Good morning, ladies and gentlemen. This is Stefan Orfmann speaking. On behalf of Daimler, I would like to welcome you to our Q1 results conference call. We are very happy to have with us today, Harald Wilhelm, our CFO. In order to give you maximum time for your questions, Harald will begin with an introduction directly followed by a Q and A session.
The respective presentation can be found on the Daimler IR website. Now I would like to hand over to Harald.
Thanks a lot, Stefan, and hello, everybody. Good morning To that Q1 call, I mean, I would say, which is maybe a bit more than a Q1 call, let me call it a bit kind of a preview or testimony of luxury meets tech, of margin expansion, of value creation being ahead of us. That quarter gives us confidence to push ahead with our work, both on the strategic and the operational side. We already disclosed, I mean, the figures last week. So today, we will go more into the details, but also talk about the outlook, obviously.
Let's jump to the key messages on page 2. First, the Q1 margin at Cars and Vans demonstrates, I would say, the strength of our portfolio and our ability to lower the breakeven point. Cash wise, we look at an excellent level of net for liquidity. The key drivers of that were an effective working capital management and a stringent capital allocation. On the project focus, I mean, the spin off and the listing of the Daimler truck by the end of this year, that work is well underway With a lot of preparation work, obviously, and it will be submitted to an extraordinary general meeting in autumn, where Daimler shareholders will be asked to prove this historic strategic step.
Product wise, we are very proud that lately we could present 3 Full electric vehicles to the world, the EQS, the EQA and the EQB. They underline our ambition to lead in electric drive and car software with high-tech luxury EVs. Recently, one of you called it luxury meets tech. As you could see in the intro, I love it and we are well prepared to deliver on that. Looking on the key figures, Page 3, in the Q1, we sold 729,000 vehicles worldwide.
That is a plus of 13%. The revenue grew by 10%. If you adjust it for FX is 15%. EBIT cash flow, nil reflect the impact of group wide ongoing positive development on top line side as well as the cost measures paying off. The free cash flow of the industrial business was at €1,800,000,000 including the payment made in connection with the settlements with U.
S. Authorities on diesel, adding to a net industrial liquidity of more than €20,000,000,000 Now let's have a look at Mercedes Benz Cars. Well, we started well at Cars and Vans, I mean, into the year, into 2021. I would say we could keep the positive momentum of the second half of twenty twenty. With the new S Class and also the attractive SUV portfolio, We have a fascinating product and favorable mix that drives pricing.
The S Class sales and orders are very encouraging. The Q1, we sold more than 15,000 units, and that means deliveries to customers. GLE and GLS remain topics among our customers as well. Our global EV share increased further and was in that quarter already more than at about 10%. In Europe, That means 1 in 4 cars sold by Mercedes and Smart were electrified, yet we delivered on the margin.
With this development, we are on track to achieve our 2021 EU CO2 targets. Internally, we drove our fixed cost reduction measures and cost discipline further and showed overall positive industrial performance. At our Stuttgart undotelkheim plant, we're gearing up for Electric First Future. That means the Mercedes Benz DRIVE System Campus will become a technology competence center with a campus focusing clearly on electric drive and battery technology. That means Transformation is actually taking shape.
Let's have a look at the EQ product portfolio on the Page 6. In the 1st month of 2021, we presented 3 full electric EQ models, the EQA, the EQB and our first Mercedes Benz all electric platform in form of the new luxury sedan EQS. The EQS is the first model in The Mercedes family to be based on an electric only architecture for luxury and executive class electric vehicles. It's the S class of the EVs and raises the bar for sustainable high-tech luxury with industry leading range, aerodynamics and refinement. It delights the driver with a full electric range of up to 7 70 kilometer according to WLTP and an output of up to 3 85 kilowatt, over the air update ability, the new and with MBUX Hyperscreen and so many more features.
Furthermore, the EQS is recharged in just 15 minutes for up to another 300 kilometers. And in terms of aerodynamics, we achieved a new best value of O.2. We're excited by the initial feedback that we have gathered so far for the EQS. Just to quote 2 media, The EQS sets a high bar for large luxury EVs, a really, really high bar Or stepping into the EQS is like stepping into a car from the future. We are delighted by that feedback.
Launch to the market in Europe will be in August this year to be followed by U. S. And China by the end of this year, beginning of next year. On the EQA, we have already more than 20,000 orders for that compact vehicle with progressive design, extensive range and intuitive operation based on MBUX. On the EQB, the 7 seater was a unique position among electric cars, Compact on the outside, spacious on the inside, all electric through and through.
There is more to come. The EQE and the SUVs on a fully electric platform in 2022. By the end of next year, a total of 8 Mercedes EQ electric vehicles will therefore be produced at 7 locations on 3 continents. So you see, we are serious to move on an all electric world only. Page number 7 on the market.
