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Hello everybody, welcome. Hello everybody, welcome to Kempower's Capital Market Day 2023. My name is Paula Savonen, I am the VP of Communications at Kempower and also your host today. This is our very first Capital Markets Day, and we're so happy to see you all here in the studio and also everybody online. I know that we have quite a lot of people following us also on the stream, thank you for joining, and we really wish you enjoy today's presentations. We have Kempower's home management team here with us today presenting our strategy and future plans. I will present to you now our CEO, Tomi Ristimäki. Welcome, Tomi. We have Jussi Vanhanen, our Chief Markets Officer. Hi, Jussi. Tommi Liuska, our Chief Sales Officer. Hi, Tommi.
Hello.
Sanna Otava, Chief Operations Officer. Welcome, Sanna. Jukka Kainulainen, our Chief Financial Officer.
Hello, everyone.
Welcome, Jukka. Juha-Pekka Suomela, our Chief Service Business Officer.
Hi.
Welcome, JP. How we run today's agenda is that we will have short presentations, and after each presentation, we will have a Q&A session. If you're here in the studio, you can just raise your hand and present your question. Do not say anything before we give you the mic because we have almost 100 people on the line, and we want everybody to hear the question. If you're online, you can type the questions in the Q&A box any time during the presentations. We really wish that you take part of to the discussion and challenge us and ask a lot of questions. We will start with Tomi and Jukka on Kempower story and the Q1 financial overview. After that, we have a short Q&A.
We continue with Jussi, surging market and customer demand. Tomi. After surging market and customer demand, we will continue with Jussi on our technology. Straight after Jussi, we continue with Sanna. Jussi and Sanna, they will have a shared Q&A just before the break. Approximately 2:40 P.M., we will have a break of 15 minutes. I hope that you will take some snacks and coffee so that you have a lot of energy for the last two presentations. After the break, we continue with Tomi on North America. The last presentation for today, last but not least, is our updated growth strategy and financial targets presented by Tomi and JP. We really wish you stay with us also online, and now I give the floor to Tomi.
Thanks, Paula, and welcome from my side as well. We go first about a little bit introduction on what Kempower is all about, if everybody doesn't know it, and then also do the figures of Q1. Our vision is to create the world's most desired EV charging solutions for everyone and everywhere. This is actually looking at the globe as one and looking at the green transition because this is affecting us all. Like I said in environmental conference in Stockholm on Tuesday that the CO2 doesn't actually, let's say, mind about the borders, so the globe is together, so we are working towards that. Kempower in brief. What we are all about, looking at also where we have gone, so top player in the Nordic DC charging and gaining market share in the rest of the Europe.
Two production sites in Lahti, Finland. Subsidiaries, couple of new names from last year. We have the Germany, Netherlands, U.K., Sweden, Norway, France, Spain, Italy. Still operational, they were most of. The new one in there is Poland. In the same way, sales office, we have the local tech support for the customers. We are looking at how to work with the local customers around with sales and also technical things. USA is a little bit different because we are actually looking at it as complete site with manufacturing and the whole operations. Kempower has today more than 30,000 shareholders listed in the Nasdaq First North Helsinki. Some reminders also the recognizers of last year being the Finnish Growth Company of the Year 2022 by Kauppalehti and also the Presidential Export Awards, et cetera.
Also nice figure here to look at that, also the group of colleagues at is growing quite fast. We ended up with a head count of 375, and now end of Q1, 465, so almost 100 people more again. It's continuing on the right way. Looking at how we address the market today and how we address it from now on, we talk about the applications, what we are charging. It is also giving our investors, and especially if we're looking at our analyst crowd here, to look at actually comparisons to market studies as well that we look at private car charging, we look at commercial vehicles, then the future market with off-highway machinery and vehicles as well. Some customers today, important to see wide customer reference base.
This is also telling the story that, of course, as a new company, you start with a limited amount of customers. The revenue comes from a limited amount, but it's getting wider. It's getting geographically wider. We have a lot larger base of customers where the revenues are coming from. We have typically there what are our typical customers. There is customer groups we would have, let's say, these public charging operators, so the people who offer electricity for electric vehicle users publicly. We have commercial fleets. Normally it is the fleet owners who own the commercial vehicles who are the main customer group for us in that segment. We work together with the, let's say, equipment and vehicle manufacturers. In certain areas, we will go actually where that is important part.
The rest of the market, what we have and applications is shared by our distribution and installation partners. Looking at the Kempower technology, this is a good picture to look at what we do from the product point of view and our solution point of view, that what we are famous about. It is to look at the electric vehicle charging as a solution that serves many vehicles at the same time. There is a lot of manufacturers still in there, manufacturing chargers, who think the situation is about one vehicle, one charger. We are seeing actually the electric fleets growing. It's moving to different vehicle types. It's very important once the investments are made for the charger, you can serve many cars, many kind of vehicles with the same system.
Especially when you have the grid connections which might be limited on the site, that you can use this limitation the best way and actually distribute the power to all the users. I know that the people, also electric vehicle drivers, sometimes behave badly, and they actually leave the car there plugged in, even the battery is full. If you have a situation, you have one charger, one car, that place is occupied. Nobody can do anything. Especially our customer who wants to sell electricity cannot sell the electricity. A system that can change over time with our dynamic charging can actually serve both our customer who wants to sell the electricity, but also the user gets actually the car charged. When we are looking at how the systems work, it's a very flexible solution.
We can serve many kinds of. If we look at, let's say, when you have more time to charge or you have shorter time to charge, in a similar way, you can do from 25 kilowatt to 400 kilowatt. With actually electric vehicles, power means saving time. It is basically a very flexible system. You can have a system for supermarket, you can be in the highway stations. Actually, it adapts to the needs. You don't need to have many different products to fulfill the market.
Behind everything and combining everything is our Kempower charger system, which is our cloud solution, and we have actually more information on that as well today and look at why it is important in the world and what kind of extra value we are bringing to the customers with our, let's say, intelligent cloud system. Just a recap on where we are concentrating in the market. We focus on DC fast charging, so DC electricity, which means it's the same electricity that the battery gets. We have the left-hand side. We have what you call home charging. This is what you would charge your car maybe in the airport when you have couple of days of time to wait.
This is using the actual charger in the car, this is power limited because of course you cannot fit the big charger in the car or the price would get high. It's getting smaller, we also see that the main application there is personal cars, when you have several hours to charge, that's a perfect way. These are not competing with each other. They are complementary ways of making the infrastructure. Where actually Kempower works is the DC charging, so the faster when you move from hours to minutes, especially when you look at the applications on the bottom, that the heavy vehicles will be mainly DC charge. It's also what we have, if people have read our notices today, that even if you charge a truck overnight, that is typically DC charging.
There is no AC charging in this market. Maybe for short transportation, but a little bit longer, bigger batteries, you need actually more power. This is actually giving then the chargers outside of the vehicle, and it is serving many vehicles with the same investment. This is kind of the idea why you take it out of the car, otherwise you would be increasing the vehicle prices. This is not something that will work. Looking at the Q1 results. Maybe I have to smile a bit. It was a quite good start of the year. The record in revenue in our case, we made more than half of last year's revenues in one quarter, EUR 55.8 million. Order intake is keeping at a good level. We will have some... Jukka will also have comments on that.
There was some questions I'm expecting on that. Looking at the, I think the growth percentage, I think there was some target internally people said that, we need to keep up the double-digit growth. We have never had double-digit growth. We only had the four numbers or three numbers. It will come, but it's still a very good state, and it's showing how the market grows and how people actually value our products and how the demand is going forward. A quite profitable quarter as well. Jukka will tell you more about that. Availability of electronic components, this has been listed all the time as if people asking what is the risk in the industry. It has improved, but I would say we are not in a normal situation. There is still risks in that field.
It will remain the whole supply chain, of course, an important topic for us because in our production rely a lot of supply chain. If it's subcontractors who are making us, we design, somebody manufactures the parts to us, or it's components, it remains that chain must grow at the same pace as we do. This is why we need to focus a lot on this. A nice figure also that we are delivering what we promised on revenue outside of the Nordics is more than the, let's say, Nordics revenue. It's growing all the time as we have been expecting that. Now the biggest part is the, let's say, Europe outside of, outside of the Nordics, which is clearly bigger already than Nordics.
That's a bigger opportunity, and now we are, let's say, more established in that market. Now I give the stage to Jukka to tell you more about the figures.
Thank you, Tomi. I'm Jukka Kainulainen. I'm from Kempower Finance. Like Tomi commented, we really had a excellent quarter, Q1. Really great start of the year. We actually have the highest ever order backlog, EUR 124.4 million, highest ever revenue, close to EUR 56 million, highest ever gross profit, reaching EUR 28 million, also highest ever operating EBIT margin, 12.4%. Then maybe the question, how did we do that? We actually grew in all four geographical regions we operate. Nordics, rest of the Europe, rest of the world, and North America as well. We also successfully scale up our capacity, both production and supply chain, like we commented in our Q1 report today.
We also improve our lead times in the quarter, so we were able to serve our customers better. All these of course reflected on our good sales revenue and profitability performance for the quarter. It was really great start for the year. Let's look little bit more how our revenue has developed since beginning of last year and also in the first quarter of this year. Like I mentioned, so almost EUR 56 million revenue in first quarter, almost 400% growth, so really excellent performance. What was now interesting in this quarter, so actually we made absolute churns most of the revenue in the rest of Europe, so that bypassed the Nordics revenue-wise, even though Nordics was also quite significant, like you see, EUR 21.4 million.
Like Tomi mentioned earlier, also outside Nordics, we generated more than 60% of revenue, so 62% of revenue. We start to take more and more share outside Nordics also in our DC charging business. Let's look little bit more about our sales performance for the quarter. In order intake, we reached EUR 61.4 million. In order backlog, EUR 124.4 million, which was highest ever, like I mentioned earlier. Also when looking order intake, we had to remove one customer order worth of EUR 5 million from our backlog, that related to our customer's financial difficulties. If we exclude that, actually our order intake would have been also highest ever in Kempower history.
Also what was of course impacted in this quarter on top of this order removal, you know, improved lead times. This is also on the short term impacting negatively in the order backlog, which is of course positive from our customers' point of view. We can serve the customers better, like I mentioned earlier. Maybe notable one more thing about our order intake. Our order intake won't develop evenly between the quarters. We have some certain existing customers which do the purchasing in one or two quarters in a year. The development is not even between the quarters also in the future. Little bit more about our gross profit and operating cash flow. Also in the gross profit, we had really good development, so reaching this EUR 28.4 million and 51% of the revenue.
We had really good sales mix in the quarter, which is now visible in the gross profit numbers. Also in operating cash flow, even though, like we have communicated earlier, we are growing, and growth in our business means that it's employing always more networking capital. Even taking that into account, we still reported positive operating cash flow, EUR 2.5 million, for the quarter. About our new outlook. We gave a profit warning last week, positive profit warning, and we raised our profit guidance for this year. Our new guidance, we guide the revenue between EUR 240 million up to EUR 270 million. Earlier guidance, we guided EUR 180 million up to EUR 210 million.
