Welcome to the Volvo Group Capital Markets Day. It's great to be here in New River Valley, USA, and it's great to be back with all of you again. It's a little bit more now than two years since we had our last CMD in 2022, and a lot has happened since, both inside and outside the Volvo Group, and it is more important than ever to understand the world, the industry, and our customers, and today we are going to share our view, how the transportation industry is evolving, and what opportunities and challenges it brings. One such opportunity for us is certainly North America. Here we are really gearing up, and this place, NRV, is very special. It is the largest Volvo truck production plant in the world and a very important part of our North American strategy that you will learn more about later today.
Thank you all for joining us here at the Customer Center, and to those of you watching from home, you are most welcome. Let's get started, and why not by introducing our President and CEO, Martin.
Hey, Kina.
Hey, hello, my friend.
Hello, good to see you.
Feeling good?
Feeling great. It feels a little bit like this, you know, we have an expression, Roger and myself, we talked about that this morning, that those are the days, you know, when we are meeting customers, when we are going out to different visits with our factories, suppliers, different partners, and Capital Markets Day is one of those days. I mean, when we have the time to share the strategic direction, not only talking about the short term and, I mean, the trading updates, but really where is the group heading, so we have a lot in store for you guys.
Yes, we do. We really enjoy having you here, and Martin, why did you choose NRV as this year's CMD location?
I mean, the obvious reason, obviously, is that we have invested more than ever in North America. We have done a great journey so far, but now we are gearing up for growth, as you said, both when it comes to products, when it comes to solutions in North America, but also when it comes to our industrial capabilities that have been partly bottleneck. And we have a great customer confidence. Growth opportunities are there, and we will look into that. That is one. The second that makes us very proud is actually when we stand here today, we have the highest share of American shareholders and investors ever. So it's also a sign of confidence, and we are very proud of that, the mix.
And we have a very strong history here in the U.S. Next year, Mack Trucks is celebrating 125 years and more than four decades now for Volvo Trucks, strongly established in the country.
Mack Trucks, an American icon.
An American icon.
I mean, it's fantastic.
Just take a look. The first Volvo FL from 1981, and over there, many of you have already seen it, the future, the all-new VNL, Martin.
Yeah, I mean, we are into an emotional business, as you know, B2B, very close to our customers. And it's emotional to see the development in technology, but also the consistency over time. Started with the cab over, the FL7, and now when we see the all-new VNL, that is just amazing, designed to change everything.
We will have plenty of opportunities to look closer at the all-new VNL later. Martin, you said we had a full program today, which is really true. We will look at both our performance here and now, but also, of course, talking about our journey towards more sustainable transport solutions. Last time we met, the title or the key message was geared for growth. What will be the key takeaway today?
Now, the title today is actually gearing up for growth. So we have moved from being in a sort of, you know, planning phase of this into coming into motion. And why we talk about gearing up for growth is obviously that we see continuous opportunities for solid performance in this group moving forward, continuous development of that, but also really how the transformation will accelerate the growth lever, the top line for our industries, for the players that do this right. And of course, also by evolving our performance culture. We are very proud of the customer base that we have, the relations that we have, but also the strong set of colleagues and competence. So it's about gearing up and continuing a good journey, Kina.
I think it's fair to say that since we last met, the hot topic in our industry has been if the transformation is happening or not. I mean, the pace is slower than predicted, and we have also seen companies backing down from their green commitments. At the same time, we have a fairly uncertain geopolitical situation, and we are also facing more normalized markets. So there's a lot to take into consideration. Martin, now I would like to ask you to give us your view of how the transportation industry is evolving, please.
Thank you, Kina. And I think I will take that small clicker there. Perfect. So again, also from my side, most welcome. We really appreciate all of you that are here in Virginia today, but also everyone watching in from on the web here. We know that it's a little bit, you know, logistics to come to Virginia and to Dublin and our facility here, but I promise you that you will go home with a good feeling of what you have seen also live here, meeting our people later on. So starting where we are and where also the world is, I would like to start with this. This is very important to us. That is the vision that is driving the Volvo Group. And why is driving prosperity through transport and infrastructure solutions so important to us? Because it means, and it will continue to mean, good business.
It means, and it will continue to mean, growth. And on top of that, what is great, it is aligned also with the key interests of our stakeholders, for our customers and their continuous success, but also their customers downstream in the value chain. It is aligned with a sustainable and necessary development of societies where transport and logistics play together with infrastructure a crucial role. It is aligned with talent acquisition that is even more important in the technology evolution that we are into, attract talent and continue to complement our great set of colleagues. And it's aligned with outstanding shareholder returns for our investors and shareholders that believe in us. So driving prosperity through transport solutions and infrastructure solutions means a lot to us.
If you take a step back and look to the growth perspective for the transport, the volume, transport volumes, and here you see that in billion ton kilometers for different transport means. As you can see, from 2010 to 2050, we will see a considerable growth. I mean, of course, it's a long time span, but even with that, that is, and this is one of the forecasts from Statista 2023, but you see similar patterns. What is interesting is that the biggest growth will be in road transport, compounded by mega trends such as increased population, urbanization, e-commerce. Mass customization is actually a very important pattern also in order to drive new logistical flows, increased purchasing power, not least in the Global South.
It will be partly countered by some other trends such as deglobalization, but the mega trends will outperform, so to speak, the negative trends, and in this case, we see an opportunity to actually increase road transports with five times, or I should say the freight volume, and that is important, but we also know that this needs to be considerably more efficient, considerably more safe and sustainable in order also to cope with the demands that we have for a future society. Combined with another very important factor is the relation between advanced logistics and the GDP development for different countries. On the X-axis here, you have actually the GDP per capita for different countries, and on the Y-axis, you have logistics cost as share of GDP.
It's not only about having logistics systems. It is about having advanced logistics systems based on a number of fundamental principles such as the equipment and solutions in itself. This is not a cost game of the equipment. It is about an efficiency game. It is about standardized pallets, such as the Euro pallets or the 20-foot container. It is about digital flows on top of the physical flows. It is about a harmonized and smart regulatory landscape. If you are coming together in that, you see a considerable uplift when it comes to fill rates, utilization, energy efficiency, and thereby, at the end of the day, competitiveness. In a competitive landscape that will continue to evolve on a global scale, nations, cities, companies cannot just ignore the fact that logistics and transport will play a very important role.
Interesting enough, when you're going into electromobility or later on also electromobility combined with automation, you will further take down some of the most advanced here, obviously. Why electromobility? Yes, because it comes with a planning that is new. How do you design the flows? How do you design also the digital capabilities around it, etc.? When we think about the transformation, it's not only about the necessary opportunity of sustainable development. It is also about competitiveness. Very important. The OEMs and the players that can provide these types of advanced solutions, both when it comes to hardware, software, and also the shift into the new will be winners. Of course, we are navigating, as you all know, in a changing world here. A lot of things are happening.
We have enjoyed strong markets, first and foremost based on absolutely too low interest rates, as you all are aware of, when the risk and reward level was too low, and then COVID came, we got imbalances, and we had a strong increase. Now, after, so to speak, the inflation shock, and hopefully we're coming down to a normalized market, we will see a development that is normalizing and that is good, and we'll come back to the normal growth rate in our industry based on fundamentals, and what is important in that context is also that efficiency will start to come back as one of the key parameters because it has been a long period where, so to speak, volumes and ability to ship has been far more important.
Free trade in global markets, as we have known it, are gradually and stepwise not disappearing, but you can say it's evolving into another direction. In that regard, both, so to speak, the fragmentation in itself, but also the intervention of industrial policies, it is very important to understand that. In the context of having regional value chains end to end, to have regional capabilities of technology and innovation, and of course, strong local and regional partnerships. Climate change has been on top of almost everything, the ESG agenda, and it's now in competition with a number of other key priorities for companies and countries, such as technology evolution, everyone, of course, what will digitalization and the advanced digitalization now with analytical and generative AI, for example. It is about resilience. It is about job creation, affordability, etc. So you need to be able to balance that.
The robust energy mix, fossil-based to a large extent, by the way, but still robust and well-known, is in big transition. In some cases, it will evolve in much higher speed than we think, but it will also make the actors, not at least in transport and logistics, think about how should we adapt and adjust to that, but more importantly, how do we take advantage of it, given the fact that we are together with our customers and customers, customers, a key player into that new energy landscape. Great opportunities ahead. Hardware first, software first. I don't need to tell you more about that and with the capabilities that we see.
But one thing that you should take away is, of course, that for logistics and transport and also logistics in, for example, infrastructure projects will be considerably involved when you can make meaningful analysis of the data, all the data that we are generating, and drive the advantage, not at least of generative AI. And we see already a lot of outcomes in that development. So the long-term trend is clear here. Our markets will transform. That is clear. And what is also clear, it will happen, as we have said here, segment by segment, application by application, and with different time facing of different geographies, depending on many different factors, by the way. So that is clear. But what really looks, you know, smooth and stable and almost plannable here, it is not like that, I can tell you, and you know it.
First and foremost, the time-phasing of every, so to speak, start and trigger point here, because, as I said, applications, segments, regions, and number two, what will be the speed of the acceleration, so you need to build in a high level of flexibility. On top of that, when you zoom in for a week or for a month or for a quarter or for a year, the volatility increases, obviously, of this, and again, agility, flexibility, speed, modularization will be key in order to cope with that, but having said that, you don't want to not be in the game when it happens.
So first movers that can cope with this volatility will continue to build resilience in their business models, will continue to mature the technology and value chain capabilities, will continue to evolve the business models with a new level of risk or reward and how you should actually incorporate the different factors between us and our customers in a smart way, and will build customer confidence because our customers want to make this journey hand in hand with a trusted partner. You are not putting the family silver into something new and then just move and hope for the best. You want to do that with a trusted partner. To summarize, a little bit simplified, but I like that because it explains anyhow how it works, the dynamics. Wealth creation is the key driver why logistics transport infrastructure development exists. Super important.
But we know also that we have had, and I've made it red for the sake of the argument here, some negative side effects. And I mean, we have improved considerably over time, etc. But still, we need to address that. It's climate impact. It is noise. It is congestion. It is also talent acquisition into the sector who wants to participate. And you have a number of other factors. Transformation is happening to make that green. And that is, of course, a bumpy road and a long journey, but it will happen. And the guys that can do that will enjoy a high level of growth. And we can also see some of the key levers that we will discuss here. Regulatory push, but also technology and digital push will be very important to mature this.
We see the market mechanism as such when it comes to pricing, for example, of CO2 gradually evolving. That will happen. It's also about the timeframe. The key enablers, obviously, I will come back to. And then what also will happen, and we start to see early signs, is the customer pool, primarily from the transport buyers. So if we go into the regulatory landscape, you will see that on the right side here, already by 2030, 2032, you have very meaningful and material adoption rates in order to avoid penalties for the OEMs. One of the key problems now, when I have a lot of discussions with key actors in the value chain, is obviously that it's unreasonable that it's only one actor in the value chain that has that demand. So that will evolve over time because it needs to be done.
But that is the case right now. But on the other hand, on the left side here, you see the adoption rate and the order intake is flattening out. We see a slowing down of the pace right now. And there are several factors for that. I mean, this is our own order intake. We have 70% market share in Europe combined. Volvo and Renault, we have 50% in North America. But volumes are still, as you can see here, too low. And now it's slowing down a little bit. One of the reasons is the current economic conditions. Interest rates are high. You want to wait. CapEx are bigger. Uncertainty. You don't go for it now. It's natural. But it's not all. That is one of the key factors now. The second piece that is important is this fundamental equation of the transformation, the adoption rate, right?
And in order to get electromobility adoption rate, you need to have a number of key vital parts in place because you are competing with a very, very efficient value chain today that has been evolved over a century, basically. And you need to have, of course, the products. You need to have a TCO that matters. You need to have infrastructure, green energy, and you need to have a matured value chain. That will not happen overnight. But again, to participate in this journey now, to learn, to evolve, to have a smart balance when it comes to your own capital allocation, combined with building capabilities, building confidence, because the growth journey here for us is amazing. And I will come back to that. It's a cliffhanger, guys. But one of the key factors that we see now is actually this one. Infrastructure.
For the early adopters, and we see some of the key players, DFDS, for example, in Denmark, they are really gearing up now. They say that we will continue to gear up if we have more and more certainty around the charging infrastructure and in particular on the public side. We see developments. We are participating, but everyone needs to do their job. Another factor, obviously, that is important is the TCO development. Already today, we have a number of segments and applications that are on par or even better than a comparative diesel powertrain, or in some use cases where the fossil-based powertrain is not actually allowed at all, like in certain city zones. But it's also clear that the evolution needs to continue segment by segment, application by application, geography by geography in order to further accelerate.
And that will be done, as we see it, both possibly through a regulatory push, also for other actors in the value chain, but more importantly, that we think is more sustainable over time is actually, so to speak, a price on CO2 in a smart way. We see that, for example, in Germany, when they have adopted the mechanism, it's working, and then you're paying, so to speak, for performance. You are paying for CO2 performance that will be a societal benefit. Investment incentives could be important for a period of time. Technology evolution. We already see that in our cost curves, obviously, but also value chain evolution.
But also to get used to it because so many of our customers, and we have several hundred million kilometers of experience now, generating an enormous amount of data to continue to optimize this, is also saying that once you have done the shift for the driver, for the system, for the customer, you never go back. You never go back. And this is the trick because, as I said, tough bet. This is the balance that we know it. This is the business on the left side here. Today's economics, what is characterizing this? The balance between us as providers to our customers, long-lasting relation, pricing, services, residuals, cost of energy, availability of energy, financing, risk-reward, how long should I keep it, what is the optimal point? This part has been developed over decades in big trust.
Now, in order to move to the right side here and to do the shift into the new and the necessary, it is a big bet. You need to evolve that together. You need to understand how you should do it. And one of the key challenges that we see is actually how do we constitute the business model to make it happen, to have a fair share of the margin since, so to speak, the constitution of the business will be different. Higher CapEx, lower OpEx through the energy consumption. How do we design the flows together so we have a higher utilization, etc.? Super energizing. But for us, of course, extremely rewarding because every shift that is happening here has at least two X tick in top line per unit. So it's not only a margin game. It is also a top line game.
And to balance that during the transformation will be key. And you don't want to lose out on that opportunity. And I mean, take other sectors when it happens. Here you have the Gartner transformation curve. Innovation trigger. Money is flooding in, you know, to all different initiatives. Sky is the limit. And then, I mean, the peak of expectations you are coming into the trough of disappointment, and then it's taking off. And just for the sake of the argument, I took with me here solar globally, what has happened completely following this now. And the main trigger, by the way, why this happened was that too early, the system was taking away the key levers to support the scale-up. And I say the system, all different actors.
