Good morning, ladies and gentlemen. I warmly welcome you from the Karl Benz Arena in Stuttgart to the Annual Results Conference 2020 of Daimler. My name is Stefan Hofmann and I'm Head of Investor Relations. Due to the COVID-nineteen pandemic, this year is different than usual. We had to do without the traditional get together on the evening before with you and our Board members as well as the usual physical conferences with analysts and investors as well as media representatives here in Stuttgart.
Good morning also from my side. A warm welcome to our video stream from the Annual Results Conference 2020. My name is Jorg Hoven. I'm Head of Global Communications at Daimler AG. As Daimler AG, we are presenting our business results for the first time Jointly to you, ladies and gentlemen, the press as well as the analysts and investors.
We want to provide you with the key figures of the past financial year, Our outlook for the current year and the strategic plans at Daimler. After the presentation, I will host a short deep dive regarding some important topics with our 3 executives. In total, our presentations will take about an hour And will be broadcasted live via video webcast on the Internet. You can follow our stream with simultaneous translation into German and Chinese.
Of course, our executives will be available for your questions. Therefore, there are 2 consecutive conference calls, one for analysts and investors from 10:15 a. M. To 11:15 a. M.
Moreover, We have one call for media representatives from 11:30 a. M. To 12:30 p. M. Both conference calls will be webcasted on the Internet and will be available on daimler.com.
The Annual Results Conference ends after the conference calls approximately at 12:30. You can follow the whole event in one stream. For an active participation in the conference call for analysts and investors, You already received your dial in data. Participants of the media conference call received their personalized access data With the confirmation of the registration by e mail beforehand. And now I would like to welcome our speakers, Ola Kallenius, our CEO Harald Wilhelm, our CFO and Martin Daum, our Head of Trucks And Chairman of the Board of Management of Truck AG.
Now, Ola, as soon as you are ready, the stage is yours.
Thank you, Jorg. Thank you, Stefan, and again, welcome, everybody. The year 2020, I believe was a stress test for almost every company in almost every industry. And I would like to start this results conference by thanking the Daimler team around the world. You helped us master this Stress test, very well.
Again, thank you. I think we have learned to work differently in 2020. And even though we all hope to return to some kind of normality soon, there are some things that we have learned that we want to take with us into this exciting future. And it's about agility and flexibility, speed of decision making which was something that was highlighted during the year 2020. If we look at Daimler, what are the main things that we achieved when we look back at last year?
We gained some significant traction in terms of improving our financial results, especially in the second half of the year and Harald will go into more detail about this. We stepped up our efforts in terms of restructuring and doubling down on cost efficiencies. But we also used the time Of this, let's say, managing through a pandemic to think about our strategy, refocus our strategy, Underline where the strengths of this company lies and we're certain that we're going to exploit these strengths going into the future. We also made at the beginning of this year a very big decision. We are proposing to our shareholders that we should Divide Daimler into 2 strong individual industrial businesses, a leader in luxury passenger cars and a global champion in trucks and buses.
And of course, with the momentum that we gained in the second half of twenty twenty, We're looking forward to this year, 2021, and hope as the economy gradually opens up that we will gain momentum. If you look at the headline figures and we will get into the detail here in a second, I think there are 2 things that stand out. On the one hand, due to the pandemic, sales went down And of course accordingly revenues went down too. But what really stands out is the result of Disciplined cash management. So you can see that we were able in adverse conditions to improve our free cash flow And we'll explain to you the components of that in this presentation.
And that has led to a very strong net industrial liquidity position At the end of 2020 of around €18,000,000,000 If we now go in and look at this From a divisional point of view, let's start with Mercedes Benz. What happened in the year of luxury cars? Well, again, we underlined Mercedes Benz is the leading luxury car brand. And We intend to build on this strength going into the future, especially with regard to electrification. We almost tripled our XCV sales.
We met the very stringent CO2 targets in Europe and I think this is a good proof point towards Our move in the direction of 0 emission driving. With ambition 2,039 we have made a clear commitment To a CO2 neutral future for Mercedes Benz. As I said, we refocused our strategy, Looked at what the USP of Mercedes Benz is, looked at where we can play and where we can play to our strengths And in transformation made a very, very clear commitment to be a leading force in terms of electrification and also Car Software. We launched our flagship car, the S Class. Every time we launch a new S Class, this is more than just Another baby in this precious family.
It is an event that all people at Mercedes is proud of. And if you look at the technical marvel of the new S Class, especially in the dimension of digital experience for the customer, This has wowed customers around the world and our order entry compared to the last S Class that we launched some 7 years ago It's more than 30% above the level that we had back then. And we have successfully Implemented measures not only to improve cost efficiencies but also to do restructuring. Made some tough decisions in 2020 to Adjust the footprint of our production network and are well underway on a longer journey To lower the breakeven of this company and make the fixed cost structure in particular even more competitive and even more robust for swings in the market. If I take a look at this from a market and sales point of view, you can see how the pandemic Hit the world in the first half of this year.
