Welcome to WEG Day 2024. I'm André Salgueiro, SFO and Investor Relations Director, and on behalf of the company, I would like to thank you all for joining us today, and also those who are following us online. I would also like to thank Décio da Silva, President of our Board of Directors, Alberto Kuba, our CEO, and all the representatives of our board who are here today, and I'd like to say that for us, it's a great pleasure to have you here once again at WEG Day, where we can present the business opportunities and the growth opportunities we have for our company in the years to come.
This year, the first part of the meeting will be devoted to the integration of the recently acquired businesses of industrial motors and alternators of the Marathon, Rotor, and Cemp brands, and the presentations will be delivered by Rodrigo Fumo, Managing Director of Industrial Motors, who will be talking about the Industrial Motors' strategy, and by João Paulo, Managing Director of WEG Energy, who will be talking about the alternators strategy. After João Paulo's presentation, we will have a first Q&A session, where you will have the chance to ask questions about these two businesses. After the first Q&A session, we will have a coffee break, and when we return, we will have a presentation by, Mr. Rodrigues, our CFO, who will provide you with a financial update, and the focus will be the integration of Marathon, and it will be followed by Kuba's presentation, which will be on our strategy for the next years.
After Kuba's presentation, we will have a second Q&A session, where you will have a chance of asking all the questions you have about the topics presented here today, or questions about any other subject related to our company and to our market. Some important announcements regarding safety for those who are here in person. We have no programmed fire simulation, so if there's an alarm, we have the fire brigade here who will indicate the exits, and our meeting point is in front of the building.
For those who need internet, login and password are on the totems on your tables, and all presentations that will be delivered here today, including the English versions, are already available in our Investor Relations and ri.weg.net. You can access the presentations there, including the version in English. I wish you all a great meeting, and now I ask Fumo to the floor so that we can start our presentations. Thank you all very much.
Good morning, everyone. Welcome, everyone. For us, it is a pleasure to have you in our attendance. Also, a pleasure to have you, attending online. My name is Rodrigo Fumo. I've been with WEG for 22 years, and along those 22 years, I was able to go around the planet. Austria, five years of China, and from April this year, I took over the Industrial Motors of WEG, and replacing Kuba, who has ascended to the CEO position. So let's talk about WEG Industrial Motors, how our main figures are, and how the integration process with Marathon and the other brands that we have all around the world. Let's talk about our figures. In this division, we have over 13,000 employees around the world.
We have over 500,000 sq m of built area, considering everything that we have put together in the last year. BRL 710 million was our investment, both in the domestic and external markets. Our revenue, industrial market, industrial motors is 75% comes from external markets, 25% in Brazil, and in 45 Brazil and 65% is in the external market. These are the main figures that I'd like to say. 75% of the sales that we have along 2023 have been of high efficiency industrial motors, which reiterates our commitment with energy efficiency. With the acquisition of Marathon, we put...
We brought ten factories to WEG Industrial Motors, and that has given us new plants in Canada, one new plant in the Netherlands, a new one in Italy, and these are countries where we did not have a foothold. And we also increased our presence in India and also in China with two new factories. And in a general way, we try to get closer to the markets in which we want to operate in a more active way, and also to diminish the geopolitical risk. We have a dual source strategy, so we have the two factories that make the same products. So we have the opportunity to make the same product in Brazil, China, Mexico, China. So in a possible logistic risk, we have other opportunities.
Later on, I will be presented the commercial footprint, and this footprint is because we have taken previous steps in order to sustain all this work. In total, we have 23 factories in 33 countries. The market share, this is a report from the end of 2023, so with figures from 2022. We had WEG with 11% of participation, with three point five percent of Marathon. These two business together, we reach a 15% of market share in the world market. In the U.S., 24% is our participation, and in Europe, Middle East, and Africa, it's 11%. In Asia, 3%.
So it clearly shows an increase in the market share in twenty twenty-one and twenty two in a consistent way, building market opportunities and really conquering new opportunities around the world. Let's speak a little bit about the integration with the Mari-Marathon business. What have we done from May first, which was the date in which we took over the company? We had an event that was held here in Jaraguá do Sul, in which we brought the main executive from the company and key people and our operation people for a one-week integration process.
The idea was to get to know better each of our structures, to define our commercial strategies, so that the people could also get to know our home, our headquarters, and see how WEG operates, and what are the opportunities in order to improve our business, be it energy efficiency or in commercial strategies. We had 115 participants, three days in events. Obviously, we extended two more days for specific meetings to take advantage of the people being in Brazil. We had presentations from both sides, be it the traditional business of WEG or the new businesses that Marathon brought, and 21 presentations with 12 hours visiting our manufacturing units, our plants, so that people could understand better how WEG operates in order to make these synergies work better in the future.
So the closing date was first of May, and we brought about two thousand... twenty-five hundred new collaborators, professionals. We started the integration in June 2017, which I just spoke, how was the dynamic, how we engaged the people, and mainly to give a sort of a tranquility to the people, because we did not want to lose any talents in that, and we were very successful with that. We did not lose any talent in this transition so far, and to have a better understanding of the business. From July onwards, we created an integration group, the Marathon Integration Group, and there is always a part of it in Brazil and a counterpart of it in the Marathon units outside. People, purchasing unit, sales units, the logistic...
chain, so that we can gain the max, we bring all these opportunities along, these new businesses. So we have the opportunity here to supply WEG products that Marathon do not have, so it's a complementary offer. And obviously, there is an important part here, which is in certain sectors, Marathon is a very strong brand, especially in the U.S., in the automotive and industry supply. So Marathon is one of the main vendors in that part of the world, so it's an opportunity for us to accelerate our participation in these markets and to work in a complementary way. Perhaps WEG was not so present and Marathon was, so now we set a new strategy to strengthen ourselves. Pulp and paper is very strong, automotive industry as well, and it's a great opportunity to advance in this market.
A very important aspect with this verticalization, we have our plant in Mexico, and later on, I'll speak about investments that we are making, mainly to gain competitiveness with verticalization in that plant and how this is going to benefit the North American plant. The Monterrey plant is going to benefit from testing, from foundries, the casting that we bring from our plant, and with that, also supply the other plants in the U.S. Looking for operating efficiency and optimize what we can offer. The China strategy, we have the Wuxi plant, and later on, the alternator plant is going to be spoken about. Here is low voltage motors. Here, again, our strategy, we are looking to go with two distinct brands, recognizing the strength of Marathon brand in that market.
Obviously, some segments, one brand is stronger than the other. We'll take that image of the strongest to the market without fighting each other, but being very intelligent in approaching the market with both brands. What we see here is that we have, again, opportunities to incorporate new products and solutions. We have our assembly of gearboxes, we have our drives factories that can be implemented with the motor, be it high or low or medium voltages. It's a very flexible plant and an excellent capacity in terms of room, space. We have an opportunity for growth still ahead.
A very interesting process here in this acquisition is that, apart from the performance, we have a lot of very good, talented people, and we have a great expectation with these new people that have come, and it is above our expectations. In India, we have two plants that complement our strategy for participating in the Indian market, and because of Marathon, it is much stronger and more present, and it has been longer in that market, we are going along. Our strategy is to sell WEG and Marathon along each other. We have delineated a strategy to open new distributors, and Marathon has a very strong sales structure. Now we have more than 124 service centers and points of sale. With that, we complement our portfolio, especially for low voltage, our low-voltage plant.
We started in a shorter time, not so long ago, so we have smoke extraction motors, fireproof. When we didn't have that in the Indian market, but we now can offer that in the Indian market with Marathon, so we couple that and march along in order to gain more market share. Rotor WEG, Rotor in the Netherlands, basically. It's a company that is based in the naval industry, and the great advantage is they already supply to freighters, to shipbuilders, be it in China, Japan, which are very complicated markets, and because they're very critical and specific. So with that, we're going to have a very good penetration in Asia through Rotor, and also we will be able to promote the WEG brand for the complementary product.
At Cemp, which this is basically a brand that is recognized for explosion-proof motors, and that complements our strategy. There is the chemical industry and other applications where we need the safe products, but we are more focused on the. And Cemp brings lower motors for smaller applications, and we have all the logistics in place and the delivery time that is going to be shorter than to bring things from Brazil. So that allows us for a geographical expansion, and we now get a stronger foothold in Europe as well, and now with opportunity, especially with Rotor, with the expertise that we already have with the naval area in WEG, to leverage and to quick start this sector. This is the philosophy of WEG, just to complement.
This is how we are building our business along the decades, which is to look for competitiveness in all stages of the production chain and the product in the business chain. And we see nowadays, WEG, especially in Mexico and Jaraguá plants, we have all the processes for manufacturing, verticalized processes. We have stamping. And Marathon has the aluminum casting, machining of axes, winding. So here is an opportunity for us to use the synergies of WEG plants, to use the China plant, for instance, to supply Wuxi, our Indian plant, and also to exchange with Indian and Marathon plants, and especially the Mexican plant, which is, we are verticalizing a lot of processes. I will mention later on some investments that we've been doing and how this can help Marathon's businesses in the U.S.
And with that, we intend to close the gaps, be it with our own structure or using Marathon's structure to benefit all these plants. Products. What do we have now in our portfolio, especially with Rotor, with the naval market? It's a very dedicated line of products for this sector, for these industries. The explosion-proof from Cemp, as I mentioned before, it complements our strategy to participate in Europe with explosion-proof products. Marathon in the U.S., with the IEEE 841, especially for the automotive industry, so we see a great opportunities to offer this kind of products in this industry, and the fire pumps, which is for the pumping of water in fire situations. And they have a very good share in the world market in this as well.
I'd like to correlate now with WEG a little bit, what we are trying to do in order to understand these differences in the portfolio, where there are shadow areas and where there are opportunities. In WEG, we are strong still with the Motion Drive strategy. We launched this WCG01, a new line of gearboxes we didn't have. We have made a strategy for growth, and we are growing faster than we had anticipated. Again, our commitment to look for complementary business and opportunities that eventually in our, within our business will give fruits. Our WCG 50 gearboxes is a most compact line for low and medium voltage motors, and here, the WCG 24 has several applications in several industries.
