Daimler Truck Holding AG

Good morning, ladies and gentlemen. This is Markus Poppe speaking. On behalf of Daimler Trucks, I would like to welcome you to our Q1 results global conference call. We are very happy to have you with us today, Karin Radström, our CEO, and Eva Scherer, our CFO. Karin's introduction directly followed by a Q&A session. The respective presentation can be found on the Daimler Truck Investor Relations website. Please note that this conference call will be recorded The replay of the conference call will also be available as an on-demand audio webcast in the investor relations section of Standard Truck website. I would like to remind you that this teleconference is governed by the safe harbor wording you will find on our published results documents. Please note, our presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject and certainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. Before we start, let me give you a quick reminder. Following the signing of definite agreements in June 2025 with the target to integrate Mitsubishi Fuzo and Hino into Archion Holding Company, the Mitsubishi FUSU subgroup was reclassified as discontinued operations and assets and liabilities held for sale starting in Q2 2025. Effective January 1st, 2026, the truck's Asia segment was no longer reported separately, and for capital market communication, we focused on continuing operations for business development, unit sales, and profitability. Our investment research activities, as well as free cash flow and liquidity, are presented on a combined basis, including both continuing and discontinued operations. With closing on April 1, 2026, our shares in the Mitsubishi FUSU subgroup were transferred into shares in Archeon, and as a result, are reported as an ad-accuracy participation from Q2 onwards. With that, let's jump into the results. Karin and Eva will walk you through how the first quarter came together, and after that, we'll open things up for analyst questions forwarded by the media. So, Karin, please, over to you.

Thanks, Markus, and good morning also from my side. As you may have seen, we had a first quarter which was on the soft side with low volumes in North America and continued tariff impact. At the same time, we are seeing really strong order intake and remain very confident as we look ahead for the remainder of the year. So with that, let me have a look at the key figures for the quarter. For the group, we generated 10 billion euros in revenue with an adjusted EBIT of around 500 million euros and a net profit of 149 million euros. Our balance sheet remains strong with net industrial liquidity of 7.1 billion euros. Furthermore, we continue to deliver on our strategy to become a more profitable and a more focused company with three topics to mention. Firstly, with the completion of the integration of Mitsubishi Fuso and Hino Motors into the newly established Archion Corporation on April 1st, we enabled that new company to unlock synergies, benefits from scale across products, technologies, and operations. As communicated, we will gradually reduce our ownership to 25%, generating a total cash inflow from the transaction between 1.5 and 2.0 billion euros. Within the next 12 months, we expect the free float to reach at least 35%, which is an important prerequisite for a prime market listing in Japan. Secondly, in addition, we announced in March that Toyota intends to join Cellcentric as an equal shareholder alongside Diamond Truck and Volvo Group. This represents a meaningful step forward for hydrogen technology. It brings together three global industry leaders with complementary strengths and improves our ability to accelerate innovation and scale fuel cell systems. This partnership underscores our strong confidence in hydrogen as a core pillar of zero-emission transportation, while at the same time, we maintain a disciplined approach to efficient capital allocation. Thirdly, given the current conditions in the electric commercial vehicle market in North America, we're adjusting our spending accordingly. We agreed with our Amplify Cell Technologies joint venture partners to defer the installation of manufacturing capacity. Limited construction will continue to ensure the joint venture remains well positioned for the future while maintaining flexibility at the market. Due to the delay of production start and ramp up, we recorded a non-cash partial impairment of 200 million euros in the equity results from Amplify in accordance with IFRS rules, which is reported as an adjusting item within EBIT. We had originally planned a contribution to the joint venture in a low triple-digit million range this year, So, overall, we will see a positive cash flow impact. Continuing with a look at the industrial business, revenue came down 14% year-over-year to 9.1 billion euros, and adjusted EBIT was down 55% to 460 million euros. The primary reasons for the decline was the lower profitability of trucks North America, where we saw very low unit sales along with significant tariff headwinds. We continued managing our overall cost base effectively and further reduced SE&A expenses. Research and development investments were also lower in the first quarter, but we expect higher spending for the remainder of the year. Now to the orders. Incoming orders, which rose by 50% to 114,000 units, shows that we have a great momentum with our products. Feedback, especially on our Actros L with the Pro Cabin, remains very positive. At the same time, unit sales were down 9%, totaling around 69,000 units for quarter one, resulting in a book-to-bill of 166%. Overall cancellation rates remain low, even with the heightened economic uncertainty related to the Middle East conflict. Turning to our zero emission portfolio, we sold around 700 battery electric trucks and buses in the first quarter, up by 26%. In North America, the Class 8 market totaled 50,000 units in the first quarter of 2026, representing a 23% year-over-year decline, reflecting historically low order demand in 2025 and in line with our expectation of a slow start in 2026. Our market share stood at 37.7%, making us, again, the clear market leader. Based on our strong order share, we expect our market share to improve as the year progresses. In Europe, the heavy-duty market expanded by 11% to approximately 80,000 units, largely driven by Poland, the Netherlands, Spain, and Germany. Against this backdrop, our heavy-duty market share increased a lot from 14.2% in Q1 2025 to 18.3% in Q1 2026, reflecting the strength of our competitive product portfolio and the successful launch of the Actros L at the beginning of 2025. As a result, we further reinforced our leadership position in Europe's medium and heavy-duty segments, achieving an overall market share of 18.5%. In zero emission vehicles, we led the market again, capturing 33% of the European heavy duty segment in the first quarter of 2026. While the overall adoption in Europe is still low at around 2% of truck registrations, this underlines our strong competitive position as the transition continues. I'll now hand over to Eva, who will walk us through the segments.

