Dear ladies and gentlemen, welcome to the conference call for fiscal year 2020 of TRATON SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. One final request. Please note the disclaimer that you will find at the beginning of the presentation. If you are only connected by phone, please access the online tool to display the disclaimer. May I now hand you over to Rolf Woller of TRATON, who will start the meeting today.
Thank you very much, Ms. Moore. Hi. Hello to everyone out there. Thanks for participating in today's conference call. We hope very much that you and your families are safe and well in these continuing tricky times. Together with me on the line today is Matthias, our CEO, Christian, our CFO, and the usual representatives from legal, finance, treasury, and IR. As you are all aware, our most important KPIs were already released on January 22nd, and that was with the announcement, because in particular, net cash flow was very strong. On March 10th, we published our annual report 2020, and today is the analyst and investor call. Today, we will provide you with some more details on the group's performance and what we expect for the running fiscal year to come.
Before I hand over to Matthias and Christian, I have to get back to some housekeeping items. First of all, the material for today's call, I hope everyone has seen it, is the press release on the battery electric initiative on TRATON site, as well as the annual report and DR presentation. If you didn't receive them, please go on our website, TRATON IR, you can grab all relevant documents from this site. As Ms. Moore has already said, there is a disclaimer on page two, which you should carefully read. I will not read it to you. After the presentation, we will, of course, host a question answer session. I would like to ask every participant in the Q&A to limit his or her questions to only two, maximum three, in order to give everyone a chance to ask a clever question.
With that brief introduction, I'm very happy to hand over to Matthias, who will guide you through the first section of this presentation. Matthias, the floor is yours.
Thanks a lot, Rolf. A warm welcome from my side. I hope you're all healthy. I think that's the most important issue these days. To start off, let me make some remarks on 2020, which was a year of two phases. We started into the year with rather low expectations because of the record year 2019. We have seen a dramatic situation because of the COVID-19 pandemic and its impact on our business. The worst situation occurred in April, when almost for the entire month, all our production remained closed. With no doubt, the first half was extremely challenging, not only for our industry. In the second half of 2020, however, we saw an accelerated momentum. Market demand picked up. Production capacity was ramped up in the recovery, especially in incoming orders, was stronger than we could have expected at the end of the first half.
This trend continued also in the fourth quarter and continues to last for the beginning of 2021. As everyone in our industry, we are focused and are still focusing on managing cost reduction and establish measures to safeguard our liquidity. Even in a challenging environment, we made further progress on our way to become a global champion of the transportation industry and strengthen our technology partnerships. We reached a binding merger agreement to acquire Navistar. The closing of the deal is expected for mid-2021. TRATON and Hino signed a joint venture agreement for e-mobility to develop electric vehicles and relevant components. TRATON and TuSimple agreed on a global technology partnership for autonomous trucks. Our TRATON brands have introduced strong products during this year.
With a new MAN truck generation and the new extra heavy truck Meteor in Brazil, we have a state-of-the-art portfolio in place on our core markets to capture all relevant segments. We are transforming transportation with our innovations in the electrification of trucks and buses. Scania, for example, introduced their first range of electric trucks in 2020. As you can see, despite the challenges we were facing in 2020, it was a year with a lot of progress for TRATON. I'm on slide five now. Since our figures for 2020 have already been published and most of you are familiar with them, I will not go into the details here. As you can see on the chart, despite the recovery in the second half, our numbers were negatively impacted by the pandemic situation.
However, with strong team effort, we managed to achieve a positive operating result and generated a net cash flow of EUR 676 million in the industrial business for full year 2020. Please have in mind, last year's investing cash flow was supported by a couple of extraordinary items, amongst others, the sale of the Power Engineering business. Excluding this, the swing year on year was positive and amounted to EUR 157 million. Let me raise some quick highlights on the performance in the second half, which you can find on page six. As you can read on the left side, we have witnessed a noticeable market recovery in combination with increased incoming orders. In the second half of 2020, incoming orders were up 47% compared to the first half 2020. Very impressive is Scania with a book-to-bill ratio of 1.4 in the second half of 2020.
Unit sales recovered strongly as well, up 45% in the second half of 2020 compared to the first half. Thanks to all these developments and other actions like strict working capital management, we generated a strong net cash flow in the industrial business of EUR 1 billion, 23 million in the second half of 2020, significantly above the first half. We reduced CapEx on primary R&D in 2020 significantly. All this resulted in recovering sales and improved EBIT, as you can see from the chart on the right. On the next slide, we have a detailed view on the brand level for the second half versus the first half of 2020 to outline the two phases of the year. As you can see, we significantly improved our performance in nearly all relevant KPIs in the second half of 2020 compared to the first half.
