Good afternoon from Södertälje. It's a great pleasure to have you all here this afternoon. I would also like to welcome those who follow our event via the website. Thank you all for joining us today. To those who have been with us this morning, I hope that you really enjoyed the interaction with our experts and the teachings, all the topics you learned a lot, hopefully, and ultimately, of course, the test drives and experiencing yourself how it feels to drive our trucks and our buses. Also for the afternoon, and you can see it here, we have put together an interesting program for you. Our board members will present to you the TRATON Group, but also all our brands. That's Scania, MAN, VWCO, and our newest member of the family, Navistar. Unfortunately, Mathias tested positive yesterday morning.
We have to be flexible, and we have to adjust, and we will. I'm glad to say that Mathias is fine, so he will be able to take part virtually. You will see him in 50, 60 minutes. We will also have two Q&A sessions during the presentation time. There's one after the Navistar presentation, and there will be another one in the end, and we will come back to that later. In addition, we will have a break after the presentation of Alexander on MAN. Before we start, as always, let us have a look at disclaimer. You will probably be very glad to hear that I'm not going to read this all now. Let us take it for the record for the purpose of this event. One last thing, if I may.
Please turn off or mute your mobile phones if you haven't done so already. Now I wish you an insightful afternoon with TRATON. Christian, the stage is yours. Thank you.
Great. Thanks, Lars. From my side, hi, everyone again, and all the newcomers online. TRATON might be a rather young organization, but founded 2015, but quite a lot has actually happened since the establishment, and also for me personally, by the way. I got a question from someone, what was your career? Well, it was basically 27 years in Scania, or 25 years in Scania, doing as everyone in Scania. Then I was thrown into this TRATON idea as CEO, and then came back as CEO of Scania last May, and then since October, also as CEO of TRATON. You're absolutely allowed to ask how the hell that happened. I also don't really know. It has happened.
I think I'm now the right guy to explain to you the background and the strategy going forward. A lot happened during this first period of the company. We did the IPO because we needed some more leg room from Volkswagen. We did the acquisition of Navistar because we needed to address the North American profit pool. We had to do the squeeze out of the MAN double layer holding. It cost us a lot of money, but it was necessary to create efficiency internally. We created a joint venture with our fiercest competitors in order to start to address the charging market and drive actually both politicians and the rest of this ecosystem forward to get electric vehicles on the road.
We created, which is perhaps the most important synergy project so far, the common driveline, which I will talk more about. Looking back, when we set out to create a global champ strategy, the global champion strategy, we put up a number of questions, and I think they were the right ones back then. The first one was, how do we develop as a group and an own entity? I think the IPO with its first step of the 10% free float was the answer to that. We then talked about how can we achieve more scale, more synergies between the brands, while the answer was the creation of the FPT project, so the common driveline addressing 60% of the value of a heavy commercial vehicle with an ICE engine.
We talked about where are the profit pools and where are we not present. That we cover Europe, we cover Latin America very well. North America, that's number one. That's why we started the alliance with Navistar, which ended up in the acquisition first of July last year. We asked, and that's pretty funny, will electrification and autonomous play a role? What do you think? Today that's rather obvious. Luckily, we came to the same conclusion. It will play a role. We started to set out our product plans for the first battery electric vehicles and also the autonomous technologies. Today, it's really about looking forward and trying to look more into the future and really see can we have rather an eight or a 10-year perspective, because that's where TRATON as a group should be.
Then you will hear more from the brands, and that will be a little bit more short-term, looking into what we are perhaps doing from now until five years. With the TRATON perspective, we should look further ahead. The three most relevant questions for us right now would be the ones you see on the screen. How can we ensure that everything we do is driven by sustainability and by the Paris Agreement? Secondly, how do we, and I think perhaps the most important for this audience, how do we create more value? How are we more consistent and disciplined in creating value for the shareholders?
Finally, how can we adapt to the new business landscape with new business models, with autonomous electrified connected vehicles, to cope also with the startup scene that is challenging us here? These are the three basic pillars of the TRATON strategy, and I will take you through them one by one. Then, as Lars said, we will open up with a Q&A session where I love to have your questions and have a dialogue going on these pillars. Let me start with the first pillar, the responsible company, putting sustainability as top priority to everything we do. For our industry, it's of course, predominantly about decarbonization. That's where we have the biggest problem. We represent 5.2% of the world's CO2 emissions, all together.
Beyond that, looking, as I said, 10 years ahead, there is something beyond zero tailpipe, and that is circularity. We will have to cover that, and I'm coming back to that as well. People and diversity. Annette, you were joking this morning, and I think you made that point very well, that we are working very hard to become a more diverse company. That comes through inclusion, where everyone counts. I think that's an absolute prerequisite to be a modern workplace and to be attractive as an employer, just as is, by the way, the sustainability work that we're doing. Finally, governance and ethics. Of course, these are key principles that are non-negotiable, and this will be part of making our company responsible. Let's start by looking a little bit deeper into our strategic approach then towards sustainability.
As I said, we put it at the core of our strategy. It also means that we're in a way reusing the idea in Scania already from 2015, where we said that this will be the key to be profitable, attractive, getting financing, whatever you want in the future. We do it not as a separate project or a side function in our companies. It's an integrated part of what every collaborator does every day of the year. That's the approach. It's then building on that everyone needs to have the understanding, how do I, in my work, influence our journey forward when it comes to predominantly then the CO2 footprint. Of course, that CO2 footprint and that journey needs to be anchored in science. That's why we so much like the Science Based Targets initiative.
Let me come back to that in a minute. Then we have learned from many of you, by the way, that we need to improve when it comes to our transparency in all the ESG areas. Here we have decided to take a bigger step and really become the benchmark when it comes to transparency and ESG data disclosure. Of course, we take in the social and governance area into the holistic sustainability approach. For today, let me focus on the E in the ESG because again, I think the climate challenge and the global warming is our most urgent and imminent priority as an industry and as a group.
We commit to the Paris Agreement, and I am actually proud to say that not only do we have Scania as the first brand in the industry claiming the leadership and the drive towards sustainable transport systems, but now also MAN, who has both applied and been approved by the science-based initiatives. On top of that, having both Volkswagen and Navistar decided to join in meaning that we will within short have the whole group on a science-based model following the Paris Agreement towards the 1.5-degree maximum. That's super important because it forces all the parts of our value chain to actually start to measure. It doesn't matter if you're a local workshop here in Södertälje serving a few customers, or if you're running an assembly line or a foundry, you're in here and you're being measured, and we need to show everyday progress.
Super powerful tool. Just a few numbers here. They are ambitious. If you take Scope 1 and 2, our own impact and our supply chain impact, we're talking on Scania on 50%, we're talking on MAN on 70%. Why are the different numbers different? Because we have different starting times. Alexander, if you start later, you also have to do more faster, right? There is no magic, but we're following the same curve. That's the target. If you think that is ambitious, then you look to Scope 3, that seems less, but it's actually even more ambitious because that goes about the usage of our products. The usage of our products is not really in our hands. It's within the hands of our customers.
To reduce 20% of the entire rolling fleet or 28%, MAN is a huge task. Here is a picture that I like very much, trying to show some of the challenges facing us on the user side. From where we are basically today, you can see that the light blue and the big circle on the combustion engine side here is how the CO2 is from the total system is coming out through the user phase. Now, if we would manage to get all customers over to BEV vehicles instead. That's the middle circle with the electricity mix of Europe a couple of years ago, but just to simplify.
You can see, well, it's proportionally smaller, meaning that we do decrease the CO2, but of course not as much as we want because batteries produce CO2 emission in the production phase, but predominantly because the electricity mix contains just too much fossil. If we are optimistic and look forward and say, Europe is gonna deliver on the Fit for 55, Europe is gonna have a completely different energy mix by 2030. This is actually what is predicted to happen, not only from the political side, also from the energy suppliers, and we talk to a lot of them. You can see the size of that circle is very, very small, which is great news. You can also see that the dark blue side, which is our own production footprint, suddenly becomes dominating again.
That's why we need to start to talk about circular and think about how do we source our battery, how do we produce our steel, and make sure that that also is. Or else we will get stuck there. That just so you see which are the step on this long-term journey. We believe a lot in battery electric in the TRATON Group, and that goes for all our brands. This picture is trying to illustrate why we are so much in favor. I don't know if it's looking complicated, but the basic physical fact is that starting with green energy, green electricity, which you do regardless if you're gonna transition through hydrogen and a fuel cell, or if you go into a battery and then go into an electric motor, it's the same.
You will need 3x more green electricity to propel the very same vehicle with the very same charge. If you assume that that electricity will continue to cost something, I think it's gonna be very hard for the customers to jump onto the hydrogen train. Why are there then so many in our industry talking about hydrogen? Well, there are, of course, reasons. One is payload. Four or Five tons less, of course, there are applications where that makes a difference. Faster fueling time or whatever you call it, charging versus filling up with gas. Of course, there's an advantage for the fuel, for the fuel cell vehicle. For that to offset 3x higher cost for the energy, I think it takes a lot, and I think that's gonna be a niche product.
You can just imagine how much money and effort we put today into the combustion engine to save 1% of fuel, and what a tremendous advantage we get in the market when we manage to bring a technology that gives 1% fuel saving. Then you can just think that, well, 1%, what is that compared to 3x . That's why we remain skeptical to the volume development of hydrogen. It doesn't mean that we're not developing it. We classify our technologies from core technology, which we wanna control in-house, meaning that we develop and we manufacture, over to strategic, which means that we need to have good insight into it, good control over it, but it can be done by partners, to basically commodities which we always buy from someone else that manufactures it.
We have classified then the fuel cell vehicles as strategic, meaning that we today work with a lot of partners, and we're learning a lot. We are with vehicles in the market, both in Norway and in Sweden. The first Scanias are rolling, and we're partnering up with a number of fuel cell suppliers to evaluate which is the best way forward here, but it's gonna be a partnership approach. I love to discuss, I know there will be questions on this in the Q&A, so I love to discuss more of it going forward. The transition then over to what we believe will predominantly be battery electric is gonna happen exactly like this. No, I'm just joking. Here is an illustrative way how we are transitioning towards 2040, which is rather soon, with an absolute majority of battery electric.
You can see that there is... Well, there is a yellow part that turns greenish. We're trying to illustrate that remaining part of combustion engines will be fueled with alternative fuels. We're talking biofuels, we're talking biogas, we're talking HVO, we're talking synthetic fuels. Because there are simply, just like with the hydrogen, there are simply use cases, there are simply geographies where this just fits better or where the preconditions for battery electric are not in place. Which are these preconditions? Charging, of course, but more so the business case for our customers. Then there might, of course, be legislative things that steer this in different directions, and we don't really know.
This is an adoption curve that is, of course, very generic, but it also tells you that we believe already 2030, already in eight years, somewhere around half of our sales will have to be transitioned into battery electric vehicles, which is a huge change for all of us in this industry. Therefore, we also need to put more resources to this. Therefore, we are upping our R&D budget. In the Volkswagen world, you work with the five-year plans, and here is how our five-year planning has evolved. Moving from an increase from 1 to 1.6, and then another increase decided this year, I think we communicated this at the Q1 release, that we need to increase that even more. We're gonna put 2.6. Is this on top money? You can ask Annette, she will say no.
It's not. Of course, we need then to put less resources into the combustion engine world. That combustion engine world, we gladly just launch a completely brand new driveline that you hopefully do, at least those of you in the room have test driven here during the morning, the Scania Super, which will gradually come into all our brands. Good. What is then coming out of this? Well, we already have in all the brands production and mainly serial production of electric, full electric vehicles.
Here is snapshots, so you see everything from the smaller distribution vehicle, the e-Delivery, that you could test drive from Roberto and his team in Volkswagen Camiones. Two, the heavier applications such as the Aman Electric City Bus, the MAN Lion's City E, or the Scania PHEV distribution truck, 29 tons of payload, two and three axles. This is just the starting point. There is going to be an avalanche of new models coming out from all our brands into the market. Before going into that, let me address a few misconceptions that we believe exist in the market around electric and battery electric vehicles. Here's the first one. Battery electric vehicles do not fit high loads on heavy applications. This beauty is going to be delivered to a customer, and it's one truck this week.
It's ready for the delivery here in Södertälje. It's going to Boliden. As you... Boliden, most of you know, but they are into mining and minerals. We choose by purpose and application that is very heavy. It's off the road. You can see it's a gravel road, and it's Arctic conditions, meaning we can operate here - 10, - 20, even -25, northern parts of Sweden. It's not one of a kind. We've done with Jula Logistics, we've done with LKAB in northern Sweden. We announced a couple of weeks ago with Dagab, the double semi-trailer, extra long vehicle. We're kind of just with small series, testing the boundaries and showing both our customer base, but also ourselves that this is possible.
Rather than rolling out hundreds of distribution vehicles, we're saying, for us, we need also to understand what are the limits. I can tell you that we learn so much by putting these one vehicles on the roads. Sometimes the questions from customers are not at all the ones that you were expecting. Super interesting way to approach, and I know you learned about the modular system, and here we use the modular approach to get these small series of vehicles quickly into the market. Another misconception is that, BEV is not for long haulage. BEV is only for inner city or for really short distances. When we look to the financial use case, actually, the long haulage vehicles are the ones best- suited for battery electric vehicles. You can ask, why is that?
Well, it's simply because these vehicles operate at very high loads, meaning very high energy consumption. When you drive a car on the highway, you're using 5%-10% of the available power of that vehicle. When you drive a truck like that, you're using 80% of the available power and torque, meaning very high use of energy. And therefore, we talk about charging here, but this can only work if there is a charging network available.
When we talk to customers and then discuss deliveries of vehicles, the first question is the business case, and the second question is, "Where can I charge?" In order to make this not a hen or the egg discussion, we contacted our fiercest competitor, Volvo, Daimler, as I said in the beginning, and asked, "Shouldn't we go together here and make sure that we get started?" Therefore, we founded the joint venture last December, and we're just waiting now for the clearance from the antitrust authority in the European Union to say, "Okay, you're good to go." Then we will actually start to construct. With EUR 500 million put together on the table, we estimate that we will be able to put up somewhere in the range of 1,500, maybe 2,000 charging stations. That will not do the job.
I know that you all think that. That's also not the idea. The idea is that this will be inspirational and this will drive others to join in. I can tell you we never had, and I think, Atif, your phone has been ringing constantly since we announced this. We never had so many from the old oil companies, from the energy suppliers, from the pension funds saying, "Hey, how can we join this initiative? This must be something great." I think we have already achieved part of the purpose. Remember, battery electric vehicle, long haulage is perfect. Third misconception, we as manufacturers gonna lose all our repair and maintenance base when customers shift to battery, because that we heard from Tesla cars. Yes, we're gonna lose certainly part of the maintenance because there are fewer moving parts and not bathing in oil anymore.
On the repair side, we see and we start to learn now with vehicles in the field and also operating other brands vehicles, that there is a lot of repair work to be done, showing that we need to be there with an uptime focus, a professional network. The other thing is that when we now start to deliver the first vehicles, the thing that our customers are really worried about is the battery. Everyone has an iPhone, everyone knows that after three years, you have to throw it away just because the battery doesn't take charge anymore. Therefore, customers want us to take over the responsibility of the battery, meaning giving a very long warranty guarantee on that battery, which we do gladly because we find out that that is not at all the case.
On the opposite, we find that the battery basically is with the only 10% deterioration lasting the lifetime of the vehicle. Super interesting learning. We take that risk, but what is then our demand on the customer? Well, it's of course, that we get 100% repair and maintenance responsibility for that vehicle. They are not allowed to touch. The competition we have today with non-OEMs, with repair shops at the corner, is basically going to disappear. We anticipate that we will have close to 100% R&M coverage on this vehicle. That's actually adding approximately another. Well, it's basically half we have today, and it's doubling up our potential profit pool. Then there are new services, of course, coming with battery electric vehicle.
That's what we're trying to say here, that services such as charging is something that a lot of customers ask for. With electricity also comes other challenges for customers. Where do I charge? How do I optimize my routing? What is the cost of energy at that charging point? I'm not saying that we're gonna solve all these problems. I'm just painting the picture and saying there will be other services that we, if we're good, can tap into and that can actually grow our services sales rather than diminish them. I mentioned on the sustainability theme also circular as something that is coming beyond zero emission tailpipe and decarbonization. We are of course already doing good things in the TRATON Group.
All of our brands are working with remanufacturing, and I think Navistar has the most advanced program with more than 11,000 part numbers already in remanufacturing programs. With Scania, we're working with Northvolt, as you know, and we're committing to get the batteries back into their right now Norwegian plant, where they reuse a big proportion of the raw material in the batteries. We are reusing metals. We have a quite advanced program in MAN, and of course, we do that in order. We're doing a lot, but to be honest, it's just scratching the surface compared to really talking about circularity. Because really talking about circularity implies that our products need to be designed for reuse from the start. We cannot mix materials we know. We cannot glue stuff as we do. We just have to assemble and develop them differently.
