Good morning, welcome to the conference call to discuss the earnings of WEG in the Q1 of 2023. This call is being webcast with the accompanying slides at our investor relations website, ri.weg.net. After it's finished, the audio file will be available at our investor relations website. Should you need assistance during the call, please request the help of an operator by typing star zero. Any forecasts included in this document or in forward-looking statements that may be made during the conference call about future events, business prospects, operating and financial forecasts and goals, as well as to WEG's potential future growth, are simply beliefs and expectations of WEG's management based on information currently available. Such statements involve risks and uncertainties, therefore depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry conditions, and other operating factors may influence the future performance of WEG and lead to results that differ materially from those included in such forward-looking statements. We kindly remind you that this conference call is being held in Portuguese with simultaneous translation into English. Today, we have with us at Jaraguá do Sul, André Luis Rodrigues, Financial and Administrative General Manager. André Menegueti Salgueiro, CFO and Investor Relations Officer. Wilson Watzko, Controller. Felipe Scopel Hoffmann, Investor Relations Manager. Mr. André Rodrigues, you may start. Good morning, everyone. It's a pleasure to be with you once again for the WEG earnings conference call. We start with the highlights of the quarter in which the net operating revenue grew 12.7% compared to the Q1 of 2022.
We delivered one more quarter with positive results in most of our businesses, reinforcing our strategy of product diversification and global presence, which allows us to take advantage of opportunities in our markets. In Brazil, the positive result comes from the good performance both in short-cycle businesses, such as low-voltage electric motors and automation components, as well as in long-cycle businesses such as high-voltage motors, automation panels, and transformers. However, the distributed solar generation business, as expected, had a reduction in revenue in this quarter, mainly influenced by the change in the regulation of the sector that came into force in January of this year.
In the foreign market, we posted good revenue growth, mainly influenced by good demand in the industrial electric electronic equipment area, in addition to the good performance of the energy generation transmission and distribution area, especially in the transmission and distribution business in North America. The EBITDA was BRL 1.7 billion, a growth of 37% compared to the Q1 of 2022. The EBITDA margin ended the quarter at 21.3%, an increase of 3.8 percentage points compared to the same period of last year. During the presentation, André Salgueiro will give more details about this performance. Finally, the ROIC, as well as we will see in the next slide, reached 31.4%, an increase of 1.7 percentage points compared to the Q1 of 2022.
The improvement in our operating performance, supported by revenue growth and improved margins, more than offset the greater need for working capital and the increase in investments in fixed assets in the period. I now give the floor to André Salgueiro. Thank you, André. Good morning, everyone. On slide five, I present the development of our business areas in the markets where we operate. Starting at Brazil with positive activity in the industrial electro-electronic equipment area as a result of good demand for short-cycle products such as low-voltage electric motors and serial automation equipment, with emphasis on the mining and oil/gas segment. Long-cycle equipment such as medium-voltage electric motors and automation panels also had a good performance, especially in the mining, pulp and paper, and oil and gas segments.
In the GTD area, despite the good performance of the T&D business, we saw a reduction in demand for distributed solar generation, which impacted this quarter's revenue. The anticipation of orders in 2022 and the entering to force of the new GD Legal Framework on January 7th of this year contribute to the lower low revenue of this business. Despite the additional challenges, we believe in the potential for continued development in this sector, especially when also considering centralized solar generation. In commercial and appliance motors, we observed a resumption of activity with positive demand in sectors such as washing machines, despite volatility in demand and inventory adjustments in some important segments, such as motors for air conditioning.
In paints and varnishes, demand continued to be strong, with emphasis on the segments of mining and oil and gas. At external market, we saw good economic and industrial activity in the various regions where we operate, with demand for short-cycle equipment spread across the different industrial segments where we operate, with emphasis on North America. There was also good performance in long-cycle equipment, especially in the oil and gas, mining, and water and sanitation segments. In the GTD business, we continue to take advantage of the opportunities present in the T&D market in North America. In the generation business, we highlight the good performance of our operation in India, in addition to the building of a robust backlog for the coming quarters. In commercial and appliance motors, we saw growth in demand for our products, with emphasis on the good performance of operations in North America.
