Hello, everyone, and welcome to our Daimler Truck Strategy Day. This is an exciting day and an exciting year for Daimler and for Daimler Truck. As you know, we are in transformation And we are pulling off some historic changes for our company. There's a fundamental technology shift going on in this industry, And we intend to lead it, especially in terms of electrification and software. For us, this comes with a definition and execution of a new strategy.
And to accelerate all of this, we're also revamping our structure. Taken together, these steps will significantly improve our company's performance, And that's why we're looking forward to tell you more about the roadmap for Daimler Truck today. What we intend to do is clear. We are building 2 independent pure play companies. Mercedes Benz will be the world's preeminent luxury car business, Committed to leading in electric drive and car software, Daimler Truck will accelerate its path towards 0 emissions as the world's largest truck and bus producer and technology leader.
Going forward, there is so much opportunity. But we are all well aware that greater independence also comes with great responsibility to raise our financial performance, to accelerate on our strategic course and to create sustainable value. I have full confidence in the financial and operational strength of our 2 vehicle divisions. And with regard to Daimler Truck, I'm convinced that independent management and governance will allow them to operate even faster, invest more ambitiously, target growth and cooperation, and be significantly more competitive. How are we moving forward?
Short answer, we are on track. We are making significant progress on all major cornerstones of this project. I want to mention just a few. The independent governance for trucks is well underway. The carve out of central functions is moving along, And we're on time for the planned majority listing by the end of the year.
The same goes for the EGM this fall. I can't wait to see what the team is going to make out of it. With this, I'll hand it over to the CEO of Daimler Truck, Martin Dahl. Before that, let's have a look at the short video.
Of an industry, a deep understanding of your customer needs, full potential, a flexible business model to beat industry cycles and create value. But most importantly, it takes the audacity to challenge the status quo. And yes, a proven track record of actually being able to industrialize technology is also a plus. To benchmark levels in each of the regions we operate. As an independent company, we are now embarking on a journey keep the world moving.
This is Daimler Truck.
Thank you, Ola, for the introductory remarks. Hello, everybody, and welcome to this first Daimler Truck Strategy Day. The film you have just seen tries to sum up What Daimler Trucks stands for as a company and what we want to become as we make our way towards an equity market listing and towards public life. And I want to start by explaining that leading Daimler Trucks towards an independent future as a publicly listed company has long been a personal mission for me. I believe it can operate most efficiently as an independent company.
And I believe the scrutiny, the intensity And the discipline that the capital markets will apply to us will be a profoundly good thing. We are committed to confront our weaknesses. We are very serious about making hard decisions. It will bring rigor to our capital allocation, and it will raise our financial performance. It will make us a better company for our customers.
It will make us a better place to work for our employees. So I'm looking forward to this journey. I'm grateful for you all tuning in and joining us here today. I'm looking forward to telling you more about this company and the great new management team that we have assembled. I'm looking forward to your questions.
And in the months years ahead, I'm looking forward to meeting with you, discussing with you, welcoming some of you as shareholders and learning from you about what you expect of us as a listed company. Let me turn to my first slide, which tries to summarize our strengths, our weaknesses and our opportunities as an independent company. Our strengths are very easy to describe. We are a true global number 1 in terms of size, reach and scale. In a normal year, we sell over 500,000 trucks globally.
We have powerful brands that customers value for what they stand for, successful across all major continents. We are technology leader in combustion engine, a technology leader in safety technology and increasingly in 0 emission powertrains. And we are absolutely a powerhouse in North America with a 40% share and a leader in profitability terms with strong double digit margins, so far so good. But we also need to acknowledge our challenges. In fact, we have decided today to spend a lot of time talking about our challenges.
We want to acknowledge them. We want to explain them to you and then we want to show you how we are going to fix them. And our challenges are substantial. Teams amongst them is our failure to turn scale, the scale that I just talked about into enduring and financial success in all regions. We have had some successes in this regard.
We have leveraged technology across continents and business units, for instance, using power drain technology developed in Europe In our North American products, we are deploying our electric solution for safety, sensors and connectivity across our global product portfolio. But overall, our regional financial results tell a story. This weakness in Europe, Asia and Brazil, We have inconsistent regional profitability, and we must address this. That leads me to our opportunities. We have an opportunity to fundamentally raise the game of this company.
So how are we going to do this? In a recently announced move, we decided to change our organizational structure. As we get ready for public life and as we get ready to raise performance, We needed a new approach. So we have decided to give each region more independence and more entrepreneurial freedom and create our product development responsibility. And then we will focus each region on targeting its local profit benchmark.
In North America, we are already the benchmark. In other regions, we are far from it. And this needs to change. You are all industry experts, so you know what this means. In Europe, the benchmark is double digit margins.
In Asia, it is high single digit margins. And in Brazil, we have competitors who are profitable, while we are not. Every region must target its benchmark. This is nonnegotiable and every region must deliver. How will we combine this with our technology strength and scale?
Simple. We will focus on pulling synergy from our technology portfolio, not pushing them into regions. We will use the scale we'll soon have in battery electric and later fuel cell and deploy that scale globally. And we will also use technology to grow our services. So we are aiming for the best of both worlds, maximum customer proximity and entrepreneurship in our region and focused engineering power for future technologies.
And I will say it again, as part of this strategy, every region must deliver. So our mission as an interbank company is clear. It's very simple. First, we need to reset profitability. Using a targeting regional approach, we will raise our financial performance.
2nd, at a time of immense industry change and by leveraging our scale, we intend to lead the way to 0 emissions. We are going to talk a lot about that today, and I hope we are going to surprise you with the extent of our ambition and the precision and detail of our plan. So that's it. It's that simple. We are going to reset profitability and we lead the way to CRO in pursuit of profit and technology leadership.
Let me tell you a little bit more about those two pillars before I introduce you to our great new team and hand over to my fantastic colleagues. This is critical. This is essential to our future as an independent company. This is our responsibility. Here you can see our strategic financial goals.
They are self explanatory. We will target regional benchmark profits, focus on the highest return segments, this means a further pivot towards heavy trucks, systematically lower our fixed and variable cost, lowering our breakeven point and grow service revenues to reduce our vulnerability to industry cycles. So that the goals, we must deliver on them. Turning now to the 2nd pillar, leading the way to 0 emissions. As well as resetting profitability, we are also aiming to lead the way to 0.
As my American friends like to say, We are going all in on 0 emission tax. I have said that we are committed to raise profitability. We owe that to our shareholders, But it is also our responsibility to reduce our carbon footprint and lead this industry to 0 emissions. We owe that to society and to the planet, and we will deliver on that promise in a way that is profitable and creates value for our shareholders. With the right technology strategy, with bold decision and with focused execution, we can lead the way to 0 and improve profitability.
That is our goal. I briefly want to tell you about the key decision we have made as a company when it comes to 0 emission. And that is that we need to pursue a dual track strategy with both battery electric and fuel cell trucks. The customer needs both. The industry needs both.
The world needs both. And we are going to develop and deliver both. Let me explain. Battery electric trucks are real. Battery electric trucks are convincing.
And the energy density and cost of batteries has developed so fast that long range electric trucks are viable. We are already selling electric trucks today, And our electric trucks and buses have driven more than 1,000,000 miles in customer hands already providing us with invaluable information to improve them further. We have some great new heavy duty electric trucks about to be delivered into customer hands. We have additional long range heavy trucks in advanced development. And we have ambitious technology plans for the ultimate next generation battery electric truck that our CTO, Andreas Corbock, will tell you about later.
Trucks is that you can deploy them in small quantities fast. An infrastructure for those trucks can be built up fast and we are kick starting such an infrastructure ourselves with high power chargers. But we also need hydrogen trucks because electricity grid can support the charging of electric trucks only up to a certain share of the fleet. But we do not believe that the electricity grid can support a pure 100% electric truck fleet. The transportation industry will need a second energy source, and this is where hydrogen comes in.
We believe hydrogen will be part of the future energy mix. We believe in the hydrogen economy, And we know hydrogen trucks work. Fuel cell trucks have an energy density that is superior to lithium ion batteries and so are better for long haul. And we have confidence in a rapid reduction in cost in fuel cell technology. Our engineers are targeting a dramatic reduction cost that can make an hydrogen truck cheaper than a battery truck.
So we can get the product cost down and thanks to our cell centric joint venture with Volvo, we can also limit the development cost while adding scale with the volumes of another major OEM. The challenge with hydrogen is starting this infrastructure. They are massive investments necessary by the energy companies, just like today in our carbon based economy. But once they are done, they will scale easily, supporting 100,000 of trucks and ultimately millions of trucks out on our roads. We intend to help kick start this infrastructure.
We will tell you more about that later in this event with some exciting news. We have heard others questioning hydrogen trucks and put all the emphasis on electric trucks. We believe this is shortsighted. Both technologies will be needed, and we intend to lead the industry in both technologies. So I have explained our strengths and our weaknesses.
I have explained our opportunities in our new regional focused organization, and I have promised that we will unlock the potential of Daimler Truck for you, our shareholders. But now I want to introduce to you the management team that I'm counting on to deliver and unlock that value. Let's turn to the next slide. Here you see our top management team. This is a team that has seen very significant change in recent months.
We have assembled a new board for Daimler Tuck that I believe have the skills and the perspective and the energy to deliver a step change in performance. In the rest of the event, key members of the team are going to explain Daimler Trucks' regions and technologies to you. Jochen, John, Karen, Hartmut and Andreas are all going to talk to you today. You are going to witness their passion, their expertise and their commitment. I am honored and blessed to lead such a great team.
I would like the team to spend as much time as possible with investors and analysts getting your input, learning from your perspectives and bringing that capital market message back into the organization. With that, I'm going to hand over to Jochen Goetz, our CFO, to talk in more detail about our financial ambitions, then I will see you again later.
Hello everybody. Welcome also from my side. I am Jochen Goetz, CFO of Daimler Trucks. And just like Martin stated in his opening comments While we are excited about our independent future in listing, we are not underestimating the demands and challenges of life as a public company. There is much hard work ahead but we are ready for this work.
We are ready for the scrutiny we will face ready to provide transparency that you require and we are ready to lift the financial performance of this company. And let's be clear we absolutely do need to raise our financial performance. We know that our financial results in the last years were not where they should be. You will see that on my first slide. This is our starting point.
