Daimler Truck Aktie

Good morning, everyone, and welcome to Daimler Truck's Second Quarter 2026 Earnings Call. I'm Marcus Poppe, Head of Investor Relations at Daimler Truck. On behalf of Daimler Truck, I would like to welcome you to our Q2 earnings global conference call.

Joining me today are Karin Radstrom, our CEO; and Eva Scherer, our CFO. Karin and Eva will begin with an introduction directly followed by a Q&A session.

The presentation is available on Daimler Truck Investor Relations website. Please note that this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Truck website.

I would like to remind you that this teleconference is governed by the safe harbor wording you will find in our published results documents. Please note that our presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties.

If the assumptions underlying any of these statements prove incorrect, actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

With that, let's jump into the results. Karin and Eva will walk you through how the quarter developed. And after that, we will open things up for analyst questions followed by the media.

Karin, over to you. Thank you.

Thanks, Marcus, and good morning, everyone. Let me start by sharing the key figures for the quarter. For the group, we generated EUR 12.3 billion in revenue, up 5% with adjusted EBIT of around EUR 800 million and a net profit of EUR 1.5 billion. Earnings per share from continuing and discontinued operations amounted to EUR 1.91.

Our balance sheet remains strong with a net industrial liquidity of EUR 8.3 billion. I also brought some business highlights for you. As you might have seen, we pre-released our second quarter results and raised our full-year guidance 2 weeks ago. This increase reflects the strong performance of Trucks North America, driven both by higher expected unit sales for the remainder of the year and the approval of Daimler Truck's U.S. content application.

Another important milestone in Q2 was the launch of Daimler Truck Defense. By bringing our defense activities together under one global brand, we can make better use of our global engineering expertise, manufacturing network, sales organization and service capabilities across the whole group, as we continue to grow this business with the ambition of reaching EUR 1 billion in defense-related revenue by 2028.

Another area where we continue to make progress is our Mercedes-Benz own retail strategy. The expansion of our service network is helping us to stay close to our customers and grow service revenue. In the second quarter, one big highlight was the integration of eStar in the U.K., which adds 6 new locations to our network.

The retail investments are helping us build a stronger, more truck-focused service network, and of course, also supports our ambition to significantly expand our retail presence by 2030.

We also continue to invest in the future of our business. Last night, we announced a new U.S. manufacturing facility. This investment gives us the rare opportunity to start with a blank sheet of paper and create a state-of-the-art facility, which will be designed around the latest manufacturing technologies, a flexible production system and, of course, the products that will define our future. Start of production is planned for late 2029. So this is a long-term investment, which reflects our confidence in the U.S. market and our commitment to strengthening our manufacturing footprint. The new facility will help create a production network that's more flexible, resilient and positioned to support future growth.

Turning to our Industrial Business performance. Revenue increased 6% year-over-year to EUR 11.4 billion. At the same time, adjusted EBIT declined 22% to EUR 780 million and adjusted return on sales came in at 6.8% compared to 9.2% in the prior year quarter. The year-over-year decline in earnings was driven by North America, mainly due to the ongoing tariff headwinds that were significantly higher than in the second quarter last year. This more than offset the positive earnings contributions from Mercedes-Benz Trucks and Daimler Buses.

At Mercedes-Benz, we remained disciplined on cost, and our Cost Down Europe program remains on track. At the same time, we're making significant investments in research and development with a large share flowing directly through the P&L, and therefore, affecting current earnings. It's in line with our commitments that we talked about in our Capital Markets Day last year.

Now to orders. Incoming orders remained at a healthy level in the second quarter, reaching around 74,000 units, which is up 27% year-over-year. The 35% sequential decline from Q1 reflects a normalization following our exceptionally strong first quarter and does not indicate a change in the underlying market environment. Unit sales were up 8% year-over-year, totaling around 87,000 units for quarter 2, resulting in a book-to-bill of 86%.

The backlog decreased compared to the first quarter, but remained on a very healthy level at approximately 50% above last year and well above historical averages. So we have good visibility for the remainder of 2026.

Our zero-emission sales increased to around 1,400 units in the second quarter, up 21% year-over-year.

Now turning to our markets. We continue to hold leading positions in both of our key regions. In North America, the Class 8 market totaled 66,000 units in the second quarter, down 6% year-over-year. What's encouraging is that order activity remains supportive, and we are confident in a strong second half of the year. At the same time, the market remains below previous cycle highs. And retail sales are still running below last year's levels following the soft start to 2026. With a market share of 38% year-to-date, we maintained our leading position in the market.

In Europe, the heavy-duty market expanded by 10% year-over-year to approximately 164,000 units. Growth was supported mainly by a strong demand in Spain, Poland and Lithuania, while some of our major markets like Germany, France and the U.K. remained below market average year-to-date. We further strengthened our leadership position in Europe's medium and heavy-duty segments, achieving an overall market share of 18.9%.

In zero-emission trucks, we achieved around 38% share of the European heavy-duty segment in the first half of 2026. So we are clearly leading. Even though zero-emission truck adoption in Europe remains at an early stage, registrations increased to around 6% of total registrations in Q2, which is up from approximately 2% in the previous quarter and in 2025. We believe we are well positioned to benefit from the continued transition towards sustainable transportation. So we're seeing very different dynamics across our markets, but our competitive position remains strong.

Now, handing over to you, Eva, to take us through the individual segments and some of the drivers behind the results.

Thank you, Karin, and good morning, everyone. Let me start with Trucks North America. In the second quarter, revenue increased by 2% year-over-year to around EUR 5.2 billion, driven by an 8% increase in unit sales. Compared to the first quarter, revenue was up 35%. Adjusted EBIT more than doubled from the first quarter, increasing to EUR 435 million from EUR 209 million. Adjusted return on sales improved from 5.4% to 8.4%. While profitability remained below last year's strong level of 12.9% due to significant tariff headwinds, we benefited from higher volumes, pricing actions and continued cost discipline.

Order intake reached more than 35,000 units during the quarter, up 156% year-over-year. Demand in North America remains very healthy and fleet replacement continues as freight conditions normalize. Moreover, since the beginning of the third quarter, we have seen increased activity from our rental, leasing and other large fleet customers, resulting in a July Class 8 order share of 45%.

At Mercedes-Benz Trucks, revenue increased to EUR 5.3 billion, up 10% year-over-year and 15% compared to the first quarter. Adjusted EBIT increased to EUR 317 million from EUR 283 million a year ago, resulting in an adjusted return on sales of 6%. Group sales increased 10% to nearly 39,000 units, supported by stronger market conditions in Europe. Order intake reached around 35 -- reached around 34,000 units, a decrease of 11% year-over-year.

In Europe, demand remained solid, and group sales increased by 36%. Profitability benefited from higher volumes and ongoing progress under our Cost Down Europe program. At the same time, earnings were affected by the ramp-up of our new global parts distribution center in Halberstadt and higher research and development costs in the P&L, driven by a reduced capitalization rate of 10.7% from 17.7% in the second quarter 2025. Due to increased inflationary headwinds, net price/cost remained negative in the second quarter. As we expect cost pressures to increase in the second half of the year, we have introduced additional pricing measures.

In Latin America, market conditions remain challenging. While Brazil showed signs of stabilization during the quarter, supported by the Move Brasil program, the overall market remained 10% below prior year levels. Argentina remained under pressure, adding further challenges across the region. As a result, profitability declined year-over-year despite continued pricing actions and cost measures.

In India, market demand remained above last year's level, supported by ongoing replacement activity and healthy domestic orders. Revenue of Daimler Buses increased 6% year-over-year to EUR 1.6 billion, reflecting positive net price/cost development, continued growth in our service business and favorable foreign exchange effects. Adjusted EBIT increased to EUR 150 million compared to EUR 147 million a year ago, resulting in an adjusted return on sales of 9.6%. Order intake reached around 5,300 units, a decrease of 25% year-over-year and a book-to-bill ratio of 86%.

Unit sales declined primarily due to weaker demand in our chassis business in Latin America and Mexico. At the same time, our integral bus business in Europe continued to perform well. While sales volumes were below the prior year level, profitability remained strong, highlighting the improved resilience of the business. Strong demand in Europe helped offset weaker market conditions in Latin America and Mexico as well as ongoing cost headwinds and high inflation in Turkey. While these circumstances led us to lower our 2026 unit sales outlook, we continue to generate strong financial results.

At Daimler Truck Financial Services, return on equity improved significantly in the second quarter. Adjusted EBIT increased to EUR 58 million compared to EUR 23 million in the prior year quarter and EUR 39 million in the first quarter. At the same time, adjusted return on equity more than doubled year-over-year, increasing from 3.1% to 7.5%. The improvement was driven by a stronger interest margin and a more favorable credit risk environment. In North America, improving freight rates and stronger used truck market also contributed positively.

Turning to ARCHION. The transaction continues to progress as planned. Following the closing on April 1, we received approximately EUR 1.4 billion in cash. Considering the deconsolidation of the Mitsubishi Fuso cash of EUR 0.3 billion, the net positive cash flow was EUR 1.1 billion. We are now in the final stages of reducing our shareholding to 25%, which is expected to generate an additional cash inflow of EUR 500 million to EUR 600 million. This step supports ARCHION's transition as an independent listed company and its inclusion in the prime standard segment of the Tokyo Stock Exchange.

The final proceeds from the ARCHION transaction will depend on the outcome of the overallotment option and will be confirmed after August 14. In the second quarter, our at-equity participation in ARCHION contributed EUR 24 million to adjusted EBIT. In reported EBIT, we recorded a gain in the amount of EUR 1.4 billion after deconsolidation and recognition of the at-equity book value as of April 1.

As of June 30, we adjusted the carrying value of our ARCHION investment from the initial valuation to the recoverable amount and recognized an impairment loss of EUR 297 million in Q2 within the at-equity result. The ARCHION sales -- the ARCHION shares classified as held for sale were measured at fair value less cost to sell, resulting in an impairment of EUR 222 million. Please note that the gain was recorded in discontinued activities, while the impairment was recorded in continuing activities. The net impact is positive in the amount of EUR 953 million.

In the second quarter, we generated a very strong industrial business free cash flow of around EUR 1.8 billion compared to EUR 20 million in the prior year quarter. In addition to the cash inflow from the ARCHION transaction, our operating cash flow in the second quarter was supported by improved working capital management, primarily reflecting optimization of payment terms. As a result, net industrial liquidity increased from EUR 7.1 billion at the end of the first quarter to EUR 8.3 billion at the end of the second quarter. This improvement was achieved despite dividend payments of approximately EUR 1.5 billion and our ongoing share buyback program.

Given our strong liquidity position, we intend to launch the second tranche of our ongoing share buyback program immediately after completion of the first tranche, which is expected no later than September 16. The second tranche is planned to be completed no later than June 30, 2027, with a volume of up to EUR 1.1 billion.

Now, let me turn to our guidance. Before discussing the changes to our full year outlook, let me briefly revisit the assumptions that underpin our guidance. We continue to expect the North American heavy-duty truck market to land between 250,000 and 290,000 units with a pickup in the second half of the year supported by replacement demand.

For the EU30 market, we expect a range of 290,000 and 330,000 units.

To date, the Middle East conflict has had only a limited impact on truck demand and global supply chains. Looking ahead, any broader impact will largely depend on the duration of the conflict and could vary by region. At present, macroeconomic indicators point to a more constructive outlook in North America, while sentiment in Europe is stabilizing. As always, our guidance is based on current market assumptions, including the existing USMCA and tariff framework.

As Karin mentioned, we raised our full-year outlook for 2026. Let me walk you through the changes. At group level, we now expect adjusted EBIT of EUR 3.6 billion to EUR 4.1 billion. For the Industrial Business, we now expect unit sales of 340,000 to 370,000 vehicles, revenue of EUR 43 billion to EUR 47 billion and an adjusted return on sales of 7% to 9%, all above our previous guidance range.

We have also increased our free cash flow outlook to between EUR 3 billion and EUR 3.5 billion. The driver of this upgrade is Trucks North America. Based on the lower anticipated tariff impact, higher expected sales volumes and including closure costs of our Portland manufacturing plant, we now guide for a return on sales of 9% to 11% and unit sales of 160,000 to 180,000 vehicles for the full-year 2026. For the third quarter, we expect profitability to be between 11% and 13%.

For Mercedes-Benz Trucks, we continue to expect a return on sales of 6% to 8%. For the third quarter, we currently expect profitability to be in the lower half of the range, reflecting sequentially higher material costs and the resulting negative net price cost effect.

For Daimler Buses, continued weakness in Latin America and Mexico has led us to lower our full-year unit sales outlook to between 20,000 and 25,000 units. All other guidance items remain unchanged. For the third quarter, we expect profitability in the upper half of the guidance range.

Financial Services remains on track, and we continue to expect an adjusted return on equity of 6% to 8% in 2026. Overall, the second quarter marked a turning point for Daimler Truck. The actions we have taken, together with improving market conditions and a stronger outlook for Trucks North America increase our confidence that the positive trajectory established during the quarter will accelerate significantly in the third quarter.

And with that, Marcus, I think we're at a good point to open it up for questions.

Thank you, Karin and Eva. That concludes our presentation for quarter 2 results. As usual, we will start with questions from analysts and move on to the media. Both sessions will be recorded and made available on our website. Before we start, the operator will explain the procedure.

[Operator Instructions] I would like to remind you that this Q&A session will be recorded on Daimler Truck request. The replay of the conference call will also be available as on-demand audio webcast in the Investor Relations section on the Daimler Truck website. [Operator Instructions]

So our first question comes from Nicolai Kempf at Deutsche Bank.

It's Nicolai here from Deutsche Bank. Well done for a solid quarter. Two questions from my side. The first one, the plan to build a new production in U.S. And I know it's early days, but will you try to adjust your overall production capacity in North America once this plant is up and running?

And my second one is on Mercedes and especially the profitability in Q3, which appears a bit soft. And for example, some of your Swedish peers have already raised prices twice this year to offset the higher input costs. So was the market not ready to accept higher price for Mercedes? Or have you been a bit too late to raise prices?

Nicolai, Karin here. I'll take the first one, and then, I think Eva can do the second one. So yes, it's early days with this plant, but it is a plant, of course, which will increase our overall production capacity in the North American market. But for now, we don't have any plans to shut down any other factory sites, but we do this out of a strategic position and giving us much more flexibility, both on how we distribute volumes across our network, but also with room to grow into the future, which we believe we have potential to do.

Nicolai, from my side, and thanks for your question. So on the price increases, we actually, in fact, also did communicate 2 price increases in 2026, the first one in March. But this will then only materialize in our P&L in quarter 4 because quarter 2 and quarter 3 were largely booked at this point in time. And then also now in July, we communicated a second price increase, which will then start hitting our P&L positively in quarter 1 next year.

Next question comes from Klas Bergelind at Citi.

I have a couple of questions. First, on the order intake in Mercedes-Benz. Can we talk through the percentage changes quarter-on-quarter across Europe, India and LatAm? And I'm also curious what you see in your European business, including Germany here into the third quarter. And then on DTNA, I'm trying to understand, is this because your build slots are now more full than peers for '26, while orders were weaker than we thought? Or is this some sort of market share loss here that we're looking at? I'll start here on orders.

Klas, sorry, I'm trying to get all the numbers together while answering. So I would say, starting on group level, I think if you look at the order intake first half of the year, we're very comfortable with where we are. And I think also in relation to our peers, we have some strong numbers. In MB specifically, we don't disclose order intake between the different regions, but it was, I think, up in Europe and slightly down in the other regions, right? And down a bit in Latin America, and I think steady in India. So I can give you at least that much.

Yes, Klas. Thank you for your question. So on North America, overall, what I can say that our order book really remains healthy, and it's significantly stronger than a year ago. And when we look at our backlog growth, that really reflects improved customer demand and stronger order intake throughout the current order cycle. And of course, we also align our production plans with market conditions, and we maintain flexibility to respond to customer requirements.

And we do see that because freight rates have improved significantly, fleet purchase intentions are rising, replacement demand remains strong. And we do really see that also reflected in our orders as we started the third quarter because our Class 8 order share in July has been at 45%. And this is also showing that we are strongly positioned in the market. And it always has to do a bit of the structure of the orders in the market, which is why you have certain fluctuations overall, but we are not concerned about quarter 2 because we had an exceptionally strong quarter 4 and also quarter 1.

And what we do see is that now also starting quarter 3, the larger fleets and the rental and leasing customers are ordering again, and they're placing larger orders again, especially, which is a part of the market that we're particularly exposed to. And so we believe on a year-to-date basis, including July, order intake remains on a very healthy level.

And when we look at our production, we have increased our production program now with the recent guidance range for quarter 4. So we have only a couple of slots open, but we're largely booked and very confident in the development there.

All right. My second one is on Mercedes-Benz and the exit rate for the year. So it looks like you need to achieve a very big margin step-up from, say, 6% to 6.5% in the third quarter, almost 10% if you stick to the 7% midpoint range. I hear you that you're increasing prices, but I assume that this fully also assumes that the spare part issue will be completely solved because that is obviously weighing on the mix given the higher margin. So, Eva, can we talk through the moving parts yet to this very strong exit if you are indeed keeping the midpoint of the range for the year, the 7%?

So yes, you're right to assume that it will be a very strong quarter 4 that we're predicting also driven by volumes. So extremely large volumes in quarter 4, but we're used to do that. We usually have very large volumes in quarter 4 of Mercedes-Benz and also the highest profitability in the last quarter of the year. And when it comes to the global spare parts center in Halberstadt, we still believe there will be some ramp-up challenges in quarter 3, but those should be easing in quarter 4. Then, we have the pricing impact, as you correctly stated, that will also positively affect the bottom line in quarter 4. And with that, we do believe that, yes, the exit rate will be at a high level entering then also into 2027.

All right. Very quick final one for me is on the tariff relief. Was that EUR 400 million in total? And am I right that you had about EUR 100 million included earlier in the guide? We're looking at a EUR 300 million delta. And how much was content relief versus MSRP? And if you can confirm that you didn't have any EPA benefit in there?

Thanks, Klas. So as you know, tariff is always a very complicated topic. As we have announced 2 weeks ago, we have received positive feedback on our U.S. content application and that combined with then also the volume upgrade for Daimler Trucks North America that led to our guidance raise, and you can well calculate how much we raised it at the midpoint. What also is considered here is that we have restructuring costs for our Portland plant.

So we announced the Portland plant closure last week, and there are restructuring costs associated with it, which we won't adjust because we do have a new guideline for special reporting items, and we do not want to adjust that much. And therefore, this will be in our adjusted EBIT affecting us. So these are the moving pieces that went into the guidance range.

I can tell you about MSRP, so the so-called IAO credits, we have applied for them as the calculation method has been released. So we applied in June, and there's an assumption for that one in there as well in our raised guidance.

So the next question comes from Daniela Costa at Goldman Sachs.

I have one in the U.S. and one in Europe, but I'll start by the U.S. one. Can you give a little bit of background of sort of like a thinking about the new greenfield investment? So a couple of items, I guess, there, you said late '29. So when you finish this, where will your mix Mexico versus U.S. be? And are you changing the mix even before opening up the plant? And does it impact your CapEx guide, which I think went sort of on the CMD up until '28? So does that change? Or was it already included there? And then, I'll ask the European one.

Yes. So I think it's -- as I said earlier, with the new plant, it gives us a lot of flexibility -- I mean, we have already today, as you know, quite good flexibility in our network to move volumes between Mexico and the U.S. depending on different conditions. With this new plant, we will have even more flexibility to do that. And, of course, with this kind of greenfield investment, we have the opportunity to really leverage the latest technologies to use a lot of automation, which has been made available in the last couple of years, and we think we can get a plant with extremely good productivity, which will be very competitive.

As for the CapEx, I hand over to Eva.

Yes. Thanks, Daniela. So on CapEx, it's a bit early to share the CapEx number for the plant because we are in the process of finalizing the site selection. What we can say is that it will be our largest plant in the United States. And as we said at our Capital Markets Day, we expect our CapEx to peak in '26 and '27, and they will still be at an elevated level in 2028. And this is still what we assume. And it's also worth noting that the new plant in the U.S., it is a very strategic investment into our production footprint and competitiveness in North America, and I can also say that it offers an attractive payback.

And then just in Europe, I think you -- Karin mentioned 6% of BEVs in Europe at the moment. There's still the 2030 CO2 reduction target. I was wondering if you could give a little bit of color on sort of how do you think BEV penetration has to evolve for you to get there. And what you're seeing in the competitive landscape there? There's a lot of things in the press regarding like Chinese competition and so on, sort of like just a little bit interested on your views on whether you're seeing effectively that competitive landscape starting to change at all.

So maybe starting with the second part of the question. We also see these announcements, but we don't yet see these trucks running with our customers. So -- and we don't see it also in registrations.

As I mentioned in the speech, on zero-emission trucks, we actually have a 38% market share. And we just announced also one of the product gaps we've had, so to speak, has been the low liner, which is used for volume goods, for instance, for like automotive inbound, outbound logistics. We will launch that now at IAA, which I think will put us even in a stronger position in terms of competitiveness. So we are quite confident in our portfolio.

But as you correctly point out, the overall market is still too small. We see that, as an industry, so not Daimler Truck specific, but as an industry, in order to reach the 43% CO2 target reduction, electrification rate in 2030 has to be around 35%. So for sure, it's a steep slope to go from the 6%, which was still much better than what we've seen before, but the 6% to 35%. And the main bottleneck still remains infrastructure, meaning charging stations. So even customers who want to transition to electric, in many cases, cannot do it because they can't charge the trucks on the road. So this is a challenge and working, of course, very close with the colleagues on this topic in ACEA and VDA. And also addressing it in Brussels.

And what we're trying to achieve is to have a better connection between all the different legislations that will enable this transition, meaning the truck availability, but also the charging station commitments that are actually legislated and the countries have committed to build, but are not building at the rate that they promised and also the Eurovignette directive, which differentiates the road tax depending on if it's diesel or electric trucks, which is only implemented in 13 out of 28 member states, which makes then the TCO calculation for customers in the countries where it's not implemented a little bit difficult. So that's the current situation.

So next question comes from Harry Martin from Bernstein.

