in the technology of Sogefi products. From there, we look at the importance and the role of technology in Sogefi profitable growth strategy. Sogefi is a young company, created in 1980 by Carlo De Benedetti, listed in the Borsa Italiana since 1986. Through CIR Group, the De Benedetti family is the largest shareholder and majority shareholder of Sogefi.
One important characteristic of Sogefi, and especially in these times of fast technology changes, is the strong entrepreneurship DNA of this company. For me, this is very important because in these times, speed is very important, being agile, being able to spot the future trends, and these are the characteristics of entrepreneurs. If we look at the evolution of Sogefi developed through a series of strategic moves and tight cost control. In 2005, Sogefi really was among the best automotive suppliers worldwide, with a cash flow generation, talking net free cash flow on sales, of around 4%-5%, which still now is a remarkable performance. That shows that not only has the company a strong DNA, but it also has a strong financial track record.
Going through some difficulties at time, the financial performance of the company has started to improve. I'm happy to mention that in 2016, we generated, I would say, again, as it was usual for Sogefi to generate cash, we generated again EUR 31 million of cash, which is around 2%. Not a bad performance in itself, but still far below the benchmark of the best time at Sogefi. We still have a way to go. Sogefi is composed of three different business units. That's very important as a preparation for the deep dive into the technology. In suspensions, the main products are stabilizer bars and coil springs. This is the largest business at Sogefi, and our main competitor is Mubea. Mubea is a large German private company. Not so much well-known from the investors as is not publicly listed.
In filtration, Sogefi is in oil filters, engine filters, fuel filters, cabin air filters. Here again, our largest competitor is a German private company, Mann+Hummel. In the air and cooling activities, our main products are the air intake manifolds, which is the air part of the air and cooling. The main cooling products are the coolant pumps, which pump the coolant inside the engine, and the coolant outlet housing. Here again, the leader in this category, our largest competitor, is a German company called Mahle, which is far larger than Sogefi. What does that tell us? That tell us that fundamentally, when we look at those competitors, these are very good companies with high industrial performance, high technology performance, and very good financial results. That means the businesses in which Sogefi is are sound businesses with good profitability potential.
Another important characteristic of Sogefi in these times of rapid changes is the diversity of the customers. Of course, Sogefi is in passenger cars, which is the main topic for my presentation today. Sogefi is also quite strong in the aftermarket. Our main brands here are the Purflux brand, the Fram brand, CoopersFiaam, Tecnocar, Filtri, which is a historical Italian brand. Aftermarket is 20% of total sales, which is quite high for an automotive supplier. We are present in the trucks market. We are present as well in the two-wheelers markets and the three-wheelers markets, mainly in India, as of course, India is the largest market for three-wheelers. As the mobility transportation is evolving, it's an important strength of Sogefi to have this diversity of segments.
Taking a closer look at our customers, I'm happy to say that Sogefi has a very well-balanced client mix. Maybe highlighting the fact that Renault Nissan has been an early developer of the electric technology. You know that today, if we look in terms of volumes of cars sold, Renault with the Zoe, Nissan with the LEAF, is among the leaders in volumes. Renault Nissan is one of our key customers, as well as Ford, Fiat Chrysler group with CNH, and PSA Peugeot Citroën Group. The numbers here are just for Peugeot Citroën. They do not include the General Motors Europe part, which is still included in the GM line because these are 2016 numbers. The deal was just made here.
The takeover of the General Motors Europe activities by PSA presents interesting opportunities for Sogefi to develop business with a new perimeter of the group PSA, Opel, Vauxhall. We are very proud of our strong position at Daimler, as Sogefi is, of course, well-known for its presence at mass producers, but is also present, as we see on volume brands and on premium brands and premium cars. Last but not least, I would like to point out the last name on this list, which is Geely Volvo. Geely is a very dynamic Chinese company which has acquired Volvo, and we have very interesting development both with Geely and with Volvo, which is strategically important going forward. As I said, Sogefi is well-known for supplying volume cars.
It's less well-known that we have a very strong presence both with premium customers and models, whether that's Ferrari or Porsche on the Cayenne, Audi on the A6, Maserati, BMW, the Mercedes-Benz GLK or the E-Class, the Volvo XC90, the Jaguar F-Pace, or the Corvette in North America. This diversity of presence, both in volumes and as well in the premium segment, is key in terms of capturing what are the technology trends for the future. Most of the automotive suppliers are concentrated on one, two, three large customers where, of course, they have a good view of what's going on. Sogefi is in a unique position due to the breadth of the client mix and the diversity of applications. Let's now go into the substance of the presentation, which is really what's going on in the technology.
I must tell you that for us in the automotive industry, these are the most exciting times in my 27 years of career in the automotive industry, as many parameters are changing at the same time, which is very exciting for us. The current trends are well-known, but I would like to emphasize their importance. Air quality is becoming more and more of an important subject, whether it's in Europe, in North America, or even in China, where, of course, pollution, as well in China as well as in India, pollution is an even more critical element. CO2 emissions reduction, fuel consumption reduction, and weight reduction, which continue to be an important trend. I've highlighted below, on those current trends, which of the Sogefi activities could benefit from those higher technology requirements.
It's important to emphasize the importance of current trends, because I'll move now to the future disruptive trends. The attention sometimes gets so focused on the new trends that some people forget that the current trends still have a very high importance in the competitivity going forward. Talking about our suspensions activity, suspension is, of course, the key factor for Sogefi in terms of weight reduction. The stabilizer bar's function is to keep the car horizontal when the car turns. You remember probably the old 2CV from Citroën. When it was turning, it was going on the side. The stabilizer bar's function is to keep the car horizontal. The entry level of the product is what we call the solid bar. This is a steel tube. Typical weight per car is 6 kilograms, and the price would be EUR 16.
A number of customers have already switched to the tube technology, which is a 35% weight reduction and, of course, a higher price for us as the tubes are more expensive and more complex to form. The higher level of technology is variable wall thickness, where we can achieve 45% weight reduction and a higher content. This difference of content will be an important element of my presentation as people focus on the evolution of the segments. Inside one product line, there are, of course, very important difference in content. Moving now to the coil spring, which is the second most important product for Sogefi in suspensions for weight savings. With the four coils, we have a indicative weight per car of 10 kilogram, a price of EUR 20 per car.
We have a mid-level of technology with higher performance process for the steel, which enables to achieve 25% weight reduction, and we are developing the composites, which offer 50% weight reduction. You see that the price factor is, of course, much higher for composite, where we are looking at a content per car of EUR 50. Moving now from the current trends to the disruptive trends. Connectivity, autonomous driving, and shared mobilities, which is capturing most of the media attention. This is, I would say, the most spectacular developments. Those developments are important to us, but they do not have strong, direct impact. That's why I've written here, connected, autonomous, and shared trends have limited direct impact for Sogefi. Electrification is less spectacular because if you look at the car from the outside, you don't see the difference, at a distance between a combustion engine and an electric car.
