This feels like a winter day in the northern part of my home country Sweden. The weather is chilly. Actually, it's freezing cold, but I love it because that's how it's supposed to be. And we want to keep it that way. That's why we all need to focus on fighting climate change around the globe.
For us at Mercedes Benz, this means we have to change fundamentally and we will even faster than previously planned. My name is Oleg Kalenius, and I'm the CEO of Mercedes Benz. Here in our climatic wind tunnel in Sindelfingen, We can control the climate with the push of a button. 2 years ago, we put a stake in the ground with what we call ambition 2,039. This saw us commit to making Mercedes Benz carbon neutral more than a decade ahead of the Paris Agreement's 2,050 deadline.
But now it's time to accelerate on that path with the most important lever available to us, the full and rapid electrification of our products. The EV shift is already picking up speed. The tipping point is getting closer, especially in the luxury segment where Mercedes belongs. And that's why we will up the ante. We are accelerating from EV first to EV only.
Next year, we will have battery electric options in all segments we serve. And by 2025, our customers will be able to choose an all electric alternative for every model we make. We will 3 new EV only architectures.
And by
the end of this decade, we will be ready to go 100 percent electric where market conditions allow. That doesn't mean that we will wait for it to happen. We're going to make it happen. This implies the most significant reallocation of capital in decades and an even more rapid pivot away from the combustion engine. But we are convinced we can do it with strong profitability, and we believe the focus on Electric only is the right way to build a successful future and to enhance the value of Mercedes Benz.
Today, we would like to show you the details of this acceleration. And it all starts with the core of our strategy, building the world's most desirable cars. Because that's our main duty in the EV transformation, convincing our customers to make the switch with compelling luxury products. Since its very beginning, Mercedes Benz has been more than just a car manufacturer. We've always been a luxury brand.
Driving a Mercedes was, is and will be something extraordinary. Take the 300 SL Gullwing for example. When this car hit the market in the 50s, people stared at the Gullwing as if it was a UFO. So what will future automotive luxury look like? One answer to this question is the EQS, the first ever all electric luxury sedan from Mercedes Benz.
The EQS is designed to exceed the expectations of even our most demanding customers. Because, well, it's the electric sibling of the S Class,
to change because electric mobility is compelling and sustainable. My name is Britta Seager, and I'm responsible for marketing and sales at Mercedes Benz. Until recently, we a moderate development of the global EV market. Now we believe customer preferences will shift even faster. Fully electric vehicles dominate the luxury market by 2,030.
Of course, no one can foresee when the last combustion engine will be sold because that depends on the is getting ready to go 100% electric by the end of the decade. And I mean fully electric vehicles. Now how do we want to get there? So first of all, let's talk about architectures. Following the launch of MMA, the compact electric first architecture in 2024, 5, Mercedes will launch 3 electric only architectures.
MBEA will cover all medium- to large which will contribute to emission free transportation and cities in the future. Next, let's have a look our products. Today, we already offer a broad electric portfolio. For many customers, Our long range plug in hybrids are the perfect bridging technology. As long as the charging infrastructure still needs to be improved, The long range plug in hybrids will remain a very attractive option for years to come.
However, at the end of the decade, Our focus will be on BEV only because we also see that more and more customers are switching directly to battery electric vehicles, and we support that switch. In 2021 alone, we are introducing 4 new battery electric vehicles. Next year, we will present SUV versions of our EQE as well as of our EQS. All these cars will provide high range, 1st class comfort and impressive dynamics. And I can promise you that we will maintain this momentum going forward.
What applies to the Mercedes portfolio also applies to our incredibly strong sub brands. We want to go electric. So you can look forward to a top notch EQS SUV version of Mercedes Maybach, for example. In 2024, we will launch our full electric G Class as well. It will continue the great story of our G Series.
Mercedes AMG will go all The AMG team is developing a completely new fully electric platform, which will redefine high performance in the electric world. On top of a phenomenal electric drivetrain, AMG will take driving dynamics to a new level. These upcoming AMGs will also move boundaries in terms of efficiency and and there will be so much more to come to make these cars real AMGs in an electric world. We've been aiming at a 25% XEV share in 2025. Our new target is to drive the XEV quarter up to 50% in 2025.