So a few on the U.S. So the first question I have is just on the Service and Parts business. Did you see that business grow in Q2? And then if you could give some commentary on the new truck sales, it looked like mix on those new trucks, was down year-over-year again in the second quarter. Is that the fact that large fleets are making up a bigger portion of the mix? And does that mix improve in the second half of the year?

And then the second question, the set of questions I have, is there some follow-ups on the new plant in the U.S.? I understand the rationale. Will it increase total capacity in North America? Or would you downsize part of the Mexico production in association? Was this a prerequisite for the tariff deal or totally unrelated? And then, the final sort of thought or question is, does the U.S. market have room for the new capacity from you, from Volvo Mexico, from Tesla, all in the space of a few years? Or is there some concern about the total level of capacity?

Thanks, Harry, for your question. So on the Service and Parts business in the U.S., it was up mid-single digit year-over-year. So yes, we do see it growing. And when it comes to new truck sales, if I understood your question correctly in the mix, as I said when I answered the question from Klas, so when we look at the last 3 quarters, we actually have a very high order intake development, which is contributing to a significantly improved backlog. In the second quarter, it was a bit lower, but I also said that the large fleets and the rental and leasing fleets that, that was a bit lower in the second quarter, but that is already starting to really catch up in the third quarter now with the 45% Class 8 order share that we're seeing in July.

On the plant, Karin can do that one.

Yes, I can do the plant. So I think, as I mentioned before, it's a strategic investment. It gives us more flexibility in the market, and we will leverage latest technologies to really ensure that we build a highly efficient plant. It will increase our capacity, yes. But I think this is a good thing because today, when we're at the top cycle, we do have a limitation in terms of supply. So this gives us opportunity for growth. We will continue to grow from our strong position today. And as I think you know, we're also trying to gain market share on the vocational side, where we still have a lot of potential for even further growth. So this makes us confident to take this investment now.

And if I can just follow up with -- I mean, was this part of the negotiations with the administration? Or was there something that was actually in the works for Daimler Truck before any of the changes in tariff policy?

Yes. So I would say -- I mean, if you look at the geopolitical development in the last couple of years, of course, this is something we've been talking about for a while within the company, how do we make sure that we set up our company to be robust and resilient for the future. So I would say this comes much more out of a strategic perspective than out of short-term gains related to the current legislative environment.

Next question comes from Lewis Merrick at BNP Paribas.

Lewis Merrick at BNP Paribas. Well, we've got clarity on the EPA27 and you're in the unique position that you've got a good balance of NOx credits to use. I mean, clearly, there's time for the regulations to change. But based on your current understanding today, how do you plan to use those NOx credits? How many units will they cover? And will these be able to be used to offset any nonconforming penalties? Peer recently suggest that, that wouldn't be the case, but I'm keen to hear your understanding.

Yes. Thanks, Harry -- thanks, Lewis, sorry. Still in the last question. Thanks, Lewis. EPA27, so what I can say is that credits are part of our technological solution to achieve EPA27 compliance. It gives us some flexibility in certification. So we won't discuss today details of the certification, but please keep in mind that these credits are awarded for our current engine generation that have lower emissions than what is required by law. What we can also say is that our EPA27 compliant engine, it's a technical solution that will be highly robust, as it will not require a 48-volt system. And we do not expect any nonconformance penalties having to be paid for our EPA27 compliant engine because we will be fully compliant with the engine that we launch beginning of next year.

Clear. And then just on the tariffs, can you give us a sense of what percentage of qualifying U.S. content you have actually agreed with the U.S. Department of Commerce?

We cannot share any details on that, Lewis.

Yes. Understood.

So next question comes from José Asumendi from JPMorgan.

A couple of questions, please. I think we can discuss order intake for very long. And I think we heard during the call that you're confident on order intake for Q3 momentum. Can you -- maybe just to speak in a different way, can we talk a bit about the production run rate ratios going into the third quarter? And do you see them also elevated versus Q2 when you say -- or improved maybe as you think about Europe and North America, which again, would sustain the view that the momentum remains strong order-wise in Europe and U.S. for you?

And then second question, the topic of aftersales in Halberstadt, is this something that you think it will be solved by the fourth quarter or maybe as quick as Q3 in terms of the impact on earnings we saw in MB Trucks...

The production -- yes, thanks, Jose. On the production, so we are expecting production to be slightly up in the third quarter, so for Mercedes-Benz Trucks and for Trucks North America and even further in the fourth quarter. And what we also see based on orders development is that our production program is largely booked for both these segments.

With Halberstadt, I can say the situation is improving from where we were in Q2, but we will see some effects also in Q3. But we are hopeful that we will solve these topics in Q3 and run very efficient global parts logistics by Q4.

So next question comes from Shaqeal Kirunda from Morgan Stanley.

Shaqeal from Morgan Stanley. So book-to-bill fell in Q2, but freight rates have continued to grow. It seems like freight demand is coming online also. What's your sense of current market sentiment? Do you think that U.S. freight operators are more confident in the cycle and could move away from replacing trucks or actually expanding their fleets?

Thanks, Shaqeal, for your question. So yes, at the moment, we see only limited increases in freight volume, but a strong increase in freight rates, but we could see further potential there in the second half of the year and then also, in particular, into 2027 as this momentum accelerates.

And then, on the EPA situation, so the NCP mechanism lets manufacturer certify engines way above the 2027 NOx standard to 200 milligrams, it seems. And from the latest sort of developments, it seems like your peers are quite happy to take advantage of that. So by fully complying, it sounds like you'd be in the market with a more expensive engine. Is it that your incremental costs are just so much lower or you're expecting that the fuel efficiency from the new engine will pay off? Can you walk us through the strategy here?

Yes, sure. And maybe we ask whoever else is talking to just mute because we heard some background noise. So we will change over our production to the new engines. As Eva already stated, we have what we believe to be extremely robust engines, very good technical solution. We don't need the 48-volt system, which means the incremental cost increase is not that high. And we also will have a TCO advantage with these engines of around 3%. So we are definitely confident that these engines will perform with our customers, and that's why we will not run like parallel programs going into '27.

Next question comes from Alex Jones at Bank of America.

Maybe the first one, just on this U.S. facility. Are you able to give any sort of quantification or color on the cost advantage of the new plant compared to your existing capacity given you can design it from scratch, as you highlighted earlier?

And then the second question, just on autonomous. Volvo obviously announced at their Capital Markets Day that they will be commercializing or launching commercial autonomous vehicles in the U.S. in Q1 2027. How do you view the progress on with Torc in that light? And is there any risk that you're sort of a year behind your key competition?

Alex, Eva here. So I'll take the one on the cost advantage of the new plant. So it's a greenfield plant. We will use state-of-the-art technologies. And we will, of course, also use very high automation rates and use really everything that is available when it comes to automation and digitalization of this facility. And so obviously, it will be more efficient than other plants because also when you have brownfield facilities, you can do certain tweaks, but you can never get to these efficiency jumps as with a new facility. But I cannot quantify it at this point in time. But of course, at a later point in time, we're happy to do so.

Yes. And I can take the question on Torc. I think what's important, and something that makes us very confident in that, is, I believe, we're the only OEM to have this capability in-house with the virtual driver and Torc as our own software company. I would say the team has made really great progress this year, and we have a big milestone towards the end of the year, which is to drive on public roads driver out, so without a driver sitting in the cab so far, but it's new technologies, so always hard to know, but we're making really good progress towards that milestone, and the team is well on track. So we're quite confident about our capabilities to compete also in the autonomous space.

Next question comes from Anthony Dick at ODDO BHF.

The first one is on the tariff topic. I mean, I'm wondering if you can provide any further incremental color on -- in terms of how much the more favorable tariff treatment or tariff outlook contributed towards your guidance upgrade or any details also on the MSRP offset impact and the IEPA impact in Q2?

And the second one is on the Portland plant shutdown and restructuring. I don't know if I missed this, but did you provide the actual figure for the restructuring that we should take into account for H2?

Anthony, so on the guidance upgrade, I cannot give you any details here on the moving pieces when it comes to tariffs. But as I said before, the guidance upgrade was defined by 3 factors: the volume upgrade in the North American business, the Portland plant closure and the Portland plant closure amounts to a high double-digit impact and then tariff-related improvement. So these are the 3 moving pieces. And yes, sorry, I can't share any further details on that one.

Next question comes from Michael Aspinall at Jefferies.

Michael here from Jefferies. And sorry if the answer is that you can't answer this, but I just wanted to check once more on just kind of understanding the shape of the content allowances. Is it fair to assume that 3Q benefits from the content allowances reflecting trucks sold from when 232 came into effect, so kind of from November last year to June? Is that benefit kind of in 3Q? I'm just trying to get a sense as to how much of the 3Q margin is catch-up of the U.S. content versus ongoing into kind of 4Q and 2027?

Yes, Michael. I'm happy to answer that. So the U.S. content application retroactively goes back to November 2025, and that is reflected in quarter 3 in our guidance.

Yes. Okay. You can't give a quantum of kind of how much is catch-up versus kind of ongoing at all? Or we just work that out...

I'm afraid I cannot, Michael.

Okay. That's all right. No worries. And then just confirming because it sounds a little bit different to how some others approaching that you're not going to sell the 2026 engine in 2027 as it sounds like some other people will.

You've understood that correctly, yes.

That concludes our first part of this Q&A session for investors and analysts. We now have a break of 1 minute, and we'll then continue with the Q&A session for media. As always, IR remains at your disposal to answer any further questions you might have. We are looking forward to staying in contact with you. Have a great day. Thank you, and goodbye.

Hello, everyone, and thank you for joining us today, and welcome to the Q&A session. Before we start the Q&A, some housekeeping remarks. This call is conducted in English. So please be so kind as to ask your questions in English as well. And now, the operator will explain the procedure for registering your questions.

[Operator Instructions]

Thank you, operator. We will now begin the media Q&A session. The operator will address the questioners by name, but please be so kind as to briefly introduce yourself and your full name with your media outlet. Take your time, please ask them slowly and clearly.

And with that, operator, please.

The first question comes from [indiscernible] from BILD.

[indiscernible]. I wonder how serious you treat the EU regulation. And what's the possibility that there will be fines that will really affect your numbers and affect the share price? Is this really a risk that in 2 years' time, we will see no EBIT and we will have the share price come down? Or do you think this is something that could be mitigated?

Thank you for the question. So the current regulation stipulates that we should reduce CO2 by 15% compared to the 2019 baseline. So that's the scheme we're currently in, and we are quite confident that we are able to deliver on that. So for the next couple of years, situation looks under control. I think the big challenge comes in 2030 when it goes from 15% to 43%, and the actual measuring period for that is mid-2030 to mid-'31. So if we were to pay something, I think it's more like 2032. But yes, it is a risk, and that's why we take it so seriously. We invested many hundreds of millions to build and be able to deliver great electric trucks. And we see that the take rates aren't where we expected.

As I mentioned, 6% of heavy-duty trucks registered in Europe Q2 were electric, and we are very keen to have that increase over the next years because to hit the 43%, we believe we need around a 35% electrification rate. So we are working very closely with both the German government and the EU to really push that the enabling conditions are in place. And that's why we are also asking for an early review of the CO2 regulation where we hope that we will look at it and connect it much more to the enabling conditions such as charging and cost parity. And especially charging capacity is currently the bottleneck that doesn't make the take rate go up relative to diesel right now.

The next question comes from Michael Scheppe from Handelsblatt.

I have 3 questions, all on the U.S. You are expecting higher sales volumes in the U.S. market. Can you give us some details? Why is the market there developing better than you have expected before?

The second question is on the new U.S. plant. Can you give us any number, any figure on how large the investments are there?

And the third question is on the U.S. tariffs. I mean, you are receiving a refund of the tariffs. Can you give us anyhow a number or a range? And why are you being so reluctant to name a number there? I mean, it's a good news for you, isn't it, that you're getting back money. Maybe you can give a bit more details there.

Thank you, Michael, for your questions, Eva here. So on the higher sales volumes in North America, what we really see now after the first half of the year is that we're getting out of the so-called freight recession in the United States that has been affecting us for the last couple of years. We do see that freight rates are up significantly, about 30% since the start of the year.

Freight volumes are only slightly up, but we also do believe there will be a further improvement coming in the next couple of quarters, and we have raised our guidance and our volume projections because we do see the orders that we have received in the last 3 quarters. And this is why our production program is basically full with a few limited slots left in quarter 4. And because of that, we are confident in achieving these higher sales volumes in the second half of the year.

And on the U.S. plant, it's a bit too early to share how much we intend to spend on the new plant because we're currently in the final stages of the site selection. It will be our largest plant in the U.S., and we will share more once this is possible. And on the U.S. tariffs, this is a very, very complex topic, but what we have shared is that we have reduced -- that we have increased our guidance for North America and also for Daimler Truck as a whole because of tariff-related improvement and also the volume impact. And so there, both of these factors are attributing to the increase in our EBIT projection. And also, in the analyst call, we just discussed that also that also the Portland plant closure that is a negative impact that's also considered in the guidance range with a high double-digit million impact.

The next question comes from Marilen Martin from Bloomberg News.

Marilen Martin, Bloomberg News. I just have a short clarification question on the costs for the Portland plant closure because you said that it's a high double-digit number. Is that in euros or dollars? And you mentioned it's in the second half of the year that we will see those costs in the balance sheet, right?

Yes, we expect these costs in the second half of the year in Q3. In particular, it's actually -- it's high double digit in euros and in dollars.

The next question comes from Ilona Wissenbach from Thomson Reuters.

Here is Ilona Wissenbach from Reuters in Germany. I wanted to know about the new U.S. plant. Karin, you mentioned that this is -- it is related to the legislative environment. So can we say this is clearly a reaction to the tariff policy that part of the plan is to avoid U.S. tariffs? And if so, what does it mean for your Mexico operation? Are you going to reduce there something even though you mentioned it will be a capacity increase? And I was a bit surprised about the closure of the Portland plant. Looking it quickly up, it seems to be not a very big plant, but can you give us some details there? How many jobs are affected? Why are you doing this? And another question is related to Germany perhaps afterwards.

Thanks, Ilona. So just to be very clear, no, we are not building this plant to avoid tariffs. And sorry if I said something which was misinterpreted. It's a long-term strategic investment. We are very strong in the U.S. market, as you know. And we think this is the opportunity that keeps us strong and also gives us even further potential to grow in the U.S. market. We have not with this announced that we will close any other plants in Mexico or in the U.S. We will have a lot of flexibility, and I think it gives us even more opportunity to really optimize our strategic network going forward. So that's the background.

With regards to the Portland plant, you're right. It's quite a small plant. So the closure affects 370 employees. And the reasons are also that it's quite logistically challenging place to have a plant as most of our customers and most of our suppliers are on the East Coast. As an example, we're shipping cabs across the country to this plant. And as I said, it's a rather small volume plant that we can absorb within our current network. So that's the background on that one. And the aim is to close the plant by end of the year.

Okay. And the question on Germany is, if I'm not mistaken, Eva, you mentioned earlier this year some optimism about impact from the German public stimulus infrastructure package. And I was wondering, do you feel any effect? Is there anything to be observed? And also related now to the current situation with the drought and the River Rhine being almost dry, debating about putting more trucks on the road. Of course, I know you cannot order a truck and put it tomorrow on the road. But do you structurally expect more growth for truck transportation because of this?

Thank you, Ilona. Good question. So on Germany and the infrastructure measures, we've been waiting for a while to see them really be translated into order intake on our side. I mean, the German market is up year-over-year, but we do not see that significant uptake that we well still hope to see at one point. But so far, it's taken longer than we thought, and we haven't also seen it in quarter 2. So Germany is still in the -- when we look at Europe as a whole, it's still comparably a bit weaker in the recovery than other European countries.

And when it comes to the River Rhine and the drought, I mean, one thing where it also affects us is logistics because we need to make sure that in the second half of the year, where we expect higher volumes in Mercedes-Benz trucks, that we get the trucks to our customers. So we've already taken measures for alternative routings on the road instead of on the river to make sure that our customers receive their trucks. And then, of course, we're always looking at supporting where we can with providing as many trucks as we can on the road to support there.

Is this a lot capacity logistically you have to replace because it's now difficult on the river with shipping?

I mean, we have to see how it continues. We believe it will be manageable in the second half of the year.

And most trucks we already transport today over road.

The next question comes from Joachim Herr from Börsen-Zeitung.

There's one of my questions left regarding the plant, the new plant in the U.S. Are there already discussions you're leading with the government? And do you expect any funding from the U.S. government?

Yes, I can take that one. So we are not doing this in order to get funding. And as I think Eva mentioned, we're in the site selection process right now, and we have some sites in a number of different states. There could be states where you get some subsidies for building a plant. But I would say that's not the main decisive lever for us. We look more at things like workforce availability, how it's supply chain access is, of course, in relation to where our customers are for logistics purposes and as well as having the infrastructure in terms of roads, electricity, et cetera. So that's mainly what we're looking at.

The next question comes from Alexander Jungert from Mannheimer Morgen.

Just one question. Some German factories like Mannheim manufacture components for the U.S. market. Will that share be reduced if you open a new plant in the U.S.?

Alexander, so the plant that we are looking to open in the U.S. is an assembly facility, and we don't foresee that, that will affect the flow of components that we have today from Mannheim to Detroit, where we build the American powertrain components. What I hope for is, of course, that this helps us grow our already strong position in the U.S. so that we will be able to ship even more components in the future. But I guess that's a little too early to say.

The next question comes from Robin Wille from dpa Deutsche Presse.

Robin Wille, Deutsche Presse-Agentur. Two questions from my side. First, why have order intake figures at Mercedes-Benz Trucks and Daimler Buses declined? And second, can we assume that the new factory in the U.S. will be built on the East Coast since that's where the customers and suppliers are located, as you just mentioned?

Robin, thanks for your question. So first, on the order intake for Mercedes-Benz Trucks. So overall, we've had a very strong order intake for Mercedes-Benz trucks in the first half of the year. It was extraordinarily strong in quarter 1, sequentially a bit weaker in quarter 2, but we do overall see that we have a significantly higher backlog than we had a year ago and that our production program for the second half of the year is largely filled and that we will get a significant volume growth there.

With Daimler Buses, what we see there is that the European market is very strong when it comes to the integral bus business, but we see that Brazil and Mexico, the markets are very weak. And this is affecting us from a unit sales perspective. But you see also that in revenue, we are compensating this because the European bus business, it has higher average selling prices per bus than the chassis business that we do in Brazil and in Mexico.

And when it comes to the new factory in the U.S., we haven't finalized our site selection yet. So I cannot tell you yet where it will be. But once we have decided, we will also let you know.

All right. That was the last question in the queue, but I do want to give a few seconds for any last inquiries. Please insert them now.

All right. That looks like it's it. So ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you very much both Karin and Eva for answering the questions. Now, as always, the IR team and the communications teams remain at your disposal to answer any further questions you might have. A recording of the session will be available later today on our Daimler Truck website. We are looking forward to staying in contact with you. Have a great day and stay healthy. Thank you, and goodbye.

Good morning, ladies and gentlemen. This is Marcus Poppe speaking. On behalf of Daimler Truck, I would like to welcome you to our Q1 results global conference call. We are very happy to have you with us today, Karin Radstrom, our CEO, and Eva Scherer, our CFO. Karin [indiscernible] introduction directly followed by a Q&A session.

The respective presentation can be found on the Daimler Truck Investor Relations website. Please note that this conference call will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of Daimler Truck website.

I would like to remind you that this teleconference is governed by the safe harbor wording you will find on our published results documents. Please note, our presentation contains forward-looking statements that reflects management current views with respect to future events. Such statements are subject and uncertainties.

If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

Before we start, let me give you a quick reminder. Following the signing of Definitive Agreements in June 2025 with a target to integrate Mitsubishi Fuso and Hino into ARCHION Holding company, the Mitsubishi Fuso subgroup was reclassified as discontinued operations and assets and liabilities held for sale starting in Q2 2025.

Effective January 1, 2026, the Trucks Asia segment was no longer reported separately. And for capital market communication, we focus on continuing operations for business development, unit sales and profitability. Our investment research activities as well as free cash flow and liquidity are presented on a combined basis, including both continuing and discontinued operations. With closing on April 1, 2026, our shares in the Mitsubishi Fuso subgroup were transferred into shares in ARCHION and as a result, are reported as an at equity participation from Q2 onwards.

With that, let's jump into the results. Karin and Eva will walk you through how the first quarter came together. And after that, we'll be open things up for analyst questions followed by the media. So Karin, please, over to you.

Thanks, Marcus, and good morning also from my side. As you may have seen, we had a first quarter which was on the soft side with low volumes in North America and continued tariff impacts. At the same time, we are seeing really strong order intake and remain very confident as we look ahead for the remainder of the year.

So, with that, let me have a look at the key figures for the quarter. For the group, we generated EUR 10 billion in revenue with an adjusted EBIT of around EUR 500 million and a net profit of EUR 149 million. Our balance sheet remains strong with net industrial liquidity of EUR 7.1 billion.

Furthermore, we continue to deliver on our strategy to become a more profitable and a more focused company with three topics to mention. Firstly, with the completion of the integration of Mitsubishi Fuso and Hino Motors into the newly established ARCHION Corporation on April 1, we enabled that new company to unlock synergies, benefit from scale across products, technologies and operations.

As communicated, we will gradually reduce our ownership to 25%, generating a total cash inflow from the transaction between EUR 1.5 billion and EUR 2.0 billion. Within the next 12 months, we expect the free float to reach at least 35%, which is an important prerequisite for a prime market listing in Japan.

Secondly, in addition, we announced in March that Toyota intends to join cellcentric as an equal shareholder alongside Daimler Truck and Volvo Group. This represents a meaningful step forward for hydrogen technology. It brings together three global industry leaders with complementary strengths and improves our ability to accelerate innovation and scale fuel cell systems.

This partnership underscores our strong confidence in hydrogen as a core pillar of zero-emission transportation, while at the same time, we maintain a disciplined approach to efficient capital allocation.

Thirdly, given the current conditions in the electric commercial vehicle market in North America, we're adjusting our spending accordingly. We agreed with our Amplify Cell Technologies joint venture partners to defer the installation of manufacturing capacity. Limited construction will continue to ensure that joint venture remains well positioned for the future while maintaining flexibility as the market [indiscernible].