Major highlights are Scania, I already mentioned, with a book-to-bill ratio of 1.4x in the second half. Incoming orders were up strongly by 70% compared to first half 2020. Unit sales and sales revenues recovered significantly. Operating return on sales was more than 8% in the truck and bus business, and again, very good in comparison to competition on a similar basis. MAN was strong on volumes and sales revenues followed. The operating loss declined to EUR 166 million in the second half. This was achieved despite the ongoing dual costs for producing in parallel the new and the old truck generation. This testifies that we are making already good progress on the cost side. MAN also benefited from an increase in unit sales. Our [equal sales] revenues were clearly impacted by the exchange rate, but generally speaking, for eco improved compared to first half in all key figures.
Having said that, I would like to hand over to Christian, who will lead you through the outlook session. Christian, please.
Thank you very much, Matthias, and also a warm welcome from my side. I'm on slide nine. Here, we are providing more details with regards to our outlook for the financial year 2021. After global growth collapsed in 2020, the International Monetary Fund is expecting a noticeable recovery for 2021. However, this upturn will vary by regions. You all know that China has found its way back to the growth path very early already in the second half 2020. The eurozone, which is very important to us, is recovering at a slower pace than initially expected. The IMF has already had to lower its expectations here in the last couple of months. This all shows that while we can expect growth in 2021, the economic environment remains volatile. If you look at the right chart of this slide, the registrations of 16-ton trucks in Europe follow the macroeconomic developments.
It went up very quickly after the corona slump. After that, the growth slowed down. All of the European market, heavy-duty trucks, has returned to the positive in direct year-on-year comparison at the end of 2020. We have seen in January 2021, again, a negative year-on-year development. Moreover, the market has not yet reached pre-pandemic levels. Bear in mind that exceptional strong year-over-year change in mid-2019 was helped by the pre-buy effect in the light of the introduction of the digital tachograph and pre-buy of some extra volumes in expectation of a hard Brexit by the time. All in all, we will stay vigilant and focused. Yes, the business climate worldwide is brightening. However, increasing infection rates and shutdowns in Europe reoccurring, there is still a high degree of uncertainty for 2021, even though the lockdowns are limited to social rather than to industrial life.
I am now on slide 10, where we can see the development of our unit sales and incoming orders on absolute on the left-hand and relative level on the right-hand of the chart. Overall, the positive development of vehicle utilization in most regions since May 2020 continued also in fourth quarter, especially in the long-haulage truck business. The market recovery went faster than we expected it to happen. Incoming orders were likewise recovering faster than anticipated. In each of the six months of the second half of the year, the group's incoming orders were above the respective prior year months, resulting in a 21% increase in incoming orders in the second half of 2020 compared with the second half of 2019. As you can see on the left graph, the decline in unit sales also slowed significantly in the second half of 2020.
The gap to previous year's levels narrowed considerably. With almost 63,000 units sold, we nearly even reached the prior year fourth quarter level. Looking at the year-over-year change on the right graph, we see the unit sales are following the incoming order momentum, which was strong in the second half of 2020. By comparing incoming orders with unit sales, you can see that our book-to-bill ratio was well above one times for industrial business throughout the second half of 2020. Overall, the graphs show resumed momentum in the third and fourth quarter. However, as mentioned before, we still have to be careful as we all see the pandemic development. Having that said, we can confirm that the start to the year saw these trends not abating. This prudence also is true for the worldwide truck market outlook that you can see now on page 11.
Clearly, the economic downtrend triggered commercial vehicles markets globally to contract in 2020, with only the fourth quarter standing out of this trend. From that low basis, all is set for a firm market recovery in 2021. This development will be unevenly distributed across markets, and amplitudes could vary for each market in light of the before-described developments. More forecasts foresee an increase of the truck market in Europe, which should range between plus 10% to plus 25% for the year 2021. For South America, the range is even greater and goes from + 10% to plus 40%, as you can see in the middle chart. As shown on the lower chart, the truck market in North America is forecast to grow between + 5% to + 20%.