That, you imagine, with our product life cycle, is something for the long term. We also need to look into our business models. There, I think we're closer because this is a completely circular business model requires subscription base or pay-as-you-go kind of business model. There with our operational leases, with our rental solutions, we are coming closer to transport as a service, and I think that is a requirement. Finally, we would, of course, also need to look into our supply chain and work in a completely different way, both upstream and downstream, in order to manage end of life and also the exchange of material during the life cycle of the vehicle. Much more like the airplane industry is working. That was just to give you some long-term perspective.
If I say 10 years, we are beyond the challenge of decarbonization, and then our true challenge will be circularity. We have already started. That's my main message. Okay, let's change chapter or pillar and start talking about the value creation. The value creation in TRATON, at least the big lines, are about these three areas. First of all, and this is a cultural thing, we are now rebuilding the TRATON Group into a group where the responsibility and the authority to produce profits is clearly with the brands. Every brand is responsible that they can refinance their own investments that they need to do. I have a fantastic team with very high acceptance saying that, "Yes, this is our responsibility.
We are not hiding behind someone else." The integration or whatever you call it of Navistar into our system, into our group, is of course another fantastic profit pool and value creation opportunity that we will work very hard with, not just one year, but many years. This will be a journey, but this is certainly top two or top one on our value creation journey. China, as I mentioned in the beginning, Asia and China are profit pools that are growing quickly, not just in terms of number of vehicles, but actually in terms of service content and in terms of technology level, meaning more advanced vehicles. But more about that later. I think, yeah, this is perhaps one slide that many of you in the room have been waiting for.
What are we committing to? What are our targets for the different brands? Annette will supply much more details why we're coming to these numbers. Of course, also as CEOs, we will talk about our brands. Just quickly to paint the picture, we're looking at the Scania that should be able to quickly come back to the 12% return on sales level based on being the first on the sustainability journey, which will be more and more important from a business perspective, based on much more potential on the service model, and I will talk more about that when I talk in the Scania section, but also the growth opportunity we see with more capacity to the system and addressing Asia and China.
MAN, Alexander and your team, the restructuring program number four is, program number one under your leadership is the first one that is actually paying off, and that is actually addressing the real fixed cost problems. Seeing really good progress, but not only also leveraging the zero-emission vehicles, but predominantly the TG3, the new product, the all new product generation launched from MAN. Roberto, while you have already proven that you can be on 8% with your team, but it's now about consistency, keeping the pricing power with your great product portfolio, and to capture more and more of the service business. Finally, Navistar, Mathias and his team, they see a target, a reasonable target on 9%.
Of course, with the use of European technology coming through the TRATON Group, but also with already a fantastic dealer network introducing more of the European contract-based services that are so important to the profitability of our European brands. All right, more about that in a moment. We also should paint some kind of picture, how does the future look like? Where do we see the markets going? And again, long-term. If we take the first column, we see that Europe has more to give. We don't see the peak, we see demand coming for more years. South America, we're probably closer to the peak, and we're having an emission step that always create effects with PROCONVE P8 coming into the market. North America, more cyclicality is expected, and we're probably much closer to the peak than we are in Europe.
China, while we have the emission level, China VI introduced into the market, and we have a very steep decrease in China right now. Part of that is, of course, but we don't know how much, related to the COVID and the lockdowns in the cities. That China is gonna come back, maybe not to the levels before, but to good levels, that's absolutely clear. The rest of the world, well, that's of course, very, very varied and difficult to talk about. When we look into electrification then, where will electrification happen first? Well, for us, it's very clear that the front runners are going to be Europe, U.S., and China. Proportion of hydrogen into the mix that I talked about was Europe, where we see 10%-ish.
U.S., we probably will see more because the simple fact that drive time is allowed to be longer and braking time is allowed to be shorter, meaning that more energy needs to be put into the vehicle faster. When it comes to the services potential and the maturity, we also see different starting points in different geography. Of course, Europe is advanced, but we still see much more, as I was into with battery electric, where we can capture a potential. South America, the market is maturing, but there's a long journey and there's a lot of business to capture in the coming years. North America, same thing as Europe. Whereas China, we start to see a maturing, which is very positive to us, where customers are rather paying for uptime than for just a low product cost. More on China then.
Record year, 2021, 1.4 million heavy commercial vehicles, biggest in the world, no doubt about it. That in itself is not very interesting. What is interesting is that we see the shift from the kind of the budget value C segment vehicles up to B and even B+ vehicles, where uptime, operational cost efficiency starts to be important. That is not A segment, not the imported segment yet. That is more or less flat and has been irritatingly flat for many, many years. The B+ is certainly growing. If we pair that with the really good news that Scania managed as the first manufacturer, non-Chinese manufacturer, to get the license to produce without a JV partner, I think we have a very interesting opportunity coming up.
Good news is that we have now managed to achieve all other permits and licenses you need, and the groundbreaking ceremony will happen in the coming weeks. In the beginning of June, we will start the construction in Rugao, which is outside northwest of Shanghai, 150 km , and build our first factory based on that license. Super interesting to follow, and this is something we will talk more about in the coming years, of course. The more long-term future, we call this chapter TRATON Accelerated. It is about how to handle new business model, it is about going much more into partnerships and not controlling the whole value chain ourselves, and it is about embracing digital.
Embracing digital in the business, but of course, also embracing digital in the way we run our operations, and so that we can do that in a much more efficient way. What everyone thinks about in this future is these bots or these totally autonomous robots running around. Of course, they are connected, of course, they are electrified, and they are visualized here as some kind of a small load carrier. What do you need in order to be able to manage such a system? Well, of course, you need to be able to develop that vehicle.
We believe that these vehicles are not gonna be suddenly transformed into small bots that are carrying around pallets, but we believe that the container standard in the world is not gonna change, and we believe that the pallet standard in the world is not gonna change. Hence, the load carrier is gonna be pretty much the same, meaning that big and heavy vehicles are going to be needed. They are going to have to have maintenance and repair and uptime just as our vehicles today. The second thing you need is the brain, and here is the software. Here is the entire stack with all the capabilities to understand where you are and what is happening around you and take the right decisions.
Both of these things we are developing predominantly ourselves, whereas of course, in the middle one, we are going into partnership for certain layers in the stack, but we also think of getting our own capabilities to do everything there. You need a control tower, because in the end, in our business, it's about logistics. That control tower is something we also learn through different initiatives in the group how to do. Of course, here we also partner up with companies that knows and has as their core profession to run a fleet and tell which vehicle to go where and so on and so forth. Our vision here is that we really continue to build the ecosystem that we are already very good at, but build it out based on the new technology. Some of these puzzle pieces we have, some we don't.
If you take transport management, handling then admin and transport planning, and real-time tracking, parts of this we have in our fleet management offering. Parts of that we are acquiring. We acquired Lumo through our RIO branch a couple of months ago. We're adding puzzle pieces to to this system. The fleet management we have already, and we are the champion in connected vehicle, as I think many of you know. The puzzle pieces are in place. Then comes charging, and I mentioned that talking about battery electric. We believe that this will be very, very important going forward, and we get that feedback clearly from our customers. Excuse me.
We see that there's a need for us to work as a so-called multi-mobility service provider, meaning that we will have to help our customers how to handle the state of charge of their vehicles, where to go, how to charge, what to pay, and actually run that interface between them and the ones who actually operate the charging stations. We need to do that predominantly from the start in their depots, so where they actually charge right now. It's 99% in the depot. Next is the destinations, and finally, the last step is to charge en route, and that's what we're trying to do then through our joint venture. In order to do this, any of this, I would say, in a professional way, we need to work more intensively with the financial services set up.
Here is how it looks today. We have Scania with its own captive financial services operation. We have both MAN and Volkswagen that is enjoying the service of Volkswagen Financial Services. We have Navistar that has been provided up until now through the Bank of Montreal. The difference between the Scania setup and the other setups is that the Scania is tailor-made to the specific needs of commercial vehicle industry, meaning that we can offer tailor-made solution to basically each and every customer, including or not including different services, insurance, buybacks, all the way up to rental solutions. We think that is gonna be necessary in the future, and therefore for all our brands, not least to take on the electrification challenge. Therefore, we're now working to create a common financial services for TRATON.
I think I saw Johan Haeggman here somewhere in the room. Johan is up there. Have a chat with Johan. Some of you know him as previous CFO of Scania. He has taken on the challenge to build this up. In very good discussion with Volkswagen, we're finding a way forward for MAN and for Volkswagen Caminhões e Ônibus. We have actually canceled the contract with Bank of Montreal for Navistar, which has a two-year notice period. By the beginning of 2023, we can start to supply our own financial services for the Navistar International customers, I should say. Based on, and here's where the scale effect is coming in, based on a common backbone, based on what we already have, systems, knowledge, people in the Scania Financial Services system. That of course needs to be reinforced, but we can reuse a lot.
Then build front offices branded by the brands in every market where there is sufficient potential to implement it. That was a quick run-through of the main three pillars of our strategy that we started to talk about already last year. I personally also felt there was something missing. When I stepped into this job and accepted to be the CEO also of TRATON, I said, "There's one chapter missing. There's one pillar missing," and that is how to get things done. We've had fantastic ideas in many areas, but we never managed to get it through. Therefore, we decided to add a chapter that we call strategy execution and governance. Just to address that rather quickly, you have heard about modular system when you walked through the tech booths.
We need to decide if we should ever get scale, real scale, smart scale out of this group. We need to decide for one product system. Therefore, we are going to build up a TRATON modular system based on the same principle as we built the Scania modular system upon, which is that we create standardized interfaces, but not only in one brand, but throughout the group, that we work with the principle same need, identical solution. Finally, and perhaps the most difficult, to have well-balanced performance steps. Performance steps we're also going to use in order to differentiate, because we don't want our products to be identical, at least not in markets where we are with several brands present.
This, and you heard in the presentation again, you heard that this is the question that the automotive industry has been asking itself since Henry Ford, how can you both customize to actually allow the customer or to get the customer to pay more and at the same time gain scale? Tailor-making or mass customization, the modular system is addressing and actually has proven to be working, and therefore, that is the way we're going. We need to accelerate. We have, of course, managed to gain synergies through purchasing, and here illustrated by the most simple thing we have in our industry, you think, tires. It's not that simple. We have more than 1,000 different tires. Yes, bundling tires, you can gain something in terms of purchasing power, but not much.
When you move into the more R&D-intensive parts that we do in-house, you can gain more, and therefore, the FPP is so important to us. What we learn with the FPP, even if the components are basically the same, we will lose part of the synergies when we do the integration work of these components because we do them then under different cabs into different chassis. Meaning that all the interfaces, whether that is water, electricity, physical interfaces, fixing the stuff to the frame, different. Which means that we have to do variants. Variants are driving complexity. The part numbers are not identical. We do not reach the same need identical solution principle. Therefore, we need to continue to move up. You see there's a time axis, meaning we cannot do this like that.
It's something that needs to be now step-by-step, component series by component series, taken into account that we move, and we will invest into driving this into a common modular system. Then we can get rid of integration costs, and then we can get rid of a lot of double work, double validation. I don't, I'm not sure if Claus talked about software, but this principle applies perfectly also to software. I think many of you know that 70% or more of the cost in developing software is in testing. If we need only to test software on one platform, we can save enormously, or we can get much more resources. Pick your choice. This requires, of course, also that we align our IT infrastructure, and that is another thing which will take investments going forward, but that will pay off rather quickly.
Change is needed. Is then the structure and the organization and the governance, and therefore, I'm super happy that I managed to get also the supervisory board of TRATON to say, "Yes, we're going this way," because it means we're setting up a new way to run development and product management in our group. The group product management has already been communicated, and we have Catharina Modahl Nilsson here with us, who is leading that function, working then not for a brand, but working for all brands under the TRATON umbrella, meaning that Catharina Modahl Nilsson needs to make sure that we develop the right performance steps and bring the right value to customer for all brands throughout these technology areas.
The technology areas that we are grouping are, of course, around the new technology such as e-mobility, autonomous software and E/E, but also what we need to master the traditional technologies, meaning ICE powertrain, basic chassis and cab, and bus solutions. In each of these technology areas, there will be one head. That one head will be responsible on a TRATON level. It's a matrix organization. There will still be a head of R&D in all the brands, and there will still be unique R&D work done in every brand, especially in the beginning, as we have a lot of legacy that we need to handle. Over time, that part will shrink and more and more will then be common, and by that, the scale effects will grow.
We have also appointed for being the responsible for the so-called group solution development, Anders Williamsson, who will start first of June to build this organization up and again on a TRATON level and working then very close to Catharina. Catharina's organization responsible to make sure we work on the right demands and the right strategies and Anders' organization responsible for actually bringing these components, these performance steps, then through the industrial system into the market. And back to the brands, I should say. The brands bring it to the market. That's a new thing, and that's a very important puzzle piece. There are many more to it, but important puzzle piece to make things happening and get things done. Trying to summarize on a very high level then, what are we doing? Well, as a group, we can deliver more value to customers.
That's what this business is all about. It's about bringing a little bit better, a little bit faster, a little bit more to the customers in all of our brands. We do that through more performance steps, as we call it in the modular system. We do it to all brands. We gain time to market because we don't need to develop in parallel, and we don't need to integrate and validate. We call it here at super simplified. We call it plug and play. Of course, it's not, but it's much more like plug and play for the brands. As a consequence, we gain scale, meaning that we can have longer series of the same components, which, as you know, double the volume, half the cost. Well, that's more or less right, actually, in the automotive industry. We gain that.
We also gain a lower system cost because there's less complexity in handling all the different varieties that we have today in the different brands. Finally, we do liberate resources. Talking to the R&D colleagues, they are talking about 20%-30% of waste today in coordination, friction, double work, because we didn't get this right. If we can liberate that and instead focus on delivering more of the new technologies to our customers, I think that is a game changer for the TRATON Group. We can afford necessary technology investments working the right way. I will stop there and just say that, from my perspective, I think we have a very solid strategy.
I really look forward to getting this into action together with a quite new team, which by the way, is a fantastic team with super experienced people that really are ready to take on this challenge and drive this to a TRATON with a lot of success. With that, I say thank you for this first strategy part. I will hand over now to Mathias Carlbaum, and here he comes. Mathias, one could wonder, you were 20 km away. You made it from Chicago to here, but why are you not here?
Yeah, that's the irony of the situation. As you said, fly over to the States and be sitting in the summer house here connected on Teams. But, anyway, tested positive. I thought that was over that stuff, but it's still around us anyway. But I'm good to go.
Oh, that's great.
Yeah.
Welcome, Mathias.
Thank you.
Of course.
Thank you. Okay. Well, again, wish I would be there with you. I'm not. I will really take these coming 25, 30 minutes to share with you why I'm convinced that Navistar's future potential is actually the biggest opportunity that we have in the heavy and medium commercial vehicles in the world. How our brands, International and IC Bus, with its unique customer relations and the legacy and the history we have together now with the joint forces, the commitment and the culture and the know-how from TRATON will really turn us into, like, very frequently used in the United States as a winner. We have now a clear vision, as you see ahead of us, ahead of you there in front of you. It's to accelerate our impact on sustainable mobility.
We have just launched all of this together to our network, to our internal teams, etc , and we're getting a very strong buy-in and commitment to our way forward. Again, this is what I'm gonna share with you, breaking it down now to how we have built up the strategy and our road forward now the coming years. I will have to say next, because I don't have the clicker here. Next. This is just to level set a little bit all around you. Some are very much more familiar with Navistar than others, but just a placeholder here to level set before we start. Again, the core business, Class 6- 8 trucks and buses in U.S. and Canada and Mexico. We have the largest dealer and service network in the United States, a very important reason for going in there, of course.
Two-fifths of the, call it the legendary, the typical school bus that you can see on pictures and movies and those who've been there and studied whatever, the yellow school buses. We have 2/5 of those rolling in the U.S. are ours, IC Bus school buses. On the truck side, about 20% of the rolling population are our vehicles. We are today the second brand in Class 6 and 7, and the fourth brand in Class 8. Huge potential ahead of us to recover positions that we've had in the past. Based just outside Chicago, in Lisle, Illinois. Total sales last year, about 71,000 units. Turnover revenue size this year heading around close to $12 billion. The number of employees, 14,500.
Again, not having any captive dealership and very much an integrating company of components is quite slim, let's say, in staffing and structure. Next, please. Let me see a little bit some accomplishments since we started. The merger acquisition, as you know, happened first of July. We are about 10 to 11 months into that. Clearly very much getting Navistar into TRATON's operation. Product roadmap, processes, governance, a lot of that is now in place. We are starting to build up and broaden the management team, both promoting internal competence in the first place, but also bringing people from different brand companies. We have, for example, a new service, sales and service director, Johan Nylund came from MAN, had previously headed this operation for another player in the United States.