Due to the delay of production start and ramp-up, we recorded a noncash partial impairment of EUR 200 million in equity result from Amplify in accordance with IFRS rules, which is reported as an adjusting item within EBIT. We had originally planned a contribution to the joint venture in a low triple-digit million range this year. So overall, we will see a positive cash flow impact.

Continuing with the look at the Industrial Business, revenue came down 14% year-over-year to EUR 9.1 billion and adjusted EBIT was down 55% to EUR 460 million. The primary reasons for the decline was the lower profitability at Trucks North America, where we saw very low unit sales along with significant tariff headwinds. We continued managing our overall cost base effectively and further reduced SG&A expenses. Research and development investments were also lower in the first quarter, but we expect higher spending for the remainder of the year.

Now to the orders. Incoming orders -- which rose by 50% to 114,000 units shows that we have a great momentum with our products. Feedback, especially on our Actros L with the ProCabin remains very positive. At the same time, unit sales were down 9%, totaling around 69,000 units for quarter 1, resulting in a book-to-bill of 166%. Overall, cancellation rates remain low even with the heightened economic uncertainty related to the Middle East conflict.

Turning to our zero-emission portfolio. We sold around 700 battery electric trucks and buses in the first quarter, up by 26%. In North America, the Class 8 market totaled 50,000 units in the first quarter of 2026, representing a 23% year-over-year decline, reflecting historically low order demand in 2025 and in line with our expectation of a slow start in 2026. Our market share stood at 37.7%, making us again the clear market leader. Based on our strong order share, we expect our market share to improve as the year progresses.

In Europe, the heavy-duty market expanded by 11% to approximately 80,000 units, largely driven by Poland, the Netherlands, Spain and Germany. Against this backdrop, our heavy-duty market share increased a lot from 14.2% in quarter 1, 2025 to 18.3% in quarter 1, 2026, reflecting the strength of our competitive product portfolio and the successful launch of the Actros L at the beginning of 2025.

As a result, we further reinforced our leadership position in Europe's medium- and heavy-duty segments, achieving an overall market share of 18.5%. In zero-emission vehicles, we led the market again, capturing 33% of the European heavy-duty segment in the first quarter of 2026. While the overall adoption in Europe is still low at around 2% of truck registrations, this underlines our strong competitive position as the transition continues.

I'll now hand over to Eva, who will walk us through the segments.

Thanks, Karin. As you mentioned, market conditions varied across regions. So let's start with a closer look at what it all meant for Trucks North America. At Trucks North America, revenue came down 29% year-over-year to around EUR 3.8 billion, following a historically low demand environment in 2025. Excluding a negative foreign exchange impact of roughly EUR 450 million, revenue was lower by 21%.

Adjusted EBIT came in at EUR 209 million, leading to an adjusted return on sales of 5.4%. Unit sales fell 25% to the lowest first quarter level since 2010. Positive pricing and disciplined cost management helped mitigate the impact but could not fully offset substantial tariff headwinds and the pronounced volume decline. With an order intake of over 59,000 units, up 86% year-over year and 13% sequentially, our growing backlog gives us confidence for the remainder of the year.

The overall industry is showing discipline, and our customers are replacing their aging fleets despite continued macroeconomic uncertainty and higher fuel costs. Freight rates have improved by more than 20% year-over-year as freight capacity has exited the market. We are now seeing the full impact from Section 232 truck tariffs, resulting in a combined low triple-digit million-euro net tariff impact in the first quarter. Our application under the U.S. content program and the review of MSRP credits are still pending with no confirmed impact on the effective rate at this time. Despite these factors, performance remains very solid and demonstrates resilience.

Mercedes-Benz Trucks generated revenue of EUR 4.6 billion, a 4% increase year-over-year with an adjusted EBIT of EUR 233 million, resulting in an adjusted return on sales of 5.1%. Order intake was strong, reaching around 49,000 units, representing a 33% increase compared to quarter 1 2025 and 4% sequentially. In Europe, profitability benefited from a strong sales performance and the strict implementation of cost-down Europe measures. This was partly offset by duplicate aftersales operation costs related to the ramp-up of the global parts center in Halberstadt, along with slightly negative net pricing. Moreover, the prior year quarter benefited from a mid-double-digit onetime warranty effect.

In Latin America, volumes increased slightly, driven by strength in Chile, Colombia and Peru and market share gains in the medium-duty market in Brazil. Profitability declined year-over-year, driven by a more challenging market conditions in Argentina. In India, volumes increased strongly in line with the market, supported by favorable mix.

Revenue of Daimler Buses was at EUR 1.2 billion, a 7% decline year-over-year with adjusted EBIT of EUR 107 million and a strong adjusted return on sales of 8.6%. Order intake reached around 5,900 units, representing a 25% decrease compared to quarter 1 2025, driven by the weaker markets in Latin America. However, still resulting in a book-to-bill ratio of 119%. The strong European business keeps its positive momentum.

Unit sales declined by 20%, mainly due to a weak market environment in Latin America and Mexico, where we primarily sell bus chassis. At the same time, our higher-margin integral bus business in Europe slightly increased year-over-year. Even with strong performance in Europe, positive pricing and FX support, we could not fully offset the volume decline in the chassis business. However, despite lower volumes, we delivered a strong profitability, highlighting the improved resilience of the bus business.

Adjusted EBIT for Financial Services decreased year-over-year from EUR 55 million to EUR 39 million, driven by higher loss allowances and foreign exchange headwinds. As a result, adjusted return on equity decreased from 7.3% to 5.1% in the first quarter. A prolonged freight recession in North America, tariff-related impacts and increased fuel prices due to the Middle East conflict have continued to weigh on customer cash flow. As a result, a growing numbers of customers are experiencing tighter liquidity in their business, also in Brazil and Mexico, which has translated into higher cost of risk as we are taking a prudent approach to provisioning. In North America, it will take time for higher freight rates to improve fleet margins that have been severely diminished after years of market downturn. Moreover, we are not adjusting for costs resulting from our ongoing restructuring initiatives to position our Financial Services business for improved returns in the future.

Free cash flow of the Industrial Business of around negative EUR 400 million was significantly lower than in the previous year, mainly driven by lower earnings and additional inventory buildup due to higher order intake. This was partly compensated by higher prepayments received from customers, increased trade payables and lower income tax payments. At the same time, our balance sheet remained very strong. Net industrial liquidity at EUR 7.1 billion after deducting the negative free cash flow and a cash outflow of around EUR 50 million resulting from the share buyback program we initiated on March 16th.

Now turning to our guidance. To date, we have only seen a limited impact of the Middle East conflict on truck demand and global supply chains. However, further developments will largely depend on the duration of the conflict and are likely to vary in severity across regions. The longer this situation remains unresolved and oil prices remain elevated, the higher the likelihood of inflationary cost pressures, supply chain disruptions and softer truck demand. As of today, macroeconomic leading indicators point to a more resilient outlook in North America compared with a more cautious sentiment in Europe. As always, our guidance does not factor in potential impacts from supply chain disruptions or adverse macroeconomic developments, particularly those related to the Middle East conflict. It also assumes that the current USMCA tariff framework remain in place.

We continue to expect the North American heavy-duty market to land between -- 250,000 and 290,000 units with a pickup in the second half of the year supported by replacement demand. For the EU30 market, we expect a range of 290,000 and 330,000 units. All segment level guidance KPIs for 2026 remain unchanged.

For Trucks North America in quarter 2, we expect unit sales to be around 50% above first quarter levels, with profitability at the upper end of the full year guidance corridor. This does not consider a reduction in tariff exposure in the second quarter. Based on our strong order intake and our expectation of a lower effective tariff rate under the U.S. content program in the second half of the year, we expect to deliver a full year return on sales adjusted at the upper end of our 6% to 8% guidance corridor.

For Mercedes-Benz Trucks, we expect group sales to increase sequentially by around 15% in the second quarter, in line with further market improvement in Europe. Profitability is forecasted at the lower half of the guidance corridor. For the full year, we confirm our 6% to 8% return on sales corridor with a strong improvement expected in the second half of the year. For Daimler Buses, sales are expected to be around 30% above quarter 1, and profitability is expected to be at the upper end of the guidance corridor. We also confirm our full year guidance corridor of 8% to 10% return on sales.

Taking into account lower cash contributions to Amplify Cell Technologies, we expect to be at the upper end of our full year free cash flow guidance and forecast a strong recovery already in the second quarter.

Thank you very much, Eva. Thank you very much, Karin. So that concludes our presentation for quarter 1 results. Now it's time to move into the Q&A portion of today's call. As usual, we will start with questions from analysts, then move on to the media. Both sessions will be recorded and made available on request.

Good morning, ladies and gentlemen, and welcome to the Q&A part of today's Q1 results global conference call. [Operator Instructions]

So good morning. I think we start with Nicolai Kempf from Deutsche Bank.

It's Nicolai from Deutsche Bank. Slow start in Q1, but well flagged, and we appreciate the comments on Q2. If we start in North America, very strong orders in Q1 that seemed to slow down a bit in April. And have you any color on that? Was this because of lead times getting longer? Was a bit of slowdown because of the higher diesel prices? So any color on this would be appreciated. And then moving to Mercedes and maybe to Europe, you've mentioned a bit more cautious indicators on the macro side. Can you just remind us what are the moving parts here going forward? And why is Mercedes going to improve in H2?

Thanks, Nikolai. Karin here. Maybe starting with North America. As you said, very strong order intake in Q1, I think, at 86%, better quarter 1 compared to last year. And in terms of April order intake, it was a bit more stable from -- moving on from March, but we're happy with the order intake in April. In terms of Europe, as we move into Q1, we also see an improvement on the volume side. So that should help to boost the result of the Mercedes-Benz Truck segment for Q2. Eva, anything -- otherwise.

Yes. I think maybe I'll shed some light on Mercedes. Overall, explaining a bit further on quarter 1 and then also how you can expect the year to develop. So I mean, just to recap a little bit also what we went through during the speech. So we saw a 4% increase in revenue for MB year-over-year. We saw that order intake was strong. And as anticipated, as you said, slower start into the year. And we do see that we have profitability in Europe moving in the right direction. This is supported by cost down Europe and also improving volumes, which will then also be a factor coming into quarter 2. Now in quarter 1, we did have temporary cost headwinds. I mentioned it, operational ramp-up of our spare parts distribution center in Halberstadt and some slightly net negative price/cost impact.

What we also saw in quarter 1 in MB that we had some temporary inefficiency in our industrial setup related to the relocation of the Atego cabin production, so medium duty to Turkey, and that resulted in additional rework costs as we ramp that up. But this is something in the next quarters that will get better.

And then we see, as I mentioned also in the speech just now, we had a lower profit contribution from Latin America here, Argentina being the main factor. And when we look at this now coming into quarter 2, we see that it will gradually ramp up into the second half of the year. You saw that we're guiding for Q2 in the lower half of our full year guidance corridor for Mercedes-Benz Trucks, but then you will have higher volumes come out and also some of these headwinds easing over the second half of the year, and we're very comfortable with our full year guidance corridor.

So next question comes from Klas Bergelind, Citi, please.

So can I just confirm on the margin guidance here for North America at the upper end in the second quarter. This doesn't include any benefits from MSRP or the preferential tariff agreement. So this is mainly the higher operating leverage quarter-on-quarter and a better mix from Cascadia.

And linked to this, given the solid margin here for the second quarter, it seems like you can reach [indiscernible] the higher end of the range of 6% to 8% for the year without these tariff benefits, at least on my math, with the tariff benefits coming on top. Is that how to think about it?

Klas, thanks for your question. Obviously, a very good one and not unexpected. So you're right, based on what you concluded that quarter 2, and I said it also just now, there -- is no reduction of the effective tariff rate considered in quarter 2. So it's really the run rate that were coming out of quarter 1 that will also then translate into the quarter 2 profitability. We have a significant volume effect coming in with 50% higher unit sales. And then obviously, that brings us to the upper end of the full year guidance corridor in quarter 2.

Now when it comes to the lower effective tariff rate that we believe we can get under the U.S. content program and then also MSRP credits. Maybe the first one for lower effective tariff rate. We have not received confirmation there. But we're still confident that we will get a relief there. But first of all, we are not exactly sure how long it would take. And then we have to see based on our application, what will be accepted. So that's a bit unpredictable. But what you can say is that the assumption in our full year guidance is quite conservative for a tariff relief because we're being cautious there.

And on MSRP, I said last time that we had considered a mid-double-digit million amount for this in this year. We have taken it out now. We still believe we will get it, but it could take a bit longer because we see that it's moving very slowly. We still don't have the calculation method, so we couldn't even apply for any credits there for the U.S. assembly. And so there, this could move into next year. So generally a bit more conservative assumptions there on the tariff side. And as you did the math, we're trending quite well there when it comes to profitability based on run rate.

Very good. My second one is on Mercedes-Benz and the orders. We had this move incentive in Brazil, which has seen truck orders surge. I'm trying to understand how much of this is the better orders that you delivered? How much is driven by the Brazil incentives that we understand will start to roll over after May versus the European better momentum, Actros L, et cetera. Just so we understand how much we need to give back from the Mercedes-Benz better orders into the second half?

Klas, Karin here. I can take that one. So actually, we have a little bit different structure from some of our competitors in Brazil as we're a full liner, and we deliver both the extra heavy, semi-heavy and the medium-duty segment. So actually, if you look on our order intake in Brazil, it has remained rather stable quarter-to-quarter. And the growth that we are seeing is coming very much out of Europe and some of it also from India.

Next question comes from Alex Jones from Bank of America.

Maybe first on pricing. If you could comment on what you're seeing particularly in Europe, where you cited negative pricing this quarter and also North America whether the strength in order intake gives you any potential to make a decision to further increase pricing through the year?

And then second question, just on the order strength. Are you seeing any customer feedback to suggest there's already an impetus given higher fuel prices to replace trucks a little bit quicker? Or is that really still too early for you to see in conversations or certainly in the numbers?

Thanks for your question, Alex. I'll take the pricing one first. So on the MB side, it was slightly net price/cost negative. Actually, what we do see is that over the course of the year this will improve, and we expect a net positive price/cost impact on a Mercedes-Benz Truck segment level for the full year.

In North America, obviously, tariff effects are significantly higher this year and our tariff surcharges are not compensating the tariff costs fully. And so we have a net negative price cost, and we do expect that to remain for the full year. However, we do see from a pricing perspective that pricing itself is improving. And we also do see that as we go into the year, looking at the good order momentum, potentially, there is also some room for improvement there. We are reviewing this every quarter when it comes to pricing and related also to tariff surcharges.

You asked then also on the demand side in North America. So we do not really see so much of this that customers replace trucks earlier. We generally see that there is a renewal need in the market as there has been a very long freight recession ongoing in the third year now. I mentioned that freight rates have improved 20% since the start of the year and also over 20% year-over-year. So a significant improvement that is helping.

We also do see that this is supported by capacity exiting the market and also really stronger requirements being followed up on English language proficiency of drivers, this non-domiciled CDL topic being tackled. And that is what is supporting now really the freight rates and results ultimately. On the demand side, we believe there's still potential for that to further pick up going forward.

Next question comes from Daniela Costa at Goldman Sachs.

Actually, two questions. But starting out with the U.S. and with EPA, just wanted to get a little bit more clarity on like how your strategy to adapt for that is? I guess your order book might be significantly filled for '26. So maybe soon we'll be talking about filling '27. Have you decided what you're going to do with pricing there? And then I'll ask an unrelated one afterwards.

Daniela, Karin here. Yes, we are still waiting [Audio Gap]

Daniela, can you hear us?

Only now. I think you went blank.

And do you hear me, Daniela?

Yes.

Yes. So I was saying that EPA has confirmed that EPA 27 will come, but we still don't know exactly how warranty and some of the other legal topics will be playing in, which means it's still quite difficult to know how to set the pricing. However, we are, I think, very confident that we will have very competitive pricing and that we have a good technical solution to be compliant, which should help us very much going into '27.

Thank you. And my second question was just more regarding how do you think about China strategy over the long run, just an update of where you stand there. We see some of the Chinese peers being a bit more active on exporting. We also see some of your peers talking about having a presence there to maybe leverage it outside of China. Just an update on where do you stand there?

Yes, I can take that one. So we have a joint venture in China with Foton called BFDA. We have been negotiating quite a long time on the way forward. And let me say, I was hopeful to solve it earlier. I think I said in our Capital Markets Day to come back at the beginning of the year. But we're still negotiating all options on the table. So I'll definitely come back as soon as there's something to tell. I think I'm learning that sometimes it's better not to stress to get to a solution, but to come out with a really good one in the end.

In terms of Chinese competitors in various markets, of course, we know them. We see them. We have seen them for many years, but now they are in some markets pushing more. I think we've shown in the bus market, where they have been present even in Europe over the last 10 years, that we're able to fight back and to show very strong performance also against our Chinese peers. And I think you see it in the result of our bus business. So I believe the same goes for the truck side. We have to keep playing on our strength, bringing very good products, keeping close customer relations, and having a very good network to ensure the total cost of ownership and the uptime of our vehicles.

The next question comes from Michael Aspinall from Jefferies.

Just two. So one in North America. We heard that there were some pricing notices given to customers in the U.S. in March. Just wondering if those orders would be delivered in 2Q? Or would they more likely come through later in the year?

Michael, you said some pricing that has been given to customers in March. Could you explain what you mean?

Yes. We just heard from some customers that some pricing notices came through in March. And I was wondering if pricing is a significant component in 2Q in North America for the margins, or if that would come through later, given when orders are taken.

Yes. So as I said, I mean, obviously, with the good order situation, our ability also to look at tariff surcharges has improved a bit, but this is mainly relevant for orders in the second half of the year, not in Q2.

Got it. Yes. Cool. And then the other one, you announced the site of a new manufacturing plant in the Czech Republic, I believe it is. Can you just talk about how important it is in reaching that position to reduce freight costs in Europe in the years to come?

Yes. It's in line with what we announced at our Capital Markets Day. So our aim is to have around 25 -- moving from 45% to 25% of our assembly capacity in Mercedes-Benz in Europe, and to bring cost down by EUR 3,000 per truck from that assembly plant.

The next question comes from Lewis Merrick from BNP Paribas.

I think last quarter, you spoke of reaching the top end of your guidance for North America was dependent on receiving favorable tariff treatment. Based on your earlier comments, is that no longer the case today?

Yes, I alluded to it when I answered the question from Klas, Lewis, but happy to explain it a bit further to make it clear. So yes, we said that in the last quarter, but obviously, you also see now that our run rate is developing quite well. And already in the second quarter, with the volume effect of 50% higher unit sales, we expect to be at the upper end of our full-year guidance corridor. And so we still, for the full year, assume that we will get a better effective tariff rate, so a lower one, especially related to the 232 truck tariffs. However, the assumption that we have considered there is a more conservative one. I mean, as you can imagine, there are a lot of moving pieces on this, and we will know once we hear back from the U.S. administration. And this is where we are right now, and we'll keep you updated.

But it's fair to say that if you were to receive that favorable tariff treatment, you could see upside to that North America guidance?

Maybe we'll discuss that in a couple of months once we have heard back from the U.S. administration.

Okay. And just one follow-up. On the price of the key inputs, whether it be energy, steel, aluminum, these all increased. Do you have an estimate of the total cost headwind you expect in 2026 from raw materials?

Yes. So obviously, it's a very volatile situation, and I mentioned it also in the speech that we have to closely monitor the development in the Middle East, and the impact really depends on how long the current situation persists. Strait of Hormuz will be open again, and so on. But what we have done is we have taken some amount into our forecast and as a result, also into our guidance when it comes to include raw material costs, logistics costs, fuel costs, and so on.

However, we have not considered the impact of potential supply chain disruptions, the potential implications on demand, because, as Karin also said, our orders are still developing well in Europe as well as in North America. So a prolonged situation in the Middle East that would prove to be challenging. That's something that we have not considered in our guidance. And of course, we have a risk scenario that we have evaluated as part of our opportunity and risk management that we always do.

The next question comes from Akshat Kacker from JPMorgan.

Akshat from JPMorgan. A couple of questions, please. The first one on order intake trend in Europe. Have you seen any slowdown or any changes to the strong order intake that you saw in Q1 in the month of April or the start of May, please?

And the second one is on R&D spending. You talked about below trend R&D spend in the first quarter. Could you just remind us of your expectations for the full-year R&D spend, please?

I can take the first one, and then I hand the second one to Eva. So, on order intake in Europe, it stayed, I would say, quite strong also in April, maybe slightly down, but still on a good level. And then on R&D, just a second.

Yes. R&D, I'll take over. So it was a bit lower in the ramp-up in quarter 1, but we still believe that we will have slightly higher R&D expenses over the course of the year compared to prior year. And as we have also previously explained, we really see R&D expenses peaking this year and next.

The next question comes from Harry Martin at Bernstein.

So the first question I have just about the ramp-up of volume in the North America business, 50% up Q2 versus Q1, but then also through the year. I wondered if there were any risks to this ramp-up? Do you have the staff for the lines of the suppliers that you have set up to match that speed? Or is there any risk to that volume expansion?

Thanks, Harry, for your question. So we do have everything lined up, obviously, already for quarter 2. Our production program for quarter 2 is already fully booked. Q3 and Q4, we're filling up nicely. I would say that's an absolutely healthy seasonality that we see there. We're used to ramping up and down, and that's what we're also doing now. So I would say we're well prepared to match that speed with one caveat, which is obviously the situation in the Middle East that we have to watch out for. At the moment, we do not see any constraints there. But as I said, we have to monitor that very closely.

Great. And then I wondered if I could get an update on the autonomous business, the Torc Robotics status. I guess, both the current technology and where we are in the rollout, but also, there were headlines through last year about potentially opening about business outside capital. So I wondered if we could get an update there.

Sure. I can provide you with that. I would say the team continues to make good progress. We have a really important milestone at the end of the year to drive on-highway with the driver-out with our production intent hardware. So I think that's one of the strong benefits we see with Torc that we already have hardware that we're ready to scale, and not prototypes. We're still planning for an SOP in early 2028. And there's nothing that the team is doing that makes me doubt that, while for sure, you know it's uncertain when you deal with new technologies.

