Daimler Truck Holding AG (DTG) Q2 2026 Earnings Call Transcript

Good morning, everyone, and welcome to Daimler Truck's second quarter 2026 earnings call. I'm Markus Popper, head of investor relations at Daimler Truck. On behalf of Daimler Truck, I would like to welcome you to our Q2 earnings global conference call. Joining me today are Karin Radström, our CEO, and Eva Scherer, our CFO. Karin and Eva will begin with an introduction, directly followed by a Q&A session. The presentation is available on Daimler Truck investor relations website. Please note that this conference will be recorded. The replay of the conference call will also be available as an on-demand audio webcast in the Investor Relations section of the Daimler Schwark website. I would like to remind you that this teleconference is governed by the safe harbor wording you will find in our published results documents. Please note that our presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. With that, let's jump into the results. Karen and Eva will walk you through how the quarter developed, and after that, we will open things up for analyst questions, followed by the media. Karen, over to you. Thank you.

Thanks, Markus, and good morning, everyone. Let me start by sharing the key figures for the quarter. For the group, we generated 12.3 billion in revenue, up 5%, with adjusted EBIT of around 800 million and a net profit of 1.5 billion euro. Earnings per share from continuing and discontinued operations amounted to 1 euro and 91 cents. Our balance sheet remains strong with a net industrial liquidity of 8.3 billion I also brought some business highlights for you As you might have seen, we pre-released our second quarter results And raised our full year guidance two weeks ago This increase reflects the strong performance of Trucks North America driven both by higher expected unit sales for the remainder of the year and the approval of Daimler Truck's U.S. content application. Another important milestone in Q2 was the launch of Daimler Truck Defense. By bringing our defense activities together under one global brand, we can make better use of our global engineering expertise, manufacturing network, sales organization, and service capabilities across the whole group as we continue to grow this business with the ambition of reaching 1 billion euro in defense-related revenue by 2028. Another area where we continue to make progress is our Mercedes-Benz own retail strategy. The expansion of our service networks helping us to stay close to our customers and grow service revenue. In the second quarter, one big highlight was the integration of E-Star in the UK, which adds six new locations to our network. The retail investments are helping us build a stronger, more truck-focused service network and, of course, also supports our ambition to significantly expand our retail presence by 2030. We also continue to invest in the future of our business. Last night, we announced a new U.S. manufacturing facility. This investment gives us the rare opportunity to start with a blank sheet of paper and create a state-of-the-art facility, which will be designed around the latest manufacturing technologies, a flexible production system, and, of course, the products that will define our future. Startup production is planned for late 2029. So this is a long-term investment which reflects our confidence in the U.S. market and our commitment to strengthening our manufacturing footprint. The new facility will help create a production network that's more flexible, resilient, and positioned to support future growth. Turning to our industrial business performance. Revenue increased 6% year-over-year to €11.4 billion. At the same time, adjusted EBIT declined 22% to €780 million and adjusted return on sales came in at 6.8% compared to 9.2% in the prior year quarter. The year-over-year decline in earnings was driven by North America. mainly due to the ongoing tariff headwinds that were significantly higher than in the second quarter last year. This more than offset the positive earnings contributions from Mercedes-Benz trucks and Daimler buses. At Mercedes-Benz, we remained disciplined on cost and our Cost Down Europe program remains on track. At the same time, we're making significant investment in research and development, with a large share flowing directly through the P&L and therefore affecting current earnings. It's in line with our commitments that we talked about in our capital market day last year. Now to orders. Incoming orders remained at a healthy level in the second quarter, reaching around 74,000 units which is up 27% year over year. The 35% sequential decline from Q1 reflects a normalization following our exceptionally strong first quarter and does not indicate a change in the underlying market environment. Unit sales were up 8% year over year totaling around 87,000 units for quarter two, resulting in a book-to-bill of 86%. The backlog decreased compared to the first quarter, but remained on a very healthy level at approximately 50% above last year and well above historical averages. So we have good visibility for the remainder of 2026. Our zero-emission sales increased to around 1,400 units in the second quarter, up 21% year-over-year. Now turning to our markets, we continue to hold leading positions in both of our key regions. In North America, the Class 8 market totaled 66,000 units in the second quarter, down 6% year over year. What's encouraging is that order activity remains supportive and we are confident in a strong second half of the year. At the same time, the market remains below previous cycle highs and retail sales are still running below last year's levels following the soft start to 2026. With a market share of 38% year-to-date, we maintained our leading position in the market. In Europe, the heavy-duty market expanded by 10% year-over-year to approximately 164,000 units. Growth was supported mainly by a strong demand in Spain, Poland and Lithuania, while some of our major markets like Germany, France and the UK remain below market average year to date. We further strengthened our leadership position in Europe's medium and heavy-duty segments, achieving an overall market share of 18.9%. In zero-emission trucks, we achieved around 38% share of the European heavy-duty segment in the first half of 2026, so we are clearly leading. Even though zero-emission truck adoption in Europe remains at an early stage, registrations increased to around 6% of total registrations in Q2, which is up from approximately 2% in the previous quarter and in 2025. We believe we are well positioned to benefit from the continued transition towards sustainable transportation. So we're seeing very different dynamics across our markets, but our competitive position remains strong. Now handing over to you, Eva, to take us through the individual segments and some of the drivers behind the results.