In our new operating EBIT guidance is between 5% up to 10% of EBIT for this year. That was also comparing the previous guidance, which was single-digit operating EBIT. We still want to address for this year that we are entering the North America market, which means that we are recruiting quite many people. We are scaling up the capacity, opening the factory in North America, and that means there will be some extra costs relating that. That is reflected on our profitability this year. At the end, Kempower as a investment. Why to invest on Kempower? Of course, this electrification mega-trend is doing well. You will hear a little bit more today how quickly market is developing, and it's actually growing even bigger comparing how we saw it few years back.
Another thing, what Tomi already mentioned, our customer base already now is quite diversified. It's a global. It's a great platform to build the growth. Our offering, like Tomi showed earlier, we have really this Satellite charging system creating the technological advantage. With the dynamic charging combining with the fact that we can actually serve all the different electric vehicle types, adding on the fact also that we are not only hardware provider, we have also the software, backend, software system ChargEye really in the middle of our offering. This makes us really strong in the existing market. Also adding the fact that our business model, operating model, which is really scalable, flexible, like you see from our past numbers, we have been really quickly scaling our capacity with quite a low CapEx needs actually.
It makes us really a strong company as well. Adding also on that of course we here in the States, everyone has the experience of managing and leading the growth company, and even more importantly, we have a great personnel, really committed, skilled, engaged employees working for Kempower. That makes us really a strong company. One more thing want to address, Kempower is really a green investment. Last year, we got this green equity designation from the Nasdaq. We were second company in Finland getting that. Our business is 100% taxonomy alignment, which means that our business really contribute on the climate change mitigation. Thank you. That was from my end.
Thank you. Thank you, Tomi. Thank you, Jukka. Now we move on to the first Q&A session. Thank you, Jukka. I would like to check first if we have any questions here in the audience. Thank you, gentleman over there. Let's wait for the mic first.
Yes, hello, this is Tom Skogman. Congratulations on good numbers of course. Still I would like to ask about order intake. I mean, it was up a lot year-on-year, but I mean, if you put on critical glasses, I have, I have, you know, glasses myself, so I mean, orders have been almost flat the last four quarters. I would like to understand a bit the dynamics behind this. I mean, I understand that the market is, you know, continuing to grow, but I also realize you have a lack of capacity, and you know, you might have step changes in capacity. You don't want to have too long lead times, and there could also be things on the kind of component side that customers are eager to pre-order more last year than this year.
Could you just open a bit more about these dynamics? You know, what is, what is the reason that orders have kind of flattened out?
Thank you, Tom. I think Tomi can start.
Yeah, I think you made the conclusion yourself already in the sentence on also one big impact is the fact exactly that the uncertainty of getting the product is getting less when your delivery time gets better and your delivery capacity is better, that the customer is not. It could be
Seen as, is it positive or not, but they are not willing to pre-order as much as let's say in the component situation last year, and it was known to everybody that electric industry. When things get better, then this pre-ordering, like one year before the delivery is less. It has been, I don't know, flat. It's several millions above if we, let's say, add the EUR 5 million that we needed to remove. In that way, I think our history is not long enough to make actually conclusions as well from this because the scale of things is growing. It's going to a year with a very strong backlog also, of course, slows down the orders in the first year when you have sold the capacity already, let's say previous year.
You know, we know that you will add some 4,000 sq m of production space in Finland late this year. In the U.S., I mean, are these orders kind of already planned for this Finnish extension and are orders already booked for the U.S. factory or is it so that you still have not booked any orders?
I think the 4,000 sq m is already in use, so it's going, ramping up what we communicated by the end of last year. It's actually. It's a continuous improvement, so I think the square meters in production is maybe a little bit difficult figure to use, and I think we will offer today a little bit better figures for looking at the capacity like we promised in the actually last year's annual, let's say, report that we or in the presentation that we will have a little, maybe a little bit better figures to see how our capacity is rather than looking only at square meters because we are looking in production all the time, improving the flow and the flow of goods and how fast you can produce products.
It's not really that much up to the square meters. Yes, this is continuing process actually.
Do you book orders for the U.S. factory already?
We book orders from U.S. Some of them are completed in Europe, some are planned for the future in U.S. Before you have, let's say, looking at the factories ready, we are not, let's say, having big orders going to that factory before that's actually running.
Yeah. Actually, I have to comment that later on in Sanna Otava's presentation, we touch upon the capacity topic, so you get more info later in the day.
I was just also going to ask about cash flow. It was positive in the third quarter, negative in the fourth quarter, and very positive again in Q1. Well, is there something with payment terms, or is it more like with the how profitability is developing?
Jukka.
Yeah. In quarter one, the main reason was, of course, really positive profitability. The big change always in is the working capital in our cash flow. How much inventories, how much accounts receivables are employed in the capital? The biggest reason was the good profitability in quarter one for the-
Do you get advance payments?
We get in some extent advance payment. That's right.
The payment terms is what is up front and how is it?
It depends so much on the customers.
The project type.
In payment terms, it's really deviates from the advance payments up to even 60 days payment terms. It really deviates from the, depending on the customer, but of course, advance payment is something every company want to target.
Thank you.
Thank you.
Any other questions in the audience? If not, I would like to pick a couple of questions from our online audience. The first one is the following: The level of investments seems low, but I assume that is due to you capitalizing the majority of those and then start depreciating them sometime in the future. How much capitalized investments and other similar costs, for example, R&D, you now have on your balance sheet, and what is the depreciation plan like?
I can take that. Regarding R&D, we don't basically capitalize the cost. We have some small costs from the history regarding the IFRS transition, which we have capitalized. At the moment, you know, of course, we follow the IFRS, but we quite rarely do the capitalization for that. Why we have so small CapEx, like we have quite many times mentioned, we have really the asset-light business model. I think when you look last year CapEx, we had really more than EUR 6 million CapEx, we still increased our revenue from EUR 27 million to EUR 104 million. We are quite capital effective in that sense.
Thank you, Jukka. Do we have any more questions in the audience at this stage? If not, then we move to the next presentation, surging market and customer demand, and we will start with Tomi, and then Jussi will follow. Thank you.
Thank you, Paula. Talking about the market, I think we go to the topic of the day really. Looking at the highlights first and what we are looking at here, so of course, this you have heard before, the faster than expected market growth, but I think it's might be even faster than we talked last time. This is a topic. Commercial vehicles driving the customer demand, I think this is also a big thing. It's about the electric trucks coming to the market and their effect and how much it actually affects the DC charging market. The North America accelerating the growth. If we look at it from the regulatory, from the driver point of view, of course, the big thing behind that is the climate change and how to mitigate with that.
It's also the political decision-makers are making decisions to support that. Look at the left-hand side, we see what's happening in Europe. We have the laws that are requiring charging equipment to be installed, and they are quite extensive in the amount. We are also looking at actually stopping sales of CO2 emitting vehicles in the whole Europe, and this is coming from the legislation of EU. This is stopping basically, and the actually good option, I will come actually to the numbers, that electric vehicles will take a big part of that. I mean, battery electric vehicles. We have things happening also on the other side of the Atlantic. This is the Biden administration issued the final rules on actually these National Electric Vehicle Infrastructure network.
They talk about NEVI, N-E-V-I, and that's $7.5 billion or EUR 5 billion, depending on which part you take, but it's a huge amount of funding provided by the Federal Government to the states who then give it to the people who are building the charging networks. Very similar ideas that they want to have an extensive network that you can move between the states, between the cities, and build the networks in the area that people can move. It's similar happening as in Europe. Things are happening that first you get the charging network where the people live close by, densely populated, but the governments are actually wanting to support the long distances there, which is actually really, really, really good. Looking at then it from the car manufacturer's side.
We can see from the car manufacturer's announcements what's really happening because if you have the vehicles, they will need the charging infrastructure. There's a huge amount, $600 billion investments from car manufacturers' side, what they have communicated that they will be used to this transition going electric. Several countries have pledged actually to be internal combustion engine-free, or let's say new cars will be combustion engines out principle. Looking at also when I talk about the truck manufacturers. Today, that's very much in the beginning compared to the personal cars, but there's sizable funds already with different truck manufacturers, and this seems to be the winning side. There was still a lot of uncertainty. What is the technology for long haul? What will happen?
If you look at what the truck manufacturers are communicating to the world, where they are concentrating their efforts, it seems to be clearly that the big portion of their efforts is going to battery electric vehicles. These batteries will be a lot larger than in a personal car because this really relates to the how much weight you are carrying and how much you need to move. This is a professional market. This is a little bit time is money in a different way than if you're a personal car, then it's more inconvenience. People are in a hurry sometimes, but this is a lot more related into this business-to-business market moving goods and time. Then it means for charging, it means higher powers, limited time, very controlled networks.
If we look at the announcement as well, this is a collection I will not read them all. I would be spending a lot of time. Main part of the manufacturers is the message is very clear, also from the truck side. Then the third perspective, how much funding has been gathered to building charging networks? This is $16 billion. This is also showing that when we are talking now about the market size, that this is already funded by the investors. This is the money actually going, and you can actually recognize when we go into a customer reference that if you compare quite many of our customers also on the list. Hopefully, the ones I can tell you more about in a couple of quarters actually found on the list.
This is showing also there's the money, there is the actually the vehicles are coming. There's kind of very clear path where the market is going on. This is exactly that if there is the cars coming and there is a demand, they will need the infrastructure to support it. Then I give it the floor to Jussi.
Thank you, Tommy. You all remember 2 years ago when we started the preparation for the IPO and published our plans there that we announced that our target market, where we are aiming, that was our prediction was EUR 4 billion year 2030. We were thinking that that's it's amazing, massive market that we are searching market that we are rushing and going with our good plans. After the IPO, we started to refine our market model and injecting different market studies and market behavior into our system and building that model. I was quite amazed when our supercomputer gave us an answer, the new estimate for year 2030, that what is the market size there.
A few kind of summaries for the coming numbers already that the market is growing so much faster than we were thinking. The change, it's just accelerating. There's a few reasons there that we will dive in. It looks like that the market will divide to multiple domains, that it's not anymore one market, one EV market, but there will be several businesses that we will go after. When the market is getting mature, the demand of the customers are getting higher. We can see that the customer requirements and expectations, they start to vary in different markets. Let's look at the figures what the supercomputer gave this wintertime.
When we talk now the markets that we talk, the Kempower target market, which is the Europe and North America, all the figures now, rest of the presentation, I'm only referring to Europe and North America. If I forget to mention, you guys remember that. Second, I will talk only about the DC fast charging market, nothing about the AC. Our prediction and forecast for year 2030 for Europe and North America looks like that the market size is EUR 14 billion year 2030. It's amazing growth within the two years and how much new business has been opened and generated and finding that business. It's remarkable, and this makes us quiet for a time that can it be true? Then we started to brush up the numbers that what was in the market numbers.
We were looking at what is the estimate for different car quantities that are in the use year 2030. Private cars, trucks, buses, and vans, both in Europe and North America. We came up with those market estimates, and then we calculated that average number, how much you drive with those cars, that how much energy you need to charge during that year. Those numbers are in that presentation. From those, we came up the conclusion that to charge that amount of energy, we need that amount of chargers, and it means EUR 14 billion. That was the market model. It looks that the market will be splitted for two kind of equal geo-geographic areas that the Europe and North America, it will be roughly equal.