Our ambition is to sell these products in a way that matches the Mercedes approach. We will use our unique brand position to grow economic value by enhancing our product mix and pricing, by ensuring our volume targets focus on most profitable models and regions, and by driving loyalty and growing recurring revenues. We have one of the world's most valuable customer bases,
to EV only for our new architectures and cars. On a global level, the pace of change in the market will vary, of course, here, a little slower there. But the transformation to battery electric cars is unstoppable and it will pick up speed everywhere. Why? So while it's true that regulations and policies for curbing emissions are becoming stricter across the globe, we believe that the primary driver of rising electric vehicle demand will be the recognition amongst customers that it is a superior technology.
But a crucial factor for mass adoption will be charging technology and infrastructure. With EQS, up to 300 kilometers of range can be added in just 15 minutes. To make sure that everyone can drive sustainably in the future, we need an efficient public charging work. Its expansion must keep pace with the manufacturer's electric ramp up. That is our main message to policymakers.
Industry and government must work together on this. But as an automaker, our main focus needs to be on the product side. So let's take a closer look
My name is Markus Schafer. I'm the Chief Operating Officer responsible for R and D. Our EQS is the first car built on our new dedicated EV architecture. 1 more sedan and 2 SUVs will follow minimum. The next milestone will be our upcoming MMA architecture for compact and midsized cars.
This architecture is designed electric first. This means the focus clearly lies on ultra efficient, fully electric models. In 2025, we will further consolidate our architectures to one final overarching system, MBEA, the Mercedes Benz Electric Architecture. No combustion engines any longer. And it will revolutionize the way we engineer electric cars.
In fact, it will not even be an architecture as we have known it so far. It's a scalable modular system, offering the different components as we need them for different vehicles, plug and play off the shelf. Just like our upcoming software architecture, mbos provides one digital backbone for our future vehicles. We engineered MBEA as the one electric backbone for the Mercedes Benz EV portfolio. For faster technological progress.
If we want to get ready for 100% electric cars, Then we also need to step up our game when it comes to batteries. They are the centerpiece of every electric vehicle. So what is our battery strategy? To reach our goal until the end of the decade, we will need a capacity of more than 200 gigawatt hours. Therefore, I'm happy to announce today that we will set up 8 new Gigafactories together with our partners around the world.
1 of the Giga factories will be set up in the U. S. To produce the majority of batteries for the cars and vans from our Tuscaloosa and Charleston plant. We will build 4 more factories in Europe with our existing strategic partners and with a new one. So I'm happy to announce today that with regard to battery cell manufacturing, we intend to team up with a new European partner to develop and efficiently produce future cells and modules for our electric vehicles in Europe.
We are looking forward to revealing further details as soon as the agreement has been finalized. The creation of a new global battery champion will help to ensure that Europe remains at the heart of the auto industry, even in the new electric era. In doing so, we will not only secure supply, it gives us another tool to transform and enhance our legacy powertrain footprint. At these 8 new Gigafactories and at the already existing factories of our global battery production network, We will produce batteries for the entire product range, from AS AMG to BS fans. Our batteries will be highly standardized.
More than 90% of all future Mercedes vehicles will be based on a common battery platform. At the same time, we will be flexible enough to offer individual solutions to all our customers. So how can we do that? We are aiming for a modular battery system that consists of uniformly designed components and standardized interface to the entire vehicle. Only 2 differentiating characteristics We create the necessary variance in terms of range, charging and driving performance, cell chemistry and the height.
Besides a very innovative battery technology, an improved e drive system contributes to further increasing the range and efficiency of electric vehicles. We already have world class electric vehicle technology. But we intend to take it to the next level by insourcing e drive technology. This will allow us to build truly differentiated products with unmatched performance. In in house, electric motors are a key part of our strategy with a clear focus on efficiency and cost of the entire system including inverters and software.
Last year, at our strategy update, we told you about EATS 2 point 0, an in house developed and built motor that will be key to the forthcoming MMA architecture. EATS 2.0 will have an outstanding performance as part of an 800 volt powertrain with a silicon carbide inverter. E ATS 2.0 is a radial permanent magnet motor designed for the majority of our key products. For our forthcoming AMG high performance cars based on the AMG EA architecture, we wanted something even more special, Something that will give a level of power density performance and endlessly repeatable acceleration that will be truly unmatched. And that's why we are so excited to announce today an important acquisition.
We are acquiring U. K.-based
The electric motor is not a commodity. It's a fast developing technology where innovation and will drive performance and differentiation. Almost all electric motors in the automotive world are radial, long and cylindrically shaped. But for high performance applications, there is a new and very different concept, the axial flux motor. And at the very cutting edge of axial flux, There is a unique and very special technology, conceived, developed and already in production.
