Daimler Truck Holding AG

Good morning, ladies and gentlemen. This is Marcus Poppe speaking.

On behalf of Daimler Truck, I would like to welcome you to our Q1 results global conference call. We are very happy to have you with us today, Karin Radstrom, our CEO, and Eva Scherer, our CFO.

Karin [indiscernible] introduction directly followed by a Q&A session. The respective presentation can be found on the Daimler Truck Investor Relations website.

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

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

Such statements are subject and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements.

Forward-looking statements speak only to the date on which they are made. Before we start, let me give you a quick reminder.

Following the signing of Definitive Agreements in June 2025 with a target to integrate Mitsubishi Fuso and Hino into ARCHION Holding company, the Mitsubishi Fuso subgroup was reclassified as discontinued operations and assets and liabilities held for sale starting in Q2 2025. Effective January 1, 2026, the Trucks Asia segment was no longer reported separately.

And for capital market communication, we focus on continuing operations for business development, unit sales and profitability. Our investment research activities as well as free cash flow and liquidity are presented on a combined basis, including both continuing and discontinued operations.

With closing on April 1, 2026, our shares in the Mitsubishi Fuso subgroup were transferred into shares in ARCHION and as a result, are reported as an at equity participation from Q2 onwards. With that, let's jump into the results.

Karin and Eva will walk you through how the first quarter came together. And after that, we'll be open things up for analyst questions followed by the media.

So Karin, please, over to you.

Thanks, Marcus, and good morning also from my side. As you may have seen, we had a first quarter which was on the soft side with low volumes in North America and continued tariff impacts.

At the same time, we are seeing really strong order intake and remain very confident as we look ahead for the remainder of the year. So, with that, let me have a look at the key figures for the quarter.

For the group, we generated EUR 10 billion in revenue with an adjusted EBIT of around EUR 500 million and a net profit of EUR 149 million. Our balance sheet remains strong with net industrial liquidity of EUR 7.1 billion.

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

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

Secondly, in addition, we announced in March that Toyota intends to join cellcentric as an equal shareholder alongside Daimler Truck and Volvo Group. This represents a meaningful step forward for hydrogen technology.

It brings together three global industry leaders with complementary strengths and improves our ability to accelerate innovation and scale fuel cell systems. This partnership underscores our strong confidence in hydrogen as a core pillar of zero-emission transportation, while at the same time, we maintain a disciplined approach to efficient capital allocation.

Thirdly, given the current conditions in the electric commercial vehicle market in North America, we're adjusting our spending accordingly. We agreed with our Amplify Cell Technologies joint venture partners to defer the installation of manufacturing capacity.

Limited construction will continue to ensure that joint venture remains well positioned for the future while maintaining flexibility as the market [indiscernible]. Due to the delay of production start and ramp-up, we recorded a noncash partial impairment of EUR 200 million in equity result from Amplify in accordance with IFRS rules, which is reported as an adjusting item within EBIT.

We had originally planned a contribution to the joint venture in a low triple-digit million range this year. So overall, we will see a positive cash flow impact.

Continuing with the look at the Industrial Business, revenue came down 14% year-over-year to EUR 9.1 billion and adjusted EBIT was down 55% to EUR 460 million. The primary reasons for the decline was the lower profitability at Trucks North America, where we saw very low unit sales along with significant tariff headwinds.

We continued managing our overall cost base effectively and further reduced SG&A expenses. Research and development investments were also lower in the first quarter, but we expect higher spending for the remainder of the year.

Now to the orders. Incoming orders -- which rose by 50% to 114,000 units shows that we have a great momentum with our products.

Feedback, especially on our Actros L with the ProCabin remains very positive. At the same time, unit sales were down 9%, totaling around 69,000 units for quarter 1, resulting in a book-to-bill of 166%.

Overall, cancellation rates remain low even with the heightened economic uncertainty related to the Middle East conflict. Turning to our zero-emission portfolio.

We sold around 700 battery electric trucks and buses in the first quarter, up by 26%. In North America, the Class 8 market totaled 50,000 units in the first quarter of 2026, representing a 23% year-over-year decline, reflecting historically low order demand in 2025 and in line with our expectation of a slow start in 2026.

Our market share stood at 37.7%, making us again the clear market leader. Based on our strong order share, we expect our market share to improve as the year progresses.