At the moment, the market is little bit bigger in Europe, the change will be very fast in North America. That's why we have a very good aggressive plan to enter for that market. Little bit deeper, if we look at this is the number I was talking to you after quarter one, that how much there was added DC charging points in Europe. This is the European North American market, that last year it was 233,000, and the estimate is that the average growth is still going to be 26% per year, year-by-year growth in the quantity of deliveries. For these quantities we are planning our operations, and Sanna will come back to our plan for to gain the market share from there.
If we look at the euros, of course, the euros matter. The quantities we plan our operations, but the euros that how much we will earn money, that looks that the market will grow 19% year-by-year. The difference between the quantity and the euro is that we have estimated and calculated some price erosion for the market model. That's the difference there. If we look key customer groups and what I was talking, that it will be divided for two main domains now. The private car charging where we use charge our private cars on the street sides and charging hubs, and then the commercial vehicle charging trucks, vans, and buses.
This will be the two main markets that we are tapping, and we will get back to that in a strategy and this is the basis for it. Three main customer groups, CPOs for public charging operators, those like a typical Recharge in Finland and Osprey to show in the presentations. Original equipment manufacturers, those are the customers that are building their machines and selling our chargers together with their own units. The fleet operators is the third main customer group. Fleet operators like bus operators. It's one big customer group at the moment. In the future also the logistics centers and logistic operators with their bus, with the vans and trucks.
For the future, the third big market segment that we are building is the off-highway, that we have couple of customers already operating in off-highway, and those are the vehicles that you cannot bring to the highways. Those working machines in the harbor areas, construction sites, and so on. Mining, for example. You have seen many times our Epiroc reference, or it's not here. These are the main customer groups and market segments that we are tapping. This is interesting now that how these two main markets will be divided in the near future. Year 2022, the Europe-North America market all together, it was EUR 1.4 billion. The big part, the major part, EUR 1.2 billion, was private car charging. Now you see year 2030 that the commercial vehicle charging will be, say, two-thirds of the market.
EUR 9 billion compared to EUR 5 billion for private cars. It's a major difference in that how the market will behave and how important the bus, truck, marine, off-highway will be in the future. There is a good growth also still in the private car charging. It will be five times bigger within eight years. The biggest change will still be in there that the truck charging that will be so big business in EV charging but also for Kempower. This is something that we are tapping our strategy heavily now. Very interesting numbers there.
I was talking about that market behavior, that what are the customer expectations that when you are shifting to multiple domains that, one, two years ago, when we were coming to the market, it was more or less so that you have a EV charger and you charge whatever machine comes there with the CCS plug, that you do the charging for it. When we are getting the mature market and customer expectations are growing, we need to start doing the advanced integrations and adjusting and adapting the customer needs for our product.
So far we have been very successful with that with our modular product structure that the solution can be modified for different needs, but also one of the biggest stronghold for us has been the ChargEye software and the software integrations. It's amazing what kind of solutions and the systems we can build together with our customers based on the ChargEye there. Advanced integrations, that's happening already now. We are well positioned there. How we see the next steps in the future when these, like, big trucks are coming, marine vehicles, marine vessels, and so on, that we need to start designing the product more for that specific market. That is a crucial in the strategy that we diversify our portfolio according to the customer needs there.
I have a few examples here that just visualizing the story that how the transformation of EV goes that this Osprey Charging in U.K. that that's the private car CPO customer that we're having a massive rollout of charging hubs in the U.K. 150 high-power EV charging hubs, altogether we will have 1,500 charging points in the U.K. This is a very strong collaboration with the Osprey there and very enjoyable developing that future together. That's for the private car charging. I was talking about the truck charging. Tomi was mentioning that there is the pipeline is there, that the EV trucks are coming.
The EV truck charging infrastructure need to be built already now so that when the trucks are coming, that the infrastructure is there. We have couple big sites already built. Last year, this year, like this, Falkenklev Logistik, 1.6 MW charging power, connected to our ChargEye and controlling the whole charging events. This is the evidence that the e-trucks are really coming and the charging infrastructure is built all the time already. The electric bus depot, 124 Kempower Satellites and charging points, 18 Power Units, 121 buses, and this is done together with the GodEnergi in Aalborg, Denmark. One of the biggest e-depots in Europe now and more to come.
That this is, buses are important for us now and in the future, and the portfolio what we have, it's very suitable for that business. All in all, the key takeaways what I wanted you to remember that this EUR 14 billion market size from Europe and North America, it's a big change, and that change was in the two years already. Let's see what is the real number when we are year 2030. This is what we estimate at the moment. It's good working number. Then Europe, North American market will be say relatively close to each other year 2030. Taking in account that the European market is little bit bigger at the moment, the growth rate in the U.S., that will be massive.
This market divided for multiple domains, and the main split what we are working on now is the private car charging and commercial vehicles. Totally two different domains that having a lot of synergies, and we can utilize the same product portfolio quite well for both of them. Now doing with the adaptation and more future designing for those markets. Those truck charging, that's the fourth takeaway that you saw the massive growth in the truck charging. It's unbelievable that you don't see the e-trucks yet in the cities or the highways, but they are there. They are there coming. All the OEMs, they have their plans to bring those.
The fifth one that JP will talk more about that when the customer demand is getting stronger as we need to build also the services for the business. All these numbers that I was showing, it's pure equipment sales without the software and services, and there we have another strategic point of view to tell for you. That was what I wanted to say about the markets. Oh, sorry. Q&A. Sorry. Yeah.
Yeah. We take the Q&A because actually we have quite a few questions here online. First, I just wanna mention that our audience online has doubled since we started. When we started, we have 100 people online, and now 200. I just wanna say that thank you all for joining and stay there. We have a lot of interesting topics coming up. Now, do we have any questions about the markets in the audience? If not, I have a couple that our online audience has presented. The first question is a little bit linked also to the technology, but I take it now. How is your product different from the ABB solution, Jussi?
Our is a centralized Power Unit, decentralized Satellite system that have more freedom to build the charging hubs. That is the main difference. We have a similar product also than the ABB has, but that's the main that our system is quite unique, that Satellite system, compared to any other. The benefits I will get back to you in few minutes.
Yeah.
Maybe the, I will come back to the my fundamental difference on that majority of other manufacturers are looking at the single vehicle, single charger situation as the main, let's say, challenge in the market that how to solve that. We are looking at this kind of how to charge large fleets, a large number of EVs with the similar investments and similar systems. This is maybe a good summarize or getting people more confused, but this is the basic idea.
Yes
...on the whole solution thing.
Thank you, Tomi and Jussi. Hey, if you have any questions while I'm picking the questions from the online audience, just raise your hand, and we take the questions from the audience. Next question. Is there no DC charging market outside Europe and North America? This is a question because we talk about Europe and North America. How is it?
Maybe I can answer as the chief of sales. Of course there is, but, Europe and North America are our focus areas. We already now, as of today, have sales in other continents as well. According to numbers that this, outside of Europe, North America, that's like 50% more business, we are aiming for 50% of the market at the moment. China is very big market and that we have excluded from our strategy. The Southeast Asia, Australia, Oceania are also big markets.
Today we have some maybe news coming from that region, and it's more like that we have distributors in that area, but it's not active market that we are directly in yet. We will actually come back to that during today.
Very good. Following... Yes. Do we have the mic?
Hello, I'm Jari Akola. I would like to know what is your strategy towards the services market, since you were exclusively talking about the equipment market here earlier. Can you share a few words about this?
JP.
Yeah. JP from the service side will come up in my part of presentation in more detail, if that's okay then.
Sure. Thank you.
Thanks.
Yeah. Thank you. Yeah. Go ahead.
You Emiliana here from the analyst. You launched the Pantograph product, and on the presentation earlier, you mentioned about the Satellite for heavy trucks. I just wanted to have some color in terms of how that is progressing.
I think it's, and when we are looking at Jussi was also mentioning that it's a different solutions, different market, it doesn't mean it's a physically different product. We will come back to that. It's a more solution offering what you are tying together with the products. It's not that much about this hardware to this customer when we are finished today.
Hopefully you will get the point as well. This is the Pantograph has a certain market. Central European cities are doing the bus charging through that. You have I think the truck charging specials that it's more or less how to increase the power outputs because the batteries are getting bigger. It could be also similar systems could serve the marine market than the trucks. It's not that much vehicle type dependent from the hardware point of view. I don't know if I confused more or answered. It doesn't need to be physically different if we're looking at hardware products. It could be that the differentiation is done how we service or what kind of software service we're adding or what kind of integrations.
Thank you, Tomi. The next question, any idea how the different industry categories will be divided for Kempower? Jussi or Tomi?
I think we also don't communicate that. We are not reporting.
Yeah.
Yeah.
... segments separate. I think we are telling now today about the opportunity. I will give a glimpse how we see the market.
Yeah
... in one of the slides, but not with clear numbers. To see how we see that, I think that will answer it.
Yeah.
We'll have to have some patience.
Yeah. Yeah. We will come back to that later. This is about price development. What are your price assumptions over the period to 2030? How do you come up with it? What euros per megawatt charging capacity should we think of?
I think we should, but it's not that straightforward. Maybe you can calculate some numbers, but it will not be anything related to the sales prices because selling solution is not a direct relation to that number, but more like a combination of things. It's.
Yeah. I think Tom has a question over there.
Yes. This is Tom Skogman from Carnegie. I mean, the strategy relies very much on trucks, and then, if I remember right, you know, out of the truck sales, especially in the U.S., some nine out of 10 are long hauls. The very small share is kind of for regional distribution. I guess that, those will be coming quite late, you know, in this strategic period, the long-haul trucks. It's not something, you know, that the truck manufacturers are preparing the next two, three years to be on the market, right?
I think in the U.S. there actually, there's quite a lot of news when you look at the truck manufacturers on the other side of the Atlantic, how they are addressing that. The long haul is actually recent. They're higher than in Europe. Where Europe is looking at the, let's say, the last mile, they are looking the middle mile deliveries as well, more strongly than we see in Europe, that there's kind of like a race who gets the products out. This is also the focus is because of the market in North America. This is also, if you look at the numbers afterwards, if you look at the presentation, why the energy charge in the U.S. is higher compared even the truck amount is about the same. It's about the structure of that market.
Have you broken in your strategy there, 2/3, you know, for trucks, how much of that is long haul? When I look through what the truck manufacturer is saying, that is kind of the only segment that is kind of uncertain whether it will be electrified or not.
I think it's also truck manufacturers have been pretty clear now that in lately where they are actually making the announcements, there will be different fuels, different things happening and. It's still based on the assumption which part will go to battery electric, our numbers. We are talking about the market opportunity of course, so it's not evenly split with all the years.
This is also the reason why we want to have that deep collaboration with those truck OEMs that we know they're quite well their roadmaps and their rollout plans and adapting our portfolio for that. It's really encouraging to see how these parcel delivery trucks and that is going to the market already, and those are thousands in operations in also in the U.S. already.
It just if you look at the numbers, I don't know how much granularity you have used when you have made those assumptions, but how large share of kind of your sales is going to long-haul trucks in 2030? Or not your sales, but out of the market, you know?