So then it was a painful journey for a while, but then technology came along and matured, and it took off. And interesting enough also is, by the way, that all forecasts have always been too low. So when it's happened, so again, when you are in the trough here, then you're very negative. Oh, it was the wrong bet, and it will never happen, and what are we doing, etc. But that is how it is. But then, you know, then when you're looking in hindsight, you said, why didn't I go for more here? Why didn't I show to everyone that we have an underlying business that is really, really great and that we can actually also capital allocate in a smart way to not only participate in this curve here that we believed in 2015 and maybe in that curve.
Now it looks like the latest forecast. It will even exceed that one. How does it look on the corporate sector then? Science Based Targets initiatives are super important for me. The reason for that is obviously that it's addressing the whole value chain for companies. If you are a customer to us, a retailer, for example, you need actually to address the full value chain Scope 1, Scope 2, and Scope 3, address that, set clear targets to align with Paris and other agreements, and disclose that publicly. We see a continuous journey here, but we also see hesitation, to be fair, that people are changing the targets, stepping out even, etc.
But even the guys stepping out are still keeping material targets for 2030 when it comes to their decarbonization for competitive reasons, because they understand that consumers will actually then, if it's -20% or -50%, could change. The good news for us is that the abatement of logistics is so early. The abatement ratio between the investment and, so to speak, the CO2 reduction is so early in the curve. So even if it's -20% and it starts to get material for Scope 3, we will be part of that journey. CEO Climate Leaders Alliance, 130 companies globally under the World Economic Forum umbrella, cross-sectoral, $4 trillion in top line. 87% of emissions cross-sectoral, Scope 3, need to cooperate, right? 20% Scope 3 upstream, 67% Scope 3 downstream. Interesting enough, the alliance are addressing, you know, good news for us.
They are addressing in order to cope with these fuel and energy-related activities. Feels good. Transport and distribution and transportation and distribution also when it comes to this big. So even in a world where we see certain hesitation, time facing, you are stretching out in time, everyone understands that you need to go this road. You cannot avoid it in order to be a winner, to be competitive. So conclusion on this one. Yes, it will happen. When, why, what magnitude? More uncertain. Segment by segment, application by application, region by region. The key is to have the flexibility. The key is to have the means to participate at any point in time in this volatility, be able to take the opportunity. Then obviously, it's not only the transformation because now we are talking about this one and how that will evolve, and this is the average.
We have the current business. Two things about that. The current business is often seen as the combustion business, but the combustion business will also evolve into renewables, as you know, hydrogen, biofuels, etc. We have a total growth. So for companies like us to master, so to speak, the great opportunities that will continue to be in this current business model, combined with the evolution of this and with the growth rate totally, will be key. Also in that regard, flexibility, agility, speed, maneuverability are the keywords. How do we build that? Modularization in our product portfolios, modularization in our service portfolios, a smart industrial and supplier footprint that can actually work with mixed model assemblies for different parts in this transformation curve, working close with the dealers to evolve that we have the ability to actually work with a multitude of different technologies.
The volume question, how do you keep up meaningful volumes for the different value chains in a smart way? Partnerships and utilizing the geographical strength that you have. India will be a key example, for example, for the combustion engine and specifically for T2 and T3 suppliers. Companies with a strong footprint and a strong presence and knowledge about that, for example, will have great opportunities. So that's the reason why we enjoy our vision, driving prosperity through transport and infrastructure solutions, Kina.
Thank you so much, Martin. Painting a very clear picture of how the industry will evolve during the coming years. You speak a lot about customers. I know that you have one in your back pocket. Maybe we should listen to Jesper from IKEA. Absolutely. Let's do that .
In electric vehicles, we have today one out of three home deliveries from IKEA goes electric.
Here, the ambition is actually to try to go to 100% already by 2030. We are now a third on the pathway. It is collaboration with companies like yourself, with the innovators, with the people setting up the charging infrastructure, so working with cities and so on. But basically, here we have a very high ambition to go as fast as possible to renewable.
What do you expect from us at Volvo and how can we support you?
Well, I think three things. To start with, I think we rely on your technology and basically your opportunity to change your industry. And we will be your partner in this, meaning that when you need to take some risky decisions and take some leaps, we can be a good friend, both in being there with our capacities, with our needs and our demands.
Secondly, I think we work together on the agenda of changing the incentives of the economy. And here, I think we could work even more together, how we meet up with governments, cities, and make sure that we basically create economy of scale around this topic. And then third, I think Volvo and U.S. leaders are climate leaders of the world. We know the incredibly difficult challenges from financially to technologically. And I think you already help us by being an idol for us to say that you have made your decision. You don't have all the answers, but you have decided to do this for Volvo, for the economy and for the future. So you inspire us, and we hope that you will continue to do that as a community.
Very strong voice from Jesper. And we hear this a lot from our customers that we're in this together.
Would you say, Martin, that these strong customer relationships are the foundation for growth?
Absolutely. And I mean, and what is interesting with Jesper here and could be a lot of other voices is that they are largely also representing the customer's customers, the transport buyers, right? And that is super important for us that we are connecting now with the value chain. We have a fantastic foundation with our customers, and we have really, really good work in that regard. But we now need also to take the next step. And by the way, in that regard, we are also working a lot with our own logistics. We are one of the biggest transport buyers ourselves.
So again, painted a very clear picture of what's going to happen in the coming years. The nee d for transportation will increase. It has to be much more sustainable.
That is also why we are staying firm to our own commitments, Martin.
Absolutely. That is the three times 100%. It is a long-term ambition. Again, coming back to the slide and the relation between logistics and performance for countries, GDP development as we know it, it is actually about these three factors to drive and continue to drive this. To be 100% safe because that is the minimum that we can achieve. To be 100% fossil-free because that will be necessary in order to have the competitive advantage for many different things. When you can start to count also the side effects on a global scale of the devastating climate change, this will be a very good business case. Of course, number three, 100% more productive for our customers through improved technology, through improved services, digitalization, and also the transformation.
So we spoke about the very strong customer relations, and we also talked about having a clear direction in mind. Then coming to our strategy that we've had now for quite some years, does it still hold well, you think?
I think it holds well. It's always important to come back and scrutinize and discuss that. But it starts with our customers because I always say that, I mean, and we are fortunate, by the way, and you were into it already, that, I mean, we are in B2B. We have very, very strong customer relations, continue to nurture that in our culture. Money is not falling down from heaven, as we say, unfortunately, by the way. But it's coming from customers wanting to work with the Volvo Group and not having to work with us. We are very proud of that.
How we in the best way can serve them here and now. We see that we have an increased customer satisfaction in many different levels, but also how we can support them in doing their transformation will be key here. Would you mind walking us through our strategy and just look at it and share some highlights? Yeah, some key points then if we take that is obviously, I mean, strong position in key markets. As we have said, we have today a very good presence, Europe, obviously, Latin America, Australia, many parts in Asia, India I was into, and North America. We'll continue to build on that platform with also strong connected regional value chains.
Value creation through portfolio management. You will hear about that later, but continuously also look into our portfolio of markets, businesses, business areas, etc., to have the right set and competitive set on that. Service business growth and synergies across the group also through our modularization. That starts with the customer. We will never compromise that the customer gets what the customer wants, so to speak. Then by a smart set of combination, we can actually combine that also with economies of scale, economies of scope when it comes to technology and development. Then, as we have talked about also, we are leaning in to be a leader in the transformation. Again, also with a smart combination then, for example, through modularization.
What about the financial implications?
No, but I mean, also there we have been consistent over time because we think consistency matters, not least for our investors and shareholders. Our financial ambitions have been clear, starting with a gradual and consistent earnings improvements over time. Create maneuverability. Number two, reduce volatility in earnings and cash flow because we are in a cyclical business. We cannot avoid that. But at the same time, what is important is to make sure that we can utilize the smart levers, both portfolio management, but also service business growth, very clearly connected to the volatility. Discipline in capital allocation. It should be clear how do we actually allocating. Strong balance sheet, technology innovation, of course, good returns. And continuous investments then in our future, as I said. And finally then accelerated growth, the opportunity through the transformation. So strong performance, great values for all stakeholders.
Now look, it was difficult to say. We are going to look at a slide which I think many of you follow very, very closely, the TSR, the total shareholder return. How does that all come together, Martin?
No, of course, I mean, you can say that it is TSR as many other results, if I put it that way, or outcomes, or just what it is. They are results of something. And in that context, of course, when we look at our total shareholder return in relation to the MSCI Index Global that we think is a relevant, so to speak, benchmark, of course, we are proud of our journey. But we are also very clear that this is a journey that we are pushing forward in order to have a good also journey moving forward.
But I think a couple of comments on this slide, apart from the outcome in itself. During this journey, we have also moved from a net debt, rather significant net debt position up to a net cash position. Number one, creating maneuverability strength moving forward. Number two, we have gradually increased our investments also in R&D, in digitalization, in industrial and commercial capabilities. And number three, we have also returned good levels back to our shareholders. And that is the way we want to look in it. We are building short and mid-term value, but we are also constantly preparing for the future. Long-term consists of many short-term, and you need to balance that in a smart way.
And what you are describing, Martin, is acting from a position of strength. What will you say is our key asset?
It will not come as a surprise to you, but at the end of the day, it's about the culture. It is about the people. It is about the way of coming together as a team. And this is one of my favorites, so to speak, not slide, because it's not a slide that is important, but it's one of my favorites, so to speak, principles, how we are operating in this group, Kina. I mean, we have been into that. Those closest to the customers are empowered to take decisions to move quickly. The decentralization in order to drive the business, the entrepreneurial spirit, super important, the owners' mentality.
And thereby also the clear leadership for the P&L, responsibility for each brand or market or product line, leveraging partnerships in a smart way, simplicity and speed, continuous improvement will come back now, super important, and unleashing the full human potential. We are in an emotional business. It's rational, it's B2B, it's fuel economy, uptime, etc., but it's a lot about trust also. And trust is the ultimate human currency. So this matters to us, the Volvo culture, the Volvo DNA. And when we look at engagement in the group from different metrics around cross-collaboration, around quality, around customer centricity, around innovation, around engagement, we have a clear trend and we are very proud of that.
It's all about people.
It's all about people. It's all about people.
I have one final question for you, Martin.
The title of today's Capital Markets Day, it's gearing up for growth, meaning that we are very much in motion, putting in a new gear. And what you said before, normally you say that long-term consists of many short-terms. And here right now, what is your priority?
No, but I mean, the priority is, as we said at the start, actually, I mean, continue solid performance, take advantage of the transformation, take advantage of some of the key pockets of growth, North America being one of the key levers. But also we will continue to deliver what the customer wants in this journey. And we will continue to deliver great solutions for them.
And regardless, because we are often getting that question, if that is the combustion technology, also with renewables, if that is battery electric, if that's a fuel cell and hydrogen-based solutions, we can do it, we will do it, we have the flexibility. And that is the priority and we are looking forward.
Thank you so much, Martin, for now. We will, of course, see a lot of you during the day. Why don't you have a seat? So we are going to move on, or maybe to be a little bit more accurate, we are going to rotate and take a deeper look at our growth plans. And we will start with the business area Volvo Construction Equipment. We're going to look at some of the products and solutions that will pave the way for VCE's growth. And now hold on to your seats because here we go.
That was quite an entrance. You were surprised, weren't you? You didn't see that one coming. So Melker, great to have you with us today. And that was a pretty impressive product portfolio that you showed off. But normally you would come out with a big smile on your face. What's wrong?
Of course, I'm happy to be here. These are the days, right? But you're right. I'm a little bit sad also because you saw some fantastic machines here in the film. And my plan was to bring one of the great new generation articulated haulers here in front of us. But you know, it's too big. It's huge. So I need to bring a small one myself instead to have something to hold on.
Okay, I'll place it over here for you. No, I know it's your precious. Give it to me.
I can just say to all of you, there is one on the outside, so there is a great selfie moment later today. Now, Melker, why don't you take the stage and share the VCE growth ambitions?
Thank you, Kina. In 2024 and 2025, we will have our biggest launch year ever, so we will introduce nearly 80 new and updated machines. That is like one third of our entire portfolio, so we are launching a total new range of excavators. We are launching a total new range of articulated haulers. We are launching some rigids and several numbers of electric machines, and it's obvious that this development of all of this started a number of years ago, but I must say, I feel really lucky to have all of this product now available in this, for our business, somewhat turbulent times, so that's a great timing on that.
I'm also quite confident that our customers will appreciate this a lot, the innovations, the improvements. So 15%, 15% better fuel efficiency on the new range of excavator, just to pick one. That will be really great also for our customers and for them, the bottom line and the profitability. So these launches will help us to both defend, but also to grow and strengthen our market position. For instance, the new generation of articulated haulers will help us to continue to be number one. Globally, we have almost 40% market share. In Europe, we have over 60% market share. And with this product, this range, we have a clear potential and ambition to reach over 30% in the very important North America market for this product. As Kina said, we got one of this outside. Take a look. And I must tell you a story.
Last week, I saw one of the first real ones of this at the backyard of our customer center in Eskilstuna in Sweden, and as a coincidence, I had one of our global big customers for a visit, so I brought him, we went out, and I literally stole the keys from our demo drivers, and we went for a test drive, and of course, I understand that I might not be the perfect reference for this, but I can tell you this machine, this range, is just a winner. All these improvements, innovations, productivity, operator comfort, what have you. Love it. We were early out when it comes to battery electric machines. Now we have a clear ambition to be winners in sustainable powered machines overall. We started with compact, smaller machines, but now we are step by step moving up to bigger and bigger machines.
Today, we have already 12 commercially available models, and we have very clear and ambitious plans going forward in this development. I see large here, and we have a big advantage that we can use and leverage the group technologies to do this through the CAST system in a very smart and efficient way. That's very important for us. And of course, as Martin said earlier here, the transformation journey is a bumpy road. Of course, we will adjust our plans when needed, but we stay firm in our commitments. We stay firm in our beliefs. We are leaders in this, and we will continue to be leaders in this. And when the demand takes off, we will be ready. So we can do this from a very strong position.