In paints and varnishes, exports from Brazil to Latin America, countries and sales from our operations abroad contributed to this quarter's growth. Slide six shows the evolution of EBITDA, which grew 37% in relation to Q1 of 2022. The EBITDA margin ended the quarter at 21.9%, 3.8 percentage points higher when compared to the same period of last year. This result is mainly a reflection of the accommodation of costs observed in recent quarters, together with the change in the mix of products sold, mainly impacted by the difference in the margin of the industrial segment, which showed greater growth in relation to GTD. Finally, on slide seven, we show the evolution of our investments.
We invested BRL 343.4 million in the quarter in modernization of an expansion of our production capacity, machinery and equipment, and new products. 49% were allocated to production units in Brazil and 51% to industrial parks and other facilities abroad. In Brazil, we highlight our investments in the expansion of factories for industrial motors and electric traction motors. Abroad, we continued with the expansion of the motor and transformer factories in Mexico, in addition to the expansion of the factory in India for the production of wind turbines. With that, I finish my part and give the floor back to André. Before we move on to the Q&A session, I would like to talk about some of our latest accomplishments and comment on our outlook for the remainder of the year.
Regarding the achievements, I would like to highlight that we announced investments to expand battery pack production capacity in Brazil, totally BRL 100 million over the next years. The investments will be made in Jaraguá do Sul Industrial Park and involve the expansion of the current manufacturing building and the construction of a new factory scheduled for the H1 of 2024. Finally, on the outlook for the rest of the year, we continue with a robust order backlog in the long-cycle projects, both in industrial and area and GTD, especially in T&D projects, which will contribute to growth in Brazil and abroad. The accommodation of raw material costs, combined with the normalization of supply chains and a more favorable product mix, should continue to favor operational dynamics.
It's always important to keep an eye on the global macroeconomic scenario and the possible risks and volatilities, both in the local and international scenarios. Even so, we maintain our growth expectations with positive demand in most of our businesses. This concludes my presentation. Operator, we can proceed to the Q&A session. Ladies and gentlemen, we'll now start the Q&A session. In order to ask a question, please press star one. To remove your question from the queue, press star two. Our first question comes from Lucas Marquiori from BTG Pactual. Hello, everyone. Good morning. Thank you for the call. There's one topic I would like to discuss regarding margins. I think this has been the major surprise in the quarter. I would like to understand from the two Andres that there is a bit of a cost accommodation as well as improved mix of products.
I understand that, the lower pressure on costs and maybe at the end of the day, the margin changes, and that would fit the discussion of the beginning of the year saying that margins should be going down slowly or in line with last year's margin. Given the dynamics of the favorable dynamics of the industries as a whole, do you somehow think that margin can be flat until the end of the year instead of decreasing? If so, how much will it come from the improved pressure on costs and how much it comes from mix of products? I would like to hear from you on that. Thank you. Hello, Lucas. This is Rodrigues speaking. Let's talk about the margin.
In our release, we said that there were some factors that had a positive impact on the margin, a very positive margin for the company. First was cost accommodation of most of our raw materials. The normalization of the global supply chain also impacted that. It's worth remembering that the change in the mix of products, depending on what we're talking about, has a different margin profile. For example, the industrial segment had a larger growth when compared to T&D or GTD, especially in terms of renewable energy, solar and wind, because as we always say, the margin for that is lower than the average margin of the company. The impact on the margin was the prices. The prices were improved of long-cycle with the accommodation of the cost of raw materials in the last quarters.
When we are in the movement of increasing costs, the margins are under pressure. When the costs are stabilized, margins tend to increase. That was positive. Also, a better occupation of plants, of factories, that improves operations and has an impact on margins as well. This is an overview of the positive effects on margins. In terms of prices, this movement can lead to a future reduction. Adjustments can be made according to market conditions. It's worth remembering that in addition to the cost of materials and other costs, there are other costs, such as personnel that also cause increases. The inflation of latest years also is included in that. We also had the normalization of international freight costs, which contributed to that.
As these factors go back to normal and according to market conditions, of course we'll assess future price adjustments on a case to basis. It's always important to remember that we always try to preserve the company's profitability. In terms of what we can see about future margins, we are still in the Q1, so we're cautious in the beginning of the year. There are macroeconomic issues that need to be better analyzed in the future. If everything continues according to the current performance, it's possible that we may deliver better margins or similar to margins that we had in previous years. Okay. Perfect, André. Thank you very much for the call. Good day. The next question comes from Josh Milberg, from Morgan Stanley. Good morning, everyone, and thank you for the call. My questions refer to the electro electronic area.