Yeah. We don't have those numbers here now. I cannot say. We can get back to that.
Actually, when we get it, what applications we have in truck charging, that will clear the things out a little bit later.
Yeah.
I think it's what cases there are for the business.
That's true about the use cases. The next question is about fleet management, from the online audience. Yes, I take the online question first, and then we go to the last question from you. Would you consider fleet management, including the charger hardware, as more a full solution? You can comment something, and then you come back to that later. Yeah.
Yeah.
This is exactly that. We have that charge site for the depots that we are integrating together with the, with the fleet management and scheduling systems of the bus companies. That is exactly what we mean with the full solution, that those software integrations and bringing the hardware together into the customer business processes, that's the full solution what we m ean.
Yes
Go ahead.
This charging, required charging powers are quite high on the trucking segment so are your products already compliant with the company needs or what kind of R&D you need to do going forward?
I think the trucks are not ready. I think the charging industry will be ready first. It's a kind of chicken and the egg. The current truck charging and truck routes built are using less power per plug. You can have trucks today with the prototypes that you have several plugs in the same car, you get the powers up. There is certain limitations with the current charging standard, which is coming from the design of the power plug used for that. Before the new standard where the very high power is coming out and then the truck manufacturers have actually adapted and offering vehicles that can do that, we will be there.
Yes. Now we take the last question from the online audience. By the way, thank you everybody who is online. You're so active. It's super nice. What are the biggest risks in the truck segment given that to date the business has been quite focused on passenger vehicle charging? Looking at the market development, the future growth will be very much dependent on the success within the truck segment concerning us. The question in a nutshell is: what are the biggest risks we see in the truck segments?
I could start, and then I'm pretty sure Tomi will compliment me. This rolling out the truck charging hubs, it's a massive project for electricity infrastructure. When you are driving there on the highways that you can see that electrical lines are not where the highways are. In the highways, we need to build the charging hubs. How to bring this tens of megawatts power for the charging hubs, and that is the discussion in the industry that we talk with everybody. This is one of the biggest challenge, and that's why the energy management, energy storages, and those are in the discussion all the time.
All software integration together with the vehicles
Yeah
how to pre-book the systems and how to secure that this is a basically, logistics is a business operation and not a Sunday ride. It's a bit different demands also when you're looking at the times and systematically how you build the logistics channels. It's very interesting, but it is, I think the biggest risk is the time, that maybe takes a bit more time to do things. It's in every growing industry. Now, the models what we have calculated is a demand-based calculation. If there is a... I think the market will be there, but the risk of these numbers is about what is the year of where to reach which number. Let's see. With the reality and market expectations meet, you have the real answer.
Today, actually, the EV industry has been going over the market expectation every time, so.
Thank you, Jussi. Thank you, Tomi. Now we move forward. First we hear Jussi talking about technology, and then straight after Jussi, we have Sanna Otava, our Chief Operating Officer, talking about the de-delivery capability. There will be no Q&A session between Jussi and Sanna. We take all the questions about the delivery capability and the technology after Jussi's and Sanna's presentations. Jussi, go ahead.
All right. Thank you. Yeah, I forget that I have still 15 minutes with you. Wonderful. Let's enjoy these moments. Cutting edge DC charging technology from Kempower. It's a big topic. It's a important topic. I will start with our competitive edge that why we are good and what are the competitive edges that and strongholds that we are building our system. The number one has been the user experience and the charging flow. What is the experience when the consumer and the EV driver comes to the hub? Many people ask that, "Okay, sounds good, but what is the user experience?" We think that the good experience is something that you feel that it's convenient, that it's easy, and you...
Actually, we are fanatic about the charging, but the EV drivers, you don't wanna think about it. It's just something that you go there and plug the cable and then you go to supermarkets or the coffee shop. One example of this user experience, now this is the scary moment, but it's something that when you park the car here, whatever position, in every car you have the charging points, it's in a different corner. So you wanna bring your cable to the different corners of the car and plug it in. The cable management is something really unique what we have developed. What happens typically, the normal sites that the car comes, and then you drive over the cable. Never happens with our charger.
This is one part of it that we think every aspect that when the user comes and how is the flow that when you come. Second is the screen here that how we communicate it. You don't wanna read all the details. You just wanna tap it in, put your payments there, and forget it. This is the first stronghold in the, in our technology. The second is the modular structure. There is a roll-up there about the picture about the modules. That modular structure, it's really scalable. It's very easy for our operations, but it's very easy also for maintenance and and service. Serviceability of our unit is something something special. Also the redundancies and everything, all those nice features, that it's always on. It never gives up.
That you always it gives you power when you come there. For the reliability figure, the charging success rate is one of our KPIs that we measure. That what's the probability that you plug your cable and the car starts to charge? Our success rate with our chargers, that's the at the top of the market. I guarantee that there is no better product in the market from that point of view. Everything is based on the modular structure that is built in and designed in Finland, made in Finland. This is also something very unique and bring us a competitive edge when we go to U.S. now. That it's a European design and we try to maximize the local content from the Europe.
The second is the technological innovations like a dynamic power sharing and that centralized Power Unit and distributed Satellite system that gives you the freedom to optimize your charging hubs and optimize, and the CPOs can optimize their earnings and revenue for their businesses. That's something that optimizing the systems that it's incomparable. That you cannot compare the system with others. We mentioned few times already the software and the charging control that is designed inside, in the Kempower again. The charging control is our own IPR, and all the software and ChargEye connected to that. Those three, four strongholds, that they are the key that we are building our success story.
If we look at the fundamentals and the foundations of our charging, that Tomi was writing in a blog about the reliability. That was the success rate and those things what I mentioned there. That the reliability, it's one of the key foundations in our system, and it really matters for the drivers and companies. User-friendly, that I was talking quite a bit already. When I look at these two fundamentals of reliability and friendliness, that there was something really Finnish in that one. That it's like a Finnish husband, that it's reliable and friendly. It delivers. That it's makes me comfortable. Dynamic power distribution, that we were talking already. I have a detailed slide coming about it.
Data solution and the software, it's something that we should one time here like open up the ChargEye a little bit better, but I all invite you to come to the Oslo exhibition that we can demonstrate the ChargEye for you. That it's something, it's remarkable. The integrations with the software for business processes, that it's not a standalone unit that stands in a there in a in a parking lot, but how you integrate your fleet management or if you're a grocery store, that how you integrate your loyalty programs to the charging experience and that kind of. Those kind of integrations, that's it's more and more important in the future, and we are building based on that. There was a question about the services. JP will come back to that.
Partnering with our customers and doing a good high-level service for them, it's crucial. In the future, that this, we are developing the product further and further by analyzing the data we are collecting from the every charging session. That we have few data scientists already, and they are crunching the numbers and optimizing our roadmap development plan based on those. Those are the kind of fundaments for our technology. This is, there is so much now information in this slide, but let's try to go through that in a one minute. Let's bear with me. That we have more videos in YouTube and so on.
The traditional system that you were asking, or the online guys were asking, that it typically there is one charger, two cables, and it's splitting the car, the power for each car 50/50. It doesn't matter what is the actual demand of the car, that the car is demanding the charging power. It's splitting it 50/50. When the other car leaves and leaves the plug empty, it doesn't go back. They all stay 50/50, and you need to unblock your cable. Our centralized Power Unit system there, it's talking with the car and allocating exactly that amount of power that the car is demanding at the moment. It's a dynamic. It goes to dynamic power. It goes up and down according to the charging curve that the car is having.
These two features are means that you charge more. Our CPO customers, they earn more money with our chargers. We have lots of calculations, there is one of them that how much more they can charge power with our chargers. There's a less idle time, idle time means that your power electronics is not doing anything. It's just sitting in a cabinet and not charging cars, even that there's some more cars there in another plug demanding. We maximize the use of power electronics. That's why we maximize the charging energy and the revenue for our customers. All this it's also leads to the smaller grid connection. Grid connection size, it's a cost for our customer, and with this system, you can minimize it and optimize the usage of that grid.
That's about the comparing the dynamic power with the traditional charging systems. Not mentioning any specific names anymore. Few examples of the ChargEye, and that's my try. We have 20 people in a ChargEye team developing that already. Tried to explain the benefits of that system in the two minutes for you. There's a example there that how the charging flow goes, and those are the screenshots there from the screen when the charging event and this session goes forward. The beginning, like the showing the estimates that how long you need to still charge and stay at that charging hub. Finally when this charging ends, we can give the, also the cost and how much you earn the money.
All that you can tap in into ChargEye and track that any time, and it's online all the time. At any moment, you can go there and see what is happening in the charging. This all the charging sessions like that, it's stored in a cloud system. We can have that full access of all the sessions and doing the data analysis for our customers that how their charging hubs are behaving. This is a example of the charging session from the ChargEye. The very same screens that you can see here on a real hardware, but they are online in the back end.
This, this was about the end user experience, and the second is the advanced optimization of the depots and the fleets. That, that when you plug in into the ChargEye, the scheduling of the, of your bus system, that what time the buses need to leave on a, on their route, and we can optimize and estimate, like, how much, when the, when the charging session needs to start and, and so on to optimize the energy cost for our customers. This is bringing what we have calculated, roughly 30% of the savings, for depots.
Keolis Sweden is one of the very big customers for us, that depot they were saying that once they took the ChargEye into the use, that before the ChargEye, they actually had the people there on a, on a charging field middle of night, plugging in the cables, unplugging, and they're trying to optimize the energy use of that charging hub. Now with the ChargEye, we do that automatically, and it's connected into the energy pricing models and so on. We guarantee that the buses are leaving with the full batteries and hot batteries in the morning. They say that...
Keolis was saying that this is something unbelievable, that this is some tool that they never had before, that the tool they were using before the ChargEye in a, in a charging hub, that was sledgehammers they were using. This is something totally different that they have never able to dream of that. Anyway, let's go forward.
The solution pipeline or roadmap, what is related very much for the strategy that we've talked and to the numbers there, that the first solution that we are now releasing this year for the market is a Plug and Charge. It's automated communication and billing process developed by the private car OEMs. Means that when you plug the cable to your car, that you don't need any payment systems, that the car and the CPO with the Plug and Charge, that will automatically do the charging and billing for you. No more apps, no more tags, no more credit card readers there. This we have ready. It's tested with one CPO in Europe.
We just releasing it for the sales. Next week, you will hear from the media more about it. Kind of like a easy promise for you that we will bring as a roadmap, but it's a ready feature. The Eichrecht, it's a German calibration law, measuring the electricity and the energy, how much you are charging. This is needed for private car charging in a German market. German market is the biggest in Europe, it's a dominating market, and that now, that Eichrecht feature, that is opening the German market for us. This we are bringing in the quarter three to the market. Massive opening for Kempower again. Megawatt charging, MCS, it's a big word for the charging industry.
This is a specific technology developed for the truck charging. This is in the development, and we are quite well progressing with that. The truck charging, it's not only megawatt charging, the trucks are charged with the CCS charging also, but this will bring the big powers and on-the-move charging for the trucks. Big development project for Kempower. The fourth solution in the pipeline that we are bringing the silicon carbide technology for our chargers, and this means increased efficiency, increased switching frequencies and grid behavior, better control, and also vehicle-to-grid support. This means that better integration of energy storages and bi-directional energy feed between the car. Those are the four big solutions that we are developing at the moment. Key takeaways from the technology.
