Good morning everybody. Welcome to Alstom Capital Market Day. The last one was around three years ago. It's a pleasure to have you all in Paris today. We have a full day of meeting together. We have to start with a disclaimer. After that, the agenda of the day. We start by a general overview of where we stand today and our market perspective, as well as our strategy. Laurent will present to you the finance part. Thierry Best, who is with us today in charge of the operations, will present to you the efficiency. Ling, who is in charge of the full Asia Pacific region, will present to you a small snapshot on our activities in India. We'll have a questions and answer session at the end of the morning. The lunch break, classically.
This afternoon, we'll reconvene. Jean-François Beaudoin will make a snapshot on signaling activities, which you will see will be key to our future plan. Bernd will do a snapshot on services as well, a key part of our future plan. Marc Granger, who's in charge of strategy, will give you a few highlights on our innovation. We'll have another Q&A session. I will make some closing remarks. You have a few colleagues from the Executive Committee of Alstom who are in the room, in addition to the one I've just presented. I can see Gian Luca, who is in charge of Europe there, and Jérôme, who is in charge of North America. As you know, we are organized by region. Jean-Baptiste is there. Where is Jean-Baptiste? He's there. Jean-Baptiste is in charge of France.
Of course, you are not allowed to ask them any question. They are just here for them. Here they are. You have all the pictures of the different presenters of today, the speakers of today. Let's get started. Of course, I'm sure that you all came today to hear about our future. Most of the day will be dedicated to our future and how we are going to achieve our new plan. Having said that, it was worth spending one or two minutes on where we stand today and the results of our previous strategy. I have a few slides on this topic. As you may remember, this was in March 2016, when we launched externally our 2020 strategy. Inside Alstom, at the time, we were all part of the global group. It was not publicly disclosed.
Inside Alstom, this 2020 strategy has been actually launched in 2014, 2015. The idea behind 2020 strategy was very simple. We had five pillars. The idea behind was the fact that our markets were globalizing. We needed to become global ourselves. What does it mean? It means that not only we had to be present commercially on all continents. We wanted also to invest physically on these continents. To have manufacturing capabilities, engineering capabilities, project management capabilities on all the continents, all the regions. This was the main theme of our plan. Of course, this had to be accompanied by a number of innovations. The first one was to extend our range of solutions, because to go on all these new markets, we had to develop our turnkey solutions, turnkey capabilities.
We had also to renew our rolling stock platforms, which were not necessarily competitive enough in order to address all the markets worldwide. We had to innovate as well in terms of more fundamental research and development in order to accompany all the needs for the digitalization of our market, for the sustainability of our market. As you know, we have launched a number of innovation. Of course, this was to be done while serving our customers, while delivering our backlog at the time. We did that, and actually, it worked. It worked pretty well, to be fair. We achieved our main goals of this 2020 strategy. First, as I said, the first pillar of this strategy was a geographical pillar.
As you can see on the slide, we were indeed, at the end of the plan, number one or number two on all the main regions, and we are today the most global player. Europe took time to take off. We had a slowdown in France, and now we are recovering quite fast. Overall, we have grown by more than 5% per year, which is to be compared with a market growth of 2.3%. Very regular growth, which was again, the first pillar of our plan, which has totally brought its fruits. As I said, this was the goal which was achieved. The means behind this goal is definitely to enlarge our capabilities, enlarge physically our capabilities.
I think it's fair to say that we are today, as I said, the most global company, the most multi-regional company in the transport world. With the largest number of employees outside what we can call the domestic markets or domestic countries. You see here with a huge growth of activities outside Europe. Europe representing now more or less a little bit than 50% of our employees, but we are significantly present in the Americas, in Asia Pacific and in the Middle East. As I said, we have created hubs in order to execute our contracts, in order to manufacture our trains. You can see here some example of these hubs. In the U.S., where we are invested quite heavily, notably for the very high-speed train. In Brazil, where we have a new factory in Taubaté, coming from a smaller factory in São Paulo.
We have a new factory in South Africa. We have a new factory in India. I could have also added a factory in Kazakhstan. These factories, and I'm sometimes asked, is it only due to localization and will localization continue? The answer is, yes, localization will continue, the main difference between what we have done in the past and what we are going to do in the future is that these factories are really hubs to serve their regions. While tomorrow, if we are to localize somewhere, we'll do it only for the contract which is concerned. We don't need new hubs. Once you have covered the world, you don't need new hubs, once you have enough hubs. Sometimes you are asked to localize, and that we will do, but really with dedicated means, focused means, in order to address a specific project.
In addition to the hubs, we have created two base shoring. Two important resource pool for the competitivity and the volume of our business. One is India, of course, I am not going to go into the details because Ling will make you a complete presentation on India. The second one is Poland, which is playing within the European region, an increasingly important role. This kind of expansion, because we are in a world which requires partnership, which requires to team up with local authorities. This kind of expansion has to be also accompanied by new partnerships or by partnerships. I have put on the slide a few of the most important ones. Transmashholding in Russia, the largest rail manufacturer in Russia, CASCO Signal Ltd in China, Gibela in South Africa or Indian Railways in India for the locomotives.
Extremely important to be flexible enough to adapt your footprint, to adapt your organization, your structure to the local needs. We cannot imagine that this growth outside Europe has come without any investment. This has come with fundamental investment, a lot of investment, both in terms of capabilities and in terms of physical capacities. In terms of solutions, a huge effort has been done to renew completely our platforms, to rebalance our portfolio in order to increase the turnkey capabilities, in order to increase the service capabilities, and in order, of course, to increase the signaling capabilities as well. Even though, as you will see, I think we are going to boost much more both service and signaling in the future. In terms of investment and R&D investment, we had to renew our platforms. This was, and this is still, I have to say, a very significant effort.
When you launch a new platform like a tramway platform, like a metro platform, it requires two, both a huge investment at the beginning and then, of course, an investment again during the first projects. Because the first projects are always more complex to deliver when you have new platforms. We have managed during this period not only to renew our platform, but also to deliver our projects to the satisfaction of our customer. As you will see, investment will continue in the future. These platforms have a duration which are quite long, 10, 15 years, and therefore we are not going to renew them again, but we are going to expand them in the future. As said, it is both a consequence and a necessity. This has been deployed with continuous improvement of operational excellence.
In terms of on-time delivery, which is the most important indicator, which has improved in the last years, +15% or +15 points to be clear. In terms of cost of non-quality, which has also decreased. We have seen year after year, the margin which is included in our order intake increasing year after year. This came together with an improvement of the way we were executing our contracts within our backlog, as being illustrated by the chart. Each year, we have improved the mix of the margin within the backlog. You see you have not only the new contracts which have better margin, but within the backlog, the margin is improving.
This expansion has also been done with a tight control of SG&A, of the structural cost. Therefore, we have managed to take advantage of the growth in order to leverage this growth to improve our profitability going forward. This, I would say that this is both a consequence of our actions, very clearly, this is as well an enabling factor of these actions. If we don't execute properly our projects, if we are not entirely focused on our projects, we are not in a position to implement our strategy. This goes together. We cannot transform a company if we are not properly executing our projects. That's extremely important, and that's also key for the future. In a snapshot, 2020 was largely a success.
We have today the largest backlog in the industry. This largest backlog has been fueled by the geographical expansion, has been also fueled by the expansion of service, long-term maintenance contract. We have grown the fastest in the industry in the meantime. We have increased significantly our profitability. We have recovered in terms of free cash flow, although, as some of you may say, we can do better in that perspective. Now, where do we stand and what are the future? A few elements on the market, you all know that. My message is that very simple message. Drivers are not changing, the market is better every day, too. I was with the Railway Manufacturer Association of Europe a few days ago, some people said that the market has never been as good as it is today. It's simply because we have huge tailwinds.
Of course, the drivers will not change. We still have economic growth, which is here. Still the funding, governmental funding, it may lack in one or two regions, as I said, in Middle East, in Latin America, we may have some issue of financing. In the main, the priority remains rail transportation and the ability of fund is there. Urbanization is, of course, a key trend, as you know, is accelerating. Quite symbolically, I think Shanghai Metro has reached 10 million per day of passenger, which is a huge number. It shows that if all cities in the world have to achieve this kind of number, the growth is really in front of us. The number one indicator, which is now, I would say, overwhelming, is the sustainable development.
If you compare 2020 with when we launched 2020 and the situation now, we had an acceleration of environmental concerns in the world, which is incredible. This is day after day, we become used to it. This, of course, in Europe, for the European election, you've seen that, we become used to it very recently. Who could imagine that you had such a public debate on airplanes? In the last months, you had a lot of debate on whether we should forbid domestic flights in Europe. This could not be imagined only a few years ago. This is pushing all investment in favor of electrical mobility, of course, the most electrical mobility today is definitely rail. You see that on the chart, very regular growth of ridership, urban, +5% per year.
There are very few industries, very few sectors which can benefit from such a regular, and you said it's not cyclical, regular growth of the underlying demand. Actually, it's not a market which is driven by the demand. The demand is untapped, and the demand is infinite. If you put a new line, if you put a new metro, it's immediately full. Two weeks ago, this is quite symbolic, and maybe we'll come back, Ling will explain that later on, but we have delivered the Sydney Metro. Sydney Metro is extremely symbolic for a number of reasons, because it's the first metro which has been delivered by Alstom entirely from India. Manufacturing from India, signaling from India, system from India, everything from India. But it's not because of that that I'm quoting Sydney Metro.
I'm saying that because in two weeks, you had one million passenger in the Sydney Metro, in two weeks. This illustrates the fact that it's not a question of whether there is some demand or not demand. It's a question that people are waiting everywhere in the world that new lines are coming. This, by the way, puts a huge pressure on us, which is good, which is the fact that now all public authorities are scrutinizing extremely closely all what we are doing, of course, because they need to answer to this basic demand. Urban, but as well main line, this is also one thing which has changed over the last years.
There was, five years ago, particularly in France, but in other countries as well, you had a kind of trend debate on whether it was too costly, what was the future of trend, this is not at all the case anymore. If you look at the very high speed all across Europe, ridership is increasing a lot. Not only we know that in France, but it's true in Italy, it's true in Germany, and so forth. It's a really important trend. Of course, these are the fundamental drivers. It translates, by definition, into a growing market. The market is estimated to grow around 3% per year in all regions with two small caveats, as I said, Latin America and Middle East, Africa, which are growing a little bit more slowly.
Even though we are still a lot of projects, I expect some of these projects to be delayed. Asia Pacific still growing a lot. Europe, very important, I think we should invest a lot in Europe. There are a lot of huge market in Europe and North America discovering urban transportation. In terms of solutions, you can see here that all the activities are growing. As I said, I'm challenging the estimated growth of 30, because I know that some of the large projects, in Middle East, Africa will be delayed at the end of the day. In our plan, we don't count on the rebound of this system project in Middle East, in such a short period.
Another trend which is accelerating even though it has taken a lot of time, which is the diversity of our customer, because of the deregulation, because of the liberalization. From traditional customers, as you can see, the SNCF, RZD, TCDD in Turkey, or Amtrak in the U.S., we have now a much larger variety of customers, some of them being, by the way, affiliate of the first one, but acting more as private customers in the world. Therefore, these customers are becoming more and more partners. They are becoming partners and they want to be with us, not only at the inception of the projects, but during the lifetime of the rolling stock, during the lifetime of their systems. They are interested by the total cost of ownership.
They are demanding services. If you take a FlixTrain, as it's been announced to come to France, these guys, they don't even want to own the rolling stock as they do in buses. Which will push for new types of business models such as pay-per-use, mobility as a service and things like that. One thing which is very characteristic of that is our partnership, for example, with NTV in Italy, where we are very close with one each other. You have to see that actually operators are less and less our customers. The operators, these movements where transport is becoming increasingly important for any public authorities, has led a lot of public authorities in the world to take more power on this transportation agenda. You see that everywhere in the world.
For those of you in Paris, for example, in the France mobility is gaining a lot of importance. This is true in Riyadh, this is true in Singapore, this is true everywhere in the world. The operators are becoming more partners rather than customers for us. We team up with them, in order to serve ultimately the final customer, which of course are the passengers, but these passengers are represented by the public authorities rather than by the operators. This opens up, of course, a large variety of new services that we can bring to the market. Technology, environment to illustrate my point on diesel ban. I was discussing that with Europe recently. Everybody has been surprised by the speed of this environmental concern, in particular against the diesel.
You know that a lot of bus manufacturer have invested billions and billions to develop new diesel engines in order to match and to be compliant with what they call Euro 6, which is a new norms of emission. They will never sell one bus like that because today all cities will buy electrical buses. This was absolutely not foreseen. You see that the societal and the people and the society is moving much faster than the norms actually. It's actually the general environment, the people which are pushing as we have seen all train operators to set some deadlines to take out all diesel trains from their network. Nobody has asked them to do so. There was no law, no regulation, but it's just the general public which is asking that, this is accelerating the move.
Of course, we have two emerging technologies to replace the diesel trains, the hydrogen, and as you know, Alstom has developed the first manufacturer to develop a train and the batteries. The two have their own, I would say zones of actions. Batteries for short, either very dense or very short legs, and the hydrogen for longer legs. This mobility change comes with a huge impact of the digital technology. Why? Not only because I would say it's trendy to have the digital technology, but because if you want to implement a complete sustainable mobility, you need to coordinate the different modes of transportation. You need to make sure that the metro systems are working 24 hours a day, seven days a week.
For that, you need to increase your usage of digital technology in order to connect your trains, to make some predictive maintenance, to make sure that you are real time, totally aware of what's happening in the trains. You want to work towards autonomous trains in order to be more flexible in the operations. Shared mobility, meaning that you need to move people in the different type of mobility. You need to improve the flow of people in the city. This is what we call the multimodal flow. Of course, you need to communicate between the infrastructure and the vehicles. All that comes with a number of different technologies, and that's, I think Marc will come more in the detail on this kind of technologies that we are going to use in the future.
In a nutshell, to describe what's happening, you had different silos in the past between the electrical shared mobilities, which was the rail, and the polluting individual mobility, which was the car. Now we have something which is coordinating both mobilities, which we call the new mobility. Both, this slide can be shown not only by us, transportation, or rail transportation, but I'm sure that the car industry is sharing with you exactly the same trend. It happens that the rail mobility is by far the most advanced type of mobility, in that direction. It's safe, it's sustainable, already electrified. It's already automated, not yet autonomous, completely autonomous in an open network, but already automated, particularly for metros. It knows how to address a very complex system. Basically, you know where we are. We have achieved our 2020 Strategy.
We have a lot of tailwinds coming from the market. We are extremely well-placed as a company, but also as a sector in this new mobility. Now we need to write the new chapter of Alstom history. First, what we want to be. We are already global, that's where we are, and that was the result again of the 2020 Strategy. We want to be seen as the most innovative player for sustainable and smart mobility. You could say it's obvious, don't forget that 10 years ago, a little bit more than 10 years ago, we were breaking the world record in terms of speed, here there is no reference to speed. We are not saying that we want to be the fastest transportation company. What we want to focus on is to move to the mobility transition.
Maybe there will be, as there is energy transition, there is a mobility transition. We want to be the leading player of this mobility transition, both in terms of sustainability and smart mobility. We have defined the branding, what we call mobility by nature for Alstom. I don't know if you have the small movies coming or not. You have the small movie? I'll show you a small movie just to make the point.
[Presentation]
This is the new branding of Alstom. Of course, as you can see, the idea is really to say basically two things. The first one is that we are a pure mobility player, we want to be in the mobility. This is our DNA. This answers the by nature in that sense. This is a new Alstom, but now coming from a few years. We are not technology for being technology. The idea is to provide, again, a sustainable mobility, hence, this maybe this play on words with this by nature, and this is what will represent Alstom in the future. We have launched a new plan. We need always to encapsulate all our actions in a plan in order for them to be implemented. We have three pillars of these new plans on growth, innovation, and efficiency.
The difference with the 2020 is, again, growth will not be based upon geographical expansion, which was the heart of 2020. Now we are a global company. The idea is to partner more and more with our customers, with the operators, in order to extend the value that we are bringing to them. This can be illustrated by service, and this will be illustrated by service. This can be illustrated by digital functions, Jeff will present the signaling part. This also can be illustrated by the enrichment of our platforms. In rolling stock, instead of changing our platform, we're going to enrich this platform in order to serve better our customers. Innovation, as I said, I come back to that, dedicated on green and digital, extremely important. Efficiency, we need to deliver efficiently our backlog.
We have, as I said, the record backlog in the industry, we need to deliver it. Now that we have a vast network of footprint, we need to manage it efficiently. We have to recognize that there is a huge potential there, because we have been extremely fast in growing. When you are growing fast, by definition, you have sites which are lacking maturity. The dialogue is not perfect. There's a lot of things to be improved, and this will be improved thanks to the huge utilization of digital technologies. We have also changed a little bit our values for agile, inclusive, and responsible, because we believe that this is the heart of Alstom, where we need Inclusive is kind of a classical word today, but we want to be inclusive inside because our products have to be inclusive as well.