We try to bridge the gaps as in small or big gearboxes and also in motors as well, not only with the technology improvements, but also with competitiveness, so they can offer in all markets. A very important aspect, speaking about sustainability and technology, this is the most efficient electric motor in the world. We launched this year this line of products, and it attains the efficiency level of IE6. In Europe, the minimal level is IE4, so we are two steps ahead. What do we want with that? Here is a launch in conjunction with WEG Motors and WEG Automations, and we are bringing the motor and the drive as well, so an integrated solution for the market. They do they work separately?
Yes, they do, but our idea is to sell them together to the market, and with that, we have the most compact line, the IE5 and IE6, to strengthen our commitment to sustainability and technology. Sustainability, because it allows us to reduce the carbon emission, because it's more efficient than a common product, and obviously, it will use less material. We were working with reducing the density to make them more compact, to make them using less resources and making with the same output. And to have an idea of how this product is classified in comparison to our competitors, obviously, we did not mention the name of our competitors because we don't want to advertise them, we want to advertise ourselves, so what is the range of power that we have here?
It's 600 kilowatts, but we go up to 1,200 kilowatts in this line of products. So we offer the market the most wide condition in terms of power with this product. So we became the world reference in energy efficiency for low-voltage motors. This is a new launch. We are very aware of what everything that is going on in terms of technology and new possibilities, especially new businesses. So again, this is a pre-launch. Our official launch is going to take place in the fair in the U.S., in the SPS, in Germany. And this is what we are going to launch, is the Axial Flux technology.
Just for you to have an idea of how this product fares is, we get our common products weighs 1,500, and this weighs 150, and the ultra-compact 50 kilos. So we are talking about using a much lower quantity of material to make the same efficiency and same output. Again, IE5, IE6 products. It has a external cooling, be it water or any other cooling system. What is the catch of this product? OEMs for these products who are re-making their solutions for something that is more compact and reduced. So we have several opportunities, especially with clients in Europe, which are rethinking their solutions in terms of the size of their solutions. So they need something much smaller to install in their products.
And obviously, for others that already have a cooling system, a water cooling system can already take advantage of this system. Let's talk about Mexico. We are finishing this plant at the end of the year, BRL 63 million of investment, 2,500 sq m of constructed area, of built area. In the North America market, we're talking about $800 million market, over $400 million market for gearboxes, industrial gearboxes. And this plant is going for lower, smaller gearboxes in order to participate both in the Canadian and the US market, as well as the Mexican market. So this is one of the main investments for this plant. Another one that we have announced in September is the new winding wire drawing factory.
So we made this investment thinking about the transformers, transmission area, so it's going to supply our transformers area, it's going to supply our energy, our motors in Mexico and the U.S., as well as the Marathon plant. So we thought of this investment in a way as it could supply not only WEG businesses, but also to supply Marathon businesses as well. So we'll take this investment. We will start operations in twenty twenty-nine. This is the improvement of our winding wire factory in Itajaí plant here in Brazil, and we want to use this for transformers. These are the square and circular wires used for transformers. So we are very competitive here and helps in the verticalization of our process.
The increase in Brazil, growth in Brazil, we are increasing the foundry in Brazil, and some of you will be able to visit this plant. Another part is in Guaramirim, which is very close here to Jaraguá do Sul, and we will expand the foundry area there, BRL 160 million invested, and 6,000 sq m of built area. The main takeaway messages that I'd like to leave is our strategic global presence. We are still very much focused in being present to the markets where we want to increase our participation. There are a lot of synergies with Marathon's. There are several examples that we have brought on how we can gain market share, how we can cooperate with the structures, and how we are already structured in order to continue our growth.
Also, our growth capacity is going to be presented later on, but we also have a commitment to deliver results, not only looking inwards, but also our financial performance of the business as a whole, and our innovation and technology. We are still with an eye on our core business, but also an eye on what we can become more competitive, how we can gain more market, and obviously, to make the business increasingly more profitable. Thank you very much. I pass the floor to Salgueiro.
Thank you. We'll be back to you for the Q&A session. Now, I call João Paulo, who will be delivering his presentation on the alternators strategy.
Good morning. Good morning! Better now. I will be talking about alternators. For those of you who are not familiar with that, that's a generator that is used in generator sets, particularly emergency generator sets, like the ones you see in supermarkets, industrial applications, and critical applications, in poultry houses. And I have just two slides on WEG Energia, WEG Energy, because I'll focus more on alternators related to the acquisition of Marathon and why this part of the business, why Marathon is so important to our company. WEG Energia, we have five thousand one hundred employees. It makes steam turbines, wind turbines, and big, generators, and something that has been growing a lot in, WEG Energia business, which is services.
Services in steam turbines and wind, turbines, big motors and generators, and we have been providing this kind of services in our São Bernardo do Campo, Sertãozinho plants, also in India, Minneapolis, and we are starting now in our Portugal plant. The footprint of WEG Energia, we have a plant in Minneapolis. Now, we... The addition of Monterrey in Mexico, the Portugal plant, it's a new one. It will actually open next October 17th. Of course, in Brazil, we have three sites here. Hosur in India, and now in Jiaxing, which is the Greater Shanghai area, with the acquisition of Marathon. Well, this slide tells an important story, here where the alternators part of my presentation starts.
According to Omdia, which is specialized research on generating equipment, WEG, before the acquisition of Marathon, had 1.1% of the global alternators market. If we excluded Brazil, where WEG is the number one player in alternators, this would be non-significant, actually. Meaning, basically, WEG was not in the alternator business, except for our importance in Brazil, where Marathon used to have, or has, 8% of this market. If we add to WEG, goes from the sixth position to number three, still far from the first and the second place. When we look at this and the history of Marathon in alternators, which I'm going to be talking about next, and when we look particularly to these two players here, this one, we will never be able to catch. Why?
Because this is an alternator company in England that was purchased by a green color manufacturer of generator sets. I won't tell their name, so it's a captive customer. We will very hardly be able to reach them, but here, we can reach that one. It's a French manufacturer acquired by a Japanese company. This is where we have to focus, and I'll tell you why it's so interesting and why our acquisition of Marathon is so important, which had a very important global presence. When we look at North America, Marathon used to be the absolute leader there. What happened to Marathon? A company which was founded in 1913. WEG was founded in 1961. WEG Energia was founded in 1980. Marathon acquired another manufacturer of alternators. They had been making them since 1940, then it grew a little bit more.
WEG started the alternator business in 1993, launched a few lines. The joint venture between Marathon with Shanghai Electric in China. And here is an important point in the change in their strategy: Regal Beloit acquired Marathon. But since they used many motors, Regal Power Hydraulics, this is their business. This business is part of the Regal Group, so pretty well until the middle of the next decade. I know them very well because when WEG first entered the USA in the 1990s with our own operation, Décio da Silva, by the way, was the CEO who opened the first branch there in the early 1990s, and I was part of the project back then. Marathon, together with Reliance, was the most desired brand in the industrial market: oil and gas, petrochemical, auto industry.
There were some other brands like GE and Siemens, but they were not so much mentioned by special clients. GE and Siemens was regular industrial application. WEG entered into this market, and it was considered a second-level brand, not very much desired at that time. Marathon, until today, is a brand that has been approved by many petrochemical companies and oil and gas industries where WEG isn't operating. Even though WEG today is number two in the American market for motors, Marathon is still, for some segments, very important to this very date. And then, if we fast-forward here, we acquired Marathon, but in alternators, it is still a very important brand also in the USA. We decided to adopt the following strategy: WEG will be our alternators brand for South and Central America, where we are very strong.
Marathon, over the years, lost room for not paying proper attention by the former controller. Investments that were not made in products, in production or market service with a localized inventory, so we will recover that. When the investments, they are not extremely high, so it's a traditional brand in North America. There will no longer be WEG alternators. We will make a transition. By the way, the U.S. team, everyone is part of the Marathon. Our alternators people are now Marathon's employees, and our brand in this market will be the Marathon brand. I won't talk about all these points here, but we're local plants, local engineering, local sales teams in South and Central America. We will continue to have the WEG brand. In China, we already have a joint venture there.
We have had it since 1996 with Shanghai Electric, where is the controller through Marathon. The same thing, local production, local engineering, local sales. It's very well. This division is growing a lot. The partner is really interested in continuing this partnership, so does WEG. It's a very good plant, a new plant, so we will be able to grow in that market as well. Europe and the Middle East. Marathon used to have a very significant participation in Saudi Arabia, Dubai, Oman, and over time, they lost that. Why? Because as you know, those who developed the oil market in the 1970s, particularly in Saudi Arabia, were the Americans. So all products that were there in the Middle East were particularly or mainly American products, and Marathon, through alternators, used to be an important brand there. Here, we will do that in the medium term, and why?
Because when we acquired Marathon, I thought that we had to take Marathon and take it back to Europe... in order to regain that market. But after the closing, when we still can talk about sales, I realized that in the end, Marathon lost a lot of market. You could see it has only 16% of the American market today. So there's a lot of work to be done home or in Marathon's market, home market, which is USA. They have a huge opportunity to recover this market, and later I'll tell you why this strategy is so important, namely, focusing first on the North American market. The main global players for generator sets are all concentrated in that area of Wisconsin, Northern Illinois, Indiana. And of course, these three ones here are all Americans. This is Austrian, Jenbacher, this is German, and Rolls-Royce.
These are the main OEMs in the world market. Integration strategy. First, Marathon today is an assembler. You know that WEG is a verticalized company. It likes to invest in making the things it sells. I mean, making components. Our idea is, as time goes by, and it's not immediate, but many actions are already being taken for us to use our idle capacity, especially in Mexico, and turn Marathon, in Mexico Marathon, into a company that we will be using a lot of our internal resources. So it's about verticalization through the use of WEG Mexico, particularly in sheets and axles, components that makes internally. Oh, sorry, and also, we have a huge foundry plant in Mexico with idle capacity, ready to get a second furnace. A foundry line, actually, that is available, and now we have to make this transition.