This is a key trend for Sogefi filtration and air cooling activities. We've developed with McKinsey, which is one of the top world-class consultants, a detailed world database and model to create alternative powertrain scenarios, which I would like to share with you today. We are in uncertain times, the scenarios method is, I believe, one of the best methods to assess what could be the evolution into the future. In any case, electrification as well as the current trends I mentioned before is calling for higher technology requirements. When we look at the media, sometimes there is quite a confusion of what it is that we are talking about when we are talking of the evolution of the powertrain. We've explained here what do we mean when we talk about new energy vehicles. In fact, new energy vehicles covers two categories.
It covers the electric vehicles, the battery electric vehicles, and the fuel cell electric vehicles, which is highlighted here in green, but it also incorporates the hybrids. The hybrids are also new energy vehicles. Inside the hybrids, you still have an internal combustion engine. That means when you look at the evolution and the impact of the evolution for Sogefi, you need to look at the three categories, the electric vehicles by themselves, the new energy vehicles as a category, and then the total internal combustion engine, which includes the conventional internal combustion engine cars, plus the hybrids, because the hybrids still have significant internal combustion engine inside. I think that's very important to really differentiate the technology evolutions. To be very precise on what we're talking about, we've included on this page 16 of the presentation, the exact definitions of what we are talking about.
The pure internal combustion engines is what we know for years. The hybrid, we have three different categories. We have the mild hybrid, which is 48 volts. Why 48 volts? Because 48 volts is the highest voltage which is harmless for the individual. That is, if a mechanic is plunging his heads into the car, if it's 48 volts, if he gets an electric shock, it's not a problem. Higher than 48 volts could be harmful to human life. That's why people are focusing on developing 48-volt systems for hybrid. On the full hybrid electric vehicle, we are, of course, at higher voltages batteries. The typical case for this is the Toyota Prius. You know that Toyota was very successful being the first introducing this category. An important current trend is what we call the plug-in hybrid, which is different from the Prius technology.
We've given as an example, the new Golf GTE. A lot of developments now, including at Toyota, are dedicated to plug-in hybrids. The distinctions are important because the technical solutions behind those diversity inside the hybrids category are meaningful for Sogefi products. We have the battery electric vehicles. I mentioned the Renault Zoe, the Nissan LEAF, and of course, the different Tesla models, which are pure battery electric vehicles. The fuel cell electric vehicles, such as the Toyota Mirai, which is available, and validated for use already on the roads. There is a fair amount of technical development on the fuel cell electric vehicles. I'll share with you what that means for Sogefi into the future. When we look at the media, we have the impression that battery electric vehicles and hybrids are already the dominant powertrains. That's not the reality.
The reality is that if you look at the world quantities, the world numbers is that if you look at our definition, which is passenger cars and light commercial vehicles, 2% is battery electric vehicles, 4% is hybrid, 17% is diesel, and 78% is still the good old gasoline engine. Of course, if you look at Europe, the split is quite different. Battery electric vehicle is 1%, hybrid is 3%, and diesel is 41%. Diesel has already reduced a lot. It was more than 50%. It's been reducing. It will reduce further, as I will show. Very meaningful because of the quantities is China. China is 28 million new cars per year. Here we are at 2% battery electric vehicle, 3% hybrids, 6% diesel, and 19% gasoline. There are two main trends as far as powertrain are concerned. The first one is the diesel disruption.
It's mainly affecting Europe. It's the combination of several factors. More stringent regulations, the consumers turning away from diesel, the politics, diesel circulation restrictions in large cities. I will tell you more details about the scenarios. We've developed two scenarios. One, which we call the base case, and one, which we call the strong case. Of course, we have more scenarios internally. Those are the ones that I would like to share with you today. In the base case, we consider that from 41% in Europe, the diesel will go down to 25% in 2027. There was a publication yesterday from IHS, which is one of the reference publication in the automotive. Their numbers for diesel in Europe in 2027 is a bit higher than the 25%. You see that the base scenario of Sogefi is already quite aggressive in terms of the diesel reduction.
In the strong case, we are also projecting at 20% the share of the diesel going forward. Now, on the electrified powertrain, including hybrids and electric vehicles, there's lots of technology improvements going on. Politics also play an important role, both in France and the U.K. with the ban for diesel and petrol cars, which have been announced for 2040, as well here in Italy, where the government's announced a target of 5 million electric cars, as well as in China, of course, with the increase of electric vehicles. All in all, on a worldwide basis, we take the 4 plus the 2 I mentioned before, which makes 6 to 30% in 2027 and 33% in the strong case. This is a busy slide. What we've highlighted is to share with you how we construct our scenarios.
We have two main parameters. One is a diesel with a low diesel and a high diesel version, and then we have another independent parameter, so to speak, which is the low electric vehicle and the high electric vehicle. Our base scenario for 2022, because this is a vision of 2022, our base scenario is calling at a worldwide level for 7% battery electric vehicles and 9% hybrid and 14% diesel. If we move to the strong case, which is the upper left corner, you see that we are projecting 11% battery electric vehicle, 13% hybrids, 9% diesel, and 16% gasoline. What's important to see is that even if battery electric vehicles and hybrids are growing, the internal combustion engine, which is the sum of 68 plus 9 plus 13, if we look at the top corner in the strong case, still remain 89%.
That means, yes, battery electric vehicles and hybrids are growing, and we're projecting very significant growth rates. Still, in this scenario, in the base case, the internal combustion engine, which encompasses the pure internal combustion engine plus the hybrids, reach 93% in the base case and 89% in the strong case. Moving ahead to 2027. Again, we have in the middle highlighted in pink, the base case where we see, of course, a higher share of electric vehicles going to 14% for battery electric vehicles, where we see 16% for the hybrid, 11% diesel, 16% for gasoline. If we move to the upper left corner, which is the strong case, we project 19% for EV worldwide, 15% hybrids, 7% diesel, 59%. If we do the same reasoning, basically the total ICE is a difference between 100% and the pure battery electric vehicle.
In the base case, we still have in 2027, 86% of internal combustion engine, and in 2027, 81%. Today there is a consensus among analysts of the automotive and professional of the sectors that internal combustion engines are here to stay. Of course, the new technologies will develop, so there is competition. Internal combustion engine is not going to disappear neither tomorrow, not even the day after tomorrow. Of course, what's important for Sogefi is a projection by region, and here we've broken down the base case by region. Why? Because you know that 60% of Sogefi business today is in Europe, so of course, what is happening in Europe is more important to us as of now. We see here that for Europe, we project electric vehicles to go up from 1% to 13%, hybrid at comparable level at 14%.