Our EBIT margin is simply not competitive with the benchmark. Our volatility of performance is excessive due to a too high breakeven point and too low share of service revenues. While we are the profit leader in North America, our other regions are not strong enough. We need to fix this. The good news is, we have the blueprint for how to do that.
Dynatrucks North America, strong market position, excellent customer relationship and benchmark in profitability. But on the other side, to be candid, In Europe, Asia and Faselle, we have our challenges. Given the size, Europe is the most important region and has the highest upside potential. We are focused on fixing it with new leadership from car in Radstrom and a comprehensive turnaround plan underway. So, we recognize and acknowledge our problems And we realize that our shareholders will demand much stronger performance.
So how do we tackle these challenges? First, our most important challenge is to streamline our fixed cost base. We aim to reduce our fixed cost by 15% by no later than 2025. We have already achieved a lot in this regard in 2020 And yes, you can debate the reason for that is the pandemic and the corresponding one time measures everyone has taken. Some of that is true, but on top we actively installed some very strong strategic initiatives to lower our overall fixed cost level.
At the Capital Market Day, back in 2019, we already announced our personal cost reduction target in Europe and we are well underway money and time wise. But besides personal cost, we are also engaged in systematic efforts across the businesses to reduce complexity in our products, in our structure and in our organization. Another major step for that is the recently announced organizational change to give more entrepreneurial freedom to each region while reorganizing our resources on the truck technology side. We will be able to leverage technology globally and be more efficient in product management and R and D. For sure, we learned quite a lot during the pandemic.
This cost focused spirit, we will keep also in the years to come. Based on what we have achieved so far and based on the initiative which will be effective in the near future, we are very confident that we will achieve this target. So now let's focus on CapEx and on R and D. Same as on the fixed cost side, We will see a normalization effect in 2021. However, we will remain significantly below the level of 2019 and we will further reduce spending going forward.
But what is necessary to achieve this 15% reduction target? 1st, We will even more focus on heavy duty since this is known as the by far largest market segment with structurally higher profitability. It is our intention as a business to grow our revenue per unit by richer mix high quality products and services. 2nd, as another very strong initiative, we implemented active portfolio management. We will use that to identify the profit pools of the future and ensure smarter allocation of our capital.
The overall reduction of CapEx and R and D is one ambition. But within the given budget, there will be also a significant shift from ICE towards 0 emission and autonomous. And the last point on this slide is really key. We are committed to absolute budget for CapEx and R and D in the future independent from the market environment we are operating in. As I just said, we want to increase our revenue per unit via mix and product and grow the quality of our revenue via services.
This is really important. We don't want to grow the top line by fighting by market share, but rather by delivering compelling products and intensifying our relationship with our customers. We want to increase our recurrent revenues and find long term enduring customer relationship. So now, let's talk about services as one of our most promising growth paths. When I talk about services, I first mean the traditional ones like spare parts and maintenance, but I also mean financial services like leasing and customer specific insurances.
And I mean the very fast growing new services in the field of digitalization, electric and autonomous. Based on our new global connectivity backbone, we are developing tailor made services for every region and for every customer going forward. And for me, the most exciting area are the services regarding 0 emission trucks starting with battery management and ending with the question What do we do with the battery after the first life? So overall, the growth potential we see on services is significant And with that, we aim to increase our revenues on our service portfolio from roundabout 30% today up to roughly 50% in 2,030. Now let's talk more in detail about the financial performance of our regions.
I know there have been questions from analysts and investors about how Daimler Truck will disclose financials going forward. And right now, I can give you the answer on that. In future, we will report 5 segments. 1st, Trucks North America including the very strong brands Freightliner, Western Star and Thomas Built Buses. 2nd, the Mercedes Benz Truck brand in Europe and in Latin America.
3rd, Trucks Asia including our operations in China, in Japan, in Indonesia and in India. Then the Mercedes Benz branded bus with the main operations in Europe and in Brazil. And finally, Daimler Truck Financial Services. And my overarching message here is clear. We must improve the financial performance of many of the segments.
We will have a no excuses policy. Every region must deliver. Let me explain in detail. Obviously, there are 2 very decisive segments. That's trucks in North America and that's Mercedes Benz trucks.
In North America, our main job is to reinforce our very strong position and to sustain discipline. And even if it looks like we already have achieved the maximum here, We still see an upside potential, especially with our latest launch product, the tailor made vocational truck. So our challenge It's more at the Mercedes Benz trucks. Here we have to improve dramatically. We must lower the breakeven point profoundly and increase our revenue share on traditional and digital services.
In Brazil, we must reverse our losses in a rather weak market environment, finalize the renewal of our product portfolio and significantly lower the overall cost. Asia, we see as the region with the greatest growth opportunity mid term. First of all, In China, with our Mercedes Benz branded heavy duty truck made in China for China and second, with the light duty business where we see opportunities especially in Southeast Asia. Now let's briefly talk about the bus. Despite the currently very difficult situation, well, the coach market in Europe has basically stopped due to the pandemic.
The business itself is in a good shape. And then we will welcome our latest member in the TriMet Trucks and Buses family. After the separation, We will have our own financial services business where we want to build up a high return on equity business. I know you are all very curious about the regional profitability but please bear with me I cannot disclose them today. We are still in the process of preparing all the financial numbers for our new segments after the spin.
And I promise At your 2nd Capital Market Day in Q4, where we will focus on financial performance, we will give you detailed segment specific financials. To sum that up, what does it mean for our overall financial ambition? You all are experts on this industry. So you know that the truck business is a very cyclical one. Having that in mind, we decided not to shoot for one single point, but rather focus on 3 different scenarios.
The rainy scenario is very much in line with what we have seen last year. The so called fair weather scenario in the midfield reflects a kind of an average. And then all the way to the right, there is a sunny scenario. This scenario is based on rather strong market conditions. Important here, regardless of the weather scenario or market conditions, We will stick to our 15% reduction targets in regard to fixed cost as well as of CapEx and R and D.
What does it mean in terms of profitability? We are working to prepare a floor where we can achieve at least 6% return on sales even in the rainy scenario. In average, we shoot by 8% to 9%. And in sunny conditions, which we have seen already several times in the last decade, We aim to deliver more than 10%. That is our target and we will work relentlessly to make it happen.
But what's needed to do so? We must focus on bringing our fixed costs down and on improving our aftermarket performance And on top of that, we will address even more levers to improve our profitability. Material cost efficiency, efficiency in operations, product quality and also very important establishing our new business model in China. Regarding cash, One of our strengths in the past was always to convert our EBIT into strong cash flow and we will continue to aim for cash conversion rate between 80% 100% in all scenarios. So this is our answer on the overall financial ambition and how we will create value for our shareholders.
And as I said before, we will give you a more detailed financial guidance in Q4 also including regional profitabilities and regional targets. In addition, ahead of the spin, we will give full details of our dividend and shareholder return philosophy, which is going to be a priority for us. Before I hand over to John, I would like to repeat once again. We want to achieve benchmark and profitability and for that each and every region and I mean each and every region must deliver.
North America, Daimler Truck's largest and strongest market, fueled by unrivaled success in the on highway segment and our market leading Freightliner brand, we account for 1 of every 3 trucks on American Roadways today.
Hi. I'm John O'Leary. We have enjoyed tremendous success in the last decade, but our goal is to now go from strong to even stronger.
Freightliner was founded on meeting customers' core needs.
Freightliner has powered our company for more than 40 years in return for running Freightliner trucks, it's helped propel our company forward. We know we can count on Freightliner for not only the truck, but for the service they provide. I'm proud to say that Daimler Trucks North America has had that distinction for many years. At Schneider, we've been purchasing Freightliner Since 1998. The reason is that Daimler Trucks North America makes the best trucks on the road.
That means they're the most fuel efficient trucks out there. They're the best engineered trucks that are out there. They're the easiest trucks to maintain for our fleet of mechanics across the country. It gives us the total cost of ownership advantage at Schneider that keeps us competitive in our industry.
The undisputed on highway segment leader for the past 2 decades, Daimler Trucks North America now turns its focus to the highly profitable and less cyclical vocational truck segment, a fantastic growth opportunity.
Western Star is The crown jewel of our North American vocational business. And the all new 49X, which we just launched, is Set to deliver on the demanding needs of the hardest and toughest jobs.
The infrastructure bill currently making its way through D. Is set to offer up to $2,000,000,000,000 to fund the upgrade of 1,000 of American highways, bridges, and buildings. And vocational trucks are the tools to get this work done. The secret of Daimler Trucks' continued success in North America goes beyond the products.
We provide assets to businesses who use them as long and as much as they can. For us, the question is not will our customers need to visit a dealer. It's when they need to visit a dealer, how fast can we get them back on the road or on the job site, generating revenue and ultimately keeping the world moving.
Shareholders. The North American market remains a land of opportunity, and it's one in which we're strong with a clear plan to get even stronger. Hello. I'm John O'Leary, CEO of Daimler Trucks North America. Thanks for your interest today.
After spending Q4 of 2020 And part of Q1 of 2021 in Germany, launching the Mercedes Benz Trucks Transformation and as Interim CEO, I recently returned to assume the leadership of DTNA. I have a long history serving in various senior leadership positions here in North America, CEO of Thomas Built School Buses, Head of Aftermarket and more recently as Chief Financial Officer. This is a business I know intimately. In this time, we have grown our business to become the undisputed leader with 40% market share and most importantly, number 1 in both absolute profit and return on sales. I'm excited to speak to you today about how we leverage our great strength to grow even stronger in the years ahead.
My plan for the future is to expand both our market position and our profitability at Daimler Trucks North America. We will do so in an efficient, smart, But most importantly, effective way. We will further grow our top line, while at the same time improving efficiencies to keep Our industry benchmark cost position. As you saw in the video you just watched, we operate a large enterprise in North America, offering everything from electric school buses to the industry leading Class 8 truck, the Freightliner Cascadia. And Among the nation's largest fleets, you can see our unrivaled strength reflected in our 58% market share.
But as you can also see, We still have plenty of room for growth in the Profitable Small Fleet and Vocational segments. Despite the normal fluctuations of industry cycles, We continue to dominate in Class 6 to 8. 2nd place is 25% to 26%. We've shown this remarkable resilience and strength, thanks to several key factors. 1, by offering industry leading technology to enhance safety, fuel efficiency and productivity.