We are in the fourth month after the closing, so Marathon has to go on producing and operating. These are some of the components of the alternator. So right in the beginning, we established an alternators committee with WEG and Marathon members in order to look at what their product portfolio was, so updating their product portfolio and our update. WEG, so far, wasn't very interested. Okay, we had the Brazilian market, some customers in the U.S., and then in 2022, I challenged Fumo, by that time was engineering director. I told him: "You know, either we stop this business or we really have to try to do something." Then we started launching a new product line. We launched a W10, which is our new alternator line.
Over these three years, we've launched two housings, and now until the end of this year, one additional housing. We are revamping our alternator product line. I mean, WEG product. Then now will be just one thing. When we go to a new customer, we will offer them one single platform. One, depending on the market, we'll have the Marathon brand, and depending on the market, we'll have the WEG brand, but it's a much more competitive line. However, Marathon has a line of bigger housings, which is particularly for data center applications, which was launched in 2022. That's an extremely competitive line. This alternators committee will look at all aspects related to the joint product portfolio, meaning the world market as one single thing with different brands for different markets. This is an important thing.
93% of the sales channel is through OEMs. The generator sets, 7% is basically aftermarket and very small suppliers. Here, the strategy or the power range represented by different markets, and here you see that greater than 1 MW is the biggest market, and this only trends to grow because of AI. I'll give you some data on that later. Business strategy. Some of you might ask: What about BESS? Will BESS not take some market away from this product? Well, yes and no. BESS will operate particularly on non-critical operations. I'll give you an example. IT in a hospital, there will be no BESS there because it's 4:00 P.M., and there's no energy, patients will die. Generator sets are used for these applications here.
... because you are able to bring diesel oil to supply the generator sets, and it can operate for days. For example, an area that was impacted by a hurricane, well, it may takes weeks for power to return. A generator set with trucks, you can supply them. Poultry houses, airports, telecom, data centers. Data centers, 100% of the power used in a data center has generator sets, not to generate power just for lighting, as is the case in a hotel or supermarkets, so it's power to maintain the data center operating. 300 MW is the average power of a data center in the U.S. today. This requires 152 MW generator sets, just for you to have an idea.
So as the world goes through this energy transition, and increasingly, as more intermittent energies, solar and wind, without quick update of the power grid, generator sets will be used not to provide power constantly, but for emergency situations. The main message is in Marathon business integration, particularly through the supply chain, it's become an important business for WEG, for WEG Energia, WEG Energy, especially, and once again, we will have a global presence, which Marathon has already had once, and due to the strategy by the previous owner, didn't have the attention it actually needed. That's it. Thank you very much.
You may stay here on the stage. I'm going to call Fumo as well to start our Q&A session. Just please, raise your hand if you have a question. We have roving mics, and we'll take them to you. Before questions, if you may identify yourself, say your name and the company you represent. We have a first question here in the front. So we cannot-
Ah, translation!
I'm sorry. I didn't know it was being transmitted. Hi, Eugenio Araujo. Eugenio Araujo, Bank of America. Thank you for this event. I have a question in regards to generators. You spoke about a need to update the products before to focus and gain of market share, just to understand what WEG already has in this line of products and why they still need to develop, timing, et cetera. Just in order to understand the step-by-step process, if you already have a product to get this market share, or you still have some time to develop.
Thank you for the question. For the smaller carcasses, for the smaller housing, we already introduced the 60 - 180, which is the start of the line. We have lower powers, but this is not a focus, which would be the home appliance applications, where the carcass 160 -1 80 have already been launched in Brazil, and we are going to make this line available in the external markets next year, as the carcass 210 is being launched up to the end of this year. Every six months, we are to introduce a new carcass, a new housing, a new size, and it's, in terms of active materials, it reduces about 35%, so it's a significant reduction that we have, and we gain competitiveness with that.
For the higher housing, for the higher casing, and I'm talking about 3.5 MW, Marathon already has an updated line of products. So we now are with a little deficiency, so to speak, in the mid-size housing, mid-size carcass, that both WEG and Marathon have a conditions to maintain their actual customers. But in order to gain new markets, new customers, or to recover markets for this intermediate size housing, we are going to face a little more difficulties in the next two and a half years, up to we are able to complete this new line of products that is going to be made available in about two and a half years. Not sure whether I answered your question?
Yes, you have. Thank you very much.
Good morning. Alejandro Michele from Jefferies. I'm going to ask in English.
So you have talked about some differences in the process of Marathon-
We understand that we have a way in terms of verticalization that we still have to go down to. We have updates in the short, mid, and long term. In the short term is what we already mapped. We analyze the cost of all lines of products, Marathon and WEG's products, and with that, we have in the short term to analyze the suppliers who have a better condition to supply. Mid and long term is verticalization. So basically, we are talking about investment and bringing components to manufacture, to assemble them in-house. We are talking about for something more significant of more significance, three to four years to develop the tools to take to our plant to Mexico. We are going to have the wire winding, drawing in Mexico.
So we have gradually opportunities to increase competitiveness of Marathon to the levels of WEG's. Good morning, Marcelo Montana, JP Morgan. Still in the alternators, we spoke that in North America, they lost market share in the last few years, perhaps of lack of attention by the previous administration. When you see CapEx, do you think there was a lack of commercial investment, of investments? And how do you plan to recover this market share? And if you can mention, what was the market share, and where can you reach in the short term? Thank you for the question, Marcelo. I'll start the answer with an interesting figure.
When we took over Marathon last May, there was a customer from the U.S. that wanted to start to buy from 200 alternators per year to 800, and Marathon's management said that they could not supply that because they needed investments. At WEG, we said: "Go back there and talk to this customer and say, 'We're going to supply.'" They said: "But we don't have the production capacity." So we took it and made a decision. Last year, when I was there, through WEG's governance, we approved an investment to meet this new demand. It's a $4 million investment, so it's not very significant investment in order to triple the size that was proposed by the customer.
I had a question: If this client is overestimating the need that he has to supply his data center, and if he ends up buying only three hundred, so we made investment for eight hundred. And the answer from our sales director of Marathon is, "Well, they already buy four thousand, but they depend on supplier A, and what we want is to diversify." All right, so let's after the four thousand, not only eight hundred. In order to answer your question, yes, we do need CapEx. It's not an absurd amount of CapEx to meet the demand that already is out there, and with that, we can recover the market share that Marathon used to have.
European manufacturers, they used to participate in the market, but Marathon had 60% of the U.S. market in the 1990s, and today they have only 16%. So just to see the lack of attention that they had. It's. They are very competitive. They have other very competitive areas of business, but in this particular one, they haven't given much attention to.
Good morning, João Paulo and Paulo. Thank you very much for your presentations. I have two follow-ups to make. In terms of competitiveness. I'm sorry. Alberto Valerio from UBS. Two follow-ups that I have. One is a competition in the alternators in the U.S. and Brazil. You have, have you seen anyone investing, abroad or and here?
In terms of synergies with Marathon, where are we in terms of margin, and where can we get in terms of margin after this three to five years, verticalizing, verticalizing and improving the operations?
Start with alternators first. In the Americas, we are, we have the leader of the market, so he has got a competitor which is also interested in growing in this market, so we're gonna make them run for the money, run for their money. In regards to margin, this is not as good as we wanted, but there are some short-term measures that we already taken in order to improve this. For instance, for the axle supplier, nowadays, they buy from India, and WEG cannot supply without any investments, and this requires some certain time.
This is a relatively simple item, and we managed to make a renegotiations, 8% improvement just because of the volume that we are buying with our team in India. So we also manage 9% reduction in the metal sheets, and we are going also, obviously, bring this in-house. So we already obtaining a few gains that are going to be reflected in the coming months, but these are not significant gains compared to what we are able to attain in the longer run for alternators and generators. Well, in motors, in a similar way, Alberto, what we've been doing is obviously to work in the e-equal products, making them equal. So we have make a high running products and see them, how are they competing each other and how do they compete, how do they stand with the competition?
And in our strategy of verticalization shows that we are more competitive. So this gap is where we still have to be working in order to bridge it in the coming years to gain competitiveness. And what we want at the end of the day is that the overall company performance of the group is much better. So we cannot dwell into the details of margins, but there is a lot of opportunities to improve the business performance.
Vito from Bradesco BBI. Congratulations for the presentations. I have two questions. The first one, if you could talk a little bit about how is the use of WEG capacity now with the integration of Marathon? And the second question, going back to verticalization, when we think about the Americas, I think it's clear the gain WEG will have. My question is more thinking about Europe and Asia now, with the volume of Marathon, if already makes sense to think about verticalization also for these markets, and maybe the next step would be to think about foundry in Turkey.
Perfect. Talking first about verticalization, we have, for example, in China, a very verticalized operation, stamping, foundry, machining. So this structure we have there can really benefit both plants a lot.
Also, because of the geographical proximity, we are talking about less than 150 kilometers between these two plants and the Nantong and Wuxi plants, so there we have a clear opportunity to gain with verticalization. In India, the Marathon plant there has, in Kolkata, a degree of verticalization that is already pretty high with stamping, winding. And so that's more a matter of making some investment and advancing in the verticalization strategy, and particularly observing and looking at it, since we decided to go together to the market, what are the investments we can jointly make, either centralizing the Kolkata plant or in the WEG plant in Hosur to be a supply cluster. In Turkey, we are in a process of negotiation and acquiring Volt. So Volt has their function there in Turkey.
So together with this plant we are about to have, well, that may help us in our verticalization strategy. With that, we really fill this verticalization gap in Mexico. In winding, we will have copper and aluminum wire drawing there. And in terms of occupancy of the plants, there was a certain increase in manufacturing in this third quarter, so it's been growing over this period. So we think that we will be well prepared for the new business strategies and opportunities, particularly in Marathon. So he talked a little bit about that maybe the lack of attention, particularly in the time, the natural time before sales, we renamed directors, we changed the team. So probably next year we will capture more business, and then in motors, we will be able to go ahead in generators, so he can mention that.