As I mentioned before, a decline of the diesel down to 25%. It's a pretty steep decline, and gasoline from 54% to 49%. If you look at the world level, we see the breakdown of the different technologies which I've mentioned before. Let's now look at the evolution of the total market, because in the end, nobody lives on percentage, we all live on actual numbers, absolute numbers. If you go to a shop, we don't buy anything with percentage, we buy in EUR or in the local currency. Let's look at the absolute numbers. We see the market for vehicles, passenger cars, and light commercial vehicles to grow. We project 1.4% compound annual growth rate in the first five years and then 2.1% in the subsequent years, which means in absolute terms, from 92 million vehicles a year in 2017 up to 110 million in 2027.
Of course, we see that in this projection, in the base case, the EV has a fantastic growth rate up to 15 million vehicles in 2027. The hybrids also has a fantastic growth rate, going to 17 million vehicles in 2027. Now, if you look at the total internal combustion engine, which is the IC gasoline, the IC diesel, and the hybrids, we see that in this base case, although I mentioned that it's already quite aggressive, we see the total quantity, the absolute numbers of internal combustion engine vehicles staying around flat, which is a very important result. What's written in the press is true. The press usually doesn't mention that there are things which are continuing because it's better for the headlines to focus on what is new, without looking at the total market and how the total market evolves.
Let's look now in more details at Sogefi, at our products, now that we've understood how the market is going up. The main products for filtration is the oil filter, the engine air filter, the fuel filter, and the cabin air filter. You also need to understand that the OEM activity of Sogefi filtration is only 40% of our filtration business. 60% of our filtration business is aftermarket. The aftermarket business is focused not on the new cars, which are coming out every year, but on the average of the car park. It has a very different dynamics. The average age of the car park in Europe is 10 years, which means that with this strong share of aftermarket, Sogefi filtration and therefore Sogefi as a whole, because 60% for filtration means 20% for the whole group, gives us a very good resilience to the OEM volumes fluctuations.
Now, if we move to the air-end cooling side, the manifold, the coolant pump, and the coolant outlet housing, they are mostly OEM products in terms of markets. What happens when we go to a hybrid powertrain compared with the internal combustion engine where we described just before what are our products? I'm on page 24. Well, on the hybrids, the main difference is that we have at least twice the volume for the pumps and the outlet housing. Why? Because the batteries do not like cold temperatures. They do not like high temperatures. That means the batteries need to have a specific cooling circuit, which is different from the cooling circuit for the engine. As you remember that in a hybrid, you have a combustion engine. The car needs a circuit for the engine and needs another circuit for the batteries.
That creates double the volume for the cooling activities. Of course, it opens as well, new products opportunities such as battery packs, such as the battery pack coolant manifold. What is a coolant manifold? It is a part which distributes the coolant to the battery, because the battery in the hybrid is relatively large, the coolant needs to be distributed all around the battery in order to cool down the battery. When you charge the battery, you need to cool the battery, and you need to cool even more the battery if you are overcharging the battery because once the battery is charged and if the charge continues, all the energy goes up in heat. The cooling of the battery is an extremely important factor for the duration of the life of the battery.
Sogefi is also working on what we call thermal packs, which is not only the battery packs, but it's also including inside the battery pack the thermal elements for the heat exchange. In the battery pack above is just the pack itself. In the thermal pack, we include the heat exchanger elements inside the pack. The hybrid powertrains offer also opportunities for coolant valves. As the coolant circuits become more complicated and needs to be tightly monitored, this creates opportunities for coolant valve. On the filtration side, we have higher technology requirements, but basically all the products we have in filtration continue to be needed for filtration. I just highlight on the bottom right side that with the hybrid car, the consumers expect to have a better contribution to the environment. There is usually a request for a higher performance cabin air filter.
I will come to that later in the presentation. We see the trend starting with the hybrids, of course, continuing on the battery electric vehicle. On the battery electric vehicle, from the range of filters that Sogefi is doing, the only filter which is left is the cabin air filter. What we are seeing is higher performance cabin air filters. If we take the example of a Tesla, in order to have super efficient air cabin filtration on some of the models, there is a primary air cabin filter, a secondary cabin air filter. The high performance in that case means also that the car offers a bio weapon defense option in order to protect the occupants of the car from not only the pollutions, but even potentially worse attacks. Moving on the other side, on the air and cooling.
You see that beyond the battery pack, which we had on the previous page, of course, the battery pack for battery electric vehicle is much larger, because the full autonomy of the car is resting on the battery. The battery packs which are needed for battery electric vehicles are significantly more important and more complex technically. The battery electric vehicles also creates the opportunity for what we develop as a battery pack coolant manifold module. As the battery is much larger, the distribution of the coolant in the whole surface of the battery becomes more sophisticated. Battery thermal pack as well. Also a very interesting development is the electric cooling module, which is basically integrating all the elements which are needed to cool the battery with electric steering.
As I mentioned before, now the volumes for the pumps, in that case it would be an electric coolant pump, the coolant outlet housing and the coolant valve is also twice because you still have the battery electric vehicle, but you still need to have a coolant and a heating system for the car itself. Therefore, the volumes for electric coolant pump, coolant housing, and coolant valve also have an increased effect. Moving on with the fuel cell electric vehicle, we find again the electric coolant pump, the coolant outlet housing, the coolant valve. Again, it becomes more interesting for filtration. We still have, of course, the high performance cabin air filter, but as you know that the fuel cell is working on air, the air which comes in needs to be filtered.
The fuel cell filters and what we call the complete system fuel cell air filter becomes very important again, as well as the water separator, as the fuel cell itself is producing water. It is hydrogen and oxygen, putting water. The water separator becomes an important element of the fuel cell electric vehicles, creating again opportunities of new products for filtration. The good news as far as Sogefi is concerned, is that, of course, hybrids and battery electric vehicles are the future, but for Sogefi, the future is now. We are already on a number of those cars, and we are working also on new developments on these. As far as hybrids are concerned, Sogefi is on the BMW 3 Series, the Audi A8, the Mercedes-Benz S-Class, the Porsche Panamera, the Chrysler Pacifica, Chevrolet Malibu.
Again, I am happy to mention the Geely TX5, which will be the London hybrid cabs developed by Geely. On the battery electric vehicle, Sogefi is already on the Renault Zoe, the Smart Fortwo, the Mercedes-Benz B-Class, and the Fiat 500e. There are lots of new developments, but again, for Sogefi, the future is now. It is already ongoing. As a summary, even if all scenarios predict an increase of the electric vehicle, the total ICE powertrains could remain flat or a substantial part of the market, until 2037 and going forward. Hybrid powertrain is a first step towards a world of multiple powertrains. The rise of EV is still depending on key evolving factors. The range the car can go, the battery cost, the infrastructures.