I'm a little bit over time, so I need to accelerate. We get back to that in the Q&As. Number one, modular structure, flexible, and now everybody remembers easy and reliable from this presentation. Then this backward compatibility and the compatibility between the different products of Kempower, it's very important. It's one of the key specifications in all our R&D that the solutions we made, they are future-proof and safe investments. This unique ChargEye, what I have been talking quite a bit, that may be number three. Now I finally give the time for Sanna for scalable delivery capability and operations. Thank you from my side, and we get back to in the Q&As.
Our operation model. Operation model has proven to be pretty successful. When we created the model, there was two targets: scalability and good flexibility so that we can meet all the customer needs. The good product management and the modular product design, those are the basis for the flexibility. With our mass customization production method, we are able to create and build all those solution based on the customer orders, based on the customer needs. That's the flexibility. The scalability is also coming partly from that modular product design because when we have limited number of parts, then we are able to focus better on control our outsourcing, our supply chain. Really having that dual sourcing strategy. Alive.
From the very beginning, we also created the model so that we are capable to do outsourcing always when there's a benefits for the scaling. More about the model here. We have own product design and own production. Having those together, good cooperation with R&D and production, we are capable to introduce new products to the market pretty quickly. Because keeping that competence, production competence in-house, then we are better to do outsourcing cost-wise and quality-wise. Typically, our own production is final assembly production, meaning that we are doing those last steps of the whole manufacturing chain. Therefore, our production model is pretty asset-light. Typically, our supply chain model is so that we have own factories, final assembly factories, and then there's local supply chain.
We are having those local subcontractors doing a lot of our parts, components, sub-assemblies, and feeding to our main factories. The similar model is here in Europe and in U.S. as well, North Carolina. The model is so that own factory, local supply chain, subcontractors doing the production a lot, then supported with global component sourcing. Having that kind of model that we have a local supply chain, we gain some benefits. Of course, we are able to control the supply chain better, have transparency, and have those sustainability impacts. Like, we have pretty good optimized transportation length from the supply chain to our final production, so having that good impact for the emission. Of course, have local supply chain, we are creating jobs and have that kind of benefits for the local societies. The whole.
Sorry, I need to change. Production itself. At the moment, we have in Lahti, we have two sites in Lahti, and we are looking for the extension in European countries. At the same time, we have that North America factory project. Tommi will tell a little bit more about that later. Our way is that we will have the similar model for the both sides, here in European countries and also in U.S., so that we have similar practices. We are able to balance the workload between, and the load of the producing, and do the deliveries balancing between all those factories. It's not only the new facilities. Of course, here in Finland, at the moment, we are doing a lot of constant improvements so that we are able to increase the capacity each month.
The capacity-wise, here, please note this is not the financial target. This is pure form production point of view. We need some frame. We need to plan how we are going to ramp up our capacity. Of course, you need to prepare that you have that capacity when there's a demand. So this is the planning from production delivery point of view. We have selected few index. There's a number of charging points, plugs, and the power. Those index are indicating pretty well how we are ramping up our delivery capabilities. Like you see, it's each year growing because we are growth company. That's what we are implementing. How to implement this, of course, those facilities is the one key, that existing facilities, extension in European, and then the U.S. facility. Those are one way.
As important way how you increase the capacity is that constant improvement. That's natural. That's our mindset, that we are continuously improving the balancing the production lines, improving the material flow, looking for all those tools solution, how we are able to increase the capacity being better. That's very natural. That's our way how we are seeing our work. A second, or third way how to ramp up the capacity is of course the supply chain, because the model was so that we are scaling together, increasing our own production capabilities, growing with our suppliers. Managing and helping our suppliers, subcontractors to grow, that's important task, and there we should focus as well. Let's key takeaways.
First, of course, that scalability, both scaling own production, scaling via subcontracting, and still keeping that good flexibility, good cooperation with our R&D, with production, understanding, having the knowledge inside, in-house, so be better with that. Third one is that our global operation model, that we have own final assembly factories, local supply chain supported with global sourcing and similar model here Europe, in U.S. Having that kind of big competence pool and capabilities to balance the load. The last one but not least one, sustainability. From operation point of view, sustainability is always there embedded because it's daily decisions, daily choices what we are doing all the time.
Thanks, Sanna.
Yeah. That was my presentation.
Yeah, now we-
I think we have questions.
Yeah, we go to Q&A.
Yeah.
Yeah. We go to Q&A, we have, again, quite a few questions from the online audience. First I would like to check the audience here, and we do have a couple of questions. Let's go to the, this side first if we get the mic.
Mika Karppinen here. Hello. Thank you very much for a very interesting presentation. The market is of course going to grow a huge amount in the next decade. That's quite inevitable. If you look at scaling up the business and volumes, are you modeling in how much gain in costs and efficiency for the next 10 years? I mean, if you look at the number of charging stations in the market in 2030, Kempower's projected market share, what it could be, you growing with your suppliers, of course, they are growing nicely with Kempower.
I mean, one would assume in a scaling economy that the costs for your business will come down, like you see in solar power or, for example, how much costs have come down per unit in terms of the purchasing cost. It's interesting to hear your views on how much efficiency could be gained in the future on this side because that's of course linked to your profitability quite a lot. You're already now quite profitable, but it could be much higher. Then just a quick point on your production. It would seem that the production in your facilities is not highly automated at the moment. There's a lot of manpower in assembly needed. Is that something that's gonna change in the future? Will it be more automated or not?
Thank you. Let's take the profitability and the cost question first, and Jukka, you could start. Yeah.
That's a good question. It's actually also one of the key points in our strategy, our new strategy. How we tackle possible price decreases, price erosion. Yeah, definitely we already do that now and we do more and more in the future. Defending our existing gross profit and also keeping our unit cost competitive, even though it's not only cost game because we see that we also are the premium supplier and that is also seen in our business and whole pricing model, et cetera. That's a really good question, and this is really in the middle of our new strategy as well.
Thank you, Jukka. Then the next question was about the production and manpower versus automation.
Yeah, that's one tool. Yes. When we are all the time screening where is those application use cases where we are gaining enough benefits doing increasing automation. It's a little bit complex when you are doing the final assembly for the product like this. Yes, we are actively screening where we should do that effort. When it's, there's benefits, clear benefits, then we are increasing that. There are other tools as well. That is one tool.
Thank-
Of course, we are talking about today's product range, and doing more automation requires the full changeovers. I can guarantee one thing, that the products will be not exactly the same in 2030 that we have seen today. Tech industry moves quite fast that it's not going to remain the same. One of the factors about of course the production lead times on the design, and that leads to profitability as well. Is it increasing the company profitability or remaining at the same level? Anyway, it's important topic when we go further as our market model was including the price erosion expectations when the, let's say, competition phase of the market begins.
Thank you. I would like to take a follow-up question from the online audience before we take the next question from here. The follow-up question from online is on optimized production also to Sanna and about the productivity. What is your productivity increase target per year? Can you mention, for example, hour spend or the production value? Do you have any targets?
Yeah, yeah. Growing like this, it's a bit complex question. How to answer it? Of course, that's because the whole target, the whole mindset what we are doing, that we are looking for all those ways how we can grow, how we can increase the capacity. Of course, that's embedded as well.
In the core.
It's not only adding the factory space, factory floor, but that constant improvement. That's actually the same.
Yeah. Yeah. Thank you, Sanna. Now we go to the audience.
Yes, it's Tom here from Carnegie. I wonder if Sanna has been forced to say to the marketing people that you need to hold back orders, that you cannot ramp up capacity quickly enough, or if the bottlenecks have been rather on the supply chain side. Have you managed to ramp up, you know, in the kind of demanded space what salespeople are asking for?
I can say that at the moment, the, for example, the lead times, that's not the issue for the sales.
Maybe that's giving the answer. Because we have quite good situation at the moment with the capacity and all what we are doing, so that's not the issue for the sales, that there's no capacity or lead time or lead times are too long.
I think that you cannot separate a single thing. It's, it's... Also the capacity plans demand base, so if there wouldn't be demand, that capacity would never exist. It is actually, and it's quite quick actually to scale the capacity on our final production, but I would also remind that it's then you need to get the supply chain keeping up with the growth. That's a two-way street in there that you have to think about both when looking. We do only the final assembly. Also when we look talking about the manual labor, yes, it's handmade thing, but it's also small portion of the value, so it's a good question on whether investment should be made in automation if the hand work is only small part of your bill of materials cost.
Then I wonder when you open the factory in the U.S., I mean, you showed here that 80% of components to the Finnish factory sourced kind of nearby from here. Going to the U.S., I assume you need to have totally different suppliers and, you know, what risks and challenges do you see here, you know, going to another continent even?
I think the base idea because we have own design, the product is Kempower's design. Most of the materials you are ordering is based on the Kempower's design. That's very typical that you create that local supply chain. Using all that experience we have got from here, that's what we are utilizing when creating that U.S. supply chain. Yes, in U.S. there will be that local similar supply chain.
This was also. We will come back to that.
Yeah
... about North America, but one of the key reasons to choose the location was also the available supply chain in region of North Carolina and how, what kind of industries is both today that was one of the key reasons where to go in U.S. to have that closeness of supply chain available.
Yes, this is a wonderful bridging also to the topics we will talk after the break. To be able to keep up with the schedule, we start the break now. We will have now a 15 minutes break, and we will come back at 2:55 P.M. It's not going to be like 3:00 P.M. sharp. We try to start at 2:55 P.M., in 15 minutes. I would like to thank the online audience for the questions. We see each question here, it's such a lively dialogue now that we don't have time to take all the questions. I'm pretty sure that we can continue discussion later on.
After the break, we will go to North America with Tommi, also talk about the updated growth strategy and financial targets and the services with JP and Tommi. 15 minutes breaks. See you soon. Hi, everybody, welcome back. My name is Paula Savonen, and I'm the VP of Communications for Kempower. You are joining Kempower's Capital Markets Day, the first ever. We are so happy that we have a big audience online and also here in Helsinki studio. We have 1 more hour to go with interesting topics. Next, we go to North America. It's actually 3:00 P.M. in Helsinki, Finland, which means that on the East Coast, people are wide and awake, and there may be also audience joining from North America. Welcome all. I would like to give the stage to Tommi.
Yes. Thank you, Paula. Good afternoon, everybody. My name is Tommi, and I'm from sales. One of the key missions for me and my team is to commercialize business opportunities in North America. I will utilize this about 50 minutes lot so that I will explain you that why we are going to North America, why we do it now, what we are going to do there, how and when, and what we have done now, and what is going to happen next. North America accelerating our growth. This picture explains that why we go there now. As we can see, the business as of today is relatively small. It's about 30% of the business size in Europe if we think about the DC charging. What is different that this business will grow faster than in Europe.
Like Jussi mentioned in the earlier today, we expect or market consensus expects that the market value will be EUR 6.5 billion by 2030. Compared to Europe, the biggest difference is that the private car charging business possibilities are massive, but even bigger are commercial vehicles, and especially trucks. There are different trucks and different kind of business possibilities. There are this kind of short distance trucks and vans that are, let's say, lighter than 7.5 tons, so-called last mile vehicles. There's middle mile, and then this first mile heavy-duty trucks that will come at the later stage. That's the difference. It's growing faster than Europe. Why is that?