We have for Michael Grahe, who came from TRATON, who's now our operating man, CEO, vice president, and our CFO also coming from TRATON. We're putting together a lot of strength and resource from the group. Myself, I have 20+ years at Scania in our commercial operations in different positions around the world. Now when we look forward now, we are actively, let's say, broadening the base with local talents, but also bringing along more and more people, primarily starting on the R&D side from group companies, primarily from Scania so far, but building up, blending in this competence into our organization. We've also leveraged our balance sheet, refinancing loans with substantially lower costs. Very important, starting to set the foundation for the next generation of vehicles and technology.
We're working with here now, but of course, very much also forward-leaning to pro projects and products 5+ years away in time. Much more to come, and that's what I'm gonna walk you through now in the coming 25 minutes. I start with something that's normally not that present, but I think this is essential in any company and even more when, if a merger should be successful or not. How we're able to, let's say, unify, take the strengths from the current Navistar organization and build in the very strong strengths we have in the group companies at TRATON. How we create solutions that drive us towards a sustainable future. I'll come back to that. Very exciting moment in North America today.
That is really, as I thought when coming there, being slightly behind, I would say, where Europe is today, but in a good North American way, catching up and very fast. How do we create our solutions to embrace and take a leadership position in that? Also, of course, all this is nice future, et cetera, but on short-term, we're really determined to improve our profitability. That is something working every day, and I'll come back to our aspirations and what's happening in our short-term to really put us on, let's say, a level on which we can grow further in top line and profitability.
Also, very important, Christian mentioned several times, how we can leverage from the group technology on vehicle, but also on the business model around services, digital, and all of that that comes in today's business model already that we can expand, but also the foundation for when we move over into electrified and autonomous. These four to the right are the ones I'll try to take you through now again in the coming 20-25 minutes. Please next. The cornerstones of our strategy, starting with the cultural leadership, going counter-clockwise, sustainability impact, profitability performance, short/midterm, and the foundation we set for future, as said. I will start shortly now, again, around the cultural leadership. Next, please. These are just an illustrative way of course, the strength comes of joining cultures.
I would say that TRATON is now very much led and directed to adopt a lot of the, let's say, the very strong Scania culture that we, that myself also have been trained within. If I look to on the left side, what strengths did we have or have very clearly at Navistar? Well, one of them, again, I always feel a bit strange to talk about because it is very American, but really the strong desire to win, actually, to come back, to be what Navistar was in the past and beyond. Navistar, before the acquisition, had a difficult decade, led by, problems on the engine side with the EGR and also, let's say, I call it the ownership structure and the perspectives of, let's say, time and investment.
A little bit fallen behind, but this is a very strong will within the company everywhere, dealerships, employees we can see inside and also in our customer base to really come back International and IC. Collaborative, well, it's a buzzword today that we have to do partnerships and collaborative. That's the whole way Navistar is built. It's again, an integrating company with relationships with today's suppliers and also, let's say, into new technologies built very much in partnership, and that will take us forward in this collaboration that we have now within the TRATON Group. Looking just the right side, some things that we put forward there, but just talk about leadership model. How do we work? What is the behaviors and non-behaviors? What are the values that we have within Scania and TRATON?
Bringing those to Navistar, you have Navistar people, they're in the room and around you. You will notice how well accepted this is. Very employee-centric, delegating responsibilities, be owner of your destiny and take charge, being also accountable for that is something we're building in strongly now at Navistar. Last but not least, the future orientation. Something not very present before, and now more than ever, the future looks bright around technology, around investments we have been doing and are doing, and let's say our way to return and beyond that in North America. This a little bit about culture value. Again, very important cornerstone always, and even more to make a successful merge. When coming over to the States, we're very few of us coming over. This is not a question of a takeover.
On the contrary, we're just two, three leaders coming over at the beginning, and now we start building in, blending, sending people from Navistar to other group companies and bringing group companies over to bring this culture together by showing, acting as we should and who we want to be. Next, please, sustainability. How present has this been in U.S.? Well, I can assure you it's coming very fast. Those of you not familiar with it, last week it was the ACT Expo in Long Beach, California. Actually, Navistar, for the first time ever, we were invited to be keynote speakers in that event, a recognition, something that we gladly accepted, of course. Things moving very fast.
This is the place to be, the fair for the future, where everything boils down to who are the players today, the future players, to get to this moment here of, let's say, drive sustainability. Primarily, I would say it's an investor decision coming. I mean, investors are putting pressure on the big operators, on the big companies. It's not as much in Europe, let's say, call it from consumer up. It's more from the investor side. We see huge players, for example, like Walmart, establishing just recently their Science-Based Targets, which are putting repercussions. Our operators, many of our big customers, are now coming to ask, "We are about to set our Science-Based Targets. How can you help us to reach what?" We have clear targets here of 50% zero emissions by 2030 and 100% by 2040.
We are slightly more forward-leaning in the market in general. We strongly believe in the technology of battery electric coming in and how that will be relevant for us. Also, remember that we are quite heavy into Class 6 and 7 school buses where that happens first. Science Based Targets, we're working on it. Until end of the year, we have our determined as well. A circular business model around. We today have more than 10,000 parts that are recycled and reused, but we're talking again, as mentioned around the battery model, and also how we can get more, let's say, raw materials and components into our production. Again, not tomorrow, but in the long run to really get down the CO2 impact on the Scope 1 to 3.
The bottom parts, I will not comment on that much, but it's somewhere that Navistar has a very strong history legacy, and I would say are as an American company, but quite far ahead than we are, I would say, generally speaking, Europe. Both on the social impact, about your community, education and environment, and also about diversity, equity, inclusion. Both the KPIs and how that is lived in the company is today something we need to, of course, continue excelling and also bring learnings from there over to the European operations. Next, please. Here are the six cornerstones around how we intend to drive our increased profitability return on sales on short- to mid-term. By 2024, be able to reach a 9% return on sales, moving from today's around 4.5%.
I will take them through one by one, I will not read the slide for you. If we just click once again, I start with the new integrated powertrain. This is Christian, I mentioned about the CBE, Group CBE. Already by next year, we bring it over to North America. This had started before the merge and is now, let's say, hitting the market quite soon. As you can see here, just on the left slide, this is how today our split between 13-L and 15-L is. The CBE is, as you know, a 13-L engine, and we should actually underselling the 13-L even compared to the industry split.
Very much reliant on the 15-L, having, yes, the A26 engine selling on the 13-L, but mainly depending on external supplier for the 15-L. For us, the opportunity is immense here. The market does accept. In very long conversations and tests being done by major operators in the U.S., we have a good acceptance for this. The engine is performing, and there's no reason to stick more than history and legacy in the 15-L. This 13 L torque and performance is incredible. We have an ambition here not only to reach the, let's say, the average industry splits, but actually drive it further, thus being able to double, let's say, our volumes of 13 L in a reasonable period of time beyond 2023. Why is this so important?
Well, it's important because first of all, the engine is performing like never before. You've seen now the performance that when it's in the Scania vehicle, and it's the same coming over to us, integrates into our vehicle. But also, you can see here on the right side of the slide, the potential of profit. If you look on the integrated, on the CBE to furthest to the right, we see a potential on the new engine as such, a 40% margin increase compared to today. The headline is value proposition. This is very much a thinking of Scania. We sell on value, not on price. This engine, it's an increased potential here based on its enormous fuel consumption saving and also the reliability we see on it. Why we see that we have this potential of pricing on the vehicle.
On top of that, the biggest moves the needle is really the service business. By bringing this into captive, let's say, proprietary parts, it drives both the revenue side, but also it has a huge leverage on the percentage of profitability. Being captive, selling own parts, but also how we now into this engine, let's call it like that, also build in service products. Extended warranties, repair maintenance contracts, maintenance contracts, bringing the business model, let's call it of Europe or Scania, into the U.S., blended launch together with this, with this engine. Again, their acceptance is good. It gives the confidence for the market that we believe in this engine on its, let's say, reliability.
It's also a product that today fleets are becoming more oriented on their core business, which is logistics and not running workshops. Next, please. Electric transition. It is here and now. Hard to believe when we talk about U.S. perhaps, but I say it's here now because these two segments. Very present in both of these segments. We're market leader in school buses, and we are, as said, number two in Class 6 and 7. This is starting to move now. You see our products outside the tent you're in today. We brought over two products just to showcase what we have today. More is to come. If you look up to the right side, this is the potential in 10 years' time. I mean, school buses will be fully converted, basically, and also medium duty, more than 70%.
Again, it's already happening now, primarily school buses, because there's also in the Biden infrastructure bill that was launched earlier this year. It was $7.5 billion earmarked to this, let's say, to put in electrifying school buses. On top of that, there's another $5 billion for electrification, for, sorry, for charging. Money is starting to get in here and all, let's say, the school authorities and the municipalities are now starting to move. How can they start electrifying their school buses? The rolling fleet of school buses in the U.S. is over 400,000 units. This will take very long time, of course, to convert it all. Average age is +20 years, but it starts from next year and on.
For us, this is a great opportunity both to, of course, try the hardware, but above all, the extended surrounding services. The turnkey solutions to go together with partnership with energy companies, with the operator, with financing, and go in and make it easier for the end user and buyer to buy this. This is the model basis for the future also in Holland, and we can already start applying it by next year in school buses at large scale. Next, please. Dealer network. I talked about it before. This is, of course, a very key reason for acquiring a company in America, the distribution network. I mentioned before, we have zero captive dealerships. Nevertheless, what's happening now is that we see a clear consolidation driven by us in the dealer network.
To drive for the strong and the fit, which are the groups that have enough footprint, enough, let's say, investment potential that will be here for the long run. In the last year, the multiple for acquiring an International dealer in the U.S. has gone up by 2x-2.5x . There are major operations going on, four to five of them. We're talking about nine-digit dollar figures for acquiring dealer groups, and we're getting in strong partners from mainly the U.S., but also some from Mexico. We have some from Latin America, but it's important groups with a track record that come in and grow the footprint. What will we do ourselves in supporting this? Of course, two things are very important. One is to support them in improving their performance.
Some might ask, but they're not yours. It doesn't matter. A profitable dealer is always good. A profitable dealer that run his operations efficiently also drives customer satisfaction, drives customer uptime, drives down cost for our customers. We talk about learnings from group, very tech-focused and product. We have a lot of experience and learning within this. Myself ran the commercial operations for Scania the last five years, and we ran a lot of, let's say, dealer performance and always achieving both efficiency in the dealership, profitability for let's say, this case it was Scania, but for the dealer, and driving also simultaneously measuring on a daily basis digitally the customer satisfaction. Also for us, of course, this will drive parts sales in short term. To the right, we see also increase of customer base. Why is that important?
Today, 60% of our volume in the States go to fleet operators. We are converting this the opposite, to do it, 60% to the smaller and medium size operator that goes through dealers and, let's say, slightly decreasing our fleet dependency. We should not, in absolute numbers, decrease our sales to the fleets, but our growth will come more through smaller customers and smaller fleets. Next, please. Here is illustrative also how we drive, let's say, bundling solutions. From selling mainly parts, some extended warranties, a little bit of finance, more floor planning, the potential is enormous when it comes to selling, repair, maintenance contracts, extended warranties, insurance, financing. All of this we're putting together now, and also, let's say, with the restructure of finance company, which I will mention, this will, that will be an enabler to bundle like this.
Go towards leasing and have also, let's say, future residual commitments, which is something we've been running for decades elsewhere and have experience of that. Gradually increase this, again, combined now with the CB. Why so? Well, to the right side, we see we need to increase both our top line and our profitability on services. Today, it's about $2.2 billion. We have an ambition here to double that by the end of this decade, having a +10% CAGR per year. It's a top-line growth, but also remember, shifting to more captive parts as we go now, starting with the CB and gradually introducing more group technology, we also see huge potential of margin increase by 5% or more in the coming 8-10 years. It's a double effect of that. Next, please.
What does group bring us in as, additional into all of this? Well, modularization explained and understood by all of you, this brings leverage into us. Simplifying production, more purchase power, faster adoption, integration of group technology, less parts out in the dealerships, and never compromising the customer choices. To the right. Sorry, to the left down, the shared R&D. We're all in for this. There's nobody in the group that is as encouraging and open to share and get the technology that we have in group. Navistar is on board. We are used to collaboration. We're now integrated in all the working groups. Our roadmap is there, and we see a lot of response also from the other brand companies of, let's say, supporting this journey.
Thus, we see this as a very good potential to speed up this exchange of technology within the group. To the right of our production footprint, what you see there is our recently inaugurated production plant down in Texas in San Antonio just about a month and a half ago. It's a great plant. Invested slightly more than $200 million. It was built in less than two years now during the mid-pandemic. We started, let's say, building vehicles there again a month and a half ago. Gradually ramping up towards latter part of the year, a capacity of 100+ units per day in two shifts. This also takes off some, let's say, burden from our Escobedo plant, so we're bringing in some more value-added work integrating that into production.
In cab assembly and some manual work we're bringing in from suppliers into our Escobedo plant. The footprint down south brings down logistical cost. It's a favorable labor market, and a lot of, let's say, benefits of being down there. Also, of course, with the state-of-the-art production facility as this, we also bring in a lot of efficiency in that. Last but not least, already initiated before our global purchasing program that we had a joint venture in place of TRATON inside Navistar already some years ahead of the merger. This is now fully integrated and just happened, let's say, in a matter of months that Navistar's full-fledged integrated into processes, tools, and systems benefiting from the large scale of TRATON and in some cases, of Volkswagen benefits in purchasing. Next, please. Financial services.
Christian mentioned before, we had an exclusive partner here, Bank of Montreal, that had a two-year exclusivity agreement. This is now discontinued. We continue well. We will do partnership. They will continue in floor planning. It's not that we don't need, we need them also for the future. We've done this jointly now, but we see a clear potential increase. Today, about 8% of the volume of Navistar is financed through BMO, and over long term, nothing should we be shy of what other OEMs are doing in North America, 20%-25% should be financed by us. Why so? Lack of capital? No. A lot of capital in the market. Of course, in difficult times, it's less. The main reason is really to be able to bundle products and services to an attractive value proposition to our customer.
Last but not least, of course, we're moving into new technology. This will be more important than ever. When we're now setting up our own finance company, which we're working with Scania now, we have Scania expertise and Scania people also bringing the best knowledge from there into, let's say, our way of operating. We do have Navistar Financial Services as a running entity, which is now, let's say, going more towards retail financing, previously just doing floor planning. Coming to the end of the, let's say, the profitability journey here. Next slide, now. This will, of course, have also the underlying ambition to earn our growth of market share. I say earn because market share you don't buy.
Market share, my best estimate after 20+ years in the sector, is that you can grow 1%-1.5% per year without buying. That is our ambition. We dropped 10% in 10 years, and we will recover this in a shorter period than that. To the right side here, just repeating what you just heard about. There's no secret sauce. It's hard work. It's getting these things right. Let's say, together with our dealerships, which again, are extremely motivated, investing into business and let's say anxious to, let's say, get moving in this direction. That is starting now, again, by capturing customers. We have a good, let's say, recognition already, let's say, on the stability of today's product offering. We're bringing in more tech and additional services. This will certainly be something valued by the market.
Next, please. All this said, we, of course, are also working with the foundation for the future. Some things take place as we go. I mean, digitalization, both internal processes, but also, let's say, our interface to our customers and our dealers. Also here, we have the OCC equipment installed on our new sold vehicles in the U.S. It's a couple 100,000 vehicles that already are collecting data. The most valuable asset is there's data. We are today bringing that in, how to create internal value from that, because so far, we have created good partnership with external suppliers, and also it's an open platform that the customers easily connect their systems. It's very welcome in the market and well-established.
Now we just need to, let's say, to materialize and capture more value from that data. Something, again, having happened in other group companies, so we're also bringing people expertise and know-how to support this journey. Zero-emission uptake right, much more to come. Class 8 vehicle coming soon. Towards the closer part of the end of the decade, we will have fully fledged group component, group common vehicles, battery-electric with local battery sourcing in the U.S. Autonomous, already as you know, I mean, it's in the U.S., it's happening very fast. We are cooperating with TuSimple. It was already in place before the merger, as was TRATON doing in Europe. Separate contract, Chinese walls between. Now we bring them together and see how we can jointly do one operating model of how running the, let's say, partnership with TuSimple.
Down to the right, yes, common group components, the more the better. There's a lot more to it. We're exploring all the opportunities. Are there segments that we can bring, let's say, full vehicles? We have today a test up in Canada with some Scania vehicles that are into work there. All opportunities remain open for exchange of components and products within the group.
Next, please. All in all, the opportunity ahead is immense, and we will accelerate the impact this opportunity gives to us. We shall recover markets over time, earning it through the new technologies, the services we bring to market, and the new business model solutions. We're convinced of the value from the TRATON Group modular system and the value it brings into our customers. We are always doing this, remembering where we come from with a very lean cost structure and an efficient investment strategy. This will now grow.