Thanks, Karen. As you mentioned, market conditions varied across regions, so let's start with a closer look at what it all meant for Trucks North America. At Trucks North America, revenue came down 29% year-over-year to around €3.8 billion, following a historically low-demand environment in 2025. Excluding a negative foreign exchange impact of roughly 450 million, revenue was lower by 21%. Adjusted EBIT came in at 209 million, leading to an adjusted return on sales of 5.4%. Unit sales fell 25% to the lowest first quarter level since 2010. Positive pricing and disciplined cost management helped mitigate the impact but could not fully offset substantial tariff headwinds and the pronounced volume decline. With an order intake of over 59,000 units, up 86% year-over-year and 13% sequentially, our growing backlog gives us confidence for the remainder of the year. The overall industry is showing discipline, and our customers are replacing their agent fleets despite continued macroeconomic uncertainty and higher fuel costs. Freight rates have improved by more than 20% year-over-year as freight capacity has exited the market. We are now seeing the full impact from Section 232 truck tariffs, resulting in a combined low triple-digit million-euro net tariff impact in the first quarter. Our application under the U.S. Content Program and the review of MSRP credits are still pending, with no confirmed impact on the effective rate at this time. Despite these factors, performance remains very solid and demonstrates resilience. Mercedes-Benz trucks generated revenue of €4.6 billion, a 4% increase year over year with an adjusted EBIT of €233 million, resulting in an adjusted return on sales of 5.1%. Order intake was strong. reaching around 49,000 units, representing a 33% increase compared to Q1 2025 and 4% sequentially. In Europe, profitability benefited from a strong sales performance and the strict implementation of cost-down Europe measures. This was partly offset by duplicate after-sales operation costs related to the ramp-up of the Global Park Center in Halberstadt, along with slightly negative net pricing. Moreover, the prior year quarter benefited from a mid-double-digit one-time warranty effect. In Latin America, volumes increased slightly, driven by strength in Chile, Colombia, and Peru, and market share gains in the medium-duty market in Brazil. Profitability declined year over year, driven by more challenging market conditions in Argentina. In India, volumes increased strongly in line with the market, supported by a favorable mix. Revenue of Daimler buses was at 1.2 billion euros, a 7% decline year-over-year, with adjusted EBIT of 107 million and a strong adjusted return on sales of 8.6%. Order intake reached around 5,900 units, representing a 25% decrease compared to Q1 2025, driven by the weaker markets in Latin America, however still resulting in a book-to-bill ratio of 119%. the strong European business keeps its positive momentum. Unit sales declined by 20%, mainly due to a weak market environment in Latin America and Mexico, where we primarily sell bus chassis. At the same time, our higher margin integral bus business in Europe slightly increased year over year. Even with strong performance in Europe, positive pricing and FX support, we could not fully offset the volume decline in the chassis business. However, despite lower volumes, we delivered a strong profitability, highlighting the improved resilience of the bus business. Adjusted EBIT for financial services decreased year-over-year from 55 to 39 million euros, driven by higher loss allowances and foreign exchange headwinds. As a result, adjusted return on equity decreased from 7.3 to 5.1% in the first quarter. A prolonged freight recession in North America, tariff-related