We are pretty well with clear investments to increase capacity. Some investments are for alternators, particularly in the Wausau and Monterrey plants, which are the two main plants that really need immediate attention in order to become more competitive or to improve margins. The market is there, and with these investments, we will be able to significantly improve capacity there. Of course, if we look at WEG in Mexico, we have an outstanding structure in place there to provide components to WEG Mexico with idle capacity, also to meet the needs of both Mexico and U.S. Marathon. There is a transition period here because of the tooling, and we cannot just change overnight. I think that with relatively low investments, because the main structure is already there, as I mentioned, foundry, a brand-new, wonderful foundry with one production line....
being used right now, and a second production line ready to go. We just need the equipment. I would say that we have a lot of capacity still to meet growth needs without having to make major investments.
Good morning, Daniel Federle. Thank you very much. A question to Fumo: How has been the response of competitors regarding your growth in low voltage industrial motor? What was their response to the acquisition of Marathon and Volt now? So do they feel that they really have to run for the money? Are they becoming more aggressive? And in your view, too, how do you feel if the players and the competitors are also advancing in their verticalization process or not, and why not, and why are not they advancing in verticalization?
The first part of your question, we didn't see any aggressive movement from our competitors because of our acquisition. Particularly, our traditional competitors, they are still in the market. Of course, The red one in Europe and the other, they spin out of their business, so I think that this sale of Innomotics has really opened an opportunity for us to get new markets. Whenever we have a sales process, we ended up capturing many of these customers around the globe. We didn't really see any aggressive movement in this regard. I think it opens up a new opportunity for us to go on growing in the market. Now, regarding the verticalization strategy, what WEG thinks is always to have a long-term strategy.
When we acquire, when we are thinking about a verticalization process, not to have a result for the next quarter, but rather for the next year. So how we will be competitive in five, 10, 15 years? How we'll become increasingly more competitive? What we see, particularly well, considering a Marathon acquisition, is a trend of not having a lot of CapEx for prioritizing things in the short term. I think this is the difference in strategy. We have a strategy to deliver continuous, sustainable results, but without losing sight of the long-term strategy. So this has been shown very consistently, considering the way we have been growing in the global market, and this is a strategy that has been working better for WEG, which is to continuously invest in the business to become more competitive.
Okay, thank you.
Just to add to that, having CapEx without volume, well, that's tough. In the case of WEG, we already have a huge amount of use of components for these electric equipment, and we should go on investing there because we have been generating this volume. So maybe in the case of Marathon, that was already in a process of shrinking, maybe having CapEx to produce internally, that was harder for them, and then it turns into a vicious circle. They have no volume, then no CapEx, and they, in the end, they have to pay more. I think we'll be able to change this curve now, because we are going to be... They will produce internally many of the things that they have to buy, and they pay a lot, so they are already paying less because of our negotiation with our suppliers.
And as we have the tooling, we will transfer this for internal production.
Good morning. Lucas Laghi from XP. I'd like to take advantage of João Paulo and Fumo's presence here to discuss a little bit better the Regal integration. When you look back into the history, these two last decades, this M&A, we had the M&A Cemp and then Rotor. We had perhaps Volt and GE. When we get this integration process that you're having now, it's interesting to understand a little better what differentiating factors from these last M&As that we're seeing in these industries. We are talking about a lot of verticalizations, but if you can talk a little bit more about the process, the geographical footprint, the brand positioning. What differs this integration process of WEG and Marathon compared to those other M&As that we have in the industries?
When we look at the motor industry, I think it's still a lot fragmented. You, second player, 16%, but the third player is 7.5% share. So how do you think the consolidation process is going to play out? There is still a lot of M&A opportunities out there. Is it going to be inorganic? Is there going to be any consolidation? So I'd like to understand a little bit better, mainly from Fumo, talking about a consolidation of this industry.
To start from alternators, I think that M&A is. It's kind of run out. Perhaps this was the last, because the first was already bought by a Japanese group. The second, perhaps, if one day the generator manufacturer would like to divest from the alternators, but I don't see this as something that is gonna take place in the short term. And the third and fourth player, the third is a company that perhaps-
... they have 75%, 70%, but perhaps is going to be available on the market. And then you have Marathon and WEG, and now we took over, we overtook the third player, but I don't see this as very likely to have M&As in the future, especially with the increase of the other players. So but we, I have to invest, we're talking about three to four mega inverter alternators. And with the announcement of the purchase of Marathon by WEG, and we received from the financial part, André Rodrigues has already received, and we already established a contact with other manufacturer of generators that would like to open their markets for this new Marathon, WEG-controlled Marathon. Because now they see Marathon as being...
as belonging to a company that is better opportunities to supply it, so there's a lot of opportunities. And our global director for alternators of both companies is an employee of Marathon that, by coincidence, was a WEG employee in the past, and he is the global sales director for alternators, and he, he's a professional of Marathon. Well, let's talk a little bit about integration. Well, we understand as this path that we are marching along, and it is able to bring us better results. From the beginning, we attempted to bring the people together and understand it before we made any changes. So we brought the people, we correlated the teams, and we tried to understand how the operation worked, so that was the first step.
Once the operation was understood, we started with the opportunities for improvement and synergies and opportunities for gain market share, so we're working a lot in conjunction. Irregardless of the strategy, we are in the front. People are talking to each other. We are creating committees, the working groups to give an opportunity for the people to interact, because we know that at the end of the day, who is going to make a difference are the people, and the most integrated that we have this strategies, the less opportunities for error we will have. We had just an example of alternators, of a director that see it as a whole. We have one director in Europe to see all the strategy for all these three brands.
In a similar way, we have the strategy in the U.S., and in a similar way, we also have the strategy for India and China. And with that, we were able to bring people together in order to have this synergy in place, that it happens not only on paper, but in the day-to-day operations. So that's the first aspect. But if we think a little further than M&A, obviously, we're going to be very focused, looking out for any opportunities, but we don't see many opportunities out there. But if there is any complementary opportunity, we will perhaps make the move, but that's not the main drive. We'll try to make the most of our installed capacity in motors, trying to invest to increase. But in the gearboxes, this is something that there is still potential for M&A to complement our Motion Drive strategy.
I'd just like to add, and that was an idea by Kubas, by Kuba. As soon as we had the closing, about a month later, we would have an integration here in Jaraguá with the director of Marathon from all over the world. So we had about 50 people from abroad, 60 executives from the brand that came here, exactly here on this stage. We even have a picture to prove it, and they spent a week here, visiting our plants, having presentation about WEG's governance, about our style of management, the consensual management style that we have.
What we felt is that when they went back to their operation, they saw that WEG acquired Marathon, not to close the company, but it's indeed to make the business grow, and they are very much motivated by that because they now know they have a controller that will invest in their business.
I'll thank Fumo, João Paulo very much, thank you very much for participating in this Q&A. We're going to have a coffee break. We are kind of ahead on our schedule, and we shall return to this plenary session at 10:15 A.M. Have a good coffee break to all.
... Welcome back. Let's carry on with the presentation, with André Rodrigues' presentation, our CFO, that is going to update us on the financial part of the business. Please, André, the floor is yours.
Good morning, everyone. It's a pleasure for us to have you here, to have an opportunity to talk about the financial performance of WEG, and to update you also on the evolution of our businesses in general. Okay, so this is a summary of WEG. This is a slide that I like to present to you. Every day, every year, we have an update on these figures. It's a positive update, and nowadays we have a bit over 45,000 employees that develop solution and products in 64 plants around the world, in 17 countries. In order for us to compete in a global market that is a very competitive one, we need to innovate, and we do that with support of over 4,700 engineers around the world, that in...
Just to mention here, in terms of capacity, 60,000 electric motors. We have commercial, high voltage, low voltage motors. We altogether make over 60,000 motors per day, and thanks to this engineering team that is all over the continents in the world, we are able to attain 59% of our revenues with products that were launched in the last five years. If we make a longer term average, we possibly are going still to have it above 50%. And thanks to this performance, this continuous and sustainable process of growth, in last September, we reach a market value of BRL 228 billion. So that's a 50% growth in the last 12 years. Let's talk a little bit about the performance of the company. It's still positive in terms of revenues, of...
In terms of net operating revenue, we increased, we grew 9.1%, and when we see how this is split, we see 45% in the domestic market and 54% in the external market. And I'm going to delve into each of these markets, but at a glance, with this slide, we can realize that the diversification of WEG, with the possibility of being in several different geography, geographical places and segments, allow us to find opportunities for growth in different cycles of the market. And when we talk about our four units of business, let's start with Industrial Electroelectronic Equipment, which is almost half of the company. 48% is allocated to this business unit. And here we are talking about motors, electric motors, high, low, medium voltage, automation products, drives.
When we see the growth in this first semester of the year, both in the domestic and external market, this is the fruit of the constant participation gain in the market, the market share gain. As Fumo showed in the motors, we are gaining market, and also in the participation in the sectors that is growing for WEG, as oil and gas, mining, water, and water waste. Let's talk about the distribution and transmission, which is an area that is the world is going through, thanks of investment for the energy transition energy efficiency, and also a growth in the use of artificial intelligence that demand a lot of energy.
We are here talking about the areas that encompass all the transformers and substations, but also our complete solution for the generation, so be it wind, hydraulic, thermal. When we talk about the domestic market, the good performance for the transformer area, this demand is not only restricted to one geography, but wherever WEG is present, but also because of a very positive order book for wind turbines this year, and we can see a recovery in the volumes for solar photovoltaic park energy. Unfortunately, we cannot see a reflection of that in the revenue, because the price of the solar panels have gone down a lot. But at least in volume, we can see this recovery.
In the external market that predominantly we're talking about, transmission and generation, we are talking about a 26% increase, and without any doubts, the demand for our products and especially in the North American market. Talking about commercial and appliance motors, it's a business unit that is going through a recovery area, especially in the domestic market. I think that this growth in this two last quarters is very pulverized, atomized, but pumps is what is pushing the sales. In the external market, despite the good performance of industrial motors, we had a reduction in the revenues, above all, because of the performance of our South American plants. Coatings, paints, and varnishes, a bit below. It started kind of slow, but is recovering.