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

As a result, we further reinforced our leadership position in Europe's medium- and heavy-duty segments, achieving an overall market share of 18.5%. In zero-emission vehicles, we led the market again, capturing 33% of the European heavy-duty segment in the first quarter of 2026.

While the overall adoption in Europe is still low at around 2% of truck registrations, this underlines our strong competitive position as the transition continues. I'll now hand over to Eva, who will walk us through the segments.

Thanks, Karin. As you mentioned, market conditions varied across regions.

So let's start with a closer look at what it all meant for Trucks North America. At Trucks North America, revenue came down 29% year-over-year to around EUR 3.8 billion, following a historically low demand environment in 2025.

Excluding a negative foreign exchange impact of roughly EUR 450 million, revenue was lower by 21%. Adjusted EBIT came in at EUR 209 million, leading to an adjusted return on sales of 5.4%.

Unit sales fell 25% to the lowest first quarter level since 2010. Positive pricing and disciplined cost management helped mitigate the impact but could not fully offset substantial tariff headwinds and the pronounced volume decline.

With an order intake of over 59,000 units, up 86% year-over year and 13% sequentially, our growing backlog gives us confidence for the remainder of the year. The overall industry is showing discipline, and our customers are replacing their aging fleets despite continued macroeconomic uncertainty and higher fuel costs.

Freight rates have improved by more than 20% year-over-year as freight capacity has exited the market. We are now seeing the full impact from Section 232 truck tariffs, resulting in a combined low triple-digit million-euro net tariff impact in the first quarter.

Our application under the U.S. content program and the review of MSRP credits are still pending with no confirmed impact on the effective rate at this time.

Despite these factors, performance remains very solid and demonstrates resilience. Mercedes-Benz Trucks generated revenue of EUR 4.6 billion, a 4% increase year-over-year with an adjusted EBIT of EUR 233 million, resulting in an adjusted return on sales of 5.1%.

Order intake was strong, reaching around 49,000 units, representing a 33% increase compared to quarter 1 2025 and 4% sequentially. In Europe, profitability benefited from a strong sales performance and the strict implementation of cost-down Europe measures.

This was partly offset by duplicate aftersales operation costs related to the ramp-up of the global parts center in Halberstadt, along with slightly negative net pricing. Moreover, the prior year quarter benefited from a mid-double-digit onetime warranty effect.

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

In India, volumes increased strongly in line with the market, supported by favorable mix. Revenue of Daimler Buses was at EUR 1.2 billion, a 7% decline year-over-year with adjusted EBIT of EUR 107 million and a strong adjusted return on sales of 8.6%.

Order intake reached around 5,900 units, representing a 25% decrease compared to quarter 1 2025, driven by the weaker markets in Latin America. However, still resulting in a book-to-bill ratio of 119%.

The strong European business keeps its positive momentum. Unit sales declined by 20%, mainly due to a weak market environment in Latin America and Mexico, where we primarily sell bus chassis.

At the same time, our higher-margin integral bus business in Europe slightly increased year-over-year. Even with strong performance in Europe, positive pricing and FX support, we could not fully offset the volume decline in the chassis business.

However, despite lower volumes, we delivered a strong profitability, highlighting the improved resilience of the bus business. Adjusted EBIT for Financial Services decreased year-over-year from EUR 55 million to EUR 39 million, driven by higher loss allowances and foreign exchange headwinds.

As a result, adjusted return on equity decreased from 7.3% to 5.1% in the first quarter. A prolonged freight recession in North America, tariff-related impacts and increased fuel prices due to the Middle East conflict have continued to weigh on customer cash flow.

As a result, a growing numbers of customers are experiencing tighter liquidity in their business, also in Brazil and Mexico, which has translated into higher cost of risk as we are taking a prudent approach to provisioning. In North America, it will take time for higher freight rates to improve fleet margins that have been severely diminished after years of market downturn.

Moreover, we are not adjusting for costs resulting from our ongoing restructuring initiatives to position our Financial Services business for improved returns in the future. Free cash flow of the Industrial Business of around negative EUR 400 million was significantly lower than in the previous year, mainly driven by lower earnings and additional inventory buildup due to higher order intake.

This was partly compensated by higher prepayments received from customers, increased trade payables and lower income tax payments. At the same time, our balance sheet remained very strong.

