RITES Ltd

NSE:RITES

Good morning, ladies and gentlemen, and a warm welcome to our Capital Market Day Mastering Transformation. We will kick today off with our annual results conference for 2024. We're very happy to have you here with us today. And I would like to introduce myself. I am Christina Schenck. I'm the Head of Investor Relations and Treasury.

Good morning, everybody. My name is Willem Spelten, I'm heading Corporate Communications. Also a warm welcome from my side. We start today with the annual results conference for the like approximately first 30 minutes, followed by the Capital Market Day Mastering Transformation, providing a comprehensive update on where we are standing and where we're intending to go for analysts, for investors and for the media.

So in total, our presentations will last for roughly 2 hours. You can follow our stream with simultaneous translation into Chinese and German. For those of you in the room, you can access the translation function as well. Channel 1 for German, Channel 2 for English and Channel 3 for Chinese.

And both Q&A sessions after the CMD will be broadcasted on our website, so you can also join digitally. The event ends around noon today. And we will now start with the Annual Results Conference hosted by our CEO, Ola Kallenius, followed by our CFO, Harald Wilhelm.

[Presentation]

Good morning, ladies and gentlemen, and hello to everybody that is watching this Annual Results Conference and Capital Markets Day on the stream. And again, welcome. We would like to start by sharing the numbers of 2024, but then spend more time today talking about the future of this company, what's happening in the industry and what is Mercedes-Benz doing to propel itself into a prosperous future. That is what today is all about.

But let's start and look at the numbers for 2024. Everybody knows that 2024 was another exciting year in the auto industry, but a year that was also defined by macro challenges and also a tough market condition. How have we fared during this year? In the market conditions that we encountered, especially in China in the second half of last year, yes, it did affect our revenues and accordingly, also our profitability.

But in that context, to be able also in the competitive set to print a EUR 9.2 billion free cash flow is a very strong statement of a company that has a solid foundation. And in spite of the fact that we returned back to shareholders almost or around EUR 10 billion through the dividend, but also through share buybacks, the net industrial liquidity of the company still sits at around EUR 35 billion. So the foundation and the balance sheet of this company is very strong, which we think is an advantage as we tackle the next few years, where the market conditions probably also will see its challenges.

What was going on at Mercedes-Benz Cars. Well, at Mercedes-Benz Cars, for those of you who joined us yesterday, you got a little special presentation on the G-Class. It's one of those unique icons in our portfolio. And surely, that was one of the big events in 2024 launching the all-new G and also the insanely performance electric G that many customers are also now turning to, the perfect car for adventure now at zero emission.

But 2024 was also a year where we have laid the foundation for what we're going to talk about in the update into the future. Markus Schäfer, our Head of R&D, is here today, his team, but also all the teams in R&D, in production, and marketing and sales, they're readying themselves for what is going to be the biggest tech and product launch offensive in the history of this company. So whereas maybe we didn't have so many launches in 2024, that didn't mean it was a slow year. It was probably one of the busiest years that we have ever had, and we're ready and poised to go.

If we take a little bit closer look at the structure of the sales, as I mentioned, we and others encountered a Chinese market with subdued consumer sentiment. And yes, that also affected some of the upper ends of the segments, whereas we have in a successful way, protected our market share and in many cases, actually increased our market share. This is something that we had to deal with in 2024, and we're looking at how does this develop in 2025, and how do we make sure that our very strong position on the top end that we can protect it and also in the next few years, build upon it.

On the xEV side, if you double-click on xEVs and BEVs, and you do an analysis of the premium luxury market of what's going on, you quickly see that in the segments where we have the most of our first-generation electric vehicles, which is E-Class and S-Class segments, Sedans and SUVs alike. In most markets, Mercedes-Benz is the EV leader in those segments. And this is in spite of the fact, with all the market pressure and many market participants resorting to price action, you're not completely immune to that, we try to be a little bit more careful. The biggest segment in the EV side for premium and luxury is GLC and C-Class segment. There, we have no offering in our portfolio today. But when we meet here next year, we're ready to go. Those products are in the pipeline, and they're coming in 2026.

So in a thoughtful way, we manage through this period. You can see that the plug-in hybrids have been quite successful. I don't think there's any company in our competitive set that has a better lineup for plug-in hybrids. Most of our offering is WLTP 100 kilometers and above. Very few companies have that. And we can see a renaissance of the plug-in hybrids, and in this day and age, where I think it's clear that the transformation into electric mobility is going to take a little bit longer than maybe most people thought 5 years ago, and it's going to be heterogeneous to have that card as well to play is good. That's a strong hand.

The Van division. The Van division had another banner year. The profitability was again unusually high. When Mathias Geisen, who has now moved into marketing and sales presented the Van strategy a couple of years ago, he said, the light commercial van company based in Europe that can print a double-digit margin at all is a phenomenal result. And here again, they have done it north of that. What is it? It's the strength of the portfolio, it's the strength of the product, good structure, a disciplined go-to-market strategy and also good on pricing. That doesn't mean that you can sit back.

The Van division is going through similar to the passenger cars, maybe even more in relative terms, a very big change. You know that the cycles of vans are longer, and we have started also here the biggest investment and product offensive in many decades, and we will launch the first product of the so-called VAN.EA architecture next year and then following products, the years after that.

There is vigilant about cost as we are on the passenger car side. If you're making more money, you cannot kind of relax and become a little bit loose. You have to have the same discipline. One example of that, we're announcing that we are again, adapting our production network. We're selling our plant in Argentina to improve the utilization of that plant to an investor group, so they will act as a contract manufacturer to us, but can use unutilized capacity in that plant for other things. So again, improving our fixed cost position for the Van division.

So strong profitability, but not a reason to sit back and relax. Also, the van market could see that the market was normalizing somewhat, and there was also market pressure on vans, which affected our overall sales. But as I mentioned, with a very, very good structure, we are kind of in Europe, the premium van of choice. We have a strong business in the United States. And we have a niche business in China that we think with the next VAN.EA architecture, we can grow further.

That leads me to Mercedes-Benz Mobility. For those of you who have covered financial services company, in the interest cycles, you're at the back end, you're at the front end and so on, that it is affected by interest rates, and there is a lag there. I think, a very important thing for the financial services business is, what does your new business margin look like? When you acquire new business, is it healthy? Or is it under pressure? So even if the actual results in 2024 was not one of the best years of our Mercedes-Benz Mobility division, that new acquisition profitability is looking healthy. So I think we're preparing ourselves for a cycle there, depending, of course, on how interest rates develop if inflation stays down or maybe comes down even more.

But I also want to give some kudos to the mobility team, because not only are they kind of the wing person of marketing and sales facing the customers, they're doing other enabling things. And one of those projects is charging solutions. What was a PowerPoint presentation and an idea a couple of years ago is now starting to become reality. Through participation in consortiums and through our own activities, we are now building a Mercedes-Benz charging network, high-power charging network will be fantastic for this car, that is next to me here, around the world. And I've already visited some of those both here in Europe and in the United States and kind of really feels good when you are a Mercedes driver and you hook up and it's just plug in, it's very quick and you go.

And the message for that activity is clear. Going into the future with the electric offensive that's coming, the message to these customers is, we've got your back. If you get them a car for Mercedes, you're going to get the convenience with it.

And with that, I will hand over to Harald, who will drill down on the financial numbers. Thank you.

Yes. Hello, everybody, also from my side. Very happy now to dig a bit deeper into the numbers, obviously. And I would say let's get started with cars, right? So we heard on sales before, revenue evolution, I mean, is in line with the sales, given the circumstances, Ola have been pointed out, we printed EUR 8.7 billion of EBIT on the car side and the number is slightly higher than that on the cash flow before interest and tax. How did we get there? Let's have a look at that. I mean the bridge, but before digging into the bridge, obviously, I think a word on the fourth quarter, and where did we end up on the fourth quarter, also at 8.1% is on the full year. So ahead of the 6% to 7%, which we predicted at the end of the third quarter. And that was thanks to a better volume, definitely a strong mix in the fourth quarter and also more cost efficiencies, which we could pull already in the fourth quarter, which I think is encouraging if we think about, I mean, 2025.

But back to the full year and the full year bridge, obviously. So what happened in 2024? Well, very obvious on the chart, the bucket volume structure and net pricing is negative. Inside, I mean, you have net pricing being negative. You have the lower volume. You have a bit of a worse mix in 2024. And we also stepped up the efforts to enhance product content, so what we call life cycle measures, which had a headwind for 2024.

As well at the same time, as we guided for, the used car business came in significantly lower than 2023 and we also recorded towards the tail end residual value adjustments in the bucket of volume structure net pricing here, as you can see.

On the FX side, we see chiefly the impact of the Turkish lira. What happened? However, on the industrial performance side. And I think if you look at that, that also is encouraging if we think about 2025. Basically, it's EUR 1 billion of an improvement. If you bear in mind that within that, we had to swallow headwinds from onetime supplier cost, I mean, chiefly the capacity adjustments we have been talking about since quite a while. So you can see that the underlying improvement is even higher than the EUR 1 billion in 2024 coming from manufacturing, coming from material cost efficiencies as well as raw material tailwinds, which we could cash in.

And talking about efficiencies, I would say also you could see efficiency at work in the R&D markers, right? So really, I mean, trying to work hard on the products, but also on the efficiency of the engineering organization, that's what you see basically here in the bridge.

Leaves me with the other bucket. What happened I mean, over there, lower BBAC at equity result, including the China dealer support we have been talking about, I mean, in the third and the fourth quarter, some lower valuations, valuation adjustments, impairment, which sit inside and the absence of prior year positive impacts, which favored 2023, which will not repeat in 2024.

A word on the adjustments. The diesel ones, I think, are well known from the first quarter already. The new one is EUR 350 million adjustment on top on ACC and that is related to the adjustment in terms of the adjusted industrial ramp-up side at ACC, which factored in at EUR 350 million outside the underlying in the reported on the right-hand side of the chart.

How did we translate that into cash? So at a rate of 1 or even at a rate of 1, let's say, EUR 9 billion. How did we get there? I would say, overall, working capital, I mean, pretty well managed inventory down, so definitely a tailwind here on the cash side, on the inventory. Trade payables were also down, offsetting that. I mean, more than offsetting that, you see that on the numbers, I mean, on the chart. Net investments running ahead of PPE now, but obviously in support of the product portfolio, firework we are preparing.

And also here, on the others, I mean, the usual one, the reversal of the at-equity and the divi for BBAC. And obviously, you see the non-cash elements from valuation impairments as well as the dealer provisions, which have been recorded but not cashed out yet in quarter 4.

So what else? Let's move to the indicators on change on cars. I think, these KPIs, we are looking at on a regular basis to track whether we are in online with the strategy execution, chad yourself, please, let's say, despite the challenges we could see in 2024, the ASP is up by almost 40% between 2019 and 2024. We ended in the fourth quarter, the ASP at EUR 72,000, which I think is a good number.

