Jan Krönig, Head of strategy, Daimler Truck
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An unedited transcript is below.
Ali Tabibian:
Welcome, welcome, welcome everyone to this episode of Tech. Cars. Machines. This is your host, Ali Tabibian. As always, you’ll find more information about me and this podcast series in the show notes.
“If you bought it, a truck brought it.” The trucking industry uses this catchy phrase to rightfully remind everyone of how important the trucking value chain is to the economy. A couple of episodes ago, we talked to a representative of the powertrain part of the value chain. Our guest was Amy Davis from the world leader in commercial powertrains, Cummins Engine. Amy leads Cummins’ efforts in new, carbon-friendly power sources. Today’s episode is very special because we go to the next step in the trucking value chain by talking to another world leader: public company Daimler Truck Holdings. In particular, we have the pleasure of hosting Jan Kronig, who is the head of strategy and corporate development and is based in Stuttgart, Germany.
Started about 100 years ago as part of a group of companies commonly known as Mercedes Benz, Daimler Truck has been an increasingly independent part of the Mercedes Group, leading to its listing as a public company in December 2021. Today, the company has about 40bn Euro of annual revenues, spends about 1.5 bn euro in R&D every year, and has roughly 100,000 employees and sells about 110,000 vehicles a year. You can recognize their trucks and buses via the Mercedes star logo in some countries, and in places like the United States the familiar Frieghtline trucks are, in fact, Daimler vehicles. One thing to emphasize about the large truck companies, especially Daimler, is how global they are. Jan will give you some details, but remember that in each geography he mentions, Daimler doesn’t just have a presence, but is a major player.
Daimler’s customers typically pay twice as much for fuel over a vehicles’ lifetime as they do in purchase price. Therefore, increased fuel efficiency is the recurring top objective of the company’s development efforts. However, squeezing more efficiency out of engines that burn fossil fuels is getting harder. At the same time, commercial transportation is responsible for a good portion of global CO2 emissions, a fact that hasn’t been lost on Daimler. Daimler’s reaction has been to aggressively transition its offerings to a dual-track battery and hydrogen fuel strategy, which Jan has had a hand in formulating. This will be the main topic of today’s discussion.
Without further ado, let’s get to it!
Jan Krönig:
Great.
Ali Tabibian:
Welcome everyone. We have a great guest for you today, Jan Krönig, who's coming to us from Stuttgart, if I'm not mistaken, Jan. Is that correct? Is that where you are today?
Jan Krönig:
Yeah, that's where I'm at today. Thank you very much. Thanks for having me here.
Ali Tabibian:
Great. Thank you. And Jan and I have known each other in the business context for, I want to say a couple years now. We've had some really great conversations about the world of commercial transportation, both medium duty and short duty. And I should say medium duty, short haul, as well as heavy duty and long haul. And as the head of strategy and corporate development for Daimler Trucks, there aren't that many people in the world, and I'm not exaggerating, who know more about the segment than Jan does. And Jan, tell us a little bit about yourself. I noticed that you obviously have a PhD, and you did that in Switzerland, I think if I'm not mistaken.
Jan Krönig:
Yeah.
Ali Tabibian:
And then went on to McKinsey, and then what used to be Daimler/Mercedes. Tell us a little bit about that background.
Jan Krönig:
Yeah. So thank you very much. So my background, as you said, I started out at St. Gallen University, had an MBA then in the University of Miami. Came to McKinsey, and from that, I started out with Daimler AG back then, which then turned into Daimler Trucks. And what I did is actually focusing on sales and marketing, on after sales, on procurement. And then finally, it brought me back to strategy. Being a consultant before, that actually came quite naturally. And I'm really enjoying them for three years for now what I'm doing.
Ali Tabibian:
Absolutely. And Jan, I remember I knew about you before we met, because I do recall that a couple of the strategy documents that I once read that was issued by Daimler Trucks, the Daimler subsidiary at that point, actually had your name on it. So that was a good way of getting introduced to you, introduced to your thinking even before we met. So tell us a little bit, Jan, about what does Daimler Trucks do? Clearly, it's an independent company right now, independent public company, but what markets do you serve? What geographies do you serve? And in what geographies do we see the Mercedes logo still? And in what geographies will we see another name, let's say in the United States, that actually would be Daimler?
Jan Krönig:
Right. Yeah, sure. So Daimler Trucks is actually proud to be the biggest heavy duty and medium duty truck manufacturer in the world with 450,000 trucks a year. We are truly global company being in all the trade markets and selling close to 120 other markets over the world. We have strong global local brands, which we lead globally. So in the US, we are Freightliner, Western Star, and Thomas Built Buses. In Europe and Brazil, we have Mercedes-Benz. And in Asia, we have FUSO.
Jan Krönig:
And these are really truly strong brands, which then range of light trucks, that is rather in Latin America and Asia, medium trucks, which are then in Europe and the US, and then heavy trucks, which are also mainly focused in Europe and the US. So that is the core of our business. And we are really proud to serve all the world to all the ones who keep the world moving, because we are convinced by supporting our customers, we will have the best impact to the industry.
Ali Tabibian:
Jan, one additional thing I've noticed about Daimler and the Mercedes logo on big vehicles is, both overseas and I think in the US, I've been on buses that look like they belong to you. Is that correct?