When we want to be in a sustainable business, we believe that it's not only pure environment, it's also to provide to all our passengers the possibility to use our products. A few, I will go fast because then this will be again detailed to you later on in the day. On services, we want to become the undisputed leader. We are already the leader in size. We want to grow in terms of innovation, of new services that we can bring. In terms of partnership, as I said, long-term partnership, predictive maintenance. Again, this will be explained to you. In signaling, I think that we have invested a lot, but this is an area where we still need to renew some of our platforms, in particular on mainline, in order to gain some leadership there.
Rolling stock, as I said, the idea is not to redevelop completely a new platform, but it's to enrich them in order to better serve the customers that we are already serving or to address new markets. Overall, we want to be number one or number two in our market geographically as we are today, but also by product line, by activities, everywhere in the world. Services, again, a market which is untapped today, largely untapped. One, because lots of operators are doing their services themselves. The liberalization will change that. Two, because as operators are asked by the public authorities to be even more efficient, again, 24 hours a day, seven days a week, and so forth. There are lots of things that we need to bring to the market in order to allow this new efficiency.
Particularly in Europe, the install base is quite old. We need to refurbish to retraction. This is also the green service, because a lot of old trains, diesel trains, will have to be renovated in order to comply with the new environmental concern. Today, we have a very good position, more than 60,000 vehicles. Only 1/5 of that has a service contract, so a lot of potential. We are starting to see a lot of good stories of subcontracting. As you can see on the slide, we have grown quite significantly over the last year in sales, but there is also a timeline between orders and sales. We are growing even faster in orders, and the growth in sales will cover the next 10, 15 years.
When you take a contract in Riyadh, it's a 20-year contract, it's really a very long backlog that we have. Signaling. I think here as well, lots of potential in signaling. You have to distinguish maybe two markets. There is the ERTMS market, the European mainline market, which is a very large market as you can see, which is gaining momentum. Really the ETCS, which is the ERTMS deployment, is gaining a lot of momentum, project by project, but also country by country. Alstom happens to be very good in complex project management. This is playing a key role in the future, but we need to invest in order to be more efficient. Jeff will come back to that. In urban, we are by far the most global player. We have the largest installed base.
We are number one in China and number one in India, which are obviously the two main markets for urban. We need to invest. We have invested a lot in terms of new platform here. We have, I think, with Fluence, which is our new urban platform, we have the world-class platform for the future. NAM freight. We are in freight and mining. This is a more smaller market, but which is quite promising, not only in North America but in the rest of the world. Rolling stock. As I said, we are number one as a global player today in rolling stock. We have today 50% of our orders are coming from the new platforms. We are still not at the end of that, but we have reached a significant tipping point, if I can say.
We have already EUR 1.8 billion for our new regional trains contract, EUR 300 million for the trams, EUR 1.2 billion for the metros. EUR 4 billion for our new very high speed. The new platforms are really now there. They need to mature. There are a lot of optimization that we can do with these new platforms. This will drive not only our growth but of our profitability going forward. We have to embrace and to embark with the maintenance, we do then design for maintainability. We need to improve the energy consumption of all these new platforms. Of course, to integrate all digital technology, as we do with, for example, with Nomad, which is a small acquisition that we did to connect our trains with the ground. Innovation, Alstom is quite known for its innovation capabilities.
I'm not going back to the 10 years ago with the world speed record, also, long ago with the first power electronics in driving in drive controls and so forth. Very recently, we have invested in a new bus or vehicle which is halfway between a bus and a tram, the hydrogen train, which again has been the landmark launch of last year in terms of new rolling stock. We have pioneered the predictive maintenance with HealthHub. We have pioneered the energy optimization of systems with Hesop to be able to capture all the energy, the braking energy notably. We have pioneered the driverless metro more than 20 years ago now. In the future, we have two clear priorities. As I said, green mobility and smart mobility.
Green mobility is green traction, to optimize our traction capabilities because this is where the battle of the consumption is, but also to use new types of energy, such as hydrogen, batteries. Road electromobility, as we know that roads are becoming more and more electrical, and that's our investment in buses, but that's also investment in electrification of roads. I would say the green processors inside the company in order to optimize or to minimize our energy consumption, to minimize our waste in our different sites. Extremely important. We believe that as time goes, our customers will not be only interested by the environmental performance of our products, but they will also be interested by the environmental performance of our sites, of our engineering on the way, and how much CO2, I would say, are emitted, for example, through the production of their products. Second topic, smart mobility.
To optimize the flow within our systems. I would say beyond the classical signaling systems, you need also to optimize the flow of the people because the first goal of signaling is of course, safety, but you have a second goal, which is efficiency, and we need to have this efficiency at the level of the metro system, for example, but also at the level of the city. You need to connect the train and this is data-driven rail mobility. Of course, autonomous train is the next frontier. We have automated metro, but we have not yet automated trams or automated trains on our network. This is the next frontier. Efficiency, Thierry will say much more on that.
We have reached our margin goal of 7%, through sourcing cost reductions, through manufacturing in what we call best cost countries, particularly in India, particularly in Poland, but also in Latin America, in South Africa. Control of our project execution and of our costs. We had a change in mix. The next phase will be a little bit different. Again, the change in mix will have not as an impact as in the previous plan. Service will grow and this will obviously improve the mix because service has a better margin mix. However, we have improved quite a lot rolling stock, so now the difference between rolling stock and the rest of the activities is not so wide, and therefore the mix impact plays a smaller role. The new levers will be clearly the optimization.
It will be more a lever of efficiency and optimization of stabilization rather than expansion. This optimization and this stabilization will build out through the digital transformation of the company. Of course, we need to continuously execute our project properly, because if we don't do that, then not only we are not going to deliver the appropriate margin, but also we are not being positioned, as I said, to transform the group. There are some, I would say, what they call natural drivers, so there are some mechanical impact as we are now beyond the first contracts of our new platforms, as we are reaching the second contract, the third contract, the fourth contract, of course, the new platforms are gaining maturity, and they become more competitive. As I said, sustainability is extremely important for us.
We have a few targets which are dedicated to that, to enable the decarbonization of the mobility, to care for our people. We continue to decrease our, I would say, our accident rates. In order to create a positive impact on society, it's important for us, Alstom, again, as you have just seen in our brand, is not only a tech company. We are here to improve our communities, and we are measuring that, and to develop not only in Alstom, but in our supply chain, all these values. In a nutshell, here is our main financial targets, as you can see. Continue to grow, as you have understood, not through the same levers.
We are growing by improving and increasing the value that we are bringing to our customers, one customer by one customer, instead of having a geographical growth. We want to increase our adjusted EBIT margin to around 9%, this is a significant increase, which also will rely mostly on our own efficiency gain, own optimization of our footprint, as well as some mix impact, but to a lesser extent. Of course, we want to reach a sustainable level of free cash flow generation, be fueled as well by the decrease of our capital expenditure, as will be explained to you by Laurent, and a sustainable shareholder return. In the past, it was useless to define a dividend policy as our net income was polluted, if I may say, by the results of the joint ventures with General Electric.
Starting this year, we'll have a pure net income, I think it's worth defining a dividend policy. Without further ado, as I said, now I will hand over to thank you very much, I will hand over to Laurent. Again, there will be a Q&A session at the end of the morning, you spare all your questions for Laurent. Thanks a lot.
Good morning, everyone, very pleased to be with you to guide you on our Alstom in Motion financial framework. I chat with you all after almost a year, Henri, with you in Alstom. Quite an exciting year and interesting year, I have to say, with my colleagues from the ExCom here in the room. Maybe I'll start with a quick wrap-up on the financial achievement of the last four years. Starting definitively by our backlog, which is industry-leading backlog, EUR 40 billion. This is definitively for us, a major asset. On the sales side, as Henri said, we have been growing by more than 5% per year, reaching our target of EUR 8 billion a year in advance versus our 2020 plan.
Related to the adjusted EBIT, we have uplifted our profit from 5.3% to 7.1%, as well reaching our 7% target a year in advance, which is a remarkable achievement. On the cash side, we have been growing steadily over the last three years despite the transformation CapEx for our globalization of our companies and as well our financing cost. What is the recipe of this margin uplift? Number one is operational excellence, and Thierry will come back on that. On competitiveness, on sourcing, globalization, and project execution of our new product generation. On mix, we have been moving to 60% in terms of signaling, services and systems, and benefited as well on the volume impact net of the pricing evolution. As you see, altogether, very solid growth in terms of profitability and sales, and this faster than the initial target.
What is the real foundation of this performance? It is very simple. It lies in tenders execution and project performance. We are executing, as we speak, a portfolio of 500 main projects, and on a yearly basis, we are executing more than 300 large tenders on the yearly basis on all the regions. On tenders, we have increased steadily our gross margin on order intake in the last four years, thanks to our new product generation, but as well selectivity, and I have to say, quite precise market pricing analysis that we are using on a daily basis. On project execution, we manage a positive evolution of our margin at completion at portfolio level since eight semesters. This is what you show here, our best internal KPI for project stability and performance.
Both tenders and projects, I want to insist on that, is our key performance backbone in Alstom. This is, I can tell you, our daily management focus. Beyond project, we are extending our reach with joint ventures and partnership. With the Chinese market, link with CASCO, very successful companies working operationally hand in hand with our signaling business, as well on TMH, which allows us to access Russian market. TMH is today a EUR 4 billion plus companies enjoying 80% of market share after the merge with LocoTech Services companies. We developed as well to be agile and flexible, close to our customers, JVs and partnership related to project in Gqeberha, South Africa, Madhepura in India or in Kazakhstan. As well, developing on partnership on innovation, Marc will come on that, with EasyMile autonomous vehicle or Nomad Digital for passenger connectivities.
All of this is translating into a share of net income from joint ventures at EUR 89 million in 2018, 2019, with around EUR 30 million-ish +1 -off from TMH and 711 share in equity. Let's move to the working capital evolution in the last years. We have been able to manage a stable down payment position, as you see, supported by, number one, obviously our commercial momentum, but as well a stabilizing trend on the tender condition. Altogether, we have been able to have a working capital stable in a range of EUR ±100 million and remains negative at -20% of sales, thanks to our business model, which is based on down payments and progress payments.
To wrap up on the last four years in terms of net cash, as you know, our board has been deciding back in May to propose a dividend of EUR 5.5 per share for 2018/2019. This will leave us with, I would say, a robust net cash position of EUR 1.1 billion to support our business growth and future investment. A technical accounting point for the accounting experts, we are implementing IFRS 16 as of 1st of April 2019, and we are expecting an accounting net cash impact of EUR 400 million- EUR 500 million. To wrap up on the last four years and on the 2020 plan, two key points. Number one, very solid financial performance achieved ahead of our 2020 target. Second, as you see, a very solid balance sheet. Let's move to Alstom in Motion, our new plan.
First, I would like to share with you that this plan, led as well by Martin and Julie, has been designed and worked out by a team of 200 people in Alstom, which means that this plan is grounded into the company, and this is critical when it comes to the financial framework of Alstom in Motion. Our first cluster will be defining and designing our growth path related to the sales performance. The second one will be focusing on future growth and competitive edge with disciplined and selective investment. Third one, on efficiency cluster, Thierry will come back on that, will drive profit and cash generation. All that I will be explaining will be based, of course, on the latest IFRS standard, 15 and 16 in particular. Up to the sales now. We are targeting an increase of 5% year-on-year stable of sales sustainably above market conditions.
Our first asset is definitely our backlog, which is allowing to secure EUR 16.5 billion to EUR 17.5 billion of sales in the next few years. We will be as well prioritizing our growth on high-value segments like signaling and services, targeting 40% of these activities in 2022, 2023, while we are building and continue to build on our leadership position on rolling stock and systems. 2019, 2020 will be softer in terms of sales growth with activities reduction on large Middle East system project like Route 2020, which is obviously to be completed before October 2020 and the universal exhibition, but Riyadh as well, which were last year at the peak of activities. Overall, we confirm our sales long-term growth based on backlog execution and positive market momentum. Zooming on signaling, I will be fast. Jean-François will guide you on this this afternoon.
Our clear ambition is to gain leadership on this market, accelerated momentum on European market, on the main line, globally on the urban market, but as well benefiting from our installed base to develop services. We will be as well leveraging our Bangalore assets. We have, as we speak, 1,250 engineers in signaling. We are targeting to go up to 2,000 people. I was there a few weeks ago, I was really impressed by the skills, competencies, and as well the can-do attitude of our team in India. Margin-wise on signaling, we are targeting to move with Jean-François from high single digits to low double digits in the midterm. On services, we want to harvest and accelerate our clear leadership. We are benefiting, and this is a key asset of a huge backlog, EUR 13 billion.
Beside that, the quality of the backlog is reference customer commitment for 20+ years for a number of contracts. From there, we will be expanding on model or on parts, on long-term performance services contract, and on green modernization. We will as well be using digital capabilities to optimize our performance contracts. Just for me to give you a sense on the new very high-speed train generation, we will be able to measure 2,500 parameters 10 times per second to optimize the operation of the train. These activities, to be honest, tick all the box. This is why as CFO I like it so much. Low capital intensities, high margin in the mid-teens, low risk, and even more important, customer intimacy. In practical terms, this means that we are supporting our customers in their key operation, which is a critical part for the next tenders to come.
On to systems. We are definitely at a peak of activities with our key major projects, which will be completed in the next two or three years. Moving forward, we see opportunities in Middle East and Latin America, but with, I would say, the geopolitical constraints, this probably will take time, hence overall a decrease. On the rolling stock, we see overall an extremely positive momentum. First, thanks to our very strong and long backlog, but as well with an excellent market traction in Europe, in North America, and in Asia. The Grand Paris project is a flagship example around us here in Paris, but there is example in India, Australia, and the U.S. In terms of margin, we are expecting to increase from mid-single digit to high single digits in the midterm, benefiting from our best cost countries set up in particular. Let's move to innovation.
Our clear target is to maintain our R&D capacity investment, keeping our R&D over sales stable. This will give us innovation firepower to invest in green mobility, signaling, and smart mobility, while we continue the development and finalize our development on the very high-speed train. Related to the other platform, rolling stock platform, as Henri said, we will not invest into a new family generation. We will rather harvest on our current families and as well build on our newest innovation, the eBus Aptis and the hydrogen train. I think that we can collectively be very proud of this. As you know, we are the first and the only one on the market to offer this technology. Related to margin, we are targeting to boost our profit to benchmark level from 7.5%-9%. First, the definition subjects to explain the 7.5%.
In line with our peers, we will be including as of 2019/2020 the CASCO share of net income in our adjusted EBIT to reflect, as I explained, the strong operational link between CASCO and our signaling business. This with an impact of 0.4% pro forma in 2018/2019. What are the drivers to reach this 9% goal? Number one, volume, where we will be benefiting from the increase, and the continuous overhead cost management, while we do not expect changes in the pricing evolution. Mix will be benefiting from the higher signaling and services margin. Finally, operational performance benefiting from our best cost countries footprint and sourcing, targeting around 60% with what I call the two competitiveness war machine we have, which is India and Poland. We will be as well harvesting, of course, on our new standardized platform.
All of this will be based, again, on our key performance backbone. Tender performance translating into healthy margin on order intake, and project execution securing our margin on our backlog and on our portfolio. From margin, we want to, moving forward, to focus on EPS growth. As we said in the past, our EPS, our net income has been impacting by the GE transactions. Our key EPS drivers will be obviously EBIT expansion. Not only, we'll be as well returning to normative level on the resourcing cost. Financial expense will be reduced thanks to the bonds repayment in March 2020. Our effective tax rate will be between 25%-30%, benefiting from our deferred tax assets. We'll be using, in the future, share buyback instead of capital increase for our long-term incentive payout scheme.
On this basis, we are expecting our EPS to develop steadily over the next four years. Let us move to the cash, the EUR 1 million question. This is definitively as a management team, free cash flow generation is our top priorities. We've been putting together with Thierry Best, an holistic cash improvement program that we are co-leading, attacking all drivers. Let me give you three examples, three illustrations of this plan. Number one, aligning the management incentive. Free cash flow generation is representing 40% of our yearly financial management target for 10,000 people in the company, out of 36,000. New since this year, free cash flow to net income is used as a key midterm target associated to our long-term incentive scheme. Second, operations, which is the most critical part. We are targeting to work on a 20% reduction on the testing cycle time.
This is where basically the train is complete and obviously where a large part of our inventories is sitting. As well, in the production line, we are optimizing the high-value item to integrate it at the end of the cycle, like the brakes. All of this, in turn, is a target of 15% of our inventories coverage reduction on our projects. A practical example I've been witnessing in La Rochelle when I was visiting them a few weeks ago, we are limiting the physical storage along the production line to avoid overstock on our TGV production. By this, it's a very pragmatic way not to have overstock at the value station of the production line and something which is efficient, visual, and is giving value.