Look at the workforce reduction, 11%, 15,000 people. They are only -- they are of 10,000 white collar, which we reduced since 2019. And that is obviously a key supporter to the fixed cost achievement of 19% compared to 2019. And I would like to emphasize this as net of inflation. So if you bear in mind the inflation numbers in Europe and in the world, I think that's a quite sizable number.

On the investment side, you also see the discipline at work. All-in-all, 8% down compared to 2019 with a strong emphasis on the R&D side to support the product portfolio development, but a very stringent and disciplined approach on the CapEx and the PPE side. But we'll talk about that a bit more in depth later when we come to the CMD part of the session.

Now look at the Vans, Ola commented on the sales side already. I would like to emphasize, however, I mean, look on the revenue side, which suffered less. I mean, how was that possible mix at work, disciplined pricing, but mix -- favorable mix at work, and that is also a key reason why you see very solid print on EBIT and cash flow for the Van division in 2024.

Let's go to the bridge here as well. So how did we move throughout the year, ending at a very strong 14.6% return on sales. The volume structure pricing bucket is slightly negative. So the volume loss has been quite nicely compensated by a better mix in 2024, thanks to V-Class and other portfolio evolution. As you know, we stepped out also on the metrics in the U.S. and the pricing was actually pretty stable in 2024.

Looking on the industrial performance. So this is slightly negative, some product-related costs and inflation headwinds which we suffered here. And on the others, that is related to model change over at FBAC. I would leave that here for the Vans and jump to -- from the EBIT side and jump to the cash side. Strong translation of the EBIT into cash at a rate of 1, working capital actually balanced, well managed. And the investments running ahead of depreciation, not a surprise is we invest into the ramp-up of the Van platform on the EV as well on the ICE side.

Looking at the indicators of change on Vans. Well, also a pretty decent ASP step-up by 40%. Active workforce reduction. Also it worked 10% down. Fixed costs also 19% down, again, net of inflation. And on the investment side, obviously, up in support of an VAN.EA. So I would say strategy execution, if you judge it from the numbers, well on track on the Van side.

Looking at the mobility, new business, slightly down in line with the market evolution. Tough competition in China here, a bit of FX effect on the portfolio side, but roughly same order of magnitude. But EBIT impacted, as Ola pointed out already before, what is the reason? If we look into the bridge, it's pretty obvious here that the interest margin is a function of the past interest rate developments, I mean, suffered. That is the majority of the impact you see here on the slide, a bit of resilience also impacting here on the fleet side.

And then, we had impact on the cost of credit risk deterioration in the H1, chiefly in the -- coming from the U.S. which stabilized, I mean, in the second half of the year. What else to say. You also here, you see efficiencies at work, I mean, to compensate, to mitigate the impact from the margin side. And also we stepped up the effort on the charging infrastructure, which impacted, I mean, the number by roughly, I mean, 1% return on sales in 2024. So without it would have been a bit closer to 10.

Now looking at the group side. We talked to vans and cars and mobility. So I would just say the recon pretty balanced. So central function has been basically outweighed by positive contribution from the Daimler Truck side. With that, I mean, we are at a -- including the adjustments I talked about before, where the group EBIT reported at EUR 13.6 billion. That translates after an effective tax rate of 26% into a net income of EUR 10 billion, EUR 10.4 billion to be precise. And you can see the EPS of EUR 10, which obviously has been favored supported by the accretion effect from the share buyback.

So looking on the cash evolution in 2024, at the group level, again, business side, we explained, leaves me with the income tax, EUR 3.9 billion, obviously down in line with the underlying results, interest rate, I mean, is positive. And then in the others, you have the divi contribution from trucks out the year. And yes, I think in the circumstances of where we had been in 2024, EUR 9.2 billion is a solid number in terms of free cash flow.

On the NIL side, while you see the cash flow at work was EUR 9 billion. As explained before, you see the shareholder returns, EUR 5.5 billion of divi. We completed both programs of the share buyback, the 4 plus 3 programs, EUR 7 billion, and that means EUR 10 billion has been returned to shareholders to you in 2024. We also got some divi and capital return from mobility that makes a closing net cash position of EUR 31 billion compared to an opening of EUR 31 billion, I would say this capital allocation framework was pretty much at work. Wouldn't you agree with me?

So let's come to the outlook. So the assumption chart, I spare you that. However, I would like to emphasize in one point, the outlook is based on the current today's regulatory framework. What does it mean? Any additional tariffs over and above, which do exist today are not included, I mean, in this guidance. However, I'd like to give you a bit of a sensitivity if the tariffs for exports on the EU into the U.S. would step up from the current 2.5%, say, to 10% the -- what would be the impact on a RoS basis on the margin for cars, I would say, up to 100 basis points in terms of RoS impact coming from that, however, before any mitigation.

Mitigation, when does it come? How many vehicles do you have in country? How do you react to it? That's why it's just actually difficult to give any number on that one, and that's why we guide before any incremental impact, which could be possible in this respect.

A word on the measures which have been taken in China for the imports from the U.S. to China, which impacts obviously vehicles with engine size bigger than 2.5 liters displacement. So that is a very limited impact. The reason is we already have quite a lot of vehicles in country. Therefore, the base to which applies is more limited.

So now, let's dig a bit into the division guidance for the cars. Where do we see the sales evolution in 2025? We take a prudent and a cautious view here, I would say. We look at the various markets, we look in particular, I mean, at China. We see a very competitive environment continuing in China in 2025, and that's why we assume some further impact. Whereas in Europe, we see rather a stable sales situation for 2025. Overall, in the U.S., we see a very solid underlying customer demand momentum, maybe in terms of the group sales, however the number might be slightly lower in '25 than in 2024. That means, all in all, I mean, we see the sales for 2025 at slightly lower than 2024.

What does it mean for the margin side? Sorry, first on the -- first jumped over the xEV share, so we expect that to step up, as Ola pointed out before, very strong plug-in portfolio at work where we see good momentum. Obviously, this beautiful vehicle will come to market, but the impact in 2025 and taking the share higher is still, I mean, more remote. That is something you will rather see then in 2026 moving forward.

Now coming to the margin. On cars, so we expect, I mean, the margin on cars to be between 6% and 8%, return on sales adjusted again before the tariffs I explained before. How do we get there from the 8%, the 8.1% in 2024? The volume is slightly lower. As I just explained to it before, we see the mix slightly favorable with all of the beautiful products which came and will come to market. We see the pricing stable. That is our target. This is our ambition that we hold and defend and stay disciplined, I mean on the pricing side.

Now the 1 billion question, CO2 in Europe. I would say that 1 billion question turns out to be a low 3-digit number for 2025. So I think all of the concerns you had, at least I think for 2025, we can count me down on that one. And so then actually, what is really changing the needle as everything I said before, more or less is a wash. So I mean you're left with a lower contribution, given the volume I mentioned on the -- from the BBAC side, the contribution from BBAC in 2025 is expected to be lower.

We do anticipate some FX headwinds for 2025, and what is in our hands to mitigate that, to stabilize and in the margin, performance, performance, performance. And that means that we take a hard approach on material, on production, on fixed cost to mitigate the impact, I mean, I said before.

And with this, all-in-all, if you make the math, I think, you come from an 8% to a bucket of 6% to 8% for 2025. What do we expect for the first quarter? Maybe a word on this at this stage. So we see the volume for the first quarter for cars at about the level of quarter 1, 2024 and we see the results, the margin for the first quarter also in -- within the guidance bracket, i.e., the 6% to 8% for the first quarter.

What else on the KPIs here. The CapEx side, we see a significant increase. That is to prepare and support the product launches, I mean, to come '25, but then '26, up to 2027, whereas the R&D side is expected, I mean, to be flattish. And with all of that, I mean, we believe we can basically convert the margin into cash at the rate of 0.9 to 1 -- to 1.1.

On the Van side, we see the market being intense. So with a lot of, I mean, competition here, we want to stay disciplined, i.e., value over volume. That's why we also see the volume slightly down here on the Van side. We'll step up the xEV share with a Sprinter, the new eSprinter. And what does it mean for the margin? So we see that at the 10% to 12% for 2025. How do we get there? Lower volume, as I just said, the pricing and the mix solid, stable.

Here, the headwind from CO2 in Europe has a more meaningful impact. The number in absolute is higher on the vans for Europe than it is on the cars and therefore, obviously, on a percentage basis, given the smaller business, it has a more material impact. So probably one of the most important levers or impacts on the margin walk from 14% to 10% to 12% between '24 and 2025 is coming from the CO2 in Europe.

And at the same time, we are ramping up the effort and the prep work for the VAN.EA or the VAN architecture and the investments into our Eastern Europe Jawor facility. So with all of that before tariffs, a 10% to 12% on the Vans.

Now on the Q1, we see that in terms of the margin also in the same ballpark as the fourth quarter and R&D and PPE is expected to, I mean, to increase significantly to prepare for Van.EA and the Jawor.

Mobility. We expect the return on equity to be between 8% and 9%. What do we see here? Basically, we see some tailwinds in markets outside of China. However, pretty tough competition continuing in China. So that's, I mean, basically how that balances out, then we continue the investments. We step up the investments into charging in 2025, whereas, I mean, the cost of credit risk are expected to be rather flattish. That brings you to 8% to 9% all together and also the Q1 is expected to be in that corridor.

And leaves me with the group guidance. So on the assumptions of the division, obviously, no surprise that the group revenue is expected to be slightly below in 2025. The group EBIT as well as -- I mean, the cash flow is expected to be significantly below on assumptions I just outlined on the division side before, if you then factor on the cash flow in a matter of fact that the cash conversion on the van side is lower due to the ramp-up of the investments on the van side. I think you explained the guidance for the cash flow at the group level.

And I think with this, I hand back to Christina and Willem. Thank you.

Thank you very much, Ola. Thank you very much, Harald, for providing us with a review on the 2024 numbers. We will now shift from 2024 to the future of Mercedes-Benz. Willem?

Yes. So we are now shifting to the Capital Market Day part of the day and this road map to the future, for the future and how we're going to master the transformation of Mercedes-Benz -- at Mercedes-Benz where we presented again by Ola and Harald as well as our CTO, Markus Schafer. Well, three of them will give you deep insights into our upcoming product firework into technological innovations made by Mercedes-Benz as well as how we strengthen the resilience of our company.

And we start with our CEO with Ola after a short video.

[Presentation]

Thank you, Christina. Thank you, Willem. Now let's shift our focus looking into the future. What is our game plan? What have we been working on? What's the progress that we have made and what can you expect for Mercedes-Benz in these next coming years? That's what I would like to talk to you today about together with Herald and Markus.

And it comes down really to four core messages. These are the takeaways from today. Number one, we have this unique and iconic brand. It's a certain recipe that makes the Mercedes-Benz a Mercedes-Benz. And in this next phase of our transformation and evolution into the future, what we have done is we have taken this recipe and we have distilled it one more time to make Mercedes even more Mercedes. That's the segue in to the second point.

We are embarking on the biggest tech innovation and product launch offensive in the company's history. So it will be a very busy 3 years coming. With a refined recipe turning into product, and turning into technology, class leading technology.