This is a bit heavy slide, but I will try to make it simple. It's because U.S. government has decided to subsidize traffic electrification heavily. Basically, in any given market, when you start electrifying traffic, you have this kind of classical chicken and egg problem, that nobody is interested in investing EV chargers because there's no EVs, and there's no earning possibilities, and people and companies don't want to buy EVs because you cannot charge them. Now U.S. government has decided to take a big step or leap in order to remove this obstacle, there's massive funding. If we think about our business in the, in the very heart or core is this NEVI program, which come from the word National Electric Vehicle Infrastructure program.
It's seven and a half billion dollar support, which is spread all over the country. The basic idea is that you get more support if you place your charging stations in rural areas, unless if you place it in cities, highly populated areas. The maximum support is up to 80% of the investment value. It's tremendous that way. How our customers can get this NEVI support? There's three things that you have to fulfill. There's certain technical requirements. The charging site needs to have at least 600 kW total power and four charging guns. Each gun has to give minimum 150 kW charging power. Thanks to our modular design, it's very easy for us to make exactly this kind of product, so we can tick that box easily.
Another requirement is that the charger has to be able to support more than one car brand. It has to be a universal charger, and we are following international CCS standards, so we can also tick that box. There's third requirements, which is Buy American Act. This Buy American Act aims for increasing the local manufacturing and value addition in U.S. As of today, the requirement is that you have to do the final assembly of the chargers in U.S. It will get tighter. In near future, you have to source minimum 55% of the components from U.S. That box we cannot tick as of today, but we are building these capabilities, and at the end of the year, we can. Another thing is this Inflation Reduction Act.
That's a massive program, $1 trillion funding, and has several elements. I would say that most relevant for us is $1 billion tax credits for replacing dirty, old diesel trucks. That's a big incentive for making truck electrification. Another one is that the consumers will get $7,500 tax relief if they buy an EV. These are the things which will accelerate this business tremendously. Let's take a look at where the traffic electrification is as of today in U.S. The darker green tells that there's more EVs than in the light green areas.
We can see that the California has almost 30 EVs per 1,000 people, and overall, the West Coast is leading the development. For example, in North Carolina, where we go, it's basically EV desert. There's only three EVs per 1,000 people. This traffic electrification has not virtually started yet. One might ask that why do we go to North Carolina if there's no EVs there? One reason is that we don't believe that that's the most relevant thing. The electrification has started from the West Coast, but this will become a mainstream. EVs will be relatively soon available everywhere. In our world, there's more relevant factors to deciding the optimal location.
We did careful analysis and survey where to go by our internal resources, but also with the help of external consultants. We selected about 10 factors and gave different weights and points to these different factors. One, for example, is that we wanted to have as less time difference as possible. That's why we wanted to go to East Coast 'cause there's going to be a lot of cooperation with our European factory, especially in the beginning. We wanted to make sure that there's labor available. There's North Carolina is strong in that sense that there's already a lot of green tech industry. There's, for example, Siemens making chargers, there's car manufacturers, there's one of our big sales partners is present.
We wanted to make sure that there's universities, that we can get new talent, attract new talent. For us, ESG values are in place, and so on and so forth. As a result, we came up with three finalists. One of them was Virginia, then we had South Carolina, and then the highest scores got Durham in North Carolina. It's a result of a careful consideration. How our sales in U.S. is now structured. We have sales people now in these locations. If we start from north, we have in Quebec, Canada, sales person. We have in Massachusetts in north. If we come to south in Georgia, Texas, and then California, and in our headquarter, Durham. We are all the time now meeting customers, creating demand there.
For the most biggest major customers who are international, we dedicate global, the account manager who will orchestrate the business relationship globally. On top of our own sales team, we have a network of sales partners. Sales partners we need because we cannot sell all the customers directly. Some customers are too small, and some customers expect so-called turnkey solution where the installation is included in the delivery. Then we combine our strengths with our sales and service partners. Then some details about our Durham, North Carolina facility. It's equal in size to our Lahti production factory, 14,000 sq m .
In the beginning, we will focus on NEVI compliant charging systems because they are very lucrative, and the customers are looking for these because they come very, very affordable for them because the government support is so massive. The investment size is EUR 40 million, and in a midterm, which is in our world, 2026 to 2030, we will employ 300 people in U.S. The concrete plan, what we are doing and what we have done already. From the schedule perspective, we have actually done already big work, many, many man-hours and significant costs as well, by getting market approvals for U.S. and Canada. Now our products are ready for sales. We have approval to sell them in these markets. The approvals are different than in Europe.
We are all the time now creating demand, meeting customers, getting orders, and building sustainable business with our customers. The deliveries will happen as of today from our Lahti factory. Recruitments are ongoing, not only for sales, but basically for all the functions, because what we need to do is to build a similar Kempower in U.S. that we have now in Europe. We need talent in all possible functions. Manufacturing ramp up is ongoing. We're renovating our facility. We are committed to start production at the end of this year in Durham, North Carolina. From products perspective, our products fulfill all the requirements as of today. There's no anything special in U.S. or Canada. However, we expect that there might be some country-specific requirements later on.
That's why we are preparing for that, so that we will hire local engineering resources. How we go to market, now it looks like that it's similar way like we do in Europe. It's basically same concept seems to work. The same customer segments. The size might be different, but the receipt is the same. What is different that the market is now forming, so it's now excellent time to go in the market. We can influence it to customer behavior, who we sell direct and who we sell through partners and so on. Like explained in the beginning, truck charging is big in potential, bigger than in Europe, and we will definitely utilize possibilities there.
From operations point of view, basically Sanna and her team have already proven that this concept that we have in Europe, in Lahti factory works well, so the idea is to build a similar way production there. The local supply chain, that's important because of this NEVI compliance, but also because it just makes sense. For example, big, massive metal cabinets, they are expensive to export from here to U.S. It just makes sense to get them locally. If we wrap it up in a nutshell, it's North America is now small, but starts to grow very rapidly because of the public funding. We will utilize the best practices that we have already done in Europe and learned that they work.
North Carolina and Durham as a location is a result of careful consideration and study, we are confident that that's best possible place for us. Our manufacturing facilities will be comparable to Lahti factory. Thank you very much.
Thank you, Tommi. Thank you. Now we take questions regarding our North American entry and North American operations and the market. Do we have any questions here in the audience? I would like to check that first before we go to online questions. Not yet. Let's start with online questions. What kind of risks does Kempower see in protectionism for the U.S. expansion?
Well, it's not.
I can take it because it's also the fact with the U.S., I was in little bit talking with the political side as well, and Inflation Reduction Act is considered as protectionism. That's only for the companies who already have business that are exporting to U.S. For a company who starts from clean slate, that's an pure opportunity. It actually gives. It is a protectionism for yourself as well if you don't have anything to compare, so you are building it according to the rules. You have actually. It is a good start from that. From our side of things, when we are just building the sites, it's actually purely positive. If you already have an existing business that will be reduced, then for us it's an opportunity. For everybody, it's not.
It's actually for this case, it is positive.
Yeah. Yeah. Does Kempower develop wireless electric vehicle charging at the moment? This is, came up in the North American section, but yeah.
The Power Unit itself that we have that can support the wireless charging and different dispensers, at the moment I didn't disclose it in a roadmap, so I will not talk more about that.
Okay.
I can comment in a way that from our view, it's like one of the different type of cable to charge the car.
Yeah.
First requirement would be that such cars would exist, that then you can make a charger would charge these new cars which we would be wirelessly charged, because there is no such cars in production. It's an interesting academic exercises or projects where you are doing this today, but you need first the cars to charge before you can make a standard chargers to charge those cars. I think it's even more the chicken and the egg, what we are talking about. That's really. If you don't have any cars to charge, you don't want to create a charger in mass production for that.
Yeah
that's I think concludes that.
The next one is on the investment to Durham. It's EUR 40 million. How will we fund this? Will there be, for example, some investment support or loan from the U.S. government, or how will it will be funded?
Yeah.
Jukka?
Yeah. It was $40 million, you know.
Oh, yeah.
... our planned investment in U.S. Yeah, we got certain subsidies from the state and county regarding that, it's mainly the tax-exempt. We will, organically basically, fund that. It's, we have existing balance sheet at the moment. It's quite a healthy and earning business in Europe. We internally basically fund that expansion. That is also good to know that this, the planned investment, it can be more or it can be less. It's depending on, of course, how our business will start developing in North America.
Thank you, Jukka. The next question is about the actual space we will have over there. Are we building a new factory or buying/leasing existing factory?
It's a leased premises, so we have a long, long-time lease, and we will now modify and renovate this building so that it fits for our purposes.
It's not that very long time. It's anyway, it's agreements. It's a leased facility.
Yeah.
Of course, we are building own production lines and all that, production platform-
Yes
by ourselves.
Yeah. Any questions in the audience? Okay, you still have time to raise your hand. We have a couple of questions from the online audience. Thanks for being active. Tommi, how many people do we, at the moment, have already employed in the U.S., and how are the recruitments going?
We have now, I believe, approximately 20 people there. So far we are positively surprised that the recruitments have been easier than we estimated it. It looks like that, we have a very positive brand image there. People are interested to join us.
Yes. How much more expensive is the manufacturing in the U.S. than in Finland, Lahti?
What is the expectation to it to be more expensive? That's more like a tradition. There is different cost models, and it's a bit different where the cost is. I think that's not a direct relation of something is more expensive. It's a combination of things. it is, I think, for the market, it fits, but it's also changing the U.S. market because it's also the local suppliers have been doing their products, let's say sub-sub-sub-suppliers in Mexico, and they also need to change their chains because the Inflation Reduction Act and Buy American concept will affect the U.S. manufacturing as well. They have the same 55% coal value created in U.S., which also they don't fill today because they are doing basically importing their parts or importing the.
This is a challenge that will change the industry in there, and that actually is creating also the opportunity in there that when you have a even more limited supply of goods, that will affect the pricing in a way that is quite positive for the manufacturer side, how I would say it politely. Yeah.
If I may add, it's also that the North America is not so price sensitive now because the subsidies are so massive. If it's up to 80% of the investment costs, then the customers, they value more other features than price, like the availability, does it work and all these kind of things.
Still time to go, for online questions if we don't have any questions in, from the audience. Are there any competitive DC charger manufacturers in the U.S., and what are Kempower's competitive advantages?
Well, at the moment, there's a little bit less competition because of this, Buy American Act, but, overall, this, same advantages that we have in Europe, that we have dynamic power sharing, we can utilize the grid connection in a effective way. Our customers can earn more money with our system compared to competitors. These same things apply in North America as well.
And, uh-
Also today, it's not different competitor base as well. We meet the same companies all over the place. It's quite a new industry, and it's not an easy to come to market. It's a special knowhow. You need to be a power electronics company to enter the easy charging business. It's mostly the same companies you meet in U.S., and there is some startups, but it's very small because it's also new market in U.S. It is quite new things. There is no big players in there, which we wouldn't know already from the European side, which has been a longer developing market. It's basically the same people you meet.