We have showed stability the last decade, first by moving up to solid double-digit margins and then maintained that during, as you know, some turbulent and challenging years the last period here, and our focused strategy with a very strong brand mix, a very strong product mix, and now also a very strong market mix in our core segments have been very, very helpful for us in this profitability journey. Alongside these fantastic products and machines and these launches, we are also expanding our service portfolio. The service portfolio consists of parts, uptime services, productivity services, driving both performance, but of course also resilience in the earnings. Since 2020, the net sales on services have increased more than 40%, so now the services make up 19% of our net sales compared with 14% in 2020.
Looking ahead, both the expansion, but maybe even more the penetration of services and solutions will be really important for us, both for the growth and the profit. So we are also looking into defining, implementing, developing future business models such as equipment as a service slash pay-per-use. And we have great experience from this already today on a global level, where of course we are closer to the customers, but it's also a big upside for the customers. So this is a real, real win-win. Distribution, important. So over the last seven years, we have been working very hard to develop the distribution network, especially in North America. So we have transferred 18 dealers representing more than 50% of the North American market into bigger dealers, stronger dealers willing to invest for the future.
As a result of that, we have increased the consideration of buying a Volvo CE product from 8% to 60%, not 16, from 8% to 60%. Of course, that has been and will of course continue to be translated into businesses. The average market share increase for these territories has been 3%. I think that's a great outcome. We are in a strong position, biggest launch year ever, perfect timing. We will continue to leverage partnerships, but even more the group technologies to be able to do this in a very smart and efficient way. We have clear and great plans to continue the service journey. A strong industrial footprint is really important for this, but maybe even more a strong dealer network. We will continue to work hard with that. That is more important than ever. How was it? Gearing up for growth.
Solid performance, great culture of performance, and continue to grow our business, not at least through the transformation. Thank you.
Thank you so much, Melker. Yeah, it's worth an applause, isn't it? So you talked about group synergies. You mentioned cost, our integrated way of working in the group that we will talk later about today. How well would you say that VCE is integrated into the group?
It will be very interesting to see the rest of the day here, and then we will see. No, actually, I think we are working very good together. And I think it's important, of course, that we are smart and helping each other. But first of all, when it comes to the money we spend on development, so just the R&D spend is a good way of leveraging this.
But then also the unit cost, because if we have something fantastic and we bring it, then of course that is much better for that component. And then we integrate it, and then we have a good solution. So it's a really big upside for us.
Thank you so much. You will come back later. I will keep the hauler, but please have a seat. Okay. You will not get that one back. So we are going to rotate again, and this time to look at our truck business. And speaking of high growth ambitions and ambitious product portfolios, take a look at this. You do have a grin on your face because you have all your stuff in here, right?
Absolutely.
So welcome, Roger. I will leave it to you to start the truck section by walking us through the Volvo Trucks growth ambitions.
Thank you, Kina.
It's a great pleasure to be here today to present Volvo Trucks' growth strategy. What you see on this slide is the biggest investment ever in Volvo Trucks history. We have just launched a completely new product range globally, and this range is made for growth. All this product has something in common. They all reduce fuel consumption significantly, and they all design to take safety, sustainability, productivity, and driver comfort to a completely new level. Look at them. The design is just amazing. I can promise you, this is so very important for our customers. Let's start with the all-new Volvo VNL. This is a completely new truck, built on an energy-efficient platform, cutting fuel consumption with 10%. With this product and increased production capacity, we will grow our market shares in North America. The all-new Volvo VNL is designed to change everything.
Another diamond in our range is the new Volvo FH Aero. This is our most energy-efficient and fuel-efficient truck. In only five years, we have reduced the fuel consumption with 20%. The Volvo FH Aero has a new aerodynamic cab and camera monitor system that also increases safety. Our customers, they can choose between electric, gas-powered, or diesel powertrain. We have also updated our icon, the Volvo FH16, with a super powerful 17-liter engine, 780 horsepower, and a torque of 3,800 Newton meters. This is now the most powerful truck in the industry. The FM Low Entry is our first model only developed with an electric powertrain, perfect for city transportation and refuse handlings, thanks to zero emission and a great visibility. With this fantastic range, we have a leading sustainable solution for all customers in all markets and for all segments.
We are very confident that this will attract new customers, grow our business, and increase our market shares. This range is a game changer, and it will improve our customers' business. We have also grown our market share around the world, as you can see on this slide. Today, we have a very strong global position in terms of market share. We will continue. We will continue to grow our market share with a very special focus on North America. Another growth area is the electric segment. We were very early out, and we have a dominating position in North America and in Europe regarding electric trucks: 40% market shares in North America and 49% in Europe. We started serial production of electric trucks already in 2019. When others talk about orders, we talk about deliveries.
Right now, we have delivered more than 4,600 electric Volvo trucks to 49 countries around the world. Our customers, they have driven 120 million kilometers in commercial operations with electric Volvo trucks. That is equal to 3,000 laps around the world. We have today the widest product range of electric trucks with eight models into serial production. And thanks to Volvo Financial Services, we can offer the most flexible finance solution on the market as Volvo On Demand. But going forward, we will see huge business potential with our new electric long-range truck: 600 kilometers on one charge. Sales start already next year. In addition, the higher truck value, more service contract, and charging services will bring us more revenues. We have a really strong foundation, and we have a strong position to capture the market when it really takes place for electric trucks, and it will happen.
We are also developing our commercial offer. It is about maximizing the earnings during the life cycle of the truck by selling the total offer. It starts with the right truck model to the right segment. When we add specification and features, we will come to the total truck price. We all know that all trucks need maintenance and repairs and digital and uptime services. This will add even more values to our customers, and we will package all these services in a customized service contract. Then we add financing and insurance leading up to the total offer. This is very good for our business, and it's even better for our customers. This creates a win-win situation for all of us. But there is more potential for us to capture here in every step of this value chain. Let's look at Volvo Trucks business development since 2017.
We have grown our net sales during this period with 94%, and we have grown the operating income with 201%, and during this period, we have improved the operating margin with 6.7 percentage points from an already high level. This is, of course, thanks to our customers, but we have been growing our volume, our trucks and service to record levels, and we have managed to make several price increases, but during this period as well, we have invested more than ever in R&D. We operate from a position of strength, and talking about strength, if we look at our service business, we see a big potential for further growth. In the past six years, we have grown the service business with 74%, and during this period, we have more than doubled our service contract portfolio.
With our current rolling population of 1.1 million Volvo Trucks and more and more trucks sold with service contracts, we will see an exponential growth of our service business in the near future. To summarize, we will utilize our strong position to capture further growth. We will maximize our product range to increase market share and sell total offer. We will capture the growth of the transformation by taking advantage of our leading electric position. We will grow the service business by capitalizing on the rolling population and service contracts. With our powerful offer, we will target market growth with a very special focus on North America. The most important asset we have is our customers. Long-term relationships and partnerships with our customers are the foundation in everything we do. When they are successful, we are successful too. Thank you for listening.
Thank you so much, Roger.
A very impressive journey by you and the team. Very soon, we are going to deep dive and zoom in on the North American market. And this is obviously a place where we have invested a lot as a group. How would you describe the untapped potential in North America?
The untapped potential, as you understand, is huge in North America, and we have all the possibilities to make this happen now. If we'll start with our customers, we have a really high level of customer satisfaction in North America. And now we are developing the whole regional value chain with a new product, with a supply chain and manufacturing. So we have the possibility. And our ambition is for Volvo Trucks to have 15% market share in North America. And it will happen.
It will happen.
I can reveal 15 for you, 10 for Mack, 25 for the group. We will come back to that in a little while. You will soon be back, but now you can rest your legs over here, please. Thank you, Roger. As I said, we're going to take a closer look at North America. We should, of course, start by looking at the beauty over here. When I say beauty, I mean the truck, even though, Peter, you are a very dear friend of mine. Please. First of all, on a scale from one to 10, in terms of design.
11, maybe 15.
11, maybe 15. I somehow know that you were going to say that, but the reception from your customers has been amazing, and you and the team have done a very strong launch.
Why would you say that the all-new Volvo VNL is such a game changer compared to competition?
The all-new VNL is, as mentioned before, designed to change everything. What we have done is we have built this truck from the ground up. It's built in North America, designed and developed in North America for the North American market, for our North American customers. 90% is new. And if you see what it resulted in, it resulted in leading fuel efficiency, 10% better than the current truck. But we have leading safety already, and we have further increased that. And then we built the truck around the driver. Today, Volvo Trucks is the preferred sleeper for drivers on the North American market. With the driver environment that we have built right now, this is even a more preferred truck. And finally, look at the design. It's a winner.
It's a winner.
We are setting a new standard in the transport industry.
Maybe it's time to listen to our customers, what they think. You were at a trade show in Nashville recently. We were. And this is what they said.
Averitt is 53 years old. We have LTL truckload, dedicated warehousing, and integrated services. Most of our larger facilities in the Southeast, we have 2,640 Volvos. And very, very happy with those Volvos, VNRs, day cabs, and looking forward to the new VNL. We want to give the driver the safest truck. Collision mitigation, emergency braking, blind spots. We're excited about the fuel economy. And we've been asking for the driver convenience center in the back. We finally have that. And as we grow in our LTL truckload division, dedicated division, we can see our truck count increase.
DB Schenker is a major global freight forwarder in the market in air-ocean contract logistics and obviously land. Our number one initiative as an organization in land transport is to set the gold standard for safety in the industry. It's followed closely by sustainability. And we feel that the partnership, the product that you guys are bringing to the table with the new VNL helps us meet those initiatives better than any truck that's on the road today. We'll be able to reduce our carbon footprint not only for us, but all of our partners in the industry. Well, we're excited to get the truck into the hands of our professional drivers out there in the fleet.
I think that was a pretty strong saying. There is no better truck on the road today. How does that make you feel? Happy, I guess.
It makes me feel great.
But of course, and it was mentioned before, it's an emotional business. We're doing business with people. Customer relationships are super important. Doug Lloyd, Averitt, we have a long relationship. DB Schenker, previous USA Trucking, new relationship, very strong, very blessed and grateful.
But I will also put some pressure on you, Peter, because it's you and your team who is going to gain those 15% or get those 15%. How will you make that happen?
Well, our growth will follow the structure of the market, right? If you look at the North American market, we have a strong position in long haul today. We have a strong position in regional haul today, roughly 70% of your total market. And we are well anchored with the larger fleets, as you can see. Doug has 2,500 trucks in his fleet.
We're also well anchored with the smaller customers. I think that today we have never had such a broad offering for our customer base. We will follow the structure of the market. If you look at where we are, the product has never been better than ever. If we combine that with a more stable and stabilized supply chain, if we combine that then with the extra capacity that we'll get both here from New River Valley and in Mexico, then I think we have the elements to say that we are gearing for growth in North America with Volvo Trucks.
Thank you so much, Peter. The good news is that our investments are not only good for Volvo, they are also equally important for Mack. Why don't we bring up the head of the most iconic American truck brand in the world, Stephen?
Thank you. So another gift for your table. Melker, I love your articulated haulers, but we are in the US. This is an iconic brand, and so we need to put this on the table. A little bit of history. The Bulldog was really created during World War I, during such times that the British soldiers saw the durability, reliability, and kind of a pug nose on the truck, kind of a softer nose. And so they named that truck the Bulldog. A couple of years later, on e of our engineers carved out of wood the Bulldog that has been with us ever since. So please, sorry, Melker.
Thank you. This was not rehearsed, but I'm more than happy to have two of them. So you two are working extremely close together. And you have also developed a holistic program for growth.
Yeah, absolutely.
I think obviously we in North America share some common distribution. We're focused in the same market. It's the largest market in the world and plenty of opportunity for both brands to exist. But we are on the journey now of really developing this holistic approach to develop the infrastructure and the support necessarily. Obviously, Mack's got a product that's right behind what you've seen for Volvo. A little more detail here shortly, but the feedback early has been fantastic from some of our previews. As we get into the supply chain and manufacturer, obviously the news about Mexico is very exciting, not only for what we can do in North America, but for Mack, what we can do in Mexico and Latin America, more to come on that.
As we've designed the product, we've had a chance to really work with our supply base, which is extremely important to make sure we have the right supply base. Their resiliency is there. They can support us for the long haul, and so we've made changes to our supply base. We've invested in some of our suppliers to ensure that as we launch products, we're ready to increase production and grow market share for both brands. Also, on the service side of the business, lots of activity, continuing to grow our traditional aftermarket parts business, growing our finance and insurance business, but both brands have recently launched our customizable service contracts, similar to what Roger discussed in Europe, and I think it's starting to pay off. Our top five dealers already have this. They're seeing growth, and these service contracts are set up by our different segments.
So one size does not fit all. What works for the transport hauler is not going to work for the dump truck operator. So we've really created these platforms to allow us to support our customers. Obviously, that brings in additional revenues for us, but it also creates a stickiness with the customer. It makes sure that we're looking at their truck at different points in time, ensuring the quality and reliability and ensuring uptime. So I think that's a key point in this journey. And last, but absolutely not least, is our great distribution, great trends over the last 10 years. Peter, maybe a little more detail on our dealers, and we'll hear from one of our dealers.
Thank you, Stephen. And as you can see, we work really close together here in the market, Stephen and I, Mack and Volvo, and we do that through our distribution network.
530 rooftops, 80% of those rooftops are dual-branded. And our dealers strongly believe in the brands and they strongly believe in the growth. If you see that they have invested over the last 10 years more than $1 billion in the network. So, I mean, if anything is gearing, anybody's gearing for growth, it's our dealer network. I was in Chicago last week with Ron Meyering, CEO of M&K. Maybe we can look at what's happening.
Let's take a look.
I look at the future, and those decisions that I've made since 2002 to invest in my business representing those brands have been really wise investments. There's so much opportunity for us in North America, investments in new product, full range renewal for both brands. The new plant that was announced in Monterrey, we're going to grow volume in this down year.
I think the reason we're growing is the alignment between Volvo Group, North America, and AB Volvo and the dealer networks. I've never experienced a situation where we were in complete alignment in our objectives and we were working together, focused on the same mission. It's really been a unique period of time, and it's going to take us where we want to go. It won't fall in our lap. We have to go out and do it and make it happen. But the product is desired in the market. And if we focus on the right customers, we absolutely can move the market in a way that is really incredible. Great.
Thank you, Peter. Thank you, Kina. So a little bit more about the Mack opportunity ahead of us.