Even if we love cars, and it's a lot about cars. We spend a lot of time here in Sindelfingen and we look at styling and we test drive and so on. Everybody in this room and especially the audience that is in this room knows, you cannot have innovation strength if you don't have financial strength.

So financial strength equals innovation strength. Financial strength equals return of capital to shareholders. That is why we will leave no stone unturned in the challenging macro and market environment that we're in to look at our complete business model and every single cost category investment category to make sure that we have the most efficient operations that we can have.

Not the easy way out. Just cut your R&D spend and your CapEx spend, you can very, very, very quickly improve your short-term financial performance if you would do that. But Mercedes-Benz has always been a long-term thinking company. So we're not going to eat our seed, we're going to use our seed to create future exciting products and returns to our investors. But at the same time, we will double down on efficiency. That is the third message I want to -- I want you to take with you today.

And last but not least, this is a Capital Markets Day. We're talking to our investors. Many of our investors are here. We want to make sure that you have a good return on investment. Harald showed us the numbers from 2024, a healthy dividend, also a good share buyback program. We want to continue our capital allocation policy to be investor friendly. I could almost stop the day there and say that's it. Let's now go out on the test track and drive some cars. And I know for those of you who are in the room, you're ready for that, and you will get to that. But let's double click and go in a little bit more deep, but those are the four messages.

Let's start with the recipe. If you work at Mercedes-Benz or you have been associated with Mercedes-Benz for a longer period of time, that recipe is like in your genes. If you work in R&D, you know what a Mercedes is. But sometimes it is important to stand back and look at what are the ingredients is and how do you need to maybe refine those ingredients is. So you either meet or exceed the expectations of your customers. It's about them, what do they get? What do they buy when they buy the 3-pointed star? And how are we going to make that experience even better in that technological substance even deeper?

Yes, if you would wake me at 3:00 at night and say, what this is, yes, of course, it's class-leading safety. It's the way it writes and drives that comfort. Even if you're blindfolded, you know you're in a Mercedes. Of course, the quality, the longevity of the product, it's something that you buy to keep. I think, residual values on our classic cars are amongst the highest in the world. So we have many of those icons.

When we talk about intelligence, it's not tech for the sake of tech, it's tech for the sake of you. We invented the assistance systems to make you more safe. Now it's about safety and convenience. We don't put a big screen into the cars just because it's a flashy screen. We're thinking about what's in it for you? What can you do with that? Is it entertainment? Is it actually working in the car? What is it?

And timeless, timeless elegance, a design carrying Mercedes-Benz into the future. Design doesn't stand still. There is a site gist to modern luxury. You have to keep on reinventing it. And we will show you that today, for those of you who are part of the program, kind of the final event today will be a sneak preview of upcoming models in '26 and '27.

I mentioned safety. Some people might not think about this when they purchase the car, because they purchase the car with the eyes, oh, it looks beautiful. I want it. Absolutely latest when you start a family is, when you look at this thing here. It's not about a box-ticking exercise. Yes, our engineers are proud that if they have the highest score of anybody in the class in 2024, in this case in Euro NCAP. Fine, you take that little gold star put it on your exam paper and you feel good about yourself. But it's not the thing.

In R&D at Mercedes, we say one star is enough, the Mercedes-Benz star. 75 plus years of refining this part of the recipe, having had over decades, hundreds of accidents forensically investigated and translating it into engineering solutions that keeps you safe. This is a core value of the Mercedes-Benz brand. And I think one of the main reasons you should look at when you buy a car, that is Mercedes-Benz and that recipe continues.

I talked about the ride and drive. Yes, here is a preproduction curve, the new CLA and it's -- it's like a calling card for a whole host of vehicles that are coming here in the next few years. The very first time I stepped into this car, and Markus had driven it, the prototype before he goes like, I don't want to promise too much, but you're going to be excited and all that than the other.

My very first feeling was not thinking about the class-leading electric drivetrain or all the ADAS stuff and all of that. It was not my first thought. My very first thought was, I'm not sitting in a CLA. I'm actually sitting in a car that is one class up, a C-Class. The ride and drive the solidity of it, the performance of it felt like a more adult car. That feeling of comfort, of safety, performance, if you want to take it to the track, maybe you can take a Mercedes to a track, I wouldn't advise you to do that. I would go to our friends in Affalterbach at AMG. That's where you get race technology for the road.

But it is this feeling of effortlessness. Inside the car, anybody who has the privilege of sitting in the back of an S-Class or even better, a Maybach S-Class, from time to time, I do this. At the moment, my company car is an EQS SUV Maybach. It is so insanely quiet and serene that when I ride in the morning with my driver, I'm even tempted to start -- strike up a conversation with him. But I don't want to waste the time, so I use it to do my e-mails and inform myself about what's going on.

Here is an example where we have upped the game in the EQS. Yes, a very aerodynamically shaped car, class-leading aerodynamics, hence, the best range in its class. But with the executive seating now in the EQS, you get almost the S-Class combustion feeling.

On the digital side, MB.OS, and I don't want to steal your thunder, Markus, I'll leave most of this to you. And I just want to say one thing. It's about you. It's not about the tech, it's about what the tech can do for you. I'll leave it at that.

And then, with regard to styling, and we'll come back to this several times today, we are readying the next generation of styling. For those of you who will see the presentation, you will see it. But there needs to be a level of timelessness to it. So that when you look back 20, 30, 40 years later, and you see it, of course, cars will look different in the future, but you look back and you go, the proportions are right. The lines are right. It just feels right. Even if you know nothing about cars, subliminally, it needs to feel right.

So that's the recipe. But the recipe is not just the product. I'm the first to admit that we are a product-centric company. Quite often you talk to consultants, you need to be customer-centric. Yes, you are customer-centric, but we come in our DNA from the product side and then to the customer. But we are working very intensively on the customer side as well.

Today, we're in a building that we call the Center of Excellence. If you know the name, Raimund Dornburg, sorry Raimund for outing you know, in front of a very large audience here in the world. If you know this name, within the Mercedes-Benz family, you know you've made it. Raimund is the guy who runs this place. This is the place for the very best Mercedes customers. They come here and they spend hours here looking at options from our manufacturer. And for those of you who saw the presentation of AMG yesterday, you saw that we're kind of increasing the level of manufacture content in our vehicles on the upper end.

We are making that also strategic imperative. In a building only 5 minutes away from here, we have more or less cleared the whole part of the factory and turned it into a manufacture production. Yes, it's craftsmanship. Yes, it's expensive. But yes, if you buy a tailor-made suit on Savile Row, you expect to pay maybe a little bit more than if you buy a Prêt-à-Porter in one of the department stores. And that is what manufacturer is all about. So we will continue to build the individualization for Mercedes-Benz customers, not just here, but also make it more available and more convenient for customers around the world to tap into it.

Speaking of customers, we have the product. We have the individualization of product. What about the other touch points? Maybe I should have shown a picture of our service network around the world. There is no premium luxury brand that has a broader and stronger service network than Mercedes-Benz around the world. It's actually one of our assets. And it's also an asset in the intense competition with new entrants into the market. And yes, the service level of spare parts is extremely high at Mercedes-Benz. Usually, you don't have to wait, if you have to wait, I'm sure the customer says, "Hello, I'm waiting, and we will respond quickly to it".

So all of those mechanisms in the background, the ingredients is for a successful automotive company. They are relevant, and we're working on them. But we're also trying to improve every single touch point vis-a-vis the customer to make the experience for the customer even better. On the left-hand side, you see an example of an almost insane Mercedes showroom invested by one of our private investors that says, I believe in this brand. I've seen what you have in the product portfolio. I'm going to put $100 million plus into a facility that is almost like a like a place for pilgrimage for Mercedes fans.

The digital side a little anecdote from the past. Some years ago, my dad or my parents who live in Sweden, said, I want to buy a Mercedes. Yes, they drive Mercedes. And I said, "Let me help you configure the car. In this case, it was an E-Class, and I sat down with my dad to configure the car. I pretended with him as if I had everything under control, but it felt a little bit like I needed a PhD degree to understand all the combinations that I could configure.

Good thought, execution may be not perfect. The marketing and sales team have spent a tremendous amount of time to make the digital journey, not only seamless into the physical journey, but much more convenient, much more easier to access. And yes, you can even buy a car online. Most people don't do that, because it's a very big purchase, but you can do it if you want to.

So the digital side of it is also important, we will continue to invest in the digital customer experience. Last but not least on this slide, if you see this artifact, it's even better than knowing Raimund Dornburg. If you get it, in this Silver Arrows program that we're launching this year, starting here in Germany and then going into different markets. If you have this artifact, you are actually recognized as one of the best customers in the Mercedes-Benz family.

As the risk, you will have to spend quite a bit of money to get one, but it's not about the money, it's about being part of a family. So on the very top end of our portfolio, we want to create a unique family for those customers and offer them experiences above and beyond the normal stuff, a little bit money can't buy type of things as well and access to information and other things that you just don't get as a normal person.

I talked about this launch program. Okay. So what is it? What is coming? Where are the cars? Yes, we have a very good product portfolio now. I think, we have more than 40 different models. Many of them are new. They are very successful. The new E-Class is really cleaning house, Markus. But -- now it's that we're going to reskin the whole portfolio here in the next 3 years and into 2028 as well. But the period starting middle of this year to end of '27 is going to be particularly intense.

I mentioned styling. Styling is, as I said, kind of a site guys thing, modern luxury doesn't stand still. You reinvent luxury all the time. If you go into an old apartment in Paris, a beautiful old apartment that was built 100 years ago, it's beautiful. But if you would build it today, it would not look the same. You have to evolve this and you have to look into the future.

And starting next year in 2026, we're going to kind of enter the next era of the design language. What has guided us here? When I was a kid, I grew up in Malmö, in the south of Sweden. Most families back then, let's say, in the '70s, maybe early '80s, they drove Volvo or Saab. If there was somebody in the neighborhood that had a Mercedes, and maybe that was a little bit more unusual there than if I had grown up here in Germany, I guarantee you that every single kid on the street knew who that was.

And the symbol of it, I pulled out a grill from the past with this honeycomb pattern. It's like even if you see it in your indirect site, you go that's a Mercedes. I talked about distilling the recipe. The styling is also part of the recipe, the technical functionality, the packaging, how you sit and all those other things, of course, no compromises there, but it's part of the recipe. So it's almost like we have done a sole search and go back into what is the Mercedes soul design-wise, but carry that into the future. And that will start in 2026 and be the design gradually for all models or Mercedes-Benz, regardless if they are BEVs or ICE vehicles.

So let's talk about the vehicles. Of course, I cannot in this public domain show what's behind the curtain here on every one of them. But look at this picture. We sort our world when we think about how our portfolio is built up, top end, the AMGs, the Maybachs, the GEs, the S-Class, the GLS, that kind of family, core where we have the E-Class and the C-Class and the GLCs and the GLE, and entry the new MMA market architecture, where the CLA is, where the GLA is, GLB is and so on.