impacts, and increased fuel prices due to the Middle East conflict have continued to weigh on customer cash flow. As a result, a growing number of customers are experiencing tighter liquidity in their business, also in Brazil and Mexico, which has translated into higher cost of risk as we are taking a prudent approach to provisioning. In North America, it will take time for higher freight rates to improve fleet margins that have been severely diminished after years of market downturn. Moreover, we are not adjusting for costs resulting from our ongoing restructuring initiatives to position our financial services business for improved returns in the future. Pre-cash flow of the industrial business of around negative 400 million euros was significantly lower than in the previous year, mainly driven by lower earnings and additional inventory build-up due to higher order intake. This was partly compensated by higher prepayments received from customers, increased trade payables and lower income tax payments. At the same time, our balance sheet remained very strong. Net industrial liquidity was at 7.1 billion euros, after deducting the negative free cash flow and a cash outflow of around 50 million, resulting from the share buyback program we initiated on March 16th. Now turning to our guidance. To date, we have only seen a limited impact of the Middle East conflict on truck demand and global supply chains. However, further developments will largely depend on the duration of the conflict and are likely to vary in severity across regions. The longer this situation remains unresolved and oil prices remain elevated, the higher the likelihood of inflationary cost pressures, supply chain disruptions, and softer truck demand. As of today, macroeconomic leading indicators point to a more resilient outlook in North America compared with a more cautious sentiment in Europe. As always, our guidance does not factor in potential impact from supply chain disruptions or adverse macroeconomic developments, particularly those related to the Middle East conflict. It also assumes that the current USMCA and tariff framework remain in place. We continue to expect the North American heavy-duty market to land between 250,000 and 290,000 units. with a pick-up in the second half of the year supported by replacement demand. For the EU30 market, we expect a range of 290,000 and 330,000 units. All segment-level guidance KPIs for 2026 remain unchanged. For Trucks North America in quarter two, we expect unit sales to be around 50% above first quarter levels, with profitability at the upper end of the full year guidance corridor. This does not consider reduction in tariff exposure in the second quarter. Based on our strong order intake and our expectation of a lower effective tariff rate under the U.S. content program in the second half of the year, we expect to deliver a full year return on sales adjusted at the upper end of our 6% to 8% guidance corridor. For Mercedes-Benz trucks, we expect group sales to increase sequentially by around 15% in the second quarter, in line with further market improvement in Europe. Profitability is forecasted at the lower half of the guidance corridor. For the full year, we confirm our 6% to 8% return on sales corridor with a strong improvement expected in the second half of the year. For Daimler buses, sales are expected to be around 30% above quarter one, and profitability is expected to be at the upper end of the guidance corridor. We also confirm our full year guidance corridor of 8% to 10% return on sales. Taking into account lower cash contributions to amplify sell technologies, we expect to be at the upper end of our full-year free cash flow guidance and forecast a strong recovery already in the second quarter.