First, could you comment on the market share evolution given the granularity about individual products, especially about automation and reducers, because I believe you mentioned that there's major room for improvement when compared to your positioning in the past. That's the first question. Hi, Josh. Good morning. Thank you for the question. This is André Salgueiro speaking. When we look at electro electronic and industrial equipment, as you pointed out well, we have three main blocks of products. Industrial motors, automation, and reducers. The company has an important market share in Brazil. We are among the leaders in most of these products. When we look at the foreign market or external market, we see that low voltage industrial engines or motors had an important evolution.
We said that during WEG Day, WEG became the second largest market share with 10% in the global market. When we look at the other markets, especially drives and automation and reducers, our global market share is relatively small, lower than 1% or 1%. That brings talks about the opportunity we have when we look at the industrial engines as a whole. We will use the market share we have in industrial motors to leverage on drives and reducers, as well as our brand knowledge. As we evolve and gain market share in the motors business. Due to the pandemic, we had an interval in that development, but it's a very developing sector, and so we'll continue with drives and reducers.
It's a gradual process year on year, and we'll have to work in order to attain such an evolution. Okay, thank you for your detailed answer, André. My second question refers to the domestic market. You've said that long cycle has helped, sanitation is not one of them. Could you give us an update on the law of 21, and how would be the share of the company for the next quarters? Thank you. Hi, Josh. This is André Luís Rodrigues speaking. Undoubtedly, water and sanitation sector has always been important for WEG, and the framework will bring additional opportunities for the company. This legal framework is important for Brazil as a whole. The changes in the format that are being discussed should improve demand for improvements, although it could impact on the project's schedule.
We have an updated portfolio of products for this market. We have energy-efficient solutions. Solutions to control water losses and to regularize the supply of water. These things got a bit delayed. We feel that because orders are a bit below our initial expectation. As I said at the beginning, this legal framework is important for Brazil, and although there was a delay in, it will be important soon. Okay, perfect. Thank you very much. The next question comes from Lucas Laghi from XP Investments. Good morning. Congratulations on your results. I would like to know about the dynamics of revenue. We saw some investors were a bit afraid of this sequential drop in revenues since the Q4. In the history, there is a seasonal effect.
The revenue in the Q1 is usually lower than in the Q4, and then it continues to grow on the H2 of the year. I would like to understand whether that make sense for this year, and what's the reason for this seasonality that we see that usually the revenues in the Q1 is usually lower. We see that demand seems strong. That's the first point. The second point, more specifically regarding the domestic market, that's pretty much stable when in the quarterly comparison. I would like to understand why the drop in the solar Distributed Generation. The tech need, what was the breakdown of that? Thank you. Lucas, this is André Luís Rodrigues speaking. I think you provided the dynamic correctly. If we look at the variations or the changes between quarters, it's important to highlight that that happens.
It depends a lot on the long cycle portfolio, the industrial projects that are delivered, the GTD variations. If we look at the historical average from 2011 until last year, from 2011 to 2020, always the last quarter of the year has a better performance than the Q1 of the following year. This is because usually in the last quarter, we concentrate deliveries of projects. That creates the seasonality. There is an increase in revenue in the last quarters of the year. Due to the pandemic and all these, dismantling of our supply chains and the dynamics in the years of 2021 and 2022, there was a change in that dynamic. The normal trend based in the past is for the Q1 of the year to have lower revenue than the previous quarter, which is the Q4 of the previous year.
The right way to analyze that is quarter-on-quarter comparison. What we had is an issue in GTD, and André Salgueiro could give you more information about this impact on the revenue from solar generation. We don't break down the specific revenue by business within GTD, but this is a fact that was included in the release. We can say that the solar had a drop in revenue in this quarter, both compared to the Q1 of last year as well as to the Q4. Even the drop compared to the Q4 was even higher than when compared to the same period of last year, the Q1 of 2022. Wind also showed a slight accommodation due to delivery of projects, but it was very similar to the Q1 of last year.
All the other businesses in there had a good performance of growth is hydro, electrical, especially T&D. If we exclude solar effect, this business would have growth 2 low digits when compared to the 1st quarter of last year. That can give you an idea of the size of the impact of the solar performance or the solar in the performance of this quarter. That was very helpful. Thank you for your answer. Have a good day. The next question is from Andressa Varotto from UBS BB. Hello, good morning. Thank you for the question. I have 2 questions. One is a follow-up about the solar GD. We said that some projects could have less incentives in GD and migrate to centralized generation. How do you see this opportunity to capture this volume of GD in the centralized generation?