This is one of our iconic trucks, the Mack Granite, a staple in the U.S. and Canada today for really driving the vocational business, but as we said, we're now in the journey of taking this great American icon and taking it to the next level, and to do that, we have to have the right foundation in place, and I'm going to hit on a few of those. Obviously, we're also launching our long haul flagship model next year, and between that and our 125th year celebration, I'm sure there'll be several parties along the way with my colleagues and all of those who have been involved. But we do have a strong foundation starting with our customers. Our customers are very loyal. They've been with us some two and three generations, and we continue to focus on our customer satisfaction, annual survey done from an independent agency.
Last year, number one in customer satisfaction among our peers and also number two in brand image. Continued work to do, but I'm very proud of where we are on our customer satisfaction. And that's really built on the quality of our product, the reliability of our product, and a great distribution network who leverages our uptime processes, remote diagnostics, and continue to train at the highest level. So I would tell you here and now, this will continue. This will continue to be a staple for Mack Trucks. We've already talked about our strong dealer network. The area that I'm most excited about, and Peter talked about this, is the capacity coming to North America. Mexico will help us both provide products to the U.S. and our country south of the U.S. More detail there. And the recent acquisition of CVG was extremely important.
That really allowed us to have our own production of cabs here in the U.S., close to our production facilities. And we're already seeing improvements in our total production systems because of that acquisition. Now, let's be clear. Capacity has been a limiting factor for the Mack brand since 2019. We've had to go on allocation, which means our core customers who are loyal to Mack, we had to allocate a certain percentage of trucks to them to try to keep our customer base happy. And the good news is, as we expand our capacity, we know we'll grab that share back because these have been loyal customers for a long time. So very excited about the investments going on and where we are in the near future. The other important thing I think that we have as a Mack brand is the range of our product offering.
Our vocational product, our rugged products are clear market leaders when it comes to brand image and expectations. And the launch of our highway product will continue to give us new opportunities as well. If you think about Mack, and this is a phrase we hear quite a bit in the USA, when it's built like a Mack truck, we're talking about the quality, reliability, and the DNA we've had for centuries. With that in mind, let's look at what I call this kind of a teaser because we're not going to share the entire view today that comes up in Brooklyn next year. But let's look at a teaser of where we're going with our Mack flagship long haul truck. Indeed, something wicked is coming. I can tell you, I get goosebumps every time I see that video. And our customer reaction, as I said, has been extremely positive.
And I really see this for Mack as an industry disruptor. We go from a product that's a fairly old product from a foundational standpoint to a premium product that will absolutely allow us to compete in 70% of the market, which is the highway tractor, a combination of long haul and regional haul. So clearly, an opportunity for us to grow. Another opportunity is our Mack medium duty product launched only four years ago. And today we have a 5% share, leading in customer satisfaction. We've recently launched our MDE, our electric version that's actually outside in the front entrance. And we are in the process right now of expanding our plant here in Roanoke to add additional capacity for our medium duty product. And we see great opportunity there.
I really, again, will emphasize that as we get our core customers back in our vocational business, that gets us up to where we've normally been in the past, which is about an 8.5% market share. That was the trend before the capacity concerns that we saw after 2019. Now, with the introduction of this new product, this is what gets us to 10%. So I think absolutely opportunity to make sure that we have a 25% share between two great brands here in North America. And then lastly, while I'm excited about what's going on in North America, I'm also increasingly excited about what we're doing outside of the U.S. and Canada. Latin America today, again, has been constrained because of the capacity we have in the U.S.
They will now get to leverage the Mexican plant to have product delivered to them that meets the Latin America market needs. Mexico today is an extremely large part of the North America sales, up about 45% over the last four or five years. And actually, we've seen in some years, the Mexican market is actually larger than the Canadian market. So again, very important opportunity. This is another area we'll have a great opportunity to expand both our vocational product and our regional and long haul tractor. Australia, great products in Australia. They continue to grow market share, continue to improve customer satisfaction, and continue to deliver really good returns for the group. And then another unique opportunity we have in North America is the Mack Defense organization. They actually support our U.S. Armed Forces here.
For the last five or six years, we traditionally sell two to three hundred trucks to the U.S. Armed Forces. But two major projects are coming up in the next couple of years. We have prototypes for both of those projects. This will be potentially a 10-year deal with approximately 14,000-15,000 trucks. And again, this is core for Mack. They leverage our commercial truck today, our Granite that you saw earlier, which allows us to then be competitive and build specific applications that were asked to do by the Armed Forces. So this really helps to continue to build the resiliency for Mack. So we're not just looking at what we do in the U.S. and Canada, but really have an opportunity to expand all of Latin America, Mexico, potential other exports down the road, and then leverage our Mack Defense organization.
With that, I'd like to end it up by saying that Mack has been moving and building America since the 1900s. We will continue to do that tomorrow with an expanded product offering, and we'll do that with cleaner, safer, and more productive trucks. So thank you for this time, and I look forward to having conversations here after the event. Thank you.
Thank you so much, Stephen. We're all looking forward to next year.
Absolutely.
Celebrating your 120, well, not yours, but Mack Trucks' 125th birthday. And of course, the launch of your new fantastic truck, and it will happen in Brooklyn, as you mentioned.
Brooklyn, the home of Mack Trucks. Absolutely.
Birthplace of Mack. Thank you so much. Why don't you join Peter? Yes. And I will ask Roger and Marty to come back and also Jens and Lars, please.
So I think this is what a 25% market share looks like, right?
Absolutely.
Yeah? What do you think? Pretty sight? So Martin, starting with you, there has been a very strong commitment now. There is a strong commitment to make this happen.
No, but I think first and foremost, what you have heard now when it comes to our coordinated investment along the value chain, starting from our suppliers, also when it comes to the industrial value chain technology, obviously, but also dealers and the commercial operations. It has come also step by step. If we take a step back and talk about our operating model, we have been clear that we are working with a decentralized model, and that goes also for North America. And five, six years ago, we did see that we are getting our act together.
We are getting our act together when it comes to serving the customer, customer satisfaction. We are getting that together when it comes to actually cover different ranges, getting that together when it comes to our profitability, captive powertrains, services, etc. And at that time, we said, now it's time to take the next step because you cannot grow yourself out of other problems. You need to have a strong foundation that we have. And then we took a bold decision. Now we do a coordinated end-to-end effort, and that is what we see the result of.
Thank you so much. Lars, Jens, welcome on stage. How would you describe your contribution?
Martin was into it, but I mean, it's a chance of a lifetime for our engineers. The technology team, we really got the opportunity.
This is the biggest investment ever for the Volvo Group when it comes to new products in North America, and I can guarantee you that the new trucks for Volvo, the new trucks for Mack, they will set a new benchmark, not only for us, but for the industry in North America.
Now, I've been working with and in North America for a long time, and I must say the operational team we have in place right now is the strongest ever, and together with Andrea and the purchasing team, also creating a robust supply chain, robust and with the right capacity, we will be there.
And to the sales team, why is this end-to-end approach key?
It's super important. We have been working now together for quite a long time to develop this beauty and what is coming with Mack as well
But it starts with, as I said before, with the customers. Listen to the customers, add values to our customers. And these products that we are coming now will add an enormous amount of values. Just think about 10% reduction of fuel consumption. It's massive.
Taking end-to-end regional value chain is standing here. And then we heard it from Ron Meiring. It's clearly visible in the market right now. So we've never been as aligned as we have right now. So this is a winning team. It's an end-to-end winning team.
Yeah, I think absolutely. I think the timing couldn't be more perfect. We have a market starting to climb in 2025 and 2026 prior to a pre-buy. We have capacity coming into it. We have new products coming. So we really see this is, as you said, a lifetime of an opportunity well into past 2030.
Thank you all.
Now you know what a 20% lineup looks like. We will see more of you later today. So please have a seat.
And maybe as the sales you will have the chance to see the investments here in New River Valley. It's great.
Absolutely. Thank you. Please. So from building growth today to a teaser, how we will develop our offering in the future and access new revenue streams. And behind me, you see another beautiful VNL coming up. What is the difference between the two trucks? Anyone? Come on, you know that. The white one does not need a driver. So let's bring up on the stage our head of Volvo Autonomous Solutions, Nils. Why don't you give us an update on what is happening in the autonomous world?
Thank you, Kina. A lot of things are happening at Volvo Autonomous Solutions.
Let me focus today on the progress we're making in the segment of autonomous on-highway transportation, as this is so vital for the U.S. market. Peter, you shared earlier about the introduction of the new Volvo VNL. I want to extend a little bit on that one because only four months, only four months after the VNL was introduced, we showed for the first time a first-ever production-ready, fully redundant, purpose-built, purpose-designed truck for the autonomous use case. You see it behind me. It has already the Aurora virtual driver fully integrated. Now, it is important to point out that the VNL autonomous is only the first truck, only the first truck we release from our new autonomous vehicle platform. What does that mean? We have built at Volvo an autonomous vehicle platform, which we can deploy across all group truck brands.
We can bring the Renault truck, we can bring it to the Mack truck, and we can bring it, of course, also to the European truck range. Now, this platform approach, that will allow us to scale. We can scale across geographies, we can scale across use cases, we can deploy different drivelines, and we can utilize different business models like transport as a service or truck as a service. Now, key is also that this autonomous truck platform is built to be driver-agnostic. So we can add more virtual drivers to this platform, allowing the tech companies to monetize their technology together with Volvo Autonomous Solutions on our truck platform. So this platform, it will give us leverage, it will give us scale, it will give us competitiveness, and it will lead to a strong market relevance.
Now, the autonomous truck, which I have here right behind me, is one important part of a new autonomous transport system. And this transport is different from traditional trucking. And for that reason, and we're the only OEM with that focus, we are creating a new transport ecosystem because we believe this ecosystem is required to facilitate towards the adoption of autonomy. So we have the autonomous truck, we're building the transport ecosystem, and with it already assembled our launch fleet. And our launch fleet consists of 25 autonomous VNL, one of them I brought with me. And this brings me also to today because we are now ready to start commercializing our transport solution, operating on public road in autonomy mode with safety driver. And together with DHL, and I'm really proud of that, we're bringing now the first trucks into commercialization, pulling commercial load.
Now, important here to point out is that we have a very clear understanding of what is required to execute on our autonomous growth plan. For us, the next milestone is, of course, the removal of the safety driver. We will do this again with safety and with redundancy in place, working very close, very aligned with our partner Aurora. Again, for this, we have a clear roadmap, so we know that everything is in place, all the critical enablers are in place when we are at launch date. From launch, we will go to industrialization, and it is very important to understand that we are undertaking now all the necessary steps to allow for the industrialization. The VNL autonomous will be built here at NRV, the most modern factory we have, and we will produce the autonomous VNL on the mainline.
This allows rapid and business demand-driven scaling. So in summary, we are executing on a clear roadmap towards launch and scalable production, and this gives us the opportunity to win, to win with a strong market introduction of our autonomous truck platform and the respective ecosystem. So we have what it takes to utilize this great opportunity to create value for the Volvo Group and for the Volvo Group shareholder. Thank you. Thank you so much. Nils? Yes. This is really exciting. And you mentioned the launch of 25 trucks. What will come next? Yeah, as I said, we have a very clear roadmap. And if I look at that slide, I could also point it out in a way. We will move from tens to hundreds to thousands of trucks and production volumes.
Thank you so much. Looking forward to that.
We have looked at construction. We have looked at several of our ambitious sales strategies. But to make this happen, you need a best-in-class backbone in terms of development, operations, and procurement. We are going to rotate further, and we are going to start by looking at development and how we serve our customers, no matter geography, segment, or specification. I am going to leave the stage to Lars, but as we rotate, please take a look at this.
I can tell you that I have never been so proud leading the engineers in the Volvo Group as of now. You heard Melker. You heard Nils. Volvo Group is high-tech, clearly so. What we have launched during the last 12 months when it comes to trucks has been just amazing. You have heard Peter talking about the all-new VNL for North America. You heard Roger talking about the Volvo Aero.
And on top of that, during the last 12 months, we also updated the entire heavy-duty range for Renault Trucks, also including battery electric on their side. This is three different launches, three different vehicle ranges, but developed by one global team of engineers. And these massive launches during the last 12 months, they are proof points of a lot of synergies through smart R&D, through cost. Martin was into cost. Melker was into cost. Nils was into cost. Let me explain a little bit more about it. Common architecture and shared technologies. It might look like a dartboard, but it's not. But all those colored rings, every color represents a set of components, a component family. One color, engines. Another color, transmissions. A third one would be batteries. A fourth one, infotainment system. Another color would be the autonomous platform that Nils just talked about.
Inside the component family, when my engineers are designing, they are working on standardized interfaces. And then several performance steps of each component family. Take engines as an example, eight liters, 11 liters, 13 liters, 17-liter engines, designed with the exactly identical interface towards the transmissions. Think Lego, click. This gives us the opportunity towards our customers to deliver tailor-made solutions, catering for exactly their specific needs, optimizing solutions by combining different components and systems in order to fulfill their dreams. That is what we get from a customer perspective. From an industrial perspective, when we are talking about standardized interfaces across, if you go back, please, if you think about standardized interfaces across the group, this gives us the possibility to reuse systems and components as Melker was into. This gives us synergies in R&D. It gives us volume on the different components.
That's definitely helpful when it comes to part cost. It's a huge benefit for Jens because it reduces the number of part numbers in production. Cost is in the DNA of every Volvo engineer. And for many years, you have heard us talking about engines and transmissions. That was the starting point here as proof points of cost. Some of you have heard me talking about the story when we reused components from our early city buses, electric city buses. We took the batteries, we took the motors, we took the software when we electrified our first trucks. Utilizing cost, taking what was available off the shelf there was the reason why we were first out in Europe with electric trucks. That was thanks to cost. That was an example of how we reused from buses to trucks.
Now it's payback time because the latest truck batteries are now used also in intercity buses and also by Melker and the team in the yellow machines. It goes in all directions here and all product areas in the group. They understand the power of cost. With our recent launches in trucks, we are now taking cost to a new level when it comes to systems and components in the area of electronics and software. We have now, for the first time, an identical architecture for electric and electronics, including software in all the three truck brands across the globe. Inside the cab, if we talk about instrument clusters, infotainment systems, camera monitoring systems replacing the mirrors, it's identical hardware and base software. If you look at the safety systems based on radars, cameras, same hardware, same software.
All this is valid for Volvo, North America and across the globe for Renault Trucks and for what Stephen talked about, the Mack Trucks to come. But it's so important that you understand that here we are talking about synergies in the industrial system, but with brand distinction. My engineers, they put an honor in delivering both synergies and brand distinction. And sometimes it's a delicate balance that takes discussions in between all of us. But this balancing, that's an art that takes time and leadership to master. Here in North America now, our new vehicle ranges, they will be game changers. You have listened to Peter about the all-new VNL. You heard Stephen talk about what is to come for Mack. This is the biggest investment ever in new products in North America. And for years now, my engineers, they have been working on these new products.