The YASA Axial Flux Motor With vastly superior power to weight, outstanding efficiency and endlessly repeatable performance, The era of the ultra high performance electric motor is here. Yasser is an early stage technology company based near Oxford Fuel flux motor and high performance controller has been granted over 120 patents and has brought the motor to production. Yasa Motors very recently entered low volume production on 2 ultra high performance mid engined hybrid supercars. But now, it's time to take it to the next level. Technologies for AMG Mercedes Electric Only Platform.
YASA will also act as an electric drive innovation partner and develop pioneering new electric drive innovations for Mercedes Benz. Mercedes Benz will be bringing best in class axial flux motors onto the road. And with Yassa's continual development, this technology is likely to remain highly distinct, offering exceptional performance.
There you have it. YASA is going to power us to a new level of cutting edge electric drive technology. But becoming more electric and sustainable is not just about batteries and alternative drives, because we all know that won't be enough. That's why we at Mercedes Benz are working towards a CO2 neutral supply chain. I'm very proud to confirm that as earlier this year, We will be using the first deal from Salzgitter AG, which is 100% recycled and thus emissions are reduced by 60%.
We are also taking a stake in the Swedish steel manufacturer H2 Green Steel, which will supply us with CO2 free steel from 2025 on. Of course, when talking about a green supply chain, the battery cell is of particular importance. The EQS, for example, contains CO2 neutrally produced batteries. Our EQS suppliers source raw materials for battery components only from IRMA certified mines. Now we are going one step further to both preserve human rights and secure our future supply.
For lithium, for example, we intend to team up with a lithium producer, Albi Malley Corporation. Together, we are discussing reduction of CO2 emissions in lithium production, implementation of lithium recycling and localization of battery grade lithium production in Europe and the U. S. Direct sourcing of other battery raw materials like nickel and cobalt are under consideration. We will help make the world a climate neutral place with the aid of exceptional engineering
My name is Sajjad Khan. I am the Chief Technical Officer at Mercedes Benz AG, responsible for e drive and the Mercedes Benz operating system. When we say the word e drive, we mean the battery, the drive unit, the charging system and the complete e drive software. Let me start with the battery technology. Today, we are using lithium ion batteries with NMC 811 in our flagship vehicle, an energy density of more than 5 50 watt hour per liter on cell level is the enabler for an installed energy capacity of 111 kilowatt hour in total.
This leads to a bench position in the luxury segment. With our next battery generation, we will vary the chemistries within the battery to provide the best solution depending on the customer's need in different markets. These chemistry variants will be available in our forthcoming platforms. We are also working with our partners like Sila Nano on anode technology to increase energy density up to 900 watt hour per liter by using silicon carbon composite in the anode. This will allow us to offer unprecedented ranges and even shorter charging times.
Looking ahead, we plan to team up with additional partners to accelerate technological development of the high silicon anode. We are also proactively working with the promising startups to look into the disruptive technologies of the solid state chemistry. Solid state batteries have the potential to push the energy density beyond the limits of conventional lithium ion cell up to 1200 watt hour per liter and more than 400 watt hour per kilogram. This will double the energy capacity and reduce the weight in the same packaging space. Furthermore, our solid state technology will endure more charging cycles over lifetime.
With solid state, we have the opportunity to rethink the design of the battery system as a whole and all of that what at the prospect of even higher safety. Our aim is to continuously integrate the most advanced battery cell technology in our production cars, vans and in all our AMG models. With our new lifecycle strategy, we will raise the bar increasing the range during the lifecycle by roughly 25%. This shows that eMobility is so much more than just a new drive frame. It moves our whole business into completely new dimensions, especially if we combine it with the possibilities of software.
The battery management system is the brain of our batteries. With more than 50 intelligent system functions, We regulate the whole battery system, for example, state of charge, stage of health, voltage, electric current temperature of each cell in such a way that our customer gets the best range out of that and we have the best system available. Our battery management system entails an intelligent AI based algorithm that adapts the whole battery system to the individual driving behavior. With the best in class battery in the drive unit, we have the ingredients for a luxury driving experience with our electric cars. However, one important factor for the whole battery electrical vehicle experience is the premium charging.