China. China had a remarkable recovery. I mean, this is what I call a true V Shaped recovery. And after the dip in February March, we came back quickly and almost instantly for Mercedes Benz jumped above Last year's level. And we set the record in China in 2020 with more than 770,000 vehicles sold.
In Europe, a little bit different picture. The lockdown had a longer effect and it took us to the second half of the year before we could Recover and get close to around the levels that we had in 2019. And of course, again in Europe, we're experiencing now through this 2nd lockdown, some effects here early in the year that we have to deal with. In the United States, Seesawing a bit, but towards the end also getting back to levels that Resemble 2019 and we started strong in January as well in North America. So we're hopeful That the market momentum as the vaccines get rolled out will pick up momentum throughout this year.
I mentioned the CO2 neutral future. This is a strategic decision for this company. There are no ifs or buts. And the first real test and proof point was to see if we can come from the level we were at in 2019 With the sales footprint that we had in 2020, our target in the NEDC cycle It was 106.6 grams and we came in according to our calculation at 104.3 grams. So we even had some margin.
How were we able to do this? Strong performance of XEVs, battery electric vehicles and very attractive, very sought after Plug in hybrids. So we sold more than 160,000 of those in 2020 and much of that momentum came in the second half of the year. Now as you all know, we're switching to a new method, WLTP for 2021. So even though the target in this new cycle Looks higher with 125.
The challenge is just as big in 2021 as it is as it was in 2020. But we are committed And we have this as a clear target to meet this in 2021 as well and of course beyond. And how are we going to do that? Well, we're going to build on the momentum of our XEVs, the battery electric vehicles, the plug in hybrids and we could perhaps maybe even double the sales as a share of overall sales in this coming year. Our Van Division, The premium van in the commercial vehicle world.
Last year when we met around this time, We were looking at figures for the Van Division that were not living up to the expectation or the ambition that we have. Well, I can say this now, our van division is back. And I also want to thank the van team for a very strong turnaround during these last 12 to 18 months. We are the market leader in premium vans and we have the industry's richest mix. That is also A little bit similar to on the passenger car side, the play that we're going for on vans.
So we could pick up in terms of our sales performance. Europe is our most important market. So in spite of Europe taking to the second half to get back, I think we were even a little bit ahead of our most relevant competitors. We also took the same tough cost measures in the van divisions as on the car side And it's starting to pay off. In terms of electrification, we now soon have the complete range of vans From large to small electrified.
Next year we will launch the electric Citan and then literally Every van segment will be electrified. This 1st generation has been received well in the market, but the 2nd generation is only a couple of years away. So we're going to pick up pace in terms of XEVs vans also and we have already set off the concept work For the 3rd generation, stay tuned. Maybe electrification will come to Vans quicker than some people think, and we're quite excited about this. In terms of the financial numbers, and I'm going to let Harald dig into the details.
For Mercedes Benz cars, It's very similar to the picture that we looked at for Daimler as a whole. Of course, due to COVID, sales down and revenues down, but a strong Cash flow performance. Harald, why don't you take us through and give us some more details on those numbers?
Thank you, Ola. Well, I mean, let's have a look at the profit walk from 2019 to 2020 on the EBIT adjusted, I. E. The underlying performance. How did we get to SEK 6,800,000,000 of EBIT adjusted?
Well, I mean, the most material headwind obviously were the lower unit sales In 2020, that was a key negative. And the market recovery in the second half could finally not offset what we lost In H1 sales. Despite that, I mean, we got to 6.9% return on sales adjusted. I mean, how could we get there? Strong pricing, good residual values, a strong product mix, In particular, at the higher end of our segments.
We faced a bit of a headwind from the FX On the dollar, but also on the Turkish lira. But then really we worked on our efficiencies all across. Yes, we were helped. We were supported By the short term working, I mean, benefit, but we went far beyond that. In the industrial performance, We went on the operations side.
We reduced the fixed cost over there. We improved the efficiency. We worked on the material cost. And then you see that in the chart at €300,000,000 of the industrial performance improvement, You could say, I mean that's a rather slow number, but bear in mind please that there is a significantly higher level of amortization and depreciation sitting in there Which has been by far overcompensated. And then the big move, yes, was in SG and A, so in a classical conventional Fixed cost area with a strong impact mainly on selling, on marketing expenses, but it went all across.