From day one, we were super clear. This will be a new level of cost. We have reused many of the state-of-the-art solutions that we have in our European trucks. In some cases now, we are implementing new global systems for the first time in the North American trucks. Those systems will come in Europe in a few years. On top of the global solutions, we have also developed and we are implementing local solutions, local performance steps that are unique to our North American customers. With those local ones, we are, of course, sharing as much as possible between Volvo and Mack, but without jeopardizing brand distinction. This has resulted in a wider offering than ever for Volvo and Mack in North America, a possibility for them to really deliver tailor-made solutions to their customers.
But from a manufacturing perspective, we have managed to take down a number of parts in production with thousands, thousands of less part numbers. We have even taken it to a new level when it comes to assembly. If Jens would like to, he can in the future assemble both Volvos and Macks on the same assembly line. We are now starting to launch these new vehicles with combustion engines, but I think it's rather easy for you to understand what kind of synergies my engineers can realize when they now are installing both batteries and fuel cells into these vehicles. Because we are still convinced that we will need all three technologies: combustion engines, battery electric vehicles, and fuel cell electric vehicles. We stated early that there is no silver bullet to decarbonize roads transport.
We have so many different customer demands coming from different transport applications, different markets, and different regions, and you heard Martin earlier being very clear on that we stay firm on 100% fossil-free from the Volvo Group at the latest 2040. The three-path strategy with battery electric vehicles where we are market leaders in both Europe and in North America. Fuel cell electric vehicles where we now are performing tests on vehicle levels with very, very good performance, and the third technology, and here I'm rather happy, more and more OEMs are talking about the future for combustion engines. We have been clear on that all the way, and I am confident that there is no best before date for combustion engines running on fossil-free fuel. It's a massive undertaking to deliver on this portfolio. We have never had so much on the to-do list than we have today.
During last years, we have engaged in many partnerships in order to accelerate and/or to share the burden on this journey. Starting up here in the battery electric area, we acquired Proterra earlier this year, and by that, we leapfrogged when it comes to battery modules and battery packs. Around fuel cells, we have our joint venture together with Daimler Truck, cellcentric, where we are sharing the development costs, and we are bundling the future volumes to get the product cost at the right level. We have a new, rather new joint venture called Cespira together with Westport, where we are focusing on injection systems for gas-powered engines, high-pressure direct injection systems. We are using those systems today for our natural gas and biogas-driven vehicles. Very good experience. Roger has some 8,000-9,000 trucks on the roads with amazing performance. So that's for LNG and LPG today.
But the future plan for that injection system is to be used for hydrogen as well. And Cespira, as a company now, is working hard in attracting other customers, other OEMs that will also then benefit these fantastic systems. Another example of a partnership is together with Isuzu. You know that they bought UD Trucks from us, and at that point in time, we also started what we call the strategic alliance with Isuzu. Now we have signed license contracts so that they can utilize part of our engine and vehicle technology for their future heavy-duty trucks. And on the engine side, eight- and five-liter engines, next generation will be developed together with our Indian joint venture, Volvo Eicher Commercial Vehicles. And you know the transformation is not just about being green. It's a green and digital transformation in parallel.
Rather recently, we announced, indicated on the right side here, that we are setting up a new joint venture together with Daimler Truck in the area of what we call software-defined vehicle platform. We have the intention to develop on hardware and software an identical platform up to the level of operating system. From that point, we will be fierce competitors. We have an ambition to create some kind of industry standard here, and we have a clear ambition of bringing more customers on board on this venture as well. Very exciting. We hope to be operational in the beginning of next year here. I dare to say that we have many partnerships in place, more to come, in order to accelerate and to share the burden on this challenging journey.
Today, over here in the workshop, I have brought some components to illustrate a little bit on where we are focusing right now. Starting over here, we have the electric axle, where we are installing both the transmission and the electric motor directly onto the axle. This compact installation frees up a lot of space and volume on the truck where we can install more batteries. And Roger was into it before. He said that next year he will start to sell the long-range version of the Volvo battery electric trucks with 600 km range. Then Roger will utilize this E-axle together with new batteries with more energy on board. This version here has just one electric motor. It's a perfect fit where you have two driven axles, one motor per axle.
In those cases where we will use only one driven axle, then we will add another electrical motor onto the axle. That's a true proof point of how cost is working in reality. If I leave the E-axle, this one will also be used in fuel cell electric trucks. And over here, I have one fuel cell system coming directly from cellcentric in Germany. In this unit, we are converting hydrogen to electricity. We are pumping in through this compressor a lot of air, meaning oxygen, and then oxygen and hydrogen together, creating electricity, heat, and water. So the emission coming out of a fuel cell electric vehicle is water vapor. A lot of advantages with fuel cells. High conversion rate of conversion of the hydrogen to electricity. Long range, quick refueling, and as I said, the emissions are just water. Moving over to the internal combustion engine.
This masterpiece is a 13-liter Turbo Compound engine that we are using in both North America and in the rest of the world. It's delivering amazing fuel performance. I can say the future for combustion engines is framed by very tough legislations when it comes to noise, when it comes to nitrogen oxides, and when it comes to CO2. Maybe to someone's surprise, this year, 2024, we are investing more than ever in the development of combustion engines. Combustion engines running on fossil-free fuels is definitely the future. It's definitely one of the three technologies that we will need. Because it's very, very common that I get this question. Why do you need to go that broad? Why do you need to invest so much into different technologies? Wouldn't it be enough with just battery electric vehicles? A few years ago, I was more bold.
I was more confident in being able to explain to audiences like you that this technology will be perfect for that transport application and another transport application where you will see this technology as the sweet spot. Today, I'm more humble. I think that we will see differences across the globe. We will see differences across regions. Because the sweet spot for these technologies connected to the transport applications will not only be decided by my engineers. It will be very much an equation of availability of energy, availability of green energy through different infrastructures, pricing of energy, capacity of the electrical grids, the build-out of hydrogen infrastructure, and so forth. So you will most likely see in a few years the same transport application in Region A will be very, very logical to say, of course, the sweet spot is batteries. For Region B, it will be fuel cells.
And for Region C, it's very, very clear that it will be combustion engines on fossil-free fuel, maybe hydrogen. This is the reason why I believe that it's still the right direction to go for all three and to continue on this successful journey. So with that, back to you, Kina.
Thanks so much. I think that deserves an applause.
Oh.
Stay with me. I want you to stay with me. I'll stay with you. No, you can't leave quite yet. Thank you so much, Lars. Jens, why don't you join us? So Lars talked a lot about cost, common architecture, shared technology. And can you explain how you and your organization, how you are leveraging cost to drive efficiency?
Cost is extremely important for the industrial system. And I very often say to Lars, it starts with the product, and then you build the industrial system.
You can always look at the frontline operations, as I call it, where you produce trucks, cabs. That is very close to our different customers, to serve our customers. Whether that is buses or CE, it's the same thing. We want to be close to our customers. But when you take one step behind the scenes, when you talk about the component side, when you talk about engines, transmissions, battery, battery components, or electrical components, here we can really utilize regional footprints, but also what we call GeoFlex. So in peaking volumes, we can start to share components across the globe, and then by that, creating a resilient system. I also would like to highlight the service markets. With a decomplexed product structure, we also decomplex how we serve our customer in the best way on global scale. So cost really creates resilience.
Speaking of resilience, as you all have understood, resilience is a key theme here today. Flexibility is a big enabler. Now we would like to leave the stage to you, Jens, for a few minutes and share exactly how our strategy supports our global footprint. Please.
Thank you. We have what we call four distinct industrial hubs, starting with Europe. Supporting Europe and Africa is, of course, maybe our oldest and most mature. Out of Curitiba, we support Latin America. I would like to highlight Asia or Southeast Asia. Here, our foundation for future industrial growth will be India. We have been in India for 25 years. We have great people. We have been producing trucks for 25 years, and the future growth will be in India from an industrial perspective to serve Southeast Asia. Finally, I would like to highlight North America once and for all.
We've made up our mind. We will be strong. Number one, we are investing in Lehigh Valley for the Mack brand, both in capacity and for the new products. Number two, here in New River Valley, we invest in for the new product, but also in capacity. Number three, we are just insourced the Mack cab in Kings Mountain. It's in our own hands as of 1st of October. And finally, then I would like to add then Mexico, Monterrey. We had a groundbreaking ceremony just three weeks ago. It looks like a small shed here, but that's actually a big tent. We were more than 100 people in there. So Monterrey, here, due to the new products, we will be able to produce both Mack and Volvo on the same line. For the Volvo brand, we will support U.S. and Canada.
For the Mack brand, US and Canada, but also important, like Steven said earlier, both Mexico and South America will be important for the Mexican plant. Resilience is something that we work on a daily basis. Lars, myself, and Andrea, it's something you have to earn over time. To give some more words on this, I would like to invite Andrea Fuder, friend and colleague, but also Chief Purchasing Officer of the Volvo Group.
Thank you, Jens. Hello to everyone at the Capital Markets Day. Our supply partner network is a huge part of the success of Volvo Group, representing over 70% of the value of our products and some 50,000 first-tier suppliers. The focus is on building flexibility, adaptability, and resilience over time. With every impactful event, there is a direct consequence in the supply base.
For example, the turbulent geopolitics, the extreme weather events, the increasing inflow of trade policies and regulations, workforce shortage, all hold potential disruptions to our capability to serve our customers. So we need to ensure resilience in how we operate. Jens talked about a strong global and regional system. Strong localization in all our global hubs creates multiple sourcing and by this global resiliency, as well as natural currency hedging. At the same time as managing the daily challenges in our operations, our supply network is also in a big transformation to support sustainable transport and infrastructure solutions. What we currently see is that the market readiness for electric vehicles and machines is somewhat slower than the capabilities of our supply partners, leading to an under-absorption and financial pressure. Of course, the demand will rise over time, but the pace is highly dependent on many factors that must be synchronized.
As a result, it is important for the supply network to have built-in flexibility to manage many parallel tracks at the same time in terms of capacity and cost competitiveness. To be successful, we have to work as one team with our supply partners and across the Volvo Group industrial system. The combination of flexibility in the here and now and in parallel, accelerating to shape the future, is what will define our ability to win.
Thank you, Andrea. We have great supply chain partners. I sometimes get the question. We have chosen a strategy with mixed model assembly. That is due to our modular design. We can produce the battery electric vehicle and the combustion engine vehicle on the same line. Firstly, I would like to say we have proven that it works at scale. We are doing it as we speak right now.
We also heard Andrea saying that some of our supply chain partners are actually underutilizing their investment in the battery electric journey right now. And I would state right here and right now, we have little to none underutilization of our industrial footprint due to the mix of battery electric and combustion engine. And in an instant, we can increase capacity when the transition so needs it. So for me, the answer to that question is a clear yes.
Thank you so much, Jens. It seems as the two of you have pretty much all the pieces in the puzzle in place, but one piece that we haven't talked about is our battery value chain. How far would you say that we have come in terms of fully controlling it?
It's a long journey, and we have to take it step by step.
I think for a long time now, we have been producing our energy storage system, or ES. That's the big component that you put on the truck or the bus or the construction equipment that we have had in-house for quite some time. We have the pack. We produce already now in-house in both Sweden, Belgium, and Korea. We have Akasol as a supplier. And I also would like to highlight then Proterra, our acquisition from this year with a footprint here in North America supporting the North American market. That is a great step that we have. Going the next step into modules, here we have Akasol mainly then for buses and medium products. We have our long-term partner Samsung. And also here, Proterra is a great asset for North America supporting us for the future.
As we are speaking right now, also in-house production of modules for the next long-range products that is coming, that is what we are investing in right now in-house production. Finally, on sell side, we have LG supplying our cells through Proterra, Samsung as a long-term partner for many of our products. And also we talk about in-house production, Mariestad we have talked about. Two things I would like to state here. Number one, we are doing it with partner or partners. Number two, we have announced 12 to 24 months replanning. And of course, it's natural that you replan, and we will continue to replan and make that accessible when the transition so needs it. So we will be ready.
Thank you, Jens. Now turning to you, Lars. I think it's pretty obvious how close the three of you, including Andrea, how tight you are working together.
Yeah, I have never experienced an industrial system working that close together, and we are super tight, and we have developed this over the last years connected to all the crises, semiconductor crisis, restarting of the pandemic. I mean, Saturday afternoon, Sunday mornings, call from Andrea or from Jens. We are in trouble, Lars. We need to do something. Andrea calling saying, Lars, how fast can your team change the semiconductor in this component? And you know, Sunday morning, the standard lead time is two years, Andrea, and you know that. And then she said, two is good, but you get two months.
That's how it is. And we managed. You managed. One way or the other, we managed.
It's fascinating. Now, I think it's just to feel that you're part of a team that win and lose together. But of course, we prefer to win.
That's true.
Let's take a moment and just talk a little bit about talent and expertise, and, given the complexity of where we are, how are we ensuring that we have the right skills and competencies to meet future demands?
If I start on the industrial side, it's a little bit like the GeoFlex I talked about earlier. Of course, we are regionalized, building competence on region level, but also we're utilizing key competencies across the globe. For instance, starting up now with a new body in white here in New River Valley that we will see later here. I mean, of course, we utilize experts across the globe. So again, decentralized, regionalized, but supporting in a GeoFlex setup.
And from technology, we have been growing over the last years, and we see that we are attractive.
We can attract talents across the globe in North America, in Europe, in Asia, in new areas. But I'm also extremely proud of my engineers when they are taking on new challenges, new technology areas, new domains. I have so many proof points of engineers, curious engineers taking on new challenges, being masters of new technologies. So a curious engineer can always learn new things. And if you are not curious, then you are not an engineer.
They can come and work for me in communication, Lars. Thank you so much for the two or three. Please have a seat. And now I would like to bring back Martin again.
Thank you, Kina.
So our growth strategy is clear, and we will continue to serve our customers here and now, but also in the future.
To win, Martin, both today and tomorrow, one very important asset is our installed fleet, our customers and their operations. Why is this such a lever?