Net industrial liquidity at EUR 7.1 billion after deducting the negative free cash flow and a cash outflow of around EUR 50 million resulting from the share buyback program we initiated on March 16th. Now turning to our guidance.

To date, we have only seen a limited impact of the Middle East conflict on truck demand and global supply chains. However, further developments will largely depend on the duration of the conflict and are likely to vary in severity across regions.

The longer this situation remains unresolved and oil prices remain elevated, the higher the likelihood of inflationary cost pressures, supply chain disruptions and softer truck demand. As of today, macroeconomic leading indicators point to a more resilient outlook in North America compared with a more cautious sentiment in Europe.

As always, our guidance does not factor in potential impacts from supply chain disruptions or adverse macroeconomic developments, particularly those related to the Middle East conflict. It also assumes that the current USMCA tariff framework remain in place.

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

All segment level guidance KPIs for 2026 remain unchanged. For Trucks North America in quarter 2, we expect unit sales to be around 50% above first quarter levels, with profitability at the upper end of the full year guidance corridor.

This does not consider a reduction in tariff exposure in the second quarter. Based on our strong order intake and our expectation of a lower effective tariff rate under the U.S.

content program in the second half of the year, we expect to deliver a full year return on sales adjusted at the upper end of our 6% to 8% guidance corridor. For Mercedes-Benz Trucks, we expect group sales to increase sequentially by around 15% in the second quarter, in line with further market improvement in Europe.

Profitability is forecasted at the lower half of the guidance corridor. For the full year, we confirm our 6% to 8% return on sales corridor with a strong improvement expected in the second half of the year.

For Daimler Buses, sales are expected to be around 30% above quarter 1, and profitability is expected to be at the upper end of the guidance corridor. We also confirm our full year guidance corridor of 8% to 10% return on sales.

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

Thank you very much, Eva. Thank you very much, Karin.

So that concludes our presentation for quarter 1 results. Now it's time to move into the Q&A portion of today's call.

As usual, we will start with questions from analysts, then move on to the media. Both sessions will be recorded and made available on request.

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

It's Nicolai from Deutsche Bank. Slow start in Q1, but well flagged, and we appreciate the comments on Q2.

If we start in North America, very strong orders in Q1 that seemed to slow down a bit in April. And have you any color on that?

Was this because of lead times getting longer? Was a bit of slowdown because of the higher diesel prices?

So any color on this would be appreciated. And then moving to Mercedes and maybe to Europe, you've mentioned a bit more cautious indicators on the macro side.

Can you just remind us what are the moving parts here going forward? And why is Mercedes going to improve in H2?

Thanks, Nikolai. Karin here.

Maybe starting with North America. As you said, very strong order intake in Q1, I think, at 86%, better quarter 1 compared to last year.

And in terms of April order intake, it was a bit more stable from -- moving on from March, but we're happy with the order intake in April. In terms of Europe, as we move into Q1, we also see an improvement on the volume side.

So that should help to boost the result of the Mercedes-Benz Truck segment for Q2. Eva, anything -- otherwise.

Yes. I think maybe I'll shed some light on Mercedes.

Overall, explaining a bit further on quarter 1 and then also how you can expect the year to develop. So I mean, just to recap a little bit also what we went through during the speech.

So we saw a 4% increase in revenue for MB year-over-year. We saw that order intake was strong.

And as anticipated, as you said, slower start into the year. And we do see that we have profitability in Europe moving in the right direction.

This is supported by cost down Europe and also improving volumes, which will then also be a factor coming into quarter 2. Now in quarter 1, we did have temporary cost headwinds.

I mentioned it, operational ramp-up of our spare parts distribution center in Halberstadt and some slightly net negative price/cost impact. What we also saw in quarter 1 in MB that we had some temporary inefficiency in our industrial setup related to the relocation of the Atego cabin production, so medium duty to Turkey, and that resulted in additional rework costs as we ramp that up.

But this is something in the next quarters that will get better. And then we see, as I mentioned also in the speech just now, we had a lower profit contribution from Latin America here, Argentina being the main factor.

And when we look at this now coming into quarter 2, we see that it will gradually ramp up into the second half of the year. You saw that we're guiding for Q2 in the lower half of our full year guidance corridor for Mercedes-Benz Trucks, but then you will have higher volumes come out and also some of these headwinds easing over the second half of the year, and we're very comfortable with our full year guidance corridor.