In Brazil, this growth is optimized, but with a lot of use in the domestic, in the appliance areas, and the external market, in spite of the low growth because of the drop in South America, but was somehow compensated by our Mexican operation. As for the operational results, I can show you that we are presenting a consistent performance with the growth of the company along the years. Here, without a doubt, the main...
The outline here is EBITDA plus, when we see the result that we deliver in the first quarter of the years, is the biggest in this historic series, and that is the result of the constant work of the company in reducing cost, optimizing expenses, very good use of our capacity in all our industrial operations, but also good results from the margins and the long cycle products and some of the mix of the products that has contributed to this. Speaking a little bit about the main indicator of performance, the return on invested capital. We have an exceptional result in our capacity to invest in business with good returns. The good use of the capital and the use of the CapEx program has helped a lot in this process.
And our main objective here is to go on delivering good margins and returns above the average of the market. For the cash conversion. The company, through its business model and management, has a model that allows for cash flow generation. And when you see here the conversion, we can see that we are above 90%, above the historical average of 79. But this historical average we had in the year 2022, that brought this average a little lower, but with the pandemic, we had to had a higher use of working capital, especially in inventory. And the company took a strategic decision to increase the inventory so that it could go on developing what it was.
It was an outlier in 2022, and what we are doing in 2024 is align with the historical average of the company. The dividend flow, this generation of cash, generation of EBITDA and cash we distribute, we remunerate our shareholders through the dividend payment. In line with our historical average, we have a distribution of about 50% of our net revenue. We have an increase of about 6% in the dividend per share from 2014- 2023. Fumo and João Paulo represented the integration with Marathon, and we can see that we have a very positive movement here. But this is not because of the business area.
The management areas have a very important role here, and I think that our concern here, since the beginning, was to make this integration process at the right speed. Some of you may ask, "But what is the right speed? Is that the faster one?", but we consider that the right speed is that that allows to guarantee the continuation and the continuing operation of the business, the continuation of our operations without any break, and from the beginning, our focus was in regards to our customers, the former customers of Marathon, so that they could go on being well-served, and also our professionals, our collaborators, that from May onwards started to be part of WEG as well, and that was a question that rose in the first session. How was this integration process in WEG?
I think WEG, along these years, we had the opportunity to learn to make integration process and to make it in a very organized way. In the company, for the management areas and obviously for the business areas, they also have their own processes. We have a guideline for the integration, and this guideline has five main stages, in which each person from the financial area, controller area or IT know exactly what their role is in this integration, and they have their sort of recipe in order to make it, if they followed all the guidelines. What are these five stages? The first one is what we call the preparation. So right after the signing of merging, we structured ourselves in a working group in which we established a very high-level working plan.
The second is the pre-closing, so very, very near to closing. We already have all the action plans in detail. The third stage is the first day. First day is the professionals that are going to take care of this integration know exactly what their role is. The fourth stage is the plan of integration, where we establish the actions and guidelines for the first week of integration, the first thirty days, the first ninety days in this process of integration. The fifth stage is where we find ourselves right now, after ninety days, is the synergy gains, is the longer term stages that we are working on in order to gain efficiency.
In regards to this, at this fifth stage, we are already seeing opportunities to consolidate some activities and to standardize and simplify certain operations that are going to bring us certain gains. What is the implementation of the WEG Business Services, which is our shared service model that takes care of the transactions through a process conveyor belt. All North America, everything that is transitional service agreement, that they are supply services to us. Up to the moment, up to the beginning of next year, when we present our business model, we are going to have significant cost reductions from nine, from the next year on, with the use of the integrated WEG services. Another thing that is very important is the role of information technology in this process.
We find ourselves in a separation or systems integration. What is a carve-out? It's that is being carried out at this very moment in a very complex operation, as we have 10 operating units in seven different countries, and we are executing a separation of over 130 systems that came with the acquisition. So it's a very complex operation, very technical one, in terms of being carried out. We updated our data center for our systems sometime in the first semester to receive the other company's services. After this stage, we have a very important phase, in which is to advance and implement our ERP. From the moment that we well, we have one single ERP for the whole organization, regardless, independent, regardless of Marathon systems.
At the moment that we are able to integrate this, we will advance faster in these gains. Important information here, WEG, an important index, a key performance index that you have is to get the IT expenses and divide by the revenue, or the perimeter that was acquired from Marathon that came to us, has this indicator that is 2.5 higher than WEG. Let be no doubt, we are going to bring this down when we incorporate this. It's gonna take us a little time, but it's gonna be done. In a world that is even more exposed to information technology, when you have more control of this, is fundamental.
So that was one concern of the IT since before the integration, to make sure that from the first moment, we would put all the protection barriers that such an integration requires. Well, let me talk a little bit about investments. The first two quarters, we invested BRL 678 million. The general average of the company is 6%-7%. The focus of our investments are always been geared towards the increase of our capacity, the internationalization of our products, and also the automation and modernization of our plants. Rodrigo Fumo, João Paulo has spoken a little bit about investments in their respective business area. I'm going to give you a little bit more detail on investments in other area.
First, let me start with the liquid paints and using our plot of land, 600 sq m area that we acquired last year in Mexico, so it's another very important investment for the company. The liquid paint, industrial liquid paint, is a $100 billion market, and of which market had a very regional share. So we made a decision to make, put together this, plant in Mexico. We already have a powder paint, and now we're going to invest in the liquid paint. It's very near the gigantic market of the US, and with a very competitive labor in place that is going to help us in this expansion. We're talking about $100 million investments for an area of 5,300 sq m. When we get all the permits and licenses...
that is going to start in the second quarter, and by the second or third quarter of twenty twenty-six, is gonna have this plant ready. Two important announcements were made in terms of investment. The transmission and distribution, it's a very, very hot nowadays, that demands new capacities, and here we have the Betim plant, in which we announce a BRL 370 million last year. I'm not sure whether you can see in this presentation, this slide, we have two faded shades of blues, and the clear one is the investments that was shown in the last year, and our additional expansion is going to add 24,000 sq m in this darker shade of blue. We intend to start operations in the second quarter of 2026, the second semester, actually, of 2026.
Thanks to these expansions that are going on, we are going to have 75,000 sq m of built area. Once again, everything that the world is going through, energy transition with renewables, electrification of the world, demands increasingly solutions in transformers and digitalization, digital solution for the optimization of net... of the grid. WEG is going to work and participate in this. The second investment that was announced in conjunction was the amplification of the transformer factory in Gravataí, a BRL 128 million investment for a transformer up to 230 kV. Starting operation possibly in the second semester of 2026.
To end up my presentation, not to take much of your time, and pass the stage, pass the floor to Kuba, the main key messages is that we are going to maintain our consistent cash generation. That is the model of the company, and through this cash generation, this consistent cash generation, is going to make possible our investment plans. The second point is to improvement in the integration process. We already started, as Fumo and João Paulo have presented, we started it very well, and in the next phases, in the next periods, we are going to witness the gains. There are no doubts that we will be able, along time, to bring the margins of the Marathon's operations very closer to the margins of WEG's operations all over the world.
And we are going still to have healthy EBITDA margins and ROIC, and our aim is to deliver better than average results in our competitive advantages, such as the verticalization. For those of you who have an opportunity to visit our plant, will see that. The industrial scale, and also a industrial strategy that is very well developed in the company, which is a a differential of the company, and other cost reduction plans. Well, thank you very much. I now pass the floor to Alberto Kuba to carry on with our Investor WEG Day.
Thank you, André.
We will call you back for a Q&A later on. I now invite Kuba to show us the strategy update.
Good morning. How are you? Good morning, good afternoon, or good evening for those who are online with us. It's always a pleasure to welcome you here at our WEG Day. I would like to start, and this is the first time I welcome you here as the CEO of this company. It's also the same time as a salesperson, I'll be selling things that do not belong to WEG Motor, so this is something really new. I'd like to start by specially thanking the board of directors for all the support. I am really fortunate, because over the time, after I came back to Brazil, I had a chance of working with Harry, who is a great CEO, and now I have the chance of working with Décio, who was the second WEG CEO. So this has been very good time.
Almost a weekly coaching I have had the opportunity to have with Décio. Harry carried out a very smooth, assertive transition process. We worked for three months together earlier this year, and I had time enough to be, or to go to all business units, so I would like to thank all the managing directors and all the board members, because I had a chance of talking to all of them over these three months to understand our business, and particularly be able to understand the strategy we're designing for every business unit. So it was a very smooth transition process, and the idea today is to talk a little bit about the world scenario, talk a little bit about what we see looking forward, and then I'll talk to you about the strategy for all WEG products. Are you okay with that?
So today, we provided a strategic view of the acquisitions. Now I'm going to show you how this is going to work, look at all businesses. But in general, to warm up, 2024, we see that many WEG customers decelerated. In general, there was a bit of a slowdown in the growth of the North American market, which has already happened in the past. The PMI in the last three months showed decreased industrial activity, accelerated by the elections, and there's a more pessimistic view of American OEMs. In Europe, things were a little worse. If you compare first half of this year with last year's, indicators show that Europe decreased in 2%, 2.1% decrease in industrial production, very much related to weak internal consumption in our customers. Well, many of them are global OEMs.
Sales had orders, purchase orders, that were less than last year. There were challenging scenarios both in the U.S. and Europe, in China, and you have been following the news until the beginning of this year, until recently, there was a crisis that was becoming more and more serious, that was also impacting the industry. Now with this package by the Chinese government that we hope will accelerate things there. This is the scenario, but regardless of the scenario, WEG could advance, could move forward. André showed that we increased our consolidated revenue by 9%, and there is a major highlight in our Motion Drive strategy. It has been a strategy. We grow more in gear and more in motor drive, and we also have a very interesting growth with the strategy.