We can see that China is running well above last year's levels and above pre COVID level. For Europe, after recovery in the course of 2020, we see a slow but encouraging start into 2021 back to about pre COVID level. And in the U. S. With a slow start, but a steady recovery, we are coming back to pre COVID level.
Note, however, that the underlying market demand is even stronger. However, the semiconductor availability refrained us from realizing that full potential. Now on the van, Page 8, We continue to make progress on the turnaround, which we started last year and to make that sustainable. The efforts are clearly paying off. We have a volume growth with strong profitability underpinned at the same time by a lower cost base.
The sales performance is strong with best first quarter in the U. S. And in China. The group sales of electric vans quadrupled compared to Q1 2020. And we drive a consistent implementation of the electric strategy at the Vans division as well.
The next generation eSprinter is based on a newly electric on a newly developed electric versatility platform coming to market in the second half of twenty twenty three. Now on the financials for Mercedes Benz Cars and Vans. Q1 sales and revenues are ahead of last year. Sales increased by 15% to 627,000 units. Revenues increased by 16%.
If we adjust for FX here, we were up around 20%, which demonstrates significant mix improvement. The EBIT adjusted grew to 3,800,000,000. The CF bit turned positive to 3,100,000,000 demonstrating the focus on the cash flow. Let's have a more detailed look at the margin bridge. The favorable sales momentum at Mercedes Benz Cars translated in a significant increase in volume, structure and pricing, Where main drivers were especially S Class, GLE and GLS, but also on the lower end of the portfolio of the GLA and GLB, They had also very positive contribution.
The overall pricing environment furthermore had a positive impact on discount levels and residual values continued to develop favorably. The ruble and the U. S. Dollar drove a negative FX result of about 130,000,000 Industrial performance developed significantly positive on the production and on the material cost side. Additionally, we extended the useful lives as explained in our last year's disclosure.
We Worked on the reduction of selling and marketing expenses, however, without compromising on the market appearance, as you can see with the EQS presentation. The same holds true for G and A, where we continue to hold a tight grip on cost. The R and D came in with about EUR 120,000,000 higher year over year, which reflects as we guided for a slight increase in our technology roadmap. In the other lines, the most prominent driver is the increase of the equity result of BBAC. It was a total of €480,000,000 in the Q1.
Remember, Q1 2020 showed a COVID impact in China. In addition, we had a positive impact from the re measurement at fair value of the charging infrastructure operator charge point resulting from its IPO and a smaller M and A real estate transaction. Both topics amount to about 1% point ROSS in Q1. The adjustments in the quarter include expenses for legal proceedings and personal cost optimization programs, Furthermore, income of EUR 600,000,000 in connection with establishment for the JV for fuel cells, Cell centric resulted in a positive contribution. Looking at the cash flow, Page 11, The change in working capital underpins uncontrolled inventory management given the increased sales volume and the richer model mix.
Due to the semiconductor shortage, we had to pre produce some components because we anticipate to recover part of the lost volumes by the end of the year. As you can see, the net investments and PPE and tangible assets versus depreciation, amortization and impairments continues on an almost balanced level, reflecting our rigorous approach to capital allocation. The other line is straightforward. It includes the adjustment of the BBAC at equity result, other non Cash book gains within the segment, I. E.
The charge point to sell centric and cash out from provision consumption. Finally, the other bucket includes the payments in connection with the ongoing governmental and legal proceedings and measures taken with regard to Mr. Yves Benz, diesel vehicles. This relates in particular to the payments made in March 21 in settlement of civil and environmental claims made by Several U. S.
Authorities in the prior year in connection with emission control systems used in certain vehicles. On the adjustments, we have diesel payments, the Volvo GV with a cash inflow of EUR 310,000,000 and payments made in connection with the personal cost optimization program. Now let's move over to trucks and buses. Here we could drive sales growth in the Q1. The increase of truck sales came mainly from Europe and North America due to improved market conditions, but also from gains of market shares.
However, at the bus side, especially the coach bus segment was hit strongly by the effects of COVID-nineteen. Incoming truck orders in all regions were significantly above prior year's quarter. The impact from semiconductor shortage was not very material in the Q1. The Q1, we were able to further reduce our used vehicle stocks. Net pricing developed favorably.
End of February, we announced our plan to cooperate with Cummins. We signed a memo you to establish a global strategic partnership for medium duty engine systems. And we also could close in the quarter the fuel cell joint venture with Volvo, which we announced already before. Let me Emphasize a few points on these on the Page 13. So for the fuel cell, Volvo Group acquired a 50 percent interest in the existing company, Daimler Truck Fuel Cell for Approximately €600,000,000 Daimler Truck and Volvo Group have agreed to rename the company as Cell Centric.