Thank you, Karen, and good morning, everyone. Let me start with Trucks North America. In the second quarter, revenue increased by 2% year-over-year to around 5.2 billion euros, driven by an 8% increase in euronet sales. Compared to the first quarter, revenue was up 35%. Adjusted EBIT more than doubled from the first quarter, increasing to 435 million euros from 209 million. Adjusted return on sales improved from 5.4 to 8.4%. While profitability remained below last year's strong level of 12.9% due to significant tariff headwinds, We benefited from higher volumes, pricing actions, and continued cost discipline. Order intake reached more than 35,000 units during the quarter, up 156% year-over-year. Demand in North America remains very healthy, and fleet replacement continues as freight conditions normalize. Moreover, since the beginning of the third quarter, we have seen increased activity from our rental, leasing, and other large fleet customers, resulting in a July Class 8 order share of 45%. At Mercedes-Benz trucks, revenue increased to 5.3 billion euros, up 10% year-over-year and 15% compared to the first quarter. Adjusted EBIT increased to 317 million from 283 million a year ago, resulting in an adjusted return on sales of 6%. Group sales increased 10% to nearly 39,000 units, supported by stronger market conditions in Europe. Order intake reached around 34,000 units, a decrease of 11% year over year. In Europe, demand remained solid and group sales increased by 36%. Profitability benefited from higher volumes and ongoing progress under our Cost Down Europe program. At the same time, earnings were affected by the ramp-up of our new global parts distribution center in Halberstadt and higher research and development costs in the P&L, driven by a reduced capitalization rate of 10.7% from 17.7% in the second quarter 2025. Due to increased inflationary headwinds, net price costs remained negative in the second quarter. As we expect cost pressures to increase in the second half of the year, we have introduced additional pricing measures. In Latin America, market conditions remained challenging. While Brazil showed signs of stabilization during the quarter, supported by the Move Brazil program, the overall market remained 10% below prior year levels. Argentina remained under pressure, adding further challenges across the region. As a result, profitability declined year over year, despite continued pricing actions and cost measures. In India, market demand remained above lastest level, supported by ongoing replacement activity and healthy domestic orders. Revenue of Daimler buses increased 6% year-over-year to 1.6 billion euros, reflecting positive net price cost development, continued growth in our service business and favorable foreign exchange effects. Adjusted EBIT increased to 150 million compared to 147 million a year ago, resulting in an adjusted return on sales of 9.6 percent. Order intake reached around 5,300 units, a decrease of 25 percent year-over-year and a book-to-bill ratio of 86 percent. Units has declined, primarily due to weaker demand in our chassis business in Latin America and Mexico. At the same time, our integral bus business in Europe continued to perform well. While sales volumes were below the prior year level, profitability remained strong, highlighting the improved resilience of the business. Strong demand in Europe helped offset weaker market conditions in Latin America and Mexico, as well as ongoing cost headwinds and high inflation in Turkey. While these circumstances led us to lower our 2026 unit sales outlook, we continue to generate strong financial results. At Daimler Truck Financial Services, return on equity improved significantly in the second quarter. Adjusted EBIT increased to 58 million euros compared to 23 million in the prior year quarter and 39 million in the first quarter. At the same time, adjusted return on equity more than doubled year over year, increasing from 3.1 to 7.5%. The improvement was driven by a stronger interest margin and a more favorable credit risk environment. In North America, improving freight rates and stronger used truck market also contributed positively. Turning to Archion, the transaction continues to progress as planned. Following the closing on April 1st, we received approximately 1.4 billion euros in cash. Considering the deconsolidation of the Mitsubishi Fuso cash of 0.3 billion, the net positive cash flow was 1.1 billion. We are now in the final stages of reducing our shareholding to 25%, which is expected to generate an additional cash inflow of 500 to 600 million. This step supports Archeon's transition as an independent listed company and its inclusion in the prime standard segment of the Tokyo