The good news for us is that, as you have understood, more volumes for cooling products, new Sogefi products, I have highlighted some of them. Higher content, for Sogefi existing products. Let me again do another deep dive into the contents. Oil filter is one of the largest markets for filtration worldwide. Here again, we have a large diversity of technology levels. Entry level is a typical oil filter spin on which each time you go to the garage, gets changed when we change the oil. There is another level, which is the oil filter plus cap. Then, depending on the architecture of the engine, the car manufacturers might decide to have a complete module, which includes the cooler for the oil and includes as well a number of valves.
In that case, the unit price goes up. When we look at Sogefi for the current situation, we see a clear average trend going up. The average price goes up because the mix goes up in favor of more modules. In that case, the car manufacturers have decided for architectures which incorporates higher value products. If we look at the engine air filter, which in terms of size is a comparable size market to the oil filter worldwide. Sogefi can provide a filter element, which is the base of the competencies, the filtration, but also a filter element and box, and you see that the price jumps from EUR 2 to EUR 9, which is a significant difference. A complete engine air intake system, including the ducts, go up to EUR 28.
If we now move to the air cabin filter, which is here to stay for a very long time and has a lot of higher requirements. The entry-level filter is filtering the pollens. The middle technology is filtering the particles and the odors. The higher level could be anti-allergen or even higher levels of requirements going up to EUR 3. Let me complement and conclude on this section as far as the content of filtration is concerned on the pricing power of our brands. The filtration aftermarket, like most automotive parts market, can be segmented in 3 levels. We have the private labels, which could be private labels from the distributors or could be private labels from the car manufacturers, because the car manufacturers have a strong focus on the parts market. The Eurorepar brand, for instance, is a private label brand from the PSA Group.
There is a strong development of the private label segment, which would have a price index of 80 as far as public price. We have what we call the mid-range. In the mid-range, Sogefi has the CoopersFiaam brand, which would be with an 85 price index. Last but not least, Sogefi has a strong position in the premium segment, where most of our activities is today with the Purflux brand, the Fram brand, and the Tecnocar Filtri brand, especially here in Italy, where Tecnocar is long recognized by the mechanics as a premium brand. Moving now from filtration to air and cooling and looking at the contents. In that case, the pricing effect is even more important. A basic, simple entry-level manifold starts around EUR 10.
In order to increase the performance of the engines, which is very important and even more important now, the car manufacturers could decide to have a part of the tuning of the performance of the engine in the air intake manifold with an actuator, which controls the airflow inside the engine. Let me maybe explain just a little bit about this. The diesel is very important for the car manufacturers to meet the CO2 requirements. With the diesel going down because of the public turning away from the diesel, the pressure is increasing at the car manufacturers to improve the performance of the gasoline engines. In order to improve the performance of the gasoline engine, the share of manifolds with actuators is increasing very fast. Another way of improving the performance of the engine is using a turbo.
What we see in the projection is a strong growth of the turbo. The turbo enables to increase the pressure of the air coming into the engine, which is increasing the efficiency of the engine. The problem with the turbo is when it increases the pressure, it increases the temperature as well. You need to cool the air. After you've increased the pressure, you need to cool the air of the turbo before it gets into the engine, because if the temperature is too high, it decreases the efficiency of the engine. In all cars where you have a turbo, you have a charge air cooler.
The trend we are seeing in the market is that from the past where the charge air coolers were in the front of the cars, the car manufacturers are increasingly interested by solution where the charge air cooler is included inside the air intake manifold, which reduces the total packaging. You can imagine that when the car manufacturers have to design a hybrid car, they don't have more space inside and they have to tuck the battery, they have to tuck the electric motor. Basically, they need space and the space constraints are increasing. This solution which integrates the cooler inside the air intake manifold is very interesting for the car manufacturers. You see that the price factor here goes from EUR 10 to EUR 23 and then up to EUR 40. On the coolant pump side, there is also lots of technology developments.
The typical mechanical pump is actuated by the engine with a rubber band, which makes the pump turn, this pumps the coolant inside the car. There is a second level of technology, which is still a mechanical pump with a cooler for the coolant and a thermostat. We also have solutions which are still mechanical, but could have on top of it an electric-controlled valve in order to control the flow of the coolant, as the flow of the coolant is an important factor in the efficiency of the engine. That's why we see a trend towards smart coolant pump, and a smart coolant pump indicative price is EUR 25 to be compared with EUR 8 for the entry-level pump. On the outlet side, because as soon as the coolant gets in, it needs to get out of the engine.
We have also from the entry level, which is a basic thermostat on/off, enabling either the coolant to get in or to be blocked inside the engine, to have a variable move through the electric thermostat, or even more complex, a smart multi-way valve, which enables a more complex flow and therefore contributes to a higher efficiency of the engines. Here again, the price difference goes up from EUR 8 to EUR 13 and EUR 25. With all those technology changes going on, Sogefi is looking outside at what is happening in the market. What is happening in the market is compared with when I started 27 years ago in the automotive, the importance of the startup is changing. Of course, when we talk about startup, we all think about software, but there's not only startups in software. There are startups in all many different kinds of applications.
The startups are becoming key players of the automotive world. We now have startups making cars, but also have startups making all kind of technical development. The startups, they are disrupting the existing business. They are creating new businesses in some case. At Sogefi, we are launching a new initiative, which we call Sogefi Ventures, and I am pleased to share that for the first time with you. Our objectives are, of course, to generate profits from these activities, to add value to existing Sogefi products, and to generate new Sogefi products. For this, we monitor the fields relevant to Sogefi, the air cooling, the filtration, and suspensions. Sogefi has no plans to compete into the connected car world. But from this connected car world, we could have some interesting ideas for our own product in air cooling, in filtration, and suspensions.
Once we have identified an interesting startup, we built joint development agreements, technology development agreements, which could be quite complex because this is concerning the intellectual property. We are looking at buying 5%-10% equity, because as this startup has an interesting technology, we want to play an active minority shareholder role to make sure that Sogefi gets the benefits of these developments. We look forward year after year to dedicate EUR 3 million-EUR 5 million of cash per year to this initiative. It takes time to find the right startups to build these agreements, to negotiate those things. But this is to be compared with the tangible CapEx investment of Sogefi this year of around EUR 70 million. So it is substantial. For an individual startup, it could start at 100,000.
There does not need to be EUR 1 million right at the start, depending on the size of the startup and the meaning of the products for us going forward. Sogefi is in, I would say, a world of middle technology. Sogefi is not in the world of high tech of the connected cars, which mean R&D spending of 10%-15%. We are not in this world, but we are as well not in the world of the low tech, as you have understood from all what I have described. Sogefi is in a world where technology is meaningful and becomes even more important, due to the new trends. What is key for us is what do those technology trend means for our strategy going forward? That is what I would like to share with you.