Now, but first and foremost, I mean, earlier this morning, we talked about the importance of close and trustful customer relations. Interesting enough, by the way, the customer's main market is in our vocabulary in the industry called the aftermarket. Think about that. It should, of course, be called the main market because all of us, we have heard now the technology industrial system talking about this. This is a 24/7, 365 operation among our customers in different applications. And the better we serve them, the higher the retention, the higher the loyalty we are allowed to grow with them. And it's fun. That is where we are really welding together as a team, together with our customers.
I brought another figure, 1.7 million.
Yeah, and that is actually the installed base when it comes to connected assets that we have in terms of trucks, obviously, buses, construction equipment, and also for Penta. And it generates an enormous amount of data, but more importantly, value, right? And what we see now is also how we are actually gearing up when it comes to the utilization of this data in order to create value, primarily for the customers, but also in many cases for the customer's customers when it comes to, for example, CO2 performance, when it comes to other types of metrics. We have the Efficient Load Out initiative, for example, where we see that we can take away 10%-15% of truck loads if you're synchronizing between construction equipment and trucks, etc. So safety, operational performance, great asset.
And of course, when we are now putting new layers on board when it comes to digital capabilities, together with artificial intelligence, it gives completely new opportunities. So taking advantage of our assets to build future business, those services create resilience over time, as we know. How have we developed that ecosystem? I mean, if we can look upon it, and I think Roger, and Stephen, Melker, everyone has talked about it, but it's really about the job to be done. Never forget that. And it's the job to be done for the customer. How do we create true value? In uptime, productivity, in efficiency, sustainability, performance, energy transition, or safety. And gradually, what we have done is we have built up a more robust ecosystem to really serve the customer, but also with the intention of knowing that in every of these pockets, we need to be relevant.
As a matter of fact, we need to be the best choice. But we also have a lot of good information because we are working so close with the customers. So we are climbing the service ladder. We do that in the ecosystem. And as you can see, obviously, there are now coming new types of features also related to the electromobility journey, batteries and optimization, big pocket of value, route simulations. But also now we see that for our current business models can be utilized also to further improve productivity, charging services, etc. But it's an ecosystem, and it's also cost. How can we reuse also for other types of applications, etc.? So great journey.
Can you put some more flavor on financial services?
Financial services, many of you are following that closely, how we are doing, etc.
But I would like to start a little bit because you see we have had a great journey when it comes to the portfolio here, from just plus SEK 100 billion and today to SEK 262 billion. Very, very good and solid performance, both when it comes to the retail business, but also when it comes to the wholesale financing. But maybe even more importantly, when we talk about the result, is why is financial services so important? And then number one is really that through financial services, we are getting so much closer to our customers when it comes to understanding of their business, their balance sheet, their P&L, their contracts, their prospects, their priorities. So to really utilizing that more and more.
Of course, as we talked about the balance and how do we move into the new, reducing complexity and uncertainty by a number of solutions, for example, then financing solutions all the way up to equipment or transport as a service, but that is built on tailored packages of services, but still in a modular context. Then, of course, VFS, Volvo Financial Services, it is an art. I mean, money, money is commodity, but financing is not, meaning that it is a true service business. And if we leverage the platform subscription, how do we work with the customers, risk and reward, etc., we will continue to grow this in a very meaningful way, but we will also grow other services.
I would like to come back to understanding of customers' key performance levers. Can you explain why that is such an important part of this?
First and foremost for the customer in itself, because if we can be and we see that we didn't put this by chance. I mean, when we are working with customers from a holistic perspective, including, so to speak, the customer finance and insurance, we are getting better retention. We are getting better performance. We can understand how we can support our customers through, so to speak, understanding their key priorities because the customer's key performance levers could be, okay, are they into the transformation? What are the priorities when it comes to growth? Are they moving into new segments, etc.? And the good thing about this story is that there is still a lot of revenues out there to catch. Always more to be done. Often we talked about, I mean, when we talk about market shares, we talk about hardware that we can measure into, you know, 12.83245.
And that is the base here. What is the market share that we have for our equipment or trucks, whatever? And of course, a key lever is to continue to grow that base because eventually that comes into the installed base, the rolling fleet, the main market for our customers. But on top of that, that creates a potential of actually adding our services. And there we have a clear view now together in the different business areas of driving this into a one-to-one relation. So I mean, why shouldn't we be with the preferred choice of these key services that are so important for the customers to get the job done? And we are good in parts and workshops. Roger went into that by working with the service contract management, what we are doing with the service contracts.
We are pulling these two up to 100% during the contract length. That is what's happening, and interesting enough, when we are having the gold or really advanced contract penetration, we are getting a higher level of loyalty and customer satisfaction, so it's really a win-win situation, but for us, of course, it creates a good level of resilience. We have uptime services growing, charging is emerging, and it will be more to come here, so really unleash the full potential of the installed base. We have done a great journey so far, but it's so much more to be done, and then continue to grow, North America being one example.
A nd speaking of charging and energy solutions, Martin, which role would you say that new services play for our transformation?
I mean, both in the current context, it's a tough world out there.
You want to have the highest performing type of operation environment, of course, as a customer. And when you're moving into the transformation, this is about performance, but it's also about peace of mind to make sure that that is working. And therefore, the charging, together with a number of bundled solutions, also the digital layers of that electromobility service provider will be a very important piece for the customer, but also a very, very important revenue pool for us as well. And then you have the whole energy transition itself, right? Absolutely. And I mean, based on the journey that we do here, we have also developed a set of different types of products here. So if you can take the next slide here maybe and see if that is coming or if it's, yeah, here we have it. So the energy transition in itself is a great potential.
Obviously, as I said, for customers, we are working primarily today when it comes to the direct offer on depot charging, different types of performance steps for the charging in itself, but often also combined now in the discussions with different types of energy storage. And on top of that, of course, the e-mobility service provider, locations, optimizations, pricing, etc. But the good news, it's not only valid now what we are developing for our traditional verticals or our customer verticals, but also for a lot of other players. Penta is moving fast, for example, when it comes to energy storage. And we see great potential because there again, we can build that on the base that our industrial and technology system has provided. We have scale, we have capabilities, we have modularity, and it will be very interesting markets.
Great potential, but in all fairness, we have managed to grow our revenues already.
Now, I mean, we have seen some of the business areas and their journey, but since 2016, SEK 71 billion, and we had now after the third quarter, SEK 130 billion. Good journey, creating more resilience. But at the same time, also what is great, coming back to the full potential of the installed fleet, market share ambitions, the transformation activities, more to be done, more to come, very exciting.
Thank you so much, Martin, for this deep dive regarding our services business. Why don't you join me over by the table? We have now gone through the vast majority of our business. We have been looking at sales and service ambitions, backbone strategy, and how to progress into new business models. It is time to bring in our CFO, Mats, to talk about the financial implications.
Thank you, Kina. And thanks to all of you for being here. It's great to see this many familiar faces as well. You have heard my colleagues talking about our improvements in performance over the recent years and in many dimensions, not least in the service dimension that Martin talked about. When driving performance management in the Volvo Group, it's all about capital allocation. Capital allocation being key and to invest in the right areas timely, to nurture the good initiatives that we have, or to exit the ones that don't meet our expectations. Our way of working has served us well, as you can see on this slide. We have increased our return on capital employed the recent years, and we are now on a level of 38.3% on a rolling 12-month basis.
Our strong earnings and our strong cash flow is also very important when it comes to our solid cash in our industrial operations. That was standing on SEK 62.9 billion by the end of the third quarter. That is similar to last year when we ended 2023 at SEK 83 billion. All of you know that the fourth quarter is a strong cash flow quarter from a seasonality point of view. Our solid performance also makes it possible for us to invest in the future, to be forward-leaning when it comes to investing in innovation, new technologies. You heard the team talking about all the great products that we are launching this year, and 2024 actually being a record year when it comes to product launches. At the same time as we are forward-leaning, investing in the future, we are also shifting to our shareholders.
We have since 2017 paid out close to SEK 170 billion in dividends, and in 2024, we paid out SEK 36 billion in April this year. The tools we are using for shifting to shareholders are our ordinary dividend, where we have been very consistent in increasing our ordinary dividend by 0.5% per year over the last four years. And on top of that, the extraordinary dividend. And we will continue to be consistent in the way we are shifting to our shareholders. So how has it been possible for us to invest heavily in the current operations, being forward-leaning, investing in the future, and also being shareholder-friendly? And it's all about our improved financial performance over the last 10 years.
We have tenfolded our operating income since 2013, and in the same time, developing our operating margin from low single digits to strong double-digit numbers, ending the third quarter this year on a margin of 13.1% on a rolling 12-month basis. So what's the underlying drivers then when it comes to the improvements we have seen? And I would like to highlight five dimensions that I think have been key to take us to where we are today. First of all, all the value we are bringing to our customers when it comes to the products and when it comes to the services. That makes it possible for us to have a premium pricing on our solutions. Secondly, the focus on the service business. We have doubled our service business over the last 10 years.
And that is not only important when it comes to our profitability with the high margins. As you all know, it also brings an earnings resilience with the service business being less cyclical compared to the new vehicle sales. We also have our efficient and very strong operations and manufacturing system. Jens talked about that. We also are very, very flexible when it comes to that system. And an example of that is the beginning of this year when we adjusted swiftly to the new lower or normalized demand that we saw in Europe, and by that, avoiding under-absorption. Then we have the CAST system that brings us a lot of advantages when it comes to the costs, and both Lars and Jens talked about that as well. And last, but probably the most important thing, and that is the people in the Volvo Group.
We have a strong performance culture, and we have a decentralized way of working with empowered leaders throughout the organization, and that has served us well over the last 10 years. Maybe looking a little bit deeper into our performance management and our way of working, and I think many of you probably recognize this picture from previous Capital Markets days, so I had kind of copied with pride from before then. But I think it shows in a good way the way you're working in the Volvo Group, where we focus on performance in all dimensions. Looking at the green dots representing the ones that we are developing and nurturing in a normal way of working, in a normal governance, often decentralized, working locally.
The yellow ones representing the ones that take a little bit more frequency when it comes to the follow-up, typically being businesses that are less mature, businesses we are scaling, or businesses where we need to address the performance, and lastly, the exits. We have a couple of good examples only from this year when we have exited businesses. We had the divestment of our defense business with Arquus. We divested the paving business with construction equipment. But we also have a more recent example when we have changed the business model in Europe for buses, where we have been going through and restructuring and exiting the body manufacturing in Poland, and we will actually listen to Anna Westerberg, the President of Buses, giving a little bit more details on that strategic change.
To improve profitability and secure long-term competitiveness of Volvo Buses, we had to change our setup in Europe. So what we have done is that we have changed our business model from selling and producing complete buses to offering buses where we do the chassis and work with partners for producing the bus body. This business model is not new to us. In fact, it's a model that we apply successfully in many markets around the world. And as a consequence of this decision, we have now closed our bus body production that we had in Poland. The change of business model in Europe is one of several factors driving our improved profitability. Others are price realization. We are improving our margins on our products and services.
We are growing our service business, and we have been able to keep our organization and cost structure on a level where we can get leverage from increased volume, and looking at the overall market, we see continued good demand in the coach segment, and in the city bus segment, the transition to electromobility remains strong, so going forward, we will continue to focus on profitable growth, securing orders for next year and beyond, and to build long-term sustainable performance based on profitable segments and markets, solutions that deliver true business value for customer success, and on continuous improvement of our operation.
Thanks, Anna, and you have actually seen the positive effects from this change in the business model over the recent quarters with a very, very good development of the performance for Volvo Buses.
As you all know, when we are reporting the truck segment in the Volvo Group, we are doing that as one piece in our external reporting when it comes to the quarterly reporting and the annual reporting. But back in the Capital Markets Day in 2018 and 2019, we provided some more details into the performance for the different parts of the truck segment. And we felt it was time to do that again, to be a little bit more granular on the performance within the truck segment. And what you can see on this slide is the relative performance for the different brands and geographical regions versus our operating margin target of more than 10%. And overall, we have a great performance when it comes to our truck brands.
Looking at 2023, 14.8% in operating margin on the back of high volumes, prices, and also good development of the service business. But please also remember when you see this number that the truck segment is carrying a lot of our forward-looking investments in the future as well. If we're looking at the overall performance, it's great. But we are not satisfied because we have pockets where we need to improve, and North America is an example of that, where we believe that our new vehicle ranges when it comes to Volvo Trucks, Mack Trucks, together with the investments we are making in our manufacturing footprint, will serve us well going forward.
If we are moving to the next slide and looking in a little bit deeper into the parts outside the brands, the thin gray line you can see here represents the more mature joint ventures when it comes to our truck joint ventures with DFCV and VECV. And those only have a very marginal effect on the overall performance for the truck segment. It's neutral. But on the right-hand side, we have the transformational ventures, and most of them related to the development of the zero-emission vehicle technologies. But we also have Volvo Autonomous Solutions that Nils talked about. We also have the software development joint venture with Daimler that Lars talked about.
If we're looking at the overall performance and the financial impact from the transformational ventures, it is currently around 150-200 basis points in terms of effect on the truck segment when it comes to the transformational ventures. We will give more details and be more granular on the performance once the ventures become material on an individual basis. Then, lastly then, looking into the transformation and the journey to zero-emission vehicles, and to be clear here, we are managing this transformation from a position of strength. Our premium business with ICE as a base will continue to be the backbone and the cash cow for many years to come, and we are continuing to invest in the ICE technology, and Lars talked about those great launches that we have had.
On the zero-emission side, we will continue to invest in technology when it comes to the battery-electric vehicles with longer and longer ranges, as well as the alternative technology, the fuel cell technology, or using the combustion engine for hydrogen, as an example. Looking at the volumes, volumes are still low, but we are market leaders, and we have the first-mover advantage here. We have more than 150 million kilometers out in real life with our customers, which gives us a great opportunity to improve both when it comes to the products and solutions with all the data we get and all the experiences. And even though volumes are low, we will be able to drive growth on the battery-electric vehicles because the revenue per unit is approximately two times the revenue per unit you get for an ICE truck.
To conclude, the transformation to zero-emission vehicles will be a bumpy road, but we are positioned to create value regardless of the speed of the transformation. I think actually Martin will elaborate a little bit more on that.
Thank you, Mats. Thank you, Mats, for that outline. I brought a slide that I find rather interesting and very important also to convey to all of you. On the X-axis here, you see the EBIT margin at any point in time, and on the Y-axis, you see the speed of transformation. The speed of transformation is actually also synonymous with an accelerated CAGR when it comes to top line.