We are undecided how strong the recovery is taking place. We would not see the upper end of these ranges being reached in 2021. We are not believing that we end 2021 close to the peak levels seen in 2019, but would see them being reached not before 2023. This might also partly explain our forecast on the operating margin in 2021 on the group level. After elaborating on truck market developments for 2021, we are now focusing on the expected development of our group for 2021, which you can see in the last column on the right. As you've already seen from our press release of the 2020 annual report on March 10, after the decline in 2020, we expect a sharp rise in unit sales and a substantial increase in sales revenues for 2021.
Given that all our major truck lines are renewed, we are in firm belief that we emerge stronger from this crisis than we have been before. For the return on sales, we are forecasting 5%-6%. This depends very much, as said on the slide before, on the development of the end markets. In line with the improved operating performance, we're assuming a cash conversion rate in the range of 25%-35%. Just as a reminder, our outlook does not contain any expenses or expenditures for the MAN Truck & Bus restructuring program and any effects from the planned acquisition of Navistar. The forecast is subject to no further increase in the number of cases due to the COVID-19 pandemic, and that no associated countermeasures are taken by the affected countries, as well as subject to any potential impact on our production and supply chains.
However, the distinct brand performance, the new truck lines, the introduction of the Common Base Engine, and other benefits should all help achieving this goal. Which brings me to the next slide. What are the focus areas for TRATON in 2021? First and foremost, the planned acquisition and integration of Navistar. The deal accelerates our global champion strategy by creating a global leader across key truck markets. Nevertheless, that will not be our sole focus for this year. MAN has initiated a comprehensive realignment program, which will allow for structural changes in its cost framework. On top, the introduction of the new truck generation at MAN will be completed in the second half of the year and will allow MAN to further reposition its brand. First benefits were already realized in the second half of 2020.
After five years of development, we will introduce our Common Base Engine into the market in the second half of the year. Scania will start to roll out the brand new 13 L engine in Europe, which would set the new standards in terms of fuel economy and efficiency. By leveraging powertrain components across our brands, we can realize significant cost savings over the years to come. We are best positioned with our new truck lines and the new engine to exploit the key transportation innovations. Very important, with the renewal of all our truck lines and with finishing the development of the CBE, we completed the bulk of the CapEx budget dedicated to new products and can concentrate now on new investments for future technologies. That means we will continue to further speed up our electrification activities and expand our positions on alternative drivetrains. Now I'm on slide 14.
I'd like to provide you with some more details on the MAN Truck & Bus realignment. The executive board and general workers council agreed on a framework paper to enable the company's rigorous and sustainable reorganization of the production and development network with a strong focus on future technologies. The agreement on the key points supports a package of measures with the aim of improving earnings up to EUR 1.7 billion. On the left chart, you can see that it specifically aims to achieve an improvement in overhead and personal expenses of up to EUR 550 million. Material costs are to be cut by around EUR 700 million as a result, improving cooperation with our suppliers, starting as early as the concept design phase for products. The company also aims to generate around EUR 450 million through additional sales efforts, among other things.
The measures planned also entail cutting around 3,500 jobs across all areas of the company in Germany by the end of 2022. The Steyr plant in Austria, which has around 2,200 people, is still being discussed. We are reviewing all options in this respect, including the possibility of selling or closing the site. In total, the restructuring measures are currently expected to result in costs of high triple-digit million EUR amount for the entire restructuring period. This is including the measures in connection with the Steyr site, which are still to be defined. What we can witness, there is a clear momentum now at MAN Truck & Bus, and benefits will occur already in 2021. You will be able to follow that on a quarterly basis during 2021. On page 15, some details regarding our planned acquisition of Navistar.
As you know, we signed the binding merger agreement with Navistar in November 2020. On March 2nd, a clear majority of Navistar's shareholders approved the acquisition at Navistar's annual shareholder meeting. The planned acquisition of Navistar marks another important step in our company's history. It will accelerate our global champion strategy and is a natural next as we will enter the North American market. Consequently, we, the TRATON management team, are very much convinced that a combination of TRATON and Navistar will create sustainable value for our business partners as well as for our shareholders. Unchanged closing is expected for mid-2021 and subject to regulatory approvals and customary closing conditions. The delisting of Navistar is envisaged to take place shortly after closing. Going forward on this deal, we will put our focus on the successful integration.