Stock Exchange. The final proceeds from the Archeon transaction will depend on the outcome of the overall allotment option and will be confirmed after August 14. In the second quarter, our ad equity participation in Archeon contributed 24 million euros to adjusted EBIT. In reported EBIT, we recorded a gain in the amount of 1.4 billion after deconsolidation and recognition of the ad equity book value as of April 1st. As of June 30th, we adjusted the carrying value of our Archeon investment from the initial valuation to the recoverable amount and recognized an impairment loss of 297 million euros in Q2 within the ad equity result. The Archeon shares classified as held for sale were measured at fair value less costs to sell, resulting in an impairment of 222 million. Please note that the gain was recorded in discontinued activities while the impairment was recorded in continuing activities. The net impact is positive in the amount of 953 million euros. In the second quarter, we generated a very strong industrial business free cash flow of around 1.8 billion euros compared to 20 million in the prior year quarter. In addition to the cash inflow from the Archeon transaction, Our operating cash flow in the second quarter was supported by improved working capital management, primarily reflecting optimization of payment terms. As a result, net industrial liquidity increased from 7.1 billion at the end of the first quarter to 8.3 billion at the end of the second quarter. This improvement was achieved despite dividend payments of approximately 1.5 billion and our ongoing share buyback program. Given our strong liquidity position, we intend to launch the second tranche of our ongoing share buyback program immediately after completion of the first tranche, which is expected no later than September 16. The second tranche is planned to be completed no later than June 30, 2027, with a volume of up to 1.1 billion euros. Now let me turn to our guidance. Before discussing the changes to our full-year outlook, let me briefly revisit the assumptions that underpin our guidance. We continue to expect the North American heavy-duty truck market to land between 250,000 and 290,000 units, with a pickup in the second half of the year supported by replacement demand. For the EU 30 market, we expect a range of 290,000 and 330,000 units. To date, the Middle East conflict has had only a limited impact on truck demand and global supply chains. Looking ahead, any broader impact will largely depend on the duration of the conflict and could vary by region. At present, macroeconomic indicators point to a more constructive outlook in North America, while sentiment in Europe is stabilizing. As always, our guidance is based on current market assumptions, including the existing USMCA and tariff framework. As Karen mentioned, we raised our full-year outlook for 2026. Let me walk you through the changes. At group level, we now expect adjusted EBIT of 3.6 to 4.1 billion euros. For the industrial business, we now expect unit sales of 340,000 to 370,000 vehicles, revenue of 43 to 47 billion euros, and an adjusted return on sales of 7 to 9%, all above our previous guidance range. We have also increased our free cash flow outlook to between 3 and 3.5 billion euros. The driver of this upgrade is Trucks North America. Based on the lower anticipated tariff impact, higher expected sales volumes, and including closure costs of our Portland manufacturing plant, we now guide for return on sales of 9% to 11% and unit sales of 160,000 to 180,000 vehicles for the full year 2026. For the third quarter, we expect profitability to be between 11% and 13%. For Mercedes-Benz trucks, we continue to expect a return on sales of 6% to 8%. For the third quarter, we currently expect profitability to be in the lower half of the range, reflecting sequentially higher material costs and the resulting negative net price cost effect. For Daimler buses, continued weakness in Latin America and Mexico has led us to lower our full-year unit sales outlook to between 20,000 and 25,000 units. All other guidance items remain unchanged. For the third quarter, we expect profitability in the upper half of the guidance range. Financial services remains on track, and we continue to expect an adjusted return on equity of six to eight percent in 2026. Overall, the second quarter marked a turning point for Daimler truck. The actions we have taken, together with improving market conditions and a stronger outlook for trucks North America, increase our confidence that the positive trajectory established during the quarter will accelerate significantly in the third quarter. And with that, Marcus, I think we're at a good point to open it up for questions.