Together, we aim to commence serious production during the second half of this decade. In February, on the Cummins side, we announced an MoU concerning the global strategic Partnership for medium duty engines. As part of the planned strategic partnership, Cummins will invest in the further development of the medium duty engine platform And its global production supply for Daimler trucks and buses as of the second half of this decade. Cummins is about to establish an engine plant within the existing Mercedes Benz Manheim campus to localize medium duty engines. What does it mean altogether?
These moves allow us to focus on our investments and to allocate capital to those areas where our future lies. Daimler Trucks invest in the development of 0 emission drive technologies and the further development of our own heavy duty engine platform. On the market side, Page 14, I I think that the chart impressively shows that in the key regions, we are already back on pre COVID levels by the end of Q1. Especially January February are historically low sales months because of the production shutdown in December and strong deliveries in the Q4. With the production pipeline build back, we saw a strong March.
Incoming orders exceeded the prior year's figure by 63% significantly benefiting from the economic recovery, level of incoming orders increased by 58,000 units to 150,000 units in the Q1 of 2021. This development is This should cover as well for the sales development in the coming quarters. Book to bill, therefore, was at 150% coming in particular from Europe and the U. S. As well as Asia.
That means we're literally sold out in North America. And if you look at the incoming order levels, It's important to mention that we did not open the order book yet for the next year. On the financial side, The sales increased by 4% to 101,000 units. The revenue decreased slightly by 1% to 8 7, but remains close to prior year level. Adjusted for FX, revenues increased by 5%.
Adjusted EBIT more than doubled and amounted to EUR 518,000,000. See EBIT turned positive to EUR 435,000,000. Looking at the margin walk, higher truck unit sales mainly in Europe and North America resulted in positive volume structure and also net pricing, including a positive contribution from used trucks business and aftersales. Pricing development is also favorable across all regions. FX results this quarter was slightly burdened by the U.
S. Dollar, translation effects that were offset with transactional effects from other currencies. Within the industrial performance, we see slightly Higher cost for raw material as well as supply chain constraints and logistic costs. Bear in mind that Q1 2020 was not yet hit by COVID-nineteen. Overall, selling expenses stayed at about the same level as well as SG and A.
In the positive other line, we have included, for example, a better equity result from our Chinese JV with Photon. That leads to the EBIT adjusted of €558,000,000 which equals a return on sales of 6%. Adjustments include the GV with Volvo and expenses for restructuring measures. The buses on the other hand is facing a very tough business environment. On the cash flow side, we can see that the working capital in Q1 was quite good.
Even so we are operating at a higher market level, yet the working capital grew under proportionate, used vehicle stock is on a record low level as well. The net financial investments reflect the cash contribution attributable to the Daimler Trucks from the cell centric JV with Volvo. Depreciation and amortization exceeds net investment in PPE and intangible assets underlying our focused investment approach. The other line simply adjusts the EBIT effect from CellCentric settlement and that leads us to see a bit of EUR 620,000,000 adjusted for restructuring measures and equity injection. So the that amounts to €435,000,000 which is a cash conversion rate of €0.8.
Over to Mobility, Page 18, Compared to the Q1 last year, we could see a slight increase in new business, mainly driven by strong loyalty and customer retention, especially in China. Credit reserves are on stable level with continuously low net credit losses. Also at Daimler Mobility, the execution of our efficiency measures shows a positive impact on earnings. Absolute OpEx figures go in the right direction. At our Mobility Services, we are further Optimizing our shareholdings and improve our operative business.
Let me pick a few examples. Recently, We announced the plan to sell the Park Now group with 2 Easy Parks. At The charge now, we aim to gain a new partner and investor with BP joining Daimler Mobility and BMW Group as a 3rd investor. At Frina, we continue our growth plan. We will launch multi Mobility services in more than 30 new cities in 2021.
And also in Chernow, We start worldwide with the 1st reward program in 14 cities in Europe. On the financials, Page 19, the new business was up by 4%. The contract volume amounted to 153,000,000,000 That is 1% higher than at the end of 2020. However, the portfolio decreased in Europe and Americas, but could be overcompensated by FX effects. Adjusted EBIT increased significantly to $691,000,000 And Page 820 shows you how we could get there.
So that means that 691 equals 18.7 Percent return on equity adjusted. Let me briefly explain, I mean, how we could get there. Small and negative FX effect. Key reason for the EBIT improvement compared to last year came from the lower credit risk provision in the higher interest rate margins. After an increase of credit reserves in the past year, we could see a further flattening of credit risk provision by beginning of this year.
Absolute net credit losses are below the long term average. Cost of credit risk ratio is at 25% compared to 1.58 in the same period last year. Furthermore, positive operative business performance contributed to a higher EBIT. The adjustments of €54,000,000 versus last quarter relate mainly The one time effect coming from the sale of shares in Via Inc. I have Already explained on the group level Page 21, I mean the division walk.