An easy, seamless and integrated charging experience is enabled by our Mercedes me Charge. Together with the market launch of the EQS in North America, we have partnered with ChargePoint in the U. S. Together, we will establish a new benchmark charging network with the access to almost 60,000 public charging places nationwide through all relevant charging networks. And as an industry first, The additional integration of more than 60,000 semi public chargers at shopping malls, hotels and workplaces make Mercedes me Charge the largest integrated network in the U.
S. With just one account. Because of the fast ramp up of our BEV portfolio, we see the need for additional infrastructure, especially in Europe also. We already have the largest open high power charging network with the company IONITY. However, We will further develop this network so that charging becomes even more convenient.
Furthermore, with Shell, we will be working on expanding our overall charging network. Shell will offer enhanced access to its Shell recharge network for Mercedes Benz customers consisting of over 30,000 charge points by 2025 in Europe, China and North America, including E1, more than 10,000 high power chargers globally. In addition, We are planning to launch several premium charging sites in Europe, which will offer a bespoke charging experience for our customers with top notch facilities. To sum it up, Mercedes me Charge is already one of the world's largest charging networks and currently comprises of more than 530,000 AC and DC charging points worldwide. Once you arrive at the charging station, the brand new feature, Plug and Charge, simplify the complete experience.
Plug and charge, unplug just as easy. No authentication is required, nothing else is required and the payment automatically runs in the background without any additional hassle or action. Plug and Charge will go live with the market launch of the EQS this year. If you are driving an electrical vehicle, It is also important that it runs on clean electricity. Mercedes Benz in this magnitude is one of the first automotive manufacturer to use the so called guarantees of origin to green charging sessions.
This ensures that an equivalent amount of electricity from renewable resources is fed into the grid for charging electrical vehicle with Mercedes me Charge. Mercedes Benz, therefore, facilitates the green charging at all different public It's all about providing a value to our customers by offering the superior technology in the shape of longest range, best charging experience and above all the fun to drive the most desired luxury vehicles
Today, we are talking about the future of Mercedes Benz. And
the
achievements become reality in a car. That's why I'm very proud to give you a preview for our vision EQXX. It's our ambition to lead in electric drive translated into a car. Back in 2020, we initiated an exciting next step in electric vehicle development and put together a cross functional multidisciplinary team of experts supported by specialists from the Mercedes Benz AMG F1 team. We instructed them to aim beyond 1,000 kilometers on one charge.
But not by making the battery bigger. Anybody could do that. No. They are working with a normal sized battery, destined for serious production in a forthcoming Mercedes compact car. Efficiency is the new currency.
To this end, the goal is to massively reduce consumption with extraordinary efficiency improvements in almost all areas. In terms of aerodynamics, this project aims at going even beyond what's been achieved with the EQS, already the world's low CD series production car ever. And we are also working on increasing the energy density by additional 20% at the cell level compared to the EQS. Our e drive experts are making rapid gains in efficiency and pushing the boundaries of what's possible in terms of e motor, inverter, battery design, packaging they are chasing marginal gains that compound to substantial increase in range. All these factors are contributing to reaching a single digit figure for kilowatt hours per 100 kilometers or put it another way, efficiency of over 6 miles per kilowatt hour.
The VISION EQXX itself is in construction with pioneering body castings and sophisticated materials. Our goal is to integrate these new technologies in future Mercedes Road cars. You can really look forward to next year when we will demonstrate its real world driving range.
We are accelerating our ramp up in R and D activities to serve an all electric era. Investments in new technologies will be significantly and pull forward. This includes expanded activities in battery cells and systems. We will also prepare our global production network for 100 percent electric output. From a capital allocation perspective, we will do this within the very clear and strict guidelines that we set out in 2020 to ensure that we can remain a very profitable and cash generative business, creating value for our shareholders.
And we will also do this while ensuring that we build sustainable cars in a sustainable way. Our Factory 56 in Sindelfingen is the blueprint for future Mercedes Benz plants around the world.
When it comes to sustainable production of sustainable cars, we at Mercedes Benz want to walk the talk by leaving the smallest footprint in the process. My name is Jorg Wurze, and I'm the Head of Production and Supply Chain Management. Manufacturing, retooling our production to embrace a sustainable future. And the great news By 2022, all passenger car and battery assembly sites run by Mercedes Benz AG will switch to carbon neutral production. Demand for electric vehicles is rising, accelerating a fundamental the our unique production expertise, driven by generations of skilled engineers and a spirit of relentless improvement.