The opportunity now the group brings is rather keep on R&D levels at, let's say, call it the state of the art, low level, lean in our investments, continue working with partnership this time with TRATON and let's say, get the leverage. We're also very resilient in bad times, not carrying much of a cost structure. Last but not least, all of this, of course, to increase the return we can give to the group and to our shareholders. Midterm, we have this clear target of 9%. I strongly believe we have a lot of work to do to get there, of course. We have a clear path. We're determined in that, but this is not where we will stop.
Again, let's deliver on that, take the steps on a quarterly, yearly basis until we get there, until we start, let's say, talking what comes beyond. The potential in North America for doing more is just immense, both on the percentage profitability and also on the potential of top-line growth, given where we are today, our market share in segments that we previously had a position, and we certainly would recover it. That is why I strongly believe that we have the biggest opportunity right now in the industry of medium and heavy commercial vehicles for, let's say, the case and the future of International IC Bus. Thank you very much. It is very hard and sad not to be there, sitting in front of a screen just staring like this. I hope I got my message through.
There's coming up a Q&A, which I will be glad to answer all that I can. There's people from Navistar. My team is there. Please pose any questions, doubts, or needs you have for more information. Thank you very much.
Thank you, Mathias. It's great to see that you are fine, actually, and to be fair, that is what I would call resilience and the right spirit we need. We will now enter our first Q&A session. Let me ask Christian on stage, please, to join me. Mathias will stay with us, of course. Let me do a couple of housekeeping requests before we start. We will take questions from the audience here in the room only. If you ask a question, it would be great if you just state your name and firm you are representing. Finally, it would be great if you would limit yourself to one question.
Yes.
With that, let's kick it off. Christian, I join you. Who's first? Yes, let's kick it off.
Thank you. Hi, Claus at Citi. First, Christian, on the modularization, it's a great opportunity. You can do a lot on the powertrain side through the CBE. The CBE is the powertrain is typically 40% value of the truck. Typically, getting the chassis modular is a big driver. Obviously, we have Scania being launched in 2016, MAN's NTG about a year ago. Getting that alignment right can take quite a bit of time. My question really then is how much can the common base engine drive the share of modularity and what is the share of modularity versus, like, the need from the chassis side as well? That's my first one. Thank you.
Yeah, that's a great question, Claus, and that's at the core of our challenge, I would say. At some point in time, you just have to decide. There's different, as you say, different cab investment cycles, different life cycles, same on the chassis. At some point, we have to say stop with one or the other and say, "Now we go common." You know, and that in itself, of course, is not bringing any customer value, but everything thereafter is gonna bring a lot of value and bringing the synergies along. I will not tell you a date when we do that. That's something that we're planning right now, how to do in the smartest possible way.
Of course, try to continue to benefit the investments we've done on specifically on the cab side. Of course, you can imagine different routes depending whether this is an ICE platform or this is a battery electric platform. Then we add Mathias and Navistar to that equation, which has the different legal frameworks, and it's getting complicated. That's the puzzle that we're now putting together, and especially Catharina and her team are working very hard on finding the best points in time from an investment point of view and also from a technical point of view.
What we don't talk so much about is the electrical architecture, and that is just as important and is growing in importance because we put today more than 50% of our R&D resource actually in software. Where we really put priority now is to come to the same electrical architecture with the same control systems, both hardware and software. That's, I wouldn't say it's easy. That would be definitely exaggerating. It's actually easier than starting to touch all of the hardware. There we're putting our very firm roadmaps and saying, "Could we do that first?" Then that would really help all of the rest. Sorry not to give you a precise answer, but you can imagine the struggle behind the curtains here to make the best out of that challenge. Daniela, you're fourth.
Thank you. I'll speak to Annette, as you asked. I wanted to come back to the margin targets, which obviously we have Navistar is new, but the other targets are similar to the ones at IPO. During the IPO, the group has talked about quantified the savings. I think it was EUR 700 million at the time, if I remember correctly. Can you talk about how much of that was already achieved? How much of that is still in? Or if the form is different in terms of all the modularity and other actions that you talked about?
Yeah. Someone told us before that IPO, never say a figure because it will haunt you forever. I even heard EUR 1 billion before that, but maybe we said EUR 700 million. I think we stopped counting at EUR 100 million. EUR 100 million we quickly achieved in purchasing, so just bundling the components and the raw materials that were the same. Then it comes into the game that you have to invest in order to get the scale effects through. We actually said to each other, "It doesn't make sense anymore to try to chase this." It becomes, you know, just a huge job for no value. I mean, the point is to make sure that the brands make money, right? That's what we need to measure.
One way for the brands to make money is to realize they need to collaborate, you know. If we have a culture of collaboration where Mathias rather looks to what is in the cupboard of the others than starting to develop himself, that's where we will gain real scale. We work much more now on the cultural aspect of creating collaboration. To be honest, that is coming very much through putting demands on the brands to actually drive profitability and growth. Sure, if one brand can drive profitability and growth without any sort of collaboration, that could also be fine. You know? That's done because they have such a specific market area or such a specific product portfolio. I don't think so, not in our industry. Nevertheless, just to see the thinking.
We actually stopped. Maybe I'm wrong, Annette. Maybe you are still having someone in a corner doing the calculation. No, you don't. Good. We could have saved that money. Yeah, that's the answer to the question.
Yeah.
Hi, it's Miguel Borrega from BNP Paribas Exane. Maybe one for Mathias Carlbaum at Navistar. Three years to the 9% margin target, you did 3.7% in Q1. The drivers you mentioned all seem more longer term to fully implement within the next three years. Modular powertrain, parts and service, financial services. You mentioned also winning 1% market share each year from the 14%. Are there any short-term levers like cost-cutting you think you could do that could give us some confidence in this 9% target? Or maybe some breakdown on the six levers you mentioned.
Mm.
What will be the core of the margin expansion targets?
Yeah.
Some kind of bridge.
Sure.
...or more-
Sure. I could comment a little bit on the very short term. I mean, right now we are as everybody else. I mean, we're having some supply disturbances and we see some lost volumes that are hitting us a little bit unfavorably. Again, like many others. If we would come back on the volume side, I'm not fantasizing on a free market with the supply arranged and getting out the desired price point that we could have got today. When we came into the operation last year, we had already an order book that basically year of 2022 was sold out. So what have we been able to do?
Well, we've been able to do something that I think we were among the first ones in the U.S., in North America to do it, to apply surcharges on online order book. We've come a bit on that. I mean, there is some additional surcharges hitting in throughout this year, but it comes to a road's end. I mean, especially we're not able to supply not even the volumes you're committed to. You cannot get further on that. I see that when we get the balance, a slightly better balance on the supply side, which again, everybody's looking in the crystal ball and having different opinions. It's a bit into next year in the best case, I would say.
We have a volume potential right now that will definitely help us a couple of percentages up on the profitability side, very immediate. Of course, there's still a gap from, let's say, I would say taking us from 4%-6% up to the 9%. That is what we have to work on the coming, let's say, year and a half. I would say to cross the line on the 9% is towards the end of 2024. We will start having by then contribution on the sale from the CBE, not on the aftersales yet, but on the new sales, yes.
We also have, let's say, some service products that not only give a revenue along the time, but when you sell a bundled service product into the market, you actually start having revenues from day one. It's not fully needed that you're three, four days down on repair maintenance contract. You ask about the cost side. On the cost side, it is an exceptionally slim structure we have today. On the SG&A side, we're cautious, but there's not much to work on the SG&A side. There is on the R&D side, like I said before, and maybe supporting Christian's answer, we could never keep today's R&D levels.
Throughout the coming three to four years if it weren't for group technology. I'm sure we would have to double that to be anywhere at all when it comes to, let's say, to respond to the, let's say, the transformation lies ahead of us. We will keep very low R&D costs, and that will of course help us also on the leverage getting some top-line growth when we keep fixed R&D costs at low level. To decrease costs right now, that is not the plan. It is to work nitty-gritty and, let's say, also benefiting somewhat now a product mix which comes in quite quickly when you start selling to smaller customer.
On a seller's market like we have today, now that we start opening book, order book for 2023, we favor better, they call it the smaller operator with better product customer mix and also, let's say, going upwards more towards Class 8. On a product and customer mix, something that will hit sooner also than, let's say, sooner than later.
Maybe Mathias, you should add something what you expect out of the shift of footprint over to the San Antonio plant in Texas.
Yes, we have a conversion cost saving here also that will benefit us. We have a slightly, let's say, more expensive footprint in northern operations of the plants there. Of course, the growth that we see ahead of us comes mainly through the southern footprint where we have a better PVA and let's say that contributes very positively to the cost of a product. That is starting ramping up now. In the first quarter, it's a burden within brackets because we have the cost but not yet the output. We're today at 25 units per day, again, reaching toward 100 units toward the end of the year. That will of course come also throughout the year and let's say full effect in 2023.
Thank you, Mathias.
Thank you.
We have another question. Yeah, Michael, maybe first and then you're left, please.
Right. Thank you. Michael Aspinall . When I look at all of the building blocks of your strategy in the 9% target 2024, it looks like the vast majority of the concepts you're going to implement are coming from Scania, and perhaps there is historically a very good reason for that. You could also argue that on the back of that, the other brands of the group will have to concede what used to be core competencies, thus suffering frustration, which in turn could pose a risk for execution. How do you keep up motivation in the future despite having to concede competencies? Is this motivation perhaps also kept up by tying, reaching the targets to variable remuneration of management at high, mid-level, and perhaps even lower levels? How far down do you go? Thank you.
That's a great question and really difficult to answer because we don't really have the answer. I can give you a few clues how we're thinking. Of course, you're right and we should add to your analysis there that also in the past, all of the common technology, or let's say 90% of the common technology was developed in Scania. Apart from the rear axle gear that has been developed in MAN, and the whole driveline, the whole control system, the aftertreatment, gearbox and engine is coming out of the Scania R&D team. And by the way, also the electric drives that are adding to the group. But always done in competition and with friction and with these management challenges that you're into.
What we have to build now is yes, we're gonna ride on the Scania technology and lots of the competencies in the advancements, but we have to be, from the Scania side, much more inclusive. We have to. I mean, we are coming from a culture where we think we're always right, and we do everything ourselves, and that will never fly, also not as a standalone case in this new economy. To really open up, and what we work with is very much values. We don't want the same culture in TRATON. We wanna have different cultures because the customers are attracted by the different cultures of the different brands, but to have the same values. The most important value that I'm working with is respect. You know, respect for the others.
With respect comes curiosity and try to understand. Why are you doing what you're doing and why is that good? You know, that's really something that the Scania side needs to, and the Scania leadership needs to work with now to really understand why are the others doing it differently. Because a lot of that is of course better than what Scania is doing, even if Scania as a whole system has been outperforming the others. That curiosity is something that I demand from the leadership team and that cultural journey or that leadership and value journey we are going to perform. I did not go into that in my strategy presentation, but the foundation for the execution part is really values, to work with common values. Then comes the mixing of the teams.
Of course, we have to have senior leadership. I think Catharina's team is a great example of that. That started out also as a team that was quite Scania-focused, and then has grown. Today, I don't know exactly how it looks like in your management team, Catharina, but it's, I think, all brands are represented. 17 nationalities in the team. It's also a maturity thing. Of course, starting up, we will need, because we will base our whole engineering work on the Scania modular system, you will have to have solid knowledge about the Scania modular system. Not all people in there will come. The top management will come from Scania, for sure not. Yes, there will be a majority. Then that will.
I expect that with time, we will be completely working with a meritocracy, saying that the best one will have the job. I expect that to change over time. A very active rotation policy where people are changing from one brand to the other, living up to an idea I think we can learn from Volkswagen, the 2 + 2 +2 system should be the basis for promotion, meaning that you have worked in two different functions, you worked in two different regions, and you have worked in two different brands, in order to actually be promoted to the higher management levels.
A very fair question, and I think it's a question that you should also ask to Alexander and to Roberto and to Mathias, and say, "How can we together cope with this question inside the brands?
Sorry,
No, we can't. Sorry.
Are you tying your margin targets to bonuses, bonification wherever?
Yeah. Absolutely yes. Everyone on top level, and we already implemented that for 2022. They have a depending on the level, the higher, the more TRATON share you have in the variable remuneration system. That we are all, I mean, onboard, only TRATON, of course, but on the levels also in the brands, they have a fair share of TRATON performance in their remuneration.
Thank you.
Which is more of a symbol, but nevertheless, it's important symbol. Yeah.
We will address that question also later today. Next question.
Thank you. Erik Golrang with SEB, and the question comes on the back of Mathias' share gain ambitions there, which you seem very confident. I'm actually gonna ask you, Christian, about market share in a bigger perspective. I think, you know, Scania came from a legacy that seemed to focus a bit less on market share. It was more of a residual, and then things changed a bit. For a period, it was a lot about market share and volumes. Where are we now? Is market share super important? Are the league tables up there on every management meeting? What's the-
Yeah.
What's the most important factor?
Well, I would disagree. Even if I was away three years from Scania, I would disagree. Market share was never on top. You're right that when we put the 2015, when we put a 2020 strategy to life in Scania, we realized in order to really grow the service revenues, we also needed to grow volumes. There was not a market share focus, but you can, of course, interpret it that way. It was really about getting a more stable rolling population to harvest from in terms of services. That has been successful, I would say. Even more successful has been the service market share growth on that volume.
Scania has typically been, if you go 10 years back, around 12%-14% market share, and the last 5-10 years, rather been around 15%-16% market share average. I feel very comfortable, I talk about Europe or talk about Latin America, it's the same. I think that's where Scania really should be in order to preserve the price leadership. Because that is, for me, what defines the premium role of the brand, that you manage to get EUR 10,000 -EUR 15 ,000, 10%-15% more from the end customer because you offer more value. That is what counts.
When looking to MAN in Europe, I expect MAN to outgrow Scania in terms of volume and market share by working closer to the upper but midpoint price point in the market, where there are lots of activities with big fleeters and with low volume transport in all European markets. That's something about the strategy. Scania clearly needs to be the price leader and also the one who actually supplies most of the services, having the highest service market share on that volume of sales. Otherwise, I think we will risk the price premium.
Thank you, Christian. I know there will be further questions, but this concludes our first Q&A session.
Unless it's for Mathias, because he's not in the next session. If it's for Mathias, we will give.
He will be back in a second one.
He will be back.
Yeah.
Okay. Sorry.
I promise. There will be a second Q&A question.
Hold your horses.
I promise it will be longer than the first one. Thank you, Christian.
Thanks.
Thank you, Mathias. Yes, you may leave. I'll stay for a second, because it's now my pleasure to lead over to VWCO, which is our next presentation. Roberto.
Ladies and gentlemen, good afternoon. I am really happy to meet some of you that we last met in London in February 2019. Very happy. It's also a big pleasure to be here to talk again on one of the TRATON's brands, the Volkswagen Camiones y Autobuses brand, translating to English, the Volkswagen Truck & Bus. A brand. Let me go back. A brand with products and services following the philosophy, less you don't want, more you don't need. Exactly the way the customer wants. I'm really excited to present to you the developments and achievements we did since we last met, and also what are our plans for the future. For those that are not familiar with the Volkswagen Camiones y Autobuses brand, just some key factors, facts from our company.
We are a very young truck and bus brand. If we compare it to our group fellows like MAN, more than 250 years, Scania, Navistar, we are just four decades, but very intensive one in the business. We are present in 30 countries. Primarily whole Latin America from Mexico to Argentina, Africa, and some business in Middle East. We have produced and sold more than 1 million vehicles so far, and we are the market leader in Brazil in the truck business for several years, including last year and this first quarter, and we are running a position in the bus market. We are a full-liner product from 3.5 to 125 to 120 gross vehicle weight.
We have more than 350 dealers throughout the Southern Hemisphere, primarily half in Brazil and half in the other countries. We have a state-of-the-art production system, known as Consórcio Modular, based in Resende, and we have a very motivated people. A lot has happened, and I would say a lot of good things has happened since we last met in the capital market day in London in February 2018. The most important thing is that I can say happily that we delivered everything we promised to you at that time. We said that we would expand our product portfolio. We did. We said that we would enter in the electric business, we did.
We said that we would enjoy growth in volume, both in Brazil and in the other markets, despite COVID, we did. Above all, we delivered the promised financial results. Going very quickly through each of those deliverables, when we met, we were pretty much in the medium to heavy duty truck with the high tons delivery Constellation vehicle. Since then, we introduced what we call the light duty truck Delivery Express, which we will enter in the new truck segment to compete even with bus, sprinters and so on in the 3.5 segment.
At the same time, we grew to the extra heavy segment, introducing first the Constellation extra heavy based on the MAN powertrain, and most importantly, also based on the MAN, the Meteor, which I hope you had a chance to drive here today. With that, we expand our product line to a range of gross combined weight from 3.5 with the Delivery Express to 125 tons. Regarding our play in the electric vehicle, we are very proud to announce that we were the first company to locally develop, produce and sell the zero-emission truck in Latin America. The e-Delivery, which I hope you also had a chance to drive here, is an urban truck with 11- and 14-ton GVW.