Finally, on the culture and the mindset with training, processes, management focus, cash is pushed in daily decision from tenders to production to sourcing, supply chain, down to project execution. Our cash focus program managers used to say that we make cash a key decision subject in any decision of the company. We make it a key discussion subject, including in our canteens. You can witness that if you come in Saint-Ouen or in one of our sites. Turning to CapEx now. CapEx prioritization is done as part of this cash focus program with a strong and stringent operations and finance process. We are ending our transformation CapEx this year, and we do not target any opening of any new industrial hub. Our priorities are very simple.
Capacity increase, again in India and in Poland, benefiting from our low manufacturing labor rates, as well, the competitive supply chain which are around these sites, and as well, efficiencies and automation. Wonderful example is Gibela, our new plant in South Africa, which has opened back in November. We have, to give you a sense, eight robots, which are allowing 22,000 welding points per day, stepping up the efficiencies of this plant. Altogether, we are expecting to move from 2%-2.5% of sales for industrial CapEx to around 2% in the midterm. Now up to the working capital dynamics driven by new projects and execution. On new project as part of cash focus, we have strict down payments and working capital golden rules to ensure positive financing sustainabilities.
We do not see in our tenders activities on a daily basis any declining trends in terms of down payments vis-à-vis our customers. The second axis is execution of our project portfolio. On this one, inventories is to ramp up on our key rolling stock projects like PRASA in South Africa or Amtrak, for example, in the next two years, impacting our working capital position. On the midterm, we are targeting a stable working capital position based on steady execution after ramp up and on tenders discipline. Altogether, in terms of delivering our free cash flow performance, we are targeting to uplift our free cash flow to net income from around 50% in 2018, 2019 to above 80% by 2022, 2023. Our key drivers will be, of course, our EBIT ramp up, driven by profitability and sales expansion.
Working capital will be stable on the midterm, as well, financial cash out will be reduced by our bonds repayment, our tax cash out will be supported by our tax losses carried forward. Our free cash flow, for sure, will be subject to the usual customary short-term volatilities related to our business on down payments and progress payments. Turning to investment. We are implementing a disciplined M&A approach based on bolt-on acquisition. We'll be focusing on our key strategic axis, signaling, services, as well, accelerating our digital and innovation strategies. We are targeting, obviously, to be EPS accretive overall on this investment. Our priorities here will be, again, very clear. Number one, selectivity, Number two, integration, and third one, quality of execution. Moving to our shareholders' return on capital allocation, the bedrock foundation is and will remain, obviously, our free cash flow generation.
Our target is to maintain a solid balance sheet to execute our backlog and support our growth in order to invest into a disciplined M&A policies. In parallel, we target, of course, to maintain our solid investment grade rating. On this basis, we are confident to define a sustainable shareholder return policies with a dividend payout between 25%-35% as of this year. Let's wrap up all together. Starting with 2019, 2020. 2019, 2020 will be a year of stabilization of growth after an exceptional year 2018, 2019, with a step-up of sales and profitability, which has been impressive.
This year's business cycle with the finalization of our major system contracts and the evolution of our large rolling stock project will lead to a sales and margin growth lower than our average objectives and to a working capital generation which will be impacting the generation of free cash flow. For the period up to 2022, 2023, we are confident to present you our Alstom in Motion financial framework objectives with, for the period 2019, 2020, up to four years, an annual sales growth of 5%, adjusted EBIT of around 9% in 2022, 2023. Third one, net income to free cash flow above 80% by 2022, 2023. Finally, implementation of a discipline investment and M&A policy to create value. On this basis, Alstom will be introducing a dividend payout of 25%-35% as of this year. Just to conclude on my side in a very few words.
Number one, we are extremely well-positioned in a growing market, which is driven by green mobility, and we are a global players in all sense. Number two, we are targeting leading margin and cash generation. Third point, we retain firepower to invest in disciplines, innovation, and M&A, supported by our strong balance sheet. Altogether, ladies and gentlemen, our priority is very simple: sound execution on projects, tenders, and investments to deliver EPS and free cash flow growth, all of this leading to sustainable shareholder return. Thank you very much, I pass the floor to Thierry, who will guide you on the efficiency drivers. Thank you very much.
Thank you, Laurent. Good morning, ladies and gentlemen. I'm extremely happy to have this opportunity to drive you through how operationally we are going to support the financial performance that Laurent just described. Indeed, it's very much about how to execute efficiently the EUR 40 billion backlog that we enjoy today. As you remember, the Alstom 2020 strategic plan was based, operationally speaking, on three pillars: sourcing, footprint globalization, and low labor cost country extension. Thanks to that, we've been able to hit the targets that we fixed three years ago, namely enjoying a sourcing saving of EUR 250 million per year, pushing 60% of our train manufacturing outside Western Europe, and reaching 3 million engineering hours in our Bangalore hub. Building on these foundations, we want to add three additional levers on this efficiency stream. The first one is digital transformation.
The second is footprint stabilization and optimization, as already mentioned by Henri. Third, best-in-class project execution. With these additional three levers, we target to be able to decrease by 15% our lead time development, further increase our engineering hours in India to reach 30% of all engineering hours being performed in Alstom, 60%+ sourcing and more generally, operations activities in best cost country, last but not least, a 15% hard inventory coverage reduction. Let's move to the first pillar, digital transformation, starting by engineering. Here, we are heading towards two very precise directions. The first one is to develop and to implement a seamless process and tool from the very early stage of the R&D to project execution. Second is to massify the usage of 3D technologies in our design reviews. You can see two examples on the screen.
First example is Dubai Metro, Route 2020 Metro, and second example is the recent development of our new generation of regional trains, Smart Coradia. Internally, we've factored a massive effort in terms of digital development and digital review for the design of these two trains. The ambition that we have today is not only to be able to perform this internally, but also to convince our customers to do joint design reviews through this 3D technology. We have a 3D room here in Saint-Ouen, in our headquarters. We've developed a mobile pack so that we can do that anywhere, including our customer premises. We are now developing what we call a smart board to be able to connect several locations around the world to perform these design reviews at the same time, without having to request the engineers to move in a single location.
Thanks to that, we have already recorded a substantial reduction in our lead time for metro, -4 months. We want to expand this by 2023 to all our solutions, reducing by 15% our lead time development. Second function that is embarked in this digital transformation, industrial operation. Here you can see some examples of what we are using today. One of the very obvious one is obviously robotization. You can see on the bottom right a photo of one of the biggest robot used to weld bogie frames that has been developed in Le Creusot, our center of excellence for bogies. A smaller version has been installed more recently in Ubunye, a joint venture that we have in South Africa to perform exactly the same kind of task. It's also the usage of virtual training for critical processes, such as welding or painting.
3D printing, especially useful in the very early stage of prototyping, where you can face missing parts or missing tools, hence the necessity to be able to react extremely quickly. Connected workforce. This is extremely interesting because, as you know, we have expanded all around the world, and from time to time, operators can be facing issues. In order to save time for the experts to take the plane and to come and help, with these connected glasses, the operator can live comment the problem he's facing and the experts to help him solve it. It's also very much about digital supply chain, where we can have impeccable traceability of our parts.
All these being encompassed in the manufacturing execution system, which is a totally paperless process from the very early stage of the engineering right to the shop floor for the operator to be able to perform his task. With this, the ambition that we are taking in the Alstom in Motion strategic plan is to be able to reach a 10% additional productivity in terms of manufacturing hours. Digital transformation is not only about engineering and manufacturing. All métier, all functions in Alstom are embarked on this transformation, I've put some examples here. Commercial population, digital tendering process, manufacturing engineering, I have already mentioned. Quality, supply chain, human resources, services that Bernd will come in this afternoon. All these being now encompassed in our new ERP core model called Global Single Instance.
On top of that, we factored an integrated data management supporting the automatic extraction of all relevant operational KPIs in order to help each manager to monitor its performance. Today, 70% of the company turnover is covered by Global Single Instance. By 2022, we have the ambition to have 100% of the company being covered with an ambition at the end of the Alstom in Motion to have 75% of all our processes being digitalized. As a flagship of this pillar, digital transformation, we factored all these innovations in the TGV du Futur, TGV 2020 contract that we have signed one year ago with SNCF. It's a massive order, 100 trains, with the very latest innovation that has been factored in it. We've been able to take a 25% challenge in terms of number of manufacturing hours compared to the previous generation that has been put in service recently.
First pillar for this operational excellence stream, digital transformation. Second pillar, optimization and stabilization of our footprint. Starting by rolling stock engineering, we are heading into three directions. First one is to specialize our engineering site by product. One or two sites for tramways, one or two sites for metros, regional locomotive, very high speed. Second direction is to develop quite aggressively two hubs. One hub here in Paris, in our headquarter in Saint-Ouen, where we concentrate our master and senior experts in all disciplines. The second hub that has already been mentioned and that will be detailed by Ling later is Bangalore in India, where we have access to almost an unlimited pool of talents, very impressive in terms of maturity acquisition. Third direction is the creation of center of excellence. We already have this center of excellence.
For instance, I've mentioned Le Creusot for bogies. I could have mentioned Ornans for motors, Petit-Quevilly for traction transformers, Charleroi and Tarbes for traction cases. We want to go further in that direction. We recently created in partnership with Safran in Toulouse, a center of excellence for electrical. You have to remember that in one linear meter of a train, you've got one kilometer of electrical cable. We've launched this center of excellence in Toulouse with a foot in Bangalore, of course, for the engineering and a manufacturing in Fez in Morocco. It's also the case for car body shell, where we are developing our expertise in Hijosun. In terms of interiorism, as you know, customers are increasingly demanding in terms of perceived quality, so we've developed a center of excellence in Valenciennes.
With all this, the ambition that we have is to be able to grow further our footprint in terms of engineering in India, reaching 30% of all Alstom engineering hours being performed there by 2023. Second function that is concerned by this stabilization and optimization is sourcing. Sourcing, it's all about concentrating at the very early stage of the development, our efforts with a restricted number of suppliers. We've called them the Alliance Panel. Limited number, 30 big companies where we massify our efforts, not only in new build but also in aftersales, maintenance, and parts, in order to be able to perform design to cost. Once this is done, have a full catalog of standard products that we can take off the shelf during project execution. It's all about supplier-based rationalization and a better usage of best cost countries.
What do I mean by better usage of best cost countries? Traditionally, what we have done is to ask our historical partner to accompany us in the new geographies. We have asked the usual suspects to come with us in South Africa, in India, in Kazakhstan, in Poland. Thanks to our industrial presence in these geographies, we've discovered and we've developed links with local partners, and I've picked just one example here in Mexico, where we have partnered with a pure Mexican company in electrical panel who has given us an additional 20% cost reduction compared to our traditional suppliers. With this, the ambition that we have in the Alstom in Motion strategic plan is to be able to move from 50% today of sourcing in best-cost countries to more than 60%. Third function that is in this footprint stabilization and optimization stream, industrial. Industrial operation, quite obvious.
As already mentioned, we've expanded quite rapidly our footprint in the different geographies. It's now a must to contribute to the ramp-up, to the stabilization of all these factories, be it in South Africa with Ubunye and Gibela, in Kazakhstan with Astana, in Katowice in Poland, in India with Coimbatore, Madhepura, and Sri City. Quite a fair number of sites that need to grow in maturity and stabilize. Then it will be all about optimizing this footprint. The idea is to specialize a very limited number of hubs into capital-intensive activities, namely welding, machining, and painting. Once we have concentrated these capital-intensive activities in this restricted number of factories, these factories will serve a network of what we call final assembling unit, being located extremely flexible and agile, very close to our customers.
With this, the ambition that we have in the Alstom in Motion is to have 60% of our manufacturing hours being performed in best-cost countries. As a flagship to illustrate this second pillar, footprint stabilization and optimization, Sydney Metro. It has already been mentioned, so I will go quickly. Indeed, we've been privileged to sign this contract full turn-key for a full driverless metro in Sydney with signaling, rolling stock, and system integration. All this being performed in India with strong support of the Center of Excellence in Western Europe, but also with a strong need to build a strong team in Sydney. Why? For the purpose of commissioning and warranty of the system, of course, but also to perform the 15 years maintenance contract that we have signed.
Really, three pillars in order to be able to perform this Sydney contract with the center of gravity in India, which has allowed us, compared to a previous generation of turn-key contract, to gain a 20% cost reduction. Digital transformation, footprint stabilization and optimization. Third pillar of this operational excellence stream is best-in-class project execution. As already mentioned by Henri, during the previous strategic plan, we've been able to improve by 15% on time delivery, thanks to disciplined tender process and seamless project execution. We've added another dimension to that, flexibility and agility, and I've picked up two examples. One is PRASA, South African Suburban and Regional Trains, where the engineering was performed in Saint-Ouen, in our headquarter, collaboratively with São Paulo.
The first 20 trains were produced in Brazil whilst we were building a factory in Gqeberha, and then from train set number 21, everything has been shifted in South Africa, engineering, sourcing, and industrial. The seven first pure South African trains have been produced and put into service. Second example, Amtrak Very High Speed Train. Here again, engineering performed in Paris and in Savigliano in Italy because it is a tilting very high-speed train. From the very early stage of the manufacturing, you can see the photo, the very first train is being manufactured in our Hornell, New York State factory. These two examples must now become, let's say, an industrial way of behaving for our tender and project execution. The 500 projects that were mentioned by Laurent are to adopt this methodology in order that we have impeccable and seamless project execution.
With this, the ambition that we have factored in our plan is a further 5% improvement in our on-time delivery. I have mentioned three pillars, but obviously, there is a fourth pillar that is absolutely crucial for this operational excellence stream, which is cash focus. I have picked up. Sorry, Laurent, I have copied with pride your presentation. The examples that we are factoring in our roadmap. Vendor managed inventory. This has been implemented quite successfully in La Rochelle. The idea is to have a pay-per-use approach with the main components. Thanks to that, we have been able to reduce by 15% the hard inventory in our La Rochelle factory. Optimization of the production flow, where we are pushing all the most expensive components at the very end of the industrial process.
Automatization of the testing process so that we can save 20% of the time because it is the moment where the train is the most expensive in terms of our balance sheet. Then introducing a cash focus angle in all our operational processes, which needs to be fully revisited. Last but not least, having all our people in operations with an enhanced training program. With this, we have been able to factor, as I already said, in TGV 2020, a 25% manufacturing hours reduction. But we have also been able to factor a 33% reduction in the lead time of production of these very high-speed trains. More globally, the ambition that we have in the plan is to be able to reduce by 15% the hard inventory coverage. With all this, as a conclusion, efficiency and agility is really at the heart of profitability and cash generation.
Thank you very much. I now hand over to Ling for the India strategy.
Sorry. Hi, everyone. I'm Ling Fang. I'm in charge of Asia-Pacific Alstom. I would like to tell you about our incredible India development story. After several years of hard and efficient work, Alstom has built an important and large footprint in India. Today, India is a key contributor to our Alstom global strategy, with high standard sites for rolling stock, engineering, and manufacturing. We count today 4,000 people in India, located in four different places, Bangalore, Coimbatore, Sri City, and Madhepura. Bangalore, with close to 3,000 people, is Alstom's largest engineering center in the world for both rolling stock and signaling. Today, Bangalore delivers 22% of the worldwide engineering hours. Coimbatore, with close to 400 people, it's one of our global traction manufacturing sites. Coimbatore represent today 18% of our global hours for traction production.
At the Sri City, we build a metro manufacturing facility serving customers worldwide, with a monthly capacity of 20 cars. Madhepura is a local manufacturing site dedicated to Indian market. Not only we were able to build this footprint, but also today, Alstom has a proven track record of project delivered from India. For example, for metro rolling stock, we have already commissioned successfully four projects. Three projects for India, Chennai, Kochi, and Lucknow, and Sydney, as mentioned by Henri and Thierry. For example, for Lucknow Metro, for which Alstom supplied both rolling stock and signaling, it was the first completed Made in India project. The first train was delivered in a record time of 14 months. Another two important project, Montreal and Mumbai Phase 3, that we won one year ago, are currently under delivery.
For signaling, India participate to many projects, both urban and mainline, India market and international market. Very often, Bangalore is the design leading unit for this project. For example, Hong Kong South Island Line. It was the first driverless project in Hong Kong, opened for commercial services two years ago. It was also the first driverless Alstom solution delivered from India. Over the past four years, Alstom went through a fantastic ramp-up in India. This journey for growth will continue in future. Sri City and Coimbatore have become world-class manufacturing sites. In the past four years, the manufacturing hours has more than doubled, and we intend to reach two million hours in 2023. In India, we have built also a large supplier base, with high focus on quality. From one side, we reinforce the local presence of international supplier base.
For example, we signed nine alliance partnership with international suppliers. At the same time, we have been growing our Indian local supplier base with very strong technical support from Alstom. These actions allowed us to improve significantly the Indian content of our metro project, from 30% four years ago to 70% today, and we intend to reach 80% in 2023. Bangalore has been developed as innovation hub and a center of excellence for many domains. Today, we can count 200 world-class experts in Bangalore with 30 patents. As Thierry said, today, we deliver already three million hours, for engineering from Bangalore, and tomorrow, in 2023, we want to deliver five million hours. India is definitely a unmatched differentiator for Alstom. First, India can provide a skilled and abundant workforce. As you know, it's the second most populated country in the world with 1.3 billion people.