We think we're in a strong position with the Freightliner Cascadia. It's the best autonomous chassis in the market, and we also feel that there is a lot of interest from competitors of Torc for that chassis. And also in that particular segment where we believe autonomous will start to scale, we have a very strong market share because it's with the big fleets on the highway where we have the Cascadia.

In terms of how we will move on with the company, I think we're fully intent on funding that and making it a success, while for sure, we also always look for options for value creation.

Next question comes from Hemal Bhundia at UBS, please.

One of your peers mentioned that the parts business was a bit softer than expected. I'm curious on how you're seeing your aftermarket business develop in Europe and North America, and I'll follow up with my next question after.

Yes. So on the service side, we saw a low single-digit growth year-over-year. We think we will improve over the course of the year. So I talked a lot about breaking the curve. I would say we have not yet broken the curve in terms of our service growth, but I think we have a lot of great initiatives in the pipeline. In the U.S., we're working with AI to improve pricing. We're opening up some new retail stores to better reach the second and third owners of our trucks, which is a segment where we've had relatively low market share.

And then as already mentioned, in Europe, I mean we made just recent announcements, we opened on retail inland I think we announced yesterday or the day before that we bought a dealer group in the U.K. So we're establishing our first own retail in the U.K. And then as Eva mentioned, Halberstadt, which is currently a bit of a challenge with the ramp-up, as you can imagine, with 300,000 parts moving into 170 countries. But once we get that under control, which I think will happen over the next months, definitely, we are optimistic about the potential to grow the service business even more.

Very fair. And I recall that you mentioned that there were some bottlenecks in the vocational side of the bodybuilders. Could you give an update on how this has developed?

Fairly stable, I would say. So we still see that. But generally, the vocational business is developing as we expected -- believe that we can see significant growth there in the next couple of years, also in market share.

So our last question comes from Frank Biller at Landesbank Baden-Wurttemberg.

So it's a question about zero-emission vehicles. Here, we saw strong deliveries here, book-to-bill ratio of 1.5 here. What is your expectation for the full year, given the higher diesel prices? Is it going steadily upwards? Or is it a bit more coming down because of the U.S. business here? And the other question is on this autonomous driving again. I've seen the cost went down to EUR 71 million compared to EUR 81 million in the quarter. Have we seen the peak already? Or will it go upwards with the start of production?

Frank, I can take the ZEV question. So actually, we don't see that diesel prices going up directly drives the adoption of zero-emission trucks. And the main reason being that infrastructure is still a bottleneck. So actually, we do see with some of our customers that the total cost of operation for electric trucks, depending on the use case, of course, is quite positive, especially for those who drive a lot on the Autobahn, where you also have the significant advantages from the mouth for an electric truck versus a diesel one.

But due to the still very slow ramp-up of infrastructure, and it's actually both the public infrastructure along the highway, but also for customers who want to establish infrastructure at the depot, it takes too long with the permitting processes and getting the electric connection to the grid. So that's actually the main bottleneck, which is very unfortunate considering this would be an opportunity, really, where it should and could have taken off more.

Yes. And on the cost ramp-up, no, we haven't seen the peak already. So it's a fairly stable development that we're expecting this year, also compared to last year, when we look at the full year ramp-up of costs.

That concludes the first part of this Q&A session for investors and analysts. I would now like to hand over to Andy Johnson for the second part, where all participants from the media can ask their questions. Now, as usual, IR remains at your disposal afterwards. Have a great day. Thank you, and goodbye. Over to you, Andy, please.

Thank you, Marcus, and welcome, everyone, to the media portion of our Q&A session today. Before we start our media Q&A session, some housekeeping remarks. As you probably have guessed by now, this call is conducted in English. So please be so kind to ask your questions in English as well. The operator will now explain the procedure for registering your questions.

[Operator Instructions]

Thank you very much. We will now begin our media Q&A session. The operator will address the questioners by name. Please be so kind to also briefly unmute yourself with your full name and your media advert. Take your time, and please ask your question slowly and clearly. And with that, operator, let's go with our first question.

The first question comes from Robin Willer from DPA Deutsche Presse-Agentur.

This is Robin Willer from DPA Deutsche Presse-Agentur. Hope you can hear me. In your press release, you state that the financial results were primarily impacted by lower profitability at Trucks North America. Could you please explain this in more detail? I mean, what were the main factors here? And can you quantify them precisely, for example, how significant was the headwind caused by the tariffs? And what factors outside of North America influenced net profit, looking at the loss on equity method investments? Could you also please explain that?

Robin, Eva here. Thank you for your questions. So the important thing about North America is that it was really the lowest volume quarter that we have seen since 2010. So this was really a historic low, so a significant volume effect in there. And in addition to that, we have the highest tariff effect in quarter 1 that we have seen so far because the 232 truck tariffs are fully considered there. In quarter 4, it was only two out of three month. And so the overall tariff effect, including all tariffs, reached a low triple-digit million amount, just to give you some idea here.

And then we had an adjusted effect, which you also see in our numbers, that was EUR 200 million for a partial impairment of our stake in Amplify Cell Technologies. Karin mentioned that in her speech. So there, we have decided together with our joint venture partners that, considering the environment in North America concerning zero-emission vehicles, we will delay the buildup of manufacturing capacity in that joint venture. It's a battery cell manufacturing joint venture, and that caused, based on IFRS accounting requirement, a partial impairment of our book value.

However, we will have a positive free cash flow effect out of this because we did consider in our initial planning a low triple-digit million amount in cash. Injections into this joint venture, which we do not expect anymore and that then also brings us to the upper end of our guidance corridor for the full year when it comes to free cash flow.

The next question comes from Ilona Wissenbach from Thomson Reuters.

So, Ilona Wisenbach from Thomson Reuters. I didn't get it now, Eva. Was this low 3-digit million amount tariff effect only for the first quarter? Or was it for the full year? That's one question and another one after that.

Yes. The first one is, it was only for the first quarter.

Okay. And how is it for the full year? Is it not -- able to calculate?

No, this is what we pay now. But then, as I also said during the speech, we have applied for a lower -- or for a relief under the U.S. content program. And there, we do then expect a reduction of the effective tariff rate that we pay under the Section 232 for the truck tariffs. So that is where we do believe in the second half of the year that there will be a reduction, but we cannot quantify it yet because we have applied for that relief with the U.S. administration, but we have not heard back.

So quarter 1 and quarter 2...

Sorry.

And the latest announcement of President Trump, do you think it changes anything, because the 25% apply anyway already to trucks?

Yes. So I mean, generally, we do not ship assembled trucks from Germany into the U.S., and that's our current understanding of this new tariff rate that was announced on May 1. But obviously, we continue to evaluate the changes in the tariff framework.

Okay. And the second question was about the zero-emission trucks in the U.S. You see that the market there is more difficult. And I wonder why you support actively the legal action of the Trump administration against the climate change rules. I think you faced criticism for that also today at the Annual Shareholder Meeting. I mean, adjusting to a weak market is one thing, but actively supporting to stop selling zero-emission trucks is another thing, and I don't understand it.

Yes, I can do this one. So it's absolutely not to be interpreted like we are against zero-emission trucks in the U.S., and the challenge we have is that California has one legislation when it comes to zero-emission trucks. And this has been challenged by the federal legislation because they are saying that the California legislation is not right or not valid. And therefore, it's more of a technical step that we are suing to understand which legislation we are to be following in the Californian market. So its -- that's the explanation on that.

In terms of zero-emission trucking in the U.S., I think we can say with confidence that we have been very committed. We had started a group-wide battery platform project to be able to scale zero-emission trucks in the U.S. However, with the change in legislation and now I'm back on the federal level, a lot of environmental legislation was -- pulled back, which we had anticipated, which means there is no demand for zero-emission trucks in the U.S. at the moment because the customers simply cannot make the costs come together to be competitive with diesel. And for that reason, we had to announce last year that we stopped our platform project, which we had started. So that's the background on that topic.

All right. That looks like it for our media questions today. Thank you, Robin and Ilona, for your questions. Everybody else joining us, thank you very much for joining us today. Thank you, Karin and Eva, as well. Now, as always, the IR and communications team remains at your disposal to answer any further questions you might have. So please don't feel or don't hesitate to reach out to us.

A recording of the session will be available later today on our Daimler Truck website. We are looking forward to staying with you in contact with you today, and have a great day. Stay healthy. Thank you, and goodbye.

Good morning, everyone, and welcome to the 2025 Annual Results Conference of Daimler Truck. Thank you for joining us. I'm Andy Johnson, Global Head of Communications for Daimler Truck.

And before we get started, let me briefly outline what is ahead of you today. First, we will deliver our presentation of the 2025 results as well as the outlook for 2026. After that, we will move into the analyst Q&A session and finally, the media Q&A session.

And now I will hand over to Marcus Poppe, who will guide you through the presentation and analyst Q&A.

Marcus?

Thank you, Andy, and welcome, everyone. I'm Marcus Poppe, Head of Investor Relations. Today, we will take a closer look at how Daimler Truck performed in 2025 and how we are positioning the business for the year ahead.

To start us off, it's my pleasure to welcome Karin Rådström, our President and CEO; and Eva Scherer, our CFO.

Karin, looking at 2025, how would you assess our overall financial performance?

Well, thank you, Marcus. Also good morning from my side. Great to be here. Well, 2025 was quite a year. The markets were shaped by geopolitical tensions, changing trade policies and a steady stream of uncertainty. But I'm really proud that through all of this, one thing remained constant, the strength and resilience of Daimler Truck.

For the group, we delivered EUR 49.4 billion in revenue, with an adjusted EBIT of EUR 3.8 billion. Our Industrial business achieved 7.8% return on sales even against the backdrop of this ongoing uncertainty and volatility. And with EUR 1.8 billion of free cash flow in our Industrial business, we closed the year with a very strong net industrial liquidity of EUR 7.7 billion.

These achievements are not accidental. They show that our strategy is already working and that we are strengthening the fundamentals of this company. We are becoming more agile, more robust and more focused.

Thank you, Karin. So staying with the theme of resilience, what were the main value drivers for our Industrial performance in 2025?

So at the Industrial business level, revenue decreased by 10% year-over-year to EUR 45.9 billion, and adjusted EBIT declined by 21% to EUR 3.6 billion. The primary reason for this was the downturn in Trucks North America, where we had both a weak market and faced tariff headwinds. However, there were also areas of strength. Daimler Buses achieved a double-digit return on sales, and we also continued to manage our overall cost base effectively and reduced SG&A expenses. At the same time, we increased our investments in research and development, which is a strategic step to further improve our product portfolio and strengthen our competitiveness for the long term.

Our Service business delivered low single-digit organic growth with a clear overall acceleration for services in the second half of the year. Revenue growth was dampened by currency movements and some structural changes from the reorganization of our rental business, CharterWay and also the Fuso carve-out. Going forward, Service growth is an important part of our growth strategy, and we have many running initiatives that will increase our momentum over the coming years. For example, a new advanced pricing tool for the North American market that utilizes data analytics to assess competitive positioning, volume potential and the life cycle value across the entire parts portfolio.

And at Mercedes-Benz, we are ramping up our own retail strategy, which is progressing as planned. Over the last 2 years in MB, we've opened 8 new commercial vehicle centers across Europe, 3 of those in Germany. And in 2025, we invested EUR 25 million also on upgrading existing sites, like, for an example, the expansion of the Würzburg location, and we also continue to work on truck dedication. So I think we're doing a lot. And in addition to these organic initiatives, we're also doing acquisitions. We've signed our first contract, so we will start to step up on the spending on the retail side in 2026.

Just to finish the bridge, the positive other effect is mainly attributable to the full impairment of the equity carrying amount of our joint venture in China in 2024, which leads to a favorable comparison year-over-year.

So thank you, Karin. Before we turn into market developments, can you walk us through how unit sales and order intake developed in 2025?

Yes, sure. I can do that. At group level, our book-to-bill ratio reached 101%, which reflects a good balance between incoming orders and deliveries. Unit sales decreased 8%, totaling around 423,000 units for the year. At the same time, incoming orders grew by 2% to approximately 425,000 units. In the fourth quarter, order intake was really strong with 52,000 units for Mercedes-Benz and 52,000 units for Trucks North America. And it's also good to see that this positive trend out of Q4 has continued since the start of the year. If we turn to our zero-emission portfolio in 2025, we sold 6,700 battery electric trucks and buses, up from around 4,000 in 2024.

Thanks a lot for that overview, Karin. So against the backdrop of our overall performance, Eva? How did the key end markets evolve over the course of 2025?

Thank you for the question, Marcus. And first of all, a warm welcome from my side to everyone. So in North America, the Class 8 market came in at 258,000 units in 2025, representing a 16% year-over-year decline that reflects a year shaped by economic uncertainty and a prolonged freight downturn. Despite this environment, our Class 8 market share held firm at 39.6%, underscoring our leadership in the market.

In the heavy vocational segment, we maintained a stable market share compared to 2024. However, ongoing congestion at body builders limited our ability to capture additional share. Western Star is growing absolute volume, outperforming the market and building a strong pipeline of unregistered units currently at body builders awaiting upfits. As this backlog moves through the system, registrations will begin to reflect the growth already evident in our production. Looking ahead, we are confident that we can expand our position toward our Capital Market Day target of more than 35% market share by 2030.

In Europe, the heavy-duty market declined 6%, totaling 296,000 units. Our momentum saw a meaningful improvement towards year-end with a 15% recovery in the fourth quarter compared to quarter 3 and plus 4% versus the fourth quarter of 2024, backed by our competitive portfolio and strong customer demand for the Actros L, our European heavy-duty market share climbed from 14.2% in the first quarter to 18.8% in the fourth quarter, delivering a 17.1% full year share. We also reaffirmed our European leadership in the medium and heavy-duty segment, with 17.7% market share. Our zero-emission lineup strengthened this position even further, capturing 38% of the heavy-duty electric truck market in 2025 and around 50% in the fourth quarter, making us the clear leader.

Thank you, Eva. Now Karin, maybe shifting gears from markets to execution, which products and platforms define us in 2025?

Yes. Well, happy to talk about that. We're really proud about our trucks and buses. Starting with Europe, we are driving the transition to zero-emission transport, which Eva just talked about, with a portfolio that's really performing great in the market, not the least our long-haul truck, the Mercedes-Benz eActros 600, but also the eActros 400 and our electric city bus, the Mercedes-Benz eCitaro. These vehicles show that the technology is ready, and we see the customers responding. So we have great products, and we are prepared to deliver at the speed of right when the markets are ready. However, the transition is still too slow, mainly due to the lack of infrastructure.

We've also upgraded our conventional portfolio. Eva mentioned the launch of the Actros L featuring the ProCabin, where we have optimized the aerodynamic design to reduce fuel consumption by up to 3% versus the previous generation. And as also mentioned, this truck has really helped us gain market share and momentum in the market.

At the same time, we started series production of the Fifth Generation Freightliner Cascadia, the newest evolution of the most successful Class 8 truck in North America. And together with our strong Western Star vocational lineup, we are reinforcing our leadership in the world's most important commercial vehicle market.

In India, we launched our new BharatBenz heavy-duty trucks for construction and mining. Even though Daimler India Commercial Vehicles has only been in the market since 2012, we are an established brand with big growth opportunities, both in India as well as in the export markets.

In Brazil, we introduced our all-new Mercedes-Benz Axor, a heavy-duty truck for up to 68 tonnes. And this truck filled a gap in our portfolio, which helped us increase our market share in Brazil from 22% in 2024 to 26% in 2025.

Defense has also become a high-growth strategically critical segment for us, and we are winning important tenders. For instance, our contract with the French Army to supply 7,000 Zetros together with our partner, Arquus for the next 10 years and the order for several hundred Arocs for the German Bundeswehr.

Back at our Capital Market Day, we set a target of reaching EUR 1 billion of revenue in the defense business in 2030. And today, I'm proud to say that we expect to reach that target already in 2028. So we are already ahead of our plan by 2 years.

So to summarize, our product momentum is really strong across all regions and segments.

Excellent. Thank you, Karin. With that in mind, Eva, let's take a closer look at how this translated into the performance of Trucks North America.

Absolutely. Happy to dive into that, Marcus. So at Trucks North America, revenue fell 21% year-over-year to EUR 19 billion, resulting in an adjusted EBIT of EUR 2 billion. Even in a very tough U.S. environment, however, we achieved a strong adjusted return on sales of 10.7%. The results were pressured by a 26% decline in unit sales, driven by the ongoing freight recession and uncertainty surrounding the introduction of tariffs. Delivering double-digit profitability in such a challenging market is a testament to the remarkable team in North America.

In 2025, the overall net tariff impact, including Section 232, was around EUR 250 million. Unfavorable foreign exchange developments added further pressure on earnings. We offset part of this pressure through decisive pricing actions, supported by model year updates and disciplined efficiency measures, including a reduction of around 3,000 positions across the workforce.

Without the tariff impact, our return on sales would have been around 12%, which is a clear demonstration of how resilient our business can be even in a sharply down market.

Thanks, Eva. I agree. Very strong performance indeed. So Karin, let's now look at Mercedes-Benz and Daimler Buses. How did these segments perform in 2025?

Yes, sure. Starting with Mercedes-Benz Trucks, which delivered a robust performance. Revenue was EUR 19.7 billion, a 4% decline year-over-year, with an adjusted return on sales of 6.2% and adjusted EBIT of EUR 1.2 billion. In EMEA, profitability benefited from a stronger volume development in Europe and the accelerated implementation of our cost down Europe measures. The 2024 impairment of the Chinese at-equity joint venture carrying amount also contributed positively to year-over-year profitability.

At the same time, we had temporary production inefficiencies during the ramp-up of the new products, namely the Actros L with the ProCabin and some selective price decisions that weighed on margins. We also increased our R&D investments to advance our product portfolio.

In Latin America, profitability declined slightly year-over-year due to the continued economic uncertainty, a drop in the extra heavy market and negative foreign exchange impacts. In India, volumes increased slightly compared to 2024, while performance remained challenged by mix effects and ongoing pricing pressure.

Overall, Mercedes-Benz Trucks continued to perform with discipline, resilience and a clear focus on strengthening the business for the future.

Daimler Buses delivered a strong performance in 2025, achieving revenues of EUR 6 billion and an adjusted EBIT of EUR 599 million, resulting in a very strong adjusted return on sales of 10%. This is all-time high for Daimler Buses and a reflection of a lot of really hard work over the last years.

The European market saw significant growth, supported by robust demand for both coaches and zero-emission city buses. Brazil performed slightly above 2024, while in Mexico, results remained below the prior year, mainly due to prebuy effects from Euro VI and a broader economic slowdown.

Adjusted EBIT increased 39% year-over-year, exceeding net revenue growth. Strong net pricing, favorable sales mix and the exceptional performance of our teams were the key drivers of this very strong result.

Thanks, Karin. So let's round things off by looking at Trucks Asia and Financial Services. Therefore, Eva, how did we perform there?

Yes. Let's do that. In 2025, Trucks Asia delivered revenues of EUR 4.8 billion, with an adjusted EBIT of EUR 212 million and an adjusted return on sales of 4.4%. The Asian market environment continued to face challenges. reflected in persistently soft demand across major markets, particularly in Japan and in Indonesia. Overall profitability declined slightly. Higher volumes, mainly driven by the Middle East as well as market share gains in Indonesia and net positive pricing were more than offset by unfavorable mix and substantial foreign exchange effects. Continued aftersales growth and SG&A cost discipline helped to strengthen resilience.

Our Financial Services value over growth strategy is taking shape. Adjusted EBIT significantly improved year-over-year from EUR 133 million to EUR 181 million. Despite 12% lower new business volume and elevated cost of risk stemming from the ongoing volatile macroeconomic environment, this favorable development was driven by increased interest results, supported by higher interest margin. We have been successfully diversifying our portfolio geographically, countering adverse foreign exchange and credit risk headwinds.

Our overall result was positively augmented by the realization of transformational and efficiency programs targeting cost savings, especially in headquarters in Germany and North America. As a result, adjusted return on equity increased year-over-year from 5% to 6.1%.

Thanks, Eva. So having covered the business performance, now let's focus on cash flow. So how did we close 2025 from a cash perspective?

Yes. Sure. Let's have a look. I'll start with a big picture. Free cash flow of the Industrial business amounted to around EUR 1.8 billion, which is in the upper half of our guidance range, driven by strong cash generation in the fourth quarter. Compared with 2024, cash was lower, largely reflecting the earnings pressure at Trucks North America and higher inventories during the ramp-up of our Parts Center in Halberstadt, Germany for Mercedes-Benz Trucks.

At the same time, our balance sheet stayed very strong. Net industrial liquidity ended the year at EUR 7.7 billion, even after roughly EUR 1.5 billion in dividends and about EUR 600 million in share buybacks. This keeps us comfortably above our EUR 6 billion liquidity threshold and gives us a very solid foundation as we move forward.

Thank you, Eva. So let's change perspectives. At our Capital Market Day last summer, we committed to providing regular updates on cost down Europe. So this feels like a right time to review where we stand. Karin, what's happening at Mercedes-Benz? And how is the program progressing?

Yes. I think with good momentum, we have strong performance in 2025. With cost down Europe, we fundamentally transform our European business, to make it more competitive, more resilient and more fit for the future. And we are fully confident in our own potential to lift profitability to a fundamentally higher level by 2030. And I think the progress we've already made underscores this commitment. In 2025, we delivered more than EUR 100 million in net savings, which actually puts us ahead of our original plan and demonstrates strong momentum behind the initiatives.

So how did we achieve these results earlier than expected? Well, first, as we shared at last year's Capital Market Day in Charlotte, we reached a comprehensive agreement with the General Works Council, covering all key elements of the program. With this foundation in place, we were able to roll out cost-saving measures quickly across all the functional areas.

Second, we saw some strong contributions from operations, sales and IT that each delivered a bit more than we expected, double-digit million euro savings. Operations delivered improvements through energy saving initiatives and longer company car leases as an example. Sales increased their efficiency with the rollout of the concept of lean truck operating centers. And in IT, we phased out legacy systems and optimized license management.