Another question is, you highlighted in the release the India generation business. My question, is there any contribution from wind turbines? Could you give us an overview about opportunities in that market? Thank you. Hello, Andressa. Thank you for the questions. With regard to solar energy, indeed, the dynamic for this year will be slightly different. We had distributed generation with a much greater performance than centralized distribution. In the beginning of the year, there was a change in legislation. The incentives decreased. In addition to the change in the law, there was an increase in interest rate, which also impacted credit facilities for this segment, which is important. There was a credit crisis in Brazil in the end of last year, beginning of this year, that restricted access to credit in general, and that impacted the distributed generation business.
Looking at a portfolio for the future, we see a performance of centralized solar generation much better this year than last year. A part of this accommodation that we'll see in distributed solar generation will be offset by centralized solar generation, especially in the H2 of this year, where we have a more concentrated delivery of centralized solar generation projects happening. As for your second question about the impact of India wind turbines, we are still in the certification process of our machine in India. It's going very well, we need a few more months in order to finish this process. What happened in India was a result of the good demand for equipment related to the generators and wind turbines that we also produce in India. Thank you very much. The next question comes from Pedro Fontana from Bradesco BBI. Hello, André Salgueiro. Congratulations on the results.
Thank you for taking my question. You've mentioned some of the avenue growths of avenue for the company generators in India. WEG is also working on electric mobility projects. I would like to see your long-term view for opportunities for growth in coming years. Thank you. Hello, Pedro. This is Salgueiro speaking. Thank you for the question. Actually, there is a slide in the presentation in which we talk about the growth avenues. There are three. I'll focus on two that fit your question. First one is about internationalization, and that is closely related to the fact of gaining market share and space in products that we already have in our portfolio, but improving our market share in the global market. When I talk about the strategy of Motion Drives, that's a practical example of that.
We do have an important share in industrial motors, now we like to increase sales of reducers and automation. This is only an example. There are other products that are in our portfolio, hydro and thermal generation, T&D, wind, solar. For all the products, there is some internationalization strategy. We don't want to go global on everything, but in areas that have a better outlook. This is a major opportunity for growth in coming years. The second one are new businesses. Why new businesses? Because throughout the history of the company, WEG has been able to develop and open new businesses, launch new products, and that has from time to time helped in our long-term growth.
Today, we are working on the electric mobility business, as you mentioned very well, as well as powertrain for trucks and buses recharge station, and more recently, battery packs. We also have the digital business as well as developments regarding energy storage. This is just to give you an example of concrete cases of businesses that are under development or developed. We have the mission and we're willing to continue to develop new business. In the future, we'll enter with new products or new segments that make sense for us. Okay, thank you very much. Next question comes from Daniel Gasparetti from Itaú BBA. Good morning, everyone. Thank you for the call. I have two questions as well. First, regarding the external market. In the opening, you mentioned that you're quite excited about this market. I would like to know more from you.
How was the volume of strong Q4, strong Q1? Is there any bottleneck for delivery of projects? Is this something that will grow? The second question is, building on André's comment about increased margin and long cycle. We're looking at your construction agreements margins. There's a significant increment in that margin, close to 15% now moving to 21%. I would like to understand in terms of mix or some projects of long cycle with longer or higher margins or maybe wind with higher margins. Just to understand whether there was any other effect, in addition to the mix of products. This is André Luís Rodrigues speaking, Daniel. First, let's talk about how we see the external market. First, we have to separate the long cycle from the short cycle dynamics.
In long cycle products, nothing has changed from what we said in the other quarters. The demand is very strong. In electro electronic industrial equipment, the demand is very positive. In T&D, we've been talking for some time now that the demand in the United States, Central America, and Mexico is very positive for this business. No major change in long cycle business, and the outlook for the future is very positive. We start one more year with a order backlog that's very well built, and now we just have to execute on it and deliver throughout this year. When we move to the short cycle, we have to analyze by region, starting with North America, where we have a very positive performance, both in industrial and low-voltage motors, as well as in commercial motors. So far, the dynamic has been positive.
