Ursula Querette: Good morning, everyone, and welcome to TRATON'S Annual Results Conference 2025. My name is Ursula Querette, and I'm Head of Investor Relations at TRATON. I am joined here today by CEO, Christian Levin; and Dr. Michael Jackstein, our CHRO. The film you've just seen provided various examples of how our brands contributed to the Group's success throughout the year 2024.

In today's presentation, we will focus a bit more on what drove our performance in the fourth quarter and how we are looking into 2025. Christian will start with the Q4 highlights and our view on the current demand situation. Michael will then guide you through the financials in more detail, and both will conclude the presentation with our outlook for 2025. As always, the presentation will be followed by a Q&A session, where we welcome questions from financial analysts, investors and media representatives. To handle potential media questions, during the Q&A session, Camilla Dewoon, our Head of Corporate Relations, is also present.

A recorded version of the webcast will be made available on our Investor Relations website as soon as possible after the event. You can also find our 2024 Annual Report, which we published this morning, and the slides to the event on our IR website. Before we start, let me remind you of the disclaimer with respect to forward-looking statements on Page 3 of our presentation. And with that, I hand it over to Christian. Over to you.

Christian Levin: Great. Thank you, Ursula. Also from my side, good morning. Yes, I am extremely proud of what we managed to achieve in 2024. Despite declines in both of our key markets, Europe and North America, we delivered an increase in revenues and more importantly -- most importantly, an adjusted return on sale, exceeding our target of 9%, to be exact, 9.2%.

This was also the figure that you can see for our quarter 4 results here on the slide. Looking again to the full year, you can see that we did 334,000 vehicle delivery, again, in a declining market. You can draw the conclusion that we did gain market share in most of our regions with most of our brands based on that good result. And you can see an increase in a record again on total turnover of €47.5 billion, a bit lower in Q4, explained by mix, and Michael, you will come back more to the details on that. More positive though, cash flow, where you can see in Q4, we did a fantastic job using all the instruments we have in the toolbox to bring up the full year to a €2.8 billion and a bit more.

So more than half of that achieved in the fourth quarter, so a great achievement by the team. And looking then to what is perhaps most important to you listening in today, our earnings per share. They did grow significantly, €0.47 up to €1.49 in Q4, giving a full year EPS of €5.61. And consequently, we are planning for an increased dividend payout for the year 2024. And again, Michael, you will come back more on that in a moment.

What I will do now, I will give you a few examples of how our different brands are fundamentally driving the TRATON shareholder value, which also leads to the possibility to pay increased dividends. So in the film, we highlighted lots of great activities which influenced our performance in Q4. I would like to highlight specifically for Scania and starting there, we achieved record high sales and earnings and for the first time ever exceeded 100,000 vehicles in deliveries despite macroeconomic and geopolitical challenges. How was that possible, you could ask? Well, we resolved many of the supply chain issues that have been haunting us throughout the last years, leading to our most stable production flow since actually before the pandemic. We also captured market shares both in Europe and in Latin America, which do reflect the superior quality of the Scania Super drive line.

Speaking of which, in Q4, the share of our Super sales in relation to total 13-liter truck sales was now up to almost 70%. That's good, but it also shows that there is more potential as we are aiming for 100%. MAN, as seen in the film, delivered its first full electric heavy-duty truck in Q4 while preparing for series production, which will already start in the first half of this year. At the same time, MAN continued working hard on cost efficiency to cope with the weaker customer demand and pricing pressure they get in Europe and particularly in Germany, that is so important to MAN. Besides various general and administrative cost measures, the German plants of MAN continues to use short-term work to lower labor cost.

At its Krakow plant, MAN also reduced production capacity. With that, and as a result, year-over-year, MAN managed to keep up the good adjusted return on sales, almost at par with a 7.2% return on sales. This focus on cost discipline and margin resilience will continue to be crucial as we progress throughout 2025. In North America, where truck demand also remained weaker, International put special focus on sales of the S13 integrated Powertrain. In Q4, and as part of a targeted marketing initiative, International highlighted the fuel economy advantages to convince more customers of the benefits of the new engine and driveline generation.

The share of on-highway tractors delivered with our proprietary S13 Powertrain increased and went up to 35% in 2024. Previously, the average mix of 13-liter versus 15-liter engines was about 25% over the past 5 years average. On the back of volume growth, we aim to reach at least the industry average of 50-50 with International in the upcoming years. Volkswagen Truck & Bus was, as always, very actively engaged in marketing activities also in Q4 at Fenatran in Sao Paulo, one of the world's most significant transport trade shows. Volkswagen Truck & Bus team presented its comprehensive range of product.

Focus was on sustainability-oriented offerings such as the biomethane-powered Constellation truck and the hybrid Meteor concept truck. Last, but certainly not least, TRATON Financial Services made enormous progress in ramping up, especially the MAN financial services offering. In Q4, there, we implemented MAN financial services businesses in the U.K. and Ireland and completed the big rollout in Germany. With that, TRATON Financial Services delivered according to the planned geographic expansion for calendar year '24, with 9 out of 14 countries as we promised back at the CMD in Munich in October.

The plan going forward for '25 is to complete the rollout in all the remaining countries and continue geographic expansion. This will enable us to grow our Financial Services portfolio and provide integrated captive financing to customers across all of our brands and most of our markets. A great example of the value of having captive financing and rapid market scaling is Poland. MAN started to offer financial services under the TRATON Financial Service umbrella in Poland mid of last year. By the end of the year, they had already achieved a record penetration rate north of 40%.

This success demonstrates how Financial Services drive brand success but also its customer investments. Okay. Let's have a look at the BEVs, battery electric vehicles. We have also made significant progress in our offering in line with our

TRATON purpose: Transforming Transportation Together for a Sustainable World. MAN is preparing, as I said, for serious production of its heavy-duty truck, and Scania is broadening its electric truck offering further, now expanding our range while also including more electric machines and actual configurations but also cab alternatives.

Our customers appreciate our offerings, as seen by a very promising order intake trend. In Q4 alone, we received orders for roughly 1,500 electric vehicles. The decrease in deliveries is partly due to supply chain issues, but also the phaseout of the MAN e-van and temporarily reduced e-bus deliveries caused by challenges in the cybersecurity software introduction at MAN. Although we recognize that current BEV figures for us and, by the way, generally, in the entire market are still too low, we firmly believe in an electric future. To get there, we clearly need enhanced charging infrastructure in the form of more charging points and more charging power but, of course, also green electricity.

We are actively working to influence the entire commercial vehicle ecosystem and appreciate a lot participating in Commission President, Ursula von der Leyen's EU Automotive strategic dialogue. The action plan to strengthen competitiveness while supporting the transition was presented last week. Good to see more concrete actions, though they focus far more on light-duty vehicles than on heavy-duty vehicles. As the current chair of the ACEA Commercial Vehicle Board, I will continue to advocate for heavy-duty vehicles in these dialogues, including pushing for an earlier review of CO2-enabling conditions. While advocating for governmental support, we also invest ourselves in the enabling infrastructure.

Examples include our newly established Erinion depot charging entity, our TRATON Charging Solutions and the ongoing development of the Milence joint venture. We also explore creative interim solutions until we get to a fully electrified world. Under the motto, perfect must not be the enemy of the good, Scania recently announced in collaboration with DHL, the testing of an electric pilot truck equipped with a fuel-powered range extender. To sum it up, we do everything we can to stimulate the demand for electric, for low and for zero-emission commercial vehicles and ultimately translating into growing sales and into growing order volumes. Talking about sales and order volumes, let's have a look at what our brands have achieved over the last years and quarters.