One more topic I would like to highlight on the next page, the trend towards alternative drives is no longer reversible. TRATON positions itself early on. We want to take a leading position here. Climate protection is an elementary goal for us. Since last year, electric buses from Scania and MAN have been on the road with a common electric drive. Our brands have set clear goals for alternative drives. In 2025, electric vehicles will account for around 10% of Scania's volume in Europe. At the same time, half of MAN's new buses will have an alternative drive. By 2030, every second vehicle sold by Scania will have an electric drive. At MAN, at least 60% of trucks for delivery and 40% of trucks for long distance traffic will be emission free. Page number 17 confirms this objective. The future of the trucks will not be shaped by diesel.
Clearly from electrified drivetrain solutions. This firm conviction leads us to significantly expand our research and development budget for e-mobility. We now plan to spend EUR 1.6 billion in the period up to 2025. So far, we have earmarked an amount of EUR 1 billion. This increase is made possible because all brands are shifting their budget from conventional to electric drivetrains. This doubles the share of product development for e-mobility by 2025. In return, less than 20% will still go into the product development of conventional drivetrains. TRATON becomes electric, not overnight, but step by step, sustainable and in line with the necessary grid expansion, because without charging infrastructure, this would not work. With that having said and making you aware of the deck for your modeling purposes, we conclude today's presentation, and we are very happy to answer your questions now.
Thank you, Christian. Yeah, that concludes the general presentation. As Christian has mentioned, there is extensive backup available with all the details and data you need in order to feed your models, and I'm very happy that Ms. Moore can now start the question and answer session.
Thank you. Ladies and gentlemen, if you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Horst Schneider, Bank of America. Your line is now open. Please go ahead.
Yeah, good afternoon, and thanks for taking my questions. The first one that I have, you can imagine that relates to the guidance that you have put out, which surprised me a little bit how cautious you are. When I look at the market guidance range, for example, then it's a pretty broad range that you define here, for example, for Europe, the plus 10%-25%. Maybe you can explain what the lower or upper range depends on. What's your view now, since we have started the year already and you got already the order intake from January and February. What you think is more likely to reach upper and lower end? Again, on leverage as well and margin as well, why you're not more bullish then on the margin? What are your key assumptions there that you remain in this 5%-6% range?
Thank you.
Christian?
Thanks, Horst, for your question. Obviously, there's a point to discuss. On our end, we've had a very good second half when it comes to order intake. As you've rightly said, compared to some of our competitors, we are less bullish on the market outlook, in particular to Europe. As I have described on page 11, this is in some regard, supported by third party thinking. For us, it's also you need to keep in mind, MAN still has to cope with the ramp-up of the new truck generation and still has some dual ramp-up cost to handle it. We guess that it will be fully implemented on the NTG side in the second half of 2021. This will be the time when we then introduce the new engine, the production and delivery on the Scania side.
As I said before, given the current situation on COVID-19 and also the situation, especially for the second quarter, at least for a temporary effect on the semiconductors, leads us to the fact that we are, since we are prudent people, a little bit more cautious when it comes to our expectation there on the market. However, if you see the development now in Q1 so far, we do see that there's a strong momentum still, that we have seen in Q4. Order intake continues to be strong. We cannot rule out that we will be maybe at the end of the year on 2019 market levels. Again, do not want to commit here. The momentum needs to be seen. Upper end of the guidance seem to be reachable.
Sorry, a quick follow-up on that. The semiconductor impact, can you quantify that for Q2 maybe?
No, we can't. We saw on MAN already one or two smaller stops here. Scania so far hasn't had any. We are closely aligned within the group. We do foresee for the second quarter some disturbances that would stretch the supply chain or maybe even the production also on the Scania end. We think it's just temporary and that we could catch up most probably in the second half of the year.
Definitely then H2 going to be stronger than H1 in terms of margin and then you'll see after H1 where you end up, right? If the visibility improves.
As I said before, let's see the first and second quarter and the situation around COVID and then we'll see. Okay?
All right. Good luck. Yeah. Thank you.
Thanks.
Thank you, Horst. The next one is Moore .
The next question is from Klas Bergelind, Citi. Your line is now open. Please go ahead.
Yes. Hi, Matthias and Christian. It's Klas at Citi. A couple of questions. I will take them one at a time. First on investments. You're increasing the e-mobility investments for good reasons from one to EUR 1.6 billion through to 2025, and then you're saying you're scaling back investment on the conventional side. Just to confirm, there is no creep upwards in total R&D nor CapEx at 2025 as you see it now. The reason for asking, Christian, is that obviously Scania is now investing to go local in China as well. Obviously there is incremental CapEx on that side. Just to confirm that.