The population is also very young. 63% of the population are under 35 years old. People can speak fluent English there. The focus on education has been greatly improved. For example, each year, over 1.5 million engineering students graduate from universities in India. This is a huge advantage for our industry. This workforce in India is also very competitive. In terms of the labor cost, India is 1.5 times cheaper compared to China and four times compared to Europe. Obviously, this competitiveness contributes greatly to Alstom global profitability. India itself is also a promising market for Alstom. In the past 30 years, the GDP growth was very good. The country is living rapid urbanization. The government demonstrates strong willingness to develop modern infrastructure. More and more cities in India have a plan to develop metro. All this provide fantastic opportunities to Alstom.
In our sector, among all the international players, Alstom is the one who has the largest and the most mature footprint in India. This will contribute greatly to Alstom long-term strategy. Thank you.
Thank you.
Thank you, Thierry. Thank you, Ling. I think we'll open the floor for Q&A. I will invite Thierry and Ling to come together with Laurent. I think we have 30 minutes Q&A, and then we will get over. We are the last obstacle before the lunch, just to put a little bit of pressure. We have all the mics, so you cannot ask questions. Are there any mic on the
Thank you. It's Martin Wilkie from Citi. A couple of questions. The first one is on the growth. You talked about perhaps a little bit of a slowdown or at least not the same ramp-up in growth because of the Middle East. Generally, if you could talk about the tendering activity to support the growth outlook over the full period. Secondly, a question on cash flow, targeting getting to 80%. If you could run through the sort of definitional items that are sort of in the cash conversion, to understand why it shouldn't get higher than that. Particularly how you're treating dividends from associates, things like that. The 80% seems perhaps a little bit lower than we might think by 2023. Thank you.
No, on the growth aspect, the tendering activity today is extremely buoyant. A lot of tenders are being discussed in Europe in particular, but not only. It's true that this year I would expect the order intake from Europe to be stronger than, relatively, I would say, than the rest of the world. As I said, Middle East is a slowdown, and the very large project from Middle East have been delayed quite a while. Apart from that, North America is quite buoyant as well, both the U.S. and Canada.
I think that the underlying growth of the market is there, even though this particular year as we speak, will be probably relatively slow in sales due to the end of the project in the Middle East and maybe relatively slow in terms of order, I would say, because of the phasing of the number of orders. In terms of tendering pipeline, it's still extremely buoyant. Laurent, the cash?
On the cash side, the definition is very classical in terms of the free cash flow definition. It comes with the tax, financing cost, the dividend from the joint ventures. What are the drivers of our free cash flow to net income from around 50% to above 80% by 2023? Number 1 is definitely the EBIT expansion, driven by the sales and the profitability ramp-up. On the CapEx, as I said, will be ramping down to around 2% of sales. Working capital, as I explained, is targeted to be stable on the midterm. There is a fourth element that we need to have in mind, is that we have a drift between CapEx and depreciation. We have been investing in the past for our transformation. There is a gap, which is around 15%-20% in 2018, 2019, which will be resolved after years.
This is taking time because these are investment which are long-term investments like factories, plants, or giant tools.
Thank you. Yes.
Hi, good morning. Alasdair from Societe Generale . I was just wondering how quickly you feel that you can kind of start up the kind of M&A engine, because obviously you've still got a very overcapitalized balance sheet. Then also you're kind of looking at lots of different interesting areas, smart mobility, green mobility, services. Maybe you could just highlight some of the priorities in terms of kind of inorganic growth and M&A. Thanks.
Our company is mostly a technological company. This is our assets, as well as, of course, our customer intimacy. If we go towards M&A, this would be to acquire some technologies that we don't have. This can be done through acquisition, this can be done through a partnership, or this can be done through your own development. I don't have any target per se in terms of M&A. There is no reason to wait. We are already discussing and we have, I would say, consistently some discussions with a number of potential targets or potential partners. It's already there, I would say. Having said that, I will never fix a certain level of M&A that we should inevitably spend, because this is not the first driver of our expansion. First driver is to acquire.
If we go in signaling, for example, and we discuss that in signaling, if we want to acquire new technologies which are needed in order to address a particular market, we will do it. It will be to be compared with internal development. You see, it's always a possibility to do both. Yes, in the front row.
Hi, it's Katie from Morgan Stanley. Just a couple of questions. Firstly, on the CASCO JV, I wonder if you could talk us behind the rationale of fully consolidating that going forward. Is there a change in your expectation for that market, or what's been the change in methodology there? Second, I wonder if you could just clarify for us the situation on down payments. There's been quite a big tick up in orders over the last couple of years, but as you're pointing out, down payments have remained stable. What is the dynamic there? Is it purely because of the TGV order that didn't have a down payment, or is there an underlying change in trend?
No, on CASCO, I think the rationale behind is that we are not really changing the situation of CASCO in China. It's clear that we are becoming increasingly partners in terms of changing and co-developing technology. The fact to put it on one side or the other side didn't make any sense anymore. In the past, we were sharing the projects between CASCO and ourselves. Today, we are co-executing the projects. In that sense, it was better to include the Alstom portion and the CASCO portion in the same basket. We want really to see CASCO as an internal part of Alstom, not only externally for you, but also internally. In terms of down payment, there is no significant change. It's fair to recognize that some countries or some customers have high down payments.
Other customers have lower down payments, and as you have pointed out, TGV has no down payment, but at the same time, a lot of progress payments. It's not because there's no down payment that it's badly financed, just a question of phasing of these payments. It's no particular, I would say, structural changes.
Yes. Thank you. Alfred from Oddo BHF. Looking forward to your margin targets of 9%, how could you split these by activity between rolling stock signaling services? How would you see the progress of profitability in each of these businesses?
On the profitability evolution, related to the signaling, as I said, we target to move from high single digit to low double digits, stepping on the plan in terms of increasing our presence in mainline European market, but as well the global urban market, as well as the standardization of our platform. Jean-François will be elaborating on that this afternoon. On the rolling stock, we are targeting to move from mid-single digit to high single digit. Here, the key drivers is exactly what Thierry has been explaining. The globalization, the utilization of our competitiveness footprint in India, the evolution in terms of the product maturities. That is for the rolling stock. In terms of services, we see more stability of high margins, say mid-teens. We are together today, very, I would say, healthy margin. It is long-term contracts.
Here, we are more looking at development of our activities worldwide, and Bernd will be talking about that. On system to complete, we are similar to the rolling stock target, mid to high single digits on the midterm.
This is Guillermo Peigneux Lojo from UBS. Maybe a question on one of your slides regarding the backlog and 50% of the new platforms being on new products and the existing old platforms. Can you, in a way, give us some granularity on the margins on those different platforms? How do you perform in the new platforms versus the old platforms when it comes to operating profit?
No, the answer is no. New platforms are much more competitive than the old ones. Clearly, they have fueled the growth of our margin. Having said that, project by project, of course, it can vary quite a lot. As I said as well, the new project tends to be more complex than the second one, the third one, the first one. It's not really one platform by one platform, but it's true that tram, for example, has been launched five years ago. The latest projects in trams are, I would say, more juicy than the first one. It's more moving gradually, positively. These platforms are addressing standard markets. You have sometimes very specific markets, which can have different type of margin profiles. Let's not draw a global conclusion on that.
A follow-up, sorry, on how do you feel trains, can you give us an indication of how that kind of rolling stock product will basically contribute to profitability to some extent?
Sorry, how is that?
On H2 or the fuel cell trains.
Yes.
How profitable are they?
This one, they are average profitability today, which I say it's good news because we are at the beginning of the market. We have just delivered the first trains, and we have managed to introduce them to the market at the average profitability, which I think it's a good sign for the future because we have to pay a lot of investment so far.
Thank you. It's Daniela Costa from Goldman here, at the back. If I may, just wanted to ask three things. First, can you elaborate on buses, why you're better positioned than, for example, truck manufacturers or someone else that is on that segment? Sort of why did you decide to go there? Then the second point, on the bridge, you had volume and pricing together. Can you talk a little bit about the pricing environment, how you see that evolving versus past? The final thing I wanted to ask about was on your follow-up on the M&A question. If you don't find sort of targets in or what's the horizon you give yourself until you would return more cash to shareholders? Thank you.
Already.
No, I will take the first one and my friend Laurent will take the two next. On buses, it's a good question. Buses is a relatively large sector with a number of players, and you can wonder why we have entered into this market. I think there are two reasons for that. First, the bus world is at a tipping point, as a turning point. As I said, all the diesel world is now behind us, and the electrical world is in front of us. So we are entering in a very specific moment of this market. Two, we believe that we have a product which has been designed for this new world. Whereas all our competitors have products which have been designed for the old world, and they have just adapted their products to the new world by changing the diesel engines to an electrical engine.
Our product has natively, if I may say, been developed for the electrical world. I don't know if you have seen it, but it's a very different product. All the traction equipments are on the roof like you have for tramway. This allows for a lot of flexibility. You can put whatever batteries you want. In the future, you could put hydrogen if you want. The maintenance is easier. It therefore has a very flat low floor. It's a product which is really, in terms of passenger experience, closer to a tram than to a bus because it has been natively designed for the electrical world. This is the only reason why we have entered. Otherwise, if it was just to bring a me-too product, it would not have been, I would say, of any interest. Maybe Laurent?
Yes. On the bridge, on the volume and pricing, so as I was explaining, we have a very sophisticated market pricing analysis. We have been, of course, carefully looking at these trends. What we see in the last years, and we see this continuing in the years to come, is, I would say, a slight decrease of price, very slight, year- after- year. We are basically baking in our profitability target, the same level of trends, moving forward. On your question on the M&A and the potential shareholder return. On the M&A, definitively we will be selective in our M&A selections. However, there is a lot of opportunities out there in the market, and we are addressing this as we speak.
When it comes to the dividend and return, the board has been deciding a dividend of EUR 5.5 recently, we'll be executing that in July. We are just articulating a dividend policy for the first time with this 25%-35% dividend payout. For the rest, we'll be so far sticking to our commitment.
We'll see in 2023. Yes. Sorry.
Good morning. Yeah, William Mackie from Kepler Cheuvreux.
Yeah.
Three questions, if I may, or at least three areas. Firstly, with regard to the structure of the group, when you talk about the improvements of efficiency, last year there was some site rationalization. Is that something we should expect going forward? More particularly, when I look at the infrastructure and systems business, you remain reasonably vertically integrated around some of your electrification products. Is that something within the strategy or at least within the portfolio that we should consider to remain core? The second question relates to service growth. Your ambitions in growing services, you have this strength in the U.K. and the strength in Italy, perhaps you could highlight a little bit which other countries or regions are going to drive that growth ambition. Lastly, on signaling. The signaling market is very well established with its competitive players.
You have your strength on board, when you mention your ambitions in mainline, it seems that the mainline players are already well established. How do you grow your position in mainline signaling?
Thank you. I think we will park, as we say, we'll put in the fridge the two last questions so that Bernd and Jeff could try to answer to these questions during that presentation or thereafter in the Q&A. In terms of infrastructure and systems, we tend to be quite pragmatic in our systems. Having said that, it's true that electrification can bring a strong value to our system. In particular, when it comes to energy saving and bringing this kind of innovation such as Hesop has played a key role in our system business. Bringing innovation such as our third rail for tram has also played a key role in our system. We should not, I would say, forbid ourselves to bring differentiators in our systems.
having said that, on one particular project, if it happens that external parties products are more competitive for one reason or another, we can go outside as well. There is nothing for disposal to your question, but we keep our liberty there.
Just to follow up.
Jeff and Bernd have taken the point.
Sorry, a follow-up. On the slide deck, your systems revenues for the next two years are projected to decline. Should we think that perhaps you will de-emphasize that part of the business going forward?
I think that it's a good point. There is a market evolution, which is clear, which is the fact that in Middle East and Latin America, the global projects have been delayed, and therefore you have not as buoyant platform as in the past. In terms of tram, it becomes less of a differentiator. There is also a commoditization of the system part of the tram business. I would say it's mostly coming from the market standpoint. It may also come from a de-emphasizing for some parts.
Thank you. Gaël de-Bray from Deutsche Bank over here. I have three questions, please. The first one is, one of your objectives is to be number one or number two in all your markets, geographies and so on. But if we look at the past few years, obviously, in terms of orders, Europe is probably one of the few geographies where you don't have yet a number one position. What would it take to become number one in Europe? I guess my question is more whether you need to do absolutely some acquisitions in Europe to get to the number one spot or not, and whether acquiring in Europe is going to be one of your core priorities from an M&A perspective. That's question number one. Question number two is on the targeted 5% growth by 2023. I think this is an all-in target, including acquisitions.
Could you be a bit more specific around that? Basically, what you expect to see in terms of organic development. The third question is on the free cash flow side. You said this year perhaps will be a bit weak because of the working capital evolution. I guess two quick ones here. Do you expect the free cash flow to be eventually down on a year-on-year basis? The second question around the cash flows is why shall we expect now an increase in inventories? At least compared to the past few years when I think the group was already on a pretty strong ramp-up phase. What's different now?
Yes, as you have noticed, Europe is becoming a key priority as well. It will require some investments, not necessarily M&A per se. In rolling stock, as we said, we need to enlarge our platforms. As you know, Europe is a very scattered market with very different types of products. Just to give you an example, we have developed a tram, which is a new platform of tram, and today we are enlarging this platform to steel. Our trams were in aluminum, but the German market is requiring steel. We have developed steel, and we have entered into the German market through this new product. We are going to do this kind of investment.
We need as well to strengthen our low-cost base. This is the Poland footprint, which we need to continue to grow, although it has grown quite significantly in the recent past. We could have some acquisition in signaling because signaling is also a very scattered market with a lot of different technologies. We could either, as I said to a previous question, develop these technologies ourselves or acquire a small player who would, I would say, masters this particular technology. A mixture, I would say, of investment and M&A. M&A will remain small and to your point on growth, we don't expect a lot of M&A.
Again, as I consider that the M&A that we are going to target can be easily replaced by investment or development, I don't think it's worth splitting between what is M&A and not, because this will be a very small M&A, no large one. If there is a large one, of course, I would say we will not put it in this 5% growth. It's only a small M&A in order to acquire technology or geographical spots, I would say. On the rest, maybe Laurent, you can take it.
Yep. On the cash for this year, Gaël, indeed. We are in a specific phase on a number of our key rolling stock projects. Let me illustrate it with a few example. On our new Coradia Stream regional train, we have just entered into a commercial service with our Pop train in Italy, and Gianluca is here, only two weeks ago. We are ramping up the production on this Coradia Stream for ICNG and for Italy. On PRASA, as Thierry has been illustrating, we have been delivered seven trains. Of course, we'll be ramping up our production in the months to come, and this is of course is having an impact on inventories. On Amtrak and on e-Loco link in India from Madhepura, we are as well in the months to come preparing the production ramp-up all together.
All of these are specific cycle on some of our flagship rolling stock projects, which is then, of course, impacting our inventories. Now wrapping up on the cash for this year, we are talking about cash generation, not talking about cash usage. This is what we are seeing for the cash for 1920.
Okay.
Hi. Thanks for taking the question. It's James Moore at Redburn. I've got a few technical questions, perhaps for Laurent, and then one conceptual one perhaps for Henri. Just on the interest line, on the P&L and the cash flow. After the bond, there'll be some outstanding hedging and maybe pension. Could you give us a longer-term projection on that? What's normalized restructuring and the 25% tax rate? How long is that sustainable for? The conceptual question is margins. You've done a great job getting the margin back to seven. You've laid out your targets very clearly with a lot of very credible bottom-up plans. My question is more that the industry has never really supported a nine. It will be a new achievement for you. Do you think that you're going to create a sustainable comparative advantage against the obvious two Western peers?
Do you think the whole industry can support a better margin?
This is a very good question. First of all, it's not totally true because I think one of our global competitor is already around nine today. These are around nine today because they have a better margin in terms of signaling, mostly. I think there are two elements to your conceptual question. The first one is the potential of our signaling business, where we need to catch up, if not to this benchmark, but to be closer to the benchmark. I know that they are larger and therefore there is economies of scale, but still, I think there is a lot of room to catch up to this margin.
In terms of the global margin, there are other benchmark, particularly the pure players usually have higher margins. We want to combine, I would say, the lean structure that they have, the focus that they have on certain region, as well as to be global. This is the key element of our recipe to get to a benchmark margin closer to a regional player, I would say, type of margin for rolling stock, is to combine through digitalization, a good localization, a good customer intimacy, as well as a global footprint. I have to say, that's why we have shown it to you, I think India is playing a differentiator role. To compensate, I would say, the lack of scale on signaling, we have the Indian differentiator.
You could ask me the opposite question, if you were to count the saving which is being bought by the Indian footprint, if you were to replace all the Indian engineers by Western European engineers, you would figure out that we should be much more profitable than the other players. If we are not, it's because we have still some potential to grasp in a number of areas, including on the platforms for signaling.