Despite challenging markets, we have seen stable unit sales year-on-year. So on this graph, here comes a lot of data, let's start up with Europe and with the European deliveries. And here, we look at the dark blue line in Europe, where customers remained hesitant. We delivered fewer trucks and buses in Q4 '24 than in '23. However, with 37,000 vehicles sold this period, achieved the highest quarterly sales in the year.

In the U.S., Q4 deliveries were also down year-on-year in a declining market. But International performed well in the vocational truck segment and returned to a healthy level in buses. In Mexico, Scania, Volkswagen Truck & Bus and International, all three benefited from a prebuy effect due to the introduction 1st of January of Euro VI. In South America, Scania and Volkswagen Truck & Bus both showed a very strong performance in the fourth quarter with a 30% increase in vehicle deliveries over the previous year and our growth in Brazil alone reached 25%, outgrowing the total market. Incoming orders.

Now you need to look at the light blue line in the graph. It appears, as you can see, promising. In Europe, Q4 truck orders were up more than 40%, reaching over 25,000 vehicles, the highest since Q1 '23. Around 60% of this growth was actually driven by Germany, by France and by Poland, hence, the big markets in Europe. This positive development also continues throughout January and February this year.

While this development is encouraging, we believe it's too early to declare a trend or a turnaround in Europe at this point in time. Looking then to North America. Although the summer numbers from the ACT Research Institute suggested an increasing trend for Class 8 in the U.S., International's figure did not come up to expectations. In addition to customer hesitation arising from reduced transportation activities and uncertainties about EPA27, our U.S. sales team faced challenges due to our customer structure dominated by the bigger fleets.

So Q4 order intake in North America was down by more than 40% year-over-year. However, this needs to be measured against, and I think you remember, a very strong Q4 '23, which was positively influenced by an unusually late order book opening. In contrast then to Europe and the U.S., the Q4 truck order intake development in South America was very strong with an increase by almost 20% year-over-year. Nevertheless, we should mention slowing market dynamics in Brazil that really start to become apparent. The total TRATON bus order intake remained low in Q4 last year.

In Europe, our bus demand is still impacted by the cybersecurity software updates, but we expect a gradual improvement in the next months and a complete normalization throughout the second half of 2025. Overall, the book-to-bill ratio stopped at 0.83, which is 8 basis points above Q2 and Q3 and 1 basis point above Q1. And lead times for trucks now remain in Europe between 2 and 4 months and in the U.S. with International at 3 to 6 months. So we believe that to declare a general market turnaround, we need to see a book-to-bill ratio by 1, and we need to see it, not for 1 but for 2 and perhaps even 3 consecutive quarters.

On that journey, it is crucial that the right political actions are taken, I'd say, on both sides of the Atlantic. Geopolitical easening would clearly improve the macroeconomic sentiment Also, further interest rate cuts could and would stimulate investment appetite among our customers. It cannot be ruled out that longer-term U.S. input tariffs may impact the truck markets, especially in North America. And then, Michael, you will come back and elaborate a little bit more on that later on.

While these external factors are, of course, beyond our control, internally we do what we can to streamline our organization and mitigate risks to achieve sustainable growth and, as a result, profitability. Let me sum it up with the next slide. Growing our business goes hand-in-hand with an efficient internal organization. Our 2024 Annual Report, just published this morning, great reading, features the motto, Together. It highlights the benefits of increased collaboration in the back end between and among our brands, ensuring that we provide our customers, in the different brands, with the best products and services.

And to facilitate collaboration, TRATON, we are -- in TRATON, we are establishing a new group industrial functions, forming strategic partnerships and driving cross-brand services. The foremost example of such a new group function is the TRATON R&D. The main objective for them is to enhance product development efficiency and create more customer value by leveraging the diverse skills of the highly talented developers from all our brands, from Scania, MAN, International and Volkswagen Truck & Bus. It is both logical and beneficial for these teams to collaborate, join forces and truly work as one team. And this concept of the one R&D organization, it was born actually some years ago, and I'm very pleased to announce that we finally made this baby walk.

A common governance structure is now in place. And during this year, around 9,000 of our colleagues in R&D will have transitioned into the new group function, which will be organized globally along R&D technology areas and technology domains. This increased collaboration will support the implementation of the TRATON Modular System, which will solve customer needs of different performance steps once and for all for several brands at the time. This will ultimately boost organizational efficiency and, in the end, profitability for the TRATON GROUP. And on this positive note, I would like to hand it over to Michael to guide us through our Q4 and the full year.

And we will also give an outlook of '25.

Michael Jackstein: Thank you very much, Christian. And of course, a warm welcome from my side as well. Christian already mentioned the key factors behind the stable but robust unit sales development in Q4 year-over-year: a strong South American market, higher unit sales at International due to the prebuy effect in Mexico, both of which offset lower unit sales due to the weak European market. On a full year basis, unit sales slightly decreased by 1% to 334,000 units.

Turning to sales revenue shown in the graph on the right. This reflects a less favorable market, product and price mix towards the end of the year, resulting in a revenue decline by 4% in the fourth quarter. The slight 1% increase to €47.5 billion on a full year basis indicates more favorable conditions in the first month of the year due to the strong order book at the start of the year. Our Vehicle Services business remained strong in Q4 and throughout the year, positively contributing to our margin development, which I want to talk about on the next slide. As you can see, our adjusted return on sales came in at 9.2% on a Q4 and full year basis.

With that, we slightly exceeded our guidance and achieved our strategic 9% target. Now while we are proud of this achievement, we remain humble and want to manage expectations for 2025 given the current market situation. Our Q4 2024 margins were strong despite the market weakness in Europe because of the strong Brazilian business of Scania and Volkswagen Truck & Bus. In addition, International performed well due to positive volume effects, especially as sales of the new school bus have increased. MAN was suffering most from the weak demand in Europe and Germany.

And as anticipated, they were not able to sustain their first half year return on sales levels around 8% in the second half. But as Christian mentioned at the beginning, the MAN team is working on cost discipline wherever they can while short-time work was kept up in Q4. Let's take a closer look at each of our brands in more detail. As always, on this slide, we demonstrate the benefits of having diversified brands, markets, products and services, in short, benefits from working together, which is the model of our 2024 Annual Report. Let's first look at the combined performance of our 4 brands, which is reflected in the segment TRATON Operations, and allow me to pick the most important factors that led to the increase of TRATON Operations' Q4 adjusted return on sales to 10.1% despite a 4% drop in sales revenue.

Number one, Scania increased their adjusted return on sales despite stable revenue in Europe. The main reasons were Scania's strong heavy-duty truck business in Brazil and their pricing power resulting from the enhanced Scania Super offering. So Scania ended 2024 with a Q4 margin of 13.4% and a full year margin of 14.1%. Number two, MAN's successful realignment program and continuous cost optimization supported their margin on the downside. Also, the Q4 margin benefited from volume effects as MAN delivered the highest number of units in this quarter.

MAN ended 2024 with a Q4 margin of 6.5% and a full year margin of 7.2%. Number three, International benefited from a prebuy in Mexico and from demand for the new school bus ramping up. International's Q4 margin was at 7.9%. They achieved 7.1% on a full year basis. And number four, Volkswagen Truck & Bus excelled due to market tailwinds in Brazil and effective containment of variable costs.

They achieved 12% adjusted return on sales for Q4 and the full year. TRATON Financial Services saw a 21% revenue increase in Q4 due to a larger portfolio volume. Also the ramp-up of the MAN Financial Services network comes with higher cost. Return on equity rose to 10.8%. Reason is that last year's figure was negatively affected by the sale of Scania Finance Russia.