So the Conciliation includes cost for further cost efficiency measures at the group level and group project related expenses. Therefore, we can see that the group all in EBIT is at €5,700,000,000 and on an adjusted basis at €5,000,000 The Adjustments amount to €778,000,000 as we could see in the division part already. Page 22, on the free cash flow, We highlighted already the division sections. So what else? The cash taxes are at 355,000,000, which is, as usual for Q1, slightly below the average.
Pension effects of 126,000,000 negative, that's mainly due to internal transfers between the entities. The reported free cash flow from the industrial business is at 1,800,000,000 It includes €900,000,000 for the payment made in the settlement with the U. S. Authorities, as I explained already before. Free cash flow adjusted for legal proceedings restructuring measures and M and A is at 2.8 and marks another step on our way towards cash flow oriented Thank you.
Page 23 on the net industrial liquidity that stands at 20,000,000,000 increased by 2.2 compared to year end 2020. The increase is mainly due to the positive free cash flow of the industrial business and the slight positive FX effect. Invest and depreciation are basically balanced. As you can see on the chart, dispose of shareholdings at to by 500,000,000. Worthful to mention, 3 rating agencies upgraded their outlook in Q1, SMP and Moody's to stable And Fitch to positive outlook.
Overall, I would say with that net cash position, That leaves us with a very significant financial flexibility. Now we jump to the outlook, Page 25. So how do we see the guidance for the full year? Before I start on that, please note that all guidance that are made under the assumption you see on the slide, meaning no further COVID-nineteen related setbacks. Our expectation for the development of business in 2021 are based on the assumption of a gradual normalization of economic conditions in the markets that are important to us.
In particular, we assume that the world economy will be able to recover from the pandemic related weakness of the year 2020, aided by among other things, increasing with vaccines. Based on the expected global economic recovery, worldwide demand for cars and vans is expected to continue favorably this year and significant growth in market volume is expected for 2021 as a whole. The Chinese car market, which performed better than most other major markets last This year should now grow significantly as well this year. This is a change to the market guidance we gave in February. The economic recovery should also result in improved demand in the major truck markets.
That means that in North America and in the EU, We expect significant growth in demand for heavy duty drugs. This is unchanged. Page 26, We expect continued positive stimulus from the economic recovery and good underlying demand for our products. We continue to expect the group revenue and EBIT in 2021 to be significantly above 2020. On the free cash flow reported.
We keep our guidance that it will be below last year's figure due to the payments in the context of the settlement with U. S. Regulators in civil law proceedings. At the full year disclosure, I also stated that we expect the free cash flow adjusted to be below last year's figure. As of Today, however, we do expect free cash flow adjusted to be in the vicinity of the prior year level despite higher cash taxes.
Our group guidance for Invest R and D and CO2 emissions remain unchanged. Page 27, on the divisional side, Let me talk about unit sales and start with a general but important remark. The current worldwide shortage of supply in certain semiconductor components affected deliveries in the Q1 and could further impact sales in Q2. However, we assume some recovery in Q3 and Q4. At this stage, the visibility is limited.
Unfortunately, 2 events occurred in February that pose further challenges for the industry, While our supply chains were already tight and our reserve stocks were low, there was an interruption of about 4 weeks in the supply of utilities in semiconductor There is relevant to us in Texas, as you know, due to the storm, as a result of which clean rooms were unable to operate. And in addition, as one is not bad enough, there was a fire in the semiconductor factory in Japan of 1 of our suppliers. We and all our partners in the supply chain are making great efforts and taking various measures to reduce the impact of these significant production losses. Obviously, we monitor the situation closely on a 20 fourseven basis, and we are in constant exchanges with the suppliers. In terms of full year sales, it is currently anticipated that lost volumes can be partly recovered by the end of the year.
Based on those assumptions or should I say despite those assumptions, the sales guidance for cars and trucks and buses is unchanged at significantly above prior year. The full year disclosure is I clarified that significantly means here more than 7.5% Or you could call that half sun or fair weather. From a customer demand perspective where we even would see more pull. However, opportunities beyond that level are at risk due to the discussed semiconductor issues. For vans, we increased our sales guidance also to significantly above from slightly before.
Now on the ROTH adjusted to cars and vans based on the strong Q1 development, we now expect 10% to 12% for the full year. For trucks and buses, unchanged at 6% to 7%, confirmed by the good Q1 performance. And I think I made that comment and I make it again. I still see it at the upper end of that range despite the semiconductor issues. For DMO, based on the strong Q1 development, we now expect 14% to 15% for the full year.
On the divisional guidance for adjusted CCR, they stay at the healthy levels we communicated before. So to wrap it up in terms of strategic priorities, Page 28, we outlined them During the full year disclosure in February, I think we are making progress in the right direction. You can see that in Q1, we could increase, I mean, the performance. We focus on profitable growth. We can leverage, I mean, pricing power.