Clearly, we invest in this vehicle because especially in Brazil, we believe that there will be a huge potential for further sales and as you can see in the graphic, we expect that by the end of the decade, half of the sales on this application can be electric. The same is not valid for the long haul, which will take some time to hit the market. Regarding our third achievement, when we said that we would grow despite the COVID and some parts shortage since 2019, our sales grew by 34% in the Brazilian market. We increased our market share, as you can see in the line on the right side box in the last two years. Part of that is really harvest from these two new products that I have just announced, especially the extra heavy segment.
The same is valid for the exports, where on top of offering new products, we are growing a little bit in each market that we are in, enjoy 57% growth. We talked a few minutes ago where the volume share, the importance for us was that we were able with this product, level we have and a good base to grow both in the share and the volume and in the profitability. While we were growing like this, we were able to grow pricing our products and increasing our margins. As a consequence of this, you can see that, last year we achieved the promised 80% over-the-cycle target return on sales. Glad to achieve already last year.
We say that over the cycle because I hope that some or most of them will be above that and, because of the cyclicality, one or two may be below. On average, 8% is our strategic target. But as you can see, we further improving the first quarter of this year, which despite of the difficulties, we achieved 90.5% close enough rounded to double digit if we can force a little bit. So that's pretty much our deliverables, what we have done, but this shows that we have a good base to further leverage the future. We say that looking forward, we really can go even further, and we are ready to that. In which manner? I don't need to explain a lot. I can summarize just repeating what we are doing.
We have to keep benefit from the market growing in Brazil and Latin America, and harvest from the new products. That is the first point. We have a potential to further grow in export, to further expand the e-mobility. We have just one model, and we have the whole product line to enter. Entering new business, and as important as or maybe even more important is leverage from the TRATON Group modular system and technology. We are ready for the future, and the first big change in line with the TRATON strategy is that we reset our value, ambitions, and proposition. Now we aiming to be the best value for money solution provider for the transport and the logistic system by offering tailor-made products and service while creating sustainable value for our shareholders.
Also looking forward, and as another step for our future, today I am very glad and proud to announce that we have an important change in Volkswagen Caminhões e Ônibus. Aligned with the strategy of further internationalizing the Volkswagen Caminhões e Ônibus brand, we have just changed our legal corporate name to better reflect these ambitions. Today, or until last month, we are legally MAN Latin America, and now, from now on, we are legally Volkswagen Truck & Bus. Brand-wise, we also are going to change from Volkswagen Caminhões e Ônibus, which is a name pretty much Brazilian or only for the Portuguese to pronounce it more or less. Now, we would be proud using an English name, Volkswagen Truck & Bus, and we are no longer, after today, VWCO, but we are VWTB.
Most important, we are going to keep the brands with Volkswagen Caminhões e Ônibus, where the Portuguese line prevails, like Brazil. If we go or we are in South Africa or other English country, it's going to be Volkswagen Truck & Bus, or if we are in Mexico, Chile, or so on, we go Volkswagen Caminhões e Ônibus. Back to the future, just to detail what's coming, and this is Volkswagen Truck & Bus way to the future. We have five building blocks to assure the continuation of a profitable business development, which will take us from where we are today with some years above, but in average the 8%. Those are ready to grow, designed for volatility, global expansion readiness, future ready, and always focused on efficiency.
I would like to go now in details of each of those building blocks, starting ready to grow. Like I said, that's we have already a good product base, refreshed full line following the motto, "Less you don't want, more you don't need." The complete product offer is reinforced by our customer proximity philosophy through an extensive global dealer net. That is very good product base to keep growing and enjoy what's coming ahead of us. In the other box, you can see the change of the industry in Latin America. If you take a look where we were, the good old times, 2010, 2011, 2012, and then went down, especially with the crisis in Brazil. Now we're starting recover, but we are still far away from where we were.
We see ourselves as a huge opportunity to enjoy this industry growth for the catch-up that was not done in those difficult years, and especially because our fleet is getting old, and it has to be replaced. The second pillar is our value, our production system, a 25-year-old concept, but it's still state-of-the-art what we call a modular production system, which is operated by key suppliers, which is bringing very low labor costs. I cannot quantify our labor cost in this plant compared to other place in Brazil, but I can tell you that it's substantially lower. It's innovative until today, and a lean, agile, and flexible plant to cope with potential ups and downs, very low fixed costs as well, and as a consequence, a very low breakeven operation.
Just to give you one idea, we produce in one line all the trucks and buses, and by adding one suppliers or one partner, which is Moura, we also starting producing the same plant in the same line, electric vehicles. It is a plant that has a 100,000 production output capacity, and we have a lot to grow what we have. Good product, good perspective in terms of industry and a good plant. We see ourself as a huge potential for further growth internationalizing. We are very strong in Brazil. We have 30% market share, and sometimes we ask why not have 30% in primarily reais-denominated country that pretty much depend on Brazil, like Argentina and so on, but we have 10%. Mexico, we also have aspiration.
Why we have 10%, 12% in those markets and not 30%? We are better money to increase market share and sales in all the 30 markets we are in. Entering new markets are the yellow one or the gold one. That's a huge opportunity in Africa and Middle East. By entering new markets and growing the markets we are in, we see also a big opportunity of grow volume and profits. We say that we are ready for the future in terms of product capacity, markets, and also we are positioning ourselves to benefit from the new services that are coming.
A lot has been said here on the electric opportunity, and we were the first one not just to launch the first electric product, but we were also the first one to launch the whole ecosystem to provide it to our main customer, not just the product, but the whole ecosystem of the services in the electric business. With that, we are really leveraging our service and the same we plan to do with the digital consortium like we did with the A consortium. By leveraging that, we believe that we really have a huge opportunity to leverage the scale. A last point is this is our DNA, collaboration. When Christian say we needed to collaborate, that's what we are all about. We always collaborate with suppliers, with group components, with the MAN, Volkswagen Nutzfahrzeuge.
We are really very happy with this recent move that we are going to further collaborate but keeping responsibility by brand. That's the ideal way, and this is our DNA. We are looking forward to work with the group and do what we did on the Meteor. Meteor was based on the MAN. We share the best, and we did it the way the Brazilians want, and today is a hit in the market. We are going to do that with a very motivated people, with outstanding execution team, with great experience, and we will get there. Summarize and thank you for the attention. I would like to say that we would like you to take five takeaways.
The first one is that we have returned to the profitability level, and it's important to say that it's not up and down. We have been growing quarter- by- quarter, month by month, and we are really getting there in a very sustainable manner. We are keeping the growing pattern, always growing little by little, customize or retain the old customer and gain new customer, especially in the electric, in this new extra heavy segment that we fight with the low-end extra heavy, not Scania's and the ones that are playing premium. We have all the required conditions, the Volkswagen brand and our experience in emerging markets to further grow globally.
We are putting together the ecosystem for electric and digital, and we keep working on efficiency and group synergies to improve even further our profitability level, which is set at 8%. Ladies and gentlemen, before we go to the next one, our track record shows that we are able to make it. Now is just to keep it up. Thank you very much for your attention. Very, very glad to announce my dear colleague, friend, Alexander Vlaskamp. Please.
Thank you very much, Roberto. Ladies and gentlemen, very much welcome here, and I'm delighted to represent MAN as a new kid on the block in this room, and also very much welcome outside here.
At MAN, we have a strong focus on the execution on our transformation. That's about the transformation of our industry, how we go into digitalization, electrification, and autonomous, but it's also about the transformation of us as a company to deliver what we actually are delivered for and what we're known for since many years in the market, value to our customers, but also value to our shareholders. We definitely have been gearing up with our team for that to show you that we are delivering. The first quarter, actually, we were on track. We started the year well, and actually, we even got more semiconductors, conductors available as we expected. Gearing up for a good quarter one. However, then, it's a humanitarian catastrophe, then the Ukrainian war hits us all. It hit more of us also the MAN team and the MAN group.
We, of course, have been taking care first of all of our colleagues in Ukraine, including our partners and including also our suppliers in Ukraine. As a matter of fact, MAN is supplied by three locations 100% with cable harnesses in sequence customized production from Ukraine. As the 24th of February, this situation hit us, we had immediately a task force in place, playing the game through with our suppliers. Unfortunately, already the week after, we were actually running out of sequence, and by mid-March, we were standing still with our truck production. At the same time, our task force, together with our suppliers, have built up duplication. A workload which you normally take 9-18 months, actually now has been put into place, and we get the first kits from Brazil with the support of Roberto's team.
We get the first kits from another supplier in Poland and helping us to ramp up production again now since the 25th of April. We are back on track. Of course, first focus was our colleagues, and also they are back on track in Ukraine and safe with their families. Secondly, of course, to get back on our supply base, and we started production accordingly again. Most of all, of course, it's also about our customers and how actually we put our customers also in a dire state, not being able to deliver the vehicles accordingly as they are longing for to make sure they deliver on their operation.
Here, we have been working on finding solutions to keep the existing fleet running, to make sure that we have vehicles available from our pool of rental vehicles and make sure that we have an eye on the customers. Last but not least, we also have been focused on being very transparent to our customers, to our colleagues, to our suppliers, and to you as well on the market.
Sadly, actually, we would have liked to show you that we have been delivering here because the 2.2% return on sales in quarter one, which actually is the result with 14% lower volume what we delivered versus last year quarter one, we would have actually topped up and had 4-point higher single-digit percent margin for MAN Group, where we actually are in the midst of our realignment program, which we're going to deliver by 2023. That's the situation we are in. We are, as a team, further committed to deliver on our realignment program and also deliver on the transformation of our industry. Let me show you which significant milestones actually we have been delivering upon. So far, we have reached.
We have launched the new MAN strategy, which we have put into place with our team 18 months ago, which is the foundation for our future success. This is including a realignment program which we will touch base upon in the next slides and show you where are we within the different building blocks and how are we going to deliver to 2023 and forward. Of course, also to show you the full relaunch of our product portfolio, which we have been launching on the truck side in 2020 and on the bus side starting 2019, and also give you a glimpse how this is actually giving value to our customers for their operations.
Of course, also, we have put extra focus actually on leveraging on our services business, on our services business here and now, but also to make sure that we are growing our services business in the future going forward. Yet, we are not there yet. We have more focus to progress further on. We have to finalize, of course, our realignment program by 2023 and make sure that we're also leveraging on the tail effects of the program and the learnings we have been doing also by executing ourselves with our own team, the realignment program accordingly. Furthermore, we have to make clear that the foundation to go into zero-emission transport is here to come and there to stay in the coming, in this decade, what we will deliver.
That we do together with our customers but also with various partners, including also the Group competences. That leads me then to the last future important building block to progress within our main group to make leverage of the TRATON Group competences and of the modular system going forward. Here we go. The new MAN strategy within our team, we speak about three important building blocks. To become a robust company, meaning, of course, being a robust team which is resilient over the business cycle. Deliver there where the business is on high, but make sure we don't fall back too heavily when actually the business is in a dire state and when the market is there where we don't want to see it normally. We are in a cyclical industry, and we have to be resilient. We show you how we get there.
Second, of course, being a smart innovator. Being a smart innovator along the transformation of digitalization, but not only drive to the future, but also deliver on di gitalization here and now within our service operations, within our production, and within also our lean processing within the support functions. Smart innovating also, of course, means to actually lay the foundation for electrification. We have been showing various information here to the market, how actually MAN on the bus side, but also on the truck side, will serve their customers with high-value trucks by the break of the market, when we see actually the S-curve going up by 2024, 2025 going onwards. Last but not least, also traction within the group, but jointly also exploring the area of autonomous transport.
This can only be delivered by a strong team and by having the focus on our customers, making sure that for our customers, it's simple and easy to do business with us, but it's complete and that they can focus on their core business. Our realignment program is the important foundation to become a robust company. Here we have a calibration on 2019, where we delivered 3.3% return on sales with 80,000 trucks accordingly. We have put a program in place along three dimensions. The first, the structural dimension, making sure that actually we have a resilient structure to enjoy the peaks of our cycle and make sure that we don't fall down too much when it comes to actually the lows in our business cycle.
Secondly, of course, we're also focusing on the material cost. When it comes to the material cost, also the product cost structure, and furthermore, of course, what we buy as energy, as transport, and so forth. Lastly, the dimension is also along volume and price. How effectively we are making sure that the value what we put into the delivery of our trucks, of our buses, how do we bring this forward to our customers, including also a broader range of service prompt contracts and including a broader range of a service footprint. If we dive into our realignment and where we are standing, then we can say that when it comes to the structural measures, we are well on track. An important part of our structural measures takes place in our production footprint.
Here, it will have a EUR 550 million effect throughout 2023, and we expecting even some tail up into 2024 to be leveraged upon. We have been closing down and agreeing to close down the Steyr plant for medium and light-duty trucks, which is an assembly plant in Austria. We are successfully ramping it down, and the ramp down will be completed by May 2023. The capacity of the plant will be shifted actually to the best cost country, Poland, to our plants in Kraków. We have also closed already today our bus modification plant in Plauen, and this job has been integrated in our bus factories in Starachowice in Poland and in Ankara. Also here again, moving from a high-cost country to a best cost country operation.
We also have been laying the foundation for expanding our plant in Kraków, our truck assembly plant in Kraków. There we have been investing and will invest under EUR 30 million to make sure that we go from 100 to 300 trucks per day capacity. At the same time also, we will build in the flexibility because we will have there the flexibility to make sure that we can assemble also medium, light, and heavy-duty trucks on the same assembly line within the same truck flow. Our Munich plant, we have dedicated to become our e-mobility truck plant, where we will start to build our e-trucks, but also with a very innovative concept to make sure that we are filling the S-curve towards e-mobility. I'll show you later.
At the same time also, we have been working on structural measures when it comes to the engineering footprint. We have been ramping up more staff in Pune and in Ankara to make sure that we have the brains going forward to facilitate on the transformation and also to develop into the TRATON modular system. At the same time, we are ramping down a number of engineers in Munich, and again here proving that we are moving the footprint from a high-cost country to a best cost country. When it comes to material cost, here we have implemented very much a cross-functional work team to make sure that we are working on the material cost savings from commercial negotiations and discussions with our partners here. Also from technical product cost optimizations throughout the products, making sure we are reducing the variance but not jeopardizing the customer value going forward.
At the same time, of course, we have been also working on non-product related costs, but also on energy and of course, on transport savings accordingly, even together within the group. One example is, for instance, how we together with Scania in Europe actually optimizing our transport routes. Here again, as you have been seeing in the previous slide, we definitely have some headwinds which we accounted for in the program. The current supply chain disruptions, the semiconductor shortages and the current inflation on raw materials of course make sure that we really have to put all hands on deck to counterattack these issues. What we're doing here is that we definitely are revising the program there, but at the same time also we move a lot of the inflation on material costs into actually our price and volume plan accordingly.
The same as Mathias also mentioned, we're also going back to our customers and have to reveal that we have to do a surcharge accordingly on the orders we have in the order book. At the same time, also, the third dimension of the program is to work on volume and price. Of course here it is to work with the customers and also to make sure that we are showing to our customers what a fantastic product we have in place. I will show you later more about that and the testimonials we get there from the press and from our customers. Also here to work on the pricing and optimization, training of the sales staff, making sure that we have combined offers, products and services that makes actually getting and gaining speed here on the volume and price mixture.
Of course, also what has been important is to the turnaround of our used business. There has been a good demand, which has given us some tailwind, but at the same time also we have worked very much on the used truck business to make sure that the quality is good on the vehicles when we take them in, that we also have a fast turnaround focus. At the same time, also, when we are reselling them, that we resell them again in packages when it comes to finance, when it comes to service contracts, so also gain there on the tail of the service business. Lastly, also making sure actually that we are reducing the quota of used trucks and residual values in our balance sheets, so make sure actually that in the future we have less risk going forward.
We have been working very thoroughly with our team through all the three dimensions, and I can tell you every day new ideas are coming up. The biggest lever what we actually gained is the change of the footprint as we have been speaking. That means that when I speak about moving from best cost countries to, Sorry, from high-cost countries to best cost countries, then actually this is contemplating in a 17% gross reduction of staff cost. This is a structural change which we will have in the company. At the same time also, we are moving to markets where we have a higher flexibility of staff. Lastly also, the ratio between direct and indirect also has been a lever which we have used to skim through actually our structure and our setup of the organization.
We see that full earnings of this comes into effect from 2024 and onwards. To deep dive into this, when we look into our production footprint, we have been moving from three truck assembly plants, are moving then by May next year to two truck assembly plants. One plant where we are fully flexible to ramp up e-mobility, and that's our Munich assembly plant. Having a full flexible plant in Kraków in Poland, where we can up to 300 and more vehicles per day produce over the full range what we have in place.
That also makes it easier for us, actually, based on the market demand, to put the right truck on the line to make sure that we don't feel pressures to fill actually with the medium- and light-duty trucks the high-cost country plants like we have in Austria. At the same time also, we have been moving from our Munich production plant the highly labor-intensive interior production of the cabs to Poland, which we also actually have been transferring right now. When it comes to the mood in the company, this is done in a joint atmosphere. I've been moving around a few times now through our plant, and I see our new Polish colleagues being trained by actually our colleagues in Munich.