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

So can I just confirm on the margin guidance here for North America at the upper end in the second quarter. This doesn't include any benefits from MSRP or the preferential tariff agreement.

So this is mainly the higher operating leverage quarter-on-quarter and a better mix from Cascadia. And linked to this, given the solid margin here for the second quarter, it seems like you can reach [indiscernible] the higher end of the range of 6% to 8% for the year without these tariff benefits, at least on my math, with the tariff benefits coming on top.

Is that how to think about it?

Klas, thanks for your question. Obviously, a very good one and not unexpected.

So you're right, based on what you concluded that quarter 2, and I said it also just now, there -- is no reduction of the effective tariff rate considered in quarter 2. So it's really the run rate that were coming out of quarter 1 that will also then translate into the quarter 2 profitability.

We have a significant volume effect coming in with 50% higher unit sales. And then obviously, that brings us to the upper end of the full year guidance corridor in quarter 2.

Now when it comes to the lower effective tariff rate that we believe we can get under the U.S. content program and then also MSRP credits.

Maybe the first one for lower effective tariff rate. We have not received confirmation there.

But we're still confident that we will get a relief there. But first of all, we are not exactly sure how long it would take.

And then we have to see based on our application, what will be accepted. So that's a bit unpredictable.

But what you can say is that the assumption in our full year guidance is quite conservative for a tariff relief because we're being cautious there. And on MSRP, I said last time that we had considered a mid-double-digit million amount for this in this year.

We have taken it out now. We still believe we will get it, but it could take a bit longer because we see that it's moving very slowly.

We still don't have the calculation method, so we couldn't even apply for any credits there for the U.S. assembly.

And so there, this could move into next year. So generally a bit more conservative assumptions there on the tariff side.

And as you did the math, we're trending quite well there when it comes to profitability based on run rate.

Very good. My second one is on Mercedes-Benz and the orders.

We had this move incentive in Brazil, which has seen truck orders surge. I'm trying to understand how much of this is the better orders that you delivered?

How much is driven by the Brazil incentives that we understand will start to roll over after May versus the European better momentum, Actros L, et cetera. Just so we understand how much we need to give back from the Mercedes-Benz better orders into the second half?

Klas, Karin here. I can take that one.

So actually, we have a little bit different structure from some of our competitors in Brazil as we're a full liner, and we deliver both the extra heavy, semi-heavy and the medium-duty segment. So actually, if you look on our order intake in Brazil, it has remained rather stable quarter-to-quarter.

And the growth that we are seeing is coming very much out of Europe and some of it also from India.

Next question comes from Alex Jones from Bank of America.

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

And then second question, just on the order strength. Are you seeing any customer feedback to suggest there's already an impetus given higher fuel prices to replace trucks a little bit quicker?

Or is that really still too early for you to see in conversations or certainly in the numbers?

Thanks for your question, Alex. I'll take the pricing one first.

So on the MB side, it was slightly net price/cost negative. Actually, what we do see is that over the course of the year this will improve, and we expect a net positive price/cost impact on a Mercedes-Benz Truck segment level for the full year.

In North America, obviously, tariff effects are significantly higher this year and our tariff surcharges are not compensating the tariff costs fully. And so we have a net negative price cost, and we do expect that to remain for the full year.

However, we do see from a pricing perspective that pricing itself is improving. And we also do see that as we go into the year, looking at the good order momentum, potentially, there is also some room for improvement there.

We are reviewing this every quarter when it comes to pricing and related also to tariff surcharges. You asked then also on the demand side in North America.

So we do not really see so much of this that customers replace trucks earlier. We generally see that there is a renewal need in the market as there has been a very long freight recession ongoing in the third year now.

I mentioned that freight rates have improved 20% since the start of the year and also over 20% year-over-year. So a significant improvement that is helping.

We also do see that this is supported by capacity exiting the market and also really stronger requirements being followed up on English language proficiency of drivers, this non-domiciled CDL topic being tackled. And that is what is supporting now really the freight rates and results ultimately.

On the demand side, we believe there's still potential for that to further pick up going forward.

Next question comes from Daniela Costa at Goldman Sachs.

Actually, two questions. But starting out with the U.S.

and with EPA, just wanted to get a little bit more clarity on like how your strategy to adapt for that is? I guess your order book might be significantly filled for '26.