And we are ready to scale up our plants. The largest are located in Beijing, Bremen, single thing in Rorschka and Tuscaloosa are all capable of building BEVs. We currently assemble 5 different BEVs. And next year. 8 Mercedes Benz electric vehicles will be produced on 3 continents with batteries from our worldwide network.
Our cooperation on cell production will further give us the opportunity to transform our now more than ever. That's why we are also partnering with selected experts in their field. The latest example, a global leader in highly innovative battery production and automation systems is joining forces with us to strengthen our battery production capacity and know how. The cooperation focuses on battery module assembly as well as pack assembly. In addition to seeking higher levels of efficiency in production, We are using the transformation toward electric vehicles as an opportunity to advance the course of sustainability.
Establishing a sustainable circular economy is a key lever for reducing our resource consumption. To that end, we are designing new processes, which take account of the entire life cycle objects tend to last a long time, especially when they are supported by established remanufacturing processes or when key components are repurposed. Batteries, for example, can be reused to help balance the electricity grid. The batteries themselves can be recycled, a way to curb the consumption of precious materials. We are currently in the process of evaluating and planning the installation of a battery recycling factory in Kupmerheim, Germany to develop and secure recycling capacity and know how.
Start will be in 2023, depending on the promising discussions with public authorities. Going forward, we will increase electric vehicle output, while at the the and a greater use of recycled materials will help us doing so. This makes luxury and sustainability a natural
In October 2020, we presented our refocused strategy based on 6 pillars. Since then, we have made substantial progress executing it. I can't think of a better proof point for a luxury approach than the new S Class and EQS. Our recent results are testament that we're growing profitably and that we're moving in the right direction. With the top end vehicle group, We have established a new unit to sharpen the profile of our sub brands AMG, Maybach and G.
We're embracing our customers with a new personalized and optimized CRM tool we created together with our partner Salesforce. We introduced green charging for our customers and we're in the process of recruiting 3,000 software experts for developing our new car software and BOS. And we're also making progress when it comes to improving our industrial footprint. The transformation process is in full swing because in the long run, it benefits no one
My name is Sabine Koe Reisen, and I'm responsible for human resources at Mercedes Benz. Our company has been around for 135 years. This great history is not the result of a sense of tradition, of faith in the future and spirit of innovation. That's why we will continue to change. When people hear the transformation, many first think of electrification or digitalization.
But the transformation of our company begins much All of us at Mercedes Benz have internalized that our transformation will only be successful if we also transform ourselves as a team. Therefore, Mercedes Benz is also accelerating its people plan. We are creating optimal conditions for everyone who wants to shape the transformation of the automobile. 3 elements of our HR strategy guide us on our path forward: reshape, reskill, and recharge. Let's start with reshaping our organization.
The transformation of our workforce will involve tough decisions. And yes, overall, we must and will reduce our personal costs. We'll continue this effective process working together with employee representatives, And we will do this responsibly by focusing on staff fluctuation and fair solutions. For example, with mutually voluntary arrangements, perseverance payments as well as attractive conditions for the transition to retirement. We are well aware of the great responsibility we have toward our colleagues.
This includes the purposeful modernization of our facilities realigned 2 of our most traditional conventional powertrain production plants. Stuttgart undeter Turckheim will become a technology competence center with a campus focusing clearly on electric drive and battery technology. A new factory for the small series production of future battery cells, and a dedicated battery safety lab complement Mercedes Benz's existing research and development activities in the field of battery technology. Berlin, Marian Felder will become a competence center for the digitalization of the global Mercedes Benz production work. The focus is set on the development and implementation of MAUR360, digital Mercedes Benz production ecosystem.
The newly founded Mercedes Benz Drive Systems Unit enables and support the transformation of our plans. For the first time, all drive types of Mercedes Benz will be integrated in 1 unit. We will not allow a 2 class society to emerge between the different technologies. At Mercedes, we are 1 And at every step, the employee will remain at the center of our actions. We are ensuring that motivated and qualified people remain at the heart of this fundamental shift.
That brings me to the second point of our strategy: In 2020 alone, about 20,000 employees in Germany We're trained on all aspects of electromobility. Our internal tech academies and other trainings offer the best possible opportunities to develop future oriented qualifications. We believe in the exceptional capabilities and the ingenuity of our engineers. Their passion for innovation is not tied to one particular technology. At R and D, employees are gradually being shifted from developing conventional drives to electric drives.