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

Good morning, ladies and gentlemen, and welcome to the Q&A part of today's Q1 Results Global Conference call. We will now begin the question and answer session.

So, good morning. I think we start with Nikolai Kemp from Deutsche Bank. Hi, Nikolai.

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

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

Yes, I think maybe I'll shed some light on Mercedes. Overall, explaining a bit further on quarter one and then also how you can expect the the year to develop. So, I mean, just to recap a little bit also what we went through during the speech. So, we saw a 4% increase in revenue for MB year over year. We saw that order intake was strong. As anticipated, as you said, slower starting to the year. And we do see that we have profitability in Europe moving in the right direction. It is supported by costs on Europe and also improving volumes, which will then also be a factor coming into quarter two. Now in quarter one, we did have temporary cost headwinds. I mentioned it, operational ramp up of our spire pipes distribution center in Halberstadt and some slightly net negative price cost impact. What we also saw in quarter one in MB that we had some temporary inefficiency in our industrial setup related to the relocation of the Atego cabin production, so medium duty to Turkey, and that resulted in additional rework costs as we ramp that up. But this is something in the next quarters that will get better. And then we see, as I mentioned also in the speech just now, we had a lower profit contribution from Latin America here, Argentina being the main factor. And when we look at this now coming into quarter two, we see that it will gradually ramp up into the second half of the year. You saw that we're guiding for Q2 in the lower half of our full year guidance corridor for Mercedes-Benz trucks, but then you will have higher volumes come out and also some of these headwinds easing over the second half of the year, and we're very comfortable with our full year guidance corridor.

that's it thank you so next question comes from class bagel and city please thank you uh marcus hi hi karen and any of us at city so can i just confirm on the margin guidance here for north america at the upper end in the second quarter this doesn't include any benefits from msrp or the preferential tariff agreement so this is mainly the higher operating leverage quarter on quarter and a better mix from Cascadia. And a link to this, given the solid margin here for the second quarter, it seems like you can reach, Eva, the higher end of the range of 6% to 8% for the year without these tariff benefits, at least on my math, with the tariff benefits coming on top. Is that how to think about it? Thank you.

Hi, Klaas. Thank you for your question. Obviously a very good one and not unexpected. So you're right based on what you concluded that quarter two, and I said it also just now, there is no reduction of the effective tariff rate considered in quarter two. So it's really the run rate that we're coming out of. quarter one that will also then translate into the quarter two profitability. We have a significant volume effect coming in with 50% higher unit sales. And then obviously that brings us to the upper end of the full year guidance corridor in quarter two. Now, when it comes to the lower effective tariff rate that we believe we can get under the us content program and then also msrp credits um maybe the first one for lower effective um tariff rate we have not received con confirmation there but um we're still confident that we will get a relief there but first of all we're not exactly sure how long it would take and then we have to see based on our application what will be accepted so that's a bit unpredictable but what you can say is that the assumption in our full year guidance is quite conservative for a tariff relief because we're being cautious there and on msrp i said last time that we had considered a mid double-digit million amount for this in this year. We have taken it out now. We still believe we will get it, but it could take a bit longer because we see that it's moving very slowly. We still don't have the calculation method, so we couldn't even apply for any credits there for the U.S. Assembly. And so this could move into next year.

so generally a bit more conservative assumptions there on the tariff side and if you did the math we're trending quite well there when it comes to profitability based on run rate very good my my second one is on mercedes-benz and the the orders we have this move incentive in in brazil which has seen truck borders surge and i'm trying to understand how much of this is you know the better orders that you that you um How much is driven by the Brazil incentives that we understand will start to roll over after May versus the European better momentum, etc. Just so we understand sort of how much we need to give back from the Mercedes-Benz better orders into the second half. Thank you.

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

Okay, very clear. Thank you, Connie.

Thank you. So next question comes from Alex Jones from Bank of America.