Yes, Klas, the discussion is, we are out with around EUR 1.1 billion on CapEx and EUR 1.3 billion on R&D. As you have rightly elaborated, we will shift within the EUR 1.3 billion since the new truck lines are all established on MAN, on Scania, and now with the Meteor and the updated delivery also in Brazil. CBE1 is developed, will hit the market in second half of the year. That means the majority of our classical R&D investments have been executed, and this is why the board still commits on the level of around the EUR 1.3 billion, as you have rightly guessed. Secondly, on CapEx, the same thing. The foundry on the Scania end is running now. The production of the CBE1 is established. We will use within that EUR 1.1 billion going forward, also the extension of certain investments. It depends on the China strategy going forward.
In the current setup, we will continue to be on the 1.1, but that's basically in the foreseeable future. You cannot judge what comes in the next couple of years in China.
No, sure. You can understand why I'm asking, right?
Yeah.
There are a lot of questions on this. Yeah.
Of course.
It's a serious Yeah. My second one is on the battery side. What kind of, if any, margin headwinds can we see once you start to roll out on deliveries here? We know that CapEx and R&D, rightly as you say, might not be as aggressive on the way up as on the past car side, but I'm still thinking about production disturbances as you roll out, lost off-the-market revenue from the ICE side, increased launch costs. Do you see, like in the case for Volvo, that the length of the service contract with increased, obviously equipment as a service sales will compensate? I'm interested in your thoughts on potential headwinds as we roll out on the battery side.
Of course. First, as you have rightly said, after-sales and service are a significant contributor to our margins. Since business models are shifting, we invest a lot of, let's say, investigation in expanding our business on that end. When it comes to downstream business, we need to assess future possibility there. We do this. We have ideas there, but it's too early to comment on it. There will be certainly some headwind in the beginning. Volumes today are quite small. If they are ramping up, assuming that battery costs will go down and that we will improve on the product cost side, the impact will not be as much, but we need to see what we can compensate on the, let's say, holistic services and downstream side.
Thank you.
You're welcome, Klas.
Very good. We go on to the next one.
The next question is from Mr. Engellau, Handelsbanken. Your line is now open. Please go ahead.
Thank you very much. Two questions from me. Starting off from the market. I think that in the second half of 2019, it was pretty clear that both Europe and North America truck markets were peaking as from looking at being above 300,000 units for some time, having around very young, active truck fleet and also some oversupply. I guess none of us expected 2020 to come out the way it did. My question is then on, what's your view on the trucking cycle here in terms of aging perspective, supply and demand or haulage, and how to think about maybe 2021 having an overshooting on the upside as 2020 had an overshooting on the downside? What risk do you see if 2021 comes out stronger than expected, that 2022 could very much be like a downturn here in the correction before having this age problem solved?
That's my first question. Second question is regarding to the press release you sent out here. My perception from reading it and looking at this is that it just seems like you have a bigger business case on battery electric rather than hydrogen trucks. That puts you more within the Tesla. I'm talking about also for long haulage, having battery electric as a power supply compared to maybe Daimler and Volvo, who's moving more towards hydrogen when it comes to long haulage. If you could maybe discuss your thinking behind that. Those are my two questions. Thank you.
Maybe I'll take that, Christian. When it comes to the market, there is a significant difference between the North American market to the European market. The sheer number of miles or kilometers in the U.S. driven is per truck much more than in Europe. That's why the replacement cycle, my expectation would be earlier to come back in the U.S., rather already partially in 2022, and in Europe, which will take really until 2023, until we are back at better market volumes, as Christian presented in the beginning. When it comes back to battery or your question, hydrogen, you know that this is in the end not what we want. In the end, it's about our customers. With what kind of products will have our customers the best benefits in their business model?
It looks like, when we calculate our models, and the models are getting better and better, we learn on our way. Actually, we see that in 2025 will be the turning point that we actually see that the BEV vehicles will give the overall total cost of ownership position for our customers will be the better one than the diesel engine. This you can also achieve with a hydrogen, but green hydrogen then only should cost you about EUR 3. It's actually on par, and this will come later from our perspective. If you compare again, then battery electric vehicles to hydrogen vehicles, we see that for our customers, the benefit in most of the use cases, not in all of them.