Christian already met our dividend proposal and the underlying shareholder value creation. Central to this is the execution of our strategy and our equity story, which we outlined at our Capital Markets Day in October last year. The execution of our strategy resulted in the 2024 financial outcomes we have just reviewed with one of the key indicators being the adjusted operating result. This slide shows the bridge from the 2024 adjusted operating result of €4.4 billion for the TRATON GROUP to the earnings after tax. Deducting the adjustments brings us to the operating result of €4.2 billion, which was 12% higher than the year before.

Please note that our operating result does not account for the earnings of our equity investments, which amounted to €238 million in 2024. If you included these, the figure would be accordingly higher. Earnings before tax came in at €3.6 billion. After tax, we achieved a profit of €2.8 billion or €5.61 per share, reflecting a 14% increase from the previous year. Based on this, the Executive Board and the Supervisory Board of TRATON will propose a dividend payout of €1.70 per share to the Annual General Meeting in May.

This corresponds to a payout ratio of 30%. Just like last year, we deliberately placed ourselves at the lower end of our intended payout ratio, as the reduction of net debt is a core financial priority for us. Still with a 6.1% yield, we think that we offer a highly attractive dividend to investors. Another attractive investing argument for TRATON is our cash generation. The vast majority of the 2024 net cash flow of TRATON Operations of €2.8 billion was generated in the second half of the year.

The first half was impacted by a volatile working capital development, mainly due to the mirror supply issue at International and EU safety-related software issues at Scania and MAN. The 2024 cash flow development was also characterized by higher investment activity. This mainly relates to future investments discussed at our Capital Markets Day, including the ramp-up of our production facility in China. Compared to the previous year, if we adjust for onetime effects of €899 million, the net cash flow of TRATON Operations increased by €139 million. Please note that the onetime effects resulted from the sale of Russia activities and from the changed ownership structure of our Financial Services business.

In Q4 2024, specifically, the net cash flow came in stronger than expected. Besides the operating performance, this was due to substantial inventory reductions at our brands. Only MAN alone reduced the amount of its inventories by around €480 million. As a result, the net cash flow of TRATON Operations reached the upper end of our guidance range, which also had a positive impact on our net debt reduction efforts, which leads me to the next page of our presentation. As you can see on this slide, we reduced the net debt of TRATON Operations including corporate items by around €900 million to €4.9 billion by the year end of 2024.

This was mainly due to our strong operating performance and the resulting net cash flow, which I just commented on. By further reducing our industrial debt, we aim to achieve two

important effects: first, increasing our equity value; and second, reaching a stand-alone investment-grade rating for more flexibility in our financing efforts. As discussed also at our Capital Markets Day, we want to achieve net debt 0 at the latest by 2029 with a strong ambition to reach this goal already by 2027. With this, let's directly move over to the outlook section, where Christian will start with the truck markets.

Christian Levin: Right.

Thanks, Michael. And then you will follow with the financial expectation based on that. So there we go. Earlier, I presented you some, I think, encouraging order intake figures for Europe in Q4. But clearly said, it is a bit early to declare a general turnaround in the market demand.

Globally, we still face cautious truck customers influenced by geopolitical and macroeconomic uncertainties, which perhaps is not so surprising. So as illustrated on this picture, based on our current market intelligence, we continue to see a decreasing European truck market throughout 2025 ranging from a minus 5% to a minus 15%. And looking to the most current figure, February year-to-date, we actually closed on minus 16% registrations. Within 2025, we're more optimistic about the second half, depending on geopolitical actions, of course, geopolitics, interest rates, trends, et cetera, in Europe. And we should remember on the positive side that replacement need remains very strong.

We also expect North America truck market, here in the middle, to remain weak depending on the magnitude of the expected EPA27 prebuy and subject to future geopolitical developments in the U.S., demand should develop somewhere in the range from 0 down to minus 10%. Also in North America, we see a back-end loaded development where we expect the prebuy, if there will be a prebuy, to rather kick in towards the second half of 2025. And fun fact, perhaps, but if you look to the light blue lines, which is the heavy part of the market, which I think most of you follow, that would put us in the range that is identical between Europe and North America, i.e., we're guiding 270,000 to 300,000 Class 8, respectively here in Europe in both market areas. As mentioned before, and looking to the right here, the strong increase from '24 is now gone and we are observing a leveling out in the Brazilian market on a high level. However, therefore, we guide our South American truck market expectations in the range from minus 5% to plus 5%, as you can see on slide.

Now you might ask how do we then plan to develop our business together with our brands and our Financial Services to -- on the back of these market expectations? And to answer that, I hand back to you again, Michael.

Michael Jackstein: Thank you, Christian. So let's then turn to our 2025 outlook slide. We expect unit sales and sales revenue for the TRATON Group to come in between minus 5% and plus 5%. We are guiding an adjusted operating return on sales between 7.5% and 8.5% for the TRATON Group and between 8.5% and 9.5% for TRATON Operations.

Considering the market dynamics Christian just presented, the second half of 2025 should be stronger than the first. And this applies to both Europe and North America. In Europe, we see early indicators in the order intake, whereas in North America, the EPA prebuy should generate momentum in the second half of the year. But independent of this tail of two halves, we do acknowledge that the full year margin guidance is below the 2024 level. What are the main reasons for this? Number one, we face persistent market challenges in Europe and North America without tailwinds from a strong order book like in 2024.

At MAN specifically, this comes with increased pressure from fixed costs while working hard on cost efficiency. Number two, increased expenses at Scania related to the new facility in China before start of production at the end of this year. Number three, increased future investments, for example, into the rollout of the TRATON Modular system, our battery electric and autonomous vehicles. But despite this temporary setback in our margins, we remain confident on our 5-year return on sales ambition of 9% to 11% presented at our Capital Markets Day. Turning back to 2025.

Net cash flow of TRATON Operations is expected to come in within the range of €2.2 billion and €2.7 billion. This is backed by an improved working capital management, as already shown in the fourth quarter of 2024. This cash flow guidance clearly supports our goal to deleverage our industrial business as quickly as possible within the next 5 years. Last on this slide, TRATON Financial Services is expected to deliver a return on equity between 8% and 11% in 2025. Before I wrap it up, let me say a few sentences on how we think about tariffs on Mexican imports.

The manufacturing sector is important to many economies, and the truck industry specifically is the backbone of the movements of goods across the world. Tariffs generally can have a significant impact on the price of goods used to produce trucks. For short-lived tariffs, we have mitigation measures in place. So here, we see no significant short-term impacts on our financials. Any assumptions on longer-term impacts are highly speculative as they depend on multiple unknown variables.

Therefore, such assumptions were not included in our 2025 full year outlook. So please note that our 2025 outlook on this slide is subject to future geopolitical developments, particularly in the U.S. and their impact on TRATON Group's business. With that, I would like to hand back to Christian.

Christian Levin: Thank you, Michael.

And I'll just make a short kind of super summary, all of this before we start Q&A. So '24, again, we delivered solid results as we promised, and this, despite quite challenging markets. The highlight of the year was that we hit our strategic 9% return on sales target. We increased our earnings per share by 14%, allowing us to pay an all-time high dividend of €1.70 for the year 2024, and we continued our path of deleveraging. As suggested by the motto of our '24 Annual Report, we are further increasing our collaboration initiatives and support our brands on many levels to offer the best products and services to our customers and to boost organizational efficiency.

Together, as a group, we're laying the foundation for sustainable growth and profitability. Temporary market fluctuations will not affect our future growth plan. So thank you. And with that, I hand back to Ursula to kick us off for the Q&A. Ursula?
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Ursula Querette: Thank you, Christian, and thank you, Michael.

I already see quite some questions lined up from the audience. But before we start, let me quickly reexplain the rules. This Q&A will be recorded, and a replay will be made available on our website later today. [Operator Instructions] Now let us take the first question, which comes from Daniela Costa from Goldman Sachs. Daniela, please go ahead.