It also includes, I mean, the benefit which we disclosed earlier in the year from some adjustments from healthcare in the U. S, I also mean a favorable impact. On the R and D side, also we could adjust, I mean, the R and D, However, without jeopardizing the investments into the future, despite the capitalization rate being lower in 2020 compared to 20 2019. In the Others, you have a bit of a benefit from a capital gain from the new shareholder arrangements in the Hill Group. I also like to emphasize what Ola said before, the recovery of the van, which sits here in the segment.
You don't see it, But with a very nice financial performance in the year 2020. If we look on the adjustments on the right hand side of the chart, All in all, SEK 1,600,000,000. Basically the key one is about SEK 900,000,000 from the streamlining of our production network, The divestment of Hamburg and the others, which we talked about already earlier, I mean, in 2020. And then all in all, around 600,000,000 for the Personal Cost Restructuring Program in 2020. Now let's have a look at the cash flow side.
Apologies. No, we're not yet on the cash flow. I wanted to come back To what we promised to you in the Mercedes Benz strategy update on the 6th October, as we promised you quite a lot For 2025, where we want to go in terms of savings, in terms of investments, you see the numbers as a reminder on the right hand side of the chart. So where did we get to in 2020? Well, you see some indicators of change here.
The headcount came down by 4% For Mercedes Benz, we adjusted, I mean, the fixed cost across all the areas by 14%. We took the CapEx and the R and D down. We said we would do more on the CapEx and less on the R and D. I think that's what you can see from the numbers as well. So yes, I think we work hard on these targets on 2020 and we stay fully committed To deliver them on 2025 and if we can, for sure, earlier.
Now I come to the cash flow. How did we turn that profitability into cash? Well, at a pretty decent cash Conversion rate, I mean above 1, 1.2 actually. So we worked a lot on the cost. We worked a lot on the cash preservation measures.
But you also see a favorable impact from working capital management, stricter working capital management. Inventory in particular was helpful in this respect For the new car segment, but also for the used car segment. And please bear in mind as well, on the new cars, I mean, with the volume coming down, you could say mechanically, yes, it has to come down. But at the same time, we had to cater for A ramp up in the inventory for that beautiful product, I. E.
The mix in the inventory, in the euro inventory, Had some headwind from the mix to get ready for the ramp up of the fantastic S Class in 2021. We also had favorable impact from receivables. The other key element in the walk, however, is on the investment. Here we reduced the level of investment by about more than NOK 2,000,000,000 compared to 2019. At the same time, the depreciation came up a bit.
But all in all, it means that investments and depreciations are now much more in balance. And obviously that translates into improvement of the cash flow. In the other bucket, Basically, you see an excess of dividend cashed in from BBAC over the at equity result And the non cash impact from the restructuring provision is, I mean, that is yet to be cashed out, I mean, in the future. So all in all, that leaves us, I think, with a pretty decent cash generation in 2020 And a good foundation for 2021. With this, I'll hand over to you, Martin.
Thank you, Harald. And we move over to the exciting world of heavy trucks. We are similarly impacted by COVID In 2019, especially in the first half, fortunately, second half was much better. The tide Starting to turn in the Q3, and we ended the year with a good momentum and even better. We ended the year This is backlog that is significantly better than at the end of 2019.
So 2021 has a very promising start, especially in North America where we had in November December Historic order intake months at heights never seen before. 2020 Was first focused on cash preservation, cash management and you'll see and it was a good nice cash flow. On the other side, We exercised cost discipline never seen before with strong focus on restructuring and ongoing success And with good success. But there's one thing that we didn't put the foot off The paddle and that is when it comes to product because product is the key to make our success our customers more successful. So we had one big highlight in the 3rd in the 4th quarter when we launched in North America on the new vocational Western Star Trek That is in that segment now the most modern track fully in our product line with full Scale effects from all the products around the world and still the best vocational truck in the North American market.
We pushed in our initiative to 0 emission vehicles, sold more of the electric vehicles than every other Truck OEM have more trucks on the road logging in every day, miles giving us great Experience to improve our products even better with more launches of more variants of our electric products coming In 2021, in parallel, we started with full force on the fuel cell development and fuel cell series Production Development, where we are going to close pretty soon our partnership with Volvo and then having pretty soon trucks With fuel cells on the road as well. We accelerated our automated driving through our 2 partners, The one with Waymo where we joined our forces to develop a redundant chassis and on the other side with our own subsidiary, Torq Robotics in Virginia, Very well on the softer package that makes those trucks able to run driverless on the highway, and we are here starting our On road testing this right this very moment. When you look at sales numbers, You see the Q2 where we basically shut down all our factories in April May last year for about 8 weeks and the Impact it had on the sales figures and it took us until the end of the year to ramp that up.