It is natural that at some point in time there will be an accommodation, but it will happen at a higher level than happen next year. Remembering that the visibility of a short-cycle is three months forward, so it's a positive outlook. When we moved to Asia, there was an increase in the closing of China that had some consequences for WEG and for everyone that operates in that country. H1 of last year was very positive. In the H2 of the year, there has been a reduction and the prospect of opening of the country. Now with that opening, if it takes place, there is a recovery. If we compare the H1 of this year to the H1 of last year, obviously, there will be a reduction because last year was very positive.
That is expected to continue growing. With this opening, the H2 of this year, we'll be able to recover the lower trend in the H1 of this year. When we move to Europe, we should analyze that there's always been a concern in Europe with the energy, and energy, Europe was able to reorganize itself in the energy sector, but the war continues. We do expect some volatility, and that should continue in coming months. That applies to the dynamic of short-cycle. In North America, it's positive dynamics. Asia. We can also say that we opened the low voltage motor factory in India, which will bring future growth. Asia is in a recovery process, but we should be a bit more cautious regarding Europe in about future outlook.
As for actually regarding the construction contracts that you mentioned in 22, in practical terms, that is directly related to the long-cycle business. We have reported a good dynamics in that. When that happens, the margin tends to expand because the demand is positive and you have full capacity. It's more important for the customer to have the product available, so pricing improves. I'd say that this will happen in a period for more than 1 year. It's now reflected in a more structural way in the earnings. At first, it was reflected in the building of the backlog. Now it comes to results. In terms of mix, there has been no significant change. Not everything is a long-cycle. For most of long-cycle, especially P&D, solar, wind and new energy with wind turbines, and other large scale machinery.
There is an improvement in pricing with time. Also, there is a movement of cost accommodation. As we evolve and new contracts are signed, the profitability increases. This is explained the change in the margin of 2022 when we look at the figures of the Q1, 2023 when compared to last year. Excellent. Thank you very much. Have a good day. The next question comes from Bruno Amorim from Goldman Sachs. Good morning, everyone. Thank you for the question. I would like to make a follow-up on solar. There are several dynamics impacting that line of business, and you emphasized the pre-buy. Many of the purchases that were supposed to be made this year were made last year. We discussed that already. Also, in this segment, there has been changes in the regulation.
You explained that despite that, this segment continues to be attractive. Now I would like to learn more, how much of this change was from pre-buy when compared to the decrease in the demand. Would that majorly pre-buy those that would be buying this Q1 but last year? If so, we can make a take that for next year, those that are supposed to buy in 2024 will buy in 2024, so that will have a growth for next year. Just to understand how much from what we see now is temporary, and maybe there will be a structural downward trend in the demand for this sector. Thank you for your question, Bruno. Well, it's difficult to break down that exactly. What we can say, though, is that we do foresee an impact, a reduction in revenue.
We also noticed a strong increase in revenue during last year, which means that in a way, there was a pre-buy effect. A part of the revenue that was to be expected for this year happened last year. There is also an important portion, not so significant, but that are the new plants from 1-5 mega that were more affected by the change in the regulation. This type of project will continue throughout this year because there are the spirit for people or projects that entered until January seventh. Something will happen this year, although in this lower volume.
In the future, this project tends to disappear, and a part of them apply to addresses answer that will migrate to centralized distribution because they were doing smaller projects to benefit from that incentive, and now they will migrate to centralized energy distribution. In solar in general, there will be an accommodation this year due to decisions made last year. When we look at the business in the medium and long run, structurally speaking, we believe that it has all conditions are favorable. Another important aspect is interest rate and credit facilities. That also had an impact. Let's see how that evolves, you know. The fact that the energy price, I mean the reservoirs are very high. We're operating with Green Flag, Green Tariff.
If you calculate that, calculations that you made a down payment and financed paying small amounts with what you saved in the energy bill, that no longer happens. When the market for credit and interest rate decreases and there's more credit available in the market, then that could make sense again. All of that has to be analyzed, but let's see how this will evolve towards the future. Just a quick follow-up. Thinking about the path for this year, this segment of small projects tends to be reduced more significantly throughout the year, maybe for next year. Q1 is not still the bottom, so it will drop a bit more still before it has to go up. Is this the trend or not necessarily? I'd say that the Q2, we have to wait.