Daniela Costa: I wanted to follow up on the commentary on -- that you had on explaining the margin guidance for this year, and hoping if you could give us a little bit more color regarding inside that, what are your pricing assumptions? How much comes from the China headwinds? And you've also mentioned you were stepping up EV investments. So if you could help us build those building blocks. My second question is just more -- I think I've heard you before talking about MAN production expected to decrease, if you could comment on Scania and Navistar, that would be helpful as well.

Ursula Querette: Yes. So Michael, the margin guidance question is yours.

Michael Jackstein: Yes. Daniela, thank you very much for your question. Happy to maybe hopefully give you a little bit more light. I would say, really a key argument when you look at our guidance for 2025 compared to the guidance for 2024, is the market situation on the one hand side, and then really taking into account that when we stepped into the year 2024, we had completely different order books with completely different lead times compared to now stepping into the year 2025. So you have seen how we project the markets based on the presentations given from Christian.

It goes without saying, and you see that also in the numbers. Let me just take MAN as an example. We had a margin of more than 8% for MAN in the first half of 2024. Taking into account that we had really well-filled order books, and we were able in this special year 2023 to get order book -- to get orders in with a good pricing. So this, you see reflected also in the margin here.

And then you can look at the second half of the year, which just translates the market environment -- the European market environment, especially the one in Germany that affected MAN certainly the most. So if you take this into account, the market situation, and then really the different order book situation, that gives you quite, I would say, some good intelligence why we guide like this. In addition, you mentioned that -- and let me then close maybe here and then hand over to Christian for your second question. You're also right that China investment bring in the facility to work this year with the SOP. This goes along with some ramp-up costs, which is a given, which will affect then also the margin of Scania slightly.

But maybe this is a good point to hand over to you, Christian.

Christian Levin: Yes, absolutely. Thanks, Michael. Daniela, yes, and I would then talk a bit on your second question where you wanted us to elaborate on the production situation inside the brands. And I will also start with MAN because we have, as we outlined here in the presentation, been running a short-term week in Germany, and we have reduced production rate in our Krakow plant in Poland to cope with the lower demand that MAN has encountered.

Good news, with increased demand, we mentioned Central Europe actually bouncing back now in Europe, is that we have decided that already from April, we will step out of the situation and also start to ramp up production again. Scania in Europe, you know that we reduced twice throughout last year production tact. We took it down 10% and then 10% again. There, we have found a good equilibrium. Whereas we, in Latin America, really around flat out and, by the way, that continues.

But in Europe, we are starting to contemplate at least to increase production rate again. But I want to summarize Europe, nevertheless saying what we also said in the presentation, it's a shaky outlook. So we stay really tight. We have -- we're happy with the lead times, the 2 to 4 months indicate, well, average 3, indicates exactly the size of order book you want to have. So customers are not forced to wait too long as before, and we're not running dry, i.e., we don't have too much cost in the system.

So I think we've found the perfect balance. But good news is that for MAN, we can now step out of the short-term work and start to increase production again. Latin America touched Scania, running flat out. It is a little bit more difficult now with the [indiscernible] rate being about 13% and our customers then paying interest rate cost for the financing well above 15%. And we see some hesitation, but we also see harvest coming in well and markets also outside of Brazil are moving in a positive direction.

That's why we have a bit of a flat outlook for Latin America. But there, we are doing what we can to satisfy customers. I think we are pretty well balanced, both in Volkswagen Truck & Bus and Scania. Finally, International, a question mark. The -- as we said here, the order intake has been rather slow.

We have a bit of an order book and we have a bit longer lead times in the U.S. Hence, we don't need to change anything now. We run on the production rate that we are running. But there will, of course, depending on the market -- and it's tremendous. I think it's never been more difficult to make an outlook for the North American total market than it is now.

But depending on that, we have to be very swift. And I know that the team in International is very swift to adapt production rates when that is needed there. I stop there. I hope that was -- answered your question.

Daniela Costa: Sorry, can I follow up just on, Michael, to make sure I understood the commentary regarding pricing, but given what you just said on second half picking up potentially of production in Europe.

What -- do you factor anything from pricing? Or is that just a neutral on the bridge for the '25 guidance or margin?

Michael Jackstein: That's rather neutral. We see -- I mean, you should read the guidance also like the last year, the upper end. This is something we will see in a more supportive environment than we see and include chances from product mix, also chances from pricing, chances from other aspects, of course. And the lower end is, in a not such a supportive environment, where we see various risks, could be additional supply chain disruptions, could be risks and also on the product mix or pricing side could be an unfavorable inflationary environment. So it's just like last year, reflecting chances and risks on the upper end and the lower side of the guidance.

Ursula Querette: The next question comes from Hemal Bhundia from UBS.

Hemal Bhundia: I just wanted to ask, have you already started initial conversations with customers on pricing on the new EPA trucks? I appreciate you said that your timing of this is expected to happen in the second half of 2025. Is that slightly late in 2025 -- in the second half of 2025 now? And then on the production chain in North America, have you started to do things differently in the past few months? Or are you looking to expand capacity in the U.S. plants given the tariff situation?

Christian Levin: Yes. I can start on the EPA27.

So there's been a lot of back and forth depending also on what our competitors are releasing in discussions with the customer. But it seems, right now, and that's why I said if there is a prebuy in 2025, seems that this could very well -- given the complete unsecurity of the situation, could very well be pushed into 2026, and then there is no real prebuy this year, but rather 2026. So -- and on specific customers, I have not personally had specific discussions with customers in North America about the EPA27 yet. So I cannot give you a precise answer on that. I think on the second question, I think, Michael, you can elaborate a little bit on what we're doing.

Michael Jackstein: Yes. Hemal, did you -- did I get the question right that you asked about the production chain and how stable the production chain is and also potential... Hemal Bhundia : Yes, exactly. And if you have done anything recently to change, say, if you moved more production away from Mexico into the U.S., for example?

Michael Jackstein: Yes. So I mean, in general, I can say that we have come to a much more stable production situation in North America.

This is also based on more stable supply chains. You remember that we talked about here that we have increased the stability in our supply chain, taken some learnings from Europe but also looking at a second source, for example, where it made sense for crucial parts. So we see the positive effects now in a much more stable production system in North America. In general, let me say that what's really key for us is that we are highly flexible. And this is also what you see in our North American production system.

We have the plant there in Springfield, San Antonio, of course. And then we have our Mexican plant in Escobedo, where we produce the Class 8 trucks, so the heavy-duty trucks. When you indicate a little bit in your question what do we see regarding potential tariffs here, let me reiterate one more time what I said before. I mean, I can give you some more details which is, of course, perfectly fine. Maybe to give you some numbers, in 2024, we sold roughly 70,000 units in the U.S.

Roughly 65% of this sales volume was coming from Mexico in Escobedo. In Escobedo, we source roughly 50% -- 50% to 55% from the United States. But let me come back to what I mentioned on purpose during the speech. We would really like not to use these numbers to calculate any potential 2025 tariff impacts. Because as I was into; short term, we have mitigation measures in place; and long term, at this point in time, one more time, we believe it's highly speculative.

There are various variables you have to take into account. So at this point in time, we would not factor this in.

Ursula Querette: The next group of questions come from Klas Bergelind from Citi. Klas, please go ahead.

Klas Bergelind: Klas at Citi.

So I just want to come back to North America a little bit. The bigger fleets, you say, Christian, it's still cautious. Consensus is for the second half prebuy. There's obviously questions around the potential repeal or if the requirements will be sort of altered. As we understand it, this can take quite some time to change anything around EPA.