Third, we maintained very strict discipline in staffing. We used natural fluctuations and strict replacement policies to progress faster at workforce adaptations in Germany, and that also supported the savings. So with this positive momentum continuing, we are targeting for 2026 at least EUR 250 million of total net savings for cost down Europe.

Thank you, Karin. So we also reached a major milestone last year with the ARCHION agreement. So Eva, can you please talk us through what that means for Daimler Truck as we head into 2026?

Yes, we definitely reached a major milestone. And Mitsubishi Fuso and Hino Motors will be integrated into ARCHION as of April 1, 2026. This setup gives the new company, ARCHION, the scale and flexibility it needs to unlock additional synergies.

What does this mean for us in practical terms? Together with Toyota, we plan to gradually reduce our ownership to 25%, generating a total cash inflow between EUR 1.5 billion to EUR 2 billion. Within the next 12 months, we expect the free float to reach at least 35%, which is an important prerequisite for the prime market listing in Japan. As a result, both our 2026 guidance and our quarter 1 figures will no longer include Trucks Asia as a stand-alone segment. Instead, ARCHION will be reflected as an at-equity investment, keeping our reporting clean and fully comparable.

Thank you both for the overview of 2025. We have covered where we're coming from. Now let's talk where we are headed. So Eva, could you briefly outline what investors should expect regarding our capital allocation in 2026?

Yes, I will do that. With our strong cash generation in the fourth quarter and the expected proceeds from the Fuso-Hino merger, our balance sheet remains very well capitalized. Reflecting this solid financial position, we intend to propose a stable dividend of EUR 1.90 per share, and we'll initiate our previously announced share buyback program in March.

Thank you, Eva. So turning to 2026, what are we aiming to deliver? And how do you see the markets evolving as we turn into the year?

Yes, let's take a quick look at our market assumptions for 2026. In North America, we expect the heavy-duty truck market to come in between 250,000 and 290,000 units. The lower end of the range would imply that the freight recession persists. Reaching the upper end would require a combination of higher freight rates and transport volumes alongside stronger EPA '27 related prebuy activity.

In the EU30, we expect the market to land between 290,000 and 330,000 units. The lower end assumes no meaningful improvement in economic activity. The upper end reflects tangible effects from German infrastructure stimulus, with positive impulses for the Eurozone more broadly.

At Trucks North America, we see unit sales coming in between 150,000 and 170,000 units, supported by a modest market recovery and higher dealer inventory following destocking in 2025. From a profitability standpoint, the improvement in volumes is largely offset by a significant tariff headwind. For 2026, we currently assume that our application under the preferential tariff treatment program will be approved over the course of this year. Based on this outlook, we forecast an adjusted return on sales of 6% to 8%. The lower end of the range assumes no relief from current tariff levels, while the upper end reflects a reduction in the effective tariff rate, driven by an increase in certified U.S. content in our vehicles.

We are actively engaging with policymakers, and we are using every mitigation lever that is available to us. At the end of the day, we're confident in our ability to manage these challenges as the year progresses.

As we look at the first quarter's profitability, we are approaching the lower end of our guidance range, reflecting the impact of the 232 truck tariffs as well as sequentially lower volumes. As we move forward through the year, we expect these effects to normalize, supported by our ongoing mitigation actions.

At Mercedes-Benz Trucks, we expect unit sales in 2026 to come in between 150,000 and 170,000 units, supported by a recovery in the European market. We also expect profitability to improve, with a targeted adjusted return on sales of 6% to 8%. This improvement is driven by strict cost discipline and contributions of at least EUR 250 million from cost down Europe, helping to offset additional R&D investments. In terms of first quarter profitability, we are approaching the lower end of the guidance range based on lower volumes.

For Daimler Buses, we're guiding unit sales in the range of 25,000 to 30,000 units. We expect European long-haul markets to remain at a high level, while the Brazilian market is likely to come in below 2025 due to ongoing political and economic uncertainty. The Mexican market is expected to remain subdued as the broader economic downturn continues. From a profitability standpoint, we expect an adjusted return on sales between 8% and 10%. For the first quarter, profitability is expected to be below that range, mainly due to seasonally lower sales volumes.

And for Financial Services, we expect an adjusted return on equity of 6% to 8%, supported by higher interest income and lower cost of risk as well as further efficiency measures.

At group level, we're targeting an adjusted EBIT between EUR 3.2 billion to EUR 3.7 billion. Industrial business revenue of EUR 42 billion to EUR 46 billion and an adjusted return on sales of 6% to 8%. For the first quarter, profitability is expected to be below that range. Including the expected cash in from the strategic Fuso-Hino transaction, we expect free cash flow to come in between EUR 2.7 billion to EUR 3.2 billion. As indicated at our Capital Market Day last year, we confirm a total expected cash inflow of EUR 1.5 billion to EUR 2 billion from the Hino-Fuso integration over time. Since the listing price of ARCHION share and timing of our sell-down is yet uncertain, we have included only EUR 1.5 billion in our 2026 guidance.

Excellent. Thank you, Eva. So now a quick legal reminder from me. Our guidance does not factor in potential impacts from supply chain disruptions or adverse macroeconomic developments, particularly those related to the Middle East conflict. It also assumes that the current USMCA and tariff framework remain in place.

So before we open the lines for questions, do you have any closing remarks?

Yes. Well, maybe something. I want to say that I believe our outlook really reflects our commitment to structurally improve our profitability levels, run an efficient balance sheet and invest into the future of our business.

Yes. Thanks, Eva. I would say I agree. I think we closed the year in a way that sets us up in a good way going forward in 2026. '26 is all about execution. We know our priorities. We're committed to delivering on them for our employees, for our customers and also, of course, for our shareholders.

Thank you both. So that concludes our presentation for the 2025 results. We'll now move into the Q&A sessions. As usual, we will start with questions from analysts, then move to the media. Both sessions will be recorded and made available on our homepage. Stay tuned. We will get started in just a minute.

Good morning, ladies and gentlemen, and welcome to the Q&A part of today's annual results conference. I would like to remind you that this Q&A session will be recorded on Daimler Truck's request. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Truck website. A few practical points. [Operator Instructions]

We will now begin the question-and-answer session.

So good morning, ladies and gentlemen. The first question comes from Nicolai Kempf from Deutsche Bank.

It's Nicolai from Deutsche Bank. And first of all, well done for a very strong Q4. My question would be on the U.S. market. And we have seen very strong orders over the last month, and we are also halfway into March. Do you see this trend continuing? And are you happy with the pricing of the orders you got over the last months? And if we stay in the U.S., a bit more question for the short to midterm. You've mentioned tariffs. It's going to be a big headwind again this year. Are you looking to increase the U.S. production capacities this year?

Nicolai, thank you. I'm Karin here. I can take the first part of the question and then maybe you, Eva, take some of the second parts. So yes, as mentioned, we have seen an uptick in order intake starting at the end of last year and also continuing into this year. I would say we are cautiously positive because even though it's a big improvement from a couple of months ago, if you look at our historical average, it's still below that average.

So let's monitor how it looks in the next couple of weeks, but it looks, for the moment, like a quite good trend. We also see that the -- what we call the -- the freight rates, sorry, blackout. The freight rates have also slightly improved at the beginning of the year. I think they're up 9% year-to-date, but still, if you compare historically on a low level. So cautiously positive.

Yes. Nicolai, I'm going to take your other questions, Eva here. So you asked about pricing. Obviously, we talked about it also already at quarter 4 that with the market being weak, we saw in quarter 4 when the Section 232 truck tariffs were introduced that we could not add additional tariff surcharges because we believe that our customers and the market couldn't digest it at that time. We still haven't done that to date. But obviously, we have some model-year pricing effects that we have, small single digit coming into 2026.

And as Karin said, the order momentum has been really positive, and that continued into quarter 1 up until today. So obviously, we're going to monitor that closely and probably the probability of increasing pricing slightly or potentially increasing tariff surcharges over the year has increased due to the positive order momentum. But obviously, for that to happen, the order momentum also has to now continue. And we also see what's happening in the world with Middle East and so on. So we're obviously very wary of that, and we monitor it closely.

Also about orders, I want to mention, when we look at our market share within the orders in North America, we're also very happy with that. Now looking at going forward, U.S., Mexico and the production footprint. What we do see there is, obviously, we've always been very flexible with our footprint, and we always adjust it as it makes sense. And as we navigate this new tariff environment, of course, we will always shift around production to get to the best possible outcome also from a cost perspective.

So we are very flexible there, and we are managing that as we go through the quarters. There is not full clarity yet also when it comes to certain credits on U.S. assembled trucks, these MSRP credits of 3.75%. It's not exactly clear yet how they will be calculated. That will also probably impact the production footprint to a certain degree, but we believe we're managing it well, and we will navigate it as we go through the year.

Thank you very much. So next question comes from Michael Aspinall from Jefferies. Please.

Michael from Jefferies here. Maybe starting back on North America. Your margin in 4Q was quite strong at 7.2%. I'm just thinking how we can think about that 4Q rate, which would have seemingly included 2 months of the 232 tariffs and quite low volumes in the context of the guide, of 6% to 8% and higher volumes?

Yes. Michael, thanks for your questions. So I think we have to really look at what's included in our guidance. And as I said during the presentation just now, we have quite a big range still of what the tariff impact could be, and we're managing this range within the 6% to 8% profitability guidance. As I said, the 6% assumes that basically we stay in line with the current tariff effect from the 232 truck tariffs and the 8% is that we would get this preferential tariff treatment accepted by the U.S. administration with a higher U.S. content of Mexican assembled trucks being qualified and then a lower effective tariff rate.

We're pretty confident that we're going to get this, but it's not confirmed yet, which is why we want to be consciously a bit cautious with our guide. But this is why the 8% is getting that U.S. content increase through and the 6% is more the current rate. But at the same time, of course, volumes also play a role, and we have been saying that the order momentum has been improving quite a bit over the last couple of months. So we believe if it continues, that would also give us some tailwinds, also when it comes to then operating leverage and also tailwinds for our return on sales.

When we now look at the volume effect, obviously, we have a positive volume effect as a basis for our full year guidance. But yes, a lot of that is really eaten up by the significantly higher tariff effects that we're having. And then it really depends what exactly will be the increase in tariffs year-over-year, we said it was EUR 250 million net for 2025, with only 2 months of the 232 truck tariffs being included. So if we manage it in a way we think we can with the, as I said, higher U.S. content.

And then on the credit side, I also mentioned that when I answered the first question, there's a bit of a range of that as well. That could also help us and then being more at the higher end of the range. And of course, we will not be limited by the upper end of our guidance range. We will always make sure that we get to the best possible result by the end of the year.

And just one last sentence, quarter 1, as I said, we will have lower volumes sequentially and then the higher tariffs effect because of 3 months of 232 instead of 2, which will then lead to a bit of a lower margin than what we had in quarter 4, and we're basically approaching the lower end of the guidance range there.

Okay. Great. I mean 4Q and 1Q sounds like good starting points for the year. So that's good. It looks like you mentioned also actually that you took share in the North America order book, which seems logical given kind of pricing and tariff dynamics. Would it be fair to say that, that probably continued in 1Q '26 with you not kind of increasing tariff surcharges at this point?

Yes, we are comfortable with our order share, and that has continued positively into the year. Also when we look at the mix in quarter 4, we had a bit more medium-duty orders. And now in the first month of Q1, we saw more heavy-duty orders. So Freightliner Cascadia orders come in, which is obviously then a good sign also for our production program and for our margin dynamics as the year progresses.

Thank you. And the next question comes from Shaqeal Kirunda from Morgan Stanley. Please.

Shaqeal Kirunda from Morgan Stanley. On the topic of the freight recession, spot rates have clearly moved up, but this has been due to supply side reasons, whilst freight volumes are still quite weak. So are you seeing this in the utilization data? And is there a risk that underlying demand for manufacturing from industries, such as housing and construction is still not strong enough to maintain order momentum?

Yes. I mean we saw it a little bit. We do see that the demand is very much driven by the supply side. As I said, it is a better trend than what we've seen for some time, but looking historically, still not a very strong market. And when we look at what drives the GDP growth at the moment in the U.S., it's mainly private consumption and AI investments. So that's not maybe the factors that mostly drive the need for freight. But yes, it's, yes, cautiously positive, still not an extremely strong outlook for the U.S. market.

And at 270,000, the market outlook for North America Class 8 is for slight growth. But at the midpoint, Trucks North America indicates 13% year-on-year growth in volumes. So can you please help us bridge the gap there? Is it mainly medium duty that's coming back? Or are there market share trends to consider?

Yes, Shaqeal, happy to do that. So when we obviously look at the market forecast, and as you correctly said, it equals at the midpoint to 4.7% growth. And it feels like it contrasts a bit with our DTNA unit sales guidance of 160,000 at the midpoint, equating to 12.7% growth. But as you assumed, we do believe that we will be able to achieve medium-duty market share gains because we lost a little bit there last year. We also discussed it last year during the quarters that the price pressure was there a bit higher, and we were not willing to discount too much. But we do see that the market is in a more healthy state now, and we believe that we can regain share, and there's also dealer restocking going on. And then obviously, also on the revenue side, we have a currency effect in there that you have to consider.

Thank you. So the next question comes from Daniela Costa at Goldman Sachs. Please.

I just wanted to ask on 2 things, but one is actually just following up from this. Can you talk a little bit about production plans, whether you're stepping up production in Europe or in the U.S., maybe as a follow-up to this last point? And then I wanted to ask you just on the confidence to -- now you're saying you're going to restart the buyback. After the results, I guess you kind of paused it. The situation in the U.S. Is it the situation on the U.S.? Or more clarity and confidence on those relief of the tariffs? Or is it just the demand? Or it's just because you now know the date when you're getting the inflow of cash from Trucks Asia? Maybe just giving us a view on how you're going to think about the buyback going forward?

Daniela, Eva here. Thanks for your question. So yes, looking at the production program, given the positive order development of recent months, we are increasing the production program in Europe as well as in the U.S., obviously. On the buyback, we were discussing this last year where we said with the 232 truck tariffs having been newly introduced and then also that happening within a very weak market environment that we need some time to adjust to that new market reality, which is why we hadn't started the buyback last year. And now we don't have full clarity on the tariffs yet. But you can also see with our return on sales guidance for North America for this year, with the 6% to 8%, I mean, we put in kind of a floor with this 6%. And that gives us a better confidence level of our minimum cash generation that we believe we will get this year.

And then, of course, there's further upside to that, but we do know that with the contribution from North America, looking at how the business at Mercedes-Benz Truck is faring and then also taking into consideration the onetime cash in from the Fuso-Hino transaction, we believe that even if we would have to continue in the current tariff environment, with the current effective tariff rate, without an increase of U.S. content resulting in a lower rate, we can afford the share buyback comfortably. We're still maintaining a net industrial liquidity above EUR 6 billion. And that led to the decision that we will start now. The first tranche will be EUR 400 million. We do that within the next 4 to 6 months. And then at the same time, we have kept the dividend stable, as I'm sure you've noticed, and that is basically based also even in our worst-case scenario of the full year results that we're expecting for '26, we can cover that.

Would you rule out -- is it now a rule out that you don't need to build a U.S. plant? You can deal with it with your current setup and the flexibility you have?

It's a bit early to talk about this. As I said, we're still working also in discussions with the U.S. administration about how we navigate that environment. We're still awaiting some clarity, as I said, on this credits on MSRP. We're looking at that increased U.S. content, and we will absolutely do what makes sense and what adds value to our customers and our shareholders once we have that full clarity.

The next question comes from Akshat Kacker at JPMorgan. Please.

The first one is on North America. And I just wanted to touch on the demand that you're seeing in the vocational part of the market because that segment has been super strong in the last few years, driven by the CHIPS Act, U.S. IRA and arguably, the prebuy there started earlier. So could you just give us more flavor on the vocational side of the market in the U.S., please?

The second one is on MB Trucks. Very strong order intake. Again, can we get some more clarity on what markets are really driving that order intake at MB Trucks? And when we think about the division, obviously, you reported negative net pricing in 2025. Do you expect price cost for Mercedes-Benz Trucks to improve in 2026, please?

And the last one, a clarification on the Hino payment. You've talked about a total expectation of EUR 1.5 billion to EUR 2 billion, EUR 1.5 billion factored in your free cash flow guide. Could you help us understand that better? Is that all settlement payment, which is the EUR 1.5 billion, and then you expect proceeds from the IPO to come later? Or how should we think about the 2 different elements within that total payment?

Okay. Thank you, Akshat. Well, quite a few questions. We'll work through it, Karin and I. Let's start with vocational. I mean, last year, vocational was faring a bit better than on-highway, but it was obviously also weaker in a generally weak market environment. And now as we see a bit of a better order momentum, we also do see vocational following there. We don't see a huge spike in orders in vocational, but obviously, we hope that, that would happen as we now go through the quarters, also with hopefully a bit more construction activity in the United States coming in supporting that business growth.

And I think MB, Karin, you will take that one?

Yes, sure. So as you said, very strong order intake on MB towards the second half of the year and definitely also start of this year. I think it's a combination of a stronger market demand in general, but also very positive customer feedback on the Actros L with the ProCabin. So we introduced that product at the beginning of 2025. And we actually saw, I think we mentioned it in the speech as well, a market share uplift throughout the year. So starting the year around 14% and ending around 18%. So I think it's a testament to how well that truck is performing and that the customers appreciate it. And we think that's also part of what drives this positive momentum. For 2026, we expect positive net cost price development for Mercedes-Benz Trucks.

Yes. And then I will take the one on the onetime cash in from the Fuso-Hino transaction. So I cannot disclose any details about the deal dynamics because we have agreed that also with Toyota that we would keep that confidential. As I said at the Capital Markets Day and also confirmed today during the presentation, EUR 1.5 billion to EUR 2 billion is what we expect to get to a 25% shareholding, which is the shareholding that we're ultimately targeting.

And what I can say is we have included EUR 1.5 billion into our guidance. So you can assume that we are very sure about bringing in this cash because otherwise, we wouldn't have done that because our guidance is definitely more on the conservative side there. So that, I can tell you.

And then when we look at the EUR 2 billion, when basically the rest of the EUR 500 million assumed will come in, we expect to achieve a free float of the new ARCHION share of 35% within a year because that's a prerequisite to be in the prime standard of the Tokyo Stock Exchange.

So that means there will be also an effect potentially in next year and not everything in this year. But again, EUR 1.5 billion, we have a high certainty and that's why it's included in the guidance.

Next question comes from Hemal Bhundia at UBS, please. Okay. We can't hear you, Hemal. Then we follow up with Alex Jones at Bank of America, please.

Two, if I can. First on the Mercedes-Benz margin. I think you did 6.2% last year. You're guiding volumes up 9%. You have EUR 150 million incremental cost savings, that's about 80 basis points. You just talked about positive price mix. So all of that is pretty positive. Can you talk about the offsetting factors, therefore, that mean the low end of the guidance range is below last year at 6% and that sort of 6% to 8% range. If there's anything else we need to bear in mind?

And then the second question on the U.S. content you've talked about. Are you able to give us any more detail on sort of the percentage of U.S. content you're sort of currently assuming and what you'd aim to get in your negotiations with the administration. And when you expect that clarification? I think Traton last week talked about the second half of the year. I'd be interested if that's the same for you?

Alex, thanks for your question. I hope I got it all right. Otherwise, please follow up. So what we have to say is we're guiding for more than 8% unit sales growth at MB. But what we have to adjust is that there is an increase of the units in India, which is about 6,000 units. And so overall, we also assume an expected market share growth at Mercedes-Benz trucks in Europe, which also brings in some units, and that's how we bridge basically the unit sales growth through the market growth. So we expect that unit sales will grow stronger than the EU30 heavy-duty market. So 8% versus 3% at the midpoint, just to explain that.

But you were obviously looking at the operating leverage, if I understand you correctly. So we have basically 2 factors that are going against the positive price cost and the efficiency gains from Cost Down Europe. And that is a weaker Latin American result because of macroeconomic factors, inflation and so on. So we do see that it will be a more difficult year. When we look at our global markets, most of them are slightly up, but Brazil will be down as per our projection. And then the other factor that's going again is our investments. We said it already last year at the Capital Markets Day, our investments will be peaking in '26 and '27. And this is really driven by Mercedes-Benz trucks, because the transformation towards 0 emission is going full steam ahead, and that's really the factor that we have to take into account here.

And sorry, the second question was the U.S. content. We will not give details on the percentage of the U.S. content, as obviously, as I said, we have applied for this preferential tariff treatment. It's still ongoing. But what we've also discussed before is that we have a powertrain that's being produced in Detroit, Michigan, in the U.S. that is then assembled in our Mexican assembly plants into the truck. So that's something that we can deduct. Also said that a powertrain from a value perspective is roughly half of the truck. And then that's where we currently are. And then we are applying for further U.S. content then also to be accepted as a deduction to this tariff rate of 25%. So that's where we are.

And then you asked when we'll get a clarification. Well, this can take a bit. From what we understand, it can take a couple of months until we know the outcome of this preferential tariff agreement. So we will have to see. This is a bit out of our influence.

Okay. Understood. And just to follow up on that Mercedes-Benz margin point, the investments in R&D. Are you able to give us a sort of order of magnitude of the year-on-year increase there?

It's a high double-digit increase -- million -- high double-digit million increase.

All right. Next try with Hemal Bhundia at UBS. I hope you can hear us?

Can you hear me now?

Yes, we can.

Thank you for the color on North America. I just wanted to start with, you mentioned the EUR 250 million tariff impact in the quarter. Could you specifically separate that by Section 232 and the EPA tariff please? And I'll follow up with my next question after.

Hemal, thanks for your question. What I can tell you is that the Section 232 truck tariff impact was a bit higher than the EPA and 232 steel aluminum copper part. That I can tell you.

Understood. And I guess on free cash flow, when I exclude the EUR 1.5 billion Hino transaction impact, it is below FY '25. I appreciate there's a range that you've given, but is this because of lower margins or anything you'd mention on CapEx or working capital?