The result was in Europe a decrease of 20% Of our sales volumes in North America, a decrease of 30% of our sales volumes. In Japan, just 14%, but then Indonesia, which for us, it's a big market and we have 50% market share in that market. So we had a drop of 50% of our dales in this important Market in India of 35% and that hit us hard. But as I said before, the momentum going into the next year is rather strong. On the results side, that resulted in a 27% sales decline and our revenue Decreased by about 22%.
On top of everything, aftermarket got pretty difficult because if trucks are not running, Then the aftermarket business is definitely distalling as well. As I said, second half, completely different picture, Good rebound and that helped us after a loss situation at half year point to end up not with a solid but Actually, there's a good momentum going forward into 2021. Cash flow conversion, very important for us, And it shows that we have a strong and solid business is far higher, so we were able to nearly end on the same cash flow level than the year before. When we look at the detailed walk of our EBIT from 2019 to 2020, you see, first of all, that we lost More through sales and market, than we gained in the entire year before. We had a slight negative what we call here industrial performance.
That has basically three reasons. On the one side, We put some money into our warranty reserves to have really here very good reserved for the future. We have secondly had in the second quarter some Covered production costs when we ramped down our factories around the world. And then now with the ramp up, we live with a very, very strict Health protocol, which is in the drug manufacturing plants, not that easy and it gives us some inefficiencies which hold into that number as well. What helped us to come out with a strong EBIT result, especially in the second half, was a strict cost discipline throughout the entire year, 1st and second half, that were all area sales on the production, Everyone was participating, so we ended up with a $678,000,000 EBIT and 2% return on sales.
We spent about $150,000,000 for restructuring costs in Europe and it's a good sign for our performance in the years To come because it helps us to save future costs. When you look at the walk from the EBIT to the cash flow, on the one side, we had A record low in working capital, great management on inventories, whether it's new or used trucks, whether it's receivables or payables, Very, very good job from everyone around the world. We have we invested wisely And could everything finance with our depreciation and then the provisions helped us to bump up the cash flow to 2,500,000,000 So much in a nutshell from the tax side. Back to you, Harald, about DMO.
Thank you very much, Martin. Well, so let's have a look at Daimler Mobility. I mean, obviously, COVID-nineteen impacted Daimler Mobility, I mean, a lot On the existing portfolio and the priority definitely was to help our customers through that very difficult period In 2020, and we'll continue to do so for sure with swift and flexible financing solutions. And we're definitely convinced that that will pay back in terms of customer loyalty and retention. 2nd one, obviously, to continue to support, I mean, cars and trucks for new sales.
So again, Every second vehicle being delivered got supported by smart financing and leasing. The same time, we continued, I mean, the full effort to digitalize I mean, the business on the customer front, on online services, Up to credit decisions, I. E. Automating creditor decisions. And COVID as well made it, that we went even stronger on the brake In terms of cost discipline and cost saving measures, that means the OpEx developed very favorable.
And that means that even in a year of COVID-nineteen, the cost income ratio improved further at Daimler Mobility. The macroeconomic circumstances made it that we had to adjust our credit risk provision in the first half. However, we could flatten that out in the second half, in particular in quarter 4. So if we look at, I mean, the key KPIs, Well, the new business, I mean, came down by 9% towards the year end. However, it stabilized again.
The total contract volume, the portfolio decreased by 8% to €150,000,000,000 Of which basically the volume adjustment is 3%, the remainder is FX. And on the EBIT side, EBIT decreased. EBIT adjusted decreased by SEK 1,600,000,000 to 10.9% return on Let's have a look at that walk and how we got there. Well, the key impact, I mean, as we can see on the chart, Comes from the higher credit risk provision. It's a credit risk provision, as you know.
That means we have to cater for the potential risk related to credit, given the macroeconomic, I mean, volatility In 2020, that happened chiefly in the first half of the year and no further increase was required in quarter 4. I really would like to emphasize that the net credit losses, I. E, the actual net credit losses are still well below the long term average. And then we worked on cost efficiencies. Well, you don't see it completely as in the volume margin.
There is an impairment on software in the context of the streamlining of our IT portfolio. Without that, I mean, that would be in the positive territory. And then overall, you see the beneficial impact from our Cost efforts also at the DMO level, improving the costincome ratio, as I said before. Also, I mean a number in there, which looks a bit tiny, but I think it's a pretty remarkable result. In the other section, SEK 60,000,000 improvement year on year Coming from the mobility services, you know that has been impacted, I mean, severely in 2020 as well.