So maybe soon we'll be talking about filling '27. Have you decided what you're going to do with pricing there?

And then I'll ask an unrelated one afterwards.

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

Daniela, can you hear us?

Only now. I think you went blank.

And do you hear me, Daniela?

Yes.

Yes. So I was saying that EPA has confirmed that EPA 27 will come, but we still don't know exactly how warranty and some of the other legal topics will be playing in, which means it's still quite difficult to know how to set the pricing.

However, we are, I think, very confident that we will have very competitive pricing and that we have a good technical solution to be compliant, which should help us very much going into '27.

Thank you. And my second question was just more regarding how do you think about China strategy over the long run, just an update of where you stand there.

We see some of the Chinese peers being a bit more active on exporting. We also see some of your peers talking about having a presence there to maybe leverage it outside of China.

Just an update on where do you stand there?

Yes, I can take that one. So we have a joint venture in China with Foton called BFDA.

We have been negotiating quite a long time on the way forward. And let me say, I was hopeful to solve it earlier.

I think I said in our Capital Markets Day to come back at the beginning of the year. But we're still negotiating all options on the table.

So I'll definitely come back as soon as there's something to tell. I think I'm learning that sometimes it's better not to stress to get to a solution, but to come out with a really good one in the end.

In terms of Chinese competitors in various markets, of course, we know them. We see them.

We have seen them for many years, but now they are in some markets pushing more. I think we've shown in the bus market, where they have been present even in Europe over the last 10 years, that we're able to fight back and to show very strong performance also against our Chinese peers.

And I think you see it in the result of our bus business. So I believe the same goes for the truck side.

We have to keep playing on our strength, bringing very good products, keeping close customer relations, and having a very good network to ensure the total cost of ownership and the uptime of our vehicles.

The next question comes from Michael Aspinall from Jefferies.

Just two. So one in North America.

We heard that there were some pricing notices given to customers in the U.S. in March.

Just wondering if those orders would be delivered in 2Q? Or would they more likely come through later in the year?

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

Yes. We just heard from some customers that some pricing notices came through in March.

And I was wondering if pricing is a significant component in 2Q in North America for the margins, or if that would come through later, given when orders are taken.

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

Got it. Yes.

Cool. And then the other one, you announced the site of a new manufacturing plant in the Czech Republic, I believe it is.

Can you just talk about how important it is in reaching that position to reduce freight costs in Europe in the years to come?

Yes. It's in line with what we announced at our Capital Markets Day.

So our aim is to have around 25 -- moving from 45% to 25% of our assembly capacity in Mercedes-Benz in Europe, and to bring cost down by EUR 3,000 per truck from that assembly plant.

The next question comes from Lewis Merrick from BNP Paribas.

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

Yes, I alluded to it when I answered the question from Klas, Lewis, but happy to explain it a bit further to make it clear. So yes, we said that in the last quarter, but obviously, you also see now that our run rate is developing quite well.

And already in the second quarter, with the volume effect of 50% higher unit sales, we expect to be at the upper end of our full-year guidance corridor. And so we still, for the full year, assume that we will get a better effective tariff rate, so a lower one, especially related to the 232 truck tariffs.

However, the assumption that we have considered there is a more conservative one. I mean, as you can imagine, there are a lot of moving pieces on this, and we will know once we hear back from the U.S.

administration. And this is where we are right now, and we'll keep you updated.

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

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

Okay. And just one follow-up.

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

Yes. So obviously, it's a very volatile situation, and I mentioned it also in the speech that we have to closely monitor the development in the Middle East, and the impact really depends on how long the current situation persists.

Strait of Hormuz will be open again, and so on. But what we have done is we have taken some amount into our forecast and as a result, also into our guidance when it comes to include raw material costs, logistics costs, fuel costs, and so on.

However, we have not considered the impact of potential supply chain disruptions, the potential implications on demand, because, as Karin also said, our orders are still developing well in Europe as well as in North America. So a prolonged situation in the Middle East that would prove to be challenging.

That's something that we have not considered in our guidance. And of course, we have a risk scenario that we have evaluated as part of our opportunity and risk management that we always do.

The next question comes from Akshat Kacker from JPMorgan.

Akshat from JPMorgan. A couple of questions, please.

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

And the second one is on R&D spending. You talked about below trend R&D spend in the first quarter.