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

Good morning, ladies and gentlemen, and welcome to the Q&A part of today's Q2 Results Global Conference Call. We will now begin the question and answer session.

So our first question comes from Nikolai Kempf at Deutsche Bank. Good morning, Nikolai.

Yeah, good morning, Karin, EFA, Markus. It's Nikolai here from Deutsche Bank. Thank you for taking my question. And well done for Solid Water. Two questions from my side. The first one, the plan to build a new production in the U.S. and i know it's early days um but will you try to adjust your overall production capacity in north america once this plant is up and running and my second one is on mercedes and especially the probability in q3 which appears a bit soft and for example some of your swedish peers have already raised prices twice this year to offset the higher input costs. So was the market not ready to accept higher price for Mercedes, or have you been a bit too late to raise prices? Thank you.

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

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

Thank you. Next question comes from Klaas Bergerland at Citi. Good morning, Klaas.

Morning, Marcus. Hi, Karin and Eva, Klaas at 50. So I have a couple of questions. First on the order intake in Mercedes-Benz, can we talk through the percentage changes quarter on quarter across Europe, India and Latam? And I'm also curious what you see in your European business, including Germany here into the third quarter. And then on DTNA, I'm trying to understand, is this because your build slots are now more full than peers for 26, why orders were weaker than we thought? Or is this some sort of market share loss here that we're looking at? I'll start here on orders. Thank you very much.

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

Yes, Klaas. Hi, thank you for your question. So on North America, overall, what I can say that our order book really remains healthy and it's significantly stronger than a year ago. And when we look at our backlog growth, that really reflects improved customer demand and stronger order intake throughout the current order cycle. And, of course, we also align our production plans with market conditions and we maintain flexibility to respond to customer requirements. And we do see that because freight rates have improved significantly, fleet purchase intentions are rising, replacement demand remains strong. and we do really really see that also reflected in our orders as we started the third quarter because our class 8 order share in July has been at 45% and this is also showing that we're strongly positioned in the market and it always has to do a bit of the structure of the orders in the market which is why you have certain fluctuations overall but we are not concerned about quarter two because we had an exceptionally strong quarter four and also quarter one. And what we do see is that now also starting quarter three, the larger fleets and the rental and leasing customers are ordering again and they're placing larger orders again especially, which is a part of the market that we're particularly exposed to. And so we believe on a year-to-date basis, including July, order intake remains on a very healthy level. And when we look at our production, we have increased our production program now with the recent guidance range for quarter four. So we have only a couple slots open, but we're largely booked and very confident in the development there.

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

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

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

Thanks, Glass. So, as you know, tariff always a very complicated topic. As we have announced two weeks ago, we have received positive feedback on our U.S. content. application and that combined with then also the volume upgrade for Daimler Trucks North America that led to our guidance raise and you can well calculate how much we raised it at the midpoint what also is considered here is that we have restructuring costs for our Portland plant so we announced the Portland plant closure last week and there are restructuring costs associated with it which we won't adjust because we do have a new guideline for special reporting items and we do not want to adjust that much and therefore this will be in our adjusted EBIT affecting us so these are the moving pieces that went into the guidance range I can tell you about MSRP so the so-called IAO credits we have we have applied for them as the calculation method has been released so we applied um in june and there's an assumption for that one in there as well in our race guidance thank you so the next question comes from daniela costa at goldman sachs please good morning daniela hi good morning thanks for taking my questions um i have one in the us and one in europe but i'll start by the the us one um can you give a little bit of of background of sort of like thinking about the new um greenfield investment so um a couple of items i guess there you said late 29 so

when you finish this where will your mix mexico versus us be and are you changing the mix even before um opening up the plant and does it impact your um capex guide which i think went sort of on the cmd uh up until 28 so does that change or was it already included there and then i'll ask the European one?