And therefore, the prebuy could still go ahead. It would be great if you have -- maybe you haven't, could elaborate a little bit more if you have spoken to customers, how are they seeing it? What are you hearing, also now given the outlook for the U.S. economy is worsening following the tariff news. I'll start there.

Christian Levin: Yes, right.

No, but what I can say, Klas, on the EPA27 issue, our main scenario and our belief is that this legislation already introduced, by the way, in American law, will prevail. So in our scenario, we are fully in developing the products that will be made available already end of this year to cope with EPA27 if there is an ask from customers and, of course, no later than when the legal requirement come into place, 1st of Jan. So that's the first. And that to me seems to be the general sentiment. So where the greenhouse gas emissions have been clearly targeted by the new government and administration to get out, the EPA seems to prevail.

And for the transport community, as you say, the big -- what we have seen is that the big fleets are a little bit more hesitant to place orders with us now because they want to see more clarity, not on EPA27, but they want to see more clarity about the U.S. economy. So I'd say the main reason why we saw lower order intake in the fourth quarter was that the fleets said, we will wait. So a little bit like what we saw in Europe in the beginning of last year, where many were saying, hey, interest rates will probably come down, the demand is not so strong. We have a rolling fleet that is okay.

We keep that one rolling. It costs us a little bit more. But that's fine because the security to invest is just too big. That's kind of the sentiment we see from the bigger fleets in the U.S. And as we have a little bit bigger proportion of the bigger fleets than our competitors in general have, then that explains perhaps why our order intake is also slightly slower specifically in Q4 than we will have to see for the beginning of this year.

That's just a few comments. I hope that gave you a bit more flesh on that one. Klas Bergelind : Yes, no, it's very clear. My second one is on the ASP. It seems like the softer sort of ASP in Scania was mix driven, as you said, Michael, versus a bit more price pressure in MAN.

And then obviously, with Germany being down this much, it's not that strange to see more negative pricing. But can you please talk about whether this is still more on the service side or if you also took down prices on the vehicles on the orders in the run-up to the fourth quarter deliveries? .

Ursula Querette: So it's on average selling prices. Michael?

Michael Jackstein: Let me say that what we have seen really in 2024 is that we had a very good positive price and product mix, both. So we managed actually quite well, I would say.

We are not reducing prices, as you know, we believe, based on the very good offering that we have. And this is -- this year then the case for 3 of our brands, with our new CBE engine. Based on the very good fuel efficiency, we see here the pricing power so that we can keep prices stable in an even more challenging market environment as it was the case in 2024 especially in Europe and North America. But again, you have heard the numbers also from Christian, talking about during the presentation, the percentage with the Scania Super is quite impressive. In the meantime, we have introduced this engine at International.

And now MAN is next, where we had the start of production in January this year. So this is also with an outlook towards 2025, giving us here quite a good and solid feeling to say so that we will be able to keep prices stable.

Ursula Querette: And Vehicle Services business you mentioned, Klas, is going very well. So...

Michael Jackstein: Vehicle Services business is going very well.

You know that this is roughly 20% of our sales revenue. So especially the parts play a big role here, roughly 75%. So in the end, we are doing -- yes, quite good business here. And we can also say that the margins in this business are even higher than in the new vehicles business. So we are quite satisfied with what we have seen here from this part of our business.

Christian Levin: I think maybe, Klas, what you think about is the comment from last time where we said that in cases we need to do something in order to stay competitive because our competitors are doing things that we don't like, then we'd rather play with the content of the deal rather than lowering the upfront price, which would indicate that you support them on the services parts which are either the financing and/or the R&M contract. And that's what we do. There are increased pressure in the markets as the markets go down. Let's not hide that fact. And then we really try to drive discipline, the Scania way, throughout the whole group.

But when needed, we rather use the richness of the deal to compensate for not going on the vehicle price because that's detrimental going further. But we have not -- I think if you're asking, have we seen that coming through on our margins for parts and services, we have not so far. Klas Bergelind : Okay. So here was my point. In MAN, they are more, if I understand it correctly, more geared to fleet than retail and given that obviously fleet have been more active as of late with sort of lower pricing, could we say that this is more mix, if you like, rather than maybe pure price pressure? I'm talking about MAN?

Ursula Querette: MAN.

For International, we talked about the fleet mix. Yes, MAN, we also always said it's more geared towards fleets. So the answer is probably yes. Okay. Then the next question comes from Miguel Borrega from BNP Paribas.

Miguel?

Miguel Borrega: The first one, just a follow-up on MAN. You're -- I think you're guiding -- at least in the preclose call, you guided for margins to be down 1 to 2 percentage points year-on-year in '25. So that would be 5% to 6%, which would be even below the exit rate of '24, 6.5%. I mean, given that European orders were up both in Q3 and now accelerating in Q4, I think they were up 40-plus percent in Q4, the economical environment also at least doesn't seem to be going down. Can you give us more background on why you expect margins to go down from Q4 specifically?

Ursula Querette: Yes Let's start with that question then, Michael?

Michael Jackstein: Yes.

Let me start with this one. And I come back to a little bit the explanation that I gave before, Miguel. It's really about what we see in the order book. The Q4 at MAN was quite strong, I would say, after the Q3 was not as strong. But if you look at the first half and the second half of MAN in 2024, you see exactly the difference, bring a big order book with good prices into the year 2024.

And there is the difference also when we now step into 2025. So that's one of the aspects. Yes, you are right, it's encouraging, and we are really happy to see, as Christian mentioned before, that we stopped short-time work beginning in Q2 at MAN. So this is a little bit the silver lining at the horizon. But we were clear when we talked about the markets, the European market remains challenging.

This is why we project here minus 15% to minus 5%. And unfortunately, very likely, we're going to see the same as in 2024 that especially the German market is affected. So we can hope with a new government in place, and typically what goes along with the new government, that there's hopefully also a positive psychological effect, that we see a second -- a better second half 2025, what we indicated and what we talked about also during the presentation. But we believe that especially the first half of 2025 at MAN will be challenging. And then again, hopefully, we see a turnaround in the second half.

But this is why at this point in time, you did the math, we project that MAN might come out with a lower margin in 2025 compared to 2024. Miguel Borrega : And then my second question is on China, which I suspect is also a big headwind to the margin in '25. Can you quantify how much will that weigh on profitability? In other words, if it wasn't for that, how much would you expect margins to be in '25, either at Scania or at group level?

Ursula Querette: I think that's a question for Christian, China.

Christian Levin: Yes. Let me put China a bit into context.

I mean, first of all, China is a long-term investment that we're doing, and we're happy that, that project, with some hiccups during the pandemic, are now back on track. And we are expecting to start production here in the fourth quarter and to inaugurate in October, meaning that the direct impact of the products in 2025 will be very small. We expect to ramp up in 2026, of course. And there, the size of the Chinese market, for instance, that currently is very depressed, will of course play a bigger role. So what we currently see out of the China business today is that we are active with imports with both Scania and MAN in the Chinese market.

Chinese market is very depressed. Prices are very low. And we have -- we are keeping up but we are having as imported brands, as always, a very hard time to compete. You need to come behind the barriers, both the formal and the informal. And that's where we're aiming with the factory investment.

Then this is, as Michael said, driving costs. And I don't know if you want to elaborate a little bit on that because it is a really big thing that we're doing there, not just on CapEx that we put in the balance sheet, but also the upfront costs.

Michael Jackstein: Yes. I mean, let me give you a number first when we talk about the investment here that we conveyed before. We are investing roughly €2 billion in China.

And it's really important to say well what Christian mentioned. We're really -- we are convinced, we really -- we are convinced. We are not believing, we're convinced that this is a strategic investment. We clearly see the benefits of being in China, being part of the Chinese ecosystem, also as Christian was into. So we are clearly behind this investment.