And the reason for that is obviously, as we've discussed, that when you are exchanging a current technology truck with a current powertrain into a battery-electric primarily then, but also other technologies, you are getting a compounded growth rate due to the change in the TCO for the customer, more CapEx coming our way, less OpEx than when it comes to energy. And therefore, what is very important to understand is how should you think about operation and how your agility and flexibility during the transformation as such, because you need to go through this transformation. So when still the speed of the transformation is unclear, the way to operate here will be key. And the Volvo Group is an early mover, as you all know, of the transformation, but also combining that now with a very strong and flexible backbone. We have talked about the customer base.
That is a backbone or a front end that we are very proud of because we need them in the transformation. Performance culture, modular and innovative technology and portfolios, regional value chains. So we are actually really excited for this journey ahead here. If it will be so that it will be an accelerated transformation, there are reasons to believe that you will see certain pressure during a period of time on the margins. So you will move here, but you will be highly rewarded thanks to the compound annual growth rate. And growth matters when you're moving forward here. And that will actually, if you think about it and do some calculations, mean an unprecedented value creation in our industrial verticals that we have not seen before.
In that context, the Volvo Group is uniquely positioned with our first and early mover advantage, but also with assets that we have. So what I say is that we are geared to operate effectively and efficiently along this line because you need to be that. At any point in time, you need to find the right type of balance when it comes to your value chains, when it comes to your customer. But if you do that, it will be a substantial value creation. And I cannot almost resist, but if you think about, for example, SEK 500-550 billion in top line for the group today, after 2030, if we do it well with, if you can say, almost zero transformation, so we have the normal compounded annual growth rate of like 4%, that will bring us 2030 to a level of SEK 700 billion, something like that.
A continuous work with the margin will be super important. Maintain, expand, reinforce. We will do that. Services, North America pockets, create great value. Let's also think hypothetically that the transformation will take place 100% in six years. Then the compounded annual growth rate will be completely different. It will be the underlying 4% of the transport demand, but it will also be the shift into the new, as I said, when it comes to CapEx. So in that case, probably you will see a top line that is twice at least. That will not happen because it will not go that quick. But if you just calculate that and if you can operate efficiently on that line, also mastering, so to speak, the operating margin, it will create significant value. So that is how you should think about it, I think.
How do you operate along this line? What levers and what tools, what assets do you have to make it happen? Kina.
The message is clear, Martin. We will deliver value to our customers and shareholders also in the future. Now, we are reaching the end of our presentations. You've been patient, everyone. Yes, you have. Before we move over to Q&A, what are your final key takeaways?
Thank you, Kina. And thanks for leading us through this. CMD also doing a great job, as always. Great partner in the executive board. I would spend just a couple of minutes to summarize. It will not be long, but I think it's an important summary. So I actually even been writing it down to be sure that I'm not missing things here.
But as you have heard us saying, the coming five to ten years will be extremely interesting for our sectors, for our verticals. It will be challenges, but it will be great opportunities ahead here. Countries, regions, cities, companies are searching to reinforce their competitive position. And in that sense, modern and reliable transport, logistics, and infrastructure will play a key role. The relation between logistics and advanced logistics on one side and GDP development per capita on the other is far too important to ignore. On top of that, demand will continue to grow, supported by strong mega trends underlying, and by 2050, the need of our freight volumes will be multiple times higher than we see today.
And it is in that context. It's absolutely clear that our verticals will transform to take advantage of technology, digitalization, but also the energy transition to build future solutions that are resilient and that are sustainable, both for societies and companies, primarily to stay competitive and to win tomorrow. And it is in this transformation landscape that the group is gearing up for the growth opportunities. And today, my colleagues and I hope you find that also, have been very clear. We have a more comprehensive portfolio, an upgraded product and services offering than ever, giving clear customer benefits. We have shown a strong growth of our services, a journey that will continue because we still have a substantial future growth potential.
And we have demonstrated that our big investments in both product services and commercial and industrial capabilities, specifically dedicated for North America, will give us great opportunities for growth here. So we are gearing up for growth by delivering continuous solid performance to maneuver and continue to maneuver from a position of strength, by accelerating through the technology transformation that gives us an unprecedented growth level, and where we have a value proposition that we can serve the customer at any point in time, and regardless of technology, and by evolving our performance culture. At the end of the day, it's all about people. It's about our customers. It is about our colleagues. It's about our supply chain partners. We will do it together. So my final words will be, we are the Volvo Group. We are gearing up.
So we have presented you with a lot of material today, and as always, it will be available on our website. It's time for our Q&A, and I will now leave the word to our Head of Investor Relations, Johan. But first, we're going to take one last spin.
So thank you, Kina. So now we're coming to the Q&A session. We will reflect upon the key messages from today's presentations. We will alternate questions here from the room with questions from the audience over the web. But first, I would like to introduce a guest that we invited, Mr. David Raso, who is Industry Head of Research at Evercore in New York. David has been ranked number one industrial analyst for the last 24 years, I think. So I think it was good to see you there. Yeah.
We invited David to make sure that our U.S. investor base is sort of well taken care of. So I will start with you, David. So what is your first question to management?
Yeah, I think the market share opportunity that you laid out, Volvo, historically about 11.9% share, Mack this year running a little bit lower, about 6%, but called 8.5%. The pockets of market share opportunity that you're looking at, obviously Volvo is a greater share increase that you're targeting, called 9-11% going to 15%, and Mack 6-8% going to 10%. But where are the pockets that Volvo sees that share opportunity? Is it the larger fleets, owner-operators? And then with Mack, given the historical vocational strength, but now more of a push in the fleet growth, is that share gained Mack with the fleets?
And then to kind of wrap it all together, can you maintain the premium pricing that you're known for with that kind of share opportunity being achieved? And there's obviously the trade-off of more volume, maybe a little less price, and then you get the aftermarket tail. But just curious how that all comes together. The share opportunity is where? And can you maintain the premium pricing?
Thanks. Great question. Should we start, I mean.
O n the Mack side?
Stephen.
Yeah, absolutely. So great observation. You're right. We're running about 6.5% today. As I said earlier, 8.5% was kind of the norm prior to 2019. And that loss was really because of the supply situations that we have, which now are being rectified. But obviously, we'll gain that share back. I think we have investments forthcoming with other products that will help us continue to grow that portfolio.
So again, 8.5%-9% on the vocational. And the vocational is only 30% of the market. 70% of the market is still the long-haul, regional haul. We've always had fairly good share on the regional haul. We've always had fairly small share on the long-haul. Long-haul is 50%. We think we can triple our market share in the long-haul segment with the product that's coming. The feedback we've gotten early from our customers is this truck adds value. It's worth the additional price point because it'll return an investment. So that, to me, gets us well above 10% with opportunity over time to continue to expand. And again, the foundation with our customer support, our dealer network, couldn't have done this 10 years ago. We're in a much better situation. Maybe on the Volvo side?
Yeah, thank you very much.
And as you said, we play in the long-haul sector and in the regional haul sector. We have actually improved our presence in the regional haul sector since 2017 when we introduced the previous VNR. So we're playing in both those segments right now. I think what we see is that the increased appreciation of the product together with the increased capacity that we'll have will allow us to grow in both these segments where we have a good foot, but I think we will grow more. When it comes to premium pricing, we are running at the premium price in different segments. The segments differ in price, obviously. From what I've seen right now with after the launch, because we launched in January, we were producing right now. We are maintaining that premium price. And at the same time, we need to be good business people as well.
But yeah, I think so.
Customer mix?
Customer mix. So we're basically following the market. We're running the U.S. market, the over-the-road market, the 30% national accounts and 70% retail business. We're following that. We're following that structure. Can I just add on the pricing side? Because it's about pricing from a value-based pricing and adding values to our customers. And we have a lot of features that we are offering to our customers. So we are specifying the trucks in a different way with more features. That is adding a lot of more pricing. It's also then being a better service potential of the product as well. And then it's also then to sell the total offer. And we have packages with a total service package, with service contract, and so forth. Then we will get the value-based pricing for our customers, adding values for our customers as well.
Maybe last point, I think this is a very important one, obviously. As you have heard during the presentation, it is no secret that we have had also supply constraints, to be fair. I mean, now when we are adding capacity, both structurally, but we are also operationally aligning because, for example, for the Mack flows, we will continue to have a combination, but we will insource more. That means also that, I mean, it will not be a quick game. We don't believe in that. Because you need to build that through the availability of our products and solutions and through value-based selling at the end of the day because we are not chasing the wrong type of volumes. We will continue to build from a very, very strong and solid position that we have invested in now.
Thank you for that.
We'll continue in the room. Nicolai from Deutsche Bank.
Yeah. Great. Thank you. Nicolai Kempf from Deutsche Bank. My question is also on the US. And everybody tries to gain market share in this market. And I mean, the new truck is impressive, up to 10% fuel efficient. One of your competitors is even claiming up to 15% fuel efficient. But this is, I think, derived from the fact that you introduced a 30-liter engine, same as your competitor. But so far, it seems like the 50-liter is more just high acceptance there. How do you think you can convert people to accept a 30-liter engine in the US?
Can you please repeat the last? How can I convert? Last question. Yeah, what was your last question?
From 15 to, I mean, the 15-liter has a high penetration and the big bore in relation to the 30-liter.
Thank you very much for that question. We've been operating in this market with the 13-liter engine for a very, very long time. In all fairness, there is no reason for a big bore engine. The 13-liter engine performs fantastic. If you look at the average speed to the North American market, together with the load that we carry, a 13-liter engine with turbo compounding and all the features that we have, performs almost outperforms the 15-liter engine. I think there is a cultural belief why we have a big bore engine. We have so far convinced, converted the word you want to use, many customers into the 13-liter engine that came out of a big bore engine, and they're very, very happy. I don't really see that as an issue at all. I think it's more a cultural thing, if I may be so honest.
I think, I mean, everyone wants to gain market share, Nicolai. I think that's natural, by the way, that everyone wants to do that in the first place. If you don't want to do that, maybe you should do something else. But having said that, I think, again, when we look at the different aspects of the uplift that we have done now, industrial-wise, technology-wise, commercial-wise with our dealer network, the energy. I mean, we are just in ramping up now. You will see that today here. We are just in the phase of ramping up. The energy level I meet now amongst customers and dealers, our own colleagues throughout the value chain is just amazing. That will take us a long way.
Thank you for that. We continue with one question from the audience online.
Peter, if we can have a microphone to Anders here.
All right. So I have a question from Klas Bergelind at Citigroup. The question is, the expansion in Mexico is pretty significant. Is it a key driver behind your market share push, in addition to the introduction of the new Volvo VNL? There is no risk of increased tariffs. How flexible will the production be in Mexico, i.e., to what extent could you bring capacity over to the U.S.? Should we see major tariffs being introduced? Do you perhaps need to build more capacity in the U.S. now instead?
The sound is not the best up here, I have to say. But if I understood it, Anders, what you talked about was, I mean, our capacity expansion in Mexico. What are the potential risks when it comes to tariffs, given the fact?
I think we have a good starting point to start with. We are 100% U.S.-based today. We will continue, as Jens had said here. We have already done that, expanded our capacity in the United States. We need a Western footprint also given our current expansion. We are very East Coast-based. In that regard, for the time being, we will do that in a flexible manner, as Jens alluded to, also invest. We should remember that we are in a good position. We are very strong American-invested and the upgrades we are doing now in the product. This is for capacity. We will, of course, make sure that we have the right balance there. I don't know if—no, and to add to that, I mean, we have more capacity in final assembly than we have on components.
That is by design, which means we have very easily we can transfer capacities between plants. So we should see that the Mexico plant is on top of. And I think it's also important to what I stated earlier. It's also to support Mexico, South America. Important to remember.
And I think also it helps us with the supply side of it. There's a very established supply network in Mexico. We're right next to some of our biggest suppliers with cab production following in 2017. It'll give us a bigger footprint. Logistically, it makes sense as well because, as you said, Martin, we can ship stuff to the West Coast, to the Southwest, and save transportation costs. And we still have a considerably large amount of our production that's still in the US.
Thank you for that. We'll continue with one question from you, David.
Yeah, a lot of great ideas at the corporate level. You're making the investment in the manufacturing, obviously with Mexico in particular. But obviously, the dealer network is the front lines. Just curious, do you feel you have the density with the dealer network and not just the traditional Volvo strong on the coast in the interior of the country? Do you have that density you need? And I noticed earlier the 80% dual brand. But just curious, the investment made, the $1 billion you said the last few years, but do we have the density? And then I would also say, are they capitalized enough to continue to invest along with you?
Yeah, and I'll turn it over to Peter in a minute. But we've seen huge consolidation over the last 10 years. And what that's done is made them stronger, bigger.
Without us really having to drive it, they've gone after to take these markets. They need scale. They need to be a billion-dollar business. Most of them are going toward that direction. Some of them are private equity. Many of them are family-owned, second generation. So yeah, I think we are building a very strong dealer network, both from a capital side, but also from their ability to support and drive growth. They've been pushing us, quite frankly, right, because we haven't delivered on the production. So they're very hungry for this. They've invested while we've been short. And so now it's our turn. We're investing. And so they're very excited about where we're going. So yeah, I think there's continued consolidation, but it's less and less. And as you said, over 500 rooftops. Seven, eight years ago, we were at 300.
So I think that expansion will continue as we grow our business.
Maybe to add, not all of our dealers are working at 10% or 15%. There's still a considerable amount of dealers that work at maybe at 5% or 7%, and they have the capacity to grow. The consolidation will help with that. I think when it comes specifically to density, I think there we are very good. And it also allowed us maybe to make one sidestep to electromobility. That density also allowed us to build out a very dense network of battery electric vehicle certified dealers. So we're now on the West Coast, on the East Coast, in Canada, in Texas. So I think for ICE vehicles, we have a very dense network, but we have the most dense network for battery electric vehicles.
Which is also important.
One last thing too, from a support standpoint, remote diagnostics really supports our customers where you don't always have to be inside. We're also seeing much more mobile applications, mobile trucks, service contracts. So that will also kind of get a virtual network without always having to have brick and mortar.
Are you helping them with the service initiative? Again, always a great idea, but the people on the ground, especially when you think of the energy transition. I know I've spoken to your construction dealers, and we need a salesperson dedicated on EV. He's going to sell diesel. That's what he knows. So I'm just curious how you're evolving the service effort. Are you putting some corporate funds to more than just education? Are you putting people on the ground and maybe help?
Specifically on EV or in general?
Both. Service broadly, given it's important for the diesel traditional type, but also EV as well.