I don't know if I've even counted, but it's probably more than 25 items on this list. For the investor, you can see that most of those are actually sitting on the top end. Some of them are, of course, derivatives of core models that AMG does. That's what they do. Some of them are unique AMG models. In the core side, and I think this is crucially important, especially for the BEV take rate that we expect to start growing once we have broadened our portfolio launch this family, the CLA itself today is actually a niche vehicle in our sales.

What about -- why all the fuss? It's because it starts -- it's kind of the first domino that falls in a whole host of cars. But you can also see here, and this is something that we told you more than a year ago decided at the end of 2023 as we could see the transformation is going to take longer. It's going to be more heterogeneous. We had already made the decision to make sure that we have the ICE portfolio updated for the latest emissions and all the other refinements that we're doing to that.

So you see quite a balanced picture here between BEV and ICE. Great news for the customer, all of the above, everything is available well into the 30s for Mercedes-Benz. A challenge for the financial controller for the engineer. How do you create the modular strategies you can actually afford this, I will let Markus and Harald do the heavy lifting on explaining how that's possible. But I think we have also made that recipe work for us for the next few years.

Okay. The CLA, the first kind of showing of this car was 2 years ago, or a little less than 2 years ago at the International Auto Show in Munich. We made some promises. We show a vision car. It's going to have good range and class-leading efficiency and you're going to charge almost as fast as you can fuel. It will have built-in supercomputers. Every single Mercedes from this point forward is going to have supercomputers, going to have all the sensor set. So you have the maximum, let's say, a compute and hardware genes already in this car and every other car for any ADAS level that your software people are able to dream up. I mean, it's the whole package.

Are we going to keep the promise that we made in Munich, 2 years ago? The answer is yes, and then some. Now the world premiere of this car is about 4 weeks from now at another event. So I'm going to stop there. Otherwise, we don't have to have that event. And then, we want to launch it by the summer. And you should not take out victory before you finish the game. So pressure on you, Markus and the team to now, I don't know, climb the Hillary Step and get up on to the summit and make sure that we finish the work, so we enter with a high-quality Mercedes product.

But it's in the making -- but more important is actually this car. So I would suggest that you show up in Munich again this year, because this car is just behind that car. This is the first car on the so-called MB.EA architecture. It is the old new electric GLC. Yes, that will be the main show, spoiler alert, come people, you can't stop me. I'm live on stage. It will be in Munich, and we will show you what that MB.EA family is going to look like.

And needless to say, if this car has pretty good technical stats, that car is also going to have pretty good technical stats. And here's where the modular strategy also comes into play that what we really have done is we have developed two platforms. One is a powertrain platform and the other one is an operating system platform. And when you have those platforms, I'm going to call them technology platforms, you can then apply them to different vehicles, and they go across many vehicles.

Also next year, another important car, GLE or car family, GLE, GLS, super popular, quite margin strong. Maybe you will say something about that, Harald, that gets a complete remake next year as well, including an even longer wheel-based version for the Chinese market. And it would be a bit strange, right, if you launch all this space age tech in the BEVs, but you would leave kind of the eyes doing their thing. You can't do that. So you take the tech from this and you put it into this. So we will proliferate the tech in terms of ADAS, in terms of infotainment and all those different things that are relevant to the customers from BEV to ICE.

The S-Class. The S-Class, the pinnacle of automotive engineering, our flagship car, gets a facelift next year. The normal facelift is, you update the tech a bit, you do something to the optics, ready to go. This facelift is different. Spending-wise, and of course, we don't have targets to spend more money. But spending wise, we're spending considerably more on the facelift of the next S-Class than we would normally do, because it would be a little bit odd, right? If you're calling card entry product into the portfolio in some domains, technologically it would be hierarchically above the S-Class. That's not how it works at Mercedes.

So the S-Class gets the full Monty. And we'll also get this tech and also get quite a comprehensive design update along the lines of the very successful new E-Class that we launched only a year ago to create some kind of a coherence within that family.

Speaking about the E-Class. We have an E-Class, we have an EQE. They're both good. They're different. The new combustion E-Class is in most markets, class leading. China really hit the spot. Last time I was in China, I talked to our Head of Digital Development there. I was driving some of the ADAS functions. I was looking at automated parking. And I was looking at the latest version of our integrated AMAP navigation. I said, "wow", that's really, really, really good. I would kind of like to have that in Germany. Obviously, you know we have different providers around the world.

One of the reasons why we teamed up with Google now for this generation and so on. And he said, "Yes, he's getting kind of calls from some of the Chinese attackers that are now looking at the navigation system in the new E-Class and going what the hell have those guys done". So I think, we also need to blow a hole a little bit in the myth that you have to be a start-up company to understand what digital experience is about. No, you don't. You can also be an incumbent and it's absolutely our ambition to be at the forefront of digital experience in any market, and the toughest market is the Chinese market.

Now we have that E-Class. We have the EQE. But in 2027, we're going to launch the new electric E-Class. And it will be in every dimension as good or better than the combustion E-Class. No compromise, as good or better than the combustion E-Class. No compromise on size, seating, anything like that. Of course, again, tech Galore in terms of e-drive train and all that, you can take that more or less for granted, but it will represent something totally different for us in that segment in about 2 years from now. And yes, you will see the sign model of that later this afternoon if you're part of the group that are -- that is here in the room.

Tech, I'm not going to give your presentation, Markus. MB.OS, we're in the driver's seat, we're the architect, Markus will do the rest. ADAS, we invented it, I don't know, 30 years ago, we want to stay on the forefront -- for those of you who are lucky drivers of an S-Class or an EQS in Germany, actually taking it to 95 kilometers an hour, even though you can drive, in some places, 200 kilometers an hour on the German Autobahn, but now this is really starting to work. You put yourself in the right lane and you literally have time for yourself and you tried a long at 95 kilometers an hour, which is decent, while maybe you're doing something else. Maybe want to make a call and concentrate on the call. Maybe you want to check your text messages, whatever it is, what you want to do. It's really starting to come together.

And yes, but Markus will dive into it. We will launch this car in China with Level 2++. And yes, we were the first company, again, that got a Level 4 approval testing in China.

Sustainability and decarbonization. Even though the political landscape is shifting and changing, the road to decarbonization is something that we must do as a world, as an industry and as a company. We define that through our ambition that by the end of the next decade, we want to be net carbon neutral. And yes, of course, it's about the electric car, but it's not just about the product. It's about the supply chain, our own operations, obviously, the product, but also the product in use. In every one of those verticals, we are making progress and will diligently continue to drive towards that goal, even though the EV take rate, obviously, is not a straight line. It will just happen automatically. It maybe takes a little bit longer, but we're on that journey.

So it's not a surprise that our goal is to comply with the CO2 regulations also here in Europe. Harald, you mentioned a little bit potential burden in 2025. So if you dissect the numbers of Mercedes-Benz cars, clearly, we met the target in 2024. That was a foregone conclusion. In 2025, Harold suggested it could be a challenge. Why is it a challenge? Because we have a hugely successful Van division, and if you register a van as a passenger car in Europe, it counts against your passenger car fleet.

If you have seen a van, it's a very big boxy thing. Usually, more people ride in it. So per person, probably the CO2 footprint is lower. But in the calculation per car, it's higher. That is a segment that is not yet on the level of electrification compared to passenger cars. With the VAN.EA starting next year, we're going to try to make a dent there. But that alone, I would say, burdens our average on the passenger cars, but maybe up to 10 grams. It depends on how many we sell.

Without that, solving that math problem, given by the teacher would be a hell of a lot easier, and maybe the regulator did not think in those fine -- in that fine granularity when the regulation was written. So be it. I think, the best way to negotiate, let's say, the coming period is to do this in a thoughtful way, through our Smart joint venture together with Geely, actually, we were already in a pool, yes. They own Volvo and Polestar. That pool is now Volvo Polestar and Smart, we're in it. So we can take advantage of that at a lower cost than if penalties would have to be paid. I think, that's a rational economical decision.

But I want to make clear what our intent is once we have launched all these products which happens here through the next 24, 36 months, we want to run up our EV share and naturally be compliant. That is our goal. Again, Markus, you will talk about these drivetrains and we have them both NextGen, all bells and whistles, e-drivetrain, but also a completely refreshed combustion portfolio starting next year.

Flexibility. All the plants are more or less flexible already, thank goodness, we did that. That's one of the benefits from the first kind of generation, first chapter of transformation, but it's also about the product. Why should the customer expect something less in either category BEV or ICE? So guiding principle -- back to you, Markus, a guiding principle would be everything that you have learned as a customer that you've learned to appreciate. Let's make sure that we protect that appreciation in every vehicle that we put on the road from this point forward, including the BEVs.

Factories are flexible. But supply chain management is also going to be unbelievably important, because one level down or one level up in the upstream, you have to manage the percentages between the ICE drivetrains and the EV drivetrains, even if your assembly plant can build both. If you are an incumbent and established manufacturer, that is a challenge that everybody has. I think, we have laid the groundwork for this. We're pretty good at it. But I also want to send a message here. I said before that on the van side, we made an adjustment yesterday to our production network through selling the Argentinian plant, better fixed cost utilization of that plant going forward. If we need to take steps to adjust the suit to fit the body, we'll take steps to make the suit fit the body. Harald, I think you will talk about that as well.

And next level performance, it's kind of your chapter, Harald. So I'll try to go quickly through this. I just want to say a few things. Sometimes I read what is written and you go like, have they actually understood what's going on. Let me say something about direct sales, and I will use it with one example.

A few weeks ago, I visited the most significant market in Europe, Sweden, Denmark. It was a joke. But I was in my home country, and it is an important market for us. We're market leaders in Sweden and Denmark, by the way, in the segment. And I was actually there to renew my passport, but I said if I'm there anyway, let's meet the team and see what's going on.

And on the day, there was a dealer board meeting. So I met with the dealer board to discuss with them. Sweden, as some of you know, was actually the very first market that we turned toward direct sales, back in 2018. The first little baby steps, we didn't really know. You have seen -- kind of you've seen the PowerPoint slide, does it really work? And I'm the first to admit that even though I left marketing and sales at the time, Britta who took over from me when she tried to convince some of the Swedish dealers to jump into direct sales. And it's not in the nature of an entrepreneur to kind of give up some entrepreneurial freedom. The first response was not positive. And she called me and said, "Oh, you need to go to Sweden, talk sense into these guys. So I went to Sweden, tried to talk sense into them. And I through 10 arguments at them, why would you do it? They threw five arguments at me, why we should not do it, and it ended with one of those -- maybe that's on Vogue now, negotiation strategies where I said, whether you like it or not, we're going to do this.

And we did -- some of these dealers, I know personally for many, many years. And I sat there in front of them. Of course, if I come, they're not going to be impolite, but even Swedes, that are usually nice people, between Swedes, we can talk a hard talk as well. Every single one of those dealers in the room said, "You were right, we were wrong". This was a good step. Why? Sell the product, don't sell the price. That's the number one thing.

Number two, their risk profile changes. And if you do this right as an agent dealer, you have a different risk adjusted business model, but I don't need to explain to a bunch of investors, analysts, that risk-adjusted return on capital is the whole name of the game, right? And they have ended up in a healthy situation. Customer satisfaction has gone up. In a recent study last year, where you measure, pretty much every single KPI, Mercedes scored the highest.