There are some use cases that definitely the hydrogen truck is giving a better result to our customers because, for example, there wouldn't be a charging infrastructure somewhere in Australia. Hydrogen makes a lot of sense. Overall for Europe, we see the BEV vehicle as the mainstream vehicle, also in long haulage.
Thank you.
You're welcome.
Thanks, Hampus. The next one, please.
The next question is from Rajesh Singla, Société Générale . Your line is now open. Please go ahead.
Hi, good afternoon. Thanks for taking my questions, maybe a couple of them. The first question is on your outlook for 2021. If I look at the slide number 12, where do you see yourself in 2021 when we are saying that there would be a substantial increase in revenue, as compared to 2019? Because in 2019, your revenue was 19% higher than FY 2020, and probably the unit sales were around 25% higher than 2020, and margin was around 7% in 2019. What is the major driver of these lower margins in 2021? How much is the raw material cost is responsible for such a lower margin in 2021?
Thanks for your question. I tried to answer that before when I answered Horst's question on the guidance. Look, we need to see the insecurity we are currently in when it comes to the market development first. I said before, MAN, until the end of the second half, needs to introduce the new truck with some dual ramp-up costs, with maybe some disturbances if COVID-19 situation is getting worse. You ramp up a new engine in the second half of the year for the group starting with Scania. That at the end of the day means that you basically need to be careful when it comes to the development of the efficiency there.
Matthias and the team on the MAN side have just recently now aligned on the MAN restructuring program, which also starts now in parallel to the, let's say, finish of the ramp-up of the truck. This brings up to the point that we, as I have said before, are just prudent people and just take it quarter by quarter here.
Okay.
Christian, I think you managed the right thing. We really do this time a really holistic restructuring of MAN. That means we touch every side, and we change the content more or less of every side. This somehow will also have an effect on the organization. I think this is very natural.
What kind of raw material headwinds are you seeing in 2021 in terms of the margin? Maybe 50 basis points is already built into these margins. If you can share some insight into the raw material pressure already built into these margins?
I think it's very difficult for us to declare details on how much of the risk portion is already there included. I don't know exactly where you're heading to, quite honestly.
Okay. Maybe the last question, with respect to the long-term guidance which you had given in the past, over the cycle margins of around 9%. Where do we stand on that, or we still think that we would be able to achieve that by maybe 2023 or 2024? Any timeline on that margin guidance?
It is exactly like we said. It's over the cycle target. We had a down cycle in Europe last year with a V-shaped recovery, as I've outlined before. Let's see how the cycle will develop, but the target's 9% for the TRATON Group, 12 for Scania over the cycle, eight for Caminhões and eight for MAN, are still valid. As Matthias has said, building up now these efforts in the restructuring is an important part of that.
Okay. Thank you very much, sir. Thank you.
Thank you, Rajesh. The next one is Mark.
The next question is from Nicolai Kempf, Deutsche Bank. Your line is now open. Please go ahead.
Yeah. Hi, Nicolai Kempf here. Thanks for taking my question. The first one would be on the order intake, and Scania did pretty good in last quarter, but MAN, the order intake was basically flat while the market was up by over 30%. Can you give some color why this was not the case at MAN? The second one is on the batteries for your electric lineup. Volkswagen Group has announced some business plans to build up the cell capacity. Can you source battery cells from Volkswagen? Thanks.
Matthias, would you like to take it?
Yes. I'll take the batteries and you do order intake.
Yeah.
I can just take both. It's not a problem. To the order intake on the MAN. You saw in the restructuring program that we actually want to improve on the measures of EUR 450 million on the pricing and net revenue side. We have now the opportunity, the first time in MAN, we have a complete new setup. We want to position that new product in the right way from day one. This is why we're not striving for market share, we're striving for product positioning and a clear price point we want to have. Yeah. This is the first point, and we will see that continuously now on the MAN side. You're going to see a much better price discipline than in the past. When it comes to batteries, we're actually thinking in two ways. Yes, let's work together with Volkswagen.
Let's have that huge volume somehow incorporated in our discussions, but we do it in a splitted way. We have it on the one hand, on the Scania side with Northvolt. There are also other passenger car brands in, so overall, we have a good volume there. Then we do it with some other passenger car brands actually on the MAN side. Not having, let's say, all eggs in one basket, but let's say, use the opportunities of the group here. We feel very confident with that.
Nicolai, everything answered?
Yeah, everything answered. Thank you.
Very good. The next one.
Thank you.
The next question is from José Asumendi, JP Morgan. Your line is now open. Please go ahead.