I think on the service side is one of the things we focused on 10 years ago. We developed the first uptime center in the group. Remote Diagnostics has been with us 15-plus years. We've now established in the last 10 years certified uptime dealers, which ensures that a truck comes in, if it can get fixed within four hours, it's fixed. The efficiency through our dealers is incredible. We were able to get more in and out much quicker. The diagnostic process has improved. So I think if you were to ask around, you would find even our competitors say we probably have the best uptime and service process in the industry. Our net promoter scores when we get a service is up in the 90s. It's unheard of.
And I think that's really what drove us to number one. I think on the EV side, we started the same journey on electrification. Maybe you can go into a little more detail.
So when we launched the truck, at the same time, we launched the battery electric vehicle certification program because our belief was that whether a truck drives on diesel or whether it drives on electricity, the goal is the same. We need uptime. And then you have the story about more or less components in an electric truck. It still has brake pads. It still has windshield wipers. It still has whatever. So you need that uptime. You need that service support.
So what we did is we launched a certification program with our dealers where we asked the dealers to invest in special tools, in charging on the side, but also to invest in education for their sales staff and for their technical staff. Then on our side, so we've developed all these programs, and there was nothing. So this is from the ground up again. Then we have on our side, in our service department, we have then battery electric vehicle service engineers. So those are people that are placed in the market specifically for electric vehicles, now mainly focused on the West Coast and the East Coast, and so that we help them as well. So there is a separate electric vehicle service network on our side as well.
Thank you for that. We continue. Mattias, DNB.
Thank you. Mattias Holmgren, DNB.
Quick one on the 25% market share ambition in North America. What's the time frame? Do you have a particular year in mind, or how should we think about it?
The last one.
You have a time frame or?
Yeah, so what we've committed to is by 2030.
Or earlier. Or earlier.
And what we think is important, as we have said, to build this now steady. That is what we have done with the whole turnaround on North America that has been very important to us, and now we continue. So we have the levers in place. But step by step.
Can I say one thing on market share? Market share is not something that you get, right? It is because we have now a product range and a setup that we believe that we can follow the demand of the customers.
Will that happen in one or two years or in three or four years? That's always a little bit difficult to say. You cannot claim market share. You earn market share. And I believe now that we are in a situation with the products and the whole setup that we can earn that. And then, yeah, I hope as soon as possible, but ultimately, it's the customer's choice. But I think we all are very much gearing now to earn that confidence from our customers.
Just one thing to add. We should not just have market share. We should have very profitable market shares as well. Can I chime in on that?
And we continue with Miguel from BNP.
Thank you. Thank you, Miguel Borrega from BNP Paribas Exane. Again, on the U.S. market share, the target of reaching 25% seems quite ambitious.
I think two of your peers also aim to gain 5% each, so that kind of takes everyone's ambitions to 120%. How do you think about your profitability in the context where everyone's getting more competitive, especially when Mack, for example, is still below target and knowing that you have a new plant in Mexico to ramp up?
Yeah, so if I go back to Mack, we're running about 6.5%. We have been at a very 8.5-ish level for a very long time. I was head of sales 10 years ago. We were at 8.5%. The reason we've gone two points below is because of the capacity constraints that we've talked about. Those customers still want to buy Mack. I mean, they're coming to us every day saying, "When can you get me these trucks?" And that will start to happen next year and continue into 2026.
I'm very comfortable that that gets us to 8.5. Then we've got to take the new product and go out and earn the business. Again, we don't have to grow to 10% share in the long-haul business to get the 10%. When 50% of the market is out there and you're a very small player, if you can go to 5 or 6% along with the 8.5% for the vocational side, you're above 10%. I'm very comfortable that that's doable because of our customers selling us. They want Mack trucks and because we know what's coming from a long-haul standpoint.
That the ambition ends up to 120% is logical, right? Because everybody wants to grow. Then, of course, the question is, who's going to grow? We very much believe that we are in a very good position to gear up for growth, gearing up for growth.
Then what will happen is then when it comes to profitability, of course, we have to be. I don't want the word to use aggressive, but I mean, if you want to gain market share, you need to convince the customer. We do that mainly, as Roger said earlier, by value. And then what will happen is then you will see the population growing, and then we will maintain margins as well by a very good service market. So I strongly believe that market share gain and margin gain go hand in hand.
But what is clear also, Miguel, I think that is very important to state that North America in particular, you have a very strong volume lever actually from your industrial base. We see that.
The volatility, for example, for Mack earnings over the month, depending on the capacity constraints, gives us a lot of confidence when we can get stability there. Also with the price realization that we see today that you get the really good leverage because that is the structure of the business, so to speak. But then on top of that, I think also if you take a step back and look holistically at the North American market, there are reasons to believe that there are not too many players that are interesting to, so to speak, structurally ruin their profitability levels given the importance of the market.
That is my belief. Thank you. We continue with one more question in the room from Björn at Danske Bank here in the middle
Björn, Danske Bank, question on trucks.
And we have seen, for over the decades, and a big consolidation over many decades, especially in Europe and North America. And on light vehicles, we have seen now new entrants basically changing the industry quite significantly. And we also see the transition now on trucks. And what is your thinking on new entrants, etc.? I mean, it's not only one company. There are, I guess, quite a few there.
Shall I start? Okay. No, no, but I mean, of course, as always, we are closely watching what is happening in the competitive landscape. And when it comes to new entrants, it can be both, so to speak, geographical based. Of course, we are seeing not necessarily now in Europe and in North America, but also in other market areas that, for example, peers from China is gearing up. But then also, of course, you have the technology entrants.
I think, again, the stance that we have taken with, and we have presented an outline today with both from the product offering that we are an early mover that we can operate along these boats will give us a considerable resilience to also withstand, so to speak, our competitive position. So in that regard, we feel good about that. But having said that, obviously, it is important to continue to have a very flexible and agile system. But in relation to cars, there are quite, it's a big difference also in the nature of the business when it comes to how the customers are looking to this. It is production equipment. It must work. You have built up trust over a long period of time. That is not only the product and the Volvo organization, but to everyone's point here, also the whole dealer structure, productivity, etc.
I think at least in that sense, it's a different dynamic. But we are watching closely, and we are taking it extremely seriously. And that's the reason why we are investing more than ever also in a smart and flexible manner, I should say.
We can also add on this one because it starts with our customer, and it starts with providing our customers with productivity, uptime, and efficiency. And we have so strong relations with our customer, and we are so close to our customers. And that doesn't go for any market. It goes all over the world. And we are working very close together with manufacturing, engineering, and purchasing. So that is the essence into it. So you need to understand your customer. You need to work with your customers, and you need to provide the value what they would like to have.
So they will make then the profitability of their business.
Thank you for that. We continue with one more question from you, David.
I might do two quick. One Mack, one construction. The opportunity with the Mexico factory to take share or be more competitive, let's say, in Mexico and LatAm, how would you size that market share opportunity versus what you expect in the US? And then on the construction side, I mean, I remember I was with Tony Helshm. I remember when they opened, when they bought Samsung. I'm dating myself here in the late 1990s in Korea. But that was.
A great acquisition, by the way.
Yeah. I mean, obviously, it's a cornerstone of your excavator business. But you've always been just dominant in the articulated dump truck. Pretty solid wheel loader. Excavators, reasonable, right?
When you think of expanding share in construction, do you think you're full scale enough? Do you think, is the market share opportunity you see in the other products, or is it driving what you're already strong in? I'm just curious if you feel you have the scale you need on the strength of product line. So I don't want to screw folks.
Yeah, I'll start on the Mack side. I think if you look at Mexico, for us, it's an untapped market. We've delivered a handful of trucks, to be honest with you, because of production issues. But what's funny, if you go to Mexico, you'll see customers take the bulldog off a Mack truck somewhere and put it on the hood of their other branded truck. So there is a demand for Mack trucks.
I think with the product that we're bringing, the product range, a new distributor who's now starting to build out an infrastructure who understands how to support customers and has a financial wherewithal, I think that gives us an opportunity to sell, to move into the 4%-6% range by 2030. Then, obviously, it is a smaller vocational market, but we've always done well with the vocational business there. For us, it is really entering with a highway product in Mexico.
Did I hear putting the bulldog on the... This is Stephen's dream, right? No, so thank you for the question. First of all, I think from a market perspective, we are one of the most global players. So there we are not kind of niche, but I understand your question more related to the products. The Samsung was '98. It was really important.
Our heritage is on the bigger machines. It's on the articulated haulers. It's on the wheel loaders. Of course, since excavators is growing and also the biggest market, that is super strategic. That's the reason also for all the investments on the excavator side. Of course, we have a lot of other businesses where we have not been that strong. So not good for customers, not good for the company and the shareholders. Then we have decided to, then it's better than someone else do it in a better way. So we have been quite clear on that. It's better to be strong, earn a lot of money where you are good, so to say. Then just to add also compact business. Compact machines is actually the most fast-growing part of the business.
There we have just created a separate business unit with a separate P&L because it's another mechanism behind it. So that is how we address it. When you think of market share gain, is it more the compact effort, or is it growing the larger products even higher, just so I... Compact business is more to get better quality into that business overall. Then, of course, that means market share. North America, for example, we are very small. Big opportunities, not least with the transformation into the new era, so to say. But then, of course, on the big machines, there we see big opportunities both on the haulers, but even more on the excavators.
Excavators, I think also to your point, if you look at the investments that we have done now in, so to speak, the heavy range, but still in the sweet spot on the 20 tonnes and above there. Where the bigger volumes are, absolutely. And we have completely stepped up there also. And on top of that, I think we have great offerings in the global footprint now that we didn't have before. But more, yeah, more to come on that. Thank you. I would like to take one more question from the online audience. If we can get the microphone to Anders here. Please speak up also. I'll try to speak up. What potential do you see for hybrid technology on long-haul applications given a slower adoption rate to BEV on the back of TCO, charging infrastructure, and range? And that was from Hampus Engellau at Handelsbanken.
Lars, maybe hybrid applications. We have stated clearly that we go for the three technologies: full electric through battery, and fuel cell electric, and continuing on the combustion engine. We have for a long period of time been working on hybrids in advanced engineering. So far, we have not taken any decision to go into industrialization, but we have it as a potential technology, but not in the planning right now to be industrialized. But if you think about it also, I mean, a fuel cell electric vehicle in a way is a hybrid because there you have the fuel cell generating electricity, but for the transients and the acceleration and things like that, you have also battery storage, etc.
So to put the bits, I mean, I should not say it's easy, Lars, because then you will not be happy with me. But what I say is that we have the competence and the bits and pieces if that should be more viable, obviously.
Thank you. I would like to hand the microphone to Erik at SEB.
Thank you. The question I really want to ask is if there are different speeds to the rotating floor, but maybe we can test that later. No, it's on autonomy. I mean, you brought us here to the U.S. There are other quite impressive U.S.-based companies pushing into electric trucks, but even more focused pushing into autonomy and autonomous vehicles.
And I mean, Aurora have come a long way, and you have a fleet now of 25 vehicles on the road, but by comparison, those are pretty small numbers, and you're competing with some pretty deep pockets here. How do we build confidence around your position as autonomy eventually really comes into play here? So I think the first part of the question was, is it US only, or is it bigger than that? No, in general, I'm not sure if this is on. In general, your position on autonomy in relation to some technology companies with really deep pockets, massive technology resources, how do we build confidence around Volvo's position in autonomy in that context?
Yeah, thanks a lot. Here we speak a lot about the term partnerships and new leadership. And in the space of autonomy, we believe that's very important.
So we're working super close, super aligned with our technology partner, Aurora. And by that, we have said that we are developing the autonomy-enabled truck, which you see behind us, and then Aurora has been developing their virtual driver, and then the integration we're doing together, and we're going to market also together. But Volvo Autonomous Solutions is then fronting towards the customers. Now, when I look at the engineering capacity we have within the Volvo Group, then I have zero concern. We have a very deep, very highly developed technology organization, which Lars is leading, and I have no concern in that regard, also if I compare ourselves to other OEMs. When it comes to the development of the virtual driver, particularly for public road applications, then that is more a comparison of what Aurora would compare to other players on that market.
I would say with great confidence that Aurora has been crystallizing as a leader in that segment. So I think actually we are super strong in this partnership together with Aurora and what we are doing in our own development.
Thank you for that. I think we take one final question because we still have an intensive program also for the afternoon, many things. But we take one final question from Henrik at Carnegie.
Yes, thank you. Henrik Kristersson from Carnegie. I have a question on the electrification and the transformation and about the investment, how you balance and pace that when there are a lot of stakeholders involved to get the enablers in place, such as infrastructure incentives, etc., at the same time as the EU is threatening the industry with fines for the OEMs at specific dates.
Yeah, and this is, of course, as we have discussed here during the morning, also one of the key parameters now for the transformation to happen. I'm more than convinced, and I think we are more than convinced it will happen because it carries so many benefits. But to your point, it's again the time facing, what speed and acceleration, and on top of that, a little bit of a hard stop done by, for example, 2030, where you need to have a certain adoption level. What we are doing in that space is obviously saying, number one, we are ready. We are launching, and we are rolling out a broader and more comprehensive product and solution range in all different segments.
Number two, we are, in addition to that, together with partners, doing our part in a number of the other pieces of the equation, for example, in infra charging infrastructure, both when it comes to the depot charging, but also when it comes to public charging, and on top of that, also the whole energy transition together with customers. So in that regard, and this is also, by the way, where I see Europe going now, we need to move from laying out, so to speak, the visionary things and move to execution, and in that regard, I think we have a strong story that we will bring forward also to Brussels and others and say we are ready. We think it's a good idea. This is very big societal, but also competitive benefits, but then we need to step up big time.
The good news in that is that we have what we call also different milestones for the enabling conditions and infra being one. And what we want to do in the industry and at Volvo is, of course, to bring that forward. So we have clear reviews, not only by 2027, but already by 2025 and 2026, because this must be a coordinated effort. And as you have understood, we are very keen to make it happen for different reasons. Good. I think that concludes the Q&A. We could easily have continued for a couple more hours. But before we end, any final words from you, Martin? No, but first and foremost, we are here. And we have also other great colleagues here to take the opportunity. I mean, yes, to discuss and continue to push us in different directions and ask questions, etc. So we are here.
We are available. We are looking forward to the discussions. And yes, again, thank you for coming. We are very excited about the future. It has never been more exciting to be in this industry. And after a little bit more than 30 years, you can understand that the excitement has always been there, but now it's super exciting. So thank you for coming. And thank you also for you watching online today. Thank you. And now the all materials are published on our homepage. Thank you. Thank you. Thank you.