Thank you. Now we go to the last presentation session. It's about our updated growth strategy and financial targets, and we start with Tomi, and then JP will follow. Go ahead.
Thanks, Paula. Again. We go directly in this subject and what it is all about what we will talk. The focus, of course, that we have heard, but let's look at the private car and commercial vehicles, the main focus areas for the upcoming years. Full solution delivery capabilities, we will talk that more exactly in this strategy presentation. All main continents established, that was also what we promised to come back to, that there is also world outside of North America and Europe. Software and services business build up, people and competences, which is probably the, let's say, the basis of whole thing that who are doing the growth in a company. Looking at the, our aim to be the dedicated and reliable EV charging solution partner.
As a strategy, and I'm actually using that's a vision, to be the top five player in Europe and North America. It doesn't mean that you are within top five with all the customer groups, all the things, but in, when you look at the total volume, that's the ambition. Europe, when we look at where we are, top position in the Nordics, increasing market share in the rest of Europe. We saw the Q1 numbers. That's going on. North America, it's rapidly growing market. Our entry is this year, but let's say the business, when we look at the support of the U.S. manufacturings, like we saw, that starts by the end of this year. That's more or less when we expect actually big, more bigger things to happen. In rest of the world, we have looked at it.
It's for us, a business development stage. We are screening the markets. We are seeing on where we need to be, what areas, what are good for us, what's a good fit. We have certain countries we have taken out, which is China, Belarus, Russia. Not all political reasons. China is quite developed, very price-dependent home market for the Chinese suppliers, so that's not a key market for us to enter. That has been from the beginning of Kempower strategy. For obvious reasons, we are excluding Russia and Belarus. Then a list of other smaller markets, but I would say that those are the main ones we are excluding. Rest of the world, we do the business today already, and it is done. We have now Malaysian charging network developing.
We have quite good project in Australia, but they are for us, it's a distributor partners work. We have local guys there to support them, but we don't do in a similar way as we look at the focus markets, we are there present by ourselves with our own sales teams, with the full focus. Looking at our financial targets, medium term, EUR 750 million, so bit different figure than we looked at two years ago, but we see that the market and what we are doing and how market is developing and how our business is growing, that this is based on the strategic things we have done, that this is something that we are now committing to. Looking at operative EBIT from 10%-15%, and then in the long term, minimum of 15%.
This is also the topic that we will remain in growth stage. There's a lot of focus on growth, that it's also when you're reading now that Kempower will stay as it is. It's our intention is to grow as a company, as you see from the revenue company, that will require. People talk about investments, Sometimes when we talk about growth investments, it could be just hiring people like two years before you would actually be needing. Or using networking capital more freely in the beginning to support the growth. For us, that's part of the growth investment.
It's not only CapEx, it's looking at how you finance the whole growth path and what you allow yourself to take the freedoms and the profitability for you to actually support the growth to get to a certain point and be big enough when the market competition phase starts. Today we are still in a situation in EV charging market where the whole supply of all the manufacturers cannot meet all the demands of the customers. You are in a situation, slowly, when you get the capacities running, this will meet the market, that you have a real competition stage, and you have to be a serious player at that time, and that's, let's say, I think the core what we are planning.
There's a little bit about the ambition, not figures, but seeing how we see the market and today, how we have calculated where the revenues are coming from. Growing to quite a different size, but also the weight classes that Europe will not remain, or we see significant part coming from the U.S. side. Rest of the world not to be insignificant. There is an idea how the split is. Of course, we are a European company, and we are growing here. Still, even Europe, U.S. is growing faster. Europe is growing bigger in euros all the time, so that's still quite a, quite a important market for us. Then we look at the application side. If you look at the private cars, trucks.
Trucks. We have been also calculating that of course commercial vehicles will grow, but there's also a little bit uncertainty. We have to calculate the certain markets. We had a comment from one of the analysts already that there's uncertainties in the truck space, so we are not calculating everything on that. We are looking at it as a whole. If we look at electric trucks today, many people in the media are talking only about the megawatt charging. There's a lot of markets and the cases which we will hear from JP as well, what business cases you have in this space. With these words, I give the floor to JP
Thank you. Hello, my name is JP. I'm from the service of Kempower. Let's look at the positioning of Kempower, both in the value chain and the offering. The customers, they look for the partner in this business, and we want to partner with our customers. That means if you look to what kind of solutions we can provide to them. We have a great product. We have discussed about that quite many times. We have great hardware, but we want to be even more the solution provider to our customers. That relates quite a lot to the software and services.
If you look at the position and what kind of full solution offering we have, it is basically combined with the hardware, software, services, energy management. If you look the bit of the detail how we sort of divide these, I want to highlight two sort of the parts here, software and cloud, and then services. If we start with the, let's say, traditional services, I call it, there are things which we are familiar with, the spare parts, for example. Our install base is growing quite rapidly, so this business will come. That's for sure. Product upgrades. I'll give you an example. Let's say the one year ago, one customer has installed certain amount of the power on the charger.
That was enough that time. Now we both know that EVs are increasing, the amount of EVs, but the same time, the EVs, they have higher capacity to charge. In one year it can be that your sort of the charger is not capable anymore, and then you can add more power with our concept rather quite easily. We are actually doing it already now with our customers. Of course, the maintenance, that's always there. We are doing already today commissionings, trainings, and certain consulting. If you look to software and cloud side, status monitoring with the ChargEye, we can see all the chargers we have. We have possibility to build up different kind of energy-related services. Already mentioned about the energy optimization. We have possibility to utilize the charging data.
I am putting the expert services, the ChargEye, our cloud, is middle of all of this. That enables us to do the traditional and new kind of services now and in the future. Let's look at couple of use cases, the practical cases. This is the for private cars. We have three kind of, let's say, the cases. We have overnight, when you have parking, typically cars are there for the longer period of time, you need less power. Destination, you go to supermarkets or restaurant, let's say 30 minutes, two hours, you can charge your car. When you are on the move, when you have the highway stops and urban hubs, you need typically higher power, you have less time. It's a classical, you know, in Finland, you go and you want to drive to Lapland.
That's exactly on the move. I just did it in the this spring, and the personal experience, good. At the moment, few stops, you know, 10 minutes, 30 minutes, you are there. Situation is now, of course the EVs are getting more. We have to have this, the market will have more of these EVs and charging stations. Let's look at the commercial vehicle side. Again, overnight, destination, on the move. Same thing applies here. Of course, the powers, you know, the relative powers are higher. We have the destination, 30 minutes, two hours, on the move, you have the higher power requirements. Now the both of these, you know, the private vehicles or private cars and commercial vehicles, we have, let's say, solutions and service already today. We can serve them in a certain extent.
The one thing I also highlight that when you do the services, you utilize heavily on our own partners, service partners. We have to basically, we cannot do everything by ourselves. Own people utilize them for the core competence, core actions, and that's how we want to do it. Okay. Thank you.
I will continue and have it going to the end of the official part. Of course, people are in the center, and how do you do growth? It's really what I believe in as well, that you do it with the right people, with the right know-how. It's really how we build the organization and get the right people working with us. Agile organization, now a flashing term, but we are moving fast, so you need people and organization that adapts, copes, learns. It's best practices, knowledge sharing, the high focus in us, customer understanding, of course, how to see the customers. I think part of our success is that we have been good in that, and we need to continue.
Competence and skills development, you cannot find any more talent from the field, so you have to have also focus in your own trainings, how to get the whole team into the space, and career incentive model are in the core because really believe that one of our major part is really, if you call it risk or the opportunity, is the people, and we need to have the right people to do the growth. If we look at the sustainability and look it in the reality, I think that's a good word for Kempower, that we don't need to look at how much CO2 reduction. If we look at it from the pure, we were born sustainable. We were born into the green transition. This is the core. That's why we exist.
It is also a couple of cases to show that. In the, like, in the Danske Bank report looking at it was the only company 100% aligning revenue and CapEx purely. Looking at the evaluation for the green equity by CICERO Green, looking at that we are by far dark green from that point of view with both revenue and CapEx. It's purely, I call it the term, I think, born sustainable and born to the moment of green transition and changing the world. It's a big, big part of it. Looking at our impacts today, just as a summary, because we are looking at, of course, it from all the letters from the ESG, looking at the social impact, looking at how we make the world better, how we affect it.
The environmental, and in there, looking at, our, let's say, impact in there that we are allowing the electric traffic and electric transportation to be born, and that has direct impact of reducing the emissions by 86% based on the Finland energy production price because this is a number from traffic. It, of course, relates to the whole movement that you are then changing the energy production and everything in the world. Of course, EVs will not save the world by alone. It's a combination of things. 390 MWh charging energy daily to customers, it means is the energy you are not anymore producing by burning things on the road. This is exactly burning things on the road. Moving things where you have like a fire inside.
It's a difference to, let's say, induction electric stove to a campfire for cooking. This is basically the transition we are doing with electric vehicles. Circular design, we are focusing that our products will be recycled. This is a big part of the whole road, how to become actually carbon negative for the whole world in the future. Today we are already 100% carbon-free electricity in our main factory, and we are moving that way with, of course, all the facilities in there. Economic impact, we are, of course, impacting the society with the direct things, but it's also part of having the local supply chain. It's only not only the environmental impact. You are affecting the whole area where you are. Creating more jobs than your company alone, you are supporting also the whole communities where we are present.
Going into conclusions, which could be half an hour or one hour, but let's try to get this that we're gonna get also to the important questions. What do you have to remember from today? Of course, the market estimation, it's quite much different than couple of years ago. Big impact is also the commercial vehicles, especially the truck market being born. We can argue, when does it happen? What does it happen? We try to give you the evidence, what the truck manufacturers, what the industry is doing, what is the demand from the customers to see, and what is the investments done for the charging infrastructure to support the claims as well. We see that this movement is now happening. Value creation. How do we look at ourselves? What are the core things in our strategy?
It's about secure the existing bright vehicle market and win even to be in the, let's say, to the top league of customers and really be talking to the right customers who are growing, and identify the right customers who are growing in this market. Develop the new stronghold in electric trucks. This is emerging market. It's a new market within a new market. It is new players. There's new market, new solutions. I could remind, new solution for us doesn't mean a new physical product. It is very much what we are looking now. It's a combination of the solution. It might be different software service or more integration to a new system that will take a new approach to be more closer to the customer's needs and actual business processes. Replicate the Nordic success in North America.
I think there will be questions, are you arrogant to say that everything works? Today it looks like, but we have also been preparing, like with the local engineering team, if the market needs some adjustment, that we are ready to answer to the customers. Today it looks like. There is the same customers, product seems to be a good fit, but, from the experience as well, I believe there will be some local requirements, and we are prepared for that. Today, if there is none, of course, we don't do anything if the customer demand is there. It is looking at also how we have moved within Europe, that we started from the Nordics, we continued to the rest of the Europe, doing the same things, expanding in the same way with the success. Secure recurring revenue. This is a long-term goal.