Thank you, Rolf. Hello, Matthias and Christian. Couple of questions, please. On the CBE side, by when do you expect the full rollout, maybe by region or by brand, to be executed? That'll be the first one. Second, hydrogen fuel cell. I get the point that you are focusing more on electric, and that's very well respected, and I get it. If for whatever reason, the market will go more towards hydrogen fuel cell trucks, can you speak about your ability to react and what you have in terms of in-house technology, please? Third, Christian, can you talk about restructuring cash outflows 2021? If there's any guidance for that, please. Yeah, I've got a final one, but I'll leave it for these three for the moment. I've got another follow-up, please. Thank you.
Okay. I'll take it quickly, Christian, then you can talk about the cash side. The CBE, it really starts now with the second half of 2021 at Scania, that it will continuously ramp up. We will be, let's say roughly 2024 second half, we're going to be on a very, very good volume base, 2025 is a full year of CBE1 being almost in every second truck of our organization globally. When it comes to hydrogen, it's not like we're actually not investing in the hydrogen. We really need to understand the technology. We're building our prototype, so we are actually quite good in that. That's why we actually have the joint venture, with Hino and with the Toyota fuel cell.
In the end, if the market would shift, which we don't believe based on all the information we have, nevertheless, we have all the capabilities. All the surroundings, the e-axles and whatever the components, you actually anyhow use for both trucks. You use for the fuel cell trucks as you use it for the battery vehicle. Most of the components are anyhow the same. It's really the storage of the electric energy which you do in a different way. We are prepared. If the market shifts, we are capable. We have the technologies.
Thank you.
When it comes to your other question, José, obviously now, since the agreement was just recently signed, we will book not on the cash side, but we'll book on the earnings and accrual in Q1, and basically for the 3,500 in Germany. As soon as we get an agreement, whether on listing or selling Steyr, we'll then do this in the second quarter, I guess. When it comes to cash outflows, pretty much stable, I would say, in the next two years, because those 3,500 people go with different measures. Some take a package, some stay on with let's say, part-time, whatever. You will see those cash outflows for the first portion, in the next, I would say 24 months, most probably.
Yes, great detail. Thank you. Matthias, back to you on a follow-up, please. The Chinese market is a huge opportunity, obviously for the group and for Scania, and I'm sure it will be a big topic of debate in the coming first months. Can you just elaborate a little bit more what has changed? The Chinese truck market has been there for a long time and very, very important, obviously. What has changed structurally for you in the last 14 months that now suddenly you're accelerating? Your competitors are also, by the way, accelerating there with a new dedicated heavy truck for the Chinese market. What has changed for you specifically, and specifically within Scania? Thank you.
The segmentation in the Chinese market has really changed, not only in the last 14 months. I would say in the last two years, we could really see that. It's not any more the mid or the lower end of vehicles from a technology perspective. It's more the, let's say, upper, even into a little bit into the premium segment, where we see the market shifting. The product and our potential of our products, they find now significantly bigger segments. That's why it's now the time for us to really invest. That shift will continue to go on. As transport is getting more, let's say, more systematic and more qualified in China, there will be a significantly bigger market segment for us, and that's why it's time now broader for us to actually invest.
Most probably, you will see a much bigger story than only the Scania story from TRATON in China.
That was great. Thank you very much. Thank you.
Thanks, José. Can we continue?
The next question is from Björn Enarson , Danske Bank. Your line is now open. Please go ahead.
Yes. Thank you. I was also on the same topic, on China. I would like you to talk a little bit more about the expansion in China and in Asia overall. If we can get some more color on how much you invest and if you can get some of your own expectation of your shares, et cetera, in that region. Thank you.
I can do this quickly, Christian. Our focus at the moment, you have to understand that, is really the team wants to now get the Navistar, then consolidate the company. That's quite a big effort for us, and that's the major focus because the second half of this year, TRATON looks very different. Our focus next, we've started with the Scania investment and discussions, will be on Asia, and it's not the time now to give you a clear answer, but it will come this year that we will show you very clearly what our strategy for Asia is. Work in progress.
Work in progress. Looking forward to that. My second question is on MAN and the major restructuring there that we have been waiting for. Can you give us some details on how your progress, timing-wise, would look towards the 8% EBIT margin? Is it a lot tilted towards the end of your forecast, or is this a gradual improvement?