Yes. So I mean, I was answering Alex's question before about the investments being higher on the R&D side. That is also true for CapEx, obviously having an effect on free cash flow. What we also see there at Mercedes-Benz, we want to also use positive opportunities that we see right now in the market to acquire, for example, own retail location. That's an essential part of our strategy at Mercedes-Benz trucks in Europe to increase our service share. And there, we see that market pricing actually is also pretty good for brownfield opportunities, so we're using that. That has an impact on CapEx and cash flow. And then, of course, being in that environment generally because of the transformation of the industry where our investments are high. That is one impact. Then we have some cash outflows also from our Cost Down Europe program for severance payments where we booked the provision last year and those are the main ones there.

Great. And one final question, if I may. Anything you can mention on whether you've seen a change in order dynamics or conversations with customers since the start of the month given the geopolitical environment?

Not yet. Let's see. We follow it closely. Maybe just to give you some color, the least as such is for us representing with Mercedes-Benz around 1% to 2% of the overall group volumes. So we don't see it outside of the region, and the region is for us, relatively small as a market.

Next question comes from Harry Martin at Bernstein, please.

So I want to start again on the tariffs, apologies for that, but there's a few numbers that I think are still not completely clear to me. So in Q4, are you currently accounting for the 25% Section 232 tariffs on the import value and booking a receivable for the expected U.S. content impact. Is that receivable sort of a proportion of the total expected amount like Traton did? Or is there any difference there? And then just compared to the EUR 250 million impact in 2025, what is the assumption that is in the guidance for 2026?

Harry, thanks for your question. I was kind of expecting that one. I can tell you, no receivable has been booked in quarter 4. The way I see this is, obviously, we need certainty until we can assume a lower effective tariff rate. And we do not have a written confirmation by the administration that we can increase the U.S. content and that our preferential tariff treatment and the application of such is accepted. So we're taking the conservative approach. So what you see in quarter 4 is really the full tariff effect come in, basically, the 25% on a Mexican assembled truck minus the U.S. content, which currently is basically the powertrain, and that's what we paid and that's reflected.

And that's then also what's reflected in our quarter 1 soft guidance and then our guidance for the year. Again, the 6% would assume no increase of U.S. content and then the 8% would assume that we get an acceptance to deduct a higher U.S. content proportion, but nothing reported in the balance sheet taking a conservative approach.

Great. And then if I could just ask a follow-up on EPA27. I saw a press release from you yesterday about expanding the partnership with Cummins on the EPA27 engines, including in heavy duty. We've heard some in the market say that the Detroit engine is better from a NOx and EPA point of view. Should we read that expansion of the partnership with Cummins is that there are still a lot of customers who want flexibility. And more broadly, would you expect any gain in your captive engine penetration as a result of the EPA27?

Yes. So as you know, we deliver the Freightliner Cascadia Class 8 truck, both with the Detroit powertrain and with the Cummins powertrain. And on the medium-duty side, we're using Cummins. For the heavy-duty side, we have a 96% penetration on the Detroit engine. We expect that to stay like that or even improve as we move over to the EPA27 regulation.

The next question comes from Frank Biller at Landesbank Baden-Wurttemberg, please. Frank, can you hear us. We can't hear you.

Hello.

Yes, now we can hear you.

Okay. I have a question on the dividend payment. So your strategy is paying out a rate of 40% to 60% payout ratio. The question here is EUR 1.90 is above this target rate. And given the high inflow in 2026 from ARCHION, is there the possibility to a special dividend? That's my first question.

The next question is on autonomous driving. Can you give us an update on your latest developments here and the further progress? And one is on electrification BEV vehicles, good performance here in the last quarter. I noticed you stated that the margins of the electric vehicles are at the same level of combustion engines. Can you confirm this? Or has something changed here?

Thanks for the question, Frank. I'll take the first one. So yes, the dividend of EUR 1.90 with this one, we're exceeding the 40% to 60% payout ratio, but we're doing that because we ended the year with a really strong free cash flow and that leaves us with the net industrial liquidity at the end of the year of EUR 7.7 billion. So really comfortable level. And then as you rightfully said, we do expect a significant cash inflow from the Fuso-Hino transaction. We've considered EUR 1.5 billion in the guidance. We're very confident about it. I said that before and that's why we believe EUR 1.90 dividend is appropriate.

And also, we have just also announced that we now start with the first tranche of the share buyback. And we believe that's a really good combination. And what I can also say is that you can see that cash returns to shareholders are a priority for us, and we will keep continuing with a good balancing between share buyback and dividends. And then I think I refer to Karin for the autonomous driving question.

Yes. So we're making good progress on autonomous driving. At Torc, we keep hitting the different milestones that we have planned for. You might know we take a little bit different approach than some of our competitors. So we are focusing the team very much on getting ready for scaling and having production intent components and software, but this year, we are also working towards the end of the year to be able to demonstrate driver-out on public roads. So that's the big, big milestone for the team now, and they're making good progress. We are still planning for start of production on a bigger scale beginning of 2028. And I can do the one on electrification of BEV vehicles. So we still see a good margin on that business and it's on the same level as with combustion engines.

Good. So our last question comes from Anthony Dick at ODDO BHF.

The first one is the last one on tariffs. It's regarding the 3.75% MSLP offset. I just wanted to confirm you haven't booked or received anything relating to that as of yet. And if you could just give us a sense of how meaningful that could be for you and when you could actually start receiving some benefits from that. And the second one is on Cost Down Europe. So obviously, some good progress already in 2026. Just wondering in terms of how we should think about the sequence for the EUR 1 billion plus cost reduction targeted in Europe by 2020. Is that going to be linear? Or have you achieved some quick wins in 2026 and then it's going to be a bit more back-end loaded or gradual going beyond.

Thank you, Anthony. So first on the MSRP credits. So as I explained, we do not have full clarity yet because the process and the calculation method hasn't been published by the U.S. administration. But we do believe there will be a 3.75% offset on the MSRP value of U.S. built trucks to really help also mitigate the tariff burden on imported parts and components on U.S.-produced trucks. And because the details haven't been published, we also couldn't apply for this yet. So nothing is recorded in the balance sheet in any way on this, obviously. It's the same as what I also said when it comes to the increased U.S. content, we're taking a conservative approach there.

When it comes to the guidance, we have really considered a double-digit million impact there as a credit could be more than that, but that's something that we do not want to include before it's concerned because we believe the eligibility based on what we know now, will be limited to imported parts listed on the 232 MHDVP tariff commodity list. And so that it will not be the full MSRP value of the truck and then you take the 3.75%. And there will be publication of DOC's procedures to administer these import adjustment offset amounts, and then we will understand how the program will be operationalized. But as I said, very conservative assumption on this in our guide.

And then I think you had one more question, the Cost Down Europe. So what we have also said today, what Karin said is that we were able to bring in savings earlier than anticipated. So it was a faster implementation of measures, which we're happy about. It was also what we wanted, because in a market environment that was definitely weaker in 2025 there was a clear necessity to bring in as much as possible efficiency measures, and these are really -- these are net efficiency measures, what we also published for last year, the EUR 100 million that will now continue throughout the next couple of years.

And then we will be adding to that with at least EUR 250 million in this year, net. That's the important thing. And it will increase. So it's not now a step up and then it will flatten but we do believe it will continue to obviously go up. It will not all come in '29 and '30, and we will continue to try to accelerate the implementation of actions. And we will -- as promised, we will keep you posted. And at least once a year in the annual results conference, you will receive an update from us.

So we actually have one more caller. It's Klas Bergelind from Citi. Klas, go on, please.

I had some phone issues here. Most of my questions have been asked, but I just want to come back to Trucks North America and the margin outlook. Your starting point is 6% in the first quarter. And in the first quarter, you're saying that the order mix is now improving with more Cascadia, which I've have seen is for second quarter builds and the build rates should go up second quarter over the first quarter. I mean I can see you could already do the midpoint of your full year margin in the first half and then volumes can go up even more here in the second half, unless, of course, we have a big setback in macro. It just seems like the T&A guidance is pretty conservative looking at the margin. If you could comment on the mix impact on the Cascadia, it seems like the margin into the second quarter could reach almost high single according to my calculations.

Klas, good to hear from you. Thanks for your question. So about the mix, I just want to mention one thing when I talked about more Cascadias, I was talking about orders and in particular, now in the first months of quarter 1. So when we look at the orders that we received in Q4 last year, it was really more towards medium duty. So that effect you will see then more towards quarter 2 coming in, in quarter 1 it will be a bit of a weaker mix. And I also said we are approaching the 6% in quarter 1. So it could be a bit below the 6% also. And we'll see how it goes. We will do the best we can, obviously, to make it a positive quarter.

You're right to assume that our guidance of 6% to 8% for the year is more on the conservative side. That was a conscious decision that we took because we also saw how the market developed a bit different last year than we thought it would. And we could really see that this freight recession took much longer than we initially anticipated. So we want to not get too enthusiastic about the good orders that we've seen in recent months, also full well knowing that it could also be a bit different maybe in the next couple of weeks, and we want to be really sure that it's a sustainable trend, and it will continue into that direction. So we believe the 6% to 8% is the right approach for right now to guide us into the year. And if there is an upside to that, and we can get to a better point, of course, also then based on potential discussions on the tariffs. And we will be more than happy to update it. But for now, we see the 6% to 8% as a conservative realistic scenario.

Yes. Just to follow up, though. I mean you're saying the same thing as me that the first quarter orders with a better mix will be more built in the second quarter. So the mix should improve quarter-on-quarter, second over first, right, all else equal?

Yes, it should be better in the second quarter. I understood you in a way that you already thought that in the first, but now it will improve more towards the second.

Yes, that was my point.

Very good. I think that concludes our analyst Q&A. Thank you very much for all the good questions. And now I would like to hand over to Andy Johnson for the second part, the media Q&A. Andy, please?

Thank you, Marcus, and welcome, everyone, to the media portion of our Q&A session today. Before we get started, a few housekeeping remarks. As you know by now, this call is being conducted in English. So we kindly ask that you submit or ask your questions in English as well. Our operator will now walk you through our question procedure.

[Operator Instructions].

Okay. Questions are starting to come in. Thank you very much. Our operator will address each of you by name when it's your turn to ask your question. We ask that you briefly reintroduce yourself though, stating your full name, your media outlet before you proceed. Take your time. Please ask your questions slowly and clearly. And with that, operator, let's get it started.

The first question comes from the line of Benjamin Wagner from Frankfurter Allgemeine Zeitung.

My name is Benjamin Wagner from Frankfurter Allgemeine Zeitung. Once again, about the U.S.A. Can you explain once again the connection between the U.S. tariffs and your customers' uncertainty? Are customers holding off on purchasing, on buying your trucks because they are unsure how imports into the U.S. will develop? And I hope that I understood it right. You said that the order intake in the U.S. has stabilized. Why then do you expect declining return on sales in the U.S.

And second, 2 questions about Cost Down Europe. Within the Cost Down Europe program, you want to cut 5,000 jobs in Germany, how many jobs have you already cut in the year 2025. How many employees are currently on the so-called orientation platform. And are you planning to relocate production from Germany plants to Eastern Europe especially from Worth am Rhein?

Thank you for your question. Benjamin. So looking at the U.S., to explain the connection between U.S. tariffs and the customers' uncertainty. That was really an effect that we faced a lot last year because it was kind of our customers took the wait-and-see approach and the market was just very weak. I mean it was the -- we were going through the longer trade recession in recent U.S. history. And so obviously, if you have an environment that's anywhere weak with low freight volume, low freight rates and then you have tariffs on top of that, that significantly impacts order behavior. It has now gotten better in recent months as we've just also discussed during the analyst call in our presentation because now there's not full certainty on tariffs, but there's more certainty, and then we also see the freight rates recovering. And that overall helps to convince our customers to order more trucks and that we see in the positive order momentum in quarter 4, and that has also continued now at the start of quarter 1.

And then you asked why, despite this positive order momentum, we expect a decline in sales in the U.S.? Well, overall, we don't expect a decline in sales in the U.S. in '26, we do expect an increase as per our guidance. So this is in line with the order development, obviously, and also our return on sales. This is highly impacted by tariffs. As we've discussed during the analyst call and the presentation, we have a significant higher tariff impact in 2026 because of the so-called 232 truck tariffs that were introduced in November 2025. So we only had 2 months effect of this last year, and we have 12 months effect of this, this year. And as we assemble our trucks in the U.S. and in Mexico, that obviously impacts us. So we have a positive effect from a higher volume in the U.S. in '26, but the counter effect is then the tariffs and this is significant, so that leads overall to a lower profitability.

Yes. Benjamin, Karin here. On the Cost Down Europe topic, please understand that we do not comment how many people have left the company or exactly how many people we have on the so-called orientation platform. What I can tell you is that we are -- as we said also in the speech earlier, we did reach our targets in 2025. I think what's most important is to look on the bottom line here in terms of the impact for the company. And we have also now disclosed the target of EUR 250 million for 2026.

In terms of the head count topic, I think the big reductions we will see when we move in forward some years where we're doing some of the bigger outsourcing topics, but as I said, I think more important is to focus on the bottom line. In terms of where we will put our production in the future, I think it's also a little bit premature to comment. Worth is our by far biggest global production site for Mercedes-Benz trucks, will remain so in the future. With that being said, of course, in all our plants across Germany, but also globally, we always look at what's the optimal way to run the system. And we are conducting make or buy analysis also to what do we do in-house and what might be better that we do -- that the suppliers do for us that we buy sort of more parts from the suppliers.

The next question comes from the line of [ Tina Fuchs from SWR Sudwestrundfunk ].

This is [ Tina Fuchs from Sudwestrundfunk ]. I would like to ask a question concerning defense. Could you give us a little bit of an insight of the new geopolitical situation results in new products that you think of also new cooperations and new customers? Do you have more incoming demand from Army's in Europe?

And allow me also on remark being a journalist covering television, I find it rather sad and discriminatory that you do not allow us to make an interview with you and that you don't show your faces during the Q&A on a video while we are asking questions here. I don't think that is the equal opportunity for press media as well as electronic media. I'm really sad about that. Thank you.

Tina, Karin here. We take that feedback, obviously, with us. I just want to clarify that we have done these annual conferences completely without video historically. This time, we decided to try something different to have the presentation with video, but for analysts, investors as well as media, we have stayed with this method, and I think mainly honestly, because of technical reasons and it's a little bit simpler, but definitely we'll follow up with you to see if there is a better way to do it going forward.

Now moving to the defense question. I would say we started already some years ago to invest into our defense portfolio. I guess, looking back, you can say it was really good timing because it was before sort of the big defense spending started to take off. We work together with many different partners. To give you one example, we work with Rheinmetall to do the armorization of our cabs on certain models. Over the last years, we've also significantly expanded our product configurations based on customer demand, so introducing more versions of the Zetros as an example, which is one of our pure defense vehicles.

We have also increased and started working much more with different partners. Maybe to give you one very recent example because we announced it yesterday, partnership with Quantum Systems. And what we want to do together with Quantum is, first of all, explore with their software, how we can run our trucks more on platooning as a first step, but as a second step also autonomously. This obviously for safety reasons to not have drivers in every truck, but also because of the needing less people in the armies if you can do more traveling autonomous. So I think that's one example.

Another example is the recent win with the French military, where we work with Arquus where we are selling chassis and they are up fitting to the needs of the French Defense Ministry. And then across the world in different tenders, we work with different partners. As an example, the Canada tender, which was, I would say, are maybe a breakthrough into the defense business. We work with General Dynamics there. So yes, and we are definitely looking to increase the number of partnerships.

We now have a question from the line of Ilona Wissenbach from Thomson Reuters.

Ilona Wissenbach from Reuters. I have 3 questions. You were talking about better operative performance. But I wonder in what measure do you talk about because you expect no pickup in the margin versus last year with a guidance of 6% to 8%. Then the question on cost on Europe. Have you taken provisions for staff card for compensation programs and so on last year and how much this year? And the third question is about the Iran war. What effect do you expect? And what is the biggest risk?

Thank you, Ilona. I'll take the first one. So talking about our operational performance, what we mean there is we expect stronger volumes, and we will convert that into return on sales, obviously. And what you have to really take into account is significantly higher tariffs. I mean this is something that we can't impact. We only can impact what we can control. And there, we are improving our results through efficiency gains. For example, through Cost Down Europe, but also in North America, we are continuing to increase our efficiency and productivity and then the tariffs unfortunately go against that. So that's the explanation for that one. On Cost Down Europe, we have taken a provision already in quarter 3 last year, EUR 321 million. And so no, we don't expect an impact of a provision there this year.

Yes. And I can comment on the Middle East conflict. As mentioned earlier, it's too early to really estimate the financial effect. So we have not taken it in our guidance or outlook for the year. But maybe to give you a little bit more color. And we have, of course, some people in the region, mainly in Dubai. There, we are working with crisis management to keep everyone up to date and, of course, also continuously assess the safety and security situation.

Then on the supply chain side, we have obviously worked through that very carefully. We don't see any short-term supply chain disruptions based on the situation. As I already mentioned, in terms of our sales, it's a rather small region for us relative to other ones. So also there, expect limited effect. So I think the biggest risk from a company perspective, financially is more what happens with the overall global economy. Where does the oil price go? Where does gas price go? How do interest rates develop and what does that do for, let's say, the global economy. But as I said, I think it's a little bit too early to have a clear idea about that, which is why we have also not taken it into our guidance.

Can I ask about the tariff effect, again. Eva, did I get that right that you're not able to quantify it yet in numbers because it's so uncertain how all this apply -- applying for some reductions will work?

Yes, exactly. So I mean we disclosed it for last year. It was a EUR 250 million net impact. And for this year, we have this guidance range of 6% to 8%. And that assumes certain tariff scenarios in that range. And of course, internally, we do have a range there that we're working with. But as it's so volatile, it doesn't make any sense to discuss it now. But with that 6% to 8% range, you get a feeling for where we are trending.

The next question comes from the line of Alexander Jungert from Mannheimer Morgen.

This is Alexander Jungert from Mannheimer Morgen. I have 2 questions. The first one is again on the Cost Down Europe program. You said earlier that you are implementing the efficiency measures faster than planned. Can you explain what that means specifically for the Mannheim side? And second question, how would you describe the current mood among the workforce in light of the cost-cutting program? Next week is also the Works Council election.

Alexander, Karin here. So on your questions on Cost Down Europe, I mean, I did mention some examples of where we saw quite good development during 2025. And in operations, specifically, we talked about, for instance, energy savings. So I think that's one that carries also for Mannheim. Otherwise, it's a little bit difficult for me to give you the exact measures that we have done in Mannheim.

In terms of the mood amongst the workforce, I think this election period, obviously very important, and we follow it very closely. I think we see a little bit the same tendencies that we see in society overall. So a little bit more extremists on all sides of the spectrum, but of course, we follow it very closely, and we are -- yes, we will work with who gets elected, of course.

All right. Ladies and gentlemen, that looks like the last question in our queue. We do have time for one last question if anybody wants to submit it. All right. It looks like there's no more questions.

So thank you, everyone. Ladies and gentlemen, thank you for being with us today, and thank you, Karin and Eva, for answering all the questions. Now as always, our Investor Relations and Communications team remain at your disposal to answer any further questions you might have. A recording of the session will be available later today on our Daimler Truck website, and we are looking forward to staying in contact with you. With that, have a great day. Stay healthy. Thank you, and goodbye.

Good morning, ladies and gentlemen. This is Markus Poppe speaking. On behalf of Daimler Truck, I would like to welcome you on both telephone and the Internet to our Q3 results global conference call.

We are very happy to have with us today, Eva Scherer, our CFO. Eva will begin with an introduction directly followed by a Q&A session.

The respective presentation can be found on the Daimler Truck IR website. On our request, this conference call will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Truck website.

I would like to remind you that this teleconference is governed by the safe harbor wording you will find on our published results documents. Please note, our presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made.

Now I would like to hand over to Eva.

Thank you, Markus, and good morning, everyone, and thank you for joining our earnings call for the third quarter of 2025. As the results show, quarter 3 was shaped by a sharp downturn in North America and a slow paced recovery across European markets.

Industrial business revenue totaled EUR 10.6 billion, driven by 98,000 units sold. Adjusted group EBIT totaled EUR 716 million.

Adjusted return on sales for the Industrial business came in at 6.3% with earnings per share at EUR 0.57.

Free cash flow was EUR 24 million, bringing our net industrial liquidity to EUR 5.9 billion at quarter end. In a volatile global environment, we are focused on what we can control, improving structural efficiency through disciplined cost management and targeted resource allocation to have the best value proposition to our customers.

At our Capital Market Day in July, we outlined our path to becoming a more resilient and profitable company, and we are executing on this.

Product highlights in quarter 3 include the launch of the eActros 400 and the new BharatBenz HX series. The eActros 400 is part of a large electric truck portfolio extension based on the technology of our eActros 600 and further strengthens our market leadership in electric trucks.

We call it the second generation of our eActros. It offers more than 40 possible combinations of the basic vehicle, depending on the application and requirements for range, payload and comfort. The new BharatBenz HX series is tailored to meet specific needs in India's growing construction and mining segment even better, offering significant improvements in operational efficiency.

Another highlight is our new cooperation with ARQUUS, which aims to develop products and processes to better meet the needs of customers in the defense sector with Mercedes-Benz providing the trusted Zetros and thereby contributing to the future modernization of the French Army's logistics truck fleet.

Furthermore, we have signed an agreement with Otokar, which adds cost-effective manufacturing capacity to meet strong demand for the Mercedes-Benz Conecto city bus, further strengthening Daimler Bus' market position.

Let me now turn to the developments in our key markets in the third quarter. In North America, the Class 8 market totaled 200,000 units for the first 9 months, representing a 12% decline year-over-year. In the third quarter, the decline accelerated to minus 20% year-over-year. The drop reflects ongoing economic uncertainty and a weak U.S. freight market.

Our Class 8 market share held steady at 40% through September, confirming our leadership position.

In Mexico, the heavy-duty market declined 45% year-over-year. This was driven by the Euro 6 transition early in the year, compounded by economic weakness in quarter 3. In Europe, the heavy-duty market declined 8% year-to-date, totaling 217,000 units.

On the positive side, however, the third quarter saw 6% year-over-year recovery. Our European heavy-duty market share rose to 16.5% year-to-date and 19.1% in quarter 3. This represents an increase from 16.2% in quarter 2 and 14.2% in quarter 1.