Of course, because it's we have today, this grows together with the installation base, how much products you have delivered. Of course, the device sales always grow, so we cannot expect huge percentage, but it will be significant part of the future, especially when the competition game starts. This will be more significant. It's also a competition way. You better services, you win more customers with the hardware, so it's a combination of things, but it's an important part of the path we are doing today. As the market is growing faster, I was talking before that it's even longer in the future, but I think the market growth is accelerating. It's bringing this part of the market also faster to the needs of the customers. Mid- and long-term profitability, very core now. There was also already questions about it. We are looking at the product costs.
It might be about product designs. We have to be competitive in the long. It's part of the things come from the economies of scale. When you're growing, you get better contracts. Your volumes will actually make everything more efficient. Yeah, it has to come to the how company is built, how the products are built, how the products are designed. You cannot just add automation, you have to design it to the product, it's part of the whole story. Value capture, differentiating customer experience. This we believe. It's not only the EV, it's not only holding the plug. It's how our business customers see it. It's how our cloud services integrate directly into the business operations of our B2B customers, how it's supporting. It's the whole experience in there.
If we're looking user, customer, they are both. If you're looking, it's a little bit different how you see in the commercial vehicle side. If you're looking at our megawatt charging, it probably weighs like 50 k, the cable with it. If you want to push 1,000 kW in there, you have to have ways to do it. Moving from product sales to solution sales, very much a big theme. This is a lot of exercise we have been doing, what kind of solutions. A lot of this differing portfolio to different groups, it's also related to how do you address the customer's needs. It's not only about the physical product. Product visions, public charging, commercial fleets, different needs, but like I said, mastering supply chain is a big part. It is even more important than how much factories you have in our model.
It's how well you design the supply chain and how well you get your friends, your suppliers growing with you and together with you, and how many things you need to have in place and choosing also the right friends to play with. Focus on product design, lean operation model, that's part of the really the profitability path. In operation or across the organization and teams, this relates to the capability of people doing innovation. It's about innovating in production models, operation models, sales models, not only the products. Thank you for this part, and I think we go to the questions.
Thank you, Tomi. Thank you, JP. Do we have any questions in the audience to start with? If we get the mic to Tom.
Thank you. It's Tom from Carnegie here. I really see the benefits with dynamic charging, but what is hard for me as a non-engineer to understand is how quickly will competition catch up? What has happened in, you know, since the IPO and how difficult is it to, you know, to replicate your type of product?
I think the story is to stay ahead with the innovation as well and have the whole solution. I think it's not only about dynamic charges. At least when I look at forward, actually the software services might play a bigger role when you look at how well your systems integrate in customers' business processes. In the long run, you have to stay very competitive, but the competition waves might not be purely hardware or purely dynamic charging in the future. This is not the easiest way. I think we have had this question every time. I'm very proud if we are the one to be copied, but I think there is also other customers who are copying other customers, so it's not customers, I mean competitors, so it's kind of...
I think we are not the biggest company yet, so it's, I think there will be in some time, somebody copying the solution, but we don't see it today.
The case is still that you cannot order dynamic charging from anyone else?
In the similar way as we do it, I haven't seen it. We don't know everything from the market, and new things are coming. I think it's a fast market. I think there will be something, but I'm also trying to tell that it's not the only thing in the market.
Yeah, we cannot build the competitive edge only based on the hardware. That's why, like, we need to build those other strongholds, partnering with customers and develop that business integrations and go for upper level to sell more intelligent systems and not hardware only.
I think it is strength today, but if we would rely on one strength, that would be very naive.
If I can add, overall, like we described, you described quite well. Whole user experience, what we have and where, how we have built whole product and offering, you know, it's many more things like this. Cable handling, like Jussi was showing, it's a software, it's dynamic charging. There's many things in the whole user experience. It's not only the dynamic charging.
You have always used the car as an example with dynamic charging, but this today is a lot about trucks. Are the benefits kind of, you know, similar despite different sizes of batteries in trucks?
I think it's a good example because it is to understand, but we have been using actually it's a big thing on the bus sides as well, which is quite similar to, for example, last mile delivery.
Yeah. It depends on the use cases you saw there on the solution vision that different use cases, the dynamics have some benefit, but some not, and especially the, this on the move that you need to push that full megawatt-
Power on the truck as fast as possible. There is a little bit less benefit, but overnight charging and warehouses and there, then you have more benefits on those. One, what the customers they really kind of like our solution now is the multi-modality that you can charge the different vehicles since the trucks are not yet there that you can charge the private cars. Not specializing on those, but using the platform for different vehicles.
Could it stand for example, using the bus Pantograph charger, that when the bus is not there you can direct the power to the cable chargers next door. It's that, not only that you don't use the investment only in one case.
Okay.
Thank you. The next question.
My question?
Yeah, go ahead.
It's Emiliana here from The Analyst. My question here is on the lead time. You mentioned earlier that it has improved. I wanted to know, like, if it's possible, what is it right now? How much has it improved, and how does it compare to the competition?
From a system supplier, it's also, hard to say, improvement of what, but I think on average, we think we could go about 30% improvement.
Yeah, yeah, in average, yeah.
it depending on the customer cases and orders, but I think we have gained the level that the lead time is not the issue for the sales anymore. cut about 30% is good estimation in general.
Yes, and if I may complement, it also depends on the product. Like we have this Movable Charger product which is basically off-the-shelf product, and then we have larger systems which obviously takes more time.
Excellent. Thank you. Do we have any other questions from the audience? Let's take a couple from online. The next one goes to Jukka, and it's about our EBIT margin. Can you share the rough mathematics behind your aspirational 15% EBIT margin, and can you explain how that ties to internal rate of return at the factory level, please? Thank you.
Yeah, good question. This 15% target in the long term was at least 15%, so that's the minimum what we target. Now of course, you know, in the medium term it was this 10%-15%. We also wanna show in our targets and also in our guidance for this year that we are still also at the investment phase. We are not the kind of the value company, sharing the dividends, but we also invest at the same time. Like you saw today, the North America investment what we also described, and of course we constantly invest on our growth in Europe as well.
Thank you, Jukka. JP, next one goes to you. How does Kempower plan to provide global customer service and support for its products?
Good question. We have of course, you know, different, let's say, the level of support. Typically, we have the partners for the first level, then it comes up, you know, our expert level. Then of course, in the U.S., we will build up service network, partner network, like our people, and then that we already have in place in Europe and the areas we are present.
Thank you, JP. Anyone here in the studio, if you have a question that pops up in your mind? Yes, just raise your hand. Thank you.
Yes. As a follow-up to the previous question, how much do you see or what share of service revenue, of total revenue do you see by 2030, for example? Is that going to be a significant component or not?
Jukka, maybe.
Yep. I can take that. Like you saw, we didn't put any target or we didn't disclose any numbers, but like JP well presented that it certainly will increase. It will increase on the short term, mid-term, and in the long term. It's a important part of the portfolio in 2030.
Okay, thanks.
Thank you. Over there, the next question.
Jan Nygård from Evli. Tommi, you said something along the lines that, DC charging is not an easy business to get into. Can you expand on that? I mean, to a non-engineer, this sounds like established technology and, so, what are the barriers?
It's established technology if you look at inverter technology and how to do power sources, but that's quite limited amount of companies who can do that. It's not that you can start to be an inverter manufacturer tomorrow. It is from the complexity of point of view building, that's what I meant. If you are making today, let's say, it would be maybe high-end solar inverter manufacturer for industry, you might be considering entering EV charging. If you make, for example, AC chargers, that doesn't make you any more compliant to come into the DC charging business. It's the business synergies, and it's also where our history is coming from, coming from power electronics industry. Within itself, it's limited amount of companies who operate in this space. That was where I was referring to.
Thank you. I can pick a question from the online audience that actually follows up on this topic. It's about the IPRs. Do you have some patents that could somehow safeguard your competitive advantage?
Can I start?
Yep.
That of course, one way to look at the patents is to guarantee that you have a freedom to operate, and that we have done quite strongly with the legal department, that there is no blockers in the market. Then, it seems to be on a good track there. There is some areas that we are patenting and pro-protecting our path forward, that some of them are related to cable management and so on. We have a bunch of good patent spending now.
Very good.
Also doing with the data, but it's also the part of things that when you patent something, it's not giving you the competitive edge, because when you're coming, you can solve the solution a little bit different way and come to the market. It's also guaranteeing you the freedom to operate when you own your tech, and you could patent protect it. That's even more important when you have done something great, that you have the freedom to operate and nobody can challenge you from using it. I think getting this kind of competitive edge that you would be only one who could charge a car in the world is, is not the case. It's more that you are secure, that you have your IPR and the advantages at some points.
Very good. About the M&As. What is your M&A strategy? Does your targets include acquisitions?
Yeah, we have also commented that earlier, and we always have said that we don't exclude the M&A. We are open to that. We have looked up small technology companies there, but this is not our target. Our strategy is not based on the M&A, execution.
Thank you, Jukka. We continue with online questions. Are your new targets ambitious enough? It seems there would be more demand and capacity for more. Tomi?
Are they ambitious enough?
Yeah.
The EUR 750 million company, when we made two years ago EUR 27 million for manufacturing company, come and do the same. That's I would urge the person who asked it that please repeat the same and say if it's ambitious or not. It requires a lot of things, and we still have. Of course, we're softwares and service, it might be easier to scale, but you are scaling a manufacturing company in a new space. This is also, we are looking at it from the all the angles when we are looking at. I think the EUR 750 million is not an, at least the lowest ambition goal I have seen. Yeah.
I think there is no conclusion, but I feel that if you can find an example in the manufacturing space with the same growth plans, I would be happy to see that.
If you look at that, those numbers for that goal we gave, that the goal is only within a few years that we will be EUR 750 million.
Yeah, it is a quick path.
last year we were EUR 100 million company, so.
Year before, 27, and the year before that, 3.5.
Exactly.
Yeah
... if we reach that, we are happy.
Yeah, I would think so, yeah.
if we reach that, we will be happy. Yeah?
Yeah. Yeah, kind of.
Yeah. Very good. I think this is a very good place. Okay, we have one more question. Let's go. One more question.
One quick last question regarding more on the financial market side and then, and viewing from the investor side. I mean, all investors are probably happy investors, I would assume. Looking forward, there are not that many large international investors yet in the company. I think there has been mention that you are aiming for the main list at some point. Is that something you can collaborate on? I guess that would have to be combined to the fact that liquidity is somewhat limited for the stock. There is a large family owner. I mean, would the family be open, or have they stated anything in regards to increasing liquidity in the company at some point?
Please, Jukka.
Yeah. Like we have said earlier also that we constantly discuss about the possibility to move the main list and, but we have no official decision on that so far. You can of course do the transfer even without having the primary or secondary. You can just do it technically as well. Second question about our main owners, so we don't comment our owners, topics, so that's their call.
Very good. Thank you, Jukka. Let's not start the video yet. I would like to thank you all, thank you here in the studio and also online, for a lively discussion. This was our first Kempower Capital Markets Day, but it won't be the last. We really wish that you found the discussion and the presentations useful, you stay tuned and follow Kempower. Thank you for all the excellent questions. There was plenty coming from online, we have already discussed and agreed that we will offer answers to these questions somehow in a blog or online Q&A or something. I wish you excellent spring, keep on charging, and thnk you all. Bye-bye .
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