We leverage in house global solutions where we can and improve our margins as a result. Take for example, our proprietary Detroit engines, which are spec'd in 94% of all vehicles we sell. 2nd, our flexible manufacturing network incorporates 9 locations in the U. S. And Mexico, allowing us to scale up or down as the market demands in a very cost efficient manner.
3rd, We have the largest dealership network in North America, serving 3 vehicle brands, all equally dedicated to satisfying our customers by keeping their productive assets up and running. Leading me to the final point here about our strength. It is derived from an absolute unwavering commitment to customer centricity. Their vehicles are assets, Expensive assets purchased from us to generate revenue for them. Most of the time, the cargo that rides on those trucks is worth more than the truck itself.
The driver shortage is well documented and it isn't unusual for drivers to just walk away From a broken down truck, the second or third time it interferes with earning a living. Customers know and even accept that occasionally trucks break down in the severe duty cycles to which they're exposed. But what becomes critical And a competitive advantage is how quickly we can get that valuable driver and their valuable cargo back in operation again. We bring an unwavering commitment to supporting every customer, every truck, every time. So looking forward, What are the key items we'll be focusing on?
In short, improved profitability driven by cost control and increased revenue growth. This includes furthering our technology leadership. Being part of the global Daimler truck organization, we have access to a wealth of technologies, whether by in house innovation or buying from suppliers at scale, We can put more purposeful innovation into our trucks than our competitors, allowing us to command a premium for our vehicles. Next, we will continue managing costs and leveraging our flexible manufacturing footprint. We are great operators.
The truck business is cyclical and we will account for fluctuations by remaining steadfast in our cost control measures in both fixed overhead and variable costs. As the pandemic has taught us, our discipline here, especially navigating recent supply chain disruptions, serves us well in good times and even more so in times of uncertainty. Moreover, we can maintain positive cash flow and profitability even down to a 165,000 unit market, which hasn't happened in our professional lifetimes. Lastly, we will continue to improve on our unparalleled market position. Our business strength has been cultivated over many years.
However, this is not a given. We are humble and still very hungry. We've forged many strong ships with the most sophisticated and demanding customer base of large fleet customers. They challenge us every day to be better. We will continue our uncompromising customer focus for those customers while doing the same for new ones in the Vocational segment.
Let me provide some specific examples of what this continuing use of our strengths looks like in practice. You heard me reference it earlier And you saw my colleague David Carson mention it in the intro video, but our vocational focus is coming at a perfect time. Leveraging the global technology toolkit of Daimler Trucks to realize synergies and cost savings, while tailoring for the unique DT and A markets, We recently introduced the all new Western Star 49X. These trucks were built for the most demanding work imaginable, Accessing oil derricks and logging camps, pouring concrete and tackling all types of construction work. I've been around this industry long enough to know that sometimes you're good, sometimes you're lucky, and every once in a while, you get to be both.
And that is exactly where we stand now As we have our sights set on achieving 45% share of the vocational market, which means incrementally growing our share by 15% in a 130,000 unit market. While the 49x is arriving now as the result $350,000,000 investment we made 4 years ago, it's just the beginning of a series of products aimed at this segment, Just as infrastructure spending is likely to increase in the U. S. Although we can't take credit for this amazing timing, We do plan to take full advantage of it. On the subject of our aftermarket business, we are wholly committed to further advancing our KPI of getting customer trucks back on the road in 24 hours or less when repairs are required.
And we'll continue to leverage our subscription based connectivity services to keep increasing our customers' productivity. Next, while you'll hear more later on the subject of electrification, let me briefly touch on the fact that we have already started delivering battery electric Thomas Built buses to school districts across North America and those numbers will only continue to grow. In the Class 6 to 8 segments, our Freightliner E Cascadia and EM2 are slated to begin start of series production in late 2022. We already have 40 fully operational development units in customer hands, from which we obtain operational data, customer input and afford our customers an opportunity to gain experience with the new technology. Just last month, we opened the order books on these important products and we're already off to a strong start in filling our backlog.
Lastly, while the sight of electric semis and school buses captures a lot of imagination and attention, I'd be remiss not to mention our battery electric walk in van chassis from Freightliner's Custom Chassis division. This is the right vehicle to capitalize on the surge in e commerce spending and subsequent last mile delivery. They are quiet, they are efficient, and they are capable, And we will begin deliveries late this year. Finally, and perhaps most importantly, is our relentless dedication to developing industry leading safety While we'll hear more on this from Martin shortly, I'll mention that this is a non negotiable here at Daimler Trucks North America and something we take great pride in delivering to our customers. In conclusion, these are just a few examples of how we continue to leverage our industry leadership position to drive future growth, fantastic profit and unmatched customer satisfaction.
We are strong and getting stronger.
Daimler Truck is a Global business with strong operations in almost every region. But Europe is where we come from, where we built the first truck ever. And the famous three pointed star lights up the highways of Europe and far beyond. In 2019, we sold revenues. 10 years ago, Europe delivered benchmark industry margins.
But we need to be honest. Profitability in recent years has not lived up to our expectations. So under new leadership, we are addressing our challenges and are determined to lift financial performance back to where it belongs.
I'm Karen Radstrom, and I just joined Daimler as the head of Mercedes Benz trucks. I've been now 100 days in my new role, and I've had a chance to get to know the company, the products and most importantly, the people. I really feel that we have the basics in place to manage this turnaround. We're going to continue to build on our strengths, the people, the brand, the products, and at the same time, We're addressing our weaknesses. I feel confident that we're on the right track.
Mercedes Benz in Europe is also accelerating its focus on sales and service to ensure ease of use and optimum efficiency for our customers.
As one team in marketing, sales and services, We are committing to one thing, maximum customer orientation, with new and innovative digital services, as well as efficient and desirable products, serving existing and new customers wherever they need us and whenever they need
Europe is key to resetting profitability at Daimler Truck. With clear. And with new management, new principles and a new focus, we intend to deliver.
Thank you, John. Hi, and nice to meet you. As mentioned in the video, I'm Karen Radstrom, and I'm the new Head of Mercedes Benz Trucks. During my first 100 days, I've had the chance to study the business, meet people, understand our strengths and weaknesses, And I've started to come to some preliminary conclusions about what we need to do. So I wanted to take this opportunity to share with you My 100 day observations.
Before coming here, I spent 17 years in the industry working at one of the competitors. And I've obviously had the chance to study Mercedes Benz as an outsider. I've always looked up to Mercedes as a tough competitor. Mercedes is known in the market for its low total cost of ownership and as a leader in safety and in technology. But even as an outsider, I've seen the company lose position in the last couple of years, and I could even identify some of the likely issues behind that.
But I chose to join this company anyway because I believe in the potential of Mercedes Benz Trucks And because I think we have everything in place to do a powerful turnaround. And now when I've been here for a while, I definitely haven't changed my mind. I honestly feel even more confident after my first 100 days and I'll explain why. But let's start with the big pictures. Here you see the facts about the European business.
When we go back to the early parts of the last decades, we were really at benchmark profitability and had double digit margins. But in the last years, we haven't delivered good performance. Our market share has declined and our financial figures have been going in the wrong direction and also customer satisfaction. On the right side of the slide here, You'll see the results of a benchmark study, which was done by a consultant company. They interviewed a very large number of truck buyers of all brands about their perception of us and of our competitors.
And the results show that amongst the major 7 brands in Europe, We're number 4 on product, number 5 on sales and number 6 on service. It's obviously not a positioning we're proud of. I think our performance decline can be boiled down into basically 2 fundamental problems. To some extent, we lost touch with our customers. And secondly, our cost base increased, but we weren't able to increase our revenues at the same pace.
Now let me tell you how we're tackling these challenges. We're taking action to become more customer driven. On the product side, we need to connect our engineers with our customers. I've lived in many different parts of the world and I met many engineers. And I can assure you that at Mercedes Benz, we have great engineers.
So that's not our problem. But we have been developing our trucks with a little bit too much from the inside out rather than from the outside in. So we're shifting our processes around to involve our customers much more in the early stages of development and to test things early before everything is finished and it's too late to make changes. And I think the electric Actros, or as we call it, the e Actros, is a really good example. We've had a fleet of vehicles in the market for over 2 years In 4 different countries, trialed by many different customers, the feedback they've been giving us has been used to develop our series product, which is coming soon.
On the sales side, some of our customers are telling us that it's a little bit complicated to deal with Mercedes Benz. They tell us that we have a big organization with sometimes too many people involved and that it takes us too long even just to make an offer. So we have to simplify this, and we're doing it through improvements in processes, better IT, better and quicker back office support, and by making sure our salespeople are well trained and up to date with our product portfolio. We're also far from the benchmark when it comes to services. And obviously, every day that a truck stands in our workshop instead of working is time wasted for our customer.
Here and now, we are increasing our focus on retail. We're investing in retail and we're improving our network locations, both on our own and together with our partners. It's our retail colleagues who meet our customers every day. The rest of us sitting here in Stuttgart, in the head office or wherever, have to view ourselves as one big support team to our guys and girls in the frontline. We need to make sure that we're giving them the prerequisites to do their job by improving spare parts availability, making IT systems easier to work in, improving service methods, having reliable delivery dates, just to give a couple of examples.
Another very concrete example of a shift is that we have changed our metrics around from being very market share based, which doesn't always drive the right behaviors to focusing on customer satisfaction and on how we can continuously make our customers more successful. We're also running an intense and systematic performance plan aimed at reducing costs across the board in almost every category. We have excessive fixed overhead costs. Within Daimler Truck, we can obviously benchmark with the other regions in the group And we can also compare ourselves since we know the levels of our competitors to them. And while I don't want to share the precise figures with you, I can tell you that we're not the benchmark.
Actually, we're a long way off. And if we want benchmarked EBIT margins, which we do, Then we need to lower the fixed costs to benchmark levels as well. The cost reduction plans were already progressing before I joined. But now that I'm on board, I intend to accelerate them. We need to go faster and we need to be more systematic.