There may be a movement of some accommodation, but for the H2 of the year when we start having a larger deliveries of centralized distribution, there should be a growth when compared to previous quarters. Okay, thank you. The next question comes from Regis Cardoso from Credit Suisse. Thank you. If you allow me, I have more follow-ups, if you allow me. One of them is about ramp up of wind plant in India. What should we expect in terms of ramp up? This is a plant that will be fully operational in the H2 of this year. It's still under this certification process, but I would like to have an idea about terms of ramp up periods. Is it a gradual ramp up or it'll be fully operational quickly?
The other topic is that there is a competitor of yours that left the engines, the NEMA motors market. Do you have anything about that that you could share? Do you see an opportunity on this same type of market in Europe where maybe they were stronger? This is another follow-up topic. The third topic is about the backlog of projects. You were commenting on the seasonality of the Q4. Now thinking about T&D and the long cycle projects, do you expect any growing or seasonal distribution throughout the year we should keep an eye on? Thank you. Hi, Regis. This is André Rodriguez. Let's talk about the wind farms in India. As I told Andressa, we are now in the certification process.
We are starting our investments to expand the medium and high voltage factory in India to start to produce these wind turbines in the future. For this year, we don't have any revenue expectation for wind. Our plans were always to certify the machines until the end of this year, to start the commercial development, to have deliveries throughout 2024. There's no expectation of revenue, even for the future. This is a new business we're starting in the country, we don't doubt the wind potential of India. Vega, WEG is always very cautious when it starts a new business. We have to develop suppliers for as tower assembly. It's natural that the first levels of contracts will be low, we'll start to restructure our business. We don't have an expectation of revenue from wind business in 2023.
As for the movement in the competition, yes, undoubtedly one important competitor left in the United States, Stanton Emma, and we became the second in market share last year. This was a reflection not only of this movement, but of all the work that WEG has done to develop new markets to have a stronger international presence. Being at the same level of quality and technical assistance as international companies, there's no doubt that this is happening at WEG. We look at the dynamics of certain markets, we know what's going on, and we know about our performance. Yes, it is a result of the increased market share. As for the backlog, we do see a backlog of long-cycle projects that is significant for this year. This dynamic has not changed. It's a robust and positive backlog, and we're adding new projects, especially in T&D.
We have a very healthy portfolio or backlog both in Brazil and abroad, and that's also reflected in the investments we're making. We're investing in Brazil to increase the production capacity of transformers, and in Mexico and United States to increase the production capacity given the positive T&D demand scenario, not just for this year, but in the long term. We have industrial projects, the important projects, mining, oil and gas, pulp and paper projects. In addition to T&D, we do have a built backlog portfolio or backlog for wind, and we do have an important backlog for thermal generation projects to happen during this year. The centralized distribution for solar is also positive for this year. In terms of backlog, we have a good outlook for the next quarters. Thank you. About this last point, is there any seasonality concentration in the last quarter?
Any different dynamics? I'd say that from the order backlog, there's not so much seasonality. Seasonality depends on the investment decision made by customers. That could happen any time during the year. It's natural that you commit to deliver projects until the end of the year. There's always some concentration of project delivery at the end of the year. This is why, in one of the previous answers, André explained that this dynamic in the drop of revenue in the Q1 of the year when compared to the last quarter of the previous year happens. That explain the movement, the deliveries continue to grow as the year evolves. Thank you very much for your answers. The next question comes from André Mazzini from Citi. Hello, Rodrigues and Salgueiro. Thank you for the call. My question is about the battery pack chain.
How is like positioned in this? There's the manufacturing of the cell, the module, and the pack. I want to understand, you're concentrating on the pack, only on the final part. What are the partners that you use to buy the cell, the module? LG came from South Korea for Sonic, and you're positioned only in the end of this change. The other is about powertrain. The powertrain, the car companies are still defining whether they'll have a powertrain built in-house, especially the LatAm market. Do you believe they are more prone to outsourcing, and the light vehicles are still making up their minds? How is that decision process in terms of electric mobility happening? Thank you for your questions, Mazzini.
As for the battery packs, we do have some exposure in that business for some time. We've announced for this quarter an additional investment of BRL 100 million to increase our production capacity of battery packs in Jaraguá do Sul. Like you said, we don't intend to produce the battery cells. We'll buy them as we continue to buy them from the market. Unfortunately, I cannot give you the names of our partners due to contract issues, they come from Asia, we assemble the packs here in Brazil. We place the cells in the pack and all the cabling and the electronic and ventilation systems. We add all that and provide a complete solution to our customers. The main focus is the electric mobility market, especially electric buses in Brazil in coming years.