Great. Thanks very much. Morning, both of you. Maybe first on pricing. Could you give comments on what you're seeing, particularly in Europe, where you cited negative pricing this quarter, and also North America, whether the strength in order intake gives you any sort of – potential to make a decision to further increase pricing through the year. And then the second question, just from the order strength, are you seeing any customer feedback to suggest there's already sort of an impetus given higher fuel prices to replace trucks a little bit quicker, or is that really still too early for you to see in conversations or certainly in the numbers? Thank you.

Thanks for your question, Alex. I'll take the pricing one first. So On the MB side, it was slightly net price cost negative. Actually, what we do see is that over the course of the year, this will improve, and we expect a net positive price cost impact on a Mercedes-Benz truck segment level for the full year. In North America, obviously, tariff effects are significantly higher this year, and our tariff surcharges are not significant. compensating the tariff costs fully. And so we have a net negative price cost and we do expect that to remain for the full year. However, we do see from a pricing perspective that pricing itself is improving. And we also do see that As we go into the year, looking at the good order momentum, potentially there is also some room for improvement there. We are reviewing this every quarter when it comes to pricing and related also to tariff surcharges. You asked then also on the demand side in North America. So we do not really see so much of this that customers replace trucks earlier. We generally see that there is a renewal need in the market as there has been a very long freight recession ongoing in the third year now. I mentioned that freight rates have improved 20% since the start of the and also over 20% year-over-year, so a significant improvement that is helping. We also do see that this is supported by capacity exiting the market, and also really stronger requirements being followed up on English language proficiency of drivers, this non-domiciled CDL topic being tackled, and that is what is supporting now really the freight rates. ultimately on the demand side, we believe there's still potential for that to further pick up going forward.

Great. Thank you. Next question comes from Daniela Costa at Goldman Sachs.

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

Hi, Vangela. Karen here. Yeah, we are still waiting.

Hello? I don't know. It's just me, but I can't hear anything.

Danila, can you hear us?

Only now. I think it went blank. I don't think it was just me.

And do you hear me, Daniela?

Yes, that's working now, thank you.

All right. Yes, so I was saying that EPA has confirmed that EPA 27 will come, but we still don't know exactly how warranty and some of the other legal topics will be playing in, which means it's still quite difficult to know how to set the pricing. However, we are I think we're very confident that we will have very competitive pricing and that we have a good technical solution to be compliant, which should help us very much going into 2017.

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

Yeah, I can take that one. So we have a joint venture in China with Photon called BFDA. We have been negotiating quite a long time on the way forward. And let me say, I was hopeful to solve it earlier. I think I said in our capital market day to come back at the beginning of the year. But we're still negotiating. All options on the table. So I'll definitely come back as soon as there's something to tell. I think I'm learning that sometimes it's better not to stress to get to a solution, but to come out with a really good one in the end. In terms of Chinese competitors in various markets, of course, we know them. We see them. We have seen them for many years, but now they are in some markets pushing more. I think we've shown in the bus market where they have been present even in Europe over the last 10 years. that we're able to fight back and to show very strong performance also against our Chinese peers. And I think you see it in the results of our bus business. So I believe the same goes on the truck side. We have to keep playing on our strengths, bringing very good products, keeping close customer relations, and having very good network to ensure the total cost of ownership and the uptime of our vehicles. Thank you.

Next question comes from Michael Aspinall from Jefferies, please.

Yeah, good morning, Karen, Eva, and Marcus. Just two, so one on North America. We heard that there were some pricing notices given to customers in the U.S. in March. I'm just wondering if those orders would be delivered in 2Q, or would they more likely come through later in the year?

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

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

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

But yeah, cool. And then the other one, you've announced the site of a new manufacturing plant in Czech Republic, I believe it is. Can you just talk to how important it is in reaching that position for cost down Europe in the years to come?

Yes, it's in line with what we announced at our capital market day. So our aim is to have around 25, moving from 45 to 25% of our assembly capacity in Mercedes-Benz in Europe and to bring costs down by 3,000 euros per truck from that assembly plant.

Okay, thank you.

Next question comes from Luis Merrick from BNP Paribas. Yeah, good morning, Karen and Eva.