We are already off to a successful start in this. And look at the results. The team we have today has built the EQS, the best electric luxury sedan in the market. Now imagine what our team can do in the future, especially since we do not only reshape and reskill. To make sure our company remains a place full of bright minds, We are also recharging.
That's the 3rd element of our people plan. Vehicle software, for example, is a key component of our strategy. To deliver on our plans with MBOS, We will hire 3,000 new software engineers. 1,000 of those jobs will be created in Germany. We offer an attractive contractual framework, which allows for innovative employment conditions.
Because our Mercedes standards do not just apply to our products, we also aim to meet them as an employer. In the field of new competitors, we call for a new spirit of cooperation. This new generation of talented people will harness can create a new culture. And new technologies require new areas of expertise. Our team has everything we need for the challenges ahead, and I've never experienced an atmosphere of renewal at our as we have today.
Now we accelerate down the road we've chosen. We electrify and digitalized our entire company. And together, as a team, we will succeed, reshaped, reskilled and recharged.
So we are preparing ourselves to go all electric. And on this way, transformation while safeguarding our profitability targets will ensure the enduring success of Mercedes in this exciting new era. The good news is the cost of batteries and other components of the electric drivetrain is gradually coming down, which will accelerate the shift and aid profitability. Still, delivering on our financial ambitions won't work autonomously. It will require a tremendous effort in every aspect of our business.
In other words, we need a hands on attitude.
Hello, everyone. My name is Harald Wilhelm, and I'm responsible for This is our boardroom. And the most important topic that we discuss here is how we manage the transformation in a profitable way. You heard what we will do differently and how we plan to accelerate. Obviously, that raises questions at your end regarding capital allocation, regarding our investment profile and regarding margin evolution towards 2025 and for the second half of the decade.
Our key message is we are 100% committed to our margin targets also in the BEV world. What's our transition plan to go to BEV only? Let me wrap it up. Next year, we plan to have battery electric options in all segments we serve. And by 2025, We want to enable our customers to choose an all electric alternative for every model we make.
By the end of this decade, We want to be ready to go 100 percent electric, wherever market conditions allow. We will ramp down ICE vehicles faster. Plug in hybrids are an important component in the transition to CO2 neutral world, however, a transition technology. This requires more BEV models to complete our EV portfolio. We will offer a fully battery electric variant in every vehicle segment currently served by Mercedes Benz.
To accomplish this, we will launch 3 electric only architectures: NBEA, AMGEA and VAN EA. To support this ramp up, We'll set up 8 new Gigafactories and we'll enter a new corporation. Now let me walk you through how we will manage and pull all levers to generate strong financials also in an electric area. Let's start with the top line. Ola already mentioned a key element.
Mercedes Benz is laser focused on profitable growth. We're not chasing the volume cramp. We have already achieved significant improvements in this area over the last 12 months. Actually, in each of the last four quarters, revenue per unit increased year over year. Obviously, healthy demand and supply constraints driven by COVID and semiconductor issues supported this.
But it is also obvious that our strong product lineup and our determination towards fostering more profitable growth, One of our 6 strategic pillars are crucial here. Our goal is to continue on this path and to further increase net revenue per unit during the decade, sustainably and significantly. This is deeply embedded in our refocus strategy we presented last fall. That means we see the potential going forward to optimize pricing. And having the right product mix is even more important in an electric world.
Rising revenues from digital service will support our revenue line as well. The switch to the direct sales model is a most important change in how we manage sales. It takes cost out, increases price transparency and allows us much tighter grip on pricing. Let's look at the variable cost side now. That's where you win or lose a battle.
We will pull all levers, in particular on Bath. In October, we told you that we plan to reduce variable cost, including material and manufacturing costs by 1% per year until 2025 on a per unit basis before product mix. These targets remain well, and we are progressing towards them. And after 2025, We will target further reductions to compensate cost escalation and regulatory required content, such as EU7. Let me highlight 3 main drivers for bringing down the variable cost for our BEV portfolio.
First, we expect the cost of the electric drivetrain can be further optimized in the second half of the decade, thanks to scale benefits and continued innovation. 2nd, we expect battery prices to come down significantly below €100 per kilowatt hour, especially for LFP technology. The battery platform concept that Markus has highlighted plays an important role as well. We expect that the share of the battery cost within the vehicle will fall significantly. Thirdly, as mentioned by my colleagues, Our future electric only architecture will be designed as a scalable modular system, a further precondition for improving variable cost of BEV.