I mean the guys over there in free now, in share now, charge parking, did also I think a great job, I mean to adjust in terms of market practice As well as on the cost side. A big thanks to them also. Now if We look at the group level in terms of EBIT evolution. Well, I mean, the key things that we explained already before the divisional performance. So the year on year decrease in EBIT adjusted at DMO and Trucks Could not be completely overcompensated by the year on year improvement on the passenger car and the van side.
Other than that, I mean, I would just like to mention the adjustments which we had to record In the full year with SEK 2,000,000,000 definitely significantly lower than 2019. And the key ones are associated to the restructuring Program, the personal cost reduction program, the move program by €900,000,000 and the capacity adjustment at cars and vans as I mentioned before. If we look at the cash flow statement, basically, we saw all of the key explanations, I mean, before. In summary, at the Group level, I mean, we see that from a pretty decent cash from operations. We had a benefit from the working capital.
And that makes, I mean, altogether a good contribution from the cash flow before interest and tax. Then I mean we had cash taxes of SEK 800,000,000, so pretty low level and that made, I mean, SEK 8.3 And on an adjusted basis, EUR 9.2 billion, basically what is in between in the adjustments, Cash out associated to field measures on diesel vehicles. We look at the evolution of the Net industrial liquidity, we started the year, I mean, with SEK 11,000,000,000. You see the strong cash from operations At the Group level, I mean, dollars 2,500,000,000 of favorable working capital evolution, which we commented before. And then overall, I mean the balance between the investments and the depreciation after the dividend of SEK 1,000,000,000 which we paid in July That leaves us with a very, very solid SEK 18,000,000,000 net cash.
I was very pleased to see recently that Stellen and Poor's Revised the outlook on Daimler from negative to stable. I hope others will follow soon. That leaves us again with €18,000,000,000 of net cash balance, and obviously that leaves or gives us a lot of financial flexibility. Now let's have a look at what to do with the net result. I mean, the net result reached SEK 4,000,000,000.
So we looked at the EBIT adjusted before, so down to €4,000,000,000 What is in between? Basically, The tax rate, the effective tax rate, which is a bit higher here at 37%, I mean, in 2020, That is a function of some evaluation allowances on deferred taxes and some expenses which have been non deductible. Moving forward, however, you should continue to apply a group rate, tax group rate between 28% 30%. Looking at the dividend proposal, the management board and the supervisory board proposes To the EAGM, a dividend of €1.35 per share. That is applying our dividend policy Offer 40% on the net income, eligible mean for the Daimler shareholders.
That is obviously supported by the cash flow in 2020. That is supported by the cash flow in 2021. That is supported by our positive business outlook, which you see in this presentation. With this, I hand back to Jola.
Thank you, Harald. Thank you, Martin. Now let's look forward to 2021. What is our task list for this year? And it looks quite simple, racing performance, accelerating technology electrification and software and preparing project focus.
But Let me put this in context. We are fully committed to executing our strategy and at the same time keep up The discipline in terms of cost efficiencies and cost restructurings. If I start with this first thing, raising performance, we could see in the presentations of Harald and Martin, we did a phenomenal job in terms of cash management. Not all of the savings that we were able To realize in 2020 are things that you can repeat in 2021. There was short term working here in Germany.
Travel costs were virtually non existent and some other expenses. If I use an analogy in our personal lives, I certainly spent a lot less money in the last year on getting haircuts. It kind of works, longer hair. My wife hasn't asked for a divorce. So you could argue, why don't they just continue doing that?
But jokes aside, some of these things, Cost will start creeping back up in some areas again as the economy opens up. So what do we need to do? We need to refill that bucket. And this is mainly a message to the people inside the company and in management in particular To stay vigilant and stay disciplined that we keep this path of raising our financial performance Year over year on the path to 2025, the plan that we have put together and presented in the fall. So what are we going to do with the money?
Next, of course, giving our shareholders their expected and fair share through a dividend, we are going to invest in technology. And there are 2 technological areas in our view that will decide who's going to be a winner and who's not In transformation and it's electrification and it is software. And we are Heavily and swiftly ramping up our investments in these areas. I mentioned before 4 battery electric vehicles that we launched this year on the car side. Martin mentioned that the electric Actros is going into production this year to add to the fleet that we already have in the field.
And on the van side, electrification across the board. But also building up software architectures and the new high computing Networks that cars of the future will have will also require a significant amount of investment. So we're putting this money, this cash generation Into good use, preparing ourselves for the future. And of course, next to running the business And making sure that we execute our strategy in a disciplined way. This is the year of project focus.
It is our goal to within this calendar year To get that process concluded and we will go to the shareholders in an extraordinary shareholders meeting Probably at the end of the Q3 and make this proposal in a concrete way and are targeting to execute that transaction for these 2 strong pure play industrial groups by the end of the year. So If that is our task list, Karol, what does that mean in terms of guidance for this year?