James, your technical questions. Thanks for that. On the interest side, we were in 2018, 2019 at around EUR 88 million in the P&L. We see indeed an improvement after the repayment of our bonds. We see an improvement of EUR 30 million-EUR 35 million in the midterm. The remaining being indeed the aging and the interest on the pension. On the restructuring, as I said, we were at 65 around in 2018, 2019. We do not have ahead of us major restructuring plans. We'll come back to a normative level that we have always indicated, the control of my IR team, Julie and Julien, around EUR 30 million on the midterm. Finally, on the tax side, we are guiding on 25%-30% of effective tax rates. It is depending on our mix by countries, it's a complex equation, we are operating in 60 countries.
It's an equation with 60 parameters, 25-30 is a good proxy, we are benefiting as well from our deferred tax assets that we can use to stay in this range.
Hi, it's John from Exane. Just looking at slide 47, particularly relative to 38. It's the EBIT bridge going forward versus how you achieved the last target. I think your sales guidance, if I'm right, probably implies something like EUR 9.8 billion of revenue in 2023. That's about EUR 1.7 billion more than you did last year. You're looking for 150 basis points more margin than you did last year after adjusting for CASCO. Looking at that bridge, it looks like it's about 50 basis points from volume and price, 25 basis points from mix, the rest operational excellence. If anything, I'm slightly surprised by the lack of volume and price this time. It feels as though the drop-through implied there's relatively anemic. Is there a negative price piece to that or are you just being conservative? I'd say the same was probably true of mix as well.
It does imply the margin on service and signaling certainly is just north of 10%. Again, if that was the case, that seems a little disappointing. I'd hope your service and signaling margins ultimately could maybe be mid-teens. Are you maybe a little on the conservative side around volume, price, and mix? I'm slightly surprised it's mostly operational excellence that's delivering most of it. Finally on operational excellence. Last time, you had a sourcing target, and I think you had an explicit EUR 250 million. This time you haven't given any explicit hard savings numbers. Was there a reason why you chose not to do that?
We start by sourcing so that Thierry can speak a little bit.
We want to continue to have this EUR 250 million to sustain. As I said, we are not forgetting the past. We are building on this foundation. We want to add more. The 10% additional cost base can be factored, moving from 50% today to 60% will give us additional savings.
On your general point, without going into the basis points, yes, you're right. The new plan is mostly based upon operational excellence in terms of margin uplift. There are several reasons for that. Yes, there is a decrease in price. We had, in the past, a steady decrease in price. Probably more, by the way, in signaling than in other places, just because the digital matter is under more price pressure, but also with more cost, I would say, decrease than in other parts of the business. In terms of mix, first, there are two elements. First of all, system will decrease. Therefore this plays negatively. Secondly, as we have said, we have increased a lot the margin of rolling stock.
Even by uplifting to seven, rolling stock, which was very low at the beginning of the plan, is now, we say, mid-teens, and therefore much closer to our target. It has a mechanical impact, which is lesser than it was at the last plan, if you were to take into account the decrease in rolling stock. It is clear that the mix, because of these two aspects, does not play such a great role that in the previous plan. In terms of volume, I would say we have kept under control the SG&A in the past. It is true that the volume leverage is less during this plan than it was during last plan. Your global analysis is correct. It will be mostly based upon operational excellence rather than the other factors.
I said signaling, as I answered previously, signaling has a huge potential to increase its margin, but this is operational excellence. Yes, Akash.
Yes. Hi. Akash Gupta from JPMorgan. I have three questions, please. The first one is on this cost saving. How much of this cost saving is priced, or let's say, given to customers versus what you are retaining, given you price these contracts multi years before you deliver them. When it comes to this cost saving number that you gave us to EUR 50 million from sourcing, what is the ratio in terms of how much filtering through your bottom line and what is passed on to customers? Second one is on slide number 44, where you showed growth in services business, which I think one can say that the growth would be higher in FY 2023 compared to the other year. What implication it will have on margins, given this is the highest margin business in the portfolio?
Finally, on industry consolidation, is that a closed chapter now, or would you be coming back on this if something change?
No. On service, I think service, Bernd will take it. Do you want to take the first one?
I mean, on the cost saving, the 250 was part of, indeed, the Plan 2020. This is representing in this operational excellence as a key part. Now, to give you the nitty-gritty of how this 250 translate into margin, we are presenting the holistic pictures. What is for sure is that sourcing is and will remain a key driver for the next term, and this benefiting to the supply chain around India and Poland. I think that fundamentally, this is the key drivers that we are looking in terms of sourcing efficiencies. To your point in terms of the pricing, as I said before, we see a stable trend in terms of pricing compared to the last four years, and we don't see any major evolution moving forward.
In terms of global, as you can imagine, this type of global restructure or global merger, it's not part of any plan by definition. I don't know if it will ever come back. Never say never. It's long-term. A lot of things have to be changed. I still believe, and I'm not going to regret any word I said during our last attempt to merge. At the same time, I recognize that if things are not changing in the environment, nothing will be possible. It's postponed for a long, long period. Maybe the last questions?
Yes. Just a follow-up on the M&A. What if one of the big group in the world decide to merge, being pragmatic and exclude maybe the political aspect, decide to merge with the Chinese? What if Siemens decide to be pragmatic and play the game of the European Commission and merge with the Chinese player? What would be the issue for you, and what could be the alternative?
First, I don't think it will happen, so it's a little bit theoretical question. I don't think today is the time. We have to recognize that these global mergers are increasingly difficult to do in the current environment and the relationship between the different nations and so forth. I don't think this is a feasible scenario. Now, CRRC wants to enter into Europe. How they will enter, I don't know. If they buy a small player or something like that, it will not radically change the situation. CRRC, I'm not obsessed by CRRC. If I am in India, my competitors are Indian competitors. If I am in Europe, most of my competitors are European competitors. You have a number of regional players which are my first competitors, region by region. If CRRC wants to globalize, it will become a competitor in the different region.
I don't think it will change completely the picture. Last question. Gaël. Alfred?
Thank you. I just wanted to follow up on the supply chain topics and your productivity gains that you're targeting. How do you view this in the context of more strained international relations, trade wars, and so on? How do you integrate this into your development plans?
Well, I think it's a good question for the last question. I'm not going to enter into this political debate. What I'm going to say is that we are already in a world in rail transportation where localization plays a very strong role, where we were already asked to have a global footprint. So I'm not saying we are immune, but we are relatively well protected against the different tariffs which can be put in place and so forth, because we are producing locally. Now, having said that, it's true that we are using our global footprint, and we need to continue to use this global footprint. Marginally, it could have an impact, but up to now, I don't think India is part of what you are describing as a trade war, so we are protected from that. Okay.
Ladies and gentlemen, I think we can take some fresh air if for those of you who have survived. We are reconvening a little bit in advance, at 1:15, in one hour from now, to listen to Martin, Bernd, and Jeff. Thanks a lot. See you then. Okay, welcome back, ladies and gentlemen. Without further ado, I will hand over to this afternoon's sessions. I think it's starting by Jean-François for signaling. Thanks a lot. Jean-François, the stage is yours.
Thank you, Henri. Good afternoon, everyone. I'm Jean-François Beaudoin, I'm the Head of Digital Mobility at Alstom. I'll be the one kicking off this afternoon's session with a focus on our signaling activities, which as Henri and Laurent mentioned already today is an important part of the Alstom in Motion Plan, in particular because of its potential. Before entering into the content of the plan itself, I'd like to remind you a little bit what we're talking about when mentioning the railway signaling by giving you basic principles. As you know, what characterizes the railway transportation is the contact between the rail and the wheel, which is characterized by the very low adhesion, which brings the immense benefit of being unbeatable in terms of energy consumption, but which makes a train very difficult to stop.
To give you orders of magnitude, when a TGV is running between Paris and Bordeaux, for instance, it's 300 km per hour, a few hundred tons of mass, and between the moment the driver actually presses emergency stop and the moment the train stops, in reality, it has run almost two kilometers. When you understand that, you realize that if you want to operate safely a railway system, you need to have a combination of intelligent infrastructure and intelligence on board to secure that the train perceives its environment and is operated at the right speed and stops at the right moment. This is basically what signaling is about. When we are selling signaling solutions, the first thing we sell is actually the safety of the railway system. The safest train is the train which doesn't move.
Of course, you want to have as much throughput as possible under the constraint of having the railway transportation system safe. That's as well what signaling is about. Of course, at the end of the day, what you want is to carry passengers or carry goods. There is a lot of contribution of the railway, of the signaling solution, to provide the proper passenger experience, notably when it comes to security, personal security or passenger information solutions. After those basics, technical consideration. Yeah. Yeah. It's a driverless mobile. You've got three different functions in the railway, in the signaling system. One is the route control. Basically, all the track products that are equipped wayside to operate and to interface the railway objects together with the overall systems. Railway objects being typically signals or point machines.
The vital computer, which is called the interlocking, you'll see the acronym IXL in the presentation, which basically is the intelligence of the route control system. Second function is called the train protection. You'll see the acronym ATP for automatic train protection, which is basically the systems which makes sure that you take over the control of the train whenever it's operated unsafely. To bring an equivalent to your daily life, it would be like if you cross a red signal at a crossroad, a system would take over the control of your car and press the emergency brake to stop it, even though you've given an unsafe instruction to your vehicle. That's the role of the automatic train protection. The third one is called IT for Rail.
It's primarily made of control center supervision solutions to manage the fleet, both in terms of instruction for routes and information for timetable. The first two blocks are safety critical in the sense that they are designed and implemented in compliance with certain norms, which reduces the probability of an unsafe event to happen. The third one is non-safety critical. Basically, if it fails, there is no risk for a casualty, I'll put it this way. Last comment on this chart. Sorry for this long technical introduction. I had to make sure you follow the rest of the presentation. The intelligence of those systems are distributed into three geographical areas, I would say. Everything which is linked to the infrastructure can be distributed along kilometers, tens of kilometers, hundreds of kilometers, sometimes a full national network.
Everything which is related to the intelligence on board, typically, vital computer that you equip within the trains, and the control centers, which are usually pretty much centralized for a metro line, for instance, or for a metro network, for the most advanced network, or for large sections of a national network. Three main benefits for our customers when we deliver these kind of solutions. Safety first. Under the constraint of safety, the operational performances, primarily throughput and availability, and of course, quality of service and passenger experience. That being said, at Alstom, we are one of the few able to provide any of those components of the overall system, both the train protection, the route control, and the security and control solutions in the mainline applications, in the urban applications. Mainline, most of the time, either component by component or in an integrated manner.
Urban, almost every time, as a turnkey solution. The other thing which makes us a little bit specific is that we have the experience of deploying these kind of solutions in new build, when you build up new lines, or in revamping or re-signaling situation. Basically, when an operator wants to increase the throughput of a line or a network, the first element in which he should invest is upgrading the signaling system, because like I said, it increases the throughput. When you've got the most advanced solutions, you can reduce the time gap between two trains and increase the throughput without having to invest in additional infrastructure with, from the CapEx viewpoint, obviously, in another order of magnitude.
Many historical networks, either national mainline networks or urban metro operator, notably in Europe or in the U.S., are investing massively in revamping, re-modernizing their signaling solution to increase the throughput of their network. Last but not least, with the increased level of awareness on cyber vulnerability, we are developing solutions in all the new products we're providing to the market, which are cyber inside, I would say, which encompass all the necessary cyber requirement to secure that vulnerability is properly managed going forward. I'll come back to that. This is more a quantification of the market by segment and by geographies. That's a chart that Henri has presented already, but I'll provide a few comments. We're talking about a EUR 12 billion market all in all, worldwide. Data from the UNIFE, which is primarily driven by the mainline applications.
Because the size of the infrastructure and the networks in the mainline world are, of course, largely superior to the ones of the urban applications. Within mainline, Europe contributes to the vast majority of this market. I'll come back to this. Roughly 60% of the global market being driven by mainline. Urban is a third of the world market. Very different dynamic. I'll come back to this in a few slides. Different technologies as well. There is one sub-market as well, which is a little bit less known, which is the freight and mining. Here the applications are very different, and the competitive and market dynamic is very different as well. I'll come back to that in the course of the presentation. In terms of geography and projection of market growth, as you can notice, it's the steadily growing market.
Not much faster than the rest of the railway market as a whole. Largely driven by Europe because of mainline, and Asia-Pacific, primarily because of the boom of the urban applications in China in the first place and India to a lesser extent. You can see that MEA and North America are smaller markets because of a shorter, I would say, railway history. This is where Alstom fits into the overall picture when it comes to revenue positioning. You see that today we are in a third position. We've been more or less steady over the last few years. There are five major global players, then a number of local or regional players in the world. The way we want to position ourselves going forward is basically to gain product and market leadership.
It has been mentioned earlier today, we want to outpace the growth of Alstom, which itself outpaces the growth of the market going forward. The rest of the presentation will be dedicated to how we plan to get there, with a focus on three main markets we believe we've got already a very positive positioning, and which are under very favorable conditions in terms of future growth, and with four key strategic levers that I'm going to describe. First important market is Mainline in Europe. Like I said, the global Mainline market is the largest in the world, more than EUR 7 billion. A large part of it is actually made of Europe, particularly wayside, to a lesser extent, onboard solutions. You need to understand the history of the European railway market to appreciate the market dynamics for Mainline in Europe.
We come from a situation where the various countries in this continent had very specific, very national signaling solutions and operating principles defined decades ago by the national railway operators. At the beginning of the year 2000, the European Commission has decided to implement, let's say, a new standard, which is called European Train Control System, ETCS, or ERTMS for European Rail Traffic Management System, which is a normalized signaling solutions for which the first purpose was to allow cross-border operations. 15 years ago, when you were traveling in the Thalys from Paris to the northern part of Europe, you had a train equipped with six or seven different signaling systems on board to be able to cross the borders. With the deployment of ETCS, one is supposed to be enough when the deployment will be completed. There are two important sub-pieces to this market. One is the interlocking upgrade.
You come from a panorama where many countries still have very old interlockings. Remember the vital computer allowing to manage route control. There is a global trend to modernize those interlocking into computer-based interlocking, that's a large part of the market, which is defined more at a national level. The second important trend is the famous European system rollout. Today in Europe, the deployment is only 10%-15% of the overall network, 10%-15% of the overall fleet of trains operated in Europe. The potential market when this rollout continues is absolutely significant, we believe we are very well positioned to tap most of its potential. There are, in the very short term, nationwide deployment, which are planned with massive investments, that's one of the reasons why the European market is going to grow. Netherlands has announced its rollout very recently.
Italy has great ambitions as well, together with Germany. France is coming as well with a plan. Why we believe we can benefit from this overall favorable market conditions. Number one, because we are the market leader on ETCS onboard solutions, I would say we are the market leader by far. The second one is that one of the key assets to penetrate or expand in the Westside Mainline market is to have a homologated interlocking in a country, today we've got interlocking which are homologated in 12 different countries in Europe. The other point is that we have a track record of deploying Westside ETCS solutions in 10 countries. This chart shows our presence in the various countries in Europe, either on Westside or onboard, sometimes in both, actually many times in both.
The other element which makes us a little bit special is that we have an element of leadership in nationwide rollouts. Denmark has been the first one few years ago to deploy ETCS in one contract, let's put it this way. At the moment, we are deploying Westside ETCS on half of the national network in Denmark and equipping the full fleet of trains operated in Denmark with our onboard solutions. Last year, we won a contract to equip Norway in a similar manner for all the onboard equipments. Second market supporting our growth is urban. Here it's a totally different competitive landscape. Very much a global competitive landscape with focus on new line construction, particularly in Asia and to a lesser extent in Middle East and Africa. China being the number one market in the world with 10 new lines a year.
India with something like two, three lines a year going to five in the next few years. The second important market dynamics is this need for network revamping, particularly in older networks, most of them being either in Europe or in the U.S. We have, like this chart is showing, a track record of being able to revamp complex networks in several cities from Asia to Europe, Latin America and North America. We are the number one on the Chinese market through our JV CASCO. We are the number one in India, like Ling mentioned earlier, and we are the world leader in metro turnkey solutions, where the global offering of Alstom, together with rolling stock and infrastructure, allows us to have a channel to market for our signaling solution. Our signaling solution is an enabler for this success.
Third market is the freight and mining one, particularly from North America, U.S. and Canada. This is a much smaller market as a whole, but this is number one market in the U.S. and Canada. Why? Because the mainline network in these countries are dedicated to freight corridors, I would say. Totally different market dynamic. It's a product business with private operators. Our customers being all the main railroads, Class I railroads in this continent, BNSF, Union Pacific, Canadian National and others. The thing which is slightly different than the rest of the market is that you contractualize a frame contract for five and 10 years. Within this frame contract, you sell products on a very short timescale. You've got long-term visibility on market shares, and then you've got deliveries which are made in a few weeks.