First of all, with all those changes going on, it is even more important to have a strong and robust profitability improved plan. Our performance drivers to improve our profitability is of course purchasing. 50% of our P&L is dedicated to purchasing, so working with our suppliers on cost reduction and on low-cost country sourcing remains a key element. Shop floor. I will go into more detail. Program management for the new products, especially when they are innovative, becomes even more important. Indirect cost reduction is a permanent, ongoing effort. Competitive footprint, developing both excellent plants, but also located at the right place. Let me tell you where we are at on the shop floor. In parallel with the efforts we did on the scenarios for the market and prioritizing of the technology developments, we also this year spent a fair amount of time in analyzing our costs.
Out of a 2016 cost base of EUR 1.2 billion, we carved out the material part, which is EUR 945 million, to concentrate on EUR 380 million of transformation costs. From there, we focused on EUR 290 million of costs, which we analyzed, and we found out there is EUR 100 million of addressable costs, which we can focus on, and we expect substantial savings in the next three years from those EUR 100 million. At the time where the world is changing, it's even more important to have differentiated product strategies. I would like to highlight that we have three main categories of product strategies. We have the categories which we call harvest, which is applicable to the fuel filter. Because of what we've said, fuel filters is a category where our priority is the improvement of the profitability.
In some cases, we could have growth because we gain market share, but clearly, in the strategy going forward profitability is the number one priority. We have products where we are challengers. That means these are products where we are not among the top five, but for reasons where we see good opportunities for technology development, we have an active challenger strategy. This is the case in the filtration for the cabin air filter, for the engine air filter, where the market share of Sogefi could grow. As well in the filtration, we are in challenger position with Tecnocar Filtri in Europe, with CoopersFiaam and with Fram. On the air and cooling side, the coolant outlet housing and the coolant pump are very exciting challenger strategy position for us.
We also have a number of products where we are clear leaders, and here that's a different product strategy than the other ones. The oil filter, we are number four worldwide for oil filters. We are number one in France with the Purflux brand, and we also have strong position in some other countries. In the manifolds, we are number two worldwide with a very strong position being present both in Europe, in North America, as well as in Asia. Also important going forward is the geographical expansion and the cost-competitive footprint. We are pleased with our investment in Mexico, where we have the three business units. The activity is starting for suspensions stabilizer bars this year in Mexico. It will continue to ramp up next year. In India and in China, we have the three business units are already present.
We are present in Romania with a low-cost country location for air and cooling. We will start in production next year for filtration in Morocco, and we have a project in the Europe, Middle East area for suspensions, which is not yet announced, but we are working on this and look forward to announce it in the next months. Beyond the product strategy, which I have described, the geographical expansion and the cost-competitive footprint continues to be an important driver of our profitable growth strategy. Of course, all of this costs money. It costs money in terms of investment. If we look back in 2013, Sogefi invested in tangible CapEx EUR 36 million. When I joined in 2015, we further increased the investment to EUR 59 million this year. We aim around EUR 70 million tangible CapEx investment.
This takes us currently at 4.1% of sales, which is still very reasonable for an automotive supplier in this phase of technology change. What do we invest in? We invest, of course, in health and safety, this is always important, in quality, as this remains an important factor, in capacity increase, as we are gaining market shares in some areas, in efficiency, some of the productivity which I've described come through investments, in new products, which was a subject of the presentation today highlighting the new products we are working on, and of course, in new plants, as I just mentioned. Of course, the question as we ramp up the investment is, what is the financial logic of doing this? The financial logic of this is here. If we look in 2015, the return on capital employed of Sogefi in the third quarter was 10.2%.
If the return on capital employed was to stay at 10.5%, that might not be a very good idea to increase the tangible CapEx investment. Why? In 2015, the benchmark for return on capital employed among 600 key suppliers was 13.5%. Clearly, Sogefi was in recovery mode, as I indicated. You see that through the various actions that we've taken, we've increased the return on capital employed to 12.8%. Last year, we reported a return on capital employed of 17.5% in the third quarter of 2017, we aim at continuing increasing our return on capital employed as we continue increasing our tangible CapEx going forward. Another important indicator is leverage.
When I joined the company at the leverage in Q3, I joined in June 2015, the leverage of the company was 3.7 at the time where the market was quite at a high level in the cycle. Of course, as an automotive supplier with many things to do as far as R&D and tangible. You don't want to stay at that type of leverage. We were successful reducing our leverage to 2.3 in the third quarter of 2016 and to 1.6 in the third quarter of 2017. Which means that the leverage that we now have supports the profitable growth strategy which I have presented, both in terms of product or geographic expansion. Let me now maybe recap what I've presented to you. What are Sogefi's strengths? Sogefi has a very strong entrepreneurship DNA. I'm an entrepreneur myself.
I left the automotive sector for three years to create a company in another sector. I really enjoy being the amministratore delegato of a company with such a strong entrepreneurship DNA, which also makes it very exciting for the startups who start being in contact with us, as we are not the typical automotive supplier. This entrepreneurship DNA is especially important in those disruptive times. I'm also happy to share with you that we have a very good intimacy level with the research and development, the purchasing, and the top management of the vehicle manufacturers.
All the topics which I've mentioned as far as the evolutions of the technology are, of course, actively discussed at the top levels of the car manufacturers, and they expect their suppliers and the management of their suppliers not only to be good suppliers but also to be able to think forward and share with them what the future trends are to be able to propose new solutions. Sogefi has recognized technical credibility to develop, launch, and ramp up innovative products. Give you an example on battery packs. We have a couple of battery packs projects right now. Of course, we are not producing battery packs today, but because the car manufacturers have been working with us for a long time, they are confident that Sogefi is the right partner to develop, to launch, and to ramp up those products in volume for the future.
Which is not a given to all companies. Many companies could do a technical solution, whether they will have the credibility to support this in the future could be a question mark. Last but not least, the multi-brand aftermarket is providing resilience to OEM volume fluctuations going forward. As I've mentioned, electric vehicles are expected to increase, but total internal combustion engine will remain a substantial part of the market. New energy vehicles offer opportunities, more volume of cooling products, new products, and higher content. Our profitable growth strategy starts with a cost reduction plan to sustain profitability and cash generation, differentiating product strategies between harvest, challenger, and leader. Last but not least, we are actively researching external growth opportunities to complement our organic growth. I would like to thank you very much for your attention, and I'll be happy to now take some questions. Thank you very much.
Okay. We are now ready for the Q&A session. If you can please wait for the microphone before asking your question, and if you can state your name and your company. Thank you.