Everybody in the company understands that we have to do this to make sure that the company comes to a new earning level, so we can actually make sure that we earn the money to transform ourselves into the future, to make sure that actually our customers sticks to us as we have a wonderful customer base around the globe. When it comes to trucks, we're moving actually from 25% assembly in high-cost country to 65% assembly in best cost country. Here our team has delivered on a fantastic optimized system going forward with full delivery from mid next year. There, definitely, we have to hold on, and I can promise you, I cannot wait to show you the results then together with our team. What is important, of course, is always to bring the value to our customers.
Our trucks actually are definitely now bringing the value to our customers. You've driven them before on the test track here, and with our TG3, we have won numerous fuel consumption tests. We also have won various cab tests, and lately actually we've been on par with the latest introduction of a peer by Commercial Motor. Why I'm saying that? Because, yes, it's important for customers to have a good TCO. But if you want to have a truck which delivers a good TCO, you also need to find a driver. And there you need actually a fantastic cab and a fantastic cab atmosphere. And that is exactly what we now have in the market and what our customers are valuing.
Of course, we would like to come back into full production swing to make sure that we can leverage this, both for our customers as well as for our earnings and our team. When it comes to the bus here, MAN has been focusing very much on first electrifying the bus business. Why is that? Because MAN has a 17% market share on the bus business in Europe and even 20% and above when it comes to city buses. Here we are electrifying Europe. With our Lion's City E, which you have been enjoying also driving here, we have already today 750 buses in the order book, and we are delivering to high-demand customers as the city of Zurich, as the city of Hamburg, and in various Southern European countries.
Both in 12-m and articulated optimized combinations, delivering also even a record 550-km range for long city range operations a day. We are learning for the technology of tomorrow, what we will need in our trucks. What we will get in our trucks and in our buses going forward will be going towards zero emission and in a later step towards autonomous transformation. Throughout that journey, we will step by step actually leverage on the group components accordingly. When it comes to our battery electric truck, we will leverage to close to 65% on group components, even including Volkswagen Group components and technology.
When it comes to our new ICE future powertrain, which we are investing in a factory in Nürnberg, under EUR 70 million and delivering soon onward, we will have another 65% actually stepping from close to 20% today to 65% value creation through group components. As Christian also presented, the next step is to jointly have the lever of a common modular system. Where we will step gradually into, but make a huge step, to actually take away all the interfaces work and make sure that 3,000 engineers at MAN can also work actually on adding value and not trying to figure out how this component can be interfaced to other components. Because that competence we need for, of course, creating customer value when it comes to our bus program and when it comes to also our truck program.
I'm really proud on this movie and how the guys have shown me there, and I really am frustrated that we can't show you this in real-time right now. When it comes to our electric truck, we will make sure that we will be flexible and also CapEx efficient by having a production line in Munich, where in the same takt time as of today, we can actually install our ICE future powertrain, as well as we can install our battery electric powertrain going forward. You see this simultaneously on the movie here, and it's a fantastic work from our cross-functional production engineering and engineering team to make this happen. By this, we are flexible and resilient as we actually are moving into the era of e-mobility.
Yet we, of course, have to leverage beyond the volume and price, also make sure that we leverage on our service business. This started definitely with the products. The product is connected. Right now, our product range is offering over-the-air updates, and the over-the-air updates bring service to our customers while actually they can enjoy more uptime of the vehicles. Actually our current product range is delivering better quality and better uptime, actually than our previous one. That is also valued by our customers. At the same time, by this, we can much more effectively operate the services business when it comes to contract portfolio and stick to the scheduled maintenance accordingly.
Last but not least, of course, also making sure that we are connected digitally, not only through the vehicle and the driver, but also making sure actually that we are connected to the operating base of the customer and smoothly plan in our network the service operations. By that, and by having this digital connection, which we will use then also for our e-mobility rollout on the trucks to make sure that it's not only about doing your service, but it's also to make sure to connect the vehicle to the right and available charging bay. That charging bay might be in one of our own captive dealer network or also at the captive service point of our partners accordingly. Last but not least, to bundle this complete product, financial services is key.
our financial services with Volkswagen Group is operating, but we believe we can step up here to actually drive financial services together also with, for instance, insurance supply to support our business going forward. A lever on services is key. What is even more key is a fantastic key team to work this and bring this forward to our customers and make sure that we are staying a robust and resilient company. That is the commitment what we have. As we also have been moving our footprint accordingly, we also focus very much on empowerment as well as top-down and also bottom-up.
By this, we are using the methods, of course, of inclusion and diversity, and at the same time also commit to a 20% female managerial roles by 2024 and also a 30% female managerial roles by 2030 accordingly. MAN will deliver, and we deliver on our realignment program. We deliver on our product roadmap and also make sure that we are leveraging on the group components and the modular toolbox which we will get available. Last but not least, our growth will be focused on our customers and make sure that along the lifetime of the products we are servicing our products with our service business. By that, we are stepping up with the realignment to 7% and going forward to a strategic 8% return on sales.
Thank you very much, and you have a deserved break right now for 25 minutes.
Right. Over to my favorite topic, Scania, and welcome again to Scania. I think Lars said it this morning, but where you are is really where we inject between 15,000 and 20,000 doses of Scania family culture into customers predominantly coming here. You are at a very holy place, and you are at the Holy Grail of Scania, which is Södertälje, where absolute majority of both R&D, purchasing, production, sales and marketing central functions are located, which is something quite strange and something we have to learn not to live with in the future, where we are going truly global and being part of the TRATON Group.
My focus for the coming 20 minutes is to take you a bit through what are the key success factors of Scania in the past, which of these are relevant for the future, and what do we need to add in order to make Scania future-proof, the way it needs to be, as the profit leader of this group. Of course, our entire industry is going through huge transformation, and we have a strategy to cope with that. On top of that sits sustainability. We have even lifted it up and say our purpose is to drive the shift towards sustainable transport system. The building blocks of that is decarbonization, just as I talked before. For TRATON, it is people sustainability, and it is later on circular business.
The way we measure our progress is through science-based targets, and we measure that in all parts of the organization. Going back to why has then Scania been successful throughout the years. Well, if you ask me, there are perhaps versions of this, but very much is coming through the very bold business model saying, "We do everything to make our customers profitable." That's a very bold statement. We do that because we believe if we make them profitable, we can also be profitable. To the extent we've been able through different management consultancy firms to measure the average profitability of our customers are higher than the average profitability of customers in general in our business. That seems to be paying off.
Another part is our modular system. You know, we spent a lot of time on that today because we're expanding that into the TRATON space. The modular system is actually part of the magic. We did not talk enough about software, but to build modular software is just as important as building modular hardware. It's our company culture. It's a very culture-based leadership style where we rely on the house with the values and the leadership principles in there. On top of that or part of that is the inspiration from Toyota that started up back in the 1990s. I should say, the modular system started in the 1940s, so you look at me as some kind of fossil standing here.
It has been working, it has been serving its purpose, and the journey together with Toyota in the 1990s created so-called Scania Production System, and from there comes one of our main values, which is elimination of waste. Question everything in a systematic way, and you will not only save resources, but you will also save the planet, and you will achieve higher quality. That's part of our background. I think we have not delivered up to expectations in the last couple of years. We used to outshine the industry, hovering around between 10% and 12% return on sales. Well, these are the latest year. Of course, 2020 with its COVID lockdown and production stops were something special. Nevertheless, we're not where we want to be. Why is that then?
From a very high level, when I look into what we have been doing, one thing is, of course, a big investment into the new truck generation, and in parallel, invest for the group in the common, the FPP that we talked so much about. The common engine, the common gearbox, and the common drivetrain. Which has been, let's say, financed by the brand, but not yet giving any benefit as the first other brand taking it is Navistar, and that's not until next year. Another thing that has harmed us, I must say, is our product cost. We have struggled in the last years from the introduction of the NTG to get that product cost down, and we have had a very good product cost optimization project running, which really has started to pay off.
We see clear improvements looking at 2021 compared to 2018 when we really started to see the first tendencies that the product cost had not been enough considered in the development of the new product. Finally, being part of the TRATON Group or the Volkswagen universe implies a lot of things on you. Everything from reporting to IT systems to kind of things that makes you less fast, flexible, and agile. That's something that we are also addressing now through the Scania transformation program that I will touch shortly in a while. I'd say product cost problem under control. I wouldn't say it's solved, it's never solved, but we have a method to take care of it. On the product side, we're also launching the Scania Super that you have all been test-driving here in the room.
8% on average, giving us a fantastic opportunity to increase pricing. There is much more potential to take out of the service business, and I'm gonna come back to that. Here is our hero, the first common TRATON-developed driveline. We are confirming through tests, but now also through customers as the first delivery has started on average an 8% improvement. That is a lot in our industry. It has been going through testing, of course, and it did manage to win the most prestigious test in our industry, the German 1000 Punkte Test, coming out first.
Even more important, we received the news last week that we also won, actually for the sixth time in a row, the European Green Truck Award, which is a comparative testing on which vehicle that actually runs the most, economically or environmentally happens to be the same thing in our industry. So 6x in a row, of course, starts to be an issue where our competitors say, "Hey, this is not possible. You know, why should we even be part of this testing?" That's just confirming that this new powertrain investment is paying off in a very, very, nice way. It's also confirmed through the measurement of CO2 emissions that, you know, our industry, just as the car industry in the European Union will have to gradually reduce CO2 emissions.
The base year is 2020, and that meant that EU had to implement a mechanism to start to measure which are the CO2 emissions. CO2 emissions equals fuel consumption in our industry. There it was confirmed that Scania, with a big distance, was the leader in fuel consumption in the industry. That's the first time we actually have an official measurement on that. That feels very good. Second best was actually MAN, which was not a surprise to you and your team, but it was a surprise on this side of the TRATON group. Congrats also to that, Alexander. On the footprint side, here is Scania in a nutshell, with a very clear philosophy that we have one global product. It's the same everywhere.
The modular system is applied in all our factories, meaning that we can shift component production and even vehicle production between our sites. With a rather big handicap that has been more and more visible in the last, I would say, the last four years, three out of the four last years, we could not deliver what we managed to sell. We are clearly hovering around our capacity maximum. Our challenge has been should we add even more capacity, either in the Latin American system or in the European system by moving into more shift forms, which is very expensive when you're already running three shift. Should you expand your factory? Should you build another factory? As the geography where we suffer the most by the distances and by our sales model is Asia, we decided that added capacity has to come out of Asia.
That was actually the first steps in looking for China. It was not that we later managed to get the license, but it was really the fact that we need more capacity if we should be able to grow. We have been capable of delivering close to 100,000 trucks, but we could never cross that line. I thought we would be able this year, but with the semiconductor shortage again, we won't do it. It doesn't matter. We cannot reach the 130,000-140,000 that we could be capable of doing from a pure sales point of view with our global presence. Therefore, the investment in China is for us super important, and on top of that, we get to address the Chinese market from a better cost positioning.
You can imagine a customer in Australia or New Zealand, super tailor-made, big V8 rig with a lot of axles. They have to wait between six months and one year in a normal demand situation. Right now we are way beyond that just because of the transport and logistic time. What you also have here on this slide is a glimpse of our sales and services network. That's also, of course, part of the Scania secret sauce that we own so big part of the network. We have more than 600 workshops in our own books, and we're running this through a system called Commercial Operations, where once I was heading that and Mathias Carlbaum replaced me. There we run the captive sales and service business with its own accountability.
That has proven to be extremely successful. That is, of course, a system that we can continue to roll out and benefit even more from. In a nutshell, a clear purpose to drive the shift, sustainability ahead of everything, best-in-class vehicles and engines, a business model that is extremely integrated based on tailor-made solutions through the modular system, and tailor-made solutions means also services, and a global footprint that has served as well, but that needs another step in order to continue to grow. What more can we add? New technologies are bringing new opportunities. One thing, I mentioned services, which is contributing today greatly to our bottom line, we can do so much more. Thanks to the connected vehicles that we were the first in the industry to standardize already in 2011, we started.
We have more than 600,000 connected vehicles now where we are collecting data. Based on that data, we can go much more proactive. One big step was a couple of years ago with the launch of the NTG, we decided to start to offer customers only tailor-made maintenance. Meaning that we only do exactly the amount of maintenance and maintenance in the exact time based on the usage of that individual vehicle. That has proven extremely successful, and that can be done thanks to the data stream. Of course, based on good AI learning, so good algorithms on that data, and of course, also experience from the workshop managers around the world.
By that, we handle today maintenance in a completely different way, meaning that we don't over-maintain, but we also don't under-maintain, and we can match the maintenance to the need, to the actual usage of the vehicles. That has many advantages for the customer, but it also has an advantage for us, and that is that we can plan. We can run our workshops like small factories, having exactly the right inventories, the right people in place, the time slot planned, and by that being very, very efficient. But for the customer, it's mainly an uptime issue. Next step, which we now launch together with the Scania Super, is a service called ProCare. ProCare is then moving the same concept into repairs, saying that the dream is that the truck never breaks down, just like an airplane.
It just has to be up and operating. There is usage of parts and certain parts does not have, and it's also not economically viable to invest in 2 million km lifetime. Let me take a typical case generator. To build a generator that lasts 200,000 Swedish mil, 2 million km, it is possible. It would be super big, super heavy, and super expensive. Doesn't make sense. Let's make sure that that does not break down and cause a vehicle stop, because that's the worst thing that can happen to our customers. Typically, it costs them around EUR 2,000 every time it happens because of the standstill, because of towing, because of on-site repair, because they are on a French highway and they are not allowed to stop there.
There are millions of problems that occur when it happens. With our ProCare service, we now expand the usage of data and sensors on the vehicles to start to actually predict the repair work and just make that a subscription-based service. Customers are prepared to pay for it. There is no doubt. They all know what standstill costs. Very interesting new contracts are taken into the market in the Scania system. I promise to come back also on electrification and be a little bit more precise what is happening. What we have at Scania in the market right now and what you can see coming out of the Södertälje factory, two-axle, three-axle vehicles up to 29 tons, typically vehicles for inner-city work.
Distribution, taking goods in, garbage collection, taking stuff out, city buses, where MAN has been much more successful and faster to market, but also Scania has now a range of city buses, fully electric. It does not cover the heavy typical long-haulage vehicle, the 40-tonner. That's the next step. During next year, in 2023, we will launch the typical tractor unit. This is also where we start to take deliveries, big deliveries of battery cells from Northvolt, meaning that we can add more range, and that's needed to these vehicles because they typically do more distances. In 2024, what we can add and what we're planning to add is more charging capacity.
That's also when we think that the first mega chargers are out in the market, meaning that you can charge in 45 minutes, which is the resting time of the driver. With that update, you really can handle most of the typical European long-haulage transport, which is 60%-70% of the market. In 2025, we expand this into our entire modular system. This is the beauty of our modular system, that we just need to add the E-axle, which is the drive. All the rest we will have. Then we can cover any type of configuration. We can do firefighters, we can do heavy mining vehicles, we can do forest vehicles, we can do whatever you want, military vehicles, if they want.
By relatively small effort, because we're just adding components that is missing into the system where everything already fits together. It's not new models. We talk about it like that to make media understand, but it's actually adding building blocks to our existing offer. 2025, we think that 10% of our sales will be electric. 2025, we will be able to cover basically every application there is. Excuse me. All right. I touched this already in the TRATON presentation, but what is interesting when we go electric is that there is a whole new ecosystem that emerged around the vehicle. This is something we have to learn, and we are learning as we speak, that customers ask for new things. All of this is an opportunity to actually build business. That's what we are doing as we speak.
Apart from helping them with incentives, yes, it's actually to us, the customers come and say, "Hey, can you help us to apply for that subsidy that we can now get through the government?" To the most obvious one, which are charging and energy provision. We are now installing together with partners, we're installing infra in depots, in destinations. We're setting up contracts with energy providers, where we have teamed up with a number of renowned European names. We are, of course, doing the normal services that we already did on the electric vehicles. We're just in the beginning, but this is a super interesting shift that is happening around electric vehicles. I mentioned some of these babies where we have a strategy to learn in small series before we actually go, you know, public.
All of these have already the components I'm talking about ready for 2023 and 2024, even if there is different level of prototype, of the components. Of course, we will have to change them once we go serial production. These are the customers that give us back lots of feedback and learnings. Wibax, I didn't talk about before. That is one of the suppliers into the Northvolt plant up in Skellefteå. As you see, it's a silo transport, taking powders from the port and up to the factory constantly. Of course, they wanted that to be electric, which, you know, makes sense. Also great marketing experience.