So I brought in fresh expertise to advise on the restructuring and we brought everything into one program. We're now beginning to reconsider and revisit every aspect of the business cost structure, in manufacturing, in logistics, in product cost, In non personnel overhead, in sales, in admin, in distribution, all of these areas are under review And we're working on a plan that will drive costs down item by item, directly linked to the P and L and to our cash flow performance to ensure that we have benchmark costs and therefore benchmark profitability. We'll give you more details on this in our next Capital Market Day towards the end of the year. By the way, in terms of cost reduction and spending where we need to spend, I think the split of the truck and car companies will be helpful because we will be a much more focused business. I'm absolutely confident that this will help us raise our performance because from my own experience, I can tell you what a focused high performance truck business looks like and I know what it's capable of.
Now over to Brazil, another key market. We've been present in Brazil since the 1950s I truly believe in Brazil for the long term. Also here, we've had incredible success some years ago, but with declining performance for the last couple of years. And while we managed to regain market share, we have not been able to grow profitability at the same rate. And our decline, I would say, is related both to our own performance and also to external factors like currency depreciation and political instability.
And we obviously cannot change the external volatilities, but we can build a more robust and a more resilient business model. So now we have a comprehensive and holistic restructuring being implemented also there. We've phased out underperforming models such as the Atron and Orion And we're introducing new products that are really fitting the needs of our Brazilian customers. We're also reviewing our dealer network performance and focusing on improving our revenues from services like fleet board, like extended warranty Mercedes Benz uptime. And we're also focusing on margin improvement, reduction of fixed costs.
We're reviewing vertical integration and changing our value chain so that we will be less sensitive to currency fluctuations. We're confident that this will take us back to success also in this important region. So to summarize, after 100 days, I feel excited and I feel confident. Mercedes Benz Trucks is under new management. We're setting a new strategy.
We're focused on strict cost management and we will be relentless about customer focus. Step by step, we're taking the action that's required to take Mercedes Benz back on top, where it belongs as a benchmark within Europe and in the world. And with that, I'll pass on to my colleague, Hartmut Schick, Over to you, Hartmut, after a short video.
Daimler Trucks' global reach extends across Asia. Markets here are huge and unique, many of them very dynamic and growing rapidly. Japan is our global center of competence for urban commercial vehicles powered by diesel and electricity. With a global presence in 170 markets, our iconic Fuso Canter is a true Japanese world truck for a fast growing segment.
By combining the best of German, Japanese and Indian cultures, KUSO is a leader in electrification technologies with
where the brand and its products are prided on their reliability and excellent performance. Then there is India, So acts as a low cost vehicle and aggregate export center as well as an IT and engineering hub to the whole Daimler truck group.
Bharat Benz has become a significant presence in India. With our manufacturing hub in Chennai, we build exceptional vehicles that are made in India for India. Despite recent weak market demand, we have continuously increased our market share and profitability. We know how to tackle challenges head on and see exciting opportunities ahead.
The biggest market in Asia accounting for half of the world's truck sales is China. The Chinese truck market is changing fast with a growing focus on efficient low emission trucks with the highest safety standards. Today, we are best positioned to serve both the advanced segment with our Mercedes Benz heavy duty trucks and together with our local partner, Photon, the volume segment with our Almond brand. Across Asia, Daimler Truck is gaining momentum. We believe in Asia's profitable growth opportunities.
And above all else, We have one mission to grow and develop mobility solutions for Asia in a way that creates value for our shareholders.
Thank you, Karin, and welcome from Asia. My name is Hartmut Schick, and I'm the Head of DynoTalks Asia. I'm truly excited to share more about our story in this part of the world. Our aim in Asia is to grow profitability, access the opportunities that the region provides and maximize our cash and earnings contribution to the group. We have operations in Japan, in Indonesia and the rest of Southeast Asia, in China and in India.
This diversity is a strength, and we are working hard to optimize our financial performance across the region. We have made progress in recent years, but there's still a distance to go. We are more profitable than some of the competitors, But we are not yet on the regional benchmark level. And that's our target because within Daimler Jack, every region must deliver. Let's start with our business with Mitsubishi Fuso.
Mitsubishi Fuso is our commercial vehicle business centered in Japan, but with extensive success across the Southeast Asian region. Customers know that the Fuso brand stands for Japanese quality. Thanks to our brand, localized production and a very strong dealerships, we can provide tailored solutions to demanding markets. Our home market for Mitsubishi Fuso is Japan, the 3rd biggest economy in the world. Last year, in Japan, we enjoyed a market share of 20.4% and are confident in growing this number further in the mid- and short term.
We are very well established in the stable Japanese market in all segments, including heavy duty, where our super crate is the clear fuel efficiency and automated driving leader. This is due to the global DNA of Daimler Trucks. It is important to note that in Japan, a very substantial amount of our contribution is generated in the service and parts business. With modernized own retail branches, by adding new working base and reducing our structural cost, We will further grow our downstream business, aggressively aiming to service the 4,000,000 trucks and buses in operation. Indonesia, with a population of 273,000,000 is our 2nd most important market for VUSO.
We hold a very strong position here and currently enjoy a market share of about 50%. With our strong partners, we have a very capital efficient and profitable joint venture structure, 220 dealers across the country with deep knowledge of local needs and culture as well as very high rate of localized parts are the basis for our ongoing success. Asia is our home turf, and we have a strong footprint in demanding markets where the accumulated share of non Asian brands is well below 5%. Here, we are well positioned as Japanese brand. Overall, we are serving 170 markets worldwide with Fuso vehicles.
Our Fuso counter is 1 of the few true world trucks in operations all around the world, the ideal vehicle for the last mile logistics. Fuso is also a leader in electrification. Today, the Fuso e candor is already offered on 4 continents and has covered more than 3,000,000 kilometers with customers across the globe. We are one of the most experienced producers of all electric trucks, And we will address being a pioneer. In 2022, we will launch the 3rd generation of our battery electric world truck with a significant improvement of its profitability.
And we already transformed our business model from a Bastion models. Most Kaimler models are only available with 3rd party ICE engines. Now let's turn to India, where we are technology leader in the heavy duty segment, where we successfully established our made in India, 4 India brand, Bharat Bends. We are the 1st manufacturer to meet the new Indian 6 emission norms last year and grew our market share to 9.1% under severe market conditions. And we are positive that the Indian markets will continue the upswing we already saw this year and are confident in further growing our position in India and doing it in a profitable and cash generative way, adding value to Daimler Truck overall.
Because also in this region, we will deliver. Speaking about Daimler India Commercial Vehicles, it can add value beyond just serving the Indian market. We have also set up our export hub, delivering parts and vehicles for all brands within the Daimler Track Networks. This leveraged the full Daimler Track potential for the best local customer fit. In particular, by serving the so called next 30 markets, Here, we expect double digit growth in the next decade.
In addition, we established a low cost, high quality R and D and IT hub in Chennai and Bangalore. Now let's turn to China, the world's biggest drug market. In theory, a source of great opportunity, but let's be honest, a market where international truck makers have struggled to find success. For Daimler, we have a strong local partnership with Photon. Profitability is not where we would like to be, but
We are working hard to improve
pricing and optimize our cost structure. But at Daimler Truck, every region must deliver. So what's our plan for China? What excites us going forward in China is the potential for the Mercedes Benz brand. We are moving fast to localize the Mercedes Benz Actros.
We will be the 1st international truck producer to localize its top level product, and we are confident we will have a clearly better cost position than for imported vehicles. We will be able to price competitively and to offer our customers a tremendous vehicle. We are convinced that the Chinese market is going to get more sophisticated in its demands, and the share of market taken by advanced trucks is going to accelerate fast. We want to capture this with our new strategy and capture it profitably. In summary, Daimler Tax Asia is well positioned, and we are ready to take it to the next level.
Profitability for Fuso in Japan is stable with a large service revenue element. Many of our important markets are expected to see tremendous growth, For example, GDP increase of 62% for Indonesia and 82% for India is predicted by 2,030. And in China, our localization strategy will mark a new chapter. Additionally, we will leverage our footprint for low cost exports and further reduce our fixed and variable costs. Asia has many opportunities.
We intend to maximize the potential of our business and target regional benchmark profitability. Now let us move on to the next chapter presented by my colleague Andreas Gorbach.
Thank you very much, Hartmut, and welcome also from my side. My name is Andreas Gorbach, Head of Truck Technology, and today, I'm here to talk about technology And even more so, it's transformation. And what does technology mean for me? Technology for me is always an enabler. And if we talk about technology in a truck, what it first and foremost enables is a benefit for the customer, Asset utilization, asset efficiency.
Now the technologies that enable this benefit for the customer the most are 2. On the one side, the propulsion system, the power to drive and on the other side, the operating system, the intelligence to drive. Now let's double click on propulsion system. And the strategy as for the propulsion system is based on 3 core beliefs, on 3 convictions. The first one is about speed, fast ramp down of ICE, diligent but fast.
The second one is about duality of technologies, battery electric and fuel cell electric. And the third one is again about speed, 0 emission speed, as for the penetration into the portfolio And as for the rapid evolution of the technology itself, let's talk about the first conviction, ICE ramp down. Speed is the imperative. 20 years anyhow a hard fact, right? If we want to comply with the Paris deal, if we want to comply with our own ambition, 20 years is set.
We are convinced that the transition will happen faster, 10 to 15 years. Why that range? Why 5 years corridor? Well, three reasons. First of all, very, very broad applications, very, very different use cases at our customer.
2nd, we still see a very heterogeneous legislative landscape. And third, the infrastructure is in its infancy and developing at different speeds around the globe. Now how to deal with that? How to manage the speed? How to manage the uncertainty?
How to avoid the Clayton Christensen situation? And the answer is 3 fold, partnering, partnering, transitioning. Now Partnering Stage 1, and you are well aware, We are completely exiting our captive medium duty technology during this decade together with Cummins. Partnering Stage 2. Also on the heavy duty side, we are actively seeking for partners in order to share The inevitable invest into the next legislative hurdle, which is already knocking on the door Euro 7.
This is a joint challenge of the industry and we have to solve it together and we will solve it together. And then transitioning basically as a result, this enables us to significantly reduce our spending In conventional powertrain, already in 2025, we will spend the vast majority of our R and D spending into 0 emission technologies. Now how does the transition look like? And you see the illustrative picture here. And you could add now the uncertainty in the year 2,030.