Yes. So I think it's, as I said earlier, with the new plant, it gives us a lot of flexibility. I mean, we have already today, as you know, quite good flexibility in our network to move volumes between Mexico and the US, depending on different conditions. With this new plant, we will have even more flexibility to do that. And of course, with this kind of greenfield investment we have the opportunity to really leverage the latest technologies to use a lot of automation which has been made available in the last couple of years and we think we can get a plant with extremely good productivity which will be very competitive as for the capex i hand over to eva yes um thanks angela so on capex it's a bit early to share the capex number for the plant because we're in the process of finalizing the site selection what we can say is that it will be our largest plant in the united states and as we said at our capital markets day

we expect our capex to peak in 26 and 27 and they will still be at an elevated level in 2028 and this is still what we assume and it's also worth noting that the new plant in the u.s it is a very strategic investment into our production footprint and competitiveness in north america and I can also say that it offers an attractive payback.

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

So maybe starting with the second part of the question. We also see these announcements, but we don't yet see these trucks running with our customers. So and we don't see it also in registrations. as I mentioned in the speech on zero emission trucks we actually have a 38 percent market share and we just announced also one of the product gaps we've had so to speak has been the low liner which is used for volume goods for instance for like automotive inbound outbound logistics we will launch that now at IAA which I think will put us even in a stronger position in terms of competitiveness so we are quite confident in our portfolio but as you correctly point out the overall market is still too small and we see that as an industry so not time to truck specific but as as an industry in order to to reach the 43 co2 target reduction electrification rate in 2030 has to be around 35 percent so for sure it's a steep slope to go from the six percent which was still much better than what we've seen before but the six percent to 35 and the main bottleneck still remains infrastructure meaning charging stations so even customers who want to transition to electric in many cases cannot do it because they can't charge the trucks on the road. So this is a challenge and working, of course, very close with the colleagues on this topic in ASEA and VDA and also addressing it in Brussels. And what we're trying to achieve is to have a better connection between all the different legislations that will enable this transition, meaning the truck availability but also the charging station commitments that are actually legislated and the countries have committed to build but are not building at the rate that they promised and also the Eurovignette directive which differentiates the road tax depending on if it's diesel or electric trucks which is only implemented in 13 out of 28 member states which makes then the tco calculation for customers in the countries where it's not implemented a little bit difficult so that's

the current situation thank you so next question comes from harry martin from bernstein good morning Eric.

Hi, morning everyone. Thanks for taking my questions. So a few on the US. So the first question I have is just on the service and parts business. Did you see that business growing Q2? And then if you could give some commentary on the new truck sales, it looked like mix on those new trucks was down year over year again in the second quarter. Is that the fact that large fleets to making up a bigger portion of the mix and does that mix improve in the second half of the year and then the second question the set of questions I have is there's some follow-ups on the new plant in the U.S. I understand the rationale will it increase total capacity in North America or would you downsize part of the Mexico production in you know in association was this a prerequisite it for the tariff deal or totally unrelated? And then, you know, the final sort of thought or question is, does the U.S. market have room for the new capacity from you, from Volvo in Mexico, from Tesla, all in the space of a few years? Or, you know, is there some concern about the total level of capacity? Thank you.

Thanks, Harry, for your question. So, on the service and parts business in the US, it was up mid single digit year over year. So yes, we do see it growing. And when it comes to new truck sales, if I understood your question correctly in the mix, as I said, when I answered the question from class, so when we look at the last three quarters, We actually have a very high order intake development, which is contributing to a significantly improved backlog.