Thank you very much for taking my question. Monica Bosio from Banca IMI. I know maybe it's difficult, but can you try to quantify a split on the revenues by gasoline, diesel, hybrid, and the rest? It would be very useful for us. Also, if you can quantify the weight, in term of revenues to premium cars, because I think that these ones will be the ones with a higher content and with higher margins. Thank you very much.
Thank you, Monica. We do not share, for reasons of competition, the detailed information and the detailed split between the various powertrain. What I can tell you is the following. As far as the diesel is concerned, we're of course looking in very much details at the trends here. Sogefi was successful in increasing market share with Renault Nissan. One of the filters which we will start in Morocco will be a diesel filter. This will increase our market share. Why is that interesting for us? This is interesting for us because you know that in the filtration, we need to look at the OEM, but even more important, we need to look at the parts, the OES market into the aftermarket.
For us, increasing our market share in diesel in Europe is a good move as it is going to be very fruitful for OES and aftermarket activities. We can also share with you is that, of course, the PSA Group is a large player in the diesel market, and we are one of the suppliers of Peugeot Citroën. As Peugeot Citroën goes from shared platforms with Opel and Vauxhall to an integration of Opel Vauxhall, we see a good chance for an increase of the diesel engines of Peugeot Citroën on Opel and Vauxhall cars going forward. That means those two factors give us a stabilization of our diesel activities for the time being. Having said that, in terms of market positioning, we are number 3 in Europe for diesel filters applications. We are not the most impacted by the future reduction of the diesel activities.
We believe that by carefully monitoring both the opportunities to take new market share and then harvesting properly this market, this could contribute to our profitable growth strategy as part of the harvesting. I will not disclose detailed numbers for competitive reasons.
Given the exposure to hybrid, just roughly.
On the hybrids, this is a different story. On hybrids, what I've presented now is, in Europe hybrid is still a very small percentage. Today, hybrids will not make a meaningful element. If we look at the new businesses we are taking, hybrid starts to be a very significant share of the new developments. Why? Because on the first hybrid cars, the car manufacturers started with existing engines. Now they are looking at the new generations, which is optimized for hybrid. Here we have good opportunities for new products, both for filtration and for air cooling.
What I can also share with you is that one car manufacturer who is communicating a lot about environment is developing a hybrid with a diesel, which might be counterintuitive. That means also that in accordance with the latest IHS report, even if diesel is declining, car manufacturers think that diesel might not disappear tomorrow, that it's still worth developing new generation of diesel engine for hybrid applications. I cannot give quantities. I cannot give names for confidentiality reasons. That's what is happening on the market. All in all, in order to quantify the impact, let's keep in mind that the two largest market for filtration OEM is oil and air. Combined, diesel and fuel is much smaller than these as far as the impact is concerned. It's just to keep the relative numbers in mind.
Yes. Renato Gargiulo, Intermonte. The first question, even if we assume your base scenario, total internal combustion engine powertrains basically flattish over the next few years, is there in your view the risk of a more challenging environment given that market growth clearly will come from the other segments? Second question about startups. Are you already working on any new venture? Related to this question, in your scenario, how much of your future CapEx or R&D percentage would be to develop these new applications for electric vehicles? My last question, maybe not strictly related to today's presentation, if you look at your customer portfolio, we see that your exposure to German clients are still relatively lower. Do you have a strategy even in this case to reach a higher penetration?
We know that they prefer to work with German suppliers. Do you have a strategy to increase penetration with them? Thank you.
Thank you very much. You're right. The fact that battery electric vehicle and hybrid take a higher share of the growth is, our response to this is what I call the differentiated product strategy between clearly focusing on harvesting in some cases, on being a challenger or being a leader in the other case. That's the Sogefi answer to this differentiating growth. That means to continue growing in this circumstance means more targeted strategy product by product. That's what I've highlighted in the presentation. Yes, it is a change, but we believe that it's a change which we have a good answer to this change as far the differentiation in strategy. On the startups, we have one where we are quite advanced in the discussions. We have some other which we are looking at for the time being.
These are complex subjects and it takes time, I cannot give you a definite time. Typically, the process takes 18 months to two years before it can be firmed up. In some cases, there might be some informations we want to keep confidential for some time before we make them public. That's why I cannot comment too much on these, as these are differentiators for the future. On the customer portfolio, we anticipate further growth with Daimler, which is our most important position as far as premium is concerned. I would say that we have very good relationship with BMW. We expect also to grow with BMW. As well, I can tell you that next week I will be visiting Audi to discuss some further opportunities with Audi. Clearly, premium cars and premium car manufacturers is among our priorities.
We believe at Sogefi that what is good for us is to keep a balance between the volume car manufacturers and the premium cars. I highlighted premium in this presentation as Sogefi image till now was more focused towards volume than premium, that it doesn't mean that we will not continue to look forward at increasing our presence at volume car manufacturers as well.
Thank you. Gabriele Gambarova with Banca Akros. The first question is on composite coil springs. You have been working on this technology for years, I would like to understand if you have solved the issues or the problems you might have found in the industrialization process. If possible, to have an outlook on the start of production, if possible. The second question is on hybrid. You gave many details. There are many opportunities there. Theoretically, if I take a normal internal combustion engine car, and let's say that Sogefi supply, I don't know, EUR 100 in terms of components, where could this EUR 100 go for an hybrid platform? Thank you.
On the composite coil spring, the product is a fantastic performance product, as I have mentioned already before. The key factor for us is our ability to produce it in quantities while hitting the right costs to make it a viable market, both for the car manufacturers and for ourselves. Unfortunately, I am not able to provide you a firm outlook on this subject for the time being. It continues to be one of our priority developments. On the hybrids, the content is higher. The reason why I am careful not giving you detailed content per vehicle, because I have had the question before on the content per vehicle for gasoline, for diesel, for hybrid, for battery electric vehicle, is that you have understood that even for, I would say, normal internal combustion engine, there could be, let's take for filtration, a price difference between EUR 2 and EUR 28.
The comparison might be misleading, because if on the hybrid, the car manufacturer decides to go for higher technology, then the content increase could be as far as 120. On the other hand, if the car manufacturer, because of some other constraint on the engine, would like to decontent some of our products, then it might be 100. It is not going to be lower in any case, but the span of the increase could be quite high. I am reluctant to give you fixed numbers because this really depends on the architecture the car manufacturer will take.