We have to associate medium voltage motor with drives, and more and more we understand that customers who buy are the same. And we have a lot of synergy when we are able to sell them, and few manufacturers in the world have both motor and drive to sell together. In the domestic market, we saw a very strong recovery of shorter cycle products, but industrial motor, smaller industrial motor plants also had favorable results in the first half of this year. And our big result in the first half of this year comes from the TD unit, particularly transformer, but wind turbines, we also had many deliveries earlier this year that really drove our revenue and our results as well. So what do we see looking forward now? There is a topic that is increasingly part of the agenda.
Back in two thousand and fifteen, when we had the Paris Agreement, when very clear goals were established to reduce CO₂ emissions, many things were established, and we see that there is an acceleration in more energy-efficient products. WEG is positioning itself to really be a major player with our products, with new efficient energy efficiency. For instance, our W22 line, which is the most efficient in the world. We have applications with integrated drive. We have all the new drive line. When you associate drive and motors, we have the variable, which are the biggest industrial applications with reduction energy consumption, and WEG is part of that. To give you an example, recently we worked in a Brazilian poultry house with embedded electronics.
It's a new motor, ECM, commercial and industrial motors is launched, and we replaced an old motor with new, with electronic, and we could reduce energy consumption by 55%. So there are many things to be done here, and WEG wants to be a major player. Renewable energies, electric mobility, which is also part of the WEG Day meeting last year. And I'd like to talk about operational excellence. We used to call it digitalization, but we decided to expand the range a little bit because we are looking here at electrification of the industry. There are many industrial processes today that are based on gas, that end up emitting CO₂, and we are in the journey of helping our customers become better operationally, electrifying and digitalizing their plants.
Looking at some things João Paulo has already mentioned and expanding it to other businesses, energy transition, regardless of having a crisis or not, will ultimately happen. Do we agree? AI is the same. Those who have already used generative AI realize that there is no going back. We will just use it more and more, so there's no turning back. Every consultation we make or a search in Google versus one that you do in ChatGPT or Copilot spends 15-20 times more power. So there is a huge demand here that will grow, a growing power demand, and WEG is ready to provide not only the alternators, João Paulo showed, but we can also supply a number of products. For instance, cooling, motors, all the panels, the e-houses. We have experience with that, where all that, those plates will be stored.
WEG can become a major player here as well, and here we have another important vector for growth looking forward. I would like to talk a little bit about energy transition, which is something that is always discussed. This is a research Bloomberg conducted and recently published, saying that last year's investments reached $1.7 trillion. But in order to achieve the goals established in the Paris Agreement, three times more should be invested. This is another important indicator. There is an acceleration in the energy transition that has already happened. We see that in our businesses, but there is more to happen in the future if the world really tries to achieve these goals by twenty-thirty. And then there's another very important point. We have had many discussions here regarding growth, and then we read many reports.
This one is by McKinsey, saying that the transformer market will probably continue to grow fast, 5% a year by 2030, and a while ago, this market would grow just 2% or 2.5%. So again, everything we are investing in the TD business is exactly to be able to continue to take advantage of this favorable situation. And another very important point, which is also helping us grow this year, is that the electrified transportation segment was the biggest driver of investments in energy transition. So WEG sees that in practice, we have had a good growth this year in electric mobility or related to powertrain, and the recharge station business is growing even faster because EVs, the first five or six months this year, grew more than 130%.
There is a very significant need for the installation of chargers. Now, I'd like to talk about growth strategies. Let's take a look at the traditional businesses, because WEG has a wide range of products. Here we have the main businesses. We would like to be a world benchmark, which are motors, alternators, transformers, automation, drive systems, and digitalization. WEG wants to be a benchmark. Our vision is to be a benchmark in these businesses, and this is how we organize our strategy to go to the market. All these traditional products here have a very big internationalization drive, so Motion Drives, medium-voltage motor and drives, and TD, transmission and distribution. In order for you to understand, all these products I showed you, they are sold all over the world.
We are talking here about 120 countries, and we have 41 sales organizations in different countries. That started back in the 1990s, so Décio, when he was the CEO, he made this movement of opening a unit in the U.S. We opened six units in Europe, and from there on, WEG today is now in 41 countries, and we are not counting here the so-called sub-offices. There are many others, isn't it, Alder? Places where we have two or three guys working, which is like a branch of a branch, and these, too, are WEG people operating there. So we could say that WEG is everywhere with their own team. And why is that important? When you have your own team, you run less risk. You are able to align strategies. Can you get that?
Imagine that back in the nineteen nineties, WEG depended on distributors. If the distributor decided to change brands, you would have lost the market in that country. So the more we go to these different markets, the more we have access to customers, and the better we understand what do we have to do to win in every market with every product. And the sales branches all over the world, they are strategically supported by a very well-distributed footprint. So our main businesses, they started in Brazil, very strongly, where we have the largest volume today of concentration of our manufacturing units. But in Mexico today, too, is a place where we have a very significant verticalization, and now China, too, with an outstanding automation plant there. So we have three countries that are competitive to supply motor drives and gearboxes.
Motors. Fumo showed 23 plants all over the world. When we look the way we are organized, now with this Volt movement, one of the main markets that we had still to conquer are the India market, Asia market, and the Middle East and Eastern Europe market, which now with Volt, we will have this market because Volt is a leader in Turkey already. Since Volt is a leader in Turkey, and since we already have introduced Motion Drive, so we are selling their drives and gearboxes, the trend is that we will also accelerate our sales there in selling gearboxes and drives in that area, in Turkey and Eastern Europe. If you look how a WEG Automation business is structured, you will see that WEG Automation has a very well-structured plant in Brazil, a well-structured plant in China for drives.
We can supply the world from Brazil, from China, same drive line, so that idea of always having two plants making the same kind of product. With the strategic acquisition of Gefran, WEG Automation now also has niche products. And also, I think that the main point in the acquisition of Gefran is to have an extremely skilled team in automation engineering, which is really key to advancing automation. And this team today has become WEG Automation Europe, supporting our staff there in Europe for special products and automation engineering and niche products with Gefran. When we acquired it, it has a line of products that are complementary to WEG's, so this is more for Brazil, China, serious products, and now Gefran in Europe, in order for us to be able to tackle the whole world. Brazil...
Supplies to North America, China supplies to China and Southeast Asia, and both plants supply to Europe together with Gefran. All very well structured and very, and with a very well-designed strategy. And as a key point, the key strategic point, Gefran, when we acquired it, it already had a structure in India, which is the fastest growing country in the world. WEG Motors advanced a lot there in India with the plant, and this is the first seed of WEG Automation in one of the fastest growing countries in the world. When we look at gearboxes, Brazil is very strong. We acquired Watt Drive around 10 years ago, and now we also strive to diversify our production footprint with manufacturing of components in Mexico as well, to supply the North American market, and verticalization in China for the Chinese and Southeast Asia market.
If you look at Motion Drive, this is a global strategy, very well designed, with plants that are well prepared. Any logistic issue, we just shift plants, gaining scale, competitiveness, with very updated lines. Because when we enter into the gearbox area, there is no standardization, so there are many differences in lines, and WEG, in the last ten years, has standardized it all. Now, regarding medium voltage, which is also very strategic, because those who sell medium voltage is a different team. It's different from the Motion Drive team. We are talking here about brown box products, short cycle products, and long engineered products that have to have engineering companies always involved, and this is a global game.
For example, sometimes the engineering company is located in Korea, the OEM might be in Europe, in Germany, in France, and England, and the end user is in the Middle East. So if you don't have an integrated team to sell that, you will miss opportunities, and WEG built. We have a High Voltage Solutions system team in Europe. We have a similar structure in the US, and we have a similar strategy for Asia in order to coordinate the whole thing. And if you look, we manufacture medium voltage motor drive in Brazil, and medium voltage motor and drive in China. We make that's wrong. We're making it in the US as well. So US is missing there. A medium voltage drive in Mexico, and also medium voltage drive in US.
We are opening a plant in Portugal, well, in two weeks, that will also make medium voltage motor and drive. We'll open a plant, a state-of-the-art plant for medium voltage motors. In India, we are finishing the expansion of our plant there, where we will also be making wind turbines with space for the future, so that WEG Automation also makes medium voltage drive there. Main markets: China, India, South America, including Brazil, North America, Mexico, US, and Europe. WEG produces it all, motor and drives. Also, a consolidated strategy, a well-structured strategy, and WEG is one of the only manufacturers that can supply the whole package, putting us on a very favorable position, talking with the same team. T&D, the strategy is clear.
I won't dwell a lot on this, because, Carlos presented that, but we will go on accelerating so that we have growing market share in the Americas and also in South Africa, which is a country that really needs infrastructure. So very briefly now on developing business strategy. Wind, energy. As I mentioned, we took one more step in India. India now has certified product. We are working now to install the machine. Isn't it, João Paulo? We should be ready to make the first deliveries starting in twenty twenty-six. So WEG now will also be able to participate in some auctions and also participate in the game there in India. In the USA, we recently started, putting a structure in place. We are still in the beginning. It's a learning curve.
In the US, the idea is WEG to be exporting this 6-MW wind turbine. To export the 7-MW generator, we have to validate it in Brazil. We have a prototype, so things are working as we designed. In renewable energies, again, for solar, Latin America, we are working well. We are doing well with our expansions. In Mexico, we had a surprise: we are also going well. South Africa, we are starting now increasingly within the same strategy as we have with transformers: to have this view of the renewable energy team because they need a lot of energy there. They have many outages. Electric mobility, something very important. Let's look first at the powertrain strategy. Brazil, powertrain, a lot in Brazil, and if consolidated in Brazil, we start exporting, but the focus for now is Brazil.
When you talk about recharge stations, Latin America and Europe, a very important step to be taken. I'll show you later to update on recharge station. Something I'll be talking about too today is our BESS structure, which started in the USA, but now it's time to do that in Brazil as well. We had an interview published saying that there will be a growth in the stations of 300%-400%. That's true. The market is accelerating. WEG has a line of stations, the first ones there. The only in the market with recyclable material, so with a sustainability appeal, we reduce energy consumption by 42% when we make products using recyclable material. There's a very important point here: in motors, WEG has the whole line, from micro motor to medium-voltage motor.