We have steadily improved our position, supported by strong demand for the Actros L. This confirms that our product investments are paying off.

Let's take a closer look at unit sales and order intake in the third quarter. At group level, the book-to-bill ratio was 96%. Unit sales fell 15% to 98,000 units, while incoming orders declined by less than 1% year-over-year to 93,900 units.

At Trucks North America, unit sales dropped 39% and incoming orders 29%, reflecting the sharp contraction in the U.S. market. Considering tariff uncertainties, our effort to accelerate deliveries in quarter 2 ahead of potential tariff changes amplified the sequential decline in unit sales.

On a positive note, our current order backlog covers the 2025 unit sales guidance.

At Mercedes-Benz Trucks, stronger order intake is now converting into higher unit sales, up 8% year-over-year in quarter 3.

Volumes rose compared to the third quarter, but were lower than planned due to continued ramp-up issues in our plant in Wörth, Germany as well as a more muted market environment in India and Brazil.

Despite tariff uncertainty and a slow paced recovery in Europe, EU30 orders rose by 56% for Mercedes-Benz vehicles with strong demand for our Actros L, leading to a book-to-bill ratio of 102% in Europe. Orders in Germany improved slightly by 5% for Mercedes-Benz vehicles.

Latin America unit sales rose by 10%, a 6% decline in Brazil due to a weaker heavy-duty market, high interest rates, inflation and political uncertainty was offset by stronger sales in Argentina and market share gains in the medium-duty segment in Brazil.

Order intake for Latin America increased by 6%. In India, unit sales rose slightly despite a market shift towards the 16 to 19 tonne segment, where we have a lower presence and quarter 4 sales pushout due to the VAT reduction, which became effective on September 22, 2025.

Trucks Asia delivered around 26,000 units in the third quarter, an 8% decrease year-over-year. This decline was driven by weaker sales in Indonesia. Order intake rose 12% year-over-year, mainly attributable to growth in Japan and Indonesia.

Daimler buses unit sales fell 4% year-over-year, mainly due to a weak Mexican market. Order intake was down 12%, driven by softer demand from Brazil.

Let's look at our ZEV volumes. In the first 9 months of 2025, we sold over 3,800 battery electric trucks and buses, up from 2,100 units in the same period last year. Order intake for zero-emission vehicles remained flat at around 4,200 units.

Our zero-emission vehicle data highlights that the transition to zero emissions depends not just on the right vehicles, but also on achieving cost parity with diesel and a robust charging infrastructure, areas where stronger government support is still needed.

The transition has faced headwinds in both the U.S. and Europe. Adoption in the U.S. has slowed significantly and progress in Europe remains below expectations. On a positive note, our zero-emission vehicle range continues to resonate with our customers, achieving a 56% share of the European heavy-duty market in September and bringing our year-to-date market share to 33%, making us the market leader in electric trucks.

Now let's have a look at our financial performance for the quarter. At group level, revenue declined 13% year-over-year to EUR 11.5 billion and adjusted EBIT fell 40% to EUR 716 million.

From a segment perspective, Mercedes-Benz Trucks and Financial Services contributed positively, while Daimler Buses and Trucks Asia saw modest year-over-year declines. Trucks North America profitability dropped over 60%, driving a 42% year-over-year decline in the Industrial business EBIT to EUR 668 million in quarter 3.

Trucks North America revenue declined 33% year-over-year to slightly below EUR 4 million -- to slightly below EUR 4 billion leading to an adjusted EBIT of EUR 257 million and an adjusted return on sales of 6.4%.

In addition to lower fixed cost absorption, the profitability was affected by higher R&D spending and expenses related to capacity adjustments. The tariff impact was in a double-digit million range in the third quarter. Pricing remained positive in quarter 3.

However, the product mix generated a headwind with fewer Cascadia and Western Star vocational trucks and a higher medium-duty share with lower captive powertrain penetration. Following significant production adjustment, our dealer inventory was reduced by approximately 15% in the third quarter, in line with the overall industry decline.

This normalized inventory will benefit us once the market rebounds. Mercedes-Benz Trucks revenue rose 3% year-over-year to almost EUR 4.9 billion with an adjusted return on sales of 6.5% and adjusted EBIT of EUR 319 million.

While a significant improvement was anticipated in the third quarter, stronger-than-expected demand for the Actros ProCabin, combined with ongoing supply chain constraints have continued to limit our production volumes.

In EMEA, profitability improved on higher volumes, a favorable mix and a release of previously accrued bonus provisions, partially offset by increased R&D spend and selective pricing measures.

As expected, in a competitive European market, we remained focused on executing the cost reduction initiatives that we outlined at our Capital Market Day in July. In Latin America, business was impacted by a 7% market decline in Brazil, driven by a significant drop in the extra heavy on-road segment and a mix shift towards medium-duty vehicles with lower contribution margins.

Volumes in India rose slightly year-over-year. Looking ahead, we expect demand to pick up following the implementation of a more favorable tax rate as many customers had delayed purchases in anticipation.

Trucks Asia reported an adjusted EBIT of EUR 67 million in quarter 3 with an adjusted return on sales of 5.7% on revenues of almost EUR 1.2 billion.

The market environment in Asia remains challenging with persistently low demand in key markets such as Japan and Indonesia. Despite weaker volumes and unfavorable regional mix and FX headwinds, the segment delivered a solid performance by maintaining strong prices and exercising SG&A cost discipline.

While we expect stronger new vehicle unit sales in the fourth quarter, Trucks Asia's profitability will be impacted by increased headwinds from FX and significant seasonal increase in R&D expenditure.

Daimler Buses delivered another strong quarter, reporting an adjusted EBIT of EUR 137 million and revenues of over EUR 1.4 billion, resulting in an adjusted return on sales of 9.8%. The segment maintained its market leadership across its core markets, including EU30, Brazil and Mexico.

Adjusted EBIT was slightly lower year-over-year as quarter 3 2024 included a EUR 26 million gain from the measurement and sale of a noncore shareholding -- EUR 26 million gain from the remeasurement and sale of a noncore shareholding.

Quarter 3 performance was supported by a favorable mix and strong net pricing. Adjusted EBIT for Financial Services rose year-over-year from EUR 39 million to EUR 48 million. The improvement was resulting from stronger portfolio margins and lower SG&A. These gains more than offset FX headwinds and elevated cost of risk, which remain driven by the ongoing freight recession and macroeconomic uncertainty in North America. As a result, adjusted return on equity increased from 5.7% to 6.5% in the third quarter.

Now let's look at our quarter 3 cash performance. Working capital had a negative impact of EUR 121 million, driven by higher inventories at Mercedes-Benz due to ramp-up challenges in our German assembly plant, initial stocking at the new Halberstadt distribution center and the after effects on the North American production network following the fire at our Cleveland plant.

Net investments in property, plant and equipment and intangible assets totaled EUR 415 million.

As a result, cash flow before interest and taxes for the Industrial business was EUR 202 million. After deducting EUR 156 million in cash taxes plus interest, pension contributions and other items, free cash flow for the Industrial business came in at EUR 24 million.

On an adjusted basis, free cash flow was EUR 116 million. Net industrial liquidity was at EUR 5.9 billion at quarter end, unchanged from quarter 2.

As in previous years, we expect cash generation to be concentrated in the fourth quarter. Let's turn to the key drivers for the remainder of 2025.

Our guidance for the 2 major regions remains unchanged. We continue to expect the North American heavy-duty truck market to land between 250,000 and 280,000 units and the EU30 market between 270,000 and 310,000 units.

All segment level guidance KPIs for 2025 remain unchanged. Since November 1, we've been operating under a new tariff environment. Some specifics remain unsolved and a full evaluation of the implications will require more time.

For Trucks North America, we remain confident in our ability to mitigate the impact of additional tariff costs for 2025 and expect to land at the lower end of both the 2025 unit sales range of 135,000 to 155,000 units and the return on sales corridor of 10% to 12%.

In the fourth quarter, we expect Trucks North America unit sales roughly in line with third quarter levels, but profitability to be sequentially weaker due to an ongoing unfavorable mix, a fading pricing tailwind, increased tariff costs and seasonally higher R&D and SG&A expenses.

Full year profitability for Mercedes-Benz Trucks is expected to land at the midpoint of the 5% to 7% guidance range. We expect quarter 4 unit sales for Mercedes-Benz Trucks to be approximately 20% higher than quarter 3, contingent on timely resolution of current supplier challenges.

Quarter 4 profitability is expected on quarter 3 level. Trucks Asia profitability in quarter 4 is anticipated to be lower than in the third quarter due to further FX headwinds and seasonality in R&D expenditure despite higher quarter-over-quarter unit sales.

Daimler Buses is expected to deliver a significant sequential increase in unit sales in quarter 4, with profitability slightly above quarter 3 levels.

For Financial Services, we expect adjusted EBIT in the fourth quarter to be on a similar level as in the third quarter.

We confirm our group and Industrial business guidance. Given the heightened uncertainty stemming from the tariff situation in the U.S., we have not yet started our recently announced share buyback. We intend to start the buyback program once we have better visibility, and we remain highly committed to a shareholder-friendly capital allocation policy. As you can see, numerous dynamics are currently at play, many of which are externally driven. That's why we are focused on what lies within our control, enhancing efficiency and delivering value to our customers.

Our first -- our results for the first 9 months show that we are on the right track.

That concludes our presentation. Thank you for participating. We are now happy to take your questions.

Thank you very much, Eva. Ladies and gentlemen, you may ask your questions now. [Operator Instructions]

The first question comes from Nicolai Kempf from Deutsche Bank.

It's Nicolai from Deutsche Bank. Two questions and both related to North America. First one, you probably saw the Class 8 order intake for October and pointing into the right direction.

And as you stated, due to the production cuts last month, inventories are coming down. So do you see a bottoming out of this market? And the second one is on tariffs, and I will refrain from asking for a specific number. But just high-level thinking here, are you considering to adjust your final assembly given the tariffs, so moving more assembly to the U.S.?

Nicolai, thank you for your questions. Two very valid ones. So let me take the first one. So order intake, and maybe let me start also a bit with how the Q3 orders developed over the months in the quarter.

So July, August were on a fairly similar level, but then September was quite a bit better than that. And October was then also a bit better than September sequentially. So we do see a positive trend continuing. I mean I have to say it's in a very low market environment that we're operating right now, but we do see that it's slowly picking up.

And I also did say during my speech that, that obviously also leads to the fact that our inventories are coming down because we have adjusted our production program now throughout the last couple of months.

So we do see that in dealer inventories. What we see, as I said, 15% that's what came -- that's how it came down over the course of the quarter.

Within that, we see that there was about a 20% reduction on the on-highway side and then 15% roughly on the vocational side. So on the on-highway side, we actually see even a higher reduction in dealer inventories, and that's now a fairly normalized situation.

So we're getting out of these high levels. And on the vocational side, it's also pretty normal that it takes a bit longer to reduce further because we obviously are relying there on body builder capacity, which has gotten better, but there's still a small congestion that we see there.

And also, our own vehicle stock has decreased as a result of the reduction of our production program where we now are in a normalized environment. And we are from a production program because of the order development in quarter 3, now fully booked with our planned production program for quarter 4, and we are now filling quarter 1, which is obviously not filled yet, and we have some work to do there.

Now let's come to your second question, the tariff implication. And of course, we're talking here about the implication of 232 that has been implemented as of November 1.

We have said before that we have a fairly high level of flexibility among our assembly plants in the U.S. and in Mexico. But I cannot tell you at this point whether we will be making any adjustments and if how we would make them because as I also said during my presentation, we need to understand the details of the new tariff scheme a bit better.

So what we obviously know is that we're paying the 25% now as of November 1 for the assembled trucks when we bring them across the border from Mexico into the U.S. and we only pay for the value of the assembled truck minus the U.S. content. So that is the situation right now.

But then there are obviously a lot of details within that when it comes to deductions and credits. So when it comes, for example, to a 3.75% credit on the selling price of trucks assembled in the U.S., and there are a couple of questions we are still having.

So we are obviously in close discussions with the U.S. administration in order to understand that better and also to, of course, discuss mitigation measures. And as part of mitigation measures, we will always look at how we utilize our flexible production network.

And of course, we also look for further efficiencies on our side and how we can deal with that situation. But it's really a bit early to tell because it's going to take us some more time to understand how it all comes together and what the final implication will be.

We have worked for quarter 4 now with an assumption of what we believe the impact will be. And as I said during my presentation, we are confident that we will be able to compensate the quarter 4 impact within our guidance.

The next question comes from Klas Bergelind from Citi.

Eva, Klas from Citi. So just coming back on the tariff comment that you expect to be able to offset the effect with countermeasures during the outlook period. But obviously, the implied margin for Trucks North America into the fourth quarter is now around low single digits.

So effectively, are you saying that within the guidance? Because obviously, in absolute terms, your tariff impact from November and December must be sort of 5% to 6% on my math. If I understand that better, Eva, I will start there.

Klas, thanks for the question. We're having a bit of a bad connection. The last part, I didn't quite understand the -- in absolute terms part about the tariff impact. What was that?

Yes. So what I meant is -- I hope this works now. What I meant is to get to a low single-digit margin for Trucks North America implied by your low end at 10%, so low single digit for the fourth quarter margin, that would imply that you have a quite big tariff impact that you can't compensate for. I hope you can hear me.

Yes. So I mean, of course, in the quarter 4 guidance, the tariff impact is implied. And we have now -- and we talked about this, I think, in previous quarters, we have a tariff surcharge that we're currently using.

We do not intend to increase this in the course of quarter 4. So that means the impact from the surcharge is as per our previous planning for quarter 4, but now we have higher tariff costs coming in. So of course, the net impact is bigger.

I said before that we expect net tariff impact for this year in a low triple-digit million amount, which is mostly reflected in the second half of the year with the highest impact in the quarter 4.

And this is excluding EUR 232 million and then EUR 232 million comes on top now. And yes, this will be a tariff impact now without mitigation, obviously, in quarter 4 because we have just 2 months there.

And then, of course, now we're, as I said, working on understanding it all better and see how we will react to it and looking at production footprint and of course, also looking at like what do we produce in the U.S., what do we produce in Mexico, how we can navigate that in the best possible way going forward with the stipulations that we have now in the new regulation.

My second one, and I hope you can hear me, is on the guidance for the year. You are reiterating the guidance for the year, but if Mercedes-Benz is 6.5% fourth quarter, Trucks North America, low single digit and Trucks Asia going backwards, I mean the absolute EBIT level, it looks to be at the low end of your guide around EUR 3.6 billion. I just want to sort of understand if you're guiding towards the lower end because that is what I get to.

Yes. So the profitability, we're towards the lower end for the year. Revenue, you can expect around the midpoint. And then the sales, they're between the midpoint and the lower end, the unit sales, and that's where we expect to be.

Perfect. Absolute final one. On orders in Trucks North America, strong in September, but obviously, the mix is tricky. I think you're alluding to that October was also better than September. Is that -- do you think, Eva, any sort of prebuy ahead of Section 232, November 1? Or yes, what -- how do you understand the order trend?

No, I do not see a prebuy effect implicating October. What we see is, obviously, October, November, these are the periods when some of our customers are also starting then to really order for the next year and planning their capacities. But we do see that happening much less than in previous years because in the past, we also had capacity constraints on the OEM side, and this is clearly not the situation right now because we're in the longest freight recession that the American market has seen in a long time. It's going on for more than 3 years.

Historically, usually a freight recession ended after about 1.5 years. And so what we see now, obviously, on the OEM side is the capacities are there. So our customers do not really see the necessity to now already order for the next year in a significant manner. So it's still -- again, it was a positive development in quarter 3, much better than quarter 2 sequentially and October is continuing a positive trend, but it's not a spike or anything that would indicate a prebuy.

The next question comes from Michael Aspinall from Jefferies.

Michael from Jefferies here. I'm just wondering if you've had many conversations with customers about how they're thinking about potentially higher prices in the context of your total cost of ownership advantage with the eCascadia?

Thank you, Michael. I actually had a lot of discussions with our customers during the course of last week because I was at the ATA exhibition and conference in San Diego last week, and we had a lot of discussions.

So what I can say, what our customers are saying is they believe we are the best in the market. That's why they like to buy from us because we have the reliability. They see the total cost of ownership advantage overall to be there because it's also for them not only about fuel efficiency, where we're doing well, but it's about the dealer network where we have the strongest in the United States.

It's about spare parts availability. It's about service quality that our dealer network provides and then, of course, quality of the truck that they can rely on.

And so they're really saying is market has been extremely weak. So they're obviously suffering from this really long freight recession, but they are committed to us. And that is something that became very clear. What we also need to say that, obviously, because of this freight recession and the situation in the market, the ability of price increases at the moment is fairly limited until the market really picks up.

And that's something that we need to take into consideration because we have really demonstrated our pricing power over recent years. And we can see that also in quarter 3, we had a net positive price effect in North America. In quarter 4, that will obviously turn a bit because of tariffs, but generally, a really good price position.

But now when it comes also into the next year, we do hope, of course, that the market will pick up. And I know we said that a year ago also, but it should -- at one point, we should see a turnaround.

But we do not expect to see it at the moment in quarter 1, and it will probably happen more towards the second half of the year. And with the return of the market in the U.S., then, of course, also pricing will be a different situation again.

At the moment, as I said before, when I answered Klas' question, with capacities being there on the OEM side, it's always a bit different. But generally, we believe we are well positioned with the eCascadia and the eCascadia Gen 5, which just came out, which is well received by our customers.

Great. One more for me then, and it won't surprise you that it's on tariffs. There's been some details of the tariffs announced, but whenever I speak to dealers or anyone else, there are always kind of mentions of negotiations.

Are you able to give us any indication as to if you believe the current state of tariffs is the final state of tariffs that will exist kind of -- I mean, I guess as I'm asking, it sounds like a silly question.

Well, Michael, I didn't bring my crystal ball today. So I'm afraid I don't have an answer. I really wouldn't want to make a prediction on this one right now because I guess nobody knows.

One last one then, can you help us with the U.S. content of trucks you're bringing across from Mexico?

Yes. I mean we talked about that, of course, before also that we're bringing the full powertrain is coming from Detroit. So that's for sure something that we can deduct from a Mexican assembled truck, and then we also have some other U.S. components and material, and that's how we're looking at it right now.

The next question comes from Shaqeal Kirunda from Morgan Stanley.

Shaqeal from Morgan Stanley. Can you please tell us a bit more about the mood of North America customers? Like we discussed, ACT order data is improving sequentially but remains on low levels.

Are customers more positive than they were 3 months ago? Or is it just seasonality? And then can you remind us on the cancellation policies and delays? Once orders are placed, how easy is it for customers to push those out in case they change their mind?

Yes. How is the mood? Maybe slightly better. So obviously, one of the questions I asked most last week was when do you think we will see a recovery? And most of them are saying that they hope in the second half of next year, but also acknowledging that we expected that a year ago, the earliest recovery that somebody sees is maybe towards the end of quarter 2.

Quarter 1, I haven't really heard much positivity around. So it's still a wait-and-see mood, and we really need to see freight rates getting to a better level there in order to, I think, really see a changed mood and momentum. So yes, nobody is excited about the market. I can tell you that much. And a lot of players in the market are struggling because of that.

On your question about cancellations, the one thing is how it is -- how is it contractually and how do you then maintain it? And I mean that's also how we managed it this year.

So we have obviously firmly placed orders, but with our large customers, especially in the United States, we also work in the way that they reserve production slots. And then it doesn't make a lot of sense to say you reserve it and now you have to take the trucks because it's about long-term customer relationships that we want to have.

And we are the OEM in the North American market that's has the most mega fleets and large fleets in the customer base. And so the customer relationship is most important for us.

But also when now over the last couple of months, we've seen some cancellations, it wasn't excessive. So I think that's really not the main problem we have that it's cancellations. And it's also not, as I said, that we're getting an excessive amount of orders now for next year because our customers know we have an order cycle of 6 to 8 weeks. So at the moment, the capacity is there, you're getting a truck.

And then can you please tell us about European order trends? I mean I understand we're probably still growing year-on-year, but should we be concerned about sequential declines? And then some of your peers expect the German infrastructure expenditure to kick in by year-end. Do you also see this? And then any update on cost down in Europe, if possible?

Sure. So yes, European order trend. I mean, in Europe, it's getting better. I mean, I think you saw that with our numbers. Also, we had now a positive book-to-bill also in Europe again, which we're happy about, but it's still not on a really good level.

So we have been waiting for this recovery in Europe also for a long time now. And Germany, yes, I mean, we were already very excited in quarter 1 that now it should hopefully happen also with the governmental announcements of infrastructure spending, defense spending.

We don't see it yet in Germany from what I'm hearing, nobody is. But yes, it should come at one point. And let's hope that in next year and beginning of next year, we see a bit of movement there.

Right now, we don't yet. So we really see Germany order intake with a moderate development, but we really don't see that decisive turnaround yet. And I mean, Europe overall improving slightly sequentially from an order perspective. When I go a bit through the European market, we see a strong order intake in France in quarter 3. So there's higher demand.

Spain is also seeing really, really positive order development. We had an exceptionally strong order intake in Poland in quarter 3 and also in the U.K. So this is where we really saw positive impulses. So it's sequentially better, but not a decisive turnaround at this point.

And then next year, we do hope that we will see a recovery, and we will give you an update then in March when we also give you our outlook for 2026. On cost down Europe, we're progressing well. I mean we gave you, I think, a lot of detail at our Capital Markets Day.

So in all the different areas where we have set our targets, we have now really on a detailed level, defined the measures and the action items, and we're working them through bit by bit. And we are on track to deliver what we said at the Capital Market Day also for 2026, which is a positive impact of a low triple-digit million range for the year. So this is all going as planned, and we're happy with the progress.

The next question comes from Akshat Kacker from JPMorgan.

A couple of them, please. The first one on the Mercedes-Benz Trucks bridge. Could you just explain the factors that are driving all the movements there? Volumes are up on a year-on-year basis. I see gross profit contribution is down. There's another bucket that is up EUR 80 million in the quarter.

You've also talked about some strategic net pricing actions. Could you just help us understand that Q3 margin better? And why are we expecting Q4 margins to be flattish on Q3? That's the first question.