We made significant progress on cost efficiencies. And on that basis, we uplifted, I mean, the guidance as you see here this morning. We want to further accelerate on the technology side. We already made important steps in terms of electrification and digitalization. And I think that has been powerfully demonstrated by the product launches in particular the EQS in April.
By implementing project focus, we aim to unlock for the full potential of 2 strong independent businesses. The plan is to complete the listing of Daimler truck until the end of the year. The truck strategy update will take place on May 20. Invitations will be sent soon. Please note the date.
And we will have the EGM in fall for shareholder approval and another CMD in November. The Q1 showed we deliver on these priorities and we're looking ahead to make our efforts long lasting and sustainable. And by creating the 2 pure play companies, we want to create Mercedes as The world's preeminent luxury and tech car business, leading in electric drive and car software with margins that reflect our luxury ambition. And with Daimler Truck, we want to establish it as the world's largest truck and bus producer and technology leader towards 0 emissions. This being said, now it's really time for Q and A, I would say.
Thanks a lot, Harald. Ladies and gentlemen, you may ask your questions now. A few practical points, please ask your question in English. As a matter of fairness, please limit the amount of questions to a maximum of 2. Now before we start, the operator will explain the procedure.
And the first question is from Arnd Ellinghaus, Bernstein. Your line is
now open. Please go ahead.
Hi, good morning, everyone. My first question is, Harold, on these bathroom disclosure rules. And I wonder what you might do internally. How can you address these rules? How can you potentially improve your financial steering and your guidance in order to deal with these issues because I think we all agree that these constant ad hoc Releases are really terrible for the multiple because it sort of expresses as if the industry doesn't know what's going on And that these results are rather externally driven than part of your guidance.
That's my first question. And secondly, you just said your net liquidity leaves you with significant financial flex. Can you be a little bit more specific what strategically you have in mind with respect to the use of excess cash? Thank you.
Yes. Thanks, Arnd. Well, I mean on your first point, I do understand that I mean ad hocs are not Pleasant for anybody neither for you nor for us, but the rules are the rules and we have a very tight interpretation of the Buffen rules. On the other side,
I think we need to
bear reminder that 2020, we had significant volatility with COVID. 2021. We have the volatility on the semiconductor. And I think we are on a Major journey in terms of cost adjustment and strategic reorientation. I mean, therefore, I mean, we have some volatility.
Definitely, it's my interest, I mean, to make that more sustainable. I would say somehow if you follow Q3, Q4 and Q1 in terms of underlying performance that's what you see and it's maybe better I mean to have an upside opportunity rather than a downside. On your second question in terms of liquidity, I think when we're focused on right now is really number 1 to continue the journey in terms of cash flow focus or cash flow culture, we call it internally. There's a campaign ongoing, which is Call to mean we are CFO, doesn't mean that we have 300,000 CFOs, but it means that we want each and every employee to be cash flow oriented. And I really see good progress in this direction.
That's what you can see also with the Q1 cash flow, I would say. Then comes certainly an important mark with the project focus where we want to equip both entities with a very solid net Cash position, we'll talk about that a minute later obviously when it comes to the spin off agreements. And with all of the transformation ahead, Definitely, I think it's good to be equipped with that solid, I mean, net cash position. Even if you could argue From a pure metric point of view that maybe there is 1 or the other, I mean, excess cash sitting in there. But at this stage, I think it's good to have that firepower.
All right. Thank you.
And the next question is from Timur Khosla, Deutsche Bank. Your line
is now open. Please go ahead.
Good morning, Harold and Stefan. Thanks for taking my questions. It's Tim from Deutsche Bank. I'd also have 2, please. And the first one is, Harold, the 2 of us discussed about this multiple Sometimes you understand the dynamics better than anyone.
The capital market always plays the delta of expectations, good returns, great expectations of better ones going forward. So you delivered on promises. You have some interesting catalysts like the spin off ahead. But the big question that we currently get from investors is, is this the peak? Can margins really only go down from here?
What do you say to that? And then secondly, pricing is a key reason why your margins are where they are right now. It's very strong for everyone currently, even mass market players like Renault yesterday points to that. It's true for new and used cars. I appreciate this is very difficult, but any help here would really be much appreciated by us.
Can you help us understand the dynamics around pricing? How much of this is really driven by increased demand for individual mobility? How much is artificially tightened supply because of the semi shortage? How much is your own implementation of a different steering system now. How much is the EV push?
Any help here would be much appreciated. Thank you.
Yes. Thanks, Tim. Let me start with the second one as maybe that answers also to some extent the first one. There are 2 elements in it, I would say. The one is, yes, I mean, it's happening across the market.
I mean, as you just outlined before, it's not something which is mainly unique to us. We see it among several players, I mean, in the market. And I mean, after the Q2 shock of COVID, yes, it seems that there is demand going into passenger cars, in particular at the higher end in the premium and the luxury space. I mean that's clearly what we can see. And all Together, I think, I mean, the whole community, the whole industry reacted in a responsible fashion, which means it Seems not the dumping, I mean, the market was material, but adjusting quickly the supply to the demand.