In transformers, I think WEG is one of the only ones that has from the smallest to the biggest transformers. Drive, same thing, from the smallest drive to medium-voltage drives, and we've reached the same level with chargers. Something which four or five years ago didn't exist at WEG, it was just beginning, and now it's becoming one of the main drivers of growth, and why did I really want to show you this image, this picture? Because this is really changing a lot. WEG used to be a product company; now, WEG is walking towards being increasingly a systems company. This is the picture of our HPC. It's an innovative product that will be launched next month. It has a bigger capacity of recharge, greater power. It has four. You can recharge four cars at a time, and it's being so...
All these products are being adapted to the European product, following European standards. That's why WEG is the first company that got the Inmetro certification, so the first product to be certified by Inmetro in our recharge stations. Particularly, this one has many functions, software functions, that enable a much faster recharging. When I tell you that WEG is becoming a systems company, it's precisely because the software that comes with our systems, in the end, they have more intelligence, more embedded technology. In an old station, like this one, for example, we have 180 kilowatts, so every point here will charge 90. In this one, we have 380 kilowatts, for example, but you can vary the recharge capacity in each terminal depending on the vehicle, the vehicle that is being charged, so it's not fixed.
The software makes this analysis and distributes the charge so that we have the best recharging optimization. And the nice thing about all this here, the great thing about this, is that it's developed by someone who knows about the Brazilian market. For example, we have many condos. If you live in a building, you know how hard it is sometimes to install one recharge station. Imagine if we continue with this speed of growth, buildings will not be able to have a structure in place, and WEG prepared a whole charging system with a condominium management administration system, and at the end of the month, the building administrator will know how much to charge and whom to charge. And there will also be no transformer issues.
Everything we are doing here is to get to know how the market works in Brazil, and we are taking this expertise and taking to the world. The first little recharge station you see there, that was launched the other way with Volvo's EX30, that recharge station is the only one in Brazil where you can plug in into a twenty amps plug, and if you have a ten amps another twenty amps cable, it will not catch fire. It will regulate the charging speed according to the installed capacity of the system. Focus, full focus on protection, bringing the best in management technology for the product and for the fleet. Now I'd like to touch on something else, which is BESS. BESS, we think it's only about batteries.
That guy on top, that should account for around 5% of the cost of BESS installation, is responsible for 40 or 40 or 50% of field issues when BESS is installed. Back in 2018, when WEG made this movement of acquiring NPS, we started to learn. This is a journey, ladies and gentlemen, a years-long journey. We were learning. There was no market at that time. We sold very little in Brazil, but groups and teams studied. So today, WEG has a PCS, which is power control system, that is pretty good, and we will be launching one early next year, which has a state-of-the-art technology, voltage management, operation frequency, and much more reliable. So WEG will have one of the best products in the world, an automation and control EMS, which makes the management intelligence better of the battery, all made in-house and customized for every customer.
WEG today has over 750 programmers working in the company, and we don't sell software. Just for you to see that we really want to develop systems to embed into our products. Transformers and panels with AC and DC, PCS, DC to AC systems, and it's all part of the storage system, auxiliary systems, anti-fire systems, and so on and so forth. This is just to show you that the only thing that WEG doesn't have in BESS is the cell. All the rest, the WEMS system and WEG automation team, they were able to develop and learn, and today, WEG has, in my humble opinion, the best system and the best, more complete BESS line in the market. Again, as I talked about recharge station, we have from the smallest BESS, which is residential, until integrated skids.
We have everything ready to be delivered next year, when we will start with this, so we built another business case again, which may, in a few years, become a great business for our company, and I'd like to show you this, for those of you who do not know, my time is almost up. Where is BESS? Because BESS, and the last S, battery, energy, S, so the last S stands for system. It's a very complex system, and WEG is ready to supply the whole system, and BESS, I think the best synonym for it is like a Swiss pocket knife, which can be used for many different things. For instance, you can put the BESS for generation.
We even made a joke: the system in the future, instead of GTD, can be GATD, generation, storage, transmission, and distribution, because not always, obviously, always, actually, you don't put together your, generation with the need for power in wind and solar, and BESS regulates that. In transmission, often, when you have power, you don't have the capacity to distribute this power, so you may store in BESS, both in the entry of a transmission line or output in order to regulate that. The user, the user who buys a specific PPA, that is, they are buying energy, they may have also a BESS to displace the curve in order to pass less power. So there are many different situations, and now for small towns... Oh, and there's a very nice application, which I'll talk about.
The biggest problem today within São Paulo's recharge station is the capacity of the transformer, the capacity of the substation. If you have a garage there that needs 50 MW to charge buses at night, but the substation can only get 20, so you may, during the day, charge a battery pack in order to meet the 40-50, and then when buses get there, the system will charge the buses, right, so you solve an infrastructure problem in order not to install a bigger substation or a bigger transformer, so there are many different choices here, and I'm absolutely sure that many different applications will be deployed from there, because the cost of the cell went down, so now what we see is that the...
with the battery or cell costs that decreased over 90% in the past 10 years, projects will become feasible in Brazil as well. Brazil was lagging behind because power cost in Brazil is cheap, but now we see feasibility in many different projects. Now, I'd like to talk a little bit about acquisitions. We were much faster in acquisitions in the past few years because we look access to the market. WEG Motors already had a team all over the world prepared to absorb them. As Fumo mentioned, the Mexican team is negotiating with Mexico, the Chinese team is negotiating with the Chinese team, so WEG is much more global and better prepared to acquire a company such as Marathon. But a very strategic movement is Volt.
We didn't talk much about that, and Volt is a totally vertical company with foundry, and is really prepared to serve the Turkish market. They don't export much, so WEG can drive sales. It brings a commercial motor factory we didn't have, so we can export single-phase motors from the Turkey operation, so bringing resilience also in terms of supply, and we see that the journey is this. Our journey will be like this: first, looking at access to the market with mature products. We had many acquisitions of transformers, gearboxes last year, or technologies as well, as were the startups when we started WEG Digital, in order to complement the portfolio and know-how that WEG doesn't have. Very briefly, just to update you, we made many movements regarding ESG.
In 2023, we had over 610 projects approved, and we improved by 15% our reduction in emissions vis-à-vis 2022. Of the 52% target, we've reached 25% reduction in two years, and this has an impact on our ESG achievements. EcoVadis last year. It's being assessed again, but we upgraded from bronze to gold, placing us among the 5% best companies of many assessed. Our customers used to make many audits to check our process, and now they know that we are certified, or that WEG is recognized, making things much easier. We improved our CDP score. This is all related to carbon emissions, so we went from B to A.
... we are at a leadership level, and Sustainalytics, there too, we improved. We improved our grade, but we are still on the same range, being low risk. So that is also recognized one of the leaders company also in ESG. Take-home messages. In everything you saw here in terms of traditional progress, we are really speeding up our internationalization. And my role as CEO, since I've lived abroad for so long, having worked so long with international market and WEG's board today, well, many of them lived abroad for a long time, and we will take this moment. So... And then we have many opportunities that will continue with this energy transition, and they're being accelerated with the use of generative AI.
We have now a full portfolio for electric mobility, so I think that electric mobility and recharge station have reached an outstanding level so that we can also take our products abroad. And we have a BESS plant being completed. And BESS, as you could see, we have everything home, fully verticalized product, except for battery cells with a software team, and BESS requires OEM. It requires maintenance, operation, and we have a lot of expertise in wind energy, and this will make a lot of difference for BESS. Additionally, we have a fully dedicated team, dedicated to the sales of transformers, and this team will also help us sell BESS. And I think that we have to go on advancing in our ESG projects. There are many things still to be done in Brazil and in the world.
This year, we are reaching 75% of the energy we use comes from renewable energy. That's a great step. In Brazil, with two self-production projects, we have exceeded 90%. In the world, we have solar almost in all operations, and that will lead us on average to 75%, which places us among the best averages in the market. That's it.
Thank you, André.
Thank you, Kuba. I invite you to stay on stage because we are now starting the second session, second Q&A session. So, I please ask Kuba and André to... And please, if you can now stand up at the time of asking your question, because it's better for the camera to show your image for those of us who are watching from remote areas.
Thank you, Kuba. André Mazini from Citibank. The first is the capacity, the transformer capacity. I think that the last WEG Day, you have been doubling what, the capacity in transformers. I'd like to understand when this full capacity is getting online, and what are the risks in taking a bit longer to become online? The second, if you allow me, Kuba was in a great interview saying that 70% of the revenue is coming from external markets in the midterm. And I think that in the external markets, the margin is lower than in Brazil because they are more competitive markets and because you're not so verticalized out abroad as you are here. The question is: can you still maintain the margin, even getting to 80%-90% of revenue is being generated in external markets?
First, in terms of the capacity of transformer, Carlos, please correct me if I'm wrong. We have been working in a very strong manner, and all these projects that Carlos has approved, December last year, are under the phase of dealing with the contractors. We took a while to make all the license, get all the permits, and all this capacity is going to start operating in 2026, 2027, 2028, and later on, we'll be at a full capacity. 2026, 2027, we double what, in comparison to 2020, 2013, and all is done, we'll double in the projected for this year. So it's not a ramp. At each plant, we'll enter at a different specific moment, and this capacity will start operate until we double the capacity that we have today in about five years.
In terms of internationalization, this is a journey that is going to take a long time, and what WEG has been doing is that we're working in the verticalization of our operations abroad, and this verticalization will also make those plants very competitive. Today, WEG motors are with outstanding performance in the foreign market. What is going to happen is that naturally, WEG will grow in the foreign markets. I was just reflecting the other day, when I joined WEG, it had BRL 1 million in revenue, and 70% was from domestic market, and nowadays, it's BRL 32 billion, and the external market had more than 22 times growth. But the external market went from BRL 300 million - BRL 17 billion, so it's natural that the external market will increase more in proportion.
For motor, 75% of the growth comes from the external markets. Transmission and distribution is even more stronger outside of Brazil than inside of Brazil.