The customer is a normal transport customer that is working in northern Sweden, and they are so happy now that they ordered more vehicles. They wanna have more of these despite the rather high product cost. I think this is the work that we're really doing to move the whole industry and showing that everything is with electric possible. It's very important for us also talking to the policymakers, because there is still doubt that we are actually decarbonizing the so-called hard-to-abate sector. We're now putting the ball in their camp and say, "Hey, Scania is ready. You are not." That's actually a fact. In most countries, the policymakers are not ready to support this enough. Therefore, the discussion around hydrogen we had before is also important. Help them also to focus.
Put the resources where it makes sense. Don't throw money at building out a huge, dense hydrogen filling station network throughout Europe. Save that for the heavy industry that really need green hydrogen. There's so little of it available. Then let us have chargers just like for the car side, but just more powerful. Key takeaway from the Scania side, we keep our business model. We work with a modular system for both software, hardware and services. We continue to build up a global system. We need a third hub, and it will be China. We drive the shift to secure our profitability leadership and the service offering. You've just seen the start of it.
Even if we passed the EUR 30 billion threshold last year, we're already talking about substantially higher numbers, and we grow the services sales the first quarter with 19%. I'm not saying it's gonna be 19% every quarter, but it just shows the potential there is in the service markets. With that, I stop because I realize that the most important parts of these are the Q&A sessions. I will make sure that we have enough time for that, both for our sake and for your sake. Thank you very much, and I hand over to Annette to take you through the financial part. Annette, please.
Thank you, Christian. Hello together, as we explored this morning to the audience here, I think you enjoyed the drive with the trucks and the take ins. I think the most important is that we come together after three years and talk with another what is the development ahead of us. You heard a lot today. Now I will take you to the finance part of the Capital Market Day. I'm the CFO of TRATON since October last year, and you heard from my colleagues the group strategy, the brand strategy, and how we want to go forward with a well-defined plan. To sum it up before we go to the financials, we as TRATON are a responsible company through a transformation towards sustainability and becoming a frontrunner of e-mobility. This is our aim.
We have a strong focus on long-term value creation for our stakeholders. We're shaping the future of the logistics ecosystem, and we are all in to expanding our business model, as explained today, by thriving and leveraging a partnership culture and to embracing digital. This is our strategy going forward. Now I will explain the role of finance in this strategy and how we want to drive this. First, a look back on our financial performance in the last five years. We improved the revenues by EUR 6 billion. TRATON recorded improvement, which was harshly interrupted by COVID-19. Now in 2021, the revenues are almost back to pre-pandemic levels. At the same time, we benefited from the consolidation of Navistar that we consolidated on July 1, 2021. Navistar contributed EUR 3.6 billion.
Return on sales were following the same trend, but then COVID-19 pandemic and the subsequent event really dampened the return on sales. Calendar year 2021, as you know, was below the 7% that we achieved in 2019 due to strong impacts from the supply chain shortages and also from the headwind of the input cost, like raw material. Even in that phase, we reported reasonable quarter. In the first half year of 2021, we had over 8% return on sales that were harshly interrupted with the shortage that we have. We show the potential that we have, but still we are not there where we want to be. When we come to the pillars of the global champion strategy, this we are executing.
The most important pillar was the acquisition of Navistar and to get access to the profit pools in the United States, Canada and Mexico. As you all know, this was one of my major project, and I'm very proud that we made it. It came also as a side. This deal was debt funded. Net liquidity has become a net debt position above EUR 6 billion. At the same time, we maintain the investment-grade rating. Based on our strategy and the described execution plan, we have defined clear focus area for me as CFO to going on. Here you see it. First, the team and I will steer to support the group to even focus more on sustainable profitability by optimizing the regional mix and increased share of value-added services.
We will also make the group more robust on earnings quality and cash flow and stronger against cycles in the industry. Second, we have to shape and to drive the development of new technologies. We will become a frontrunner in e-mobility and new business model. To do this, we have to invest in common components, in new business models and state-of-the-art technologies. It is a key to keep an efficient allocation of cash and sustaining our competitiveness. Last, dedicated to my focus, we have to reduce our net debt levels and to strengthen our capital structure. Now let's have a look on our profitability. As you can see on the chart, we have an ambitious target. As a new management team, we are committed to deliver. This is our main focus.
We count on each brand to deliver the strategic target and make a fair contribution for the group. Scania, as explained from Christian a few minutes ago, maintains the profitability leadership and will have a double-digit return on sales. Volkswagen Truck & Bus, with Roberto, leverage its excellent position and maintain the market leadership in Latin America. The strongest absolute upside will come from MAN Truck & Bus and Navistar. MAN were benefiting from the stringent execution of the realignment program, and Alexander explains the way how they want to gain and come back to the strategic target of 8%. Navistar will gain market share, and the respective volumes will drive the margin. Mathias explains the building blocks to come to the 9% overall for the group. We, as TRATON, have a return on sales target of 9%.
Not only long term, we want to reach this target in 2024. You will remember the 9% from the IPO in 2019. This 9% have a far much higher quality. What is the reason why? Because it's including higher R&D and investment to supporting a stronger competitiveness and growth opportunities. It's including a PPA of EUR 250 million at this time related to the Navistar acquisition, more than 50 basis points. As you heard from my colleagues throughout the days, each of our brand has assigned an ambitious target and a well-defined plan and of initiatives and drivers how to get there. We are confident that they will deliver. Also on group level, we have a plan to get there in 2024. We have the building block in place, and as you see here, volumes are the key driver.
We are convinced that our markets will significantly grow. A further important driver is a successful execution of the MAN realignment program, as explained, and that we have a positive net effect price of volume versus the higher input cost that we expect, and so we will have there a positive driver for our result, despite the challenges that we have at this point in time. At the same time, we will invest more in R&D and in CapEx. We aim to compensate these effects to have a significant efficiency gains across the group to reach our 9% in 2024. What are the key building blocks that driving TRATON's margin and earnings in the next years? First, we expect the market to continue to support our growth. TRATON meets the demand with highly competitive products offering that we will continue to upgrade.
With normalized supply chain, we will benefit from economies of scale and improved fixed cost absorption. This will be complemented by a further expansion of our vehicle and service business and a better price positioning. Talking about fixed cost. With MAN's realignment program, that it has a well-defined plan that Alexander explained, this will lead to a further decrease in fixed cost and bring into a better fixed cost structure and increased productivity. Q1 result shows the first positive signs here. The other building blocks, all brands of TRATON Group strive to foster sharing of the technology, know-how, and R&D costs, all based on a clear distribution of responsibility. Christian explained already the modular system and how we want to do this.
We started with a Common Base Engine and gained further traction with the modular system, and we have the full potential out of this when it's completely installed over all brands. This will not only reduce complexity for TRATON, it will also reduce the cost per unit and creating even more stronger customer value. This together with a broad footprint, with an increasing share of vehicle services and financial service, will lead to improved robustness, and therefore strong ability to master the cycles and the challenges in the market environment. Which brings me to the focus area for me as CFO. We sustaining and even increase the competitiveness while we have an eye on efficient capital allocation. The challenges are very clear. The industry must step up to decarbonize. In doing so, the customer our first priority.
We have to comply with the broad national and international regulations that add complexity and cost to our products. We have volatile and uncertain markets where we have to really also go with the competitive dynamics and the pressure that is put on us. Overall, we have an ambitious strategy in place, and the most ambition that we have is to make TRATON a front runner in new technologies. This will not come for free. This requires investments, bold decisions, and choices to be made. As you will see, we want to build out the group with the best way we can do it, and we want to increase the competitiveness with targeted investments.
Looking at our playbook to manage the shift towards sustainable mobility, we do not just step up, we also reallocating existing buckets, and we will make clear choices where we spend the money. Here, R&D is key. We aim to step up the investments in the coming years, especially to drive the transformation to a sustainable future. A strongly increased share will be spent and invested in future technology and in growth. As a result, the TRATON Group is planning to invest EUR 2.6 billion in electric mobility R&D by 2026. Securing our competitiveness and also about the right level and the right areas of CapEx. Also here, the share of future technology will increase. At the same time, we will further diversification of our business setup. Like for example, we plan to build up our own capacity in China.
Absolute spend level, both in R&D and CapEx, are set to increase, especially short term, but it will not be a straight line. Based on the underlying sales growth, the percentage to sales are expected to be lower in 2026 than today. To be clear, staying disciplined and focused while keeping a certain degree of flexibility is here the key. It brings me to pillar three. A strong commitment to reduce net debt level and to strengthen capital structure. Our capital framework is straightforward and simple. Generating more cash than spending, complemented with the active portfolio management and the structural equity measures. Our first priority, improving the cash conversion. We continue to work towards a level of around 70% in medium term.
The key levers are, first, the strong momentum of our earnings in the TRATON Group, with a 9% return on sales target based on a stronger sales revenue base. Focus will be optimizing the working capital and to ensure that only such capital as tied up as needed to steer our business. We will also screen our portfolio, and we will take a look which assets and participation across the group we need in order to build our business. We will free up these resources that are not needed for our daily business. Besides this, no major acquisition. This is a clear commitment. At the same time, we will stick to a dividend policy of 30%-40% of earnings after tax. All this should result in a decent and continuous reduction of our net debt position.
In order to take a bigger step, structural equity measures are necessary. I am sure it's not a surprise for you, but we will look into this, but the timing must be right. To sum it up, we have a clear path and commitment to execute to deliver our 9% return on sales based on a diversified portfolio and improved resilience of earnings and cash flow. Stepping up investment and driving the development of new technologies, and become a frontrunner of e-mobility with a disciplined approach and a well-targeted capital allocation. Improving cash conversion and balance sheet efficiency, with a clear commitment to reduce net debt level. As you asked today already, all this is embedded in our new TRATON bonus system. It is in place since the beginning of this year, and it's valid for management level and all non-tariff employees.
The short-term bonus is based on our major financial KPIs, return on sales and return on capital employed. Targets are based on our strategic ambition. For example, derived from our 9% return on sales target for the group. With ESG, we have added a third pillar to the target system. In order to drive the focus of the TRATON transformation to more towards sustainability. Depending on the individual responsibility and hierarchical level, the set targets are a mix of group and brand-specific ambitions. The long-term bonus, however, is entirely focused on TRATON Group as a whole. The target achievement is based on EPS performance over a four-year period and on total shareholder return in the period under review. Overall, a strong incentive for the TRATON team to deliver and execute. Let's wrap it up.
The TRATON team focus and my priority is to bring TRATON's financial performance and the resilience of our business and balance sheet to the next level. With a clear commitment towards an ambitious target of 9% return on sales by 2024. Leveraging the potential o f the group and supporting targeted investment in our future. At the same time, improving our resilience and efficiency. With a strong financial policy and a clear focus deleveraging our balance sheet. Our new bonus system is fully aligned with our strategic targets. This is also why all these levers will lead to the next point, and why I want to convince you why I think we are a highly attractive investment. An investment in a group that has a strong competitive position.
An investment in a diversified portfolio of brands across different region and attractive global growth markets with access to large profit pools, with state-of-the-art products and services that are strongly geared towards future trends. Our investment in the future are focused to be a front runner in new technology. We as a group has a significant potential to leverage the huge know-how of our brands. That is best positioned to benefit from our modular system. We are in the driver's seat of the transformation of the industry to a sustainable future. With a management team that has a clear plan and that is fully committed. To deliver the 9% return on sales and an efficient balance sheet. Therefore, we will drive attractive shareholder returns. Ladies and gentlemen, I'm completely convinced. We have an exciting, intensive, and demanding pathway ahead of us.
We as one team here, the management team that's sitting here, we are all in to bring TRATON to the next level. I'm really personally looking forward to this journey and I invite all of you to follow us on the way to a successful future. Thank you.
Thank you, Annette. Now I will be delivering on my promises. There will be a second Q&A. I said it. Let me invite all team members of the management to the stage. I think we will also have Mathias with us virtually. Hi, Mathias.
Hi.
Good to have you back. Again, during that Q&A session, we will take questions from the audience, here in the room. Again, I remind you to state your name and the firm you're representing. Again, please limit yourself to one question, but I think now we're a bit more flexible with time. We are happy to take the first questions, and I hope more will come. Who's first? Claus again.
Thank you. This is a question to you, Mathias. On Navistar, looking at the U.S. market at the moment, your chart is showing that you're close to peak but not at peak, and this was in the beginning of Christian's presentation. I guess this is your assumption on builds that still have upside as semi bottlenecks ease. There is a big backlog in North America. Every single U.S. truck indicator at the moment is now going down, be it on freight, be it on used truck values at sleepers. The used inventories are going up. I just have a question then on your margin of 9% by 2024 in that light, which looks pretty ambitious, as we might have a downturn before we can get to 9%.
Just curious, under what volume assumptions you think you can deliver your nine? I'll start there. Thank you.
Yeah. Good question. Of course, it's as you mentioned, I mean, the indicators of a slowdown on the American market have come very fast and very recent. You see, as you mentioned, the spot market price for freights is down very much
We still see very, very high price levels for used vehicles. Let's say that will still prevail for a short while, though. On the total market, the total market for this year is less expansion in areas than we thought. It is down by 7% so far this year compared to same quarter last year. I do think, as you mentioned, there's a lot, let's say, in the pipeline now to come out. Will the supply chain nurture the upturn, let's say, so it comes over last year's figures? Perhaps. I would believe that the total market more or less ends up at last year's figures, catching up in the coming quarters. What happens 2023 and beyond, which I think your main question was about.
We do see, of course, the very aging park in the States today. The huge, let's say, overusage, if that would be allowed, that use of the rolling fleet the last year and a half due to lack of supply. Even if the market slows down a little bit, we still see a huge replacement need in the big operators. As you know, the North American market is more condensed to big players, where we do have a strong foothold. Again, we do not intend to, let's say, to lose out on the fleet customers, rather try to grow on the smaller ones.
When talking very close to our key accounts, I met them personally just the last two weeks, three or four of them, actually putting similar question as yours about the slowdown we see on the market and what they are seeing. They are all very confident that their need of replacement in the coming 12-18 months is standing by. We do see, let's say, a quite favorable market as long as we can see throughout 2023. What happens in 2024? Again, I wouldn't speculate that far. Do we need a bigger market or let's say, from today to reach the nine? No.
I think if we deliver on our promise here, let's say our commitment to grow this year 2-3%, I mean, on today's market, that is again slightly below year-to-date than last year, we should be able to be in that broad range, about the 8.5%-9%. Of course, any volume additional to that would help us, but we're not contemplating that this will persist or continue at these levels of today. Claus, I don't know. It's a bit, I want to put the crystal ball for 2024, the total volumes, to try to match that with our, let's say, profit, but we do not need a growing market compared to today to be, let's say, to go for the 9%.
Okay. Very, very clear. Can I squeeze in one follow-up, Lars?
Just because it's you.
Oh, thank you so much. My follow-up is not on asbestos, it's on Scania. On R&D, as you become more modular, Christian, across the group, you're talking about liberating resources in Scania's margin today, and it was evident particularly in the first quarter is burdened by high investments that is linked to the group. It feels like, I mean, you say that you have product costs under control, but it feels like R&D for Scania, for the group, can linger on for quite a while. Do we need to wait until 2025, 2026, until you have the CBE across Navistar and MAN? Or can R&D go down earlier than that? That's my follow-up. Thank you.
Yeah. Well, if you think specifically about Scania, for Scania, it will and can go down. I think we have to ask Anette how we set up a new financial governance system for what is common development. So far, the rule has been that the brand, normally Scania then, that does the investment, takes it all on own books, and then get paid through license fee later on. Of course, with our product cycle and development times, we're talking four, five, six years before that actually starts to create some revenues. In between, you have both a balance sheet problem and an R&D problem. Of course, that's not beneficial to anyone. We will build a system where there will be group R&D instead.
I think Annette can explain different ways we're thinking how to allocate that cost more fairly. For Scania, that for Scania as a brand, that problem will at least partly disappear. I also align with Annette. I mean, I think in all brands, we need to continue to invest in R&D in this transition period. There is no, I mean, we should not pretend that we can decrease heavily our common R&D spending. If we manage to get the scale effects out or the collaboration effects out, meaning that we get 10% or 20% liberated, I think we should immediately reinvest that into actually creating even more customer value. Annette, I don't know if you wanna fill out.
Yeah, we can only say that with the new matrix organizations that we presented, we want also to change how we allocate the R&D cost in the group so that it's more fair, so that we split the management and the legal entities view. Now we have the legal entity view, where we have first somebody has to spend it, and then we get the license, and it takes very long to get the money back. With the new structure, we will want to move to a management structure where we allocate from the beginning the R&D to the brands that will use it later on. It's a more fair view, and it's also an ambition that the brands fight for to get it to the customer and to work together, you know, and not wait.
You talked about the risk, you know, where we work together. We have to work together because we split from the first day the cost, you know. We feel the burden and the brand results. This also will force us to work together.
We have one.
Yeah. Björn Enarsson, Danske Bank. A question to Annette on deleverage.
Mm-hmm.
If you're looking at the improved momentum on earnings, and you also talked about working capital, etc , how much do you think that will contribute to deleverage if we leave the structural part aside?