Allocation of product is done in a more efficient way, because you centrally control your market stock, maybe easier in a smaller, geographically big, but smaller market like Mercedes-Benz. So it's coming together. You got to have IT systems that work. It's not easy to do it. And in the beginning, you struggle. And you cannot have two models going at the same time in the market. Forget that you don't drive on the right-hand side of the road, on the left-hand side of the road at the same time. It's just not going to work.

So should you embark on this endeavor, you got to go all in. So in the markets where this is possible, mainly Europe and overseas, we're going all in, and we're going to continue doing it. China, could spend the whole day on China. How do we win in China, the most intense market in the world, with 100-plus companies buying for the new energy vehicle market. Subdued consumer sentiment and not the same dynamism in the economy that we had up until COVID.

Here, it's about the fundamentals, make cars that the Chinese customers want. Make sure that your tech is on the highest level of what they expect. Make sure that the packaging is right, make sure that the Mercedes-ness is right. So you differentiate yourself from the 100 new ones that are also many of them pretty good, but look kind of the same.

And then, the other thing you have to do is you have to lower your cost structure. So we must, over these next few years, localize even more in China, do more in China, for China, use China more as an R&D base, tap into the talent pool, there tap into the innovation pool there. And all of you know, they are strong. It's a formidable competitive landscape. You got to be. China has to be a home away from home, not something where you have a magic bullet where you can just say, do this and everything solves itself. This is going to be a very hard competition going forward, make no mistake.

But we're gearing up for it. We're not like retreating and going on what's going on here. We're gearing up for it. And we're going to fight for our position in China. Don't do crazy things like start a fire, sale to just protect some sales volume in some segment, that we won't do, but we will spend a tremendous amount of our time and resources to, on the one hand, defend, but also build the China position in the next 5 years.

Cost, Harald, I'll leave it to you, but no stone unturned.

Culture. I've been in this company for 32 years now. Is the culture the same today as it was in 1993? I would argue the answer to that is, no. It has evolved significantly. There are some core traits that are the same, that maybe even come from our founding fathers. But when you question yourself and you do an inventory of yourself, we tend to spend, of course, 99.9% looking at technical inventory and talking about technical solutions or how we're going to get the cost down. But you must also take time to do an inventory of your culture and ask yourself, do you have the fighting spirit to take on those new competitors, yes or no? Or are you too complacent just because you have had decades or 100 years plus of success? And it's very easy to fall into that trap. It's very easy to fall into the big company trap, yes, but.

So the work stream that is equally important in next level performance is to do this inventory. And part of the way we're going to do this is not that I'm going to sit at home in the evening and write a manifesto and then come back to the company and tell the Board first, listen, listen, colleagues, this is what we need to do.

Even though I have ideas of how I think we need to act and what fighting spirit is all about. And I believe I have that intrinsically in me. We're also going to let champions on all levels in the company rise and provide input. So if you call this like a soft work stream in the next level performance, maybe it is, but probably it's not, because if we can change the culture, refine the culture, to become even more performance-oriented, have the battle awareness, the jungle is changing, survival of the fittest. It's not the biggest animal that survives. It is the one that is most able to adapt that survives.

And when new animals come into that jungle we have to adapt. So I think we have this insight turning 160,000 people company completely around overnight is not the way it works, but we're going to work on this as well. And if we do it well, the new refined recipe of Mercedes-Benz, the new distilled version of it will be more attractive to our customers. We will launch a host of products that we believe will also drive growth. Through discipline, we can uphold financial resilience. Much of that financial resilience goes back into the technology, clearly, but also a healthy piece of it goes to our investors.

Thank you very much, and I think I'm going to hand over to Markus to give us more detail on the technical side.

Yes. Thank you very much, Ola and welcome. And as Ola said, we are kickstarting the most exciting product push in our history. And every Mercedes in that push will be a Mercedes, offering maximum customer choice from a portfolio of electric and high-tech hybrid vehicles, and all with a perfect combination of intelligence and emotion. They will be uncompromising, highly desirable and of course, our clear target is to make them profitable.

Today, I will show you how we are pushing these boundaries and delivering results. I will tell you about the new Level 2++ automated driving features. Our radical new steer-by-wire and the fully integrated tech stack in all our cars. We can promise you a full rollout of battery electric, plug-in hybrids and high-tech combustion engine models, each one powered, Ola, you said it, by a supercomputer. That includes the upcoming GLC, and it all starts very soon with the world beating new CLA.

Our new models will do much more than providing transport from A to B. They will be an intelligent part of your life. We are already delivering benchmark intelligence with a new E-Class, with a precursor to our Mercedes-Benz operating system, MB.OS. And this is just the start, and we are making rapid progress. Our developments offer huge potential for customer benefit and the transformation through AI will be a key enabler. With MB.OS and AI, we aim to create the most intelligent and emotional cars we have ever made. And that's because they change our relationship with the customer, giving us direct contact with the customer and allowing us to deliver direct benefits, but also creating synergies, efficiencies and new business.

So let me break that down into three categories of AI. Start with the first one. For customer conversational AI, this brings new customer experiences. We are already doing this with ChatGPT, which has greatly enhanced the experience of our MBUX Voice Assistant for general knowledge questions. It offers natural conversations that are more like chatting to a friend.

With behavioral AI, we train our systems based on human patterns to create more natural user experience. This includes personalized and proactive suggestions, and it also elevates the driving behavior of our Level 2++ system known as point-to-point assisted driving.

The third category is Agentic AI. We're using multiple agents to develop our hyper personalized user experience. So that's kind of the end of the apps. Our new MBUX Virtual Assistant based on MB.OS is the first big step. It uses a multi-agent approach to pick the best agent to answer questions. And using the latest large language models and context awarenesses, it can answer follow-up questions in a very natural way like you would have a human conversation. And it makes it even easier for our customers to connect with their vehicle.

Finally, we are also looking intensively into VLAMs, vision language action models, which can enhance automated driving and in future, help to bring voice communication and car behavior even closer together. Our MB.OS embraces AI because it's a very own system. It brings scalable and flexible intelligence into our entire portfolio. The benefits introduced into the new E-Class are also now available in the C-Class CLE and GLC. So the new CLA, based on MMA architecture will be the first vehicle to run entirely on MB.OS, making it our first software-defined vehicle. It's the world premier. It's going to be next month with market launch this year.

So from now on, all vehicles in all segments will run on MB.OS. That includes our combustion and hybrid portfolio as well as all our electric architectures. Our MB.EA for core and top end vehicles, AMG.EA for high-performance vehicles and VAN.EA for our van portfolio. So why do we want our own operating system? Because we want to be the architects with full control over the system and direct contact to our customers.

The architecture covers all domains, infotainment, automated driving, body and control, driving and charging. And we have control of all sensors and actuators across all of them, and this enables us to offer our customers a truly superior product experience. So 2 years ago, we announced this incredible new digital experience. Now we are delivering.

Our own operating system is already up and running. It is ready to hit the road now with a new CLA. MB.OS is purpose-built and highly versatile. This allows us to work with the best partners where we need them. And we can choose the third-party content our customers want. In all markets and regions, navigation is one example. We are working with the best local partners, Google for Western markets, AMAP, for China, TMAP for Korea. And this is good for our customers and good for competition. We decide who we want as our partners. So we can offer our customers the true Mercedes-Benz user experience with the features they want and the style they love. MB.OS is data-driven and personalized, and we ensure that the highest requirements for privacy and safety are built in by design.

Our architecture is scalable to fit every segment and is designed to decouple software and hardware development. MB.OS has advanced connectivity and all the computes in the car can be updated over the air. This allows us to keep our vehicles fresh for the entire life cycle. So final testing of the CLA is delivering great results. So see yourself what customer benefits, MB.OS will bring.

[Presentation]

So as I said before, MB.OS will be a key differentiator for the AI-powered intelligent cabin. Our stunning pillar-to-pillar display offers seamless interaction and control for driver and passenger. The next-generation MBUX Superscreen offers a unique user experience with real-time 3D graphics. The smart cabin is a key element for the utmost customer experience in combination with Level 3 automated driving and beyond. With AI, we are making even more immersive and hyper-personalized fit for all passengers.

Our MBUX vertical system elevates your relationship with the car. It brings a human-like sense of empathy intelligence and memory. This means chatting to the virtual assistance is like a normal conversation and our customers get quick, easy in the up-to-date answers for the questions, from navigation information to general knowledge, and our multi-agent architecture includes generative AI models like ChatGPT and Gemini. The MBUX virtual system seamlessly selects the right agent to deliver the best experience. Meanwhile, our MBUX Surround Navigation combines route guidance and advanced assistance. It is especially helpful in busy urban environments and it is all powered by the latest high-performance chips.

MB.OS is designed for deep system integration, enabling a high level of orchestration of all domains. That means full networking and control of everything, including video, sound, light and even air conditioning. The result is a truly immersive customer experience. And as you can see, our intelligent cabin is also a highly emotional cabin.

[Presentation]

MB.OS will also transform assisted and automated driving where we already have more than 40 systems, 4-0 systems. For example, our self-initiated automatic lane change on highways, which we call Level 2+ and assistance with leading and changing highways. The launch of MB.OS also brings a new name for these advanced functions, MB.DRIVE. They are based on our sophisticated safety systems and will include further enhancements like Level 2++ capability. An example is point-to-point assisted driving, which enables mature handling of complex urban traffic.

Cooperative steering and acceleration is a unique feature of at only by Mercedes-Benz. It helps the driver navigate busy streets in the world's biggest cities. It is tailor-made for local conditions and because we work with the best local partners, we are independent also of geopolitics. We remain the global leader in Level 3, conditionally automated driving, DRIVE PILOT was the first world system internationally approved.

The latest update supports even a higher speed of up to 95 kilometers per hour in Germany. DRIVE PILOT is the fastest Level 3 system globally. Our goal is to increase speed to 130 kilometers per hour by the end of this decade. And last year, we took another big step in Level 4 highly automated driving. We became the first international carmaker to receive approval for testing in Beijing on designated roads and highways. The result will support developments for privately owned vehicles in China and worldwide.

Increased use of AI will definitely change the future of automated driving. Rule-based models are being replaced by stacks with end-to-end models, always with a focus on ask more safety and transparency. We, as the architects of MB.OS are able to plan strategically and with full access from hardware to app. We did a lot of work using in-house free and open software, but where appropriate, we also worked with specialist partners.

This modular and flexible approach is also clever and cost optimized. We are able to choose the best partners for local needs and achieve geopolitical independents. MB.OS gives us full control of the software and the stack and enabled hardware agnostic development. This allows us to protect our investment and enables continuous improvement. Most importantly, we can offer our customers an outstanding user experience. So what can you expect? It's a short video from Ola filmed on the busy streets of Shanghai.

[Presentation]

They did a great job. The car did a great shop of mastering complex situations. But intelligence does not stop there. It also helps to involve the core Mercedes-Benz values like comfort. Our experts fine-tune every chassis detail to create unique Mercedes-Benz driving character. We also use intelligent innovations to enhance it even further.