Well, continue to save some money. I mean, I tried to do so as well, but it ended up Accident when I tried to cut my hairs myself, so my wife had to help me out on this one. Well, I mean, let's look forward in terms of what does it mean for guidance. Before taking you through it, I mean, in more detail, I'd clearly like to highlight, I mean, the assumption under which we give that guidance. And that definitely refers mean to COVID-nineteen that we assume mean no further, mean no third, Means significant, I mean, lockdown and setbacks from COVID-nineteen throughout the business year 2021.
2nd key assumption in here, We see some impact on the semiconductor situation in the Q1 of 2021. We do target to compensate that, to recover that In the remainder of the year. These are 2, I think, important assumptions we need to do. Globally, if we look at the markets on the chart, we see A significant increase in almost all major car markets and also I mean strong recovery Markets, maybe in the Chinese market segment is only slight increase as we had such a strong 2020. So it's not a sign of weakness, Just the matter of fact that 2020 was already so strong.
Looking at the group KPIs for 2021, Definitely, we expect recovery of the economy having a very favorable positive stimulus on our business And further fueling in the high demand for our fantastic products. That should translate into an increase, a significant increase On the revenue side as well as on the EBIT side at the Group level, we expect, I mean, this is Group EBIT reported to be significantly in excess of 2020, obviously, from operational performance to which we come in a second, But also supported by the envisaged by the plant closing of the fuel cell joint venture which will provide, I mean, a capital gain in 2021. In the second half, I mean, related to The envisaged spin off of the Truck Group, we do expect some significant positive impacts. However, today We cannot determine that. Now on the free cash flow, really I'd like to explain that as when you see free cash flow Significantly below 2021, you might wonder.
So let's go through that. Operationally, in terms of cash flow performance, I. E. The cash flow before interest and to tax adjusted 2021 will be at same level As 2020. 2020, where the cash conversion rate means significantly above 1, 1.2 for cars, 2 for trucks.
In 2021, we will be in our target corridor, which means all in all close to 1. So Cash flow before interest and tax adjusted will be at the same level. However, cash taxes you saw before were pretty low in 2020. And so here we'll be back in higher cash tax zone in 2021, which will take the free cash flow down. And then in the cash flow reported, we will have the payments in the context of the settlement with U.
S. Regulators and the civil law proceedings related to diesel emissions, which we sized at more than SEK 2,000,000,000 When we announced it in the Q3. So I hope that gives you some color on the free cash flow. What does it mean in terms of investments, PPE and R and D? PPE will stay at about, I mean, the same level Like with 2020, R and D will go up slightly.
We will invest into the key strategic fields Ola highlighted MBUS, the NVIDIA Corporation Electric Drive, to prepare for the future. All in all, however, as emphasized before, we will definitely stick to our midterm targets as outlined During the Mercedes Benz Mins strategy update. And on CO2, as Ola highlighted already before, in 2021, We'll be significantly below the comparable figure, now switching over to WLTP as a new norm. And that means that in 2020, that number will sit significantly below 2021 will sit significantly below. And how do we get there?
By almost doubling the number of XEV sales in 2021 over 2020. Looking at the divisional performance targets for 2021. For cars, we see them Significantly above the prior year. That is a function of the market recovering, but also a function of a very, very Strong product portfolio in 2021, again, S Class, EQS coming up, EQA, The full power and portfolio at work. And when I say significantly, I'd like to remind you that that means in So we are what we said in the 6th October in the kind of a, Call it half sun or fair weather conditions in 2021.
We Do assume, as I said, to recover from the semiconductor situation in the remainder of the year. However, it will impact in the Q1. The vans will have a slight increase in the unit sales. On the truck side, we see a significant increase in Thanks to North America, Europe, but also Indonesia. Now if you look at the returns on sales adjusted on cars and vans, We do expect 8% to 10% on an adjusted basis return on sales.
How do we get there? Positive momentum, which I outlined on the volume on the product side with a very favorable mix with a strong pricing and the continuation of our cost and efficiency measures into 2021. We will face on the other side some headwinds On the FX side, on raw materials, we'll have a bit of a step up in the R and D. The almost doubling of the XEV comes along also with a slight main dilution. On the other side, we'll have a bit of a tailwind From the extension of useful lives, as we reviewed how long can we use our equipments and tools, We're now convinced that we can use them longer and that means the depreciation will be lower.
That will support the EBIT In 2021 at the Group level by SEK 800,000,000, the majority of that falling into the Cars and Vans segment. On the cash side, overall at a group level, I explained already before. So what does it mean for the cash flow before interest and tax At Cars and Vans, the target of 0.7 to 0.9, so slightly below 1. Why a bit of working capital as we are ramping up, I mean, significantly as outlined before, and this depreciation impact obviously is non cash. On the trucks and buses, we expect 6% to 7% return on sales adjusted.