... 70% medium voltage drivers, 80% is from external markets. It's natural. It's not because that's a target of ours, but because Brazil represents 3% of the addressable market for WEG. It's natural that you will make actions towards growing in external markets where we have more opportunities. And naturally, our challenge as a manufacturer is to guarantee that the foreign plants gain in competitiveness so that our margins remain the same. Let's make the following reflection: What was the margin of WEG in 2014? Ten years ago, what was its margin in 2024, in 2004? See how much we have geared towards more internationalized businesses. When we are reaching now historical margins. I don't see that trend.
Obviously, there is a higher challenge in becoming more competitive in foreign markets, but history shows that we were able to make good on our promise to make those operations very good in the foreign markets.
Thank you once more for the opportunity, Alberto. Valerio from UBS. André and Kuba, we have seen a lot of projects, very interesting ones, that you showed us the details, and I'd like to know, what is the criteria? André Rodrigues also mentioned the ROIC all-time high for 28%. What is the criterion for this investment in terms of profitability, especially for the organic ones, in which I think that you have a forecast and then a more precise estimate of how much they cost and how much in revenues you already have? Well, may I get that one?
Thank you, Alberto, for that question.
I think that when we start a new investment, obviously, the return is very important, but that's not all. We know that gain in market participation are important for WEG. It's important to invest in new technology as well, and every time that a managing director addresses the board of directors and takes this into consideration, well, the return on this project is also considered. But most importantly for WEG is the speed to make these investments good. So there are businesses that when we, well, let's imagine that we always privilege the modular expansion. When we made the foundry in Mexico, it had a smaller return than the investment that Carlos is making in transformer. The market is heated up. The demand is high.
We have a price differential, and we had to make that investment because in the longer run, it would be fundamental for the competitiveness of the company, and we have targeted in the growth of WEG, and then came a merger along that sort of fitted as a glove for that investment, because they're going to bring further competitiveness when we make the die-cast core cast, so there isn't a minimum established for each business unit, but the speed that we have in order to reach the historical values of the company.
Oh, thank you very much. Rogério Araújo from Bank of America. Kuba, you spent almost a year analyzing what were the opportunities of each area, and I would like to understand a little bit better what were the bottlenecks that you have identified in the sustainable growth of WEG.
What are you doing in order to address these points? And if I may bring, one of the points that caught my attention was the acquisition of a very big area in Mexico, and I think it was kind of visionary because I remember you made here in Jaraguá do Sul. How much Jaraguá do Sul, for instance, still has for expansion area? Has that reached the limit? I think you still have a difficulty in hiring labor in the U.S., so how have you identified in order to mitigate these problems, these bottlenecks?
Well, very well. I think that's a very important issue, and that's not only the challenge of one business unit, but WEG as a whole. WEG increased to two thousand more employees.
Our businesses today permeate a lot of different industries and segments, and in order for us to keep on growing, we have to develop a lot of leaders. We have about nearly 2,000 managers, and up to 2027, WEG will need to make 500 more leaders. So basically, it's a 25% increase in the labor, so you then you have technical management directors, and these people need to be educated, need to be trained, and the more WEG grows, things get grow, get a bigger proportion. So just for you to give you an idea, from 53 plants, 43 are outside of Brazil. So it's natural to say that in 2027, perhaps the external market will no longer be 53, 54, maybe it will be 60, 68.
So this external growth require a strong effort, and recently we have nominated a first director from a guy that was an intern, and that shows you the cycle that WEG has. All over the world, we have similar instances. In India, we also have interns that are reaching the director position. So the role of Juliano, he is our Human Resources Director, also has a story like this. Juliano joined us as an intern, and he moved around a lot. He implemented the SAP ERP system, and he got to know WEG as a whole. Later on, he was expatriated, and he ran an operation as a director.
He ran an operation in South Africa, and now he comes back exactly in order to make this internationalization of our R&H, human resources area, which is a very important area. WEG, one of our important drivers of our success is the team that leads our company. Recently I met a director that worked with Eggon, and Eggon was already in the board of directors, and he asked him: "What was the success of WEG?" Because it was already successful at the time. And then both got to the conclusion that it was the team, the capacity to retain talents, the capacity of retaining value that WEG had in Brazil, and I think that André and Juliano consistently making that true also in the external market.
That's why you see when we have the Marathon-WEG integration, that the key point there is, was to establish trust, because the first thing that they, they may think is that they are going to be replaced. So we have to bring these people here in order to understand what we have in potential to help them, and then we have the demands coming from these teams. It's not us going and telling them what we need to do. It's we have them come here, knowing our processes, and then have this desire and motivation in taking that back to their operations. And when we talk about bottlenecks, I think that in a general way, our big challenge is to balance investments. It's rather complex to get an operation such as WEG's and say that we are going to grow, and how is that broken down?
We start with the forecast for revenue, and then from there, you open up in how many products, the quantity of plants. So we have a very good discipline to do that every year and adjust and balance the operation wherever it's needed. I think basically, that's it. Is there something I'm missing?
Well, about the size of the area in Mexico.
Well, about that plot of land in Mexico, that comes towards what André mentioned. It comes. You don't have a return right away. You put an enormous CapEx for a production capacity that you're gonna take a long time to reach that. So perhaps you're gonna take 10, 15 years to build everything that our area has to offer. But how do we think?
We, the executives, as we thought to build in Mexico, WEG Automation, WEG, WEG plants, we all had a vision of need in area, and then we decided to buy 400 sq m , and then we show the board the plan, because this plot of land is in front of WEG, and then the board said, "And what about this other area here?" "Well, this may become a housing area." And then they said, "Well, then buy everything!" And that was the same case in China. We were going to acquire a plot of land, and then, Luís, he did not want to buy 100,000 sq m . We bought 180,000, and nowadays, it's almost fully taken.
So I think the long-term vision, and we know we are going to need it someday, and the only problem is the speed that we're going to take to occupy this area. Everything is thought in the long term, but aligned with our vision of growth. And we wouldn't do. It doesn't make sense to making this in Jaraguá because we are very big here already. But now we are going to Betim, to Gravataí, Linhares. So that is all part of a long-term, integrated strategy.
Good morning, Marcelo Motta from JP Morgan. I'd like to ask about the systems. You mentioned that WEG is a company that is increasingly dealing with systems, and in the long term, how do you see the growth of this segment and the revenues? How does it alter the strategy? How should you think about this business?
Thank you for this question. WEG is preparing itself for systems because last year we made a decision for WEG Automation to create WEG Systems and another unit, and we thought that we needed a business unit to integrate everything. You can see that the best is part of WEG Automation makes, and there is a part that we develop anew. There is a whole part of software and imagine that when WEG decided to enter the digital business, we went after an AI company, we went after a communication company in order to communicate the plant with the cloud. We went after a company for BESS with eyes for automation, and everything became integrated into our system.
Grillo, coming of Grillo for the digital and the transformation of the digital into a business unit, brought this increasingly systems area that can be remunerated as software systems, software, but basically they are going to be integrated into the product, so what is going to happen in the end is increasingly WEG is going to integrate system, be it BESS, be it electrical mobility, and including for the electrical mobility for the powertrain, and the powertrain for electric, for EVs, has the motor of WEG, has the WEG drives, has a WEG transmission, and a WEG battery pack, so completely different things. That's why we have now this integration, and it's going to take more space.
As WEG becomes a systems company, our revenue is going to change. We have to offer more services. Everything that we are speaking about, for instance, a wind farm has a recurrent maintenance need for about 20 years. BESS, the same thing, because you have the degradation, the degrading of the battery. You have to substitute, replace batteries to maintain the capacity. So that is the journey. WEG is going to remain very strong in product because a lot of share to be gained outside, abroad, in the foreign markets. But I think in the longer years, systems are becoming even more relevant in our revenues as well as services. We still have time for one more question.
André Mazini, once again, thanks for this second opportunity.
My question is, for low-voltage motors, we are reaching very near the first player, and perhaps you will overtake this first player. And these other major players, the European ones, they are increasingly losing share. Why do you think they are losing so much share of the market? Maybe a theory is that because they have lots of their manufacturing plants in Europe, and it's a very intensive in labor, people in the plant floor, so perhaps they are in different places. Why do they bring more of this productions to India, Latin America? Is that really what is taking place? Are they in the wrong place for this business, or do you think there is something else at play here, why they are losing share?
I think that in a general way, the world, the rich world, what happened in the U.S., what happened in Europe, Western Europe, is a deindustrialization process because you have a very high-cost labor. Apart from this high-cost labor in these countries, you are not able to dismiss. See what is happening with some German automakers. They have a situation that they have the highest cost labor, the highest cost of transformation, and they are unable to make anything about it because they are bound by the structures of laws, because they cannot dismiss people. The world is cyclical. These companies in Europe, in order to maintain competitiveness, and I'm talking about the customers that we visit, nobody manufactures vertically. Everyone supply themselves with components in Asia. Nowadays, they supply themselves in India and assemble in Europe.
This model has not a long-term future because the supplier of components will increase their costs along the time. China, just for you to have an idea, when Apple launched the iPhone, the cost of the hour, or the labor cost per hour is $0.80, and I think that in 2028, it reached $8. So we see that in our operation, 7%-10% increase along the years. So in my view, it is very difficult, if WEG also had big European factories in Europe, to operate in a competitive way. That's why we have this mix between plants in more competitive places and niche in more competitive countries, Europe, U.S., et cetera.
And then the continuity of these businesses, when we talk about our future vision, ends up making more sense. And as these big companies have already ceased making their verticalization, it's very difficult now to start verticalizing back again. So that's why I think it's very difficult, and why they are losing interest or operating with lower margin, and then having lower CapEx investments.
Well, thank you very much, Kuba and André, for participating in this Q&A session. We shall wrap up our event now, and I'd like to thank once again your attendance and the participation of our executive, and everyone that has attended presentially, and for those of you out there who are remotely following us.
And for everyone else that has supported us to make this event possible, our suppliers, our partners that have worked a lot for making a great day for this WEG Day. An important message and announcement today for those of you who are remotely watching us, there is a link for a satisfaction survey. And for those of you, also, it's going to be made available by email so that we can improve for the coming years.
That's it. Thank you very much, and see you next year.