Some talk about 20%, 30%, 40%, 50%. We even talk about 60% 0 emission technologies in the year 2,030. The only question is, what is the catalyst that makes the reaction go fast? The chemical reaction, if you will, to bring the blue line up fast and the gray line down fast. And the answer is total cost of ownership.
TCO is the catalyst. In that very moment, when the customer starts benefiting more from a 0 emission truck than from a diesel truck. Well, there's no reason to buy the diesel truck anymore. This is the tipping point. And with the assumptions you see here, we are convinced that this starts happening in 2025 for battery electric and it starts happening in 2027 for fuel cell electric trucks.
It's the tipping point. And to win there, you need 2 things, benchmark technology, as for the performance, and the ability to scale fast to bring down variable cost. And we are doing both. 2nd conviction, duality of technologies. How to propel a 0 emission truck?
That's the question. And there's no debate about battery electric. There is debate about fuel cell electric and the debates are usually around assumptions as for energy price and powertrain cost. Consciously not on this slide. On this slide, we did not put the assumptions.
We put the facts and there are 3 of them. First one, These lines must cross and it's variable cost over range, installed cost over range. And for sure, at a low range, battery wins. Take a 40 tonne 300 kw truck, I need the 300 kw fuel cell for the low range battery wins. Now what happens if we increase range?
On the battery truck, we keep on adding battery cells. Battery volume, Volume correlates with cost and volume goes to the power of 3. Now let's park the 3. Go to the fuel cell truck. We have the 300 kw installed.
We increase range or we just increase the size of the tank. And the cost of the tank correlates with the surface, and that's to the power of 2. So we have to the power of 3 and to the power of 2. And you understand that this from a Mathematical standpoint means that these lines must cross and now you can debate assumptions again and move gray and blue line up and down. And the Wildest Battery Dream gives you 700 kilometer and the Wildest Fuel Cell Dream gives you 300 kilometer.
The crucial point is for us, it doesn't matter. We have important customers to the left and to the right of the intersection. 2nd hot fact, and this is energy density over charging speed. Now isn't it impressive how the energy density has developed over the last years? In a way, we would have not anticipated it, And it will further develop.
Yet there's limitations, right? There's limitations, for example, with the elements that are available on this planet from the periodic system. So even if we go to the extreme, we will still see a factor of 50 to 100 compared to hydrogen. A similar situation as for charging speed, even with 2 megawatt charging on the electric side, we still have a factor of 3. So here again, customers with high range will benefit, as for payload, as for flexibility, as for charging.
3rd fact. Independent of trucking, independent of the mobility sector as a whole, We will see green hydrogen and green energy. Now why is that the case? Today, the countries are trading with energy, right? And we do this because the self sufficiency of energy is not given.
Some countries have too much energy, other countries have too less energy. So we're trading with energy and today mainly with oil, coal and gas. Now if we fast forward in the year 2,050 and we are hopefully in a CO2 neutral society, we will still trade with energy Because the self sufficiency of the states as for green energy is also not given, sun, air, water, or at least not competitive on a global scale. Will this be electricity? Will we deal with energy in electrical form over the planet?
No. We need a chemical bond CO2 neutral energy carrier, and hydrogen is just the best form. To sum it up, We will see customers benefiting more from battery electric. We will see customers benefiting more from fuel cell electric. Both energy carriers will be available in green and competitive price, and this is why we push both.
3rd conviction, speed as for 0 emission. And isn't this a great starting point, The portfolio you see here, since years we have electric trucks in customer hands, e Canter, eZitaro, eM2, eZULI, eCascadia, e and so on and so forth. And we keep on adding 1 truck after the other year by year. We even kick started the projects for the second half of the decade already, but still this is not enough for us. And to put a little bit more color on it,
is committed to leading the way on the journey to carbon neutral transportation. We are already a major force in electric trucks. The Fuso E Canter is the perfect vehicle for light duty inner city distribution. And for heavy duty tasks, the Mercedes Benz E Actros and the Freightliner E Cascadia have been tested intensively since 2018 by customers in everyday logistic operations. The eActros will go into series production in 2021, and the E Cascadia will follow in 2022.
But we are now stepping up our plans and fast Electrification is about more than just the vehicle. It also requires a total systems approach, which is why Daimler Truck is also focused
That's why we are fully committed to charging solutions for our customers, not only charging hardware installed at our customer sites, but also the charge management software to remotely monitor and operate those chargers. With our partners, We will play a critical role in the deployment of charging hardware at public charging hubs designed specifically
With our next generation products, we are aiming for even higher performance. This is enabled by further in house technology design and development of e motors, inverters and battery management systems. We are building on our strong total cost of ownership proposition through focus on And we are committed to taking truck battery design beyond anything achieved so far. This requires a dedicated cell with chemistry optimized for heavy goods usage patterns and a state of the art battery management system. And we are working on this and are aiming for breakthrough in energy density, durability and the range of the truck.
With these ambitious plans for the next generation of electric trucks, Daimler Truck is committed to increase battery electric performance to enable our customers to undertake not just
Now as you can see, it is not just about speed as for the penetration into the portfolio. It is also about technology evolution. What we are launching the next years is already benchmark as for the characteristics, in range, in efficiency, in variable cost and in charging. But we are already working on pushing this to the next level. And we're talking about 60% more range.
We talk about 25% improvement in efficiency, 40% reduced variable cost and up to 2 megawatts charging. Now, the question here is, what are the ingredients that we need to do this? What are the accelerators behind that story? And 3 of them are really important. It's people, it's technology and infrastructure.
On the people side, we have well understood that we need to ramp up competencies and capabilities and capacities as for e Propulsion. Catalog engineering is not enough here. We need to understand, we need to specify, We need to engineer the key electric components on our own. People, technology. We have well understood that just upscaling pass car technologies is not sufficient.
We need truck dedication. We need truck genes. And I'm super happy to announce a partnership here as for the battery cell with CATL and I'll talk about it in a minute. Technology, infrastructure. We have well understood that just offering a truck in the future will not be sufficient.
And this is why we are partnering as for the infrastructure as well. I'm super excited here to announce a couple of partnerships here in a minute as well. And then certainly the truck. And we are already working on the next gen e truck as well. And this truck will certainly be able to incorporate all the new benchmark technologies.
It will certainly be able to cope with the next level of infrastructure And it will bring its own next level genes as for powertrain integration and aerodynamics. Now let's have a look what we are doing with CATL. Well, first step, and this is the baseline, we secure supply. With the technology we launch in 20 24, which already has some truck genes incepted. With this technology, we already secured the supply beyond 2,030, check mark baseline.
At the same time, the teams are already jointly working on the next level of truck dedication battery cell. Besides cost, focus very much on durability and fast charging ability. This is the baseline for the truck genes. Even beyond this, we are already jointly exploring opportunities to localize production in North America And I'm super happy now that we have a statement today from Robin Zhang, CEO of CATL.
Daimler Trucker AG has built an outstanding reputation for its high quality vehicles and reliable service which have been well recognized in the whole commercial vehicle industry. We are happy to strengthen the existing partnership based on our shared vision in e mobility. With CAT's innovative technology in EV batteries and Daimler trucks' strong expertise in the heavy truck industry, We were jointly on the development and the design of advanced battery cells and packs for truck specific applications. We believe the partnership will enable Daimler Truck AG to further enhance its market position on the e mobility stage and lead the way to the realization of carbon neutrality.
Now what are we doing on the infrastructure side? On the infrastructure side, we partner with Power Electronics in North America, Siemens and ENGIE in Europe, jointly with developed chargers such that we not only can sell the customer a truck, but also part of the ecosystem, including the charging intelligence and including installation support. We start with 350 kw. We are already working on the dimension of mega chargers at the same time. And now we are shifting from battery electric
It's the dawn of a new era. Imagine a technology that can carry goods as far and as flexibly as conventional trucks, only emitting steam and water, offering fast refueling, high ranges and high payloads. For many use cases, Particularly planable trips and hub to hub where depot charging is possible, we are convinced battery electric will be the preferred choice. However, for transportation needs over 1,000 of kilometers with heavier loads and where more flexibility is needed, we believe hydrogen based Fuel cells will be the convincing way forward. Last September, we presented this exciting technology with the Mercedes Benz Gen H2 truck concept.
And just a few days ago, we hosted a media drive in a new Gen H2 truck prototype in Germany. A key to making this vision a reality is the joint venture cell centric between Daimler Truck AG and the Volvo Group, which will develop, produce and commercialize fuel cell systems for use in heavy duty trucks. Joining forces Together with our partners, we are going full steam ahead, fully committed to getting hydrogen based clear electrification strategy based on batteries and fuel cells decades of experience with hydrogen based fuel cells the right partners and our relentless pioneering spirit, all of which enable us to do what we have always done best,
Now as you can see, also on the hydrogen side, on the fuel cell electric side, we have extremely high ambitions: 1200 kilometer range, 24 tonnes payload, only 15 minutes charging And maybe more important, nothing less than 90% reduction of variable costs. And again, the question, what are the ingredients here? What are the accelerators behind this story? And the answer is the same. It's people, it's technology, it's infrastructure.
And people and technology are self centric here. And I could talk an hour about it, very emotional, as I had just the privilege to set up and lead this company. And I can tell you the technology roadmap, the cost roadmap is super convincing. 25 years Experience in fuel cell, now 100% dedicated for trucking in a joint venture with Volvo. Self centric, people, technology.
On the infrastructure side, we partner with Linde for the right technology for liquid refilling. We partner in a consortium with many partners to jointly push the infrastructure and standards. And And that's new, and I'm happy to announce this today as well. We partner with Shell in a partnership where we showcase how we jointly remove the chicken and egg problem. So what are we doing with Shell?
A concrete route, 1200 kilometers, Rotterdam, Hamburg, Cologne. Shell providing the stations, us providing the trucks. Ready in 2025. Already, we are thinking beyond 2025. We are thinking 2030.
We are thinking 150 stations and 5,000 trucks. And we open this partnership for everybody else. Let's hear what
In February, Shell set out its strategy, Powering Progress, to accelerate the transition of our business to net 0 emissions. To get there, we will work with customers and companies across sectors And sectors such as heavy duty trucking remain one of the hardest to decarbonize. But with hydrogen, there is hope. And I'm delighted that Shell and Daimler Trucks have committed to a substantial rollout of hydrogen trucks and infrastructure across Europe. This is a partnership of 2 industry titans.