Our predictive chassis adjustment uses the potential of our fleet data and the Mercedes-Benz Intelligent Cloud. This means our systems can anticipate bumps and obstacles for an even smoother and more comfortable ride.

Switching to another chassis innovation. Today, I'm happy to announce that we will offer our customers a new technology, steer-by-wire. It will radically enhance the way you steer your Mercedes. The field offers a completely new customer experience. The new flat steering wheel is a bit like the ones in our F1 cars and the AMG ONE. It provides a better view of the pillar-to-pillar display letting it really shine.

In future, we will improve the automatic driving experience while streaming our favorite show or making a video call. Steer-by-wire enhances agility in the city and increases the fun factor at higher speeds. You can really feel the improvements in lateral agility and handling position. The system interacts perfectly with our rear axle steering, which also makes parking maneuvering easier than ever before, plus steer-by-wire offers unlimited possibilities to the mutualize the driving experience. And there's even the option to connect it to apps for in-car gaming. In addition, it reduces complexity and hardware variants and cost.

So thanks to the intelligence of MB.OS, our future models will be the smartest in town. But because they are Mercedes-Benz, they will also be the most emotional above all in their looks. And that comes from our enhanced design strategy. It's sleek, elegant lines bring more style substance and presence. Exterior highlights includes body and aerodynamic proportions, stunning front end with illuminated grill and new headlight design, a powerful presence that feels like a class above, and the signature we are designed with distinctive taillights.

On the inside, we are bringing many high-end features as standard. They include luxury sustainable materials and, of course, the best displays in the segment. When we talk about emotions, we also mean no compromises in comfort, design and driving pleasure. And that is why there's no one size fits all at Mercedes. Our lineup is uncompromising from entry to top end. We will not sacrifice key values in the name of drivetrain flexibility.

So let me explain starting with our core and top end models. They will have dedicated battery electric offerings and dedicated high-tech electrified combustion and plug-in hybrid offerings. These will have longitudinal rear-wheel drive layouts, which our customers love. We believe this is the best way to meet demanding customer requirements. With dedicated offerings, we will beat the competition where it matters in terms of space, comfort and versatility.

Next is the new CLA. The first in a family of new Mercedes-Benz vehicles, all built electric first and uncompromising. Each new model will be a true Mercedes-Benz in every respect, which is just as uncompromising. The space saving transverse engine layout works perfectly with both electric and hybrid drive in this segment. This makes our MMA well suited to drivetrain flexibility.

So let's take a closer look. In this segment, we have our high-tech four-cylinder M 252 engine. It's paired with an electrified 8-speed dual clutch transmission. This traverse engine is purpose designed for front-wheel drive. That means no packaging compromise between electric and hybrid solutions. And the electric drive characteristics are far superior, thanks to our electric drive unit 2.0 with a 2-speed gearbox. This maximizes efficiency across the board from driving around town to cruising at high speed on the Autobahn. It's really the new efficiency benchmark. We will demonstrate this very soon with a new CLA, a clear transfer from our VISION EQXX-technology program, which pushed through barriers. The Vision EQXX broke efficiency records in range and consumption.

As a result, the CLA is the benchmark in its class, not only in range and consumption, but also in recharge range and charging power. Our customers spend more time driving and less time charging. This means the CLA is not only energy efficient, but also time efficient.

Now I want to turn back to our core and top end vehicles. Here we will offer more interior space than the competition. That's because their drivetrain flexible approach is a compromise. Quite simply, electric layouts are not compatible with longitudinal engines. A longitudinal engine pushes the cabin backwards. While an electric drive unit at the rear pushes the cabin forward, that means less room in the cabin, limited efficiency and restricted battery size.

The Mercedes way is uncompromised. This means our customers are not forced to accept these sacrifices. Our dedicated electric plug-in hybrids and electrified combustion models for core and top end mean interior space is not sacrificed due to drivetrain. Our vehicles are lower, lighter and more efficient, and we keep our emotional design with luxury proportions.

In real terms, it means MBE models will be superior in all key dimensions. For instance, our upcoming all electric E-Class will offer best-in-class rear seat comfort and our upcoming GLC with EQ technology will also excel. With this dedicated 800-volt electric layout, the GLC is the all-electric SUV our customers have been waiting for.

It sets benchmarks in performance range, efficiency and charging speed. And it has all the GLC trademark versability and practicability. Customers will be able to choose from a full range of battery electric and hybrid drivetrains. The new GLC will come to the market next year.

Our uncompromising approach uses a set of intelligent scalable modules. This ensures efficient use of high-tech technologies across the entire portfolio. It includes high-performance MB.OS hardware and software, especially in the key infotainment and automatic driving domains. Our comprehensive drivetrain portfolio is also highly modular, with electric drive units and batteries that are scalable for all segments, and we have a full range of advanced future-proof EU 7 ready engines and transmissions. But it doesn't end there.

We have modular systems in further key areas, including body in white, chassis, seating and more. In all markets, we will offer highly emotional scalable drivetrains, whether battery electric or hybrid electric. Across the board, our offerings span from high efficiency to high performance from cost-effective LFP batteries to advanced NMC to high-performance round cells.

In electric drivetrains, the highly efficient EDU 2.0 offers great flexibility. At the very top of our portfolio, our groundbreaking YASA axial-flux motors bring unrivaled performance. Meanwhile, our next-generation hybrid engines are just as scalable, these high-tech units are electrified, Fit for the Future fulfilling the EU 7 standards. We offer a range of 4 to 8 cylinder petrol engines and for some Maybach and GUARD models even to have cylinders.

The portfolio includes a brand-new V8 and the new four-cylinder engine M 252. This gives our customers maximum choice and maximum motion across all drivetrains, all with the perfect combination of performance and cost efficiency. The same applies to our 4 and 6-cylinder diesel offerings.

In our electric offerings, we are delivering cutting-edge battery technologies. This brings customer benefits and cost reductions. Take the MMA battery. We have reduced cost per kilowatt hour by 30% compared to the predecessor. Our hard work on LFP and NMC cell chemistries is paying off. We expect further improvements in energy density and cost efficiency. Driven by technology, we are also making strong progress with advanced types of cell chemistry.

LMO and NMC brands are lowering costs while increasing energy density to NMC levels. LMO is a disruptive chemistry, it leverages the high potential of high-voltage applications at cell level, resulting in an attractive cost position. High silicon anodes are also helping us to increase energy density. At the same time, we are working hard to progress solid-state solutions. Intelligence will play an important role in that.

Our next milestone is bringing a solid-state battery technology to the road. Our EQS demonstrator with factorial cells is a world's first. In close cooperation with HPP in the U.K., we will pioneer a whole battery system with automotive cells for the very first time. Solid state could increase cell energy density up to 450-watt hours per kilogram. In our vehicles, the advantage of a lightweight battery with a lot of usable energy content is becoming increasingly important. This means up to 25% longer electric range at the same weight and size.

Our demonstrator can already cover 1,000 kilometers on a single charge. Solid-state technology also brings improved cell safety, further weight and energy efficiency through passive cooling. This uncompromising combination of intelligence and emotion is the Mercedes way. It is how we intend to deliver on our promise that every Mercedes will be in Mercedes, including products and features tailor-made for China.

Our products and content for China are locally developed for our customers in that region. Our customers in China get specific apps and content as well as their own infotainment and automated driving features and a strong dedication to the rear cabin, long wheel-based versions will meet our Chinese customer requirements.

In future, there will be 7 long wheel-based models across all segments and drivetrains. We are also ramping up speed of our R&D in China, maximizing the advantage of our global resources and local expertise. Likewise, local innovation inspires and accelerates our global R&D. It is already our most wide-ranging R&D network outside of Germany based on a presence dating back of more than 20 years.

Through this, we are delivering the technologies that excite our customers. Our strategic cooperation with local heroes are helping us to drive innovations even faster. This includes boosting localization with new facilities in Beijing and Shanghai to really make the most of the local ecosystem and supplier landscape. This game changer combines Mercedes-Benz standards and values with China speed.

One word that describes competition in China currently is Neijuan. This means involution, which refers to something that can no longer evolve, no matter how hard it tries. Resources are limited and local competition is taking irrational decisions. But the efforts are delivering little or no returns. We will not be drawn into this downward spiral. Across the board, in all markets, we are evaluating intelligence significantly.

At the same time, we are greatly lowering complexity and cost. We are driving down variable costs with lower unit costs for our new entry batteries with LFP technology, by making localization in China by developing advanced automated driving systems and assistance systems without LiDAR up to Level 2++ and without HD maps and through strategic cooperation on our entry-level hybrid engines.

We are achieving standardization that reduces the overall number of ECUs. Intelligent use of our models across our vehicle architectures will bring substantial benefits. We are streamlining our offer with pure hardware variants. This includes a single ICE variant for entry-level models.

When it comes to funding, we are rightsizing our global R&D resources. Vertical integration of our MB.OS allows evolutionary approach, and we are also using digital tools to minimize our hardware use in test leads.

In the time of transformation, our agile approach into innovation is paying off. It enables the perfect combination of intelligence and emotions. We enable us to offer our customers the world's most desirable cars. The future begins right now with a new CLA. It is the cleverest Mercedes-Benz ever made with a world breeding new level of electric efficiency and digital intelligence. It makes a powerful statement and puts our R&D strategy on the road in customer hands.

Thank you. And I will hand over to Harald.

Well, thank you, Markus. It's incredible stuff. Isn't that insane? Well, you guys want to know obviously what that means for numbers, how all of that, what you heard. I mean before it comes together, and maybe what we're doing on the cost side. Before doing that, however, I would like to share just a slide, I mean, with you here is very important is that we share what are the assumptions on which we look into the future.

And I would say, I mean, you can read that yourself, I mean, from the chart. But in overall, I mean, we take a prudent view when we look at the macro and the market evolution, looking forward that is baked into the statements we're going to make here with regard to the outlook.

What does it mean all-in-all, how does that translate into our expectation for sales moving forward? Stable level. I mean, in Europe, good momentum, solid momentum in for the U.S., cautious view on China. And overall, obviously, risk of tariffs is not something which probably in terms of overall economy is going to help, but I don't want to speculate on that much further at this juncture here.

Now let's dig a bit deeper and see how this incredible portfolio firework, I mean, to come is going to impact sales and mix moving forward. On the sales side, we departed in 2024 from a bit lesser than EUR 2 million, as we heard earlier today, 2025. I mean, we take a more cautious view for the reasons just outlined. And as you heard in the guidance, I mean, this morning.

But clearly, isn't there a point that this incredible portfolio firework is going to generate momentum in 2027? Don't you think there is something in it, with what you saw last night, what you see here in this morning and where you're going to see this afternoon? I strongly believe on that. I very strongly believe in that. What does it mean for the mix on the top end side? We target a share between 14% and 15% for the time to come. Definitely, the S-Class upgrade that Ola have been talking about is a very, very strong driver in this respect. But think about the AMG you saw last night, the beautiful CLE, you could see, but I mean also the AMG.EA, so on the EV as well on the ICE side.