The second one is on CapEx and cash restructuring assumptions as we go into 2026. At the CMD, you've talked about a pickup in CapEx for next year. Could you just give us your updated thoughts on CapEx and cash restructuring for '26, please?

Sure, Akshat. Thank you for your question. So let's look at the Mercedes-Benz Trucks bridge first. Maybe first, you were talking about this others items, the million. So what we do have there. I mean, these are mainly valuation adjustments for provisions that we have booked there.

But overall, when you look at the moving parts in quarter 3 of Mercedes-Benz Trucks, I mean what we obviously see is that we do have cost effects from these ramp-up challenges in our plant in Wörth, Germany because that comes with a lower efficiency if you have missing parts, you also have some issues with quality from supplier parts and really getting a production process running at an efficient level and you have to do rework.

So that costs you something. And then we have parallel activities in our old spare parts center and then the new spare part center in Halberstadt, Germany, where you have an impact. And so this is something that will also accompany us during the fourth quarter, but we also had that in the third quarter. R&D, we did have an effect, obviously, in quarter 3 of higher spending versus prior year quarter, but we also will see then a seasonally higher quarter 4 spending in R&D, which is something that we also had. And then there was a positive effect in quarter 3, which will not duplicate in quarter 4, which is provision releases.

So as you see, the year is a bit weaker than we planned because markets are not very favorable right now. And that means that also incentive provisions could be released to a certain degree. So we took them down to the current forecast projections. That's something that we will not see duplicating in quarter 4.

So in quarter 4, at Mercedes-Benz Trucks, we have a bit higher volumes, but we do still see some mix effects, and we do see that we have these reworks that will still be affecting our productivity and a higher R&D portion that is then leading to a profitability, which will be on a very similar level in quarter 4 compared to quarter 3.

And then the second part of your question was about CapEx and cash next year. So as I presented also during the Capital Market Day, we are seeing a peak in CapEx expenditure in the next 2 years, and that is still what we believe. And then from a restructuring perspective, we do see next year that we will have -- I mean, this year, it was the consumption of our restructuring provision that we booked in quarter 2 is very, very limited. Next year, that will be a bit more, but we will then update you in our annual results conference as what the premises are for '26 in detail.

The next question comes from Daniela Costa from Goldman Sachs.

I have 2 points. The first point is a follow-up on some of the tariff-related debates. But based on what you said, I guess, you're not putting an extra surcharge and you haven't decided on CapEx plans yet.

So as we look into the first half of '26, is there still enough time to do a full compensation? Or should we say that like first half '26 anyways, we should be at sort of materially lower profitability and then compensation will take into effect later?

And also, does that have -- what happens to Section 232 has any bearing on how you think about the buyback cadence?

Thanks, Daniela, for your question. So no, it's really too early to say what the effect of 232 in the first half of the year will be. And we are obviously -- the first step is now understanding exactly what all the stipulations in the 232 regulation mean.

And again, we're also talking to the U.S. government when it comes to that to understand it better and of course, also talking about mitigation and so on.

Once we know it, then we can talk about our pricing assumption, potential surcharges and so on. I mean I said before that, yes, in a low market, where there is enough capacity also, it's -- there are limits to how much you can do with pricing. But again, we're having that discussion. Once we understood what the impact is, then we will look at potential pricing topics and when we could do something and what the implications would be.

It's really too early to talk about that. I mean what I can say is, yes, I mean, we're not intending to push through potential full 232 effect to our customers. I mean we're also seeing, and I mean, I talked to you about that the net impact of tariffs for this year, excluding 232 is a low triple-digit million effect. That's -- we've obviously passed on a portion of this to our customers and a portion of it you see in our results. So that's the way to think about tariff effects.

And then when it comes to share buyback and implications on explaining CapEx and so on, obviously, we're also -- when we do our budget right now, and we're currently finalizing our budget planning for the next year, it's going to take us another month, 1.5 months or so.

And there, of course, we also look at CapEx and we look at the target there for next year. Whole picture comes together with our market assumptions because volume plays a decisive role, as you can see this year with significantly lower volumes, especially in North America, that will then give us a better overview of where we are on free cash flow generation for next year.

And what I said about the buyback is, obviously, we need to understand what 232 means exactly. And then we will look at the projections for the next year, and then we will decide on the start of the buyback at this point in time because obviously, it doesn't make sense to start the first tranche of a buyback because you have to also define on the value of the first tranche and the speed of the buyback.

And for that, you need some visibility as to how the next couple of quarters are going to look like. And once we know that, obviously, we will update you.

And the follow-up just on Mercedes-Benz, both sort of for the European and for Brazil. Like, of course, the deliveries you guided significantly up, but I guess that's because of the supply chain or the trucks you didn't deliver because of supply chain issues.

But if we think about sort of production rates, are you considering them moving forward up, down, flat, sort of what's the production plan, I guess, that's a bit different to what the deliveries path will look?

Yes. I mean, in Europe, it's not moving up because we do expect to sell off quite a bit of also new vehicle stock in the fourth quarter, which is something that we usually do because we have a shutdown over Christmas of our German plant.

And then, of course, we will also -- we will catch up from that ramp-up issue topic with the supplier parts. And that will then also, of course, also contribute to cash flow with the reduction of raw material and unfinished goods. So that's one portion of the cash contribution we expect in quarter 4.

But then the other one is obviously that we sell new vehicle stock that has built up in Europe because we don't see that development there that we saw in North America that inventories also with our own stock levels are down significantly now.

So that is the movement there, and that's why the production program in quarter 4 is a bit lower for that reason. And in Brazil, it's a bit lower because of market. So we do see a weaker market in Brazil. Overall, we are holding up quite well. We're winning market share, but the market overall, as I said during my speech, is weakening in Brazil.

The next question comes from Harry Martin from Bernstein.

The first one I have is just on the U.S. competitive position and pricing. I saw that the Class 8 market share went below 40% in Q3. What would you put the main driver of that being down to?

But also PACCAR said into next year, they're looking forward to moving away from surcharge pricing. So does this become a competitive disadvantage for you if you're adding a 232 surcharge and the players with domestic production are not going to be doing that competitively anymore?

First, Class 8 market share. Thanks, Harry, for your question. So what we see also when we look at now the orders of the last couple of months, we see our Class 8 market share holding steady, which is good.

We did see for a couple of months earlier in the year that ours was a bit weaker, but that was mainly due to mix because, as I said before, we have -- our customers are the mega fleets, the large fleets, and they've been ordering a bit less than the smaller and medium-sized fleets.

So it was a bit customer structure on the on-highway side, but we do not see that we're losing market share in Class 8, and we do believe we are well positioned competitively.

And about tariff surcharges, just to repeat what I said already, it's too early to talk about tariff surcharges for 232 because we first need to understand the impact, and there are a lot of discussions and evaluations happening.

And so that's really not something I can comment on. At this point, we've had a surcharge for 2 quarters now, and this is still there. And everything else we're currently evaluating.

And then the final question that I have is on next year's outlook. The current consensus has double-digit EBIT growth for 2026. So I wondered how you feel about that? And also what market volume you would need in the U.S. and Europe to be able to hit that level of growth next year?

Harry, I understand that, that's a very important question to ask, but it's really too early. As I said, we need a couple more weeks to finalize our budget, our market assumptions and all the moving parts before we can comment on the 2026 development.

The next question comes from Alex Jones from Bank of America.

Two, if I can. The first, just back on Mercedes-Benz volumes. You talked about your Q4 guidance being contingent on supply chain resolution. Can you give us an update on that and how confident you are that, that does get solved in Q4?

And then perhaps the second question on Torc, I think press reports during the quarter suggested you were seeking a partner for that business. Can you give any comment there and what you would be looking for in a potential partner, whether that's sort of a strategic help to scaling the business or more from a financial perspective?

Thanks, Alex, for your questions. So let's start with Mercedes-Benz Trucks volume being contingent on solving supply chain issues. So we do have [Audio Gap] in place. We had the last review 2 days ago. And I think there are good chances that we will get that solved during the course of quarter 4.

Of course, it's also always depending on our suppliers. And I mentioned that one reason is also that we have a higher demand for the Actros L with the ProCabin than what we expected and which capacities, then we also reserved for that on the supplier side, which is obviously great that our customers appreciate our new product so much.

And you also see it in the significant market share recoveries over the last couple of months in Europe. So this is really a product that's being well received. And now we obviously need to get the production up and running because we also want to be prepared then, of course, for hopefully better markets also next year.

But again, we have action plans in place, and we're getting through step by step. So that we can figure that out by the end of the quarter, and we're on a good path. I have to put in one disclaimer. It is obviously also dependent on the Nexperia topic not hitting us. I mean that's something that affects everybody in the market. So far, we've been able to manage it quite well.

I think everybody is doing a lot of broker buys, and we're used from the last supply chain crisis and how we can deal with that. And we have also strengthened our supply chain. And at the moment, production is running smoothly.

But obviously, this is also something where we just need to be looking at, and it's a watch item. On your second question, Torc, I mean, I can't comment on media speculations.

What I can say is we are progressing well with our virtual driver software and we do have trucks on the road in Texas, still with a safety driver in, but we are really moving forward step by step, and we've seen good progress over the last couple of quarters. We're hitting our milestones.

And then there are various options for how we will continue with that business, but we do believe we have a great value proposition because we do have Torc as an independent subsidiary that works on the virtual driver.

And then we have in our North American business, the part where we have developed an autonomous-ready Cascadia, so a redundant chassis as we call it. And we also see that this is very competitive product right now where we're ahead when it comes to the technology. And that's something where we believe we are well positioned then once the autonomous market starts and once the technology is ready for a market release, we are well positioned on the vehicle side and on the software side and then having, of course, our customers and the market access that, that will put us in a very favorable position.

The next question comes from Miguel Borrega from BNP Paribas.

First one, just on Mercedes-Benz. I wanted to understand how do you see a 20% increase in sales quarter-on-quarter, but flattish profitability, especially it's a bigger quarter, more operating leverage, perhaps even a better mix with more trucks coming from Europe. Order intake has been very strong lately. So what is the headwind there?

Yes. I think I answered it already. So we did have a positive impact in quarter 3, also coming from provision releases from an incentive perspective. And then overall, the mix is actually not really better in quarter 4. I mean there are always a lot of moving parts in a global business that is Mercedes-Benz Trucks.

And we do also see that pricing is obviously not easy in these markets. We're winning back share. We're being disciplined in pricing. But of course, in a difficult market environment, we already had negative net pricing in quarter 3 that will continue in quarter 4. We have seasonally always a bit higher spending levels in quarter 4 with the cost ramp-up in really all areas. And so that's where we see that coming from.

And then going back to North America and a little bit more broadly and if we take a step back, given the setup of tariffs at the moment, if we had a favorable market, if volumes do ramp up perhaps in '26 or '27, do you think the midterm guidance for margins of 10% to 14% is still possible? Or do you think the business setting will change so significantly that you may now operate on a different margin range?

Thank you, Miguel. So that's now really looking further into the future. What I can say is what we have presented at the Capital Market Day, this is our target level, and that's what we stick to, and these are targets for 2030. And of course, with a different tariff environment now, we need some time on mitigation.

So that's where, obviously, on a short-term basis, you will see an effect. But we do believe when we look at it on a 5-year basis, structurally, we're well on track. And we do believe that we have a lot of potential as we outlined in our Capital Market Day.

Yes. I just wanted to understand the margin coming down from 12% to 6% and even lower in Q4. How much of that has been driven by obviously lower volumes, your volumes are quite weak?

And how much will be the impact of tariffs going forward? So if we shave, I don't know, 5 percentage points from a weaker market and 200 basis points for tariffs, we can kind of give us the range for a new margin setting. But I just wanted to understand if the 14% is still possible even with the tariffs.

Yes. I mean, again, when it comes to the future, I think I explained how we think about that. What I can tell you about quarter 3. I mean, the tariff impact was a double-digit impact.

And the rest, I mean, obviously, also came from a mix effect, but mainly volume. So that gives you probably an idea. I mean we are operating under significantly lower volumes now in the second half of the year than in the first half of the year.

The next question comes from Hemal Bhundia from UBS.

Hemal from UBS. Just could you remind us the levers that you have available to you in Q4 in achieving the industrial free cash flow target? I understand Q4 is seasonally strong for industrial free cash flow, but any specifics you would like to call out? Is it more driven by inventory or profitability?

Yes. Very good question, Hemal. Thank you for that. So the free cash flow increase in quarter 4, the biggest increase versus the first 3 quarters of the year is coming from Mercedes-Benz Trucks, and that's something that we see every year.

So we always see that year-end Sprint with a very strong seasonality. And it's mainly coming from inventory reduction. Of course, there are always also some movements in receivables and payables, but by far, the biggest chunk is coming from inventory reduction.

And within that, and I said it already, it's a reduction of the new vehicle stock because we then also have the shutdown over Christmas. And then it's a reduction of raw materials and unfinished goods because that's where we have very high inventories right now because of the ramp-up issues because we need to get the trucks really finished and out of the door and delivered to our customers, and our customers are waiting for it.

So when we talked before about confident are we going to achieve also our sales and profitability targets in quarter 4 during these supplier challenges in Mercedes-Benz Truck, well, our customers are waiting for the trucks. And this is the biggest motivation we have to get it solved.

Understood. And on my second question, on Mercedes-Benz, you mentioned selective pricing. Is that more so much on a geographic basis? Or is it by a certain customer type?

It's something that we see in Europe because of the market weakness. So we do see that in India and also in Brazil, we still have a more positive pricing development. But in Europe, obviously, it's a competitive situation right now as the market has been down for a while.

The next question comes from Frank Biller from LBBW.

The one question is just maybe you can confirm the dividend payout ratio of 40% to 60% of net profit. That would be helpful. And the other question is on electrification. So there was a huge increase in the third quarter coming from the order intake.

Was there a special topic from the pricing side that you have such a big increase? And what is your expectation for the next years to come? Is it speeding up? Or is it more slowing down in these circumstances?

Yes. Thank you, Frank, for your question. I'll take the electrification one first. So why is the order intake so good? Because we are pretty sure that we have the best product in the market with the eActros 600. We also now launched the eActros 400.

I said that we are the market leader in heavy-duty electric trucks. In Europe now, we had more than 50% market share in the third quarter. I think that speaks very clearly for the quality and customer benefit of the eActros.

And we do see that our customers see this as a strong advantage and the customers that are buying the truck, they also see already total cost of ownership benefits if they are operating in countries in Europe where they have a toll advantage from a road toll perspective and where they have the access to the charging infrastructure, for example, when they have their own chargers and distribution centers because the public charging infrastructure is really still lacking.

And that's what's holding us back. We do believe we've really demonstrated that we did everything we can do by having a very competitive product, and we also see that our price is at the right level.

So this -- there's nothing that we're seeing where we're under price pressure, but we see that our pricing is value-based for the eActros, and this is also being accepted.

But now the infrastructure topic is the biggest one because if our customers cannot charge their trucks for the routes that they're using, then they also cannot order one. And that is something where we do need now also governmental support, and that's something that we're lobbying for also in the European Commission level.

So that's where we have to see how the development will ramp up, but we see that if customers buy a truck, there's more than a 50% chance that it's an eActros and not a competitor product. So that's good.

On the dividend payout ratio, yes, 40% to 60% is our ratio. I mean, we're not religious about it. And obviously, we will look at the dividend policy once we have closed the year, and then we will give you.

But it's very important to us that we have a strong capital allocation policy. We do generally believe that also stable dividends are important, but we'll give an update once we have decided on dividend payout for next year.

Maybe on the margin side from the electrification. So margins are still positive, but lower than combustion engines, right, yes?

No, they are not. So when we look at it on a percentage basis, so gross profit in percent of revenue, it's a very similar level. And then, of course, the absolute margin contribution is higher because the price of an electric truck is still quite a bit higher than a diesel truck.

The last question comes from Nick Housden from RBC Capital Markets.

Just one left for me. I was wondering if you could just provide us with an update on the vocational market in North America. It's obviously been quite a nice counterweight during the on-highway recession. So just wondering how you're seeing that market heading into 2026.

Thank you for your question, Nick. So the vocational market has been holding up a bit better over the last couple of quarters than the on-highway market. And I mean, obviously, not as strong as last year, which was an extremely strong year for vocational, and we're gaining market share. The Western Star product range is extremely well received.

So we do see that we continue on our trajectory of gaining market share towards our target of 35% market share in 2030. So we are on track there. Of course, also a weaker market for vocational this year than last year, but it's holding up better.

So ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you very much, Eva, for answering the questions on this, I would say, quite extensive call. After a short break, the Q&A call for media will start 9:20.

Now as always, Investor Relations remain at your disposal to answer any further questions you might have. We're looking forward to staying in contact with you. Have a great day. Thank you, and goodbye.

[Break]

Good morning, everyone. This is Thomas Hövermann speaking. Thank you for taking your time, and welcome to this conference call on our third quarter results of 2025. Here in this call, I'm welcoming Eva Scherer, CFO of Daimler Truck.

Before we start with this media Q&A session, as usual, the following notes. This call is conducted in English. So please be so kind to ask your questions in English as well. The operator will now explain the procedure for registering your questions.

[Operator Instructions]

And we are already having the first question, Markus Klausen.

My name is Markus Klausen from Dow Jones. I have 2, if I may. The first one is on the planned share buybacks. Could you give us a rough estimate when they will start in the first or possibly the second half of next year?

And the second question is about the margin forecast for this year. Is it fair to assume that the return will be a little bit more on the lower end of the range given the weak performance in North America? I believe you already mentioned this in the analyst call, but the connection was not optimal.

Thank you, Markus, for your question. Yes, I can confirm the second part with the margin outlook for this year. So it will be more towards the lower end of the range. That is correct. And the first one on the share buyback. I can't give you a timing yet.

But as I said on the analyst call also, we are currently finalizing our budget planning for next year. We are working on understanding all the stipulations within the new 232 regulation. And once we have clarity on that, that's when we can give an update on the share buyback. And that's why we haven't started yet because we don't have that clarity yet.

Next one on the line is Benjamin Wagner [indiscernible].

Yes. Benjamin Wagner, [indiscernible] Frankfurt. Can you give us an update on the Cost Down Europe Savings program? And with a special question, how many of the 5,000 jobs you want to cut have already been cut? And how many of your employees have already moved to the so-called orientation platform?

Thank you for your question. So what I can say is we are on track with our time line for the Cost Down Europe program, and we're working through the actions step by step. And we are to achieve a low triple-digit million saving amount there next year, as we have also indicated during our Capital Market Day. And on details about headcounts, we do not comment.

Next one on the line is Ilona Wissenbach.

I have a question about the EU CO2 regulation. The truck makers asked the EU for less stringent CO2 rules. And also Daimler was warning about draconian penalties coming up otherwise and noting that those foreseen now are 10x higher than those for cars.

I would be interested what is draconian? Have you assessed and how far you reached the targets and how high the fine would be you still have to face? And environmentalist groups are concerned that if this is watered down that the OEM may be less ambitious to offer e-trucks and perhaps it would also have a dampening effect on demand.

Thank you for your question, Ilona. So first of all, based on our planning, we can achieve the targets in 2030 because we have the portfolio that enables us to transition to zero emission. And this is clearly demonstrated by our market share.

As I said during my speech today, we have more than 50% market share in electric heavy-duty trucks in quarter 3. We are the market leader here in Europe. So this shows we have done our homework. We have spent a lot of money in R&D in order to develop the products needed in order to achieve the CO2 targets. But what we cannot influence is the availability of infrastructure.

So that's where we're really asking for support because we need to ensure that our customers can drive the trucks where they need to go based on their route planning, and we need to make sure that then for them, the total cost of ownership works.

And that is something where there is some work to do, and we do not see the ramp-up in infrastructure progressing as fast as we need it. And so we are -- what we are wanting is really a link of infrastructure availability with the penalties because otherwise, you're penalizing the OEMs without enabling our customers to run the trucks.

And with draconian penalties, I mean, you mentioned it, if you talk about 10x the passenger car penalties, of course, these are huge amounts. And this is why we do believe now is the time because we still have a couple of years to go until 2030 to really make sure that we put everything in place, but that it's also clear that ultimately, when the infrastructure is not there, we should not be held accountable if we have done our homework as an industry and have invested billions of euros into our electric truck portfolio.

And perhaps if I may, can you a bit elaborate more on the Nexperia chip situation? You said during the analyst call, the production is not affected and you manage it quite well yet. How is the situation? I think you are also depending on Tier 1 suppliers and -- or do you not need that many of those standard Nexperia chips?

Yes. I mean we need the exterior chips as everybody in the industry, I think. But in trucking, we need less than in the passenger car sector. But of course, also for us, it is a big topic. But our production is currently not affected. And then, of course, we're working on mitigations. We have secured broker buys, and we do hope that we'll get through the next couple of weeks until hopefully, also there will be -- that the situation could potentially be resolved, but we're doing what we can as everybody is and production is running right now and secured.

But it's really a situation where week by week, you are working on getting the parts of -- of course, also working very closely with our suppliers, but we're also doing broker buys ourselves to provide our suppliers with the chips because it's just whatever you can get your hands on right now, that's what you do.

And we have learned a lot during the last supply chain crisis, and we do have good access when it comes to the supply chain. So everybody is supporting and everybody is cooperating closely to avoid an impact, but we do not have obviously full visibility. It's a week-by-week thing.

We have now Alexander Jungert in line, Mannheimer Morgen.

This is Alexander Jungert, Mannheimer Morgen. Just one short question. You were talking about the weak business in the U.S. Are there any effects on sites here like Mannheim or Wörth?

Thank you for your question, Alexander. I mean, we do have some component supplies from our German powertrain sites into the U.S. And I mean, of course, a low market overall is impacting also our German powertrain plants. But I mean, this is all already considered in the production programs that we have now set up for the quarter 4.

So it looks like that there are no more questions. All right. Ladies and gentlemen, then we have already reached the end of today's conference call. Thank you for participating. The recording of the session will be available later today on our Daimler Truck website. If you have any further questions, please do not hesitate to contact the Daimler Truck Communications team. We wish you all a good day. Goodbye.