You can calculate that we have invested roughly half of this amount until end of 2024, which means that we will invest roughly another €1 billion in the upcoming 5 years. So this is to give you a rough estimate. Then it's quite clear we will see some ramp-up costs, especially this year because we have the SOP there. And let me also maybe give you a little bit more context. Even though we start with a low volume, it's part of the license agreement that we theoretically have to be able to produce 45,000 vehicles, which also indicates that we have to do the investments and also put the costs in to fulfill what is written down in the license agreement.

So maybe this is another piece of information. And then let me put it in the broader context without giving you an explicit number how China is then affecting the Scania RoS margin. But I would say, and coming back a little bit to the broader picture of our total margin, because I fully understand there was the question why are you guiding for 7.5% to 8.5%. So I talked a little bit about MAN. When we talk about Scania here, you understand that we have the ramp-up costs, on the one hand side, and then also we had a fantastic market in South America last year in 2024.

And we will still also see a challenging market in Europe. So if you put this all together, then this is also an indication that there is a good chance we will not see this fantastic level of 14.1% for Scania in 2025 as we have seen it in 2024. And if you combine that then with MAN and with also the challenging situation in the North American market, coming back to International, then again you have a little bit more pieces of information, I would say, to give you a better feeling why we came out with this guidance of 7.5% to 8.5%. I hope this gives you a little bit more clarity on your question.

Christian Levin: You got me going there.

I think we also said that number. I think we also need to give a little bit more background to why this is so important. You said it's strategically important. That's absolutely correct. And I think in this more divided world, it's more important than ever that we have a footprint in Asia, and that footprint needs to be where the manufacturing capabilities, where the subsuppliers are, i.e., China.

Timing, you never know when you make these investments. It could be perfect. It could be that the market is coming back in '26, we don't know, of course. But right now, it's very depressed. Said that, and this is one reason to be in China, 600,000 heavy vehicles last year, makes it still, by far, the biggest market in the world.

So apart from that, apart from needing to be present in the region where China is [indiscernible]. Apart from being the biggest market, we need to be in China to take on the competition from the Chinese manufacturers. I think you have all seen on the passenger car side how quickly the Chinese have developed both on electrification and the digitalization side. We see that starts to happen also in heavy commercial vehicles. You have also in the buses, Chinese buses coming to Europe.

And we think the best way to take on competition is to be where competition is the toughest, i.e., in the Chinese market, where that ecosystem also will be available to us, i.e., we're going to work with Chinese suppliers, Chinese partners, Chinese universities, Chinese students, Chinese employees. We're going to run their R&D procurement, production and build up a complete industrial hub, just like we have in South America. And therefore, this is I think, from a long-term strategic point, extremely important and a very good thing to do. And those of you who follow us more for the long term, I think this is great news. But yes, nothing comes for free.

It is a big investment. It comes with ramp-up costs. We have this Chinese law that we need to comply with, which means you need to build the capacity from the start even if that's not how we build factories in the West. But that's the rules of the games. But all of this put together, I want to give you a bit more background.

I think will be a game changer where TRATON Group will have an industrial hub for short lead time deliveries and level playing field in Asia, which today is just not possible. I stop there. Sorry for a long answer.

Ursula Querette: Yes. But thank you, Christian.

I think that was important additional color. Now we still have quite some questions lined up. Next one comes from Nicolai Kempf from Deutsche Bank.

Nicolai Kempf: Nicolai from Deutsche. Following up again a bit on the tariffs.

And I appreciate that the S13 share in Navistar is reaching 35%. Can you just remind us, is this new powertrain being manufactured locally in U.S. or Mexico? Or is it imported from Europe? And my second question would be on Germany. You've mentioned the election, which was probably positive. And out of that, the government is announcing a big infrastructure program.

Do you expect any imports from that? And if so, what do you believe to happen?

Michael Jackstein: Yes, Nicolai, thank you very much. I think I can take both questions and then Christian is, of course, invited to step in.

Christian Levin: I'll give the outside view on Germany.

Michael Jackstein: Exactly. I can be, I believe, quite quick regarding your first question, the S13.

We produce in the United States in our Huntsville plant in Alabama. And when we bring this into our Class 8 trucks, then we ship it to the plant in Mexico, in Escobedo. So that's the short answer to your first question. The second question, well, let me maybe say, first of all, I believe what is important is that we have a new government in Germany in place as quick as possible. I believe that we all know when we look at the economy, there are typically two sides of coin.

The one side is about purely facts and figures. The other side is about psychology, what we all believe is there a positive sentiment or more critical sentiment. So at least I believe having a new government in place rather quick, and you were into a couple of announcements regarding the infrastructure and also regarding potential investments in the military. I would say it's quite obvious that both effects will likely have a positive impact on the economy. Another topic, since you asked, I would like to mention, because from my point of view, this is one of the big issues that we have in Germany, but not only in Germany, especially in Europe.

This is really about our regulation landscape that we are in as companies, as industries. And this is not just the case for our industry, this applies to many industries in Europe. So there is certainly an area where we would like to see a different regulation landscape, to put it a little bit generically. When I talk about our industry, then it's quite clear. You heard us talking today about our Northstar, Transforming Transportation Together for a Sustainable World.

We believe in battery electric vehicles, we believe in decarbonization. But what is also crucial here that we have the right incentives in place. We can have the best products. If the charging infrastructure is not there, then we will not be able to aim -- or to achieve what we are aiming for. So maybe I stop here because I could imagine that, Christian, you would like to jump in here and complement.

Christian Levin: Yes, no, but I think you carried it in a good way, Michael. But yes, I remember now I made it to the headlines in the press here earlier this year where I was a bit outspoken in saying that Germany has quite some challenges and needs to move. And I think -- and that's, of course, based on what we see in terms of infrastructure investments, we see a shrinking economy. We, in our business see that customers are most hesitating in Germany in the whole of Europe. And of course, that's given that Germany is the most important economy, the biggest economy, the biggest industrial player, is very serious.

And we want Germany to move. And I think with the incoming Chancellor, we see very positive signs. We see speed. We see decision-making. We see schuldenbremse being up for discussion, the cap on spendings and other things you mentioned.

So I think for us, as Europeans, I see very positively, at least, early signs of Germany moving after too many years of having omitted thinking that competitiveness comes for free, which is, of course, not the case. So as a foreigner in Germany, if you allow me to give that outlook, I think it looks really good. And I think if we could get the spirit of -- you mentioned also deregulation, which is one of Europe's biggest challenges, that we have overregulated the market. If that could also be raised in Brussels, and I know it is based on several meetings now with commissioners and with Von der Leyen herself, Germany could serve as an example to Europe the way it used to be years ago. So thanks for that question.

Nicolai Kempf : And just one follow-up. That should probably mean that the trucks from Mexico are USMCA compliant, right?

Ursula Querette: Yes.

Michael Jackstein: Yes.

Ursula Querette: Okay. Then let's move to Erik Golrang from SEB.

Erik.

Erik Golrang: Yes. I have two questions, one for the long term, one for the short term, starting with the short term. Could you give us some more color on the development of your service business and the aftermarket, particularly in Europe? Are you seeing the same kind of development as on the order side, i.e., improved demand here? And then secondly, we've been talking a lot about the rollout of the CBE now coming to MAN as well this year. Beyond this, as you think about the -- your work to harmonize the TRATON GROUP and implement a bit more Scania ways of working to the organization, what are the next big steps now over the next few years following the powertrain harmonization?

Christian Levin: Okay.