What does it mean for the xEV share moving forward? Well, we expect that to increase from 2026 onwards. Obviously, when the CLA and the MMA is going to run. But then, as Ola pointed out, in particular, when the electric GLC and C-Class are going to hit the road. So that is going to generate, I mean, significant momentum on the EV side. Next to it, we have that very strong platinum portfolio where we see solid demand for that. And I think that is an additional opportunity, which can be leveraged.

So all in all, we do expect that the xEV shares should therefore go up to more than 30% in 2027. Obviously, I need to say that finally, that depends on market conditions, on infrastructure availability as well as on customer demand.

What does it mean for the top line? We are very much focused on the sales numbers all the time, but sometimes we don't look so much on the revenue lines, if I may say. Well, I dare to look back for a second 2019, 2024, where we all see sales, sales down. Well, if I look into the revenue, thanks to the mix and the pricing, actually, I find a CAGR of 2.5% between 2019 and 2024.

What does it mean looking forward? Yes, we want to drive a solid top line as well. What's driving that? Definitely ASP and pricing. And yes, it's a super competitive environment, but we want to stay disciplined. The strategy in terms of value over volume is in place. It has not been abandoned. However, it is a more competitive space as it was some time ago. So we will be competitive in the market, but we stay disciplined on the pricing side.

What does it mean for the revenue evolution? Well, obviously, I mean, for 2025 and 2026, revenue cannot disconnect from sales evolution, as we heard earlier, but again, 2027 with the product momentum that should allow to support the revenue expansion moving forward.

Now probably a question you also have, what does it mean all of these products, this gigantic portfolio 40 positions in terms of the margin. What can you extract as a juice as a margin out of it? I'm happy to elaborate a bit on this one.

So let's get started with the top end. So these are truly an iconic products, aren't they? And I would say as high as the standard and the quality and the excellence of these products are as high as the margin of these products. And when we stand here, I'm happy to say that with around 280,000 units we had in the top end in 2024, this contributed to more than 40% of the contribution margin of cars in 2024. And now just think a second about what is to come, with AMG.EA, with the ICE line up, with the S-Class. So don't you think that there's a bit of potential that this 280,000 could be a higher number moving forward, call it 300,000 or so. And the margin quality I was just talking about. So isn't that a significant potential in the lever moving forward? Up to you.

I look at the core side, I would call it a healthy contribution. Well, what's that? That's more than 1 million units E-Class roaring success in the market. And I can say, it's a very healthy contribution margin. We're printing, I mean, in that segment, not only in the E-Class in that whole segment. So it also contributes approximately 40% to the contribution margin overall of passenger cars. And same thing here, you heard electric E-Class, electric GLC, electric C-Class, I mean, to come. So definitely, I think there is a potential for expansion on the volume, but also with healthy margins in that segment.

Now on the entry, you have a lot of questions, is that dilutive? No. In my view, it's not. This is a solid margin contribution in the entry, and I would call it an accretive contribution margin quality. This is around the 500,000 segment. And with CLA, MMA, we're elevating in the game in terms of value proposition and therefore, we also have the intent to retain that solid margin in the entry segment moving forward.

The other key question, obviously, is with a higher share of the EVs, what does it mean in terms of the margin for the portfolio? And how can you create or improve, I mean, the margin on the EV side? Well, I think you heard, I mean, the #1 answer before, it is all about the product. The EV product needs to be at least as good as the ICE product. I'm 200% convinced of that one. And you will see it, I mean this afternoon, indeed driving experience, and you will see it, I mean, also on the products, I mean, later today.

Can you close the margin gap on the top line on the pricing side? I think, we all learned that the hard way. No, you cannot. So what can you do, again, do the right product and get the cost right. So what are we doing here? We take the EV costs down by more than 15% over the predecessor versions of the respective EV products. And that means we can narrow the gap between the ICE and the EVs in the future.

At the same time, we also know and you heard it with the portfolio expansion on the ICE products, that ICE is going higher for longer, isn't that great news? I think so. So in terms of the certainty of driving the margin, I think we might have lost a bit sight of that one, that this is compared to some time ago where -- when there was the view of a much higher EV share, I think it's good news.

Where is our emphasis going in terms of the investment focus? So I can say you coming to investments later, but at this juncture is we're talking about the margin in the portfolio, it's already today more than 70% of the investments going into the top end and into the core. And I think it will rather go up moving forward. And elevating the portfolio overall, not just in top end, but within the entry, within the core and for sure, I mean, the top end and overall, this is a very, very important and significant mitigant to a higher EV share moving forward.

Maybe so far here, on the top line side, on the portfolio, but obviously, very important that we are laser focused on cost and efficiencies. And we have come a long way on that, I would say, but we're switching gears, we're stepping up, and that's why we created the next level performance program, NLP to boost competitiveness and resilience even further than that.

So let's jump into that a bit. And obviously, the first thing you need to talk about that is, what is your industrial capacity? Ola, I mean, you mentioned adjusting your body size. And what did we do here over the last years, we adjusted already. We adjusted to end '24, I would say, around 2.5 million units capacity worldwide. You have that on the map. That is a map by the end of 2024.

And we did that by divestment in France, in Russia and Brazil and Indonesia. What are we doing moving forward? We will further rightsize. So in the 3 years, I mean, to come basically will adjust the capacity to around 2 million to 2.2 million units. How can we do that? We'll lower capacity by around 100,000 units in Germany, will increase and shift capacity to Kecskemét in Hungary for around 200,000 units, will end the GLB production in Mexico by the end of 2026. We have optionality in remote locations, and we have optionality for around 200,000 units in China.

And the testimony that we're serious about it is, I think, just the announcement, which was made yesterday in terms of the divestment from the Van plant in Argentina. So we are serious about it. What does it mean in terms of plans in Germany? Is there so much talk about it? No, we have no intent to shut down an MB plant in Germany. We will limit the capacity of the German plants to around 300,000 units each. So how can we do that? We adjust the workforce. We adjust the workforce via attrition and temporary workforce cuts.

So clearly, the target is to adjust the capacity to around 2, 2.2. And at the same time, we retain flexibility in line with the portfolio evolution, expansion as market conditions will tell us, and obviously retain the flexibility. We're having already today between ICE and EV in the respective facilities.

Next to capacity. Let's talk about, I mean production cost. How can we attack production costs? Well, I'm happy to say that over the last, I mean, 2 years, basically, we reduced production costs since 2022 by 10%. So we target now an incremental, an additional 10% production cost reduction between here and 2027, and we will not rest there. We aim to double that number until the end of the decade.

So you might wonder, I mean, how does it work? What are the levers? So the first lever is moving east. I already mentioned before that we are stepping up the capacity in our factory in Hungary in Kecskemét. And that means that the share of low-cost country in the EU will go from 15% to 30% by 2027. And why is that so favorable?

Well, I'm happy to say that the factor cost in that facility in Kecskemét are 70% lower than in Germany. And we also will shift one product in the core segment to that facility in Kecskemét in the future.

What are other -- what are additional levers on the production cost. Well, we are on the path to reduce head count in Germany show attrition will step up the accountability for efficiency measures and competitiveness, I mean, at the plant level, reduce absentism, something which has been talked about quite a lot in recent days, will step up in production planning, digitalization, more use of AI, for example, in the end line quality control into the digital twins, everything, but also reach out to logistics, routes, transportation routes and also attack, I mean, the energy cost by the use of more renewables, such as wind park in Northern Germany and photovoltaic on the roofs of our industrial facility. So all levers are being pulled here on the production cost.

Now let's have a look at our geopolitical hedge. So in particular important when it comes to the tariff discussion, obviously. So this is not, I mean, something which is compliantly brand new to us as a philosophy of going local for local is already value embedded into the company. So what's our target here? From 60% in terms of local for local, we want to go to 70% local for local. And we can do that, obviously, by further localization of products into China as well as the option into the U.S.

Let's have a bit closer look in terms of what makes these facilities and these homes so special? So clearly, the U.S. is the home of our SUVs in Tuscaloosa, Alabama, with around 250,000 to 300,000 units being produced locally, I mean, over there, of which 2/3, I mean, they get exported. It means that the trade balance on the vehicle level is roughly balanced, and we are one of the major exporter of vehicles, I mean, from the U.S.

And in the midterm, it means from that facility, from the U.S., we're going to export top end vehicles -- top end vehicle SUVs, I mean, to China and will export from the U.S. top end and core SUVs to Europe and the overseas. And we have the potential, I mean, to localize an additional product from the core segment into the U.S. into Alabama -- into Tuscaloosa, Alabama.

How does it look for Europe? Europe, I would say, basically, call it, the home of the top end, the kind of reference the symbol of craftmanship and excellence with around 80% of the market being served locally. And obviously, here, the exports go mainly from Germany to top end into China, and the top ends and sedans also to the U.S. and the rest of the world.

China, with very strong local presence there with BBAC, our JV jointly with our partner, bike. That serves around 80% of the market, I mean, locally. And by mid-2026, we will localize the long wheel-based GLE for the Chinese market into China, but we are not doing any exports from China.

Next chapter. On efficiency, obviously, is material cost. So what is our target here? We want to reduce production -- material cost by 8% until 2027. What are the key levers here? That's our BEAT program, BEAT 2026, Markus, which you launched with Gunnar. And here, clearly, we do expect each and every supplier to be laser-focused to pull all levers to reduce material costs. And I would say we got already very good traction in 2024. I talked that morning about the industrial performance. So you can see, I mean, in there.

But let me be clear, this is not, I think, in the spirit of a classical conventional BEAT, the supplier program. It is a cooperative approach. So we bring the engineering and the procurement teams from Mercedes together with the respective teams, I mean, of the suppliers to challenge design, to challenge, I mean, specification to work on higher level of standardization, to work on technical refinement, push design to cost initiatives, I mean, jointly with the suppliers.

Lever #2 is, you heard it from Markus is a reduction of the battery cost. 30% reduction of the battery cost on MMA with the levers, I mean, to chemistry, LFP, so the economies of scale where we're doing here, the design and the sourcing as well on the battery side.

Third lever on material cost is to reduce one-timers. And that's why, I mean, we started to introduce new flexibility approach, new flex rates into the contracts that should better shield us against idle cost risk in the future and should also support a decrease of onetime cost in the future.

Fourth lever, we're talking very much about production material, but there's a little bill, which is called non-production material, which is just EUR 20 billion. So lots of opportunity, I mean, to work on that one as well. I mean, how demand management, specification, renegotiating contracts in this area, leveraging automization, AI outsourcing. So great potential in the non-production field.

At the same time, however, let me be very clear, and you see it on the bottom of this chart, we will continue to step up the content of the vehicles to meet regulatory requirements, but as well to step up further the competitiveness of the vehicles.

Now on the investment side, I would say we are disciplined, very disciplined on the investment side. You can judge it yourself if you look at what has been achieved between 2019 and 2024 by the investments globally being down 8% net of inflation. But what's more important, obviously, is looking forward. So what does it mean in terms of the investment profile ahead of us?