In the second quarter, it was a bit lower, but I also said that the large fleets and the rental and leasing fleets, that that was a bit lower in the second quarter, but that is already starting to really catch up in the third quarter now with the 45% Class 8 order share that we're seeing in July. on on the plant so i think as i mentioned before it's a strategic investment it gives us more flexibility in the market and we will leverage latest technologies to really ensure that we build a highly efficient plant it will increase our capacity yes but i think this is a good thing because today when we're at the top cycle we do have a limitation in terms of supply so this gives us opportunity for growth we will continue to grow from our strong position today and as I think you know we're also trying to gain market share on the vocational side where we still have a lot of potential for even further growth so this makes us confident to take this investment now.

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

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

Great. Thank you very much. Next question comes from Louis Merrick at BNP Paribas. Good morning, Louis.

Good morning, Louis Merrick at BNP Paribas. Thank you for taking my questions. Well, we've got clarity on the EPA 27, and you're in the unique position that you've got a good balance of NOx credits to use, I think there's time for the regulations to change, but based on your current understanding today, how do you plan to use those NOx credits, how many units will they cover, and will these be able to be used to offset any non-conforming penalties? Pia recently suggested that wouldn't be the case, but I'm keen to hear your understanding.

Yes, thanks, Harry. Thanks, Louis. Sorry. Still the last question. Busy morning. Thanks, Louis. EPA 27. So what I can say is that credits are part of our technological solution to achieve EPA 27 compliance. It gives us some flexibility in certification. so we won't discuss today details of the certification but please keep in mind that these credits are awarded for our current engine generation that have lower emissions than what is required by law. What we can also say is that our EPA 27 compliant engine it's a technical solution that will be highly robust as it will not require a 48 volt system and we do not expect any non-conformance penalties having to be paid for our EPA 27 compliant engine because we will be fully compliant with the engine that we launch beginning of next year.

And just on the task, can you give us a sense of what percentage of qualifying US content you've actually agreed with the US Department of Commerce?

We cannot share any details on that, Louis.

Yeah, understood.

Thank you. so next question comes from jp morgan morning thank you marcus um couple questions please um i think we can discuss order intake for very long and i think we heard during the call that you're confident on order intake for for q3 momentum okay maybe just to spin it in a different way can we talk a bit about the production run rate ratios going into into the third quarter and do you see them also elevated versus q2 when you see or improved maybe as you think about europe Europe and North America, which again would sustain the view that the momentum remains strong order-wise in Europe and US for you.

And then second question, the topic of after-sales in Halberstadt, is this something that you think it will be solved by the fourth quarter or maybe as quick as Q3 in terms of the impact on earnings we saw we saw in in mbe trucks in the same special thank you should i the production yeah thanks jose on the on the production um so we are expecting production to be slightly up um in the in the third quarter so for mercedes-benz trucks and for trucks north america and even for further in the fourth quarter and what we also see based on orders development is that our production program is largely booked for both these segments.

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

Thank you very much.

So next question comes from Shaquille Karunda from Morgan Stanley. Good morning, Shaquille.

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

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

Thank you. And then on the EPA situation. So the NCP mechanism that's manufacturer-certified engines weigh above the 2027 NOC standard to 200 milligrams, it seems. And, you know, from the latest sort of development, it seems like your peers are quite happy to take advantage of this. So by fully complying, it sounds like you'd be in the market with a more expensive engine. I mean, is it that you're incorporating costs are just so much lower or you're expecting that, you know, the fuel efficiency from the new engine will pay off. Can you walk us through the strategy here?

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

Thank you. Next question comes from Alex Jones at Bank of America. Good morning, Alex.

Morning. Thanks for taking my questions. Maybe the first one just on this U.S. facility. Are you able to give any sort of quantification or color on the cost advantage of the new plant compared to your existing capacity, you know, given you can design it from scratch, as you highlighted earlier? And then the second question just on autonomous. Volvo obviously announced of their Capital Markets Day, that they will be commercializing or launching commercial autonomous vehicles in the U.S. in Q1 2027. How do you view the progress with torque in that light, and is there any risk that you're sort of a year behind your key competition?

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

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

Thank you. Next question comes from Anthony Dick at AutoBHF. Morning, Anthony.