A significant volume booster will help. Stronger mix from the heavy duty segment in North America and in Europe. We'll continue our efficiency measures. On the other side, we have a bit of FX headwind also over here. So when we say 6% to 7%, That reflects, I mean, the overall balance of risk and opportunities.
And Martin, I think we can say maybe we see it rather at the higher end In terms of this guidance range then at the lower end. Good continued discipline also on the cash conversion side in trucks, 0.8 To 1, that ramp up obviously requires also a bit of working capital and a bit of a step up in the invest. And at the DMO, we target 12% to 13% return on equity adjusted. Here we do assume some continued impact from the COVID-nineteen situation in terms of the macroeconomics. Hence, on the cost of credit risk, something we're going to watch certainly throughout 2021.
So far from my side and with this back to Jola.
So to wrap this up, 2021 will be a year of technology. You can see on this picture the hyperscreen, which is the basis for our next generation MBUX and software architecture. You will see more of that when we show later this spring the EQS flagship of our electric range. And as I said, on the commercial vehicle side, same thing, electrification, the path towards 0 emission trucking It's picking up pace and on the bus side, we're already in our 2nd generation. And of course, as I mentioned, project focus, We will have 2 strong champions in their respective business here in Stuttgart by the end of the year and we're looking forward to That new and exciting future.
And that concludes our presentation today. We'll take some questions, I believe, From Jag. And then as we mentioned at the beginning of this presentation, we're looking forward to taking your questions in 2 calls following this presentation.
Thank you, Ola. Thank you, Harald, and thank you, Martin, for your presentations. To everyone who is watching us online, we will have ample time for your questions in the scheduled conference calls. But before we start with that, I would first like to ask my colleagues some of the questions that are in my mind and I think most of the journalists and analysts as well. So Harald, you have been talking about improving the financial situation and the results are really much better than expected.
How did you do that? I mean, it's unbelievable to my mind in a way.
No, it's not magic. I think it's teamwork and team sport, Which we did in 2020 altogether. And really, I mean, I also like to thank everybody, I mean, who contributed strongly to it. Well, I mean, how could we get there? I mean, markets recovered better than expected.
I think Sitting there in March April, Paul, we did not expect such a strong finish of the year in terms of the markets. A really strong demand, I mean, for our fantastic Products. And we're just moving on into the sweet spot in 2021 and moving forward. But already 2020, we see The booster from the product substance that translates also in the market in terms of pricing and mix Benefit. And here I also like to come back to the strategy update on the 6th October, the Pillar 2, which is profitable growth.
I think the matter of fact, I mean, we saw the markets favorably, but we didn't have to push like mad to get to these numbers. And that was healthy. That was healthy in terms of pricing. That was healthy in terms of the mix. And that was in particular healthy also on residual values, on inventories Used as well as new cars.
So obviously on the cost side, we went on the brake. We try, I think, to impulse also a change in terms of culture, more cash culture in the company. And all in all, yes, with a bit of luck, all of these elements came pretty well together in the last quarter, Which made us, I think, exceed the numbers the market had in mind and we issued as a guidance earlier.
Okay. Ola, there has been a lot of talk about the semiconductor shortage. Could this affect our production planning right now or are we in line?
Well, that's certainly a curveball that has been thrown at us here at the beginning of this year. And this momentum that we have on the product side and on the demand side, It feels a little bit frustrating to be restrained now by a shortage when you really could unleash the full force of this very attractive product portfolio. So in Q1, we're looking at day to day management and it's still not 100% Clear situation. But as Harald said, we made the assumption that come Q2 and throughout the year that we will be able to recover from this. I want to highlight one thing though to make it absolutely clear.
When we made our plan for 2021 and we actually give our forecast quite a bit in advance, Sometimes more than 6 months in advance or 9 months in advance. So back in Q2 of 2020, we at Mercedes, we at Daimler, we did order and We have a quite bullish view on what we thought the 2021 market would be. Unfortunately, that was not Translated on all the levels of that supply chain and we will optimize that for the future. Needless to say, in the decades leading up to this, we've been able to rely on it. We could not do that this time and it was not until just shortly before New Year's Eve that some of our suppliers Gave us the message that we have to live with shortages in the Q1, but we're dealing with it and we have a strong and flexible production team That is making the best out of a difficult situation.
Let's talk a little bit about Project Focus. There has been a lot of talk for 15 years, I believe, About spinning off the trucks. Why do you do it now? Why do you want to split the company?