For 2025, we do expect the overall investment, I mean, to go up by approximately EUR 1 billion to support the product launches you heard this morning, last night, you will see later today. But then from 2026 onwards or from 2026 or in 2026, we expect this investment already to go over the peak and start to come down. And that means for 2027, we target an investment level of around 10% below the 2024 level.

Or in other words, 20% down compared to 2019. And that is exactly what we promised back in today a couple of years ago, despite all of the changes we did see in the landscape. Now your question is going to be, how can you do that if you do all of these products? Well, let me wrap that up, the investments in MMA, in MMA into electric GLC into C-Class, into AMG.EA they will be more or less completed by 2027, and we are already beyond the investment peak for these vehicles. We will obviously ramp up investments for future products to come -- when it comes to next-generation S-Class to E-Class, next-generation SUV, I think that's inherent with the business.

But what you heard from Markus in terms of modularization concept, be it on software side or be it on the hardware side, we can leverage throughout the entire portfolio of ICE and EVs. And this efficiency of scale is -- will allow us to reduce, I mean, investment. And the efficiency Markus showed on the chart if you follow that closely on the powertrain side, on the ICE variance compared to what was there in the past and what is going to be in the future is much more focused as well as on the EV powertrain side is much more focused, and you can use it and scale it throughout the entire portfolio, be it from the entry into the core even into the top end. And that is a fundamental lever to bring the investments down on that journey to meet the profile I mentioned before. At the same time, obviously, we'll keep investing into the tech stack, as you heard, on MB.OS as well as on other technology breaks.

Fixed cost. Well, didn't we say in 2020 that we would bring fixed cost down by 20%, 2019 to 2025? Yes, we did say that. So we achieved 19% by the end of 2024, as you heard earlier, I mean, that morning. Just bear in mind that the inflation rates as per my stats of mass in Europe and Germany were more than 20% during that period or call it, 30%, I mean worldwide. So, I think, it gives you an idea of the effort being made and accomplished during that period. But obviously, we'll not rest there and feel good with that. No, we'll take it to next level. So we're going for the next 10% of fixed cost reduction. So you might wonder, I mean, how is that going to work?

Well, what are the levers, I mean, over here? We will reduce the active workforce via attrition, but also via voluntary redundancies. We have still, I think, significant outsourcing, I mean, potentials, which are working upon in finance area, in HR, in general procurement, lots of other areas. We'll definitely streamline business functions and you saw it, I mean, on Ola slide that morning and you might have heard about, I mean, such as bringing our mobility business closer to the marketing and sales teams, I mean integrating them or the announcement we made some time ago on the divestment on our own retail business in Germany.

We're taking management positions. We are increasing the span of control. We're reducing layers and will change team management to more flexible approach. And we stopped doing, I mean, non-essential activities. We standardize, we digitalize and I think there's a great potential in terms of using much more GenAI throughout, I mean, the entire business. Maybe, Christina, we're doing the next disclosure call with the support of that, and you have a robot in front of you.

So let's come back to China shortly. We're definitely starting from a position of strength. What has been achieved over the last decade in terms of market position, I think, is outstanding. How does it look like for the top end in 2024 in China? As we talked so much about it and sometimes, I mean, we forget what is the absolute position. So clearly, we're holding more than 50% of the market share in the top end above RMB 1.5 million in China. Clearly, we're the #1 position when it's above RMB 800,000.

On the AMG side, we're #1 in performance in this market. The S-Class despite everything you read, you talk is outselling the competition by the factor 2 to 3. And if you look on the chart, you will see that we have the highest MRZP among premium OEMs. What is not on the chart is that we have the lower discount among these premium OEMs. So the highest MRZP, the lower discount of all of them. And that just means that the brand still has an incredible pricing power in the market.

However, I don't want to stand here and be naive. We are fully conscious of the challenges we are facing in the market and the need to be competitive. But we are clearly geared to defend that top end market position and to protect our profit pools in China. So you heard it in terms of what is the strategy, focus on what makes a Mercedes a Mercedes, and that applies, in particular, I would say, I mean, in China, where, I mean, the brand still has a very, very strong position.

It is important to return to the iconic and the status-driven in design to push the dedicated China products such as Geely, long wheel base to the S-Class upgrade, the dedication to the rear, but obviously also to be on cutting-edge technology forefront.

Let me say a word maybe on the local production on the JV, on the BBAC side, also to put a bit of facts and figures here. So despite the contribution from BBAC coming down in 2024, as you could see earlier on the EBIT walk. I would like to share with you that the return on sales of that entity is a 15% return on sales, isn't that damn healthy? What's our challenge? What's our target? What's our mission? Obviously, it is meant to rightsize the JV, the BBAC in such a way that it can retain double-digit margins also in the future.

And for that purpose, I mean, we launched jointly with our partner, a very, very comprehensive cost reduction program. And what does it mean? It attacks material cost by more than 10%, deeper localization, efficiencies, technical efficiencies, renegotiation of contracts, it addresses as well, I mean, the variable production costs, and it also addresses mainly fixed cost by more than 20%, respectively.

So a very, very comprehensive program. But there are also additional measures. I alluded to adjustment of industrial capacity. I mean, before I would mention also that on the dealer side, jointly, we're looking at the network evolution to make it efficient and adopted to the size, to the market, to the demand. The GLE localization offers cost opportunity, cost advantage in China and will obviously expand the footprint also for the China fit products on the R&C side and capture opportunities there in terms of development costs.

Now let's switch gears in terms of what does it all mean for the financial framing? And I understand there were some bets out whether there's going to be a weather chart or an update of the weather chart or not. I don't know whether you call that a weather chart or an outlook. Frankly, I don't care. We feel that in an environment which is pretty demanding and volatile probably putting out a weather chart, doesn't make too much of a sense. But let's stop that debate, I would say, let's just look on what it is.

So here it is, I mean, it is a clear road map back to double-digit margin. Important to note in there and a reminder that I think we take in this respect in a prudent macro end market perspective, as I showed on the first chart of that deck here. I do believe it is fair to assume that the product firework is going to generate momentum on sales and revenues more towards 2027, as I emphasized them before. You heard that we are very focused on narrowing the gap in terms of margin between ICE and EV by hard cost work. Clearly, everything has said in terms of NLP, so next level performance when it comes to reduction of production costs, material costs, the fixed cost and investment down is built into that.

And when -- I'm sure you're going to ask me that. So I preempted, you're going to ask me, so what is the biggest lever when you come from 2024 to that double digit in 2027, I can tell you, it is the NLP side. It is what is in our hands in terms of driving cost and efficiency. I would like to remind you, obviously, what I said on the guidance, that any incremental tariffs are not included in these outlooks, as mentioned for the guidance, also applies here for the other years to come.

Margin is nice. Cash is a reality. You know that better than me. So what does all of that mean in terms of cash generation and return to you. Well, I think we have a little track record here on the chart. So between 2019 and 2024, we generated more than EUR 45 billion of cash flow industrial. We distributed around EUR 30 billion via divi and share buyback. You got on top of 65% of the Daimler Truck shares via the spin in 2021. And if you wrap that up, that's a total TSR between 2019 and 2024 of 100%.

Let me illustrate that with a little math here. Let's assume you bought 2 Daimler shares in 2019 at a share price of EUR 50, make it simple. So you invested EUR 100 at that point in time. And let's assume you still hold the shares today, right? And let's assume you're still holding the 1 Daimler Truck share, you got via the spin and you count what you got is cash dividend and obviously, the accretion effect from the share buyback helped as well. So if I do the math, I come up with EUR 200.

So despite all of the difficulties in 2024 and an industry, isn't that interesting? EUR 100 invested in 2019, EUR 200 today, if you still hold it. And I'm pretty sure keeping it is a good idea or doing even more. At the same time, the NIL went up from EUR 11 billion in 2019 to EUR 31 billion in -- by the end of 2024.

But -- well, so far, that is looking a bit into the mirror. But now what does it mean in terms of looking forward, what does it mean in terms of the capital allocation and the capital allocation framework moving forward? You can take for granted, we are committed to shareholder returns. And we're committed to shareholder returns, as you expect then, but we're also committed to them as it is an expression of our own confidence into our future operational and financial performance. And that's why we will continue to use, I mean, the cash flow after divi for share buyback moving forward, at the same time, retaining a very strong balance sheet. What's a concrete capital allocation proposal now which we want to share here today. It is a divi for 2024 of EUR 4.30 with a payout around 41%, in line with the framework.

We want to announce also in here today that we will continue our share buyback activity. The Supervisory Board decided yesterday to launch a new buyback program of up to EUR 5 billion over 2 years, up to 2 years starting potentially in May 2025, as we need to seek the approval of the AGM for 10% authorization by corporate law in May 2025. And that EUR 5 billion share buyback program is intended to be supported by the cash we will generate in 2025 and 2026. And the beginning of monetization of the Daimler Truck stake. At the same time, protecting a very healthy [indiscernible] level.

A word on the Daimler Truck stake. You know the lockup expired by the end of the year. We see the potential for some monetization of cautious stakes. We see that the stock gained significant traction on Daimler Truck side since the spin-off, more than 30%. You know that I do see there is further potential in it. We clearly mentioned that we see that holding as nonstrategic. And therefore, I think it's just a logical step that we will consider monetization of market -- of a share over time in market to a friendly way. And these proceeds are embedded in the cash flow and the EUR 5 billion program. Again, important, but we need to seek authorization from the AGM for doing that.

Well, I think it's time to wrap it up and maybe sum it up in terms of what are the key pillars of the equity story of company. Why is Mercedes unique and stands out compared to others from your perspective that ultimately remains your perspective? But I'd like to offer, our perspective, we do consider Mercedes is a unique blend of luxury and cutting-edge technology. It's the most valuable brand with iconic products, and that means it captures the hearts, and not only the minds of customers, it makes them go irrational. The people at Mercedes are committed to excellence and innovation. Since the creation of the company, you could even say they inherited that from the founders. And the product evolution, the product firework we're talking about here today, I think is just taking it to another level, but with exactly that DNA.

And you see, I think, a very [indiscernible] discipline at work when it comes to cost and investment, laying out the road map back to double-digit margin continued cash generation, a solid balance sheet with EUR 30 billion, which provides a lot of flexibility and opportunities with a benchmark capital allocation framework, which we honor and are committed to with the announcement we're making here today. Obviously, our job is to deliver, the investment decision is yours. Thank you.

Thank you very much, everyone. Thank you very much, Ola, Markus and Harald for your presentations. We will reconnect with our three board members for the Q&A session that's following right after. We will take a 10-minute break to 10:45 roughly to reconvene. Please remember, we will have a first Q&A for analysts and investors, and that's followed by the Q&A for the media.

And all media representatives are, of course, invited to attend the analyst Q&A, so you can stay here in the room or in the working room. And then we have the media Q&A like 5 minutes after the end of the analyst Q&A also here in the same room. And whoever is dialed-in from the media side, we will then have like the usual procedure that you can register your questions digitally, and we will read them out here in the room.

So that's it pretty much for the presentation part, right? You can now refresh yourself, and we are back here in 10 minutes.

[Break]