We can also use that to develop the batteries that we'll need or that are being connected to the energy storage projects. These are the new fronts. This is a relatively new business, and it will develop in coming years. As for powertrain, we are focused on heavy vehicles. The delivery, it's a partnership, we've had for some time, and recently we have made some partnerships to develop electric buses in Brazil. Our focus is on heavy vehicles with some specific applications in lower volume. The major focus is on heavy vehicles. Given your comment that heavy vehicles tend to outsource the production of components more, as we see happening here in Brazil. We end up making the most of this opportunity to develop by developing powertrain for these vehicles.
When we move to light vehicles, the car companies, some of them are developing their own powertrains, others are outsourcing that, but this is not our focus. Probably what will happen is a mix, but I don't know how much will be made by the car companies themselves or car manufacturers and how much will be outsourced. It's hard to say. Thank you very much for your answers. The next question comes from Gabriel Frazão from Bank of America. I would like to give some color on MP 1152 in Congress, as well as if you have any calculation of the impact of this that you could share with us. Thank you. Hello, Gabriel. This is André Luis Rodrigues. We're keeping a close eye on this bill of law that changes the rule for transfer pricing in Brazil.
First, it's a provisional measure. It's expected to become a bill of law by the beginning of June, that will be mandatory starting in January of 2024. There is a movement to make it mandatory in January of 2025, from we've heard, it will be 2024. There's a change in the current transfer price and cost-plus margin with arm's length basis. The arm's length concept allows for five ways for harmonization, that could have an impact on the effective rate if it's, if it passes and is implemented as it is now. The portion of our operations that will be impacted is shown on the difference on rates in our financial statements. It's very early to disclose how an estimate of how much that will be.
There are many uncertainties in terms of passing that bill and what are the 5 types of methodologies, which one will be implemented. Anyhow, we do believe that part of the existing benefit will be reduced, but it will continue to make sense even after this bill of law passes. We have to wait to see whether it passes. Throughout June, if there is a decision made until the end of June, we'll be able to give you more information in the next call. Okay, thank you very much. The next question comes from Jonathan Fausto from JP Morgan. Good morning, Rodrigues, Salgueiro. I have a simple question. If expectation of BRL 1.6 million for 2023 is maintained. The second one, in Brazil, we've seen in the past that a wind turbine segment.
Would that happen in the margins with this segment? Thank you. Hi, Jonathan. Regarding CapEx, WEG's plan is always a long-term plan. BRL 1.6 billion that we foresee for this year, I don't know if we'll be able to execute all this volume of CapEx, but there is no change in the projects where we estimate to invest in. This year, we expect to change the profile of investments. Lately, has been concentrated in the external market. This year, the original plan is for 55% to be invested in Brazil and 45% abroad. When we say Brazil, the focus is on increasing capacity in expanding the industrial factory related to electric mobility. As Salgueiro said, this is a business that's gaining strength in the company, as well as an investment of BRL 100 billion in battery packs.
Also in this investment, given the good demand for Distribution business, we expect to increase the production capacity of our factory in Bechi. We do have an area for that. In the transformers that... There is also good demand for that equipment. Abroad, the focus is on Mexico, especially to increase the capacity of T&D components to supply our plants in the United States with an increase in capacity of WTU in the U.S.. That's in course. Last year, we opened a new plant. In parallel, we also will increase the capacity of our Portugal plant. These are the most important investments. India will increase the plant for medium voltage. Plan to start producing the wind turbines. Today, there has been no change in our original plans in terms of CapEx for this year.
Jonathan, regarding recent announcements about some competitors in the wind generation business, these are recently, relatively recent news. I think it's too early to say that this is affecting the demand for the next quarters. If you look at the medium and long term, you have a competitive environment with fewer players. That is positive. We cannot say we see an effect of that on our portfolio or on the demand for the next quarters so far. Okay, thank you very much, and congratulations on your results. This ends the Q&A session. We would like to turn the floor over to Mr. André Rodrigues for his final remarks. I would like to thank you all for attending this call again, and we'll see each other in the next conference call in July. Thank you very much. The conference call from WEG has now ended.
We thank you all for attending, and have a good day.