The transformation of the Automotive industry is picking up pace. We're really seeing a full force transformation of our business. I would call it a disruption and the industry will not look the same in 10 years from now. This is a time when agility and speed and decision making is Even more important than it's been in the past. And with project focus, with these 2 strong industrial groups, we want to unleash 3 things: Full customer focus and dedication for businesses that have truly different customer groups.
Entrepreneurship, speed in decision making, removing the 2 tier governance that we have in our current Group set up And last but not least, value crystallization and also the opportunity for value creation. We think that there is more potential in this stock Eventually in both stocks. And we're eager to take on the challenge to see if we can unlock more value for our shareholders.
So let's turn to the Trux Martin. You have started the eAcros series production. And at the same time, you're working full On fuel sales, which technology will be more important for the trucks in the future?
I mean, both are important. Both power, 0 emission electric truck, the formula I would say, there are formulas is lighter the load, As shorter the distance, and as more plannable the route, as more the electric Track has its advantages. If you go further, if you go heavier, and if you don't know where you end your trip then you start, let's say, in Stockholm and go to Barcelona and you don't know whether your next load leads you to a Myland or London. In that such a case, Fuel cell is a far better source for power. The benefit of electric is that you can have it in small scale on one place.
It's easier to build up a solo infrastructure. The biggest challenge on the fuel cell will be to have a European wide Green H2 Infrastructure. That's, in my opinion, the biggest obstacle for the final breakthrough for the fuel cell.
COVID-nineteen hit buses and coaches as well public transport as well. How do you see the current situation for buses? And do you have a positive outlook in the near future?
Yes. And thanks for asking because that's When I gave the general positive outlook on the truck side that came a little bit under the radar, you're absolutely right. We have one area in our business, That's a coach business in Europe done in our factory in which we closed in October and haven't opened yet Until now, no orders, no order backlog. Why? Because this market has hit them the hardest.
I would say worse than for our own factories, our customers there. Yeah, because their business is completely gone because going with the coach bus has to do with events, has to do with people getting together And having fun and going places. And we all know this is at the moment in Europe impossible. My strong belief is the very moment We all got vaccinated. We lift the travel bans.
The Europeans love to go as one half will go to the hairdressers to get their hair cut and everyone else Jumps in a bus and go places. And then we'll we open up the Neurom factory again. And we're the market leader for coach buses in Europe and our business, Belsour. And we have We are in for the long run and we will go through and my heart goes with our customers and with our people in those factories who are on short term At the moment, it's not an easy situation, therefore, but we stay behind our customers and behind our workers and behind our product.
Harald, how do you see the situation with Daimler Mobility after COVID-nineteen? Effects were strong, I believe.
Well, I mean the impacts were definitely strong. A significant part of the portfolio had to be restructured to help our customers. What does it mean? Basically extend payments, but then make sure you recoup them and recover them. And I think the team really Proved to be extremely helpful.
However, without taking undue risk on our own balance sheet, I'd emphasize also, I mean, the net credit losses being at still a very low level compared to long term average. And I think that spirit in terms of customer Proximity, at the same time, driving the efficiency further throughout. I mean, DMO is definitely something we'll take Into 2021 and beyond and then into the 2 Daimler Mobility or Mercedes Benz Mobility and Truck Mobility entities in the future. We'll not lose that spirit.
Just another question on Trucks. Martin, there is a restructuring program for Trucks in Europe. Are you making progress?
Yes, absolutely. Trucks Europe was a big contributor to our second half recovery. So I'm really bullish and positive about 2021 and we're doing good progress. But that's with any Restructuring program, you want to avoid any yoyo effect as we know from other areas in life. So we have to keep the discipline, we have To keep the focus on our business and we have to keep nimble, and then I think we'll see very, very good results.
All our final questions. We have seen a massive XUV ramp up and at the same time our margins have improved. So can we see that this goes together?
Well, one thing is for sure. We are absolutely dedicated to a CO2 Free future. So the electrification is going to continue across the board of our portfolio. But it's not yet true that this 1st or in some cases second generation of electric products are at the same margins as is the case for the combustion based products. So there's A lot more work to be done on the variable cost side.
And many things that we're doing in terms of lowering our cost structure Overall, especially the fixed cost is to combat just that. During this crossover period of many years, As we have more and more XEVs that will improve on the margin side, but are not yet there, we need to work on other areas to compensate for that, Release cash flow, invest into the future and when we come to the other end of transformation, not only maintain our strong position, but build upon our strong position. Okay.
Thank you very much, everyone. That ends the first part of our Annual Results Conference. Next up our Q and As. We will start at 10 Just a reminder for journalists who are currently watching, your Q and A will start at 11:30 Central European Time. Thank you very much and see you later.