Yes, good morning. Thanks for taking the questions. The first one is on the tariff topic. I mean, I'm wondering if you can provide any further incremental colour in terms of how much the more favourable tariff treatment or tariff outlook contributed towards your guidance upgrade or any details also on the MSRP offset impact and the IEPA impact in Q2. And the second one is on the Portland plant shutdown and restructuring. I don't know if I missed this, but did you provide the actual figure for the restructuring that we should take into account for H2? Thank you.

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

Thank you.

Next question comes from Michael Espinel at Jefferies. Good morning, Michael.

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

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

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

I'm afraid I cannot, Michael.

Okay, that's all right. And then just confirming, because it sounds a little bit different to how some others are approaching, that you're not going to sell the 2026 engine in 2027, as it sounds like some other people will?

You've understood that correctly, yes.

Okay, cool. Thanks very much.

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

Have a great day. Thank you and goodbye.

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

If you wish to ask a question, please press star and one on your telephone keypad. Please press star and two on your telephone keypad if you wish to withdraw your question. One moment, please, for the first question.

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

The first question comes from Christopher Kowalinski from Welt. Please go ahead.

Christopher Kowalinski from Welt, good morning. I wonder how serious you treat the EU regulation and what's the possibility that there will be fines that will really affect your numbers and affect the share price? Is it really a risk that in two years' time we will see no EBIT and we will have the share price come down? Or do you think this is something that could be mitigated?

Thank you for the question. So, the current regulation stipulates that we should reduce CO2 by 15% compared to the 2019 baseline. So, that's the scheme we're currently in. And we are quite confident that we are able to deliver on that. So for the next couple of years, situation looks under control. I think the big challenge comes in 2030 when it goes from 15 to 43 percent. And the actual measuring period for that is mid 2030 to mid 31. So if we were to pay something, I think it's more like 2032. But yes, it is a risk. And that's why we take it so seriously. We invested many hundreds of millions to build and be able to deliver great electric trucks. And we see that the take rates aren't where we expected. As I mentioned, 6% of heavy-duty trucks registered in Europe Q2 were electric, and we are very keen to have that increase over the next years, because to hit the 43%, we believe we need around a 35% electrification rate. So we are working very closely with both the German government and the EU to really push that the enabling conditions are in place. And that's why we are also asking for an early review of the CO2 regulation, where we hope that we will look at it and connect it much more to the enabling conditions, such as charging and cost parity. and especially charging capacity is currently the bottleneck that doesn't make the take rate go up relative to diesel right now.

The next question comes from Michael Scheppe from Handelsblatt. Please go ahead.

Yeah, good morning everyone and thanks for taking my questions. I have three questions all on the US. you are expecting higher sales volumes in the US market. Can you give us some details? Why is the market there developing better than you have expected before? The second question is on the new US plant. Can you give us any number or any figure on how large the investments are there? And the third question is on the U.S. tariffs. I mean, you are receiving a refund of the tariffs. Can you give us anyhow a number or a range? And why are you being so reluctant to name a number there? I mean, it's a good news for you, isn't it, that you're getting back money? Maybe you can give a bit more details there. Thank you very much.

Thank you, Michael, for your questions. Yes, Eva here. So on the higher sales volumes in North America, what we really see now after the first half of the year is that we're getting out of this so-called freight recession in the United States that has been affecting us for the last couple of years. We do see that freight rates are up significantly, about 30 percent since the start of the year. Freight volumes are only slightly up, but we also do believe there will be a further improvement coming in the next couple of quarters. And we have raised our guidance and our volume projections because we do see the orders that we have received in the last three quarters. And this is why our production program is basically full with a few limited slots left in quarter four. And because of that, we are confident in achieving these higher sales volumes in the second half of the year. And on the U.S. plant, it's a bit too early to share how much we intend to spend on the new plant because we're currently in the final stages of the site selection. It will be our largest plant in the U.S. And we will share more once this is possible. And on the U.S. tariffs, this is a very, very complex topic, but what we have shared is that we have increased our guidance for North America and also for Daimler Truck as a whole because of tariff-related improvement and also the volume impact. And so there, both of these factors are attributing to the increase in our EBIT projection. And also in the analyst call, we just discussed that also the Portland plant closure, that is a negative impact that's also considered in the guidance range with a high double-digit million impact.