It's actually this time really a quite complex restructuring because we're really taking each of the sites and have newly identified and defined what we're going to do per site. This also in that moment means that, for example, we have to move the production on light duty, medium duty truck from Austria to Poland. We have certain cabin manufacturing, which we do today in Munich, we're going to move to Poland and so on. Some of the engineering functions from Austria have to go to Germany, to the Nuremberg site or the Munich site. We will rework completely site structure and our logistic functions and so on. This will take some time. This is why it will take us these two years to actually implement all of that, because it's a true restructuring.
You will see, as Christian described before, gradually quarter and quarter, you will see slight improvements and we will report back what we have achieved. For some issues it really will take the two years because we first have to do an investment, for example in Poland, before we can shift the production and so on. We are on a good way and we actually know exactly what we do this time.
Great. Thank you. Last question on MAN new pricing. Is there anything you have said about the impact on volumes or what kind of potential drop in market share you are likely to accept for this? Do you expect to keep the market share unchanged medium-term?
Matthias or?
No, you can.
It's fine. It's market by market. There are some markets like in Germany where MAN has also very established market position also on the premium side. For us it's, as Matthias has alluded to before, margin before volume. We know that the new truck has a 8.2% fuel consumption improvement. We see that customers do pay for that margins start going up and we are, and as I said that in the last quarterly calls are, let's say, reducing the ramp-up speed of the new truck, in particular in order to safeguard the margin. We'll see there, as Matthias has said also, quarter by quarter particular improvements.
So far we have tried before at MAN with the old truck to actually increase share or increase pricing and it didn't work. Now this time we have the chance. We need to make right. We have the right margins in the product. It's worth it. The product is really great.
Okay. Thank you. Perfect.
Thank you very much, Björn. There's more.
The next question is from [Xin Lu] , UBS. Your line is now open. Please go ahead.
Hi. Thank you. Hi. Thank you for taking my question. Hi, Xing from UBS. Just a first question is just on the MAN. Just following up on the earlier question on the MAN, I guess earnings improvement.
The personnel overhead savings of EUR 550 million, that's probably quite clear coming over the next two years. Maybe could you expand a little bit on what is required for you to achieve the cost savings on material cost and sales efforts, and what kind of phasing we could expect there? I guess, is two years enough to achieve everything you want to do? Thank you. That's my first question.
I think, two years are not limited when it comes to material cost. Now look, MAN had a 20-year-old truck. You don't get your suppliers buying into huge material cost improvements there. Now this truck is being launched, most probably the launch is concluded now by the first half of the year. This is initiative that will go on, and also then by the time when MAN then will also take the engine and the transmission and the after-treatment system from the CBE platform, it will continue. It's an effort that is not limited to those two years. I was referring to the two years when it comes to the cash flow for the headcount measures for the 3,500 people here in Germany.
This is going to continue, and as Matthias has alluded to, we will report quarter-over-quarter how the company will develop. It's a journey, so we won't be finished in the next two years.
Mm-hmm. Absolutely.
Understood. Thank you very much. My second question is really just on the CBE. Could you maybe share how much of energy efficiency you could expect to achieve for customers, and thereby any pricing tailwinds that we could expect from this? Generally, I guess, looking at the general market uptrend, do you expect any positive pricing to come through in 2021?
Of course, I do. Matthias does as well. I think, quite honestly, we know how much fuel consumption improvement this new platform will bring, and of course, since our customers are into TCO improvement, we expect to get pricing realized there. We can't, unfortunately, even if we like you guys, disclose it today. We will do so once the product is launched into the market. Right, Matthias?
Yeah. We expect happy customers. That's the only thing we can say.
Okay. Yeah, got it. Thank you very much.
Thank you very much, [Xin]. I hand back to Ms. Moore. Ms. Moore, are there any further questions?
No, currently no further questions.
Super. Yeah, it was.
Great.
Thank you very much, Christian. Thank you very much, Matthias. For the remainder, if there are any open topics, we know 240 pages of an annual report are always difficult to digest. Whenever you have a question, please ring the team in Munich. We are very happy to answer any question you might have. In the meantime, you know that the closed period for the first quarter will start soon, namely in early April. April 10th, if I'm not mistaken. Then actually on May 10th, we will meet each other again, hopefully with even better numbers than we could provide for the second half of 2020, and look very much forward then to the first quarter conference call. Thank you very much for being with us today, and stay healthy and speak soon. Bye.
Thank you very much. Goodbye.
Thank you very much. Our pleasure. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.