It builds on the work Shell is already doing to develop hydrogen, both as a fuel for transport and industry. Hydrogen, along with electrification, can help to decarbonize the economy and Europe's own goal to be carbon neutral by 2,050. But this requires projects and policies and partnerships. And today's announcement is another big step in that direction.
Now let's talk about the second key technology, The operating system. What are we doing here? Step by step, We move the electronic architecture of the truck into a software driven, into a software defined architecture. What does that mean? It means we reduce the amount of computing units in a truck, less computing units, but more powerful computing units, thereby, de linking hardware and software cycles and thereby pulling in the relevant software know how that we need.
What's the benefit for the customer? Well, certainly more uptime, less workshop visits as we flash over the air and more efficient workshop visits as the workshop is already knowing that the customer is coming and what to do. Certainly also in addition, more tailored digital services and maybe the most important thing, It enables the seamless integration of the asset called truck into its ERP system. What's in for us? Certainly, additional revenue streams and customer loyalty, certainly more speed as we decouple hardened software, And then the big data thing.
And why is this so important? And we today already understand very well what the customer is doing with the truck. With all the data that we get here, we understand even better. In every second the customer uses the truck, What is he doing and how can we further improve the product to the benefit of the customer? Already in 2023, we launched the first evolution here.
From the beginning, 100% connected, 100% ready for over the air, ready for the next generation of HMI, ready for the next generation of safety systems, Ready for the next generation of predictive intelligence, ready for the next generation of electric and fuel cell electric trucks. And maybe this is the most exciting thing, also ready for autonomous driving. And this topic is so important that I give it back to Martin.
Thank you, Andreas. The operating system Andreas Gorbach just talked about serves as a basis for our next generation trucks and as a key enabler for our autonomous technology. Autonomous is one of the holy grails out there and to win in Autonomous, we are following a dual track strategy. We are focusing on developing a redundant chassis, the hardware basis for any autonomous driverless driving. Here we are working together with Waymo as a key strategic partner.
Secondly, we are developing our own virtual driver, The softer package for hub to hub operations on North American highways. Together with Torq, pioneer in the heavy duty autonomous industry, independent subsidiary of Daimler Trucks, we had invested in already 2 years ago. Our dual track strategy will not only accelerate the deployment of autonomous technology, but also provide our customers with a choice as to what solution best fits their business. We are convinced that with this dual track strategic approach, We have win the revolution in transportation. Now let's take a look together to understand our dual track strategy with our partners more in detail
level of technological progress. Through intensive testing, Daimler Truck is readying the truck of the future. A level 4 At Daimler Truck, we saw this potential early on. Through powerful partnerships, we are developing the best in class
Technology. When we were looking for a vehicle partner for a trucking unit, Daimler Trucks was at the top of our list as we have the deepest respect for their strong global specifically for the Waymo Driver and make that fleet available to customers in the coming years. Together, we will be able to scale the Waymo Driver to achieve our common goal of improving road safety and logistics efficiency
robotics, a pioneer in autonomous technology. Torque has a pure play trucking approach with outstanding solutions optimized for on highway hub to hub driving use cases.
Bringing fully autonomous trucks to the North American market at scale requires commitment and experience. Torque's pure play in trucking positions us to establish the industry standard in self driving trucks. A level 4 truck built from the factory with seamless hardware and software integration. Our next generation trucks on the road right now, running daily routes in New Mexico and expanding into Texas, customers can be assured There's a solid path forward to commercialization.
The path to autonomous trucking is a marathon, not a sprint.
So now it is time to sum up this event and bring proceedings to a close before we turn to the Q and A. And this slide reiterates the message that we communicated at the beginning today, our mission as an independent company. Our mission is clear based on 2 guiding principles. 1st, we are absolutely committed to resetting profitability. We have to deliver on this as a public company.
I am laser focused on it personally, as is Jochen, as is the whole management team. And how it will do that? It is start 1st and foremost with fixing Europe. Europe is our biggest challenge, and as you've heard from Karen Rastrow today, We are accelerating our efforts to turn Europe around and restore margins to the level that we know we are capable of and they do justice to our technology and our brand. Beyond Europe, we will also be highly focused.
We will target the profit benchmark in each region. There's work to do in a number of areas, but this is no excuse commitment. Every region must deliver. We will also grow our profitability in our relationship with customers with a big emphasis on services. We already have a strong service portfolio, but those recurrent revenues will be an increasingly important profit driver for us going forward, And this needs to all come together to deliver strong shareholder returns with a management philosophy that makes sure We deliver value and strong dividends for our owners.
In addition to the intense focus on resetting profitability, We are also committed to leading the way to 0 emissions. This is our responsibility as a company and as the industry leader. As Andreas Gorbach just described in detail, we are going to refocus our R and D activities on 0 emission technology. The majority of our R and D spending will be focused to 0 emission trucks by 2025. Related to this, we are going to sundown Our ICE activities is partnering strategies.
We've done that already in medium duty engines with Cummins, and we are working on more solutions that will allow us manage our exit from legacy activities. And as we move fast to deliver best in class 0 emission trucks, We will follow a dual track BEV and fuel cell strategy because we are convinced our customers will need both technologies. And we will make sure that we are highly cost competitive, thanks to ambitious targets and by leveraging our scale and our partnerships. Finally, we'll kick start infrastructure in both charging and hydrogen as we have highlighted today. So that's it.
That's our mission. We are pursuing profit and technology leadership. We will be tireless in our efforts to deliver on these promises. We are excited about becoming an independent company, excited to be listing later this year and excited to welcome investors and analysts on this journey. In fact, I'm personally looking forward to meeting many of you in the months years ahead.
Thank you for joining us today. And now let's turn to the Q and A, I'm sure you will have some great questions for the team.
Ladies and gentlemen,
also From my side, I'm Stefan Hofmann, heading investor relations, and I'm very happy to have the Daimler Truck Management team here on stage for today's Q and A session. That was a lot of interesting and valuable content today. You will be able to deep dive into all single aspects of the presentations. They will be made available after the event in the Investor Relations section on Daimler.com. Now in our Q and A session, You will have the chance to raise questions concerning the topics we just presented.
Please focus on those fields. Before we start a few practical points. 1st, in case you want to ask a question to our management team, You will have to dial in individually by telephone and register. The dial in numbers have been shared within our final invite that we sent out on Monday last week. 2nd, we will identify the questioner by name, but please also introduce yourself with your name and the name of the organization that you are representing before asking your question.
And As a matter of fairness, please just limit yourself to 2 questions. Last but not least, please be aware to mute the live stream while raising your question and listening to the regarding answers. Now, before we start, the operator will explain the procedure for dialing
in. Thank you. We will now begin our question and answer session.
Thanks for the explanation. I see already lots of callers have queued up for the Q and A. And we do start with Horst Schneider from Bank of America.
Yes. Good afternoon and thanks for taking my questions. It's Horst Schneider from Bank of America. I have got 2, please. The first one is a little bit more short term related.
I understand You talked today mainly about midterm perspective, which is, of course, very important. Nevertheless, of course, you understand we have got also Little bit more short term focus. I would not say only short term focus, but a little bit as well. So as we know, you guide for the 6% to 7% Adjusted EBIT margin for 2021, can you maybe explain again why you are not more optimistic what keeps you away from getting more bullish or how cautious this guidance is finally? And also related to the short term picture, I remember to the 2019 CMD where you guided for the more than 7% adjusted EBIT margin in 2022.
And yes, referring to your weather guidance, I think and looking at your order book, I think it looks as sunny as in the Sahara for next year. So I just want to understand how quickly you can achieve these midterm margins. Can that achieve maybe be achieved already in 2022. A more medium term question relates to the U. S.
Truck business, where I like basically your vocational strategy. But on the other hand, of course, we need to take into account that also competition is heating up because one of your competitors gear, especially Navistar, is getting much stronger by the takeover of Tradon, and they will have a better product, the lower TCO as well. And there's with that, of course, the risk that you lose market share and with that also you lose profitability. So Yes, how can you prevent that, that maybe not in the end, maybe a better European profitability is compensated by a weaker U. S.
Profitability? Thank you.
First one for Jochen, second one for John afterwards.
Okay. Horst, thanks for your question regarding the guidance. So first of all, it's great to see the demand for our products, especially in the most important markets in Europe and NAFTA is strong in absolute terms, but also in relative terms. So we're very pleased with what we see in the order intake on the market share at the beginning of the year. However, as you all know, we are in a very cyclical business And we see that also short term.
And what we see at the moment is really a stretch on the semiconductor side. We see a significant impact on Q2, And it's not clear and still it's very volatile what does it mean from a full year perspective. That's the reason why we stick with our guidance at the moment. There is clear demand beyond that. If the supply chain is able to fulfill this demand, there is upside potential.
But for now, We stick with our guidance and as we also said as part of the Q1 at the upper end of this guidance. 2nd question regarding midterm. Horst, as you know, we don't guide the next year right now. But I could say, we see also good demand in the year to come.
And, John, we would go over
to you.
Yeah. Thank you, Stefan. Yeah, Horst. So for sure, We're not here to talk about our competitors. I respect them deeply.
But we are in a really strong position right now. We're not playing defense. We're on the offense. We're not going to just stand pat. As we heard earlier in the presentation, we're all about including increasing to drive even harder to become More profitable to even get more share.
And again, it's all about profit for us. So, will there be some pressure on us? Undoubtedly. But we have great products. We have amazing relationships with customers.
We have a dealer network that's second to none. So I really like the position that we're in to be chased rather than being the chaser.
All right. Thank you.
Thanks a lot, John. And the next one in the queue is Jose Asumendi from JPMorgan.
Thanks very much. Jose, JPMorgan. A couple of questions, please. Karen, please, could you talk a little bit about the opportunity to improve the shore service In Europe and reduce the fixed cost base, especially in the light of your extensive carrier are probably one of the most profitable truck makers In Europe, when you landed at Daimler, what was specifically for you what surprised you the most in terms of that fixed cost based the vertical integration and also the levers to improve the service share? Thank you.