We really see already that we come down in a range 10%-15% of our revenue and working capital bind it up, you know. We strive to keep this and get even lower so that we get to a competitive view. You know better than me, the competitor that won very well and some has also more working capital, but our aim is really 10% of our revenue would be a good figure for us, yeah, to bind the working capital and help us to deleverage. It takes a while. You know, now we are in a special situation with all the semiconductor shortage and hardly to manage. You know, sometimes we need the material there, sometimes we don't have the trucks finalized and so on.
This is hard, but we're working on this and it will help us really to bring us certain degrees, but even more, I think the better leverage or the better help is really from the profit improvement, you know, to generate cash.
On the portfolio management, so what could that be or add?
Sorry?
On portfolio management, what could that be?
Yeah. I think one example I can also bring is that we sell MWM from Navistar in Brazil because we think we don't need this any longer as a part of our portfolio. We will go by every brand and take a look what we really need in our portfolio for the future, you know, and what we can sell or bring to other levels or say we bring it to a joint venture and so on. We're working on this one really to go with the brand, and this is starting point what we can really sell or bring to a joint venture or something else so that we really reduce here our assets.
Thank you, Annette. I think we'll continue. Thank you .
Thanks. Hi, thanks for taking my question. Himanshu from Jefferies. I have a question on the financial services. Could you just give us a bit more detail on how you're thinking about it, the timeframe, the potential funding needs, and how are you going to basically meet those funding needs given the high leverage?
I can say something about the timeframe, and I think, Annette or even Johan sitting next to you.
Yeah.
-can say something about-
Yeah.
-the funding ideas. Of course, we wanna move quickly, and top priority would be to support Mathias in the States.
Yeah.
To really make sure that when the notice period with Bank of Montreal is running out in less than two years, we should be really you know ready to fly. In the meantime, as I said, we are discussing then with Volkswagen Financial Services how can we in the best way start to roll that business over for the sake of MAN especially. We are looking into together with them what is an adequate time plan market by market to you know phase out and ramp up. That job is started. We are in very frequent discussions together with the team of Christian Dahlheim to come to a solution there. I think I stop there.
I don't have an answer to exactly which market will happen when, but we would like to get that started, of course, as soon as possible. Christian, if you are here, I was asked to do some comments on it.
Yeah, please.
Just the exactly the timeframe. Some key takeaways. For us, it's important to build portfolios, so we get the access to the ABS's structures, for example. We don't have critical mass fully yet. We will do a buildup portfolio transaction, so don't put any calculations of taking over assets and by that need to fund it. That's the strategy, at least. We will look into different ways of maybe doing some sort of funding on financial services level as well as we do it on the TRATON Group level. You know, we have been continuing to do EMTNs in the Nordics, in the Nordic currencies from the Scania platform. We try to work on those kinds of different sources as well.
We're well aware of the situation, but we're looking also to different sources.
Okay. Thanks, Johan. Annette, you wanna add?
No.
All clear.
Thank you. All set.
I think we will continue. Yeah, Johan, if you just provide that mic, and then we'll continue with Miguel thereafter.
Hi, it's Nicolai Kempf from Deutsche Bank. My question would be on the U.S. market and gaining market share there. Can you give us some more color in which segment you want to gain market share, which is Class 8 long haul or more in the Class 7, and maybe even from whom you want to gain the market share? Can you also promise us that you're not giving up on pricing to increase the volumes, especially as we are approaching the peak of the cycle, maybe?
Yeah. Well, let's start from the end there. I mean, the price. I talked before about value pricing, right? I think we come out with a good value proposition here now, already by next year to secure our price level. Also, again, shifting over in the mix of customers, that enables us to keep up a good, let's say, average price level. Where to take? I mean, again, this is not first by market share. I mean, if you look at historically, Navistar has been market leader in Class 6 and 7, which we are not today. We are number two, but have dropped considerably there.
It is something that I think little bit perhaps differently from Europe. It still is a very profitable segment for us. It's nothing that scares us. On the contrary, we do good results and good profit, and it's also a vehicle that is very welcome, let's say, working close to the perhaps closer to the local dealership, so you can call it bundling services, well, around the product. We will grow in the medium range and also on the Class 8. Again, with the new 13-L engine performing as it should, we have some, let's say, rehaul or overhaul on the cab coming up in a couple of years, will also support us in that growth.
I won't say that we will be picking any segment because to grow in the pace we need, at all, we need to pick something here and there. Both in Class 8, and we're today down at about 11-11.5%. There's a journey back there. Remember where we come from, having been very strong in Class 6 and 7. The distribution network we have is very, let's say, very local, very well integrated local communities which supports, again, Class 6 and 7. I must say it's a little bit everywhere, but keeping to this pace, 1 to max 1.5% per year, to not lose the price and value point.
Thank you. I think you have the mic, Miguel Borrega, right? We will continue with you, Daniela Costa. Maybe Niklas Klingenberg, you can hand over the mic in the meantime. Miguel Borrega, please.
It's Miguel Borrega from BNP Paribas Exane. First one for maybe Roberto Cortes at VWTB. So last year you achieved 8%, starting off the year way ahead. Why not raise the bar beyond the 8%? Also, do you have a range through cycle? I think at the time of the IPO, you were saying between 200 and 250 basis points for the group. What about VWTB? What would be the floor for profitability when the cycle turns? Or what if the cycle continues, how high could it go? Is 9% the peak? My second question for Alexander Vlaskamp: Will the margin expansion be stable, or will there be a period where a bulk of the internal measures kick in? I think you talked about the new plant in Kraków being ready mid-next year.
Will there be a big jump in profitability in 2024?
If I can answer you, Miguel. I think one of the beauties of the business model is that we have a very low break-even point. Our business model is pretty much low fixed cost and low investment base. We can have 6% even in a kind of a reduced volume. I think it's a reasonable number, 5%-6% in a not good time. A good time can be double the return as we can see in the first quarter.
Look forward to that.
Yeah. We also.
Yeah. When it comes to MAN, what we will see is that gradually per quarter, we see improvements, of course, when the volumes comes in. Now, as mentioned before, we will have a dire quarter too. Ramping up cargo production from September, that will give immediate effect going forward. Actually, the full effect we will start to see from the structural program in production by Q3 2023, and then with the tail effects into 2024 going forward.
Daniela.
Thank you. It's a question for Mathias as well, because I guess it relates mainly to the U.S., but if you wanna expand more broadly for the group, it works as well. I wanted to go back to autonomous because one of your competitors has been recently, I think a few of us have been in an event where they were very excited about autonomous and how quickly that can turn into reality in the U.S. and how sizable it can be by 2030. You didn't spend too much time on it today. Is that because of your specific challenges that Navistar has? Because you don't believe the technology will be ready to be at scale before 2030? Or if you could give some context on your thoughts there. Thank you.
Well, you're right in your assumption, that is on the market. I think I mentioned also that tech is moving on the side of autonomous moving exceptionally fast in the United States or North America. I think, why didn't I spend much time on that? We have this, call it, set-up agreement with TuSimple that was set, let's say, under previous ownership. We're revising that. It was a little bit more tentative to, let's say, to be a sales support rather than, let's say, really embed the technology and expand, let's say, the business model over the opportunities that autonomous comes.
That side is more like. I think you alluded in your question that this is to be extended to group, because there is partnership with TuSimple and others within group. There is, and I will soon hand it over here to Christian, but there is extensive investments within group in, let's say, working on the autonomous. We see now very much, let's say, how U.S. is and shall be, let's say, a lead for the group development within autonomous. Christian, maybe you can take over here.
Absolutely. Thanks, Mathias. Yeah, so this, as Mathias says, we have to join forces here between the brands. The majority of the resources are up in Scania, clearly, but we have good resources in MAN, and we're building resources up in Chicago. We need to look at this as one. We can, of course, not develop three different autonomous platforms. You know, it has to be one. We actually started with this mindset between Scania and MAN from the start. That's one of the areas where things have been done right, from the beginning.
Yes, we have two different contracts with them. One is the TRATON with more integrated approach, whereas on the Navistar side, we found that well, it's more that business model where actually TuSimple is facing the customer and Navistar is supplying the hardware. And of course, we are now discussing together to come up with one contract and one customer-facing model, or several customer-facing models, perhaps depending on which type of customer we're meeting. This is of course one of the technologies which is promising and has been promising for a long time. I personally think I said in early days that I thought we would see autonomous trucks on the street before we saw electric vehicles being fully commercialized. I was completely wrong, of course.
The development is going at the speed of light, and it's very, very impressive to see. Within our group, we are then having the first autonomous trucks driving between Södertälje and Jönköping, so from here and south w ith goods, of course with safety driver. We have received the permission then. I think we are the first in Europe.
It's hard to get that confirmed, but I think that the TRATON Group of Scania is the first in Europe to have a permission to drive also on local roads, which we're now expanding into, and we're also expanding into MAN vehicles with exactly the same platform to learn even more and to gain even more kilometers. We're focusing on the hub-to-hub, where we see the best use case from a business point of view, but we're also focusing on hubs, but because the technology is easier. Closed areas, no legal framework or an easier legal framework, and no humans around.
Ports, MAN has been looking into, Scania is looking into, continue to look into mines, and we have really interesting development there together with Rio Tinto. Yes, the technology needs to continue to mature, and I will not, again, make the mistake and tell you which year we will actually start to have real customer revenues. That the technology evolves and becomes better and better, that is very, very clear, and that there will be a business case on, at least hub to hub, that is, to me, completely clear.
Mathias visiting you earlier this year, I mean, we learned that now driver salaries are above $100,000 per driver, couple of drivers per vehicle, and you realize what kind of savings you put on the customer end if you could supply, even if it's only the driver robot or the virtual driver, so to say, and then the customer has to do all the integration into the logistics system. It would still be a very, very appealing case. It's coming, and it's coming as a TRATON solution.
Thank you. We can take a further question if there are any. It's probably a lifetime opportunity to have a third question. Himanshu, your second one today, but don't worry, I'm not counting everyone. See over here, last row, please.
Hi. Thanks. Himanshu from Jefferies. I just wanted to ask, we have talked about the volume benefit at Navistar, but can you also talk about, because Annette, I think you mentioned volume is a key driver in achieving the 9% target. So what kind of volume benefit are you expecting in the bridge from 5% - 9%? Because I think we are on the brink of a potential global recession and if markets would return, so just want to understand what you could achieve without that.
I think one thing is really the acquisition of Navistar that we did, so that we really have there the volume increase. The gaining of the market share and also that Roberto has ambition to increase the volume, yeah. We all, as Christian explained, the growth in Asia that Scania is striving for, and the same for MAN. All has ambition to grow in the sales volume, and this is also reflected in our targets that we want to have. I think that the markets, it's not that they're all on the peak. As you saw the chart that Christian presented with the market in a different cycle, and we have opportunities there until 2024, that the market will increase, and we have our fair share in this and grow.
Okay. Thank you.
Is there a microphone? Yeah. Yep. I see it.
Thank you. Just one final one. It's on the charging JV. You're ready. You're waiting for antitrust clearance. I think it's coming through now. Reading about what Daimler Truck are saying, they're frustrated, nothing happens. I guess you must be frustrated as well in terms of the regulator. Can we talk a little bit about that? Because that is really the bottleneck. I mean, the technology is there on all fronts. Christian, can you talk a little bit about that ongoing dialogue and what's the latest?
Yes, absolutely, and I can also let Alexander chip in. I think it's of course a frustration and it's of course a pity that and you have to understand the historical context. We are of course coming from a context where we as the entire automotive sector, we've been pushed by the legislators to apply to tougher and tougher emission legislations. We're now even in a discussion of a EUR 7 level in Europe, China 7 in China, and we're with EPA 2027 in the U.S., continuing that race. They're challenging us, of course. We have much earlier understood the CO2 challenge, I think, from the industry side being one of the hard-to-abate sectors.
Had good dialogue with both national governments and the EU about, you know, the need to walk down this road together. We've been very much aligned, and I think the Fit for 55 package coming out of Brussels was actually a very good one. Without charging infrastructure and without a clear business case, our customers will not change. It is as simple as that. We will find use cases where it makes sense. We do that already now, and there we are, and we supply charging solutions, so for distribution vehicles and garbage vehicles that we talked about. The volume both for Scania and for MAN is on haulage, and that's also where the big kilometers are driven and the big CO2 emissions are created in our industry.
Therefore, we have to come to the point where long haulage is being electrified. These two missing pieces are still missing pieces. We try to work with partnerships with the energy suppliers because that could also be a hurdle. We get very good response from the E.ONs and the Vattenfalls and the Iberdrolas. I mean, they all have very firm plans to actually come with green energy. Green electricity I think will be available, but not at the right price. We also talk to the owners of the grid, the national owners, like in Sweden, the Svenska kraftnät, or the four both private and state-owned entities in Germany doing the same thing. There are 100 reasons why they can't, but right now they can't. You know?
The only thing that can push them is new legislation. You know? The Swedish case is particularly frustrating as the electrical infrastructure is not considered to be national interest. So if you wanna build a railway, you have the rights to appropriate land and may have a quick process to roll it out. If you wanna build a high-tension cable, you don't. That's every community needs to take the decision. Therefore, we have some really absurd examples where we have customers who would like to buy electric trucks, but there's not just enough power to their depot. The answer from the supplier of the grid is, "Well, 10 years. In 10 years you will get it." In 10 years it's just too late.
We have similar examples, but I think Germany's a little bit more flexible. The legislature have to jump in and say we have to have special measures, new laws. It is as simple as that, right? I know it's not simple from political point of view, but we have like a COVID situation, you know? The country needs to start to act like as if we have a real crisis. It's just creeping upon us instead of just, you know, falling upon us. Yeah, it's highly frustrating. Of course also from a financial point of view, we do all these investments, and if we don't see the volumes coming, and we're not gonna live up to our science-based targets, we're not gonna get return on our investments, we're gonna be in deep trouble.
I feel that was not the deal, you know? First time we're ahead of politics and there is a risk that we get disappointed. I don't know, Alexander, your better-
No, I can just only underline it. Of course, what we have to do is to showcase it. Last week, Friday, we had an event in Berlin where we showcased our e-mobility roadmap to actually 40-ton heavy-duty transport, what we showed you also on the pictures today, to ramp up by 2024. Including in that event, we had customers, we had actually infrastructure partner ABB, and also we had the German Minister of Traffic and Infrastructure. Actually where they support us also on having a high charging small series so to say along the highway A2 in Germany. Also there, once more, together with the ABB, we underlined that, look, infrastructure is ready.
Customers, they were sitting right there, they are ready, they want to go, and they want to roll, but we need the infrastructure to get in place. That means we need cables on the depots of the logistics depots, cables actually providing the power on our service stations. Yes, of course, we want to make business out of it. I explained also to the minister, we are in business to business, so our customers, they will tell us what they can afford, yeah. We will never be able to rock the market. Don't be afraid like in the telecom industry that you have to set roaming in place as it was before. We are ready to roll with a joint venture and make sure that the technology comes on.
Then our customers, they will decide who actually is the best partner to team up with. I think that's all our duty to make that clear. I think that is how it goes when you are in a transformation.
Thank you. I would say.
Let me just add some flavor also from U.S. I mean, it's very similar there. We look into the grid in the States. It is very, let's say, fragmented of state regulation and federal regulation. We have raised that now several times, the sector. That is something that we, let's say, will address now under the umbrella of the upcoming Greenhouse Gas III regulation that should be applied from 2030, which I think will be very ambitious.
Hopefully by the, w hen this is stated, it also considers the whole question of well-to-wheel, which as mentioned by previous, I mean, if you look into the footprint of green energy in the States, today it's more or less 40%, and the estimates are by 2050, it will just be about 60%-65%. So there's still a lot of gap to do. So that under the umbrella of Greenhouse Gas III, that well-to-wheel is considered, that we get also, let's say, the energy sourcing on the right side of, let's say on green and gray, and also that we have, let's say, a joint ambition to more, let's say, access to grid because the charging points as such, we don't see as a big obstacle considering, let's say, what is needed investment on that.
Of course, it's a factor of close to 10 when you look at the needs of the grid when it comes to investments. That's of course only politicians that can sort out.
Thank you, Mathias. Now this is the end of our Q&A session, I must say. Thank you for a lively and interesting discussion, and let me hand over to Christian for final remarks.
No, I would also like to say thank you to all of you. I hope it's been rewarding. Thanks for coming, meeting us like this. It's extremely interesting to get your question. We learn a lot from the questions and from your ways of thinking. I think all of you have sharp minds and ask questions that we're not used to. That sharpens us. I would like to thank also the crew listening in. I know it's difficult to do a hybrid event. I hope it has not been too difficult to follow online. Thanks to those of you who stayed with us. Of course, most important, I wanna thank also the crew who made this event possible. I think, yeah, you've done a fantastic work.
We're not used to doing these physical events anymore, so it was a stretch. I think you did a great job. I think everything has worked perfectly. Yeah, with that, I hand over to you to explain or the continuation of the evening, or should I do that?
No, I will do that.