And I would say that somehow explains what we could see throughout the second half of twenty twenty and again in Q1 2021. But I really would like to emphasize that beyond that, we changed course, we changed strategy at our end. As we outlined last year during the strategy update, where we want to focus more on premium, on luxury, but also on profitable growth. And yes, it means that we are not pushing like mad for volumes. And that has a healthy impact.
That is a healthy impact on the pricing on the new vehicles. So it has a very healthy impact on the residual values And it had very healthy impact also on the level of used vehicles, I mean, in the stock. So that is definitely what I can say for us what we changed. And how do we do that? I mean, I cannot just give you all of The recipe here and the details here obviously, but that means a very, very detailed The margin steering in the various markets, in the various products, where we decide, where we push ahead and where we rather go on the brake Oh, where we stop?
In terms of the margin, your first question is at a margin peak. Well, I mean, the margin of 14% at Cars and Vans certainly in the Q1 is, I think, is reasonable. Ben, as you can see with the full year guidance, I mean, that's where we see it. I mean, as of today, including the uncertainties on the semiconductor issue. And I would say, I mean, a margin of 10% to 12% in Yes.
What did we say before in a fair or half sunny environment, I mean, is really good to have. We know on the other side that there is still dilution to come from a step up in the share of electric vehicles. But definitely, definitely I think we're starting from a higher base into the journey than we thought a year or 2 years ago, definitely. And maybe we start from a higher base as well than we anticipated in summer or in fall 2020. So I think that's a good starting position.
Thank you. Do you think the industry as a whole will remain price disciplined as soon as the semi shortage is solved?
That's definitely our intention, but I think it would not be appropriate to say more on this call.
Okay. Thank you very much.
The next question is from Patrick Como, UBS. Your line is
now open. Please go ahead.
Hi, good morning, Halal and Stefan. It's Patrick from UBS here. Two questions also from my side. The first one On investments and cash flow, you highlighted your focus on cash generation, the We Are CFO campaign. And the results you've delivered so far are clearly speaking for themselves.
I'm just wondering, there are some Players in the market that are now accelerating investment in some areas. You have some players that are going more vertically We integrated into battery cell manufacturing also because battery cells seem to be tight for years. There is talk about a higher vertical Also in semiconductor chains, for example, you see some car companies almost acting like venture capitalists and future tech areas. And the market seems to reward that as well. Growth seems to be more relevant than it was for OEMs in the past few years.
And free cash flow in a way seems to get a little bit deemphasized. I'm not saying you should give up your free cash flow focus, but I'm just wondering, was it the tight framework you've given yourselves as far as the investments are concerned and your CapEx budget for the next few years. Is it maybe time to review these CapEx numbers? Do you think you can cut that much elsewhere that you can still stick to these CapEx numbers And do these growth investments that might be necessary to be fully competitive in the future? And the second question It relates to the progression of the chip shortage.
Is it fair to say that Q2 will see a worse Negative production impact in Q1. And do you still think that ability to steer the chips towards the higher margin vehicles And the closure or the short working hours in Rastatt and Praveen suggests that's still the case that you can really Allocate the chips to the high margin products. Do you have that visibility that this will work out also for the remainder of the year? Or might there be some specific chips that we'll be missing, particularly for the higher margin segment as well?
Yes. Thanks, Patrick. I mean, on your first one, I don't think we are compromising on critical investments in terms of for technology change or to enable our strategic objectives to ramp up electric vehicles. Definitely. I mean, we constantly monitor and review that.
And if we would consider Any further, any incremental need, I think, we would do as all in all, I think we're still sitting on a significant level of investment. It's not that we're taking that down to 0. I mean, we said we will take it down by 25% from but from a pretty high level, EUR 15,000,000,000 R and D and CapEx. So still I think that's an impressive number and leaves us, I mean, a lot of Opportunities to invest into the right thing. And probably it's a kind of a balance as I mean, if we see higher need in investments in these areas, I mean, probably It would balance off I.
E. Decrease mean further investment or investment needs on the ICE side. However, I think we should I mean, we look into that carefully and we don't want to jump in too quickly here As we still believe in the industrial strategy, which we outlined, which means to your point on battery, We want to be deep in technology and research here. That was also the point I made in the intro on the campus to be established here in Stuttgart, where we're just sitting in on the Turkiye. But we don't want to go deep In fuel cell production is that is probably developing and changing quickly.
And our amortization base might not be high enough to justify that level of investment. So, rest assured, we will do the right thing. But To be able to do so, 1st, you need to generate the cash and that's exactly what this campaign, I. E. The cash flow focus is about.