Martino De Ambroggi, Equita. You discussed the volumes. I was wondering on prices, particularly for the internal combustion engines. Do not you see, do not you expect any additional price pressure because of the decline in volumes expected in the medium term? The second question is on profitability. Should we expect for electric hybrid components higher profitability? Because of higher R&D efforts and these kind of things, maybe will not be evident such a trend at least in the short term? Third question, more general. I know maybe it is difficult to answer, but your competitors. I know it is difficult to talk about competitors, but you showed innovations, new products, the upward trend from entry to high-level products. How your competitors are positioned? I know it is a difficult question because you have three different businesses and many different components, but just a broad idea. Thank you.
Thank you. What we are seeing for the time being is that our projection for internal combustion engine to be flat is what we are seeing. Actually, even with the increase of battery electric and hybrid electric vehicle, we do not see a decline in battery electric vehicles. The car manufacturer's price pressure, I have been 27 years in this industry. Every year, the car manufacturer are asking for very high price decrease, then we discuss what is doable, what is not doable in terms of providing price reductions. I would say this is part of the normal environment. I do not expect because of the, I would say, potential stagnation of internal combustion engine to have significantly higher price down pressures. Price down pressure is everyday life. On the electric and hybrid, as you have seen, some of the products for electric and hybrids are evolutions of our products.
In that case, the additional amount of R&D is something which is relatively easy to absorb. Some products are completely new, in that case, when these are new products, the discussion with the car manufacturers is very different. I insisted on the intimacy and the technical credibility because when the customer is developing a battery pack with Sogefi, of course, they want to pay the lowest price possible. It's not like reducing the price by EUR 0.10, which is going to make a big difference, because in the end, what they want to have is a good battery pack which meets their requirements. Today, what we see on the new products, there is the potential to, at the start of the products, to have reasonable margins.
We do not expect that with the new products, we'll have extremely high margins because the car manufacturer expects a level of transparency on what the costs are. Certainly on the new products, there is not the same kind of product as there could price pressure there could be on the spin-on filter, which has been existing for 20 years, and where every year it has been reduced through productivity. Because it's the start of a new product, it enables us to reposition the price at the right product. I would say overall, the net effect of the new products is more positive than, is more relative than dilutive on the margins overall.
On the competitors is as I said in the beginning, is the most exciting time in my life in Euro Motorcars because everyone is looking at those new trends and everyone needs to position vis-a-vis the car manufacturers. The acid test of that is the decision of the customer. If the customer chooses that company or this company, is really where the competitivity is showing. I would say the current phase, you've seen that on all the products we have, we have a few products we need to harvest. There is a few products where we are leader. There's a bunch of product we are challenger. For us, when you are challenger is a good time. Is a good time because once you have the good relationship and good credibility, you have a good opportunity to increase your market share compared with the leaders.
Without being too specific, I would say that it's more challenging for the leaders, for the ones who could tick the box, where I have a lot of challenger and saying there are leaders here, there are leaders there, is more challenging. For the number one in diesel filter in Europe, it's certainly a more challenging situation than it is for us, who is the number three for diesel filters in Europe, as an example. On the upper side, we see much more market openings now than I saw when I joined the company in 2015. More opportunities to reshuffle the market shares.
Michele Baldelli, Exane BNP Paribas. I have several questions. The first one relates to the cooling of the batteries because from a technical understanding as far as of today, I did not hear about air cooling, but more liquid cooling. I was wondering, is this already in your product range? Sorry if it is because I did not know about it. Related then to these new products on the air and cooling on battery pack, thermal pack, are we speaking about products already on the market or are we going to speak something that will be in the future? Is R&D already done? Do you have already signed contracts with some OEMs? I have got further on, but let us start from this.
There are on the market some solutions with air cooling of the batteries, but it is not the dominant trend. The dominant trend is liquid cooling. You are right. It is liquid coolant. We are actively working with actually two different car manufacturers on one being a volume producer for a volume car, which is a full battery electric vehicle on what I have described on page 25 as a battery pack coolant manifold module. It is a very interesting product. It is a quite complex product, which distributes the coolant in the various parts of the batteries. It is, if you want, like a manifold, that is why we call it a manifold because it guides the cooling. It is a module as well because there is a succession of different stages in order to diffuse the coolant on all the right places.
This is something we are working on for a volume car manufacturer. If you go to page 24, the battery pack coolant manifold, these are all liquid. Both are liquid. It is liquid coolant. Both are liquid. Maybe I should have been more specific in saying battery pack liquid coolant manifold and battery pack liquid coolant manifold module. In both cases it is. In the first case, the one we are developing is a premium car manufacturer where we are developing a very interesting battery pack liquid coolant manifold. Both manifolds are liquid manifolds. They distribute the liquid. I do not know if it is clear.
Yes, it is clear. Thank you for this specification. On the presentation, I appreciate a lot the kind of degree of granularity about the products. What is not clear to me are two things. First, I did not get about the product, the weight on the total sales. I mean, how much on your total sales represents the engine air cabin air filter or the air cabin filter or the air intake manifold. Second point, which is still important to understand what is the average price for you of each product, just to understand where is the opportunity for this improvement on the mix side.
Thank you, Michele. We decided not to share the weight on total sales of each for competition reasons. The automotive world is one of the most competitive industry. The leaders in each of our business, whether it is Mubea, Mann+Hummel, or Mahle, they are formidable competitors. We've decided not to share the detail of this.
Sorry, some of our competitors are connected to the webcast.
They're most welcome to be connected, there are some level of detail which we'd rather not share, because of the competitive field. I've depicted to you is the picture enabling you to see a profitable growth strategy for Sogefi. If you look from the outside, you could say, "Okay, powertrain is two-thirds of our business. What is this going to happen?" I try to answer this question and show that as well on suspensions on hybrids and battery electric, because the content will be higher because the weight is higher, and therefore the need for higher technology. On the weight, on the impact of these changes, both in terms of quantities and in terms of prices. In our profitable growth strategy, profitable comes first.
As far as the perspectives, even if we are developing very exciting new products, we are very selective in the businesses we are taking to make sure that the new products which we are developing will be relative to our growth. Our aim is to continue growing as we've done a little bit faster than the market, not more than that. I've not communicated on double-digit growth, I will not because at this point, remember in 2015, the company was still burning cash. We are recovering. We are now in a much better situation. We have a good plan going forward, we need to be selective and we can afford to grow and be selective by prioritizing profitability rather than chasing every rabbit. You imagine on the battery electric vehicles, you have 3 types of players.
Renault Nissan, which has been a kind of early adopter. We have very good relationship with them and of course, we are working with them. You have all the other car manufacturers who need to go very fast on hybrid and electric. There's a lot of potential new business coming up. On top of that, you have a third group of players, which is the Tesla and all the startups in electrics. If you look in China, you have an incredible number of new companies which are starting. With all this potential growth, Sogefi is carefully looking at each opportunity to see if we can make it profitable for Sogefi going forward, growing at a reasonable pace, not chasing every opportunity on hybrid and electrics.