Thank you very much.

The next question comes from Marlene Martin from Bloomberg News. Please go ahead.

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

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

The next question comes from Ilona Wissenbach from Thomson Reuters. Excuse me, please go ahead.

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

Thanks, Ilona. So just to be very clear, no, we are not building this plant to avoid tariffs. And sorry if I said something which was misinterpreted. It's a long-term strategic investment. We are very strong in the U.S. market, as you know, and we think this is the opportunity that keeps us strong and also gives us even further potential to grow in the U.S. market. We have not with this announced that we will close any other plants in Mexico or in the U.S. We will have a lot of flexibility and I think it gives us even more opportunity to really optimize our strategic network going forward. So that's the background. With regards to the Portland plant, you're right, it's quite a small plant. So the closure affects 370 employees. and the reasons are also that it's a quite logistically a challenging place to have a plant as most of our customers and most of our suppliers are on the east coast as an example we're shipping cabs across the country to this plant and as said it's a rather small volume plant that we can absorb within our current network so that's the background on that one and the aim is to close the plant by end of the year.

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

Thank you, Ilona. Good question. So on Germany and the infrastructure measures, we've been waiting for a while to see them really be translated into order intake on our side. I mean, the German market is up year over year, but we do not see that significant uptake that we, well, still hope to see at one point. But so far it's taken longer than we thought and we haven't also seen it in quarter two. So Germany is still in the, when we look at Europe as a whole, it's still comparably a bit weaker in the recovery than other European countries. And when it comes to the River Rhine and the drought, I mean, one thing where it also affects us is logistics, because we need to make sure that in the second half of the year, where we expect higher volumes in Mercedes-Benz trucks, that we get the trucks to our customers. So we've already taken measures for alternative routings on the road instead of on the river to make sure that our customers receive their trucks. And then, of course, we're always looking at supporting where we can with providing as many trucks as we can on the road to support there.

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

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

And most trucks we already transport today over road.

Ah, okay. Thanks.

The next question comes from Joachim Herr von Börsenzeitung. Please go ahead.

Thank you. Good morning. There's one of my questions left regarding the plant, the new plant in the U.S. Already discussions you're leading with the government and do you expect any funding?

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

Thank you.

The next question comes from Alexander Ljungert von Mannheimer Morgen. Please go ahead.

Yes, hi. Hello to everyone. Just one question. Some German factories like Mannheim manufacture components for the U.S. markets. Will that be reduced if you open a new plant in the U.S.? Thank you.

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

Thank you.

The next question comes from Robin Ville from DPR Deutsche Presse. Please, go ahead.

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

Hi Robin, thanks for your question. So first, on the order intake for Mercedes-Benz trucks. So overall, we've had a very strong order intake for Mercedes-Benz trucks in the first half of the year. It was extraordinarily strong in quarter one, sequentially a bit weaker in quarter two. But we do overall see that we have a significantly higher backlog than we had a year ago and that our production program for the second half of the year is largely filled and that we will get a significant volume growth there. With Daimler buses, what we see there is that the European market is very strong when it comes to the integral bus business, but we see that Brazil and Mexico, the markets are very weak. And this is affecting us from a unit sales perspective. But you see also that in revenue, we are compensating this because the European bus business, it has higher average selling prices per bus than the chassis business that we do in Brazil and in Mexico. And when it comes to the new factory in the US, we haven't finalized our site selection yet. So I cannot tell you yet where it will be. But once we have decided, we will also let you know.

All right. That was the last question in the queue, but I do want to give a few seconds for any last inquiries. Please insert them now. All right. That looks like it's it. So, ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you very much, both Karen and Ava, for answering the questions. Now, as always, the IR team and the communications teams remain at your disposal to answer any further questions you might have. A recording of the session will be available later today on our Diamond Truck website. We are looking forward to staying in contact with you. Have a great day and stay healthy. Thank you and goodbye.