On the eye side, we obviously enjoy lower variable costs today versus BEV. And we have described how we expect to further reduce the cost year over year until 2025. As you can see, We try to be ambitious on the variable cost side. However, from today's point of view, we'll not close the gap completely between ICE and BEV. Now you will have a question what that means in terms of margin.
Well, therefore, The improvement of the revenue per unit is so crucial, including all of the levers in particular product mix. However, in view of the numbers of variables ahead in this decade, we try to be responsible and proactive. Hence, we take additional measures in terms of fixed cost and funding reduction. In terms of capital allocation and investments, We're shifting gears and getting ready to go all electric by 2025 from a product portfolio perspective. What does it mean?
Capital allocation is moving from EV first to EV only. On the one side, this means investing into the 3 all electric architectures, MBEA, AMGEA and VANEA that my colleagues have alluded to, thereby adding exciting new BEV models to our portfolio. Furthermore, our intensified battery footprint will become a part of our investment plan. On the other side, we will radically reduce the non BEF investments. You can see on this chart how ICE and plug in investments will go down by 80% until 2026 in capital allocation towards electric only allows us to confirm that the overall target we showed in October remains valid, minus 20% until 2025 versus actual 2019.
And with the focused electric architectures, We can reduce R and D expenditures in 2021 will be slightly above last year, before going down again in the years after 2022. Let's turn to fixed costs. We are well on track to reduce fixed costs until 2025 by more than 20% versus actual 2019. This is a commitment we gave last October. In 2020, a part of the reductions were achieved due to short term and COVID related measures.
This year, we work hard to replace those temporary measures by permanent and sustainable actions. Towards the mid of the decade, An important driver for this will be our initiatives fostering seamless end to end processes and digitization throughout all business areas, in sales and marketing, in IT and in finance and so forth. This will allow us to reduce fixed costs also beyond 2025 year over year based on actuals despite inflation. To sum it up, What does it mean for profitability? Let's first have a look at our well known weather charts.
We introduced this last October at the MBSU to lay out our financial ambition for Mercedes Benz for 2025. How do we rate this year's performance with reference to this grid. The demand and contribution margin side is very favorable, supported by our strong product lineup, customer demand, mix and pricing can be rated as sunny. However, from a supply constraint perspective, due to the same issue, this does unfortunately not translate 1 to 1 into sales volume. Here, we are rather still close to the rate side.
On fixed cost and funding, we are on track or even ahead of the curve. This is what you can see in our financials as outlined yesterday at our Q2 disclosure. With a solid double digit return on sales adjusted in Q2 and a full year guidance of 10% to 12%, this is a double digit year, provided the semiconductor situation stabilizes. In the weather chart language, profitability wise, our performance is on the sunny side. And we translate that performance also into cash flow, as you can see in the Q2 numbers.
So what is our perspective on the journey to BEV? We are committed to the margin targets as outlined last year. The difference is last year targets were against 25% XEV share by 2020 5. Now we are talking about these margin targets with an XEV share of up to 50% by 2025 and up to 100% of BEV by the end of the decade. This is a statement of confidence that we will master the transformation successfully.
How is it possible to get there? Number 1, the good starting point we have set so far in the year 2021 and with all the pillars of our refocus strategy further kicking in, our goal is clear. We want to move up our top line and contribution margin sustainably, in particular product mix and pricing. Number 2, we will substantially reduce our best variable cost. Number 3, we will double down and extend our targets in terms of fixed cost reductions.
Number 4, CapEx and R and D will strictly be shifted from conventional and hybrid to BEF spending. You see, we stepped up our commitment. Now you will ask me, What is your margin ambition? We believe, even in a bef world, Mercedes Benz
So what's our take home message for today? Yes, Mercedes Benz is in great shape, but there's so much more potential and we have a clear plan to unlock it. Therefore, We are transforming our entire company. And these amazing cars prove that we're able to deliver on our promise. We will build the world's most desirable cars and we have a lot more fantastic cars in the works ready to hit the road soon.
In February, we introduced our plan to focus Mercedes Benz on cars and vans, and now our intention is to accelerate Mercedes Benz into a 0 emission and software driven future as the world's preeminent luxury car company. And that's exactly what we're doing. Mercedes Benz is getting ready to go bev only within this decade. Our entire team is determined to deliver. Mercedes