I guess -- Yes, thanks, Erik. Yes, services, we have had a tremendously good development in both Scania and MAN. And you asked specifically about Europe. So I think the investment that we have done into connectivity, having customer data available at the contact point, so let's think the front desk service adviser towards the customer, has helped us to increase more than we have been able to increase the rolling population. I think looking forward -- and I should add, we could also put a lot of price increases into that, given the inflation that has been over the last year.

I don't expect that to be possible. What I do expect will continue to drive the service business is an even higher degree of proactive contracts or activities, i.e., with more data, more digitalization, more connectivity, we take over the huge job which, by the way, is also very administrative and bureaucratic job for our customers, to take care of vehicle maintenance. And we transform more and more of the repairs into proactive maintenance, more like the airplane industry is doing. And that will enlarge our market share on these vehicles, and that will drive growth. Apart from that, we do expect also vehicle growth coming into place as the market is taking off.

Might not happen this year, might happen next year, but that will further support services sales. On the Scania side, especially not so much on MAN, we also continue to take over dealers and workshops where that makes financial sense, where you then get another layer of margins immediately into the result, which also will be seen throughout the years. So we continue to count on service business as a growth area and we see positive on it, but it might not grow as fast as it did here during the after pandemic years. Anything you want to add there, Michael, on the services business?

Michael Jackstein: No, I think that's perfectly fine.

Christian Levin: Good.

Ursula Querette: Let's have the CBE, what comes next?

Christian Levin: Yes, what comes next. Sometimes I even get that question internally. That's not an easy one. To be honest, there is not a grand plan exactly how we're going to make out of TRATON, a company that is extremely performant and competitive. We take it step by step and do what we can.

I spoke quite a lot about R&D. That has been a real journey as we really do that all the way, i.e., we're creating a legal entity, that is TRATON R&D, with subsidiaries in all of the countries where we have R&D activities, i.e., that is Brazil, that is U.S., that is then Sweden and Germany, China and India. That will take time to be perfectly and seamlessly operational but done. So their task is, of course, to create one modular system. The one modular system starts from a combined driveline.

But a truck consists of so many more parts. So we need to have that transformed into all the interfaces actually. So you can think of the driveline, it interfaces to predominantly to the chassis, so where we have to do a lot of work to align. We don't do that as a big bang. We do that step-wise.

Connected to that, you have all the mechatronics, the electronics, the electrical architecture and the software where we're working very intensively also to come up with a common solutions. That doesn't mean the performance needs to be identical because we work with performance steps. But basically, we developed this performance steps once and not 4 times as we do today. After you have done chassis, you have done electronics, you, of course, need to consider what in the cabs can be made on common interfaces, also the same or same performance steps or performance series. And then you have basically worked yourself through.

I make this very simplified. But that will be the journey. And this journey we will be on for many, many years going forward. But that's why it's so important to have one group R&D that puts all their effort into this. Then there will be slivers of R&D still in the brands to take care of what is really specific for this brand and what makes this brand different from other brands in the group but also in the market.

Now what I said is that everything is not set in stone in terms of operational or organizational development is that we don't really know doing this, how far do you then need to go in procurement, in logistics, in production, in back end of other functions to support. But we are certainly going to take the steps that are needed in order to make sure now that R&D can really function because that is crucial for the development of the modular system. Thanks for a very good question. Michael, you want to add?

Michael Jackstein: Yes. Maybe, I can indeed complement here.

Because as you were into, I mean, also Christian, for a very good reason talked about the trade modular system. And to make this happening, we took the decision to create this new group R&D function. So those are the things you know about already. We talked about this. But you asked what might potentially come then in the upcoming future.

So for me, one crucial topic actually is harmonization. And when you just transfer what we are doing now with the TRATON Modular System, not developing 2 or 3 chassis, not 2 or 3 cabs. If you translate this into our indirect areas, there is quite some potential. And you can imagine coming from 4 proud brands who operated very much on a stand-alone business now forming one group. What we see, of course, is different ways of working, we see different processes, and therefore, we see a lot of different IT systems.

Now imagine we do the same what we are doing with the TRATON Modular System, going on 1 chassis, going on 1 cab. This is now what we do also in the indirect area, we start to harmonize. We see where we find common ground to go on one process. And when we have one process in the entire group, we don't need 3 or 4 different IT systems anymore. So there is quite some potential.

Can we quantify this? No. Will you see that this year or next year already? Potentially, slightly. So this is also a journey which will take a couple of years. But we started this journey. This is very clear.

And there is, from my conviction, a lot of potential when we do this exercise. You said for a good reason that many things that you've seen so far is going back to fantastic learnings and achievements from Scania, the TRATON Modular System based on the Bygglada, on Scania modular system, also stepping into TRATON Financial Services based on the very successful business of Scania Financial Services. When we talk about harmonizing our processes, the beauty of our group is that in this case, all the brands bring something to the table. Now I step into diversity. So this is really having different perspectives.

And I can assure you when I have the talks in my areas, be it in the finance department, in the HR, people and culture department and in other functions, we see that everyone brings something good to the table. Sometimes it's the MAN solution, sometimes it's the International solutions, sometimes Volkswagen Truck & Bus, sometimes Scania. So we are really taking this into account. We learn from each other and we are getting stronger by harmonizing the processes. And we are not making, let's say, false compromises, but we look for the best solution.

And there is quite some potential. And again, we are on this journey.

Ursula Querette: Thank you. We have 4 more questions lined up. So just to...

Christian Levin: We need to be short.

Ursula Querette: We need a bit shorter answers from now on. Next one is Michael Aspinall from Jefferies.

Michael Aspinall: Quick one for me to start off with and then a second. Just with your guidance of €2.2 billion to €2.7 billion free cash flow, the dividend is going to be about €850 million.

I was just wondering if there's going to be another negative other that we had in the bridge this year, just to think about what -- how much of that cash flow could drop to reducing net debt. Because this year, I think the other was negative €1.2 billion. Just trying to get a scale of how much that could be next year?

Michael Jackstein: Michael, thank you very much. Let me start like this. You're fully right.

We have delivered €2.8 billion net cash in 2024 with a margin of 9.2%. So when we guide now 7.5% to 8.5%, and let's just pretend we reached the upper end, 8.5%, then this corresponds with €2.7 billion net cash which is not too far away from the €2.8 billion even though the margin is, I would say, quite some lower compared to 9.2%. So I understand your question that you asked. How do we come up with this guidance, what is the rationale behind? And the rationale behind is that we see an improved working capital. Especially when you look at our working capital, it was quite strong in Q4 2024.

So we have increased the working capital by €300 million in 2024. But if you start from the Q3 2023, then you see that we have decreased it substantially by €1 billion. So we intend to keep on working here hard on the working capital, which is one of the reasons. You also mentioned the position others in the bridge, which led to the effect that we have seen, a net debt reduction of roughly €900 million in 2024. If you look at this position, then it includes mainly FX effects of the net financial debt of trade and operations.

And then there are also additions made because of the IFRS standard 16, the right of used assets. So these were the main topics that were included in others. Michael Aspinall : Okay. Got it. And then just another one on Europe because Europe orders obviously stepped up quite a bit.

You mentioned that it continued in January and February. I just want to dig into what type of customers are ordering. Can you see an uptick in utilization through your fleet management programs? Or what else do you see as the driver of that uptick? Because I think you said it continued in Jan and Feb?

Christian Levin: Yes, I can take that at least a pretty good clue on the European system, where I met a lot of customers lately in several different markets in Europe. And I think strangely, you could say, but there is a bit of a positive momentum. There has been a waiting.

Could be that customers see that the interest rates are leveling out and there is no need to wait anymore. But we also see a leveling at least of the transport demand in our fleet management systems. We see that the kilometers are not going down. I was recently both in Belgium and in Italy here last week, meeting with a lot of bigger customers. They are all keen to place orders.