The fact that those customers are private customers makes the procurement process totally different, and the focus on innovation slightly different as well, with a much more, I would say, value for money kind of procurement model rather than specification and RFP in public procurement schemes. Some technical specificities as well. Remote location, very widespread infrastructure, more difficult climatic conditions, and a need for customer value innovation. We're introducing new technologies there, basically with the goal to increase the throughput or increase the availability of the systems, particularly with new point machines or IoT and data analytics powered systems, in particular to avoid point machines to fail. Bernd and Julien will provide you some more details on that.
The other key assets that we have there is that the supply chain and the operational excellence for short cycles management is recognized by our customers and needs to continue in this direction. The four levers. First one is the global footprint that we have. As a comparison with our colleagues from Rolling Stock, where the engineering footprint and the manufacturing footprint are very connecting the one with the other, our footprint is extremely engineering-focused. You see that we've got 7,000 employees in Signaling in the world. 2/3 of them are engineer. First takeaway is that the engineering intensity of our activities is much higher than the other segments, and the intensity as well. You've got two nature of engineering activities. One is development of technologies, and the other one is ability to deploy. We develop technologies where we live, I would say, where we are.
We deploy solutions where our customers are. To be able to properly execute our contracts, you need to have one foot in both. As a result, our footprint, engineering footprint, is made of two pillars, I would say, our technology centers, our technology hubs. Europe was the historical one. We've developed the Indian one in Bangalore with 1,250 people there, and a plan to grow this staff up to 2,000 in the next three, four years. The other part of the footprint is the deployment engineering skills, which are as close to our customers as possible. That's what explains the fragmentation of our footprint. Second lever is innovation towards competitiveness and efficiency. I will give you two examples of initiatives that we're implementing in this area.
One is platforming, and I'll give you the example of the interlocking, so the trackside computer and all the associated object controllers that you need to be able to deploy an interlocking project. We come from a pattern, like I said, where all the countries in Europe in particular, had different specification for those interlockings. There are three technological bricks in an interlocking. One is the object controller, is the interface, the physical interface between signals, point machines and the so-called vital computer. The second brick is the so-called computer the vital computer itself. It's a piece of hardware with a basic software. The third one is the applicative software, which embeds all the functionalities that are required to be able to operate within the country.
Here what we've done over the last few years that we've just completed is a convergence of a multiplicity of diverse combination of those three pieces of technology. Basically following the pattern of countries in which we operate towards one single combination with the Smart I/O, smart input output object controller, the MooN platform, and an applicative software which is flexible enough not to be rebuilt anytime you enter in a new country. Of course, by platforming both hardware and software, you gain economies of scale on the product cost itself, because when you buy electronic components or electronic boards to a supplier, it's of course much better if you can leverage scale, and on the engineering activities as well, because the need to support new technologies on a smaller number of solutions is enhanced. MooN development has been finalized now.
It is under employment both in urban applications in Middle East and East Asia, and in mainline applications in Italy and in Latin America. The second example of innovations towards competitiveness and efficiency is actually efficiency-driven. Thierry this morning mentioned a few example of how digital processes enhance the efficiency in the rolling stock world. We are doing similar things in the signaling activities. One thing that you need to have in mind is that we need to be able to get a safety certificate and have the authorization to put in our new service or solution. We need to be able to demonstrate that all the requirements that we had from the beginning of the project are properly implemented in a safety-critical manner until the end of the completion.
That leads to a level of hours of activities for validation of our solution, which is much higher than in the other verticals. Anything that can aid validation and testing in signaling brings more benefit than in the other vertical, and that's the idea of digital twins or cloud-based testing. Without entering the details, digital twins principle is to create a mathematical model and a numerical model of the systems you want to test before having completed the design, to be able to anticipate your testing and verification activities as early as possible in your design process. Cloud-based testing is basically the, let's say, outsourcing of your test benches at a larger scale to be able to scale up your activities, your testing activities, and to operate your testing in a flexible manner. Basically, you can test from anywhere at any time.
Both have the same goal, validate and test earlier in the design process, reducing the number of hours for the testing activities, and reducing the lead time to complete those activities. Third lever is innovation to our customer value. We've got a track record over the last 10, 15 years of leading technology breakthroughs. I gave you several examples, both in urban and mainline. Urban, primarily on driverless metros and revamping of CBTC solution. Mainline, particularly around the deployment of this European standard, European ERTMS, for high speed first, then high-density lines, then cross-border operations. Today, with automatic train operation and with the latest Baseline three standard defined by the European Commission. Our goal is basically to continue with the direction, with a focus on what we call digital train. Like I said, the intelligence being distributed wayside, on board, and in the control center.
We have the control over those three technologies, we can manage, I would say, the balance of this intelligence within those three subsystems. The overall target is to reduce the need for heavy infrastructure and to make the trains themselves more intelligent. Smarter trains, lighter infrastructures. Three examples of initiatives. One is automatic train operation on ETCS Level two. We've got a pilot which is running today in the Netherlands for freight operations. We have opportunities to deploy that in commercial service in the Benelux. Driving automation, that will be described in more details later. We've got a project together with SNCF on freight application with a prototype, which is expected in the next few years.
With Fluence, we will introduce in commercial service in the next couple of years, the first train-to-train concept, where most of the intelligence is on board and very little of it is on the infrastructure to secure lesser cost, ultra availability, and ultra capacity. Objective being to increase again the throughput of the existing line. Fourth pillar is around services. You'll see that it fits perfectly with what Bernd is going to describe in more details in a few minutes. We want to boost our service offering in signaling. It's fair to say that there is a lot of potential here, given the size of our install base. We believe we can grow a lot in this area. Few points of attention, obsolescence, very specific to signaling.
Although the solution we are deploying are supposed to last in operation for 20 or 30 years, the speed at which the technology evolves is extremely high, typically electronic components or software. The need to support the life cycle of the solution we deploy to our customers with more and more digital content on very long period is absolutely critical. The other point of attention I wanted to raise is, again, cyber vulnerability. Like I said, there are two pillars in our cybersecurity approach. One, which is making sure that everything we deliver today, or we design and deliver today, is cyber inside. The other one is supporting our customers who have an install base of so-called digital solutions, which have been deployed and designed five, 10, 15 years ago, at a time where the cybersecurity requirement were not existing or not defined.
We need to, let's say, provide support, and that's a service offering that we're putting together to enhance the cyber vulnerability management of those legacy solutions. Our ambition is to increase our share in long-term maintenance. We had very little of this in our portfolio up until recently. We've just started the maintenance of the CBTC solution of the Seine Metro. We'll be doing the same in Riyadh, the same in Montreal. We want to excel in the supply chain management and repairs, and like I said, be a life cycle partner for the full life cycle. Few words to conclude. Three main markets on which we want to focus, on which we already have very strong positions, but we believe the market conditions and the investment plan will support our growth. European mainline, particular west side.
Global-urban, pushed by our turnkey capabilities as well as our leadership position in India and in China. North America freight and mining, where we already are the market leader. Four levers, global reach, innovation towards competitiveness and efficiency with platforming and digital processes, and value creation through innovation, as well as service offering boost. Like it has been mentioned, we will implement in signaling a disciplined M&A policy to target bolt-on acquisitions that could help us accelerating the implementation of this plan. Thank you very much. I now hand over to Bernd, who will give you a view on what we plan to do in services.
Thank you, Jeff. Very pleased to be with you on this sunny afternoon. I will walk you through where we come from in terms of service, where we are today, and where we want to go in Alstom in Motion. Let me quickly focus on the portfolio. It's more the classical split. It's parts, that's normal. When you're OEM, you sell parts. Maintenance and modernization, and as Jean-François said, so signaling services, which is very technical. That's why we moved that more into the signaling world, because that is the drive and the engineering power. Now, if I look at the distribution, it's clear maintenance is our core market. This is where we have the long-term contracts. This is where we have the highest customer intimacy, because maintenance means you are daily together with your customers.
Classically, that was more focused on rolling stock maintenance. We see more and more system maintenance. That means bundled with signaling, bundled with infra, and that includes Alstom equipment, but also non-Alstom equipment. Quite complex and, as I said, this is a market where you have to be close to your customer. That's why you see this nice footprint of 140 countries where we are operating depots, that we are operating in 40 countries. If I look at the coverage, parts, 25% of parts that are needed for our installed base today are supplied through Alstom. Also, of course, covering the maintenance part because you cannot sell a part twice. Modernization, clearly, a market leader here as well, focused not only on the full vehicle modernization, but also very precisely on traction upgrades, IGBT upgrades, for instance.
We are clearly number one in that market and number one in terms of market share and absolute values, if we compare that with competition. It is traditionally a high growth and profitability driver. The beauty of that activity is that we have long-running contracts. We talk about 20, sometimes 30 years, and that's even more than some marriages. It's really a long-term business that we're in. If you look a little bit where we come from. Here is a chart. The blue bars represent the sales, the green bars the order intake. On sales, you see a steady growth of about 7% a year. That despite of the order intake that normally has a time lag until it translates into sales for service.
You see also the order intake, the last five years, very exciting, of 16% year-over-year, with a book-to-bill of 1.6. Clearly feeding the backlog with a lot of healthy long-term contracts. There was a question on the geography of growth. Just looking at the order intake over the last five years, it's a well-balanced distribution of where we won those different contracts. There are long-term contracts for NAM, North America and Canada. Sydney, we are talking about. Also Riyadh as a landmark contract we won recently. It's a well-balanced portfolio. If you look at the share of service in our activity, today, we represent 20% of the total sales. Service in the backlog represents even more than 30%. Clearly in that backlog, you see, as I said, those long-running contracts with more opportunities than risk.
That's the nature of a long-term contract. Outperforming the market and with a share of service in the portfolio constantly increasing. What is the reason behind that success? I'd say there are two factors that are behind. The first one is our cutting-edge innovation and technology. We were one of the pioneers starting to develop connected trains and to monitor performance. We started that when nobody even had IoT on the radar. Today we have 60 trains, 60 fleets, fully connected and covered with our monitoring solution. It's not just connected trains, but connected infrastructure. We have here also our train scanner that is a wayside equipment to capture data from a drive-through train.
We have one standardized platform to exploit this data that is robust and cyber-secured enough to use it in daily business and is open enough to integrate further advanced solutions, neural networks and machine learning. Those bricks are constantly expanded in our platform. The beauty is to not just invent those and have it for some experts to use, but to really deploy it worldwide so that the fleets, the maintainers on site take advantage of that solution. In order to do that, we have developed those fleet support centers that cover geographically fleets or also have a fleet orientation to cover all the tramways, for instance, in La Rochelle. We have developed that rollout that now is under full swing for deployment. Clearly if you see what the benefits are, it's really a differentiator.
We have now a lot of examples that demonstrate an improvement in reliability, availability, and then overall cost savings that is quite impressive. That is the differentiator versus, let's say, the classical operators that are more people-driven, that manage the drivers, and they don't have this cutting-edge technology in the back. The second axis for our success is for sure our customer focus, constantly asking what is our added value we provide to our customers. Here is an illustration of how that worked, for instance, in Italy. Italy was already mentioned this morning of one of our key countries for service among U.K. and Spain. We have managed to double over 10 years by five our sales. It's a fantastic growth story with some different steps.
First, of course, a dedicated service organization to really make sure we focus on our customer for service for daily needs. Growing expertise either through training or through very specific hiring of high-skilled experts. Building digital solutions and then concentrating on high-value services. With that, we have moved from a parts vendor, which is the classical service business for many industries, to a service provider that covers really all the needs and even some high-level engineering requirements for our customers. To illustrate that, just some examples of this partnership with our customers. If you look at NTV, which is the first private very high-speed operator in Italy. They come from a non-rail background and that's a true partnership. They totally relied on us for all the technical part in terms of running this high-speed maintenance, in terms of service day to day.
On the other hand, with the competitor of NTV. We have a partnership with Trenitalia, for instance, for their regional fleet, where they have subcontracted all the maintenance on the Minuetto fleet and just renewed it recently for another 10 years. They concentrate on the passenger side, the commercial side and their expansion to international growth. Then also on the signaling, same story, partner to RFI to improve their operation. That's all based on long-term contracts, it's a true partnership. What's our ambition? Today, we are clearly the leader in this domain. We have been building our portfolio, our solutions that are now under full deployment and demonstrating added value.
Clearly, we want to continue this path to become the undisputed leader, increase our service contribution to group sales, of course, and focus on those high-value services. Service is by definition a local business. We leverage on our presence and will continue to grow our presence hand in hand with the customers. If we look at the overall market, here is an assessment of UNIFE and the service market worldwide, and that is passenger and freight all combined. All service in rail represents EUR 80 billion. Parts, by definition, is the most accessible one because, well, any supplier can sell his parts. The other areas are about 40% accessible, and that means the other half, let's say, is still covered by either national operators that have not on the radar to outsource anything, or close countries like Russia or like China.
That market is very dynamic and will continue to grow. There are some drivers that support this growth, and growth in two ways. The total market will grow, but also the accessible market will increase. The reason for that here is clearly liberalization. The fourth railway package is now giving the option of open access, and that was, of course, the trigger for NTV to come on the market. There are several effects to that. Those new players not necessarily have rail background, so they need a partner. It will also increase further the traffic. For instance, those high speed lines, there is a clear shift from air to rail, so the passenger numbers will continue to grow in this domain. Operators looking for more efficiency. It's also a side effect.
All those established players will face, of course, the pressure to become more efficient. We see a whole new set of contracts, like the TSAs, so Technical Service and Spare Supply Agreements, where, for instance, the blue collar stays with the operator and will make sure the day-to-day activities on train are executed by these national operators. They subcontract all the technical part, so processes, spares, and in particular, digital services. We see a whole new set of new value-added services, technology-driven data services and services around cybersecurity. We have a very good foundation to sustain this further growth. A large installed base. Customer intimacy, as I mentioned, because we have today already feet on the ground, let's say, in most of the countries. We have a cutting-edge technology, and we have highly skilled workforce with experts that know exactly what they are doing.
This brings me to what our levers for further growth are. Alstom in Motion is clearly pushing further our existing businesses and adding new solutions to our core business. The first one is around new revenue streams for parts. The second one is expanding our leadership position in maintenance. That is really important because there is a lot of spin-off from these maintenance contracts. Once you are close to the customer, then you deal with obsolescence, with additional services around modernization. It's really the key driver. Enhance our position on green modernization. The first one, new revenue streams in parts, as I said, a big market. Quite low entry barrier because anybody can sell his own parts. Our ambition is clearly to continue the growth in that area.
As said, 25% of our parts. There is also a potential to grow outside of our installed base. Reduce cash and material through a more efficient supply chain and optimizing central governance versus local execution. Shorter repair loops and improve the margins through both efficiency increase of our back office and a harmonized pricing strategy. The roadmap is very clear. Worldwide integrated organization to leverage really on our size. Smart diagnostic tools and localization of repairs to avoid that we have a traffic of repairs across the globe. Strengthen of Alstom IP rights and co-development because if you do that together with the supplier, you cover more captive parts, so you are in business by definition. Entering into new revenue streams, like on commodities. Commodities, wheels, hardware, connectors, and all that stuff.
Today it's very difficult for a large organization to be competitive due to margin guidance and overhead. Here we have developed a solution. We started one year ago to develop StationOne, which is now in full ramp-up. What is that? That is the first marketplace for railway professionals. It is, if you want, Amazon for the rail industry. We develop a marketplace to bring together vendors and buyers. We are financed through the fee on the transaction, and our added value is advanced search engine, predefined kits, cross-reference of part numbers. That is really one element that is unique, so we are pushing that to continue this as a growth driver. Now, second lever, expand our leadership in maintenance. Today, the market size is about EUR 9 billion. We see here a further dynamic to increase that.
Today, the schemes are quite diverse in terms of bundled contracts with rolling stock or operate and maintain, where the operator then subcontracts maintenance, and then PPPs where we have, of course, the TCO approach. What we see in this market is a clear technology push that kind of diversifies a bit the small players that cannot follow with the digital tools that we are developing and implementing. There is a little separation, the big players and the small players in that market. What's our ambition? We want to become the preferred partner for operators, the first go-to address when they think maintenance. We will, of course, further increase the backlog. We push value selling of our digital solutions. Today, we clearly don't have digital services in the portfolio. That's purely because it is embedded in our maintenance solution.
Today, the market is not yet big enough and attractive enough, but it will come. We think of offering that also as a standalone. The roadmap is straightforward. Extend prognostic and health management. We are already leading that technology, and we, of course, continue to push together with our colleagues in that domain. Full coverage with fleet support centers. That's clearly the step of making a theoretical solution to the practical deployment. New partnering schemes on leasing and operating. Leasing because it's a very dynamic market. Think of short-term rentals and more flexible usage of fleets. We are stepping away from 40 years with one fleet in one network and towards a more dynamic use of the different fleets. We are today very successful in freight maintenance in Mexico, for instance, where we maintain 500 diesel locos. We are the biggest maintainer in Mexico.