That's why on the pricing and volume, we are rather picky in order to make sure that we go at a reasonable pace.
Last question from my side is on the part that was less of a focus during this presentation, but still impacted in my view, and I was wondering on suspension components, if I need to look at the hybrid, there is just one way, it's up because the weight of the car is higher. Will be the electric vehicles heavier than the internal combustion engine one or not? Therefore suspension can be a little bit more pricey or not? What's your view?
You are right on hybrids. Clearly the weight is higher, so it calls for higher technology for suspensions. On the battery electric vehicles, what we see for the time being is also the need to further reduce the weight, because the more the weight is reduced, the more the range of the car is extended. Range anxiety is a key factor in the adoption of the battery electric vehicles. We see good opportunities on battery electric vehicles going forward.
Thank you. Monica Bosio, Intesa Sanpaolo. I know that you are in the budget freeze, could you please give us a rough indication of your expected R&D for the next years? Also in term of free cash flow generation, you told us that the company is going to invest EUR 3.5 million in startups. What are you expecting in term of free operating cash flow after these investments? Thank you very much. Just roughly.
On the research and development, in order to compare the numbers of Sogefi with the rest of the market, you need to take into account two factors. The first factor is that we reported last year a 2.3% R&D on sales, which doesn't look like a big number. You have to understand that in the filtration business, 60% for our business is aftermarket. Therefore, if you want to compare with companies which are mostly OEM players, you need to normalize the sales by excluding the aftermarket. Here we would be 2.93% R&D on sales for the OEM, based on OEM sales. The other factor is that in the suspensions business, I've talked a lot about the product, I'm sure you've understood that the process of making the springs and the stub bars is as important as the product.
Therefore, in the real development cost, we have a lot of costs in the plant for development, which are not accounted in the R&D. Okay. Because R&D is really R&D as we report it, and is not including process technicians and a lot of other things which are done in the plant. If you account for these two differences, then the number for Sogefi is more in the direction of 3.5% or 4%, in absolute terms. We expect this number to increase slightly in the future. Why slightly? Because at the same time as we have more developments, we also have an ongoing effort to reduce the cost of our development activities. Development activities is like any other activity in the automotive, it can be optimized. As it becomes of a higher importance, we also put more efforts in optimizing the cost.
For instance, the balance between using external resources and using internal resources, the locations where we do the developments, these are the things we are looking forward, going forward. For sure, R&D linked to new products and CapEx will increase, this is within our profitable growth strategy. We don't see that this could unbalance our strategy going forward. With the startups. The startups, by nature, whether we develop with them new products or add value to our products, are risky activities. That's the point of a startup, is that there is some level of risk. That means the expected return needs to be higher than it is for the average. For clearly, as far as free cash flow projection or return on capital projection, our hurdle rate to go in is, of course, higher than the current performance of Sogefi, because there are some elements of risks.
Sometimes we will spend money with more or less success on the market than, I would say, what we would do for an existing product. Therefore, our expectation is I don't know if I answered the question.
Yes. I was just wondering what could be a rough free operating cash flow per year after the investments in the startups. You generated EUR 31 million in-
Yes
2016. I know that you're in the budget phase, I'm just trying to ask, what are your expectation for the next two years, three years? Also, on the back of the new developments in R&D, or in the investments on startups, et cetera.
Two comments on this. The first one is concerning 2016. You remember that in 2016 we had a number of one-offs, which supported the cash flow. As we've shared at the conference call at the end of the third quarter, we expect cash flow this year comparable with last year, but without the favorable effects of last year. That means that the underlying cash generation is improving this year, even with all what we are doing now, including the increase of the CapEx. For the next years, it is early to give you a number because we are looking at different opportunities. What I can tell you is that from the underlying cash generation, we expect to continue improving the underlying cash generation. After that, I mentioned the project for East Europe and Middle East for suspensions. Suspension is a capital-intensive activity.
If we decide to launch this project, of course, this will have an impact on our free cash flow. As this project is not yet decided, I'd rather keep it at that for the moment.
One more question. Without making any favor to your competitors, but just a rough idea, what is the weight of a premium? Obviously, premium cars can be defined in many different ways, but just to have an idea, what is the percentage on your sales? You also mentioned Opel as an opportunity. We already discussed it in our previous calls. Any progress in order to have an idea what could be the real opportunity? As I thought at the beginning, there is a risk of additional price pressure on what else? Thank you.
On the premium, I understand your question, but for confidentiality reasons, I will not give you more details on the premium. Concerning Opel Vauxhall, there was a meeting two weeks ago or last week with the purchasing of PSA, who presented the new integrated purchasing of Peugeot, Citroen, DS, Opel and Vauxhall. It's moving very quickly. The new organization will be in place January 1st for the new purchasing activities. The PSA Group is also moving quickly in defining, as far as engines and car platforms, what will be the architecture. What we see today is rather favorable for Sogefi, as we have a high market share with Peugeot, Citroen, DS on the engines. As those engines get transferred on the Opel Vauxhall cars, they will replace engines which today are equipped by a competitor because we had a small market share at Opel Vauxhall.
This is not a direct market share gain at PSA, but it will be favorable for us. We see it clearly in the diesel projection for the time being. That's a positive effect. Additional price pressure, of course, the car manufacturers, when they merge, it's not the first time that there is a merge on the line. It's been car manufacturer. They expect more savings. It's on Sogefi with our cost reduction plan to find a win-win agreement with the car manufacturer in how much more productivity we can give in exchange for how much more business going forward. These are discussions which we are having with the new PSA Opel Vauxhall Group.
Hi, Francesca Monfilo from Kairos. Do you plan to have any incentive plan based on this upselling process from the low entry level and to higher technologies for internal people, I mean? Do you have a kind of incentive plan in order to support this upselling process?
Inside Sogefi, you mean?
Yes.
Yes, okay.
For internal people, sales and-
Okay. I think most people at Sogefi are as excited as I am with all those new technology opportunities. We have a very, I would say, high level of motivation with the new technologies. At this point, I would say that we don't have a specific program to involve. I would say that people are naturally excited with the new potential challenges. The job of the management is rather to channel the energy in the right direction, as there are so many things going on, and arbitrating and making sure we execute on our differentiated product line strategy. There are more opportunities than there was in the past.
The management and CEO and chief have the most options.
Yes, as far as the top management of the company, we have a stock grant program for the top 70 managers of the company. It's been released officially. I exercised some of my stock grants during the month of November. This is a program covering 70 top people in the company, which is a good long-term incentive program with a section which is time-based and a section which is performance-based. We think we have an adequate system.
Okay. If there are no other questions, I think we can conclude here the presentation. Thank you very much. There is a buffet waiting for us, for you. Thank you, Laurent. Thank you to everybody.