So Karen, the first one was on the importance of service in Europe and then kind of what surprised you most?
Yeah. Well, thank you for the question. I think what I see is that we have a huge potential with services. I think historically Daimler, or especially Mercedes Benz Trucks, has been maybe a little bit more transaction focused, so more really focused on the selling of the vehicles. But that has started to change and we will continue to drive the focus more on the service business.
And I mean, there's a lot of things we can do. Obviously, one important one is the kind of questions that I'm asking. So I'm very diligently following up our KPIs on service. And when we start digging into our service KPIs, we see that There is potential more or less in all markets. And we also see that we have a big variance in markets on how we perform on service.
So what we've started doing is taking learnings between the markets to see how we can carry over good practices. We also see that we have a relatively low penetration on the traditional services, repair and maintenance. So we're doing a lot of initiatives related to that. And I think also the work that we're doing related to retail in Europe, where first of all, we're Splitting from the car side, where until today, we still have a lot of locations where we mix cars and trucks, which is generally not optimal because they need to be kind of in different places. A car dealership should be maybe in the center of the city and the truck workshop should be close to the highway.
So a lot of work going on to improve that. And we're also investing in retail, as I mentioned before, both on our own and together with partners. About what surprised me, it's a good question. I think I knew what I was getting into, so not so many surprises. But maybe a positive surprise is that I Feel very welcome.
And I know it's not so common for Daimler to take in outsiders, but I feel, from day 1, I've been very welcomed by the Truck Board and also by my own management team. And that there is a big interest and a surge to understand my experiences and how I look at the challenges that we're facing. So that's a positive one.
Thank you, Karen. And we would continue with Arndt Ellinghorst from Bernstein.
Yes. Hi, everyone, and thanks for the really passionate presentations today. Two questions, please. The first one on delivering value to shareholders. Can you talk a little bit about how you think about excess liquidity?
How you think about the dividend policy? I'm sure you're aware that other industrial goods companies have a fairly flexible dividend policy to reflect the nature of the business. Some pay special dividends. Do you think about something similar or will you stick to the more conventional payout ratios that you're used to from the Daimler world? And second one is on management incentivization.
I'm sure you understand that that's a very important topic For investors, you've been around for a long time running Daimler. We've discussed these fundamental issues for a long time, we discussed them again today. Can you share a couple of ideas how you will make sure that the management team is truly accountable? Thank you very much.
Arnd, thank you for your question. Very good questions. First of all, dividend policy, it's I would say it's too early to talk about the dividend, but we will have a clear we will have a clear policy. We are focused On high net income, we are focused on a good cash conversion rate, what we had since years. So there will be the liquidity and we are determined to create value for our shareholders.
That in a volatile business, you have to adjust to the market is clear. So will find a very good way to have the shareholders participate in our value creation. For me, fundamental is that management has a stake in the company and nothing is better to let the people focus on the share price, that they have a lot of shares. So I like the share program at the moment at Daimler. We'll certainly take it over, Make it available or make everyone participate in such a program.
I love the idea that Senior management have to hold a certain amount of stocks. So we are really long time vested in the company and benefit and suffer if our the same way our shareholders do.
Thanks, Martin.
Thank you very much, Martin and Arnd. And the next one in the queue is Nikolay Khem from Deutsche Bank.
Yes. Thank you for taking my questions. Nicole I come from Deutsche Bank. My first question would be for Mr. Radstrom and I believe you analyzed that the actress Can some parts be described as over engineered?
So how do you make sure that the electric truck will not be over engineered, especially keep in mind that a famous competitor from California likes to break with its range? And the second question, how flexible is your platform? And can you build electric, fuel cell and diesel trucks on the same platform?
Karen, I suggest you take the first one and then I Andreas takes the second one on the e truck.
Yes. Thanks for the question. Well, I think I mentioned it earlier in my speech a little The work that we've done with the eActress is a little bit different approach than what we've had in the earlier generations. So we really had it out, testing it early together with customers. I think 4 different markets, around 20 different customers.
And we've really used that insight to make sure that we are actually developing a truck, which is not overengineered, but which is exactly what our
Yes. And as for the flexibility versus commonality, I'm Very optimistic, especially with the new setup that we will find the right balance of engineering key technologies centrally for all our brands and regions and at the same time have the right customer differentiation with the regional brands. So all the key technologies we're going to engineer fit in the trucks of all regions. And at the same time, we translate what the customer needs regionally, which might differ into the truck differentiation at the same time.
Thank you very much, Karin and Andreas. The next one in the queue is Philippe Houchois from Jefferies.
Yes, good afternoon. Thank you very much. First of all, thank you very much for that presentation. I thought it was very interesting, but also very punchy. And I have a couple of questions.
One is the pace of Transition to 0 emissions vehicle in corporate thinking seems to be accelerating in trucks and the same pace as cars. So my question is going forward, when you think about allocation of capital towards ICE developments versus pulling capital away, How does that conflict with still ongoing regulation pressure, including discussion around Euro 7? So I'm just I'm trying to understand this, Is what if the industry led by actors like you accelerate transition 0 emission, what is the possibility of Pushing back on some of the additional costs that will be coming to your P and Ls as we fade out the ICE technology And also trying to understand how much of that opportunity maybe drives your reduction in CapEx and fixed costs that you're talking about in your targets? The second question is, I appreciate very much the divisional disclosure that you're going to give us. And you were very honest about the failures of the past and There's obviously a very strong ambition to succeed and the body language on the stage shows that.
So you're going to everywhere, that's the plan. What if you don't? Are you going to be in a situation where, oh, we didn't quite get the margin we want, so we'll keep the business anyway because we justify it to scale or are you ready to actually make more difficult decisions regarding the portfolio to make sure that the financial performance lives up to your market position and your brand? Thank you very much.
Thank you, Filip. So I suggest, Martin, you take both questions.
Yes, yes. Filip, first of all, the transition from ICE to 0 emission We'll be at the end accretion of 3 factors are our offering and that will be great and comprehensive. Secondly, about the infrastructure, and that is, when you talk more than 10,000 trucks on a road, pretty difficult and will take its time. So that might limit a fast trend up. And the third one is TCO, and that depends on how the prices for energy develop over time and what we base our toil system in Europe on whether on CO2 or NOx.
We can see various scenarios. We will be prepared for every scenario, even a much faster ramp up than shown here. But on the other side, if it goes slower because of infrastructural delays, no problem for us as well. Euro 7 indeed is a pain. There are some changes which will help the environment and where we can where we can comply and which is possible and doable to do.
And there are other issues in which we and not we as Daimler, we as an industry, Our intense discussion with politicians as well in Berlin, as in Brussels, as in Washington to figure out a way that makes a sense for the transition because when we see you have 60% of the trucks converting over to COE emission, why to regulate the remaining diesel even further and therefore potentially even have a bigger pull forward impact. Pretty difficult question these days. One reaction of us was clear On those engines where we have small scale like on the medium duty side, we teamed up with Cummins of a far much broader base and larger base So we can scale our investments. And I could see a similar thing on heavy duty. Here, potentially, we offer our services to other manufacturers because we have a huge scale on the heavy duty platform.
But we have to see in the next years will be an interesting question. The second question, the divisional disclosures and what is if we don't succeed. First of all, We have very comprehensive plans. We analyze the situation. We know our weaknesses.
And we shared some of you with you today, and we work diligently with it. And there is Between we keep it as today, which we don't because otherwise we wouldn't change the results to complete closure, there is a full host We want to raise our profitability and we have to raise our profitability for you, the shareholders, as well as for our capability to have all the investments necessary for our core products where we make the money. And therefore, I'm very confident that we find the right answers. And with our transparency that we offer, we are going to offer to you, we will be very accountable for what we are doing. And I'm sure this question might be asked more specifically at a date in the future and we'll get a more specific answer then.
Thank you very much, Martin. And the next one in our queue is Kai Muller from Barclays.
Thank you very much for taking my question. The first one is really when we look at the cycle and you have your targets for 2025. Is it fair to assume that the current environment we are in right now would be one of those sunny days environments, the year at 2021? And if so, can you give us also a little bit of a sense on how you would look at North America versus Europe in the different scenarios? Is it fair to that North America will always stand out compared to Europe and Asia?
Or is there a pathway to get them aligned? And then the second question I had is really around the technology side again. When we look at the powertrain spending, I understand now medium duty you are Pushing to coming for heavy duty you talk about corporation. Is it fair to say that you can then do that transition to BEVs and fuel cell technology while keeping the current R and D spending similar and just reallocating it to the new technologies? Or should we expect some rising R and D in the medium term in order to overcome those challenges?
First one, Jochen, you would take on the weather charts and then The second one is probably between Andreas and Jochen. So probably Andreas starts and Jochen might fill in.
Okay. Thanks for the question. Regarding where we are in the cycle, as I said before, when we talked about the guidance, the demand this year is strong. I would say more on the sunny side. However, and I want to repeat what I said before, we have a lot of uncertainty at the moment regarding the availability of chips or semiconductors.
So overall, from today's perspective, we would call it more The fair weather scenario for 2021 than really the strong sunny one. To your question regarding North America and Europe, First of all, on North America, we are already strong. I think John showed a lot of good examples why we are there and also showed Therefore, with our tailor made vocational truck, we have even the potential to get stronger going forward. But if you look And it's fair to say for the longer history of Europe, you also might remember that Europe was even stronger in the years between 2,005 and 2,008. So the potential from the market is the same.
So there is no reason why Europe should be not As strong as North America, that's what we are working on, that's our plan and as Martin said, they're very concrete measures ahead, which bring us on a similar level than we see in Europe and North America today.
Yes. Kai, I think you to the point, right? I mean, this is certainly a huge challenge, what you described for us and for the overall industry. And really the most important thing is focus on partnering. Focus on heavy duty in this example, partnering on medium duty.
We're partnering on the battery side and fuel cell side as well. So these are the key ingredients focused and partnering. What I'd like to add is that people tend to underestimate the advantage also that we have with conventional powertrain and e mobility in one organization because the competencies that you need to successfully integrate the powertrain into a truck, They do not defer too much. So there's always in the combination of 0 emission and conventional powertrain, especially in the R and D side, Also optimism from my end that we will see synergies there from the competence standpoint. Jochen, I don't know whether you want to add something to this.