Luis Merrick from BNP Paribas here. Thanks for taking my questions. I think last quarter you spoke of reaching the top end of your guidance for North America was dependent on receiving favourable kind of treatment. Based on your earlier comments, is that no longer the case today?

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

All right. It's fair to say that if you were to receive that variable power treatment, you could see upside for that North America guidance.

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

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

Yes, so obviously it's a very volatile situation and I mentioned it also in the speech that we have to closely monitor the development in the Middle East and the impact really depends on how long the current situation persists. The Strait of Hormuz will be open again and so on. But what we have done is we have taken... some amounts into our forecast and as a result also into our guidance when it comes to raw material costs, logistics costs, fuel costs, and so on. However, we have not considered the impact of potential supply chain disruptions, the potential implications on demand, because as Kerry also said, our orders are still developing well in Europe as well as in North America. So a prolonged situation in the Middle East that would prove to be challenging, that's something that we have not considered in our guidance. And of course, we have a risk scenario that we have evaluated as part of our opportunity and risk management that we always do.

Okay, thanks very much. Next question comes from from JP Morgan.

Good morning. A couple of questions, please. The first one on order intake trends in Europe. Have you seen any slowdown or any changes to the strong order intake that you saw in Q1 in the month of April or the start of May, please? And the second one is on R&D spending. You talked about a below trend R&D spend in the first quarter. Could you just remind us your expectations for the full year R&D spend, please? Thank you so much.

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

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

Thank you.

Next question comes from Harry Martin at Bernstein.

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

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

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

Sure. I can provide you with that. I would say the team continues to make good progress. We have a really important milestone at the end of the year to drive. on highway with the driver out with our production intent hardware. So I think that's one of the strong benefits we see with Torque that we already have hardware that we're ready to scale and not prototypes. We're still planning for an SOP in early 2028. And there's nothing that the team is doing that makes me doubt that's why for sure, you know, it's uncertain when you deal with new technologies. We think we're in a strong position with the Freightliner Cascadia. It's the best autonomous chassis in the market, and we also feel that. There is a lot of interest from competitors of torque for that chassis, and also in that particular segment where we believe autonomous will start to scale, we have a very strong market share because it's with the big fleets on highway where we have the Cascadia. In terms of how we will move on with the company, I think we're fully intent on funding that and making it a success while, for sure, we also always look for options for value creation.

Great. Thank you very much. Next question comes from Hemagundia at UBS, please.

Hi. Good morning, Karen, Eva, Marcus, Hemagundia from UBS. One of your peers mentioned that their parts business was a bit softer than expected. I'm curious on how you're seeing your off-market business develop in Europe and North America and I'll follow up with my next question after.

Yes, so on the service side, we saw a low single-digit growth year over year. We think we will improve over the course of the year. So I talked a lot about breaking the curve. I would say we have not yet broken the curve in terms of our service growth, but I think we have a lot of great initiatives in pipeline. In the U.S., we're working with AI to improve pricing. We're opening up some new retail stores to better reach the second and third owners of our trucks, which is a segment where we've had relatively low market share. And then, as already mentioned, in Europe, I mean, we made just recent announcements. We opened on retail in Koblenz. I think we announced yesterday or the day before that we bought a dealer group in the UK. So we're establishing our first own retail in the UK. And then, as Eva mentioned, Halberstadt, which is currently a bit of a challenge with the ramp-up, as you can imagine, with 300,000 parts moving into 170 countries. But once we get that under control, which I think will happen over the next year, Definitely, we are optimistic about the potential to grow service business even more.

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

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

Great. Thank you. So our last question comes from Frank Willer at Landesbank Baden-Württemberg, please. Frank, can you hear us? That does not seem the case.

Can you hear me now? Oh, yeah.

Now we can hear you.