2nd question
on semiconductors, I alluded to, I think in the guidance section that Q2 will probably be further impacted as the events in the Q1, Texas and Japan It will impact the main production and then sales, I mean, in the second quarter. Then we do expect Some recovery, I mean, with the in the 3rd and the 4th quarter. Why? As at least, I mean, in Texas, but also in Japan, we do assume that capacity will come back and that the allocation will come back. The city will come back and that the allocation will be done in a fair manner in line with Commitments.
Yes, we allocated in favor of the higher end products and will continue to do so. However, it I had some impact there as well and I cannot exclude, but it will impact in the Q2 and for the remainder of the year. And all of these elements also back to Tim's question before are factored in into this guidance of 10% to 12% therefore.
Many thanks, Howard.
The next question is from Jose Asumendi, JPMorgan. Your line
is now open. Please go ahead.
Good morning, Harald, Stefan. Thank you very much, Jose, JPMorgan. First, congratulations On the results. I think it's I'm sure it hasn't been a walk in the park to get here. And there's always more to deliver, I'm sure.
But It's also good to reflect on what you have achieved. A couple of questions. In terms of the Fixed cost reduction plans that you outlined already about more than a year ago, as we think about the auto and the truck division, I believe you wanted to achieve about 20% fixed cost reduction on auto. There was probably about 5% to deliver in 2021. Can you give us an update on where do you stand in this category?
And similar also to trucks, how far have you What have you achieved so far? And a little bit what can be done again in the coming quarters without obviously going too much into the May event? And second question, with regards to China, can you talk a little bit about how the second quarter Mercedes Benz cars momentum is trending versus Q1. Are you seeing stable Sequentially or maybe small deceleration or acceleration with that regard. And also if you could comment a bit on the truck side in China, you localized, I believe, your truck for the Chinese drug market, which I think would be, I believe, a game changer in the longer run.
So where do you stand on that product launch? Thank you.
Thanks, Jose. Yes, it's not a walk in the park. Thanks for your comment in this respect. On the fixed cost in 2020, I think we said that we came down on cars and vans. On Karls, I think it was about 15% from the top of my head, which we disclosed in February.
So a large chunk. We also do know that I mean some part of that in 2020 was helped and supported by short term working and short term measures. So definitely, the challenge in 2021 to keep that level of 2020 Means it's not a walk in the park as you need to replenish them in this 2020 measures by sustainable ones. What you see on the cars and the van side, I would say in the Q1, we were able to do so, in particular on marketing and sales expenses, But also fixed cost, I mean, in the production field and also in the classical, I mean, overhead areas. Well, there's a huge number of measures and sets, so that would definitely exceed that call here.
But It ranges mean from efficiency, more digitalization, automation, but also up to the point, I mean, that we're just Doing things at a less granular level and a bit more focused. I look at my colleagues on the controlling and the reporting side, Shortening the forecast cycle, maybe hitting more level of granularity as Arnd pointed out at the beginning. I mean, little stuff and bigger stuff. And I feel comfortable that we are able to continue that journey also in the quarters to come. Maybe on the truck side, we couldn't see exactly that momentum in the Q1.
In the Q4 2020, however, I think we could really see a good momentum and I'm sure that in the remainder of the year, we'll see that coming through as well on the truck side. On your China question, It's just great. The Q2 keeps going, keeps going, keeps going. It's really, I think, an issue of availability of the vehicles Could do probably even more, but here we're hitting I mean the limits of the semi issue, the chip issue As we debated before, and you can see in the full year guidance, so we uplift China from significant to no from slide to significant. On the basis of ready made a very high 2020 starting point.
So all great here. And in terms of, I mean, the product side, yes, I think you're right. The localization of the actors, I mean, in China Should give us a great opportunity in the future. As that is definitely mean our market potential where we should capture more And therefore that was an important
step. Thank you very much. Thank you, Harald.
The next question is from Horst Schneider, Bank of America. Your line is now open. Please go ahead.
Yes. Thank you for taking also my question. Good morning, Harald. It's Hojbjerg from Bank of America. I have got One main question left, the other one has been partially already answered by you on Daimler Trucks.
But first of all, on restructuring, What strikes me is that you continue to book fairly high charges. So I know it's always difficult for you to talk about this Personal cost saving issue, but maybe can you tell us what level of savings you would expect this year, but then also the year thereafter. Just provide an update on this personal cost savings and then also how many more charges You plan to book in the next few quarters and when should we expect these payouts to happen? And also maybe you can provide a little bit of split and I mean how that's going to be booked or these savings, how they materialize by division. Then on Daimler Trucks again, what I'm surprised about looking at this strong level of order intake That you have not raised the guidance for Daimler Trucks because you said at the full year 2020 call already that the guidance is rather cautious.
Just want to know how I should think about that. Maybe you just want to keep your ammunition for the CMD, I would understand that. But maybe you can just reiterate if the guidance is still cautious or not on Daimler Trucks. Thank you.