Well, maybe just short in addition. If you look on the R and D as a in 2019. Also keep in mind that we had a lot of major projects in 2019. We talked about China briefly today. We talked about The vocational truck in the U.
S, we talk about the renewal in Brazil. So there are a lot of big projects, including 2019. So they will go away because they're finally done now. So that helps to lower the overall R and D. And the second one I also mentioned it in my speech is the so called active portfolio approach where we really think about where are the biggest profit pools of the future and we will spend our money we believe we get the best return going forward.
Thank you, Jochen and Andreas. We continue with George Galliet from Goldman Sachs.
Thank you and thank you for taking my question. I know you didn't give the split between fuel cell and battery electric vehicle. But I was wondering if it would be possible to give us some idea of how you see the 2 different markets shaping up and whether you expect significant regional differences? And the reason I ask is, obviously, you've talked about the desire to reduce complexity and take cost out of the business through that. So with that in mind, I just wonder, the pursuit of 2 different powertrain technologies, Is the size of the fuel cell market large enough to warrant the investments that you plan to make there?
Thank you.
George, I might start with this and then I hand over to Andreas because this is one of the key questions for the future of Trucking. I see when you look on a macro perspective, I see the short term way from now to 2025 will be definitely electric. Why? Because it's only a few trucks and for a few trucks, electric infrastructure is fairly easy. Between 2025 and 2,035, the next 10 year period, where we ramp up massively, and we is not Daimler, we is the Industry, the strain on the infrastructure, always understanding that parallel, The passenger car world is ramping up as well.
The strain on the infrastructure, especially on the electric grid, will be so enormous that in my opinion, there is no way that we can do it with just one energy source. We need 2. And then beyond 2,035, it depends where do we get our renewable energy in the world. If we have to store the energy over time, meaning producing it today and using it tomorrow or over distant, meaning We're producing it in a hot country with endless sunshine and using it in a gray, foggy, windless Northern Europe. And if you have to then transport that energy, the only way to transport it will be H2.
And once you have energy in H2, the easiest way to get it out in a fuel cell. With all that, that is, I would say, Only electric until 2025, other than a couple of test trucks on fuel cell. Between 2025 and after that, The decision is how will the green energy of the future economy will be work. On the cost side, Andreas, potentially over to you. And the synergies between the 2 or whether it's stupid to have 2 completely different technologies in an engineering department.
Yes. The scale question is extra relevant, yes. I mean, What we see during this decade in cell centric is around a 10 gigawatt per year scale. And this is possible As we partner with Volvo and as we have Rolls Royce Power System also as an important customer, this is about the scale it takes to bring down the cost level that also enables the TCO breakeven during this decade. This is one of the reasons why we partner here besides sharing the invest.
On the infrastructure side, I'm also very optimistic like you are, Martin. As I said earlier, It is anyhow inevitable to decarbonize all the other industry sectors. So, in a CO2 neutral society, we anyhow are going to see competitive green hydrogen independent of the trucking industry. And I would turn it around. Imagine this comes true and you have not invested in a fuel cell truck.
And then the competition shows up with a fuel cell truck, which gives more benefit to the customer. So I see the risk of the double invest lower than the risk not to invest.
Thank you, Martin. Thank
you. Great. Thank you.
Andreas, Thanks, George. And we continue with Patrick Kummer from UBS.
Thanks, Stefan. Patrick here from UBS. Also two questions from my side, actually two follow ups. 1 on the R and D. When you gave the R and D and CapEx outlook, was wondering how you account for the activities that you have in partnerships or joint ventures in there.
I guess that is where A lot of investment is required. These joint ventures won't be self funding because they're early stage such as the fuel cell joint venture. And it wasn't quite clear to me to which extent you have to put your own money into the partnership with CATL. So if you can just give us a feel how much of an investment will be required in the next few years in these partnerships, in these JVs that might not be included in that CapEx and R and D guidance that you gave? And my second question is a follow-up on the incentives.
You said every region, every division has to deliver. If you're incentivized with stock, it's relatively easy to sail with the fantastic performance of the North American business, which is a profit driver number 1. But How will you bring this element into the compensation of the regional units? And also, when it comes to The determination of the variable compensation, how does that environment play into this? Who determines whether a performance was achieved in a stormy weather condition or fair weather condition, if you can just give a bit more color how that variable compensation scheme is going to work, please?
Okay. I'll start with the first one regarding R and D. So first of all, it's an all in number. So whatever we need in the joint ventures we have today is included in these numbers. So there's not a day offs, it's really all in, number 1.
Number 2, Well, we do not disclose obviously the capital injections we plan for each and every joint venture. It depends on how fast we can grow that, But be assured that it's in our plan for 2025. It might be not known today that we have additional joint ventures going forward. That might change that, but it also means we step into new business areas then going forward. What we know today, what we see today, it's baked into the plan for 2025.
And when it comes to the incentive, I would say regional incentivization is Always difficult because it's not just difficult to determine what type of weather situation it's in. It's at the end to determine Who was responsible for that? First of all, we here as a board have a common responsibility. Every region has to deliver, does not mean John has to deliver and if not, bad luck. We are still 7 great guys.
And I use John, I used to deliberately was just as an example. We are all responsible for that. We have to stand in for each other. And that is not just the guys like Andreas or Jochen or myself who are responsible for all the region. We have Stefan Unger with Financial Services who supports all.
But it's again John working together with Karen to make a transfer of best knowledge. Karen working together with John supplying technology potentially which is already used in Europe and then introduced to North America. So many interdependencies Between each regions, I would say that the Board at least has to only can be incentivized of the entire company. Local management, if we have local targets like a fixed cost reduction program in Europe like get the vocational truck out of the door in high quality and high customer satisfaction in North America or have the electrification of Japan going forward at a record pace that you have with such kind of local task, special local incentive, I could see that and we will be very creative on that and motivate our people. Its importance is that you motivate your people and give the results that the shareholder needs at the end Thank you.
Thank you very much. And the next one in the queue is Stephen Reitman from Societe Generale.
Yes, good afternoon. Stephen Reardon, Societe Generale of London. An observation and a question. First of all, I'd like to congratulate you. I think I don't think I've ever heard this degree of honesty on presentations about the performance of the European operations.
And I'm not sure Whether the contents of the poll you gave about the relative positioning of Mercedes would have been this ever been talked about before by management. So that's a very good thing. My question is about electrification. And for all the arguments that have been in the past about keeping Daimler as entire group has been Elements of scale. So my question is, is, you see with the separation, you talk about you will bring your scale to bear in electrification, But would there be benefits of having even greater scale if combined purchasing and might have been with cars and trucks together?
Are the truck batteries so fundamentally different from those used in the passenger cars and vans? And do you see potentially maybe the joint purchasing still some JV with Mercedes cars and vans in the future for securing cells? Thank you.
Andreas, would you take over?
Yes. Very good question, Stephen. And obviously, what we do see as for the early adopters at the moment is usually upscaling PASCAR technology as for the availability of it. However, and as said earlier, if you look into the next 5 to 10 years, The truck dedication of the technology is really crucial and then we start really differentiating from PASCAR technology. It's similar to a combustion engine, right?
It's both a diesel engine, but you don't find too many synergies between a pass car diesel and a truck diesel engine. We need different optimization criteria. For us, reliability, durability, fast charging ability are way more important than other characteristics and this indeed leads to a different cell chemistry. So moving forward for us, it's rather crucial to partner with other truck players than it is to partner with passcode players. The same holds true on the purchasing side.
Thank you, Andreas. And we have time for one more set of questions. So I'd like to ask Tom Narayan from RBC.
Yes. Hi. Tom Noreen, RBC. Thanks for taking the questions. Karen, I understand the challenge you have for you is quite daunting and you're coming from 1 of the best truck makers in Europe, curious what return on sales level you would consider in Europe as benchmark, maybe you can distinguish between Sunny and rainy scenarios.
And then Martin, would you be open to opening up the fuel cell joint venture to other truck makers? The investment you guys have before you is significant. There are suppliers out there also making fuel cell stacks and presumably with advantage since they can sell those fuel cells to anybody. Just wondering if you could open them up perhaps to where a competitor that Karen used to work at? Thanks.
Yeah, I can start. Well, I think it was mentioned in one of the earlier questions. I think for sure that Double digit margins are possible in Europe. And of course, that's not where we are today. Though with the programs we're running Right now, both on the top line and related to cost, I think we will start moving in that direction.
But then, of course, this Customer satisfaction level that we had and that I also showed earlier on in my presentation, that's not something you turn around in 6 months because it takes time to rebuild a strong trust and a strong relation with all of our customers. So I think for sure we go for double the margins on a medium term outlook.
And then for the fuel cell question. I mean, say, first of all, if you have too many cooks in the kitchen, it takes longer to get the dinner ready than if you have really focused and expert cooks in the kitchen. At the moment, Volvo and us 2 great cooks working together and it's going really amazingly well. We have so a third partner not as an equity partner, But as a partner who will take sizable chunks of our fuel cell and helps us to reach the necessary scale position, which is Rolls Royce Power System. And I won't exclude that once this fuel cell is up and running and can be touched and felt and built into vehicles that we are open for other manufacturers that we deliver them fuel cell.
And ultimately, we can think of even selling some stakes in it. But this is I would say this is long term and speculations here. Therefore, let's summarize like we are open For to sell these fuel cells to others once Daimler and Volvo have their full supply covered And I would say we have high plans. And so at the moment, no need for another partner.
Okay. Thank you.
Thank you very much. So ladies and gentlemen, thank you for virtually being with us today and thank you for your questions. We hope you enjoyed the Daimler Truck Strategy Day. Also a big thank you to the Daimler Truck Management team for their presentations and for answering all of these questions. Now Investor Relations remains at your disposal to answer any further questions you might have.
We look forward to talking to you soon. Martin, do you want to have some final remarks?
Yes, I would. A big thank you from my side To the Daimler Tank management team for being with us today. Thank you for everyone here helping us prepare this exciting event. For my team and myself, I can say it's very clearly, we are very excited about what lies ahead of Daimler Tuck, and we are looking forward to shape this journey as a managed team as we are fully dedicated to the strategy we showed you today. More detailed information will be provided in the course of the next months and at our Capital Market Day