Could you just remind us of your expectations for the full-year R&D spend, please?

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

And then on R&D, just a second.

Yes. R&D, I'll take over.

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

The next question comes from Harry Martin at Bernstein.

So the first question I have just about the ramp-up of volume in the North America business, 50% up Q2 versus Q1, but then also through the year. I wondered if there were any risks to this ramp-up?

Do you have the staff for the lines of the suppliers that you have set up to match that speed? Or is there any risk to that volume expansion?

Thanks, Harry, for your question. So we do have everything lined up, obviously, already for quarter 2.

Our production program for quarter 2 is already fully booked. Q3 and Q4, we're filling up nicely.

I would say that's an absolutely healthy seasonality that we see there. We're used to ramping up and down, and that's what we're also doing now.

So I would say we're well prepared to match that speed with one caveat, which is obviously the situation in the Middle East that we have to watch out for. At the moment, we do not see any constraints there.

But as I said, we have to monitor that very closely.

Great. And then I wondered if I could get an update on the autonomous business, the Torc Robotics status.

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

Sure. I can provide you with that.

I would say the team continues to make good progress. We have a really important milestone at the end of the year to drive on-highway with the driver-out with our production intent hardware.

So I think that's one of the strong benefits we see with Torc that we already have hardware that we're ready to scale, and not prototypes. We're still planning for an SOP in early 2028.

And there's nothing that the team is doing that makes me doubt that, while for sure, you know it's uncertain when you deal with new technologies. We think we're in a strong position with the Freightliner Cascadia.

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

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

Next question comes from Hemal Bhundia at UBS, please.

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

Yes. So on the service side, we saw a low single-digit growth year-over-year.

We think we will improve over the course of the year. So I talked a lot about breaking the curve.

I would say we have not yet broken the curve in terms of our service growth, but I think we have a lot of great initiatives in the pipeline. In the U.S., we're working with AI to improve pricing.

We're opening up some new retail stores to better reach the second and third owners of our trucks, which is a segment where we've had relatively low market share. And then as already mentioned, in Europe, I mean we made just recent announcements, we opened on retail inland I think we announced yesterday or the day before that we bought a dealer group in the U.K.

So we're establishing our first own retail in the U.K. And then as Eva mentioned, Halberstadt, which is currently a bit of a challenge with the ramp-up, as you can imagine, with 300,000 parts moving into 170 countries.

But once we get that under control, which I think will happen over the next months, definitely, we are optimistic about the potential to grow the service business even more.

Very fair. And I recall that you mentioned that there were some bottlenecks in the vocational side of the bodybuilders.

Could you give an update on how this has developed?

Fairly stable, I would say. So we still see that.

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

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

So it's a question about zero-emission vehicles. Here, we saw strong deliveries here, book-to-bill ratio of 1.5 here.

What is your expectation for the full year, given the higher diesel prices? Is it going steadily upwards?

Or is it a bit more coming down because of the U.S. business here?

And the other question is on this autonomous driving again. I've seen the cost went down to EUR 71 million compared to EUR 81 million in the quarter.

Have we seen the peak already? Or will it go upwards with the start of production?

Frank, I can take the ZEV question. So actually, we don't see that diesel prices going up directly drives the adoption of zero-emission trucks.

And the main reason being that infrastructure is still a bottleneck. So actually, we do see with some of our customers that the total cost of operation for electric trucks, depending on the use case, of course, is quite positive, especially for those who drive a lot on the Autobahn, where you also have the significant advantages from the mouth for an electric truck versus a diesel one.

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

Yes. And on the cost ramp-up, no, we haven't seen the peak already.

So it's a fairly stable development that we're expecting this year, also compared to last year, when we look at the full year ramp-up of costs.

That concludes the first part of this Q&A session for investors and analysts. I would now like to hand over to Andy Johnson for the second part, where all participants from the media can ask their questions.

Now, as usual, IR remains at your disposal afterwards. Have a great day.

Thank you, and goodbye. Over to you, Andy, please.

Thank you, Marcus, and welcome, everyone, to the media portion of our Q&A session today. Before we start our media Q&A session, some housekeeping remarks.

As you probably have guessed by now, this call is conducted in English. So please be so kind to ask your questions in English as well.

The operator will now explain the procedure for registering your questions.

Thank you very much. We will now begin our media Q&A session.