We explore if we want to expand this to other countries. Number three, green modernization. You've heard it this morning. The market is changing massively in terms of diesel ban. Imagine all the diesel fleets that are still in operation, not written off. Here is a clear potential to come up to the market with retractioning, green retractioning, be that either through hydrogen. The idea is, it's not just an idea, it's more advanced than that, to use our proven technology that is now running on regional trains and to make it more flexible in terms of individual brakes that are more easily to be configured and implemented on existing trains. With relatively low fixed costs, we are clearly more agile on this market. Become the reference for green modernization, leverage our lead position in hydrogen.
Modernization is quite a tricky market because one could think it's relatively easy, but the existing interfaces, more complex supply chains and configuration management makes it not this easy. That's why we are well positioned to continue to be the leader on that. Service has the advantage that it's relatively low risk based on these long-term contracts and the continuous flow of revenues. With our focus on more high-value activity and the differentiator through digital will lift up the margin even more. It's very nice for cash, as Laurent said, low capital and strong cash generation. That brings me to the summary. Today, we are the leader in this domain. We have proven to outperform the market over the last 10 years. It is a growing business as the frontier between accessible and unaccessible will continue to move on top of the market dynamics.
We have a strong base, a foundation that we can leverage on, and we have a clear roadmap. Yeah. That will clearly sustain us to be the undisputed leader in this domain and strengthen our market position in this area. Thank you very much. Now, Marc, you take over for the innovation.
Good afternoon, ladies and gentlemen. I'm the last to speak this afternoon. I hope you still have a bit of energy to share with me a few minutes to look forward to the future. My name is Marc Granger. I'm the Chief Strategy Officer, covering as well innovation, and innovation will be my focus right now. You've noticed that it is our second pillar, and we have great ambition in that respect. Before jumping to the future, I would like to remind that Alstom innovation DNA is very strongly embedded. Henri, this morning, already referred to, it was 12 years ago when we broke the speed world record. It was in 2007. I could also remind that we've been the first to put in commercial service a fully automatic, driverless, large size metro in Singapore, one of the most demanding customer around the world.
Moving the clock further back and remembering that we had been the first to implement GTO in our power electronic system. Innovation is very well embedded in the company. More recently, we've also developed a quite interesting product or solution. Some have already been mentioned. Of course, the Coradia iLint, our hydrogen train, you all know that. The new electrical bus platform, Aptis, it has been quoted as well. In signaling, it has not been quoted, and it's under development. It's for the future still. Fluence is a kind of revolutionary CBTC vehicle-centric solution based on communication from train to train, that allows to reduce quite significantly the headways, the time in between two trains, but also to reduce the install base on the wayside, providing some CapEx reduction, which is quite interesting. Hesop, I'm not going to mention that.
It has been largely explained by Bernd. We've developed as well the so-called SRS, which is a static charging system, which allow to charge either trams or buses in station in a very short period of time. Very interesting solution. Hesop has been mentioned as well, but it's less known than the other flagships. It's a substation that allow to regenerate a quite significant portion of the traction energy. In parallel to that, it has been mentioned as well, during the last five years, we've renewed all our running stock platforms. I'm not going to go back on that, but just to quote a couple of examples, because the main focus of the renewal of those product lines has been on cost reduction and competitiveness. You may see two example among other here on the screen.
The new generation of Metropolis, for which we have reached quite significant cost reduction as well as energy consumption, as you may see. You see as well the equivalent figure for the so-called TGV Du Futur, our new very high-speed train platform, for which we have the same level of cost reduction or energy consumption. Also thanks to the massification of the different components of the train, including the traction equipment, we've been able, at the same time, to increase the capacity of the train quite significantly by 20%. You may see that, seen by an operator, when you reduce the total cost of ownership by 20% and you increase the capacity by 20%, you are gaining a lot on your both CapEx and operational cost. We have not innovated only on products. We've also innovated in business models.
StationOne has just been quoted by Bernd, which is a very promising new business model for us. We have also massively innovated in our own industrial activities, Industry 4.0, as we commonly say. This has been detailed this morning by Thierry Best, and you have seen the result. All that has been possible thanks to a quite significant and continuous investment in R&D. It has been quoted by Laurent this morning, but you've noticed as well that our intention is to continue to sustain this level of investment over the plan. It has been also the result of a quite well and widely established internal innovation contest that we name I Nove You. Year on year, we are progressing both in term of number of innovation competing, in term of number of sites involved, of countries, providing some ideas.
Among the recent years, the Hesop, the Hesop, or the Coradia iLint has been the winner of this contest. You may see that later on, it translates in real product or solution that we are able to put on the market and to generate business like that. We have also been quite well recognized by different type of bodies on the market. One on our strong growth and leadership in terms of patent filings. We've increased quite significantly the number of patents we are capable to issue. We got some quite interesting, not to say impressive, prestigious recognition. I like to quote the one concerning Aptis. We got some questions this morning on it.
There is a worldwide fair, which is named Busworld, once every two years, the last one, we got the Most Innovative Award in that fair, even though we were not a player in that market for long. Having this strong DNA and this track record, one could challenge that why having innovation as one of the three main pillars of our Alstom in Motion new strategic plan. The answer is very simple. It is on this page. The world is changing. It has been already quoted, some very strong mega trends are becoming more and more obvious. The new technologies available are growing. There are permanently new technologies emerging on the market at a record speed.
There are also some social or business model, or sharing economy, new ways of considering life in general, but mobility in particular, that lead us or that have to be considered by us as a must-have. On top of that, what is very interesting for us, it's potentially creating new business opportunities. We are lucky enough to have our core business with strong, sustainable growth. Aside, we are lucky to have potential new business opportunities. In terms of strategic priority, we've decided to focus ourselves on smart and green mobility. It has been already presented, I want to insist on that. Those are our two key drivers for our innovation program as part of Alstom in Motion. We've selected 6 different initiatives. They have been already mentioned by Henri this morning.
Quickly, green traction, road electromobility, and eco design and manufacturing for the green dimension, and autonomous train, data-driven rail mobility, and multimodality and flow management for the smart mobility. What I suggest now is to guide you through those six priorities. Let's start by green traction. No need to mention that among the mega trends, obviously the need to reduce CO2 emissions is necessary. You may see that the goal by 2050, it's not tomorrow morning, but nevertheless, it's moving fast, is for mobility at large, to reduce by 60% the emissions. When I say mobility at large, it's to mention the fact that we, the rail industry, is not the largest contributor to that. By far, airplanes, ships, cars are the ones. Nevertheless, the diesel ban will come, it will apply, most probably apply first for public transportation.
This mean that we will have to suppress diesel train. We have also to mention that rail industry has been electrified, so green, for decades. Only a portion of the network today is electrified. If we take Europe as an example, only roughly 50% of the network is electrified. That mean that there's still a lot to consider. One could say that the best solution for CO2 emission perspective would be to electrify all the network. Obviously it is costly, and for sure, hydrogen is quite economic alternative to electrification, which makes a lot of sense in certain number of cases. The market has taken time to consider that hydrogen is a solution, but now it's starting, and I would say it is moving fast, and we are lucky enough to be ahead of the competition.
Our plan is to take advantage to be in that position and to move fast with earlier adopter in that respect. Our strategy in that respect is not only to push on our hydrogen leadership position, but also to be the top sustainable train provider. That mean that not only hydrogen train, but also battery, hybrid, and so on. We are quite confident that hydrogen will come for sure, and the other solution will be necessary, and we will be ready with those in order to capture a significant portion of the market. As I mentioned, diesel are only a part of our business, and a relatively smaller part compared to the electrified train. That means that green traction does not consider only the diesel train replacement, but also the electrical train solution.
For that, we have innovation plan, both at the very heart of the power electronic of our trains. You see there a picture that is not very nice, but I'm quoting there the silicon carbide solution. It's somehow, what was GTO grandfather is going to be in the future with some energy reduction, less weight and less volume, and a couple of other benefits for the train. We have still some innovation program for the future on the core of our business, but also more globally at the system overall level, which is on the right-hand side of this picture, for which we've initiated a program together with a startup, which aims to develop a powerful tool for energy simulation at the global system level, using machine learning and artificial intelligence in order, once again, to reduce the overall system energy consumption.
The second green priority is on road. Suppressing diesel in the rail mobility is our duty. What we are capable to do in rail, maybe applicable to road as well. That was the first reason why we decided to enter in the electrical bus market. Just to give a few figures, we do consider, given the cautiousness of the need to reduce CO2 emission and particles, we may anticipate a fast-growing market leading to 50% of the bus market becoming full electrical bus in 2025, which is in a short period of time from now, and that will represent, in Europe only 7,500 buses per year on a permanent basis. We started to enter with our Aptis vehicle, with some disruptive features, as explained by Henri this morning. It's not the only reason why we decided to enter in that market.
It's also because, thanks to electromobility, but even more thanks to the fact that in the medium to long term, those buses will become autonomous. They will have to be considered by public authorities and organized as a system. There we have significant capabilities and assets to be a player in that field. The third initiative in our Green Mobility Innovation Program concerns our eco-design processes and our focus on environmental excellence in our manufacturing. You may see on this screen the different quantified objective we've set to ourselves in order to be achieved by 2023 compared to what is the situation today. You may see that we have a great ambition to push further on those different dimensions. That was for the three initiatives for Green Mobility. Moving to Smart Mobility, we have identified three initiatives as well. The first of them is autonomous train.
We mentioned already several times during the day that we have, for long now, driverless metro. It should be a quite easy game to move from an automatic metro to an autonomous train. You have to consider that a metro is operating in a closed environment, dedicated track, no access from passenger on the track. The problematic for a train or a tram or even a shuttle operating in open field is slightly different. Here you have to develop the capability to capture your environment, of course, without any human being on board, and to be in capacity to understand what are those events you may capture outside and to make the right decision in driving. The topic is slightly different from developing an automatic metro. In that field, we have clear objectives. One is to have an autonomous shuttle system in service by 2021.
The second objective is to have autonomous train capable to operate in depots and in between depots and station by 2022. The third objective is to be able to have a fully tested prototype available and having done the demonstration that we are capable to put on the market the fully autonomous train by 2023. The second initiative in the Smart Mobility is named Data-Driven Rail Mobility. For sure, when we speak about Smart Mobility, that means developing the capability to capture data, to organize them, to be able to develop the relevant application that are using this data. We need to first, build the capability, second, the tools to make that happen, and third, the relevant governance throughout the company. In order to speak further about this initiative, I would like to welcome on board Julien Cabot.
Julien is our Chief Digital Architect. He will tell you what we are doing in that respect. Julien, you have the floor.
Thanks, Marc. Basically, the story about data for Alstom is not totally new. It started probably in 2006, while collecting all the data coming from the train, directly from the train to the ground. Now we have a huge database with very detailed data about the train during the commercial mission that we use, obviously, for validation of our train, for diagnosis, and for maintenance for sure. This information is really a very important database, because now our objective is to increase the number of the fleet and the train under this database, and to extend the coverage of this database to signaling system and to the infrastructure.
To leverage the value of this data, the purpose is to combine this data with the data coming from our customer, from the authority, from the city, to have a full representation of the mobility data, to be able to design and to provide new kind of digital solution to our customers to answer to the request in term of predictive maintenance, in term of smart operations, I mean about the traffic management and the energy efficiency as a digital solution, and to provide a new generation of city flow management. I mean to support the mobility around the overall city and the issue related to this mobility in the urban context.
The last pillar of this kind of digital solutions is about the passenger security, to be sure to use properly the CCTV that we operate, to ensure the right security of the passenger and the right cybersecurity about the passenger. We have now some commercial success with this new digital solution. I mean about predictive maintenance for sure, and some pilots around the world, including Paris La Défense and other project with Lyon and Montreal. In term of technology, because under these digital solutions, there is a lot of new digital technologies that we have to master and to build together to create this solution.
For sure, the new generation of IoT sensors, gateway, and device, give us the opportunity to collect more and more data and to have very detailed understanding of the operation of the train and the signaling system across the world, and applying new data processing about this data. Mastering the big data technologies, I mean about Apache Cassandra or Apache Spark to allow a very high level of data processing to be able to extract some pattern and information from a large historical database about the trend information, is becoming a key capability, and we invest a lot to master this kind of open source technology, to be sure to analyze properly this data.
Artificial intelligence and machine learning, as Marc mentioned, is now a key component of our digital solution to be able to predict the next failure during predictive maintenance, or to simulate or optimize the mobility flow through a multimodal solution. Our capability make some really good improvement in this field with a unique capability to mix the state-of-the-art deep learning and machine learning capabilities through our data science team and our expertise and experience about physics, electronics, and mechanics to combine really these two field to create a new kind and new generation of machine learning algo, constituting key differentiators from new entrants and the digital players. Fourth pillar in term of technology is about computer vision, giving us the capability to automatically detect some issue, some security threats through the CCTV to perform visual inspection of the train, for example.
This capability associated to big data and machine learning is really a key objective in term of technology to go ahead to develop this digital solution as the eyes on the mobility and on the train. Security, to be sure to address the right concern about cybersecurity, we have to ensure a full chain of security from the device, from the IoT device to the cloud, applying the best framework in the world to secure the data and the device directly on the train. This is part of our technical asset, and we have to extend and continue to extend this knowledge and the right usage of IoT security across our digital solution and our existing and signaling product. Containerization and automation is a kind of evolution of the technology of the train. For many years, we talk about computer-based train control.
Containerization is a form, a new kind of virtualization and containerization of the vital computer and application on the wayside and inside the train. We have to follow the evolution of this kind of technology to get the best-in-class technology to support our digital solution. To address all this new technology and this technology, we package it as a framework, as a platform, Mobility Data Platform, to ensure the right configuration between the technology and, for sure, the right cybersecurity associated to this technology to have a kind of framework or data operating system available on the cloud and on-premise for our solution and for our customers. To end this short technical or technological introduction about our technology beyond the digital solution, I propose a short video, if possible, to illustrate the usage of this technology in the predictive maintenance field.
Thank you, Julien. That was for data-driven rail mobility. I hope you've followed all the detailed explanation of Julien. If not, he will be happy to answer to your questions. Last but not least, the sixth initiative, and the third for smart mobility, multimodality and flow management. What do we mean by that? As you know, as already quoted, there are nowadays a lot of new transport modes emerging, and that become the difficulty for the public authority. I've just taken, and I would like to quote that for you. It's a report that has been requested by the San Francisco CTA, the San Francisco County Transportation Authority. This report found that the so-called transportation network companies, Uber and Lyft of this world, in San Francisco, have caused a 51% increase in vehicle hours.
Uber and Lyft were also accountable for 47% of vehicle miles traveled and are reducing the speed on roadways by 55%. What does that mean? That mean that there are a lot of new transport systems that emerging, the reality is that, for the time being, it is creating more concern for the transport authority than really providing higher transportation capacity. At the individual level, it's very easy, very nice. It looks like a great solution. When you are managing a global city, it's far to be that easy to orchestrate all those modes. That is one aspect of our Mastria initiative.
The other one is that as the congestion is growing and growing, the transport authority, if they have not created any multi-transport model approach to face some potential events, disruptive events, the mobility could become a nightmare in the city, therefore, they are requesting some tools to help us to optimize the different transport mode. That is the purpose of Mastria, and more than speaking about it, I would like to invite you to look at a short video as well. Maybe some of you have already seen it, if not, you will understand exactly what it is about. Please.
[Presentation]
Okay. It was a short version, it gave you a flavor of what is the purpose of Mastria as a mobility orchestrator tool. The next and the last initiative is more medium long term, while Mastria is now, I would say, available. It runs through some proof of concept stages positively, it's ready for sale. What I'm going to quote there is probably more medium to long term. The purpose of that is to explain what we consider we could do outside rail. You may find back on the left-hand side of this slide, what is in blue, you will recognize the three capability and solution you need to have in order to master safely a rail operation that Jean-François has explained previously to you. The so-called driving automation on this slide is a so-called onboard system that Jean-François mentioned.
The intelligent infrastructure is wayside, the supervision and regulation is the tower control. The wording used by Jean-François are purely the rail jargon. Here, those three notion are exactly the same one, but worded in a way that makes more sense to be considered in a wider landscape than rail only. This is to prepare the fact that road mobility will become progressively over time, autonomous, we do consider that public transport will be the first to become autonomous, I quote it here, "shuttle and buses." You may see that in gray there, we are currently working, but we intends to innovate and to focus ourself on expanding our assets and capability beyond rail, both in term of driverless system for public transport, in term of connected infrastructure for public transport, and in term of public transport orchestration, which is a part of Mastria.
What is in green in the screen is what we could consider on the long run as a potential deployment of our capability and solution beyond public transport, and that is longer term. Robot taxi will require as well a system approach, will require as well some intelligent infrastructure, we have there some assets, some capability, and we are the recognized and trusted body for public authorities that are asset that we could leverage in the long-term future. That is the last part of my presentation to position ourself in a longer perspective. One word to complete that is to mention that in order to make that happen, we've identified three enablers.