Some are even a bit like worried that we should have again long lead times. So they have -- and there is the replacement need that is playing out, that their vehicle park starts to be old. So it's a little bit different reasons why we see positive momentum in Europe. But I genuinely believe that it's about this waiting time starts to really take its tributes and it's kind of hurting some customers with downtime and they then need to move. So -- and now they are moving.

So that would be my -- so there is no -- I cannot tell you it's a specific segment or it's a specific application. It's not like in the U.S. I think it's rather the opposite. It's rather the fleets who are professional are now ordering. But I also see a lot of small customers coming in with orders.

And we actually -- we see it all over. It's very positive to see that markets who before were really hesitating and has been hesitating ever since the Russian invasion. I mean, markets on Poland is a good example. Markets bordering Russia, Ukraine we see really, really good order intake. I think the only market where we are still very disappointed is the U.K.

where it continues to be depressed, at least the start-up of this year. But South Europe, East Europe, Central Europe, North Europe part are giving good orders right now.

Michael Jackstein: And I would just complement really quickly and say that at least 2 prerequisites are in place that are supporting this. The one prerequisite compared to the previous year is really a lower interest rate. So this is clearly supporting that and potentially also the order intake.

And the second, as you were into also before, is really the age of the truck fleets in Europe, which is more than 14 years on average. So in Eastern Europe or South Europe, even a couple of years more. So quite some good prerequisites why we believe that we see this silver lining at the horizon here.

Ursula Querette: We still have Jose Asumendi from JPMorgan.

Jose Asumendi: A couple of questions, please.

Christian, can you comment, please, if increasing the free float in the entity in TRATON is still supported by the Supervisory Board. And are there any KPIs that you're looking in terms of proposing these initiatives. I'm just wondering if it's still -- this topic is still on the table or not? And then second, Michael, can you comment a little bit around further net debt reduction targets that you're thinking for 2025? And strategically, when you think about the year '25 and the use of cash flow, how do you think about that balance between reducing debt, paying dividends and CapEx? How do you balance those 3 elements?

Christian Levin: Okay. Thanks, Jose. And you made also the choice of who should answer, so thanks for that.

Yes, the free float, of course, remains on top of the agenda. Also always talking to you on analyst or investor community side, I can only say that we continue to reiterate the importance of this when we meet with representatives of our main owner, Volkswagen. They know our viewpoint. And then, of course, it's entirely their decision. I'm not aware of any thresholds or KPIs that they monitor in order to make the move.

I just hopefully continue to note that at the AGM of Volkswagen last year, Oliver Blume clearly said that free float up to 25% would be adequate. And when the time is right, that move will happen. And I think we have to stop there. Michael, the second one was for you.

Michael Jackstein: Yes.

The second one, the net debt reduction. And Jose, let me first start saying there is no specific target for 2025, and we will not communicate the target for 2025. But as I was into before and also as we said at our Capital Markets Day, we want to reduce the net debt level to 0 in the next 5 years. And we reiterated today, as we also said at the Capital Markets Day, our ambition is to achieve that already in 2027. So this is what I can say regarding net debt reduction targets.

Then you talked about or you mentioned the factors that play a role. Let me first start with CapEx. Also as we indicated here, we see an increase in CapEx this year, which predominantly goes back one more time to the ramp-up of our China plant, the third industrial hub for Scania. So that's the one aspect. And then I would say it's a given.

You know, of course, we keep on investing in our future, be it TMS, autonomous driving, digitalization and so on. The second topic you mentioned is the dividend. Here, we chose a dividend payout ratio of 30%. You know, we said we want to have a payout ratio between 30% and 40%. And also here taking into account what I believe you are into, further reduce our net debt level, we chose just like last year the payout ratio of 30%.

That means, on the one hand side, we stick to what we say. It's important for us that we deliver on what we promise and indicate. This is why we, of course, stay within this range of 30% to 40%. But we go to the lower end of this range, taking into account that we want to further reduce our net debt level. And then maybe a final comment on gross cash flow.

Let me just also underline here one more time. Cash flow is really a focus in our company. This is why we have introduced also the net cash flow as a KPI for all the management, be it Executive Board or management bodies in our brands. So really to put the focus on net cash flow, and I can tell you that we didn't start this journey, we're in the middle of this journey to really become a more and more cash-driven company. So net cash is one of our key priorities, which also goes in line, of course, with our ambition to further reduce our net debt level.

I hope that answers your question.

Ursula Querette: Thank you. Last one in the queue is Shaqeal Kirunda from Morgan Stanley.

Shaqeal Kirunda: Shaqeal from Morgan Stanley. I just wanted to touch a little bit more on the heavy-duty North America truck market.

One of your peers mentioned a few weeks back that North America bottomed out and the market has gotten very excited. But it sounds like you're a bit more cautious and the February ACT orders were quite weak. So what exactly are your customers saying? And do you think that tariff uncertainty which could continue for quite some time is enough to stop this inflection that the market is pricing in today?

Christian Levin: That's a good one.

Ursula Querette: You answered part of it in your speech.

Christian Levin: Yes.

No, but that's a million-dollar question anyway, Shaqeal. Yes, we were all thinking, seeing also the ACT figures for order intake in the fourth quarter that, yes, now it comes, what we had expected, a rebound in the North American market. January, February clearly indicate that is not the case. And therefore, we have also adapted our forecast. And we are now, I wouldn't say pessimistic, but we are a bit more cautious on the outlook.

And as I said, the best answer I can give is really that customers are hesitating. They're in a waiting mode. They want to know where is the interest rate going? Will Central Bank move further? Or have they now stopped given the inflationary tendencies you can see? What about inflation? And of course, the discussion on tariffs is creating question marks. And I think it's rather logical that we see, especially by the ones who are, let's say -- the bigger fleets who have more muscles to really analyze the situation and think a bit more long term that they are hesitating and waiting and say, well, "okay, I can live through this another month, another month, another month." Is that a risk? You ask if that is going to take away the -- and you say inflection point, I assume you mean the upturn that we all are expecting with a potential prebuy? Yes, I don't think so, not if the EPA27 remains because then there will be a significant price increase. There has been speculation and with a wide range of how big will that price increase be, but there will be a price increase.

And there is always a prebuy in our industry when the emission class is upped. So that will happen. So provided you believe EPA27 will prevail, then there will be at some point in time. But I think that might -- and that's why I said, if at all this year, I believe that one might come a bit later than what we had planned, given all this uncertainty. Yes.

That's the few things I can say, Michael, anything to add on that or?

Michael Jackstein: No, I think it's perfectly fine. Maybe just one slight addition. If we look at the segments, then we could say that especially the vocational segment was quite strong last year. We see that this is also, in a way, normalizing, and the same applies for the medium-duty segment. That was quite strong in 2024, where we also see a slight cooling down.

Maybe also to put this a little bit more into context when we differentiate about the segments in North America.

Ursula Querette: Shaqeal, was that your last question?

Shaqeal Kirunda: Yes. That's all from my side.

Ursula Querette: Okay. Thank you.

Then we've worked through all the questions. And with this, we are concluding our event. Thank you, everyone, for joining us today. Please take a look at our website, where you can find the online version of our annual report. Besides the detailed financial you can discover, interviews, stories, videos explaining our business in more detail.

You may also review our sustainability statement, which we prepared for the first time guided by the new EU directive, CSRD. And in the coming months, we have some conferences and road show activities planned. We look forward to meeting you there. In the meantime, in case of any questions, please reach out to the Investor Relations team and communications team. With that, we wish you all a remaining day.

Thank you, and goodbye.

Michael Jackstein: Thanks a lot. Goodbye.

Christian Levin: Thanks.