Thanks Horst. So on the restructuring, well, Yes. I mean, let me share your view. It's a difficult decision, I mean, to sign, I mean, pretty high checks per employee. But I mean, a large chunk of the overhead, the white color Reduction in the indirect area, we were doing ministating in Germany.
And I think you know the rules of the game. So you have a certain set of levers at hand when we are not in the U. S. Or not in the UK, in other parts of the world. So it is expensive.
But we have determined that we want to improve the underlying performance of the company. And therefore, I mean, we have to swallow that pill. There is a clear trade off. There is a clear breakeven. There is a clear Payback of that, I mean, otherwise we would not do that.
However, it tells us something. It would be definitely Stupid to do that if we would ramp up fixed cost and people again in a year or 2 from now. So by spending that amount of money, we have to keep the fixed cost low, reduce it even further with these measures, Making use of the other levers in particular, I mean, the attrition. However, maybe to give you a bit of comfort, the program will continue, But you could see somehow, I mean, a high amount in the Q1 as the S called turbocharger ended by the end of March. And that made, I mean, a couple of people may sign up to these agreements.
So I don't expect the same pace in terms of signing up in the remainder of the year as we could see in the Q1. But again, we are committed to take the fixed costs down. Therefore, we invest into that. Key thing, we have to keep therefore the fixed costs on a sustainable low basis, otherwise we would do stupid things.
Harald, can you say how many people have signed up by now?
I think we're not disclosing that, Zemin then.
No problem.
It's too easy to do the math. On the truck side, yes, well spotted. Well, let's see what the truck management team will say on the 20 May. No, I don't want to Raise expectation. But on the commercial side, I can say very clearly, the demand level is extremely strong in the U.
S, in Europe, also in Asia. But the Key thing is U. S. And Europe. You can see that on the charts.
I mean, with the orders, with the book to bill of 150%, I emphasize. And therefore, yes, I mean, we have the visibility that I mean, we could turn that also into sales. Why do we stay a bit more cautious here on the sales side, I mean, for the years? I mean, it's again, it's the semiconductor issue, where I mean from today's standpoint, it impacts main trucks as well. The impact in the Q1 was mainly more remote, but definitely we see the impact for the trucks in the remainder year as well.
That's why maybe not all of the commercial opportunities can be materialized, and that's why we stick with the guidance here. But as I said, we see it at the higher end.
All right. Thank you.
And the final question for today is from Dorothy Creswell, Exane. Your line
is now open. Please go ahead. Hi, there. Thank you for taking my question. I wanted to ask about 2 aspects of the electrification strategy.
So we've recently seen your nearest competitors announce new electrification targets And specifically BEV rather than XEV aspirations. And as you know, others have committed to a complete ICE phase out by a certain date. Should we expect you to adjust your official expectation targets too sometime in the near future? And then could you give us your latest guidance On when you expect to reach the BED profitability tipping point. I think in the past, you said it could be by the end of the decade, But again, others seem to think it could be within 3, 4 years or so.
So I'm wondering where your relative caution comes from. Thank you.
Yes. Thank you for that one. Usually that was the first question in the last meetings. So thanks to raise it as that is definitely I mean our strategic priority. You can see very clearly from the product presentations and now the experience of the vehicles being in the market that we are very serious to go into the direction of BEV and BEV only.
Basically, it started 2 years ago with the announcement of this ambition 2,039. Since then, so much happened in terms of adjusting and switching gears towards the best only journey. Now we have these products. So We have industrial flexibility. You know that the EQS comes off the same line as the S Class here in Stuttgart.
So we can ramp up. We can also ramp up quicker. We are very delighted therefore to see the customer feedback and The endorsement over the last weeks on the EQS. So I think Now is a really, really interesting juncture where we might see an acceleration. I'm not sure it makes a lot Sense mean to go for the headline in terms of when do you stop the last ICE engine in the valley.
What matters is to have the great products at hand. That's what we're doing. More to come in terms of the products. And also, we're getting ready industrially to raise a bar. So stay tuned, I mean, on that one.
On the margin side, what you can see, I would say, Yes. With the Q1 results, we have about, I mean, 10% of electric vehicle sales in the total sales number and despite that have a 14% margin. We have a significant share. I mean, in the full year, we said, I think we go to about 13% on the full year and we give a guidance of 10% to 12%. So I feel much more comfortable today than a year or 2 ago that we can accommodate the step up of the electric vehicles Without a too strong margin dilution, are we at parity, margin parity today?
No, we are not. But progressively we're making progress. And I will not disclose what our target is here now, But definitely being at margin parity is not only at the end of the decade, it has to be before.
Thank you so much.
So ladies and gentlemen, thank you very much for your questions and for being with us today. And also thank you, Harald, a lot for your answers. Now Investor Relations remains at your disposal to answer any further questions you might have. To all of you, have a great morning, great afternoon or a great evening, and we look forward to talking to you soon. Thanks and good