I'm not going to elaborate on them, the Data Innovation Factory, which is led by Julien, is a key pillar, a key enabler for us, we are going to invest further in that. We will push further our open and agile innovation ways of working, including some partnerships. We have already partnerships that we come back in a minute, but we will push that further. We will reshape our internal business incubator in order to speed up our good ideas to transform that in business and impacting the top line and the P&L of the company. One word on partnership. We've already established quite a robust partnership. This morning, Thierry already quoted Safran for some electric architecture approach. We have another partnership with Safran to share our experience on electrical drive and hybrid system for motorization.
We have also a partnership with Airbus for the cybersecurity, which is obviously a key concern. We have other partnership with EasyMile, as an example, you probably know that, for autonomous shuttles and with a quite long list of research institutes or academics. We will strengthen that, and we will change.
strongly our ways to work with those bodies in order to go faster and to adapt a much more agile approach for our innovation. Just to summarize, it is very simple. R&D and innovation is quite strongly embedded in the company DNA, but we've decided to continue to invest in that, and more specifically in green and smart mobility, where we intend to become the leader in that field. In the ways of working, we will implement new open and agile innovation ways of working in order to speed up our capability to put good ideas on test and then on the market. Thank you very much. I guess it is a question and answer session now.
Thank you, Bernd. Thank you, Marc. Thank you, Jeff. I will invite you on stage. We'll take a few questions for this second session. Oops. Already lining up.
I will join.
There are lots of good questions for me. Technical ones, I believe.
Hi. It is James again from Redburn. A question on the general future of digital, and almost every company on the planet has a digital strategy. It is quite clear that the cloud players are growing their revenues at 50% per annum, from Microsoft Azure to Amazon Web Services. They are the guys who have the IT stack, and they talk a lot about using that to provide the new level of analytics, whether it is predictive maintenance, remote monitoring, the many things you talk about. From the operating industrial companies are all talking about trying to get into that space. Far, it is mostly been collaborations between IT companies and industrial companies. It could be that we start to move towards a battleground for trying to get into these new data-driven services.
To what degree do you think the automation companies, whether it is Siemens or others, are trying to come in sideways to these areas of offering these services, and also the likes of Amazon Web Services are going to be trying to offer these same sort of services. Is there a competitive dynamic already developing there?
Julien, you want to take that?
Okay. Thank you. Just a technical question.
Please, go ahead.
Yes, it's a perfectly good one. By the way, we want our digital strategy with this question. Today, to be clear, Azure, Google, are our supplier for the digital capabilities on the cloud. Okay? We buy some services from their capabilities. What we want to keep and what is the difference between Amazon and Alstom is not only about the IT part, because they are very efficient on the IT part. We have two key differentiators. The first one is that we belong the network between the train and the ground. I mean, the data is collected from our product to the networks that we deliver and the gateway that they deliver, and are collected primarily firstly to our database. We capture the data, we are on the first part, and the second one is about the analytics and the algorithm.
We realize since 2006 that it's not just a question of mathematics, of statistics or just machine learning. If we apply the same technology in terms of machine learning or deep learning that Amazon or Google build for the overall market, it doesn't fit, it doesn't run. Why? Because we have to train our algorithm, our artificial intelligence, to understand the railway and to understand physics, mainly. This is why the combination between the expert from services, the expert from the engineering and the data science team is a key of our product. At the beginning, obviously, we try to use what the market is offering, in terms of analytics and machine learning, and we need to adapt and to create something more specific for our industry and for the industry.
This means that we master this part of the algorithm, and the other part, for sure, we use what the market offer in terms of technology. For sure.
The question is extremely valid. We are protected a little bit, if I may say, by the size of our market. In our discussion with digital player, I've not met any digital player who is really interested into deep diving into the rail market. They can go in the car industry because it's a massive consumer-based market. For the rail one, to get to know our rail market and the physics of the rail works, it's too much of a burden for them just for the small vertical. I don't think it will end up in the battlefield in our market. It will start by other types of massive markets where a digital company could invest into a global platform, as we see a little bit in car industries coming. Yes, Akash.
Yes. Hi. I have three questions, please. My first one is on hydrogen train. Can you give us some sort of a statistic or a number in terms of how competitive your hydrogen train is in terms of operation running cost per kilometer compared to diesel, or let's say electric? My worry is that it may be very expensive for anybody to run, and in today's environment when you can't increase prices for rail fare, then it may not be viable in that sense.
It's a complex question. The CapEx itself will cost probably 20%, 25%. The train itself, 20%, 25% above under your control, above a diesel train. The full OpEx will depend on, I would say, the cost of electricity. This is of course, a question which has no answer because the hydrogen economy works for one reason, because you can store the hydrogen and you can store energy through the hydrogen. One of the key elements that we're discussing with our partners in hydrogen is what is their cost of electricity. If you go in Northern Germany, I know that because by discussing with the guy, they can reach a level of cost of electricity which is 20% the full average cost. Why?
As you know, in Northern Germany you have fluctuations of the price of electricity, which is absolutely huge because of the wind and there are too much wind energy and not enough stable energy and therefore they can buy the electricity only at low point. With a few tanks to store the hydrogen, they can achieve this kind of average price of electricity for them which is much, much below the average price on the market. Depending on this factor, but on average, the total cost of ownership is around the same level as a diesel train. Of course, it's much below electrifying a line. Even there as well you have an arbitrage depending on the density of the line.
On a very dense line like let's say a suburban train or an urban train, you will end up saying that to electrify a line is EUR 1 million, EUR 1.5 million per kilometer. It will be cheaper to electrify the line. If you have a low density line, it will be cheaper to embark the energy and to embark the hydrogen. There is not one answer to your point. There are three ways of— you have your diesel, you have the hydrogen, you have the electrified line. In some cases we have looked at in south of France it is cheaper to put hydrogen train rather than to renovate electrical line because it is extremely expensive and there is a trend on the market that electrification and all what is linear infrastructure is more and more expensive. There are business cases which can vary.
My second question is on Aptis. How big revenue driver it can be in let's say three to five years? Can you talk about break-even like how many units do you need to sell to reach to break-even point?
It is a growth driver. It will never be the half of Alstom, that's for sure. We are targeting in the ballpark 400 buses per year under Max control. As we are not going to give you the price of the buses, you can figure that out. It's in thousands of kilo Euros. In hundreds of kilo.
Will it be break-even at 400?
Oh yes. Oh yeah. At that level it will be at the average margin of Alstom.
Finally on TMH, I think we discussed on everything other than TMH so maybe if you can talk about what you are seeing there in their operations and also on dividend policy of TMH could that be something positive for cash flow down the line?
TMH is an extremely well-run company and they have weathered the Russian crisis extremely well and they are back in profit. Last year it was particularly profitable and it will continue to grow on the back of the Russian market. It's true that it's far as a situation which is a stable situation so we are always wondering whether we can do more with them. What does it mean to do more with them? To fantastic potential to be fair, fantastic company. Now it's in Russia so there is also some country analysis to be made. That's the balance. There is a, I would say, a regular distribution of dividend which is on average 60% of their net income. This will not change so the dividend fluctuates depending on the results. In terms of financial investment it has been a very, very good financial investment.
Good afternoon it's Will from Kepler Cheuvreux. On signaling a couple of questions please. Just first of all, I think that one of the ideas as you mentioned behind ERTMS, the new signaling system in Europe was to create standardization and to reduce the cost to the consumer or to the operator. Can you just talk a little bit about what happens when you move to a fully standardized system? Does it change the barriers to entry for new players and does it also change the pricing which you can achieve for certain elements of the signaling system that you're selling, which is of course the end game for the regulator or for the European Commission? Then on CASCO, can you just explain to us a little bit about who owns the technology and how do you share that?
I mean CRSC is not an impartial competitor or player. They are looking to expand overseas as well. When they go overseas and try to promote CASCO who has the rights to market and this type of approach on the signaling business please?
I'll answer the ERTMS related question first. Like I said when ERTMS has been designed the primary purpose was to allow cross-border operations across Europe
It has then been deployed, and it will continue being deployed as a European standard. In reality, since mainline in Europe is the largest market in the world, it is becoming a global standard. ERTMS being deployed at the moment in Australia or in Middle East, for instance. On your question on whether standardization will bring down prices and/or lower the entry barriers for smaller players, I would say it's a fairly difficult question. One, regarding the entry barriers, you need two elements to be able to address the European market, a European country with the ERTMS technology. Not only you need to master the technology itself, but you need to have a homologated interlocking in this country as well, because more and more, those markets are boldened markets.
If you take Denmark, for instance, when they decided to roll out ERTMS across the country, they took benefit of this large program to modernize the whole interlockings as well. There are two barriers to entry. One is mastering the technology of ERTMS, and second, the interlocking, which is more a national concept. It's a barrier to everyone. Second element is ERTMS is a standard, but it's a fairly evolving standard. You heard me mentioning the Baseline three, meaning that there's been a Baseline one, Baseline two. Baseline three is actually R2. There's like 3.1, then 3.2. There is a need to address more and more countries and to address more and more expectations, be it ability to maintain those systems in a standard manner, cybersecurity requirement will be embedded, and so on and so forth.
You need to have an ability to further develop along this standard, which is fairly R&D intensive, which creates a scale entry barrier. You need to have the firepower to follow those regulations, although a standard one, increasing the scale of the market. You still need to be able to invest, so you need financial resources and human resources to do so. That's an entry barrier for smaller players. You will notice, by the way, that actually very few players are competing today in the ERTMS market, both for the wayside and for the onboard, and we are one of those, very strong in both. The second question on CASCO and CRSC. The JV with CRSC is 15 years old or so.
Has a very clear, let's say, shareholding agreement, where anything which is related to opportunities outside of China need to get the green light from both shareholder before being explored. In simple terms, when there is an opportunity arising, I don't know, in Middle East, in Latin America, or anywhere else, where CASCO would be interested to play, CASCO management team needs to get a green light from Alstom to bid. Sometimes it happens. We have overseas successes. Sometimes it does not. Does it answer your question? Yeah. On the sharing of technology. The core technology of what CASCO operates, in particular in the urban market, which is basically 2/3 of the revenue of CASCO, is based on Alstom technology, for which the IP is owned by CASCO.
Yes.
Hi, it's Guillermo Peigneux from UBS. A follow-up on signaling as well. Could you remind us a bit of the integration of GE Signaling business, on whether actually that is helping you to grow in a particular way in the U.S. at all? Thanks.
Yeah, I'll do that. Sorry. My mistake, when I said the IP, yes. The technology developed by CASCO is an Alstom technology with the IP owned by Alstom, of course. Sorry for the
The integration of GE Signaling has been an enormous success, to be honest. You know that they were very much present in North America on the freight and mining signaling activities. Their activities overseas was, I would say, almost marginal. One of the reason why we're so strong in the North American market in freight and mining is actually, as we say, a side effect of capitalizing on the critical mass given by this acquisition. We, Alstom, historically had a presence on this market from our unit in Rochester, New York State, and we created synergies, in particular industrial synergies, through the integration process. Today, we use the former GE factories close to Kansas City to manufacture all the products from the historical GE portfolio, as well as the historical Alstom portfolio in one single set of factories.
I have to say that from a management standpoint, it has been a reverse takeover because most of our team covering North America is actually coming from GE Signaling.
Thank you. Gaël de-Bray from Deutsche Bank. Two questions. The first one is on the service part of the business. I guess across industries and not just mobility, we see a lot of clients basically willing to increase the service, the maintenance interval, so that they could spend actually less and less on maintenance. How do you consider, how do you weigh
developing predictive maintenance models, digital services offerings, versus at the same time growing the parts business, because I guess there is some sort of cannibalization effect here. That's question number one. The other question is on the signaling business. You said you have 12 countries with a homologated interlocking. What are the key largest countries missing in your wish list? Could you also provide the breakdown of sales between urban and mainline signaling and explain why one has been more successful than the other historically?
The first one on service, it's clear that what we said, there is a cannibalization effect. Either you do the full maintenance or you sell parts. Both together is not compatible. Clearly, our business model is to help our dear customers to optimize, of course, maintenance cost whilst increasing reliability and availability. Yes, theoretically, it has an impact. The more you reduce the cost, the less volume there is in the maintenance market. It is compensated by our gain in market share and an overall growing market. We've seen that in the last couple of years, and this trend will for sure continue.
Just, if I may say, unfortunately, as you probably have noticed from Bernd's presentation, the spare part business for us is relatively small. There are very few spare parts which we are manufacturing ourselves, which are used regularly by our customer. They are usually actually purchasing spare parts to our own subcontractor. When through maintenance contract, we are decreasing the need for new spare parts, in most cases, these are spare parts actually manufactured by our suppliers themselves and not ourselves. We are not in this kind of paradox situation or where we would be tempted not to go for maintenance to sell a lot of our spare parts. For us, the game is relatively simple. On signaling?
To the first question, which are the countries in which we do not have an homologated interlocking, you can refer to the chart I presented. You see where we are.
Where we are not
Where we are not. Amongst the large European countries in which we are not present, of course, there is no secret we are not present in Germany. We are very strong in the onboard market in Germany, paradoxically. By the way, one of our key customers is actually one of our competitors.
Quite well-known
Quite well-known, a very well-known rolling stock and signaling player based in Germany, who procures its onboard units from us. On the wayside, on the contrary, we are not present. If it was my wish list to Santa, of course, I would like to put Germany on the top of the list. To the question, what's the split of revenue urban to mainline? I won't answer this question. As simple as that.
For the future or for the past?
For the numbers, your problem. No numbers. We were successful in urban through our globalization. Typically, India, we are extremely successful in India. As we said, our technology is number one in India, and this was entirely due to our globalization. As I was alluding to a little bit on the comparison between urban and mainline, it's clear that we have more upside potential in mainline, meaning that probably we have not grown as fast in mainline as we have grown in urban, and we should recover that situation.
Yes.
Laurent Richème, AXA XL Management. How do you compare your DNA in signaling? You've got two competitors who are bigger than you, maybe scale effect would be in their favor. To what extent you can win market shares over those two competitors, and to what extent your difference may help you in the future?
I think to make it simple, I do consider that with the number two on the chart, we are roughly equivalent, because to be clear, Thales has a ticketing business which is included there and which does not give any economies of scale in their signaling. It's a different activity. If you compare apple to apple without the ticketing on their side, it's on the same ground. It's clear that now Siemens is larger than we are, both on mainline, due to a larger number of countries where they have this interlocking, and in particular, of course, Germany. In urban, they are probably of a similar size on what is a standard solution, but they benefit as well from a strong market in Germany, but which is non-conventional urban, so it's not the CBTC, which is a classical one, but it's also a very locally driven technology.
On that one, they don't have so much of a economy of scale. It's true on mainline, but it's not true necessarily on urban.
There is no reason with our global footprint, and as I said this morning, we have this key asset of India. With our global footprint, with India, with the success of resource, which has been shown by Bernd, there is no reason why we cannot compete with the number two absolutely clear. We are, and I believe that being a pure mobility player is bringing a lot also in terms of systems, in terms of customer intimacy, rather having that as a very marginal activity in your portfolio. Compared to cement, it's clear that we need to push and to get some access to some markets, to some new technologies in order to catch up. That's clear.
Okay.
One question on the back. Yeah. Sure.
A follow-up question on services, please.
Yeah.
I think Europe is trying to accelerate the process of liberalization. Some of the fast lines in France are opening up by 2020. Your service provision to independent providers is very obvious. What are you seeing in terms of moving or changing business models with two of your biggest potential customers that keep all their service in-house? I think of SNCF or Deutsche Bahn.
Yeah.
How are their service operations going to come under increased scrutiny? Is there going to be a change in the business models, is that going to lead to a big change over three or five years?
Thank you for the question. It's really a key question on those two big players, because clearly Germany, in terms of implemented rail solutions is the biggest in Germany. Deutsche Bahn is very clear on their in-house policy, same as for SNCF and RATP to some extent. We focus now on what is our added value for those type of customers. We need really to ask this question, what do we bring to the table? These are digital solutions. These are advanced maintenance processes, because who says predictive and prognostic maintenance schemes requires a whole different logic to execute those tasks. It's highly dynamic. We have solutions, and we will package those in order to bring that to this type of customers. We really focus on high-value services.
We will not get into full maintenance because for political reasons, they will keep the blue color. That's why we have also talked about TSSA, Technical Service and Spare Supply Agreements. It's really focusing on what is the value we can bring to those customers.
Okay. Thank you very much. We close by one or two remarks. Just one or two key takeaways, as you have seen during all the day. We have achieved our 2020 strategy. We want to leverage on that. We have understood what is the main philosophy of our new strategic plan is now that we are a key player on all our geographies, that we have a large and diversified portfolio and a competitive offering. We want to really grow on this market, and we are helped. We don't need to find new hidden markets because all the markets are in front of us. There are a lot of positive and tailwind markets. We need to grasp this opportunity. It's just up to us. How you call it? It's self-help. That's how you call it. It's a self-help plan, so everything is in our hands.
We don't need any external support because the market are in front of us in order to become number one or number two on all these markets. I really want to thank you for being here today. You have all been punished because some of you have taken the planes, and therefore, it's extreme temperature today. Thank you for having come all the way along. Next time it will be in 2022 when we will have overperformed our plan one year in advance. Hopefully. Thanks a lot.