The operator will address the questioners by name. Please be so kind to also briefly unmute yourself with your full name and your media advert.

Take your time, and please ask your question slowly and clearly. And with that, operator, let's go with our first question.

This is Robin Willer from DPA Deutsche Presse-Agentur. Hope you can hear me.

In your press release, you state that the financial results were primarily impacted by lower profitability at Trucks North America. Could you please explain this in more detail?

I mean, what were the main factors here? And can you quantify them precisely, for example, how significant was the headwind caused by the tariffs?

And what factors outside of North America influenced net profit, looking at the loss on equity method investments? Could you also please explain that?

Robin, Eva here. Thank you for your questions.

So the important thing about North America is that it was really the lowest volume quarter that we have seen since 2010. So this was really a historic low, so a significant volume effect in there.

And in addition to that, we have the highest tariff effect in quarter 1 that we have seen so far because the 232 truck tariffs are fully considered there. In quarter 4, it was only two out of three month.

And so the overall tariff effect, including all tariffs, reached a low triple-digit million amount, just to give you some idea here. And then we had an adjusted effect, which you also see in our numbers, that was EUR 200 million for a partial impairment of our stake in Amplify Cell Technologies.

Karin mentioned that in her speech. So there, we have decided together with our joint venture partners that, considering the environment in North America concerning zero-emission vehicles, we will delay the buildup of manufacturing capacity in that joint venture.

It's a battery cell manufacturing joint venture, and that caused, based on IFRS accounting requirement, a partial impairment of our book value. However, we will have a positive free cash flow effect out of this because we did consider in our initial planning a low triple-digit million amount in cash.

Injections into this joint venture, which we do not expect anymore and that then also brings us to the upper end of our guidance corridor for the full year when it comes to free cash flow.

So, Ilona Wisenbach from Thomson Reuters. I didn't get it now, Eva.

Was this low 3-digit million amount tariff effect only for the first quarter? Or was it for the full year?

That's one question and another one after that.

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

Okay. And how is it for the full year?

Is it not -- able to calculate?

No, this is what we pay now. But then, as I also said during the speech, we have applied for a lower -- or for a relief under the U.S.

content program. And there, we do then expect a reduction of the effective tariff rate that we pay under the Section 232 for the truck tariffs.

So that is where we do believe in the second half of the year that there will be a reduction, but we cannot quantify it yet because we have applied for that relief with the U.S. administration, but we have not heard back.

So quarter 1 and quarter 2...

Sorry.

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

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

But obviously, we continue to evaluate the changes in the tariff framework.

Okay. And the second question was about the zero-emission trucks in the U.S.

You see that the market there is more difficult. And I wonder why you support actively the legal action of the Trump administration against the climate change rules.

I think you faced criticism for that also today at the Annual Shareholder Meeting. I mean, adjusting to a weak market is one thing, but actively supporting to stop selling zero-emission trucks is another thing, and I don't understand it.

Yes, I can do this one. So it's absolutely not to be interpreted like we are against zero-emission trucks in the U.S., and the challenge we have is that California has one legislation when it comes to zero-emission trucks.

And this has been challenged by the federal legislation because they are saying that the California legislation is not right or not valid. And therefore, it's more of a technical step that we are suing to understand which legislation we are to be following in the Californian market.

So its -- that's the explanation on that. In terms of zero-emission trucking in the U.S., I think we can say with confidence that we have been very committed.

We had started a group-wide battery platform project to be able to scale zero-emission trucks in the U.S. However, with the change in legislation and now I'm back on the federal level, a lot of environmental legislation was -- pulled back, which we had anticipated, which means there is no demand for zero-emission trucks in the U.S.

at the moment because the customers simply cannot make the costs come together to be competitive with diesel. And for that reason, we had to announce last year that we stopped our platform project, which we had started.

So that's the background on that topic.

All right. That looks like it for our media questions today.

Thank you, Robin and Ilona, for your questions. Everybody else joining us, thank you very much for joining us today.

Thank you, Karin and Eva, as well. Now, as always, the IR and communications team remains at your disposal to answer any further questions you might have.

So please don't feel or don't hesitate to reach out to us. A recording of the session will be available later today on our Daimler Truck website.

We are looking forward to staying with you in contact with you today, and have a great day. Stay healthy.

Thank you, and goodbye.