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

Hi, Frank Caron here, I can take the ZDV question. So actually, we don't see that the diesel prices going up directly drives adaptation of zero emission trucks. And the main reason being that infrastructure is still a bottleneck. So actually, we do see with some of our customers that the total cost of operation for electric trucks, depending on the use case, of course, is quite positive. especially for those who drive a lot on autobahn, where you also have the significant advantages from the mouth for an electric truck versus a diesel one. But due to the still very slow ramp up of infrastructure, and it's actually both the public infrastructure along the highway, but also for customers who want to establish infrastructure at the depot, it takes too long with the permitting processes and getting the electric connection to the grid. So that's actually the main bottleneck, which is very unfortunate considering this would be an opportunity really where it should and could have taken off more.

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

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

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

If you wish to ask a question, please press star and 1 on your telephone keypad. Please press star and 2 on your telephone keypad if you wish to withdraw your question. One moment please, we are now registering your questions.

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

The first question comes from Robin Wheeler from DPA, Deutsche Press Agentur. Please go ahead.

Hi, good morning. This is Robin Wille from DPA Deutsche Presse. I hope you can hear me. In your press release, you state that the financial results were primarily impacted by lower profitability at trucks in North America. Could you please explain this in more detail? I mean, what were the main factors here, and can you quantify them precisely? For example, how significant was the headwind caused by the terrorists? What factors outside of North America influence net profits looking at the loss on equity method investments? Could you also please explain that? Thank you very much.

Hi, Robin. Eva here. Thank you for your question. So the important thing about North America is that it was really the lowest volume quarter that we have seen since 2010. So this was really a historic low, so a significant volume effect in there. And in addition to that, we have the highest tariff effect in quarter one that we have seen so far because the 232 truck tariffs are fully considered there. In quarter four, it was only two out of three months. And so the overall tariff effect, including all tariffs, reached a low triple-digit million amount, just to give you... some idea here. And then we had an adjusted effect, which you also see in our numbers. That was 200 million euros for a partial impairment of our stake in amplified cell technologies. Karen mentioned that in her speech. So there we have decided together with our joint venture partners that considering the environment in North America concerning zero emission vehicles, we will delay the buildup of manufacturing capacity in that joint venture. It's a battery cell manufacturing joint venture and that cost based on IFRS accounting requirement, a partial impairment of our book value. However, we will have a positive free cash flow effect out of this because we did consider in our initial planning a low triple digit million amount in cash. injections into this joint venture, which we do not expect anymore. And that then also brings us to the upper end of our guidance corridor for the full year when it comes to free cash flow.

The next question comes from Ilona Wiesenbach from Thomson Reuters. Please go ahead.

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

Yes, the first one is easy. It was only for the first quarter.

Okay, and how is it for the full year? Is it not able to calculate?

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

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

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

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

Yeah, I can do this one. So it's absolutely not to be interpreted like we are against zero emission trucks in the U.S. The challenge we have is that California has won legislation when it comes to zero emission trucks. And this has been challenged by the federal legislation because they are saying that the California legislation is not right or not valid. And therefore, it's more of a technical step that we are suing to understand which legislation are we to be following in the Californian market. So that's the explanation on that. In terms of zero emission trucking in the U.S., I think we can say with confidence, we have been very committed and we had started a group wide battery platform project to be able to scale zero emission trucks in the US. However, with the change in legislation, and now I'm back on the federal level, a lot of environmental legislation was pulled back, which we had anticipated, which means there is no demand for zero emission trucks in the US at the moment. because the customers simply cannot make the costs come together to be competitive with diesel. And for that reason, we had to announce last year that we stopped our platform project, which we had started. So that's the background on that topic.

Thanks.

All right. That looks like it for our media questions today. Thank you, Robin and Ilona, for your questions. everybody else joining us thank you very much for joining us today thank you Karin and Ava as well now as always IR and communications team remain at your disposal to answer any further questions you might have so please don't fail or don't hesitate to reach out to us a recording of this session will be available later today on our Daimler truck website we are looking forward to staying with you in contact with you today and have a great day stay healthy thank you and goodbye