Jan Krönig:
Yeah, that's correct. And probably when you were still really young as a school child you rode in a Thomas-built bus, which we're doing in the US. And then in Europe we have Mercedes-Benz bus which is actually one of the leading companies for city buses and also for all long-haul over-the-road buses where we're actually selling them in Europe and Latin America and a lot of other countries. So that's also very strong footprint of our company.
Ali Tabibian:
Excellent. And do those buses also have your own powertrains in them and are they built local to their geographies or is there a different distribution for that business?
Jan Krönig:
Yeah, they're actually quite local. So for Europe, for Latin America, for the US, and also for Asia, but they have one thing in common. They use our own powertrain. As we also see here, significant potential by playing with all the different levers to make that the best drivetrain then in the world.
Ali Tabibian:
Excellent. Thank you. And when you say medium duty and heavy duty, just give us a sense for what that means in your vernacular.
Jan Krönig:
So medium duty would be kind of what you call in the US, class five and six trucks, so 6 to 16 tons, and even above that. Depending on which region you are, heavy duty trucks are normally from 16 to 50 tons, so class seven and eight trucks. I mean, they are really all different in terms of the applications they're in, so they might be long-haul trucks, particularly in the heavy-duty segment, and distribution trucks in the medium-duty segments. And all what we are doing are trucks which serve special purposes. And so then we also have a significant range of products, which we serve.
Ali Tabibian:
Excellent. And one of the interesting things about the trucking industry is that a lot of the participants are both vertically integrated, but at the same time, actually transact and purchase from people who would otherwise be their competition if I'm not mistaken. So for example, Daimler is quite vertically integrated in terms of producing its own engines, as well as all the way through the vehicle system, and of course, all the after market and sales support. Is that correct?
Jan Krönig:
Yeah. So we are a pretty integrated company doing our own engines. However, in the US, for example, we also buy engines from others and built them in their vehicles based on the customer request. In Europe, that is rather an integrated model. Why are we doing that, and I think we've shown that quite nicely in our vehicles in the market, is that if you have all the pieces of your drivetrain in your own hands, you really can make a difference. Our customers, they look at the total cost of ownership and one big piece is of course fuel consumption out of it. And so by controlling all the bits and pieces from your engine, from your transmissions, from your axles, and orchestrating that, then you can make a difference towards the customer, which they then really appreciate and offer your product.
Ali Tabibian:
Exactly. To draw a very distant comparison, but it's still a really relevant one, one of the reasons an iPhone has one of the smallest batteries amongst all the smartphone manufacturers is their vertical integration. They're just a lot more power efficient. And that shows up in Apple's gross margins, because that battery cost is a big part of the cost of that handset. And if you can get away with a smaller one, more money in your pocket.
Ali Tabibian:
One last question, overall question, because I know it'll be on a lot of people's minds, as a spinoff from Mercedes, are Daimler Trucks premium priced? Does that carry over? Is that heritage common or is it just a different approach to your marketplace?
Jan Krönig:
There always was and will be a different approach than Mercedes-Benz. So in our industry, I wouldn't say that there is a kind of a premium pricing. I mean, either you can provide your customers good value, which they then can make money with. Then you get a premium, so more money than the others, or you cannot offer that, and then you're not getting a premium. So as I think, we are really, particularly on the TCO field, in most markets have an advantage, customers are willing to pay more for Mercedes product, or Freightliner product, or FUSO product, than for other brands. And that's what you could consider premium, but it's always founded by the value we are providing to our customers.
Ali Tabibian:
So, Jan, during our interactions over the last couple years, the subject has always essentially been about sustainability and efficiency. And you've been in the industry for a long time, how quickly and how strongly has the sustainability and ESG objective come along in the last few years? Has it always been there and it's sort of we just notice it now, or has it suddenly become a very strong objective for the market participants?
Jan Krönig:
I would say it has been there for a long time. Yeah. But with now society, and I think that's important to understand about ESG that yes, of course, it's also there about rulings. And so, but at the end of the day, it's all about society. And society over the last three to five years, I think worldwide, but definitely in Europe, is more pushing for, we need to have a more sustainable company, not company, but a more sustainable society. And by that, it means everyone wants to be in this society, so every person, every company also has to contribute with.
Jan Krönig:
And that of course then puts particularly a different mindset in a company like ours in place that we also say, of course, you need to understand how we contribute to this target, which the society gives it to yourself. And this is getting more and more important to the people, and that also is more and more important to us.
Ali Tabibian:
Excellent. You kind of anticipated some of my questions here. How resilient is this focus? In other words, when there's an economic shock, political shock, in the case of some of the problems in Ukraine, does the focus suddenly go away or is it managed to survive some of those shocks?
Jan Krönig:
The focus will definitely stay, so I cannot imagine that the focus on sustainability will go away. It's right now overshadowed by so many different things, so many other crisis. Yeah, but the focus still stays and it will never go away. And that's why also our efforts will never go away. And if you really think that through economically, so just from an economist of viewpoint, you always will see that yes, all the resources will get scarce. And by that, you need to do something to be more sustainable also from a purely economic reason. And that will also fuel this trend, and by that it'll stay and everyone has to contribute to support it.
Ali Tabibian:
What’s the split between what's mandated and what is self-imposed?
Jan Krönig:
That's really tough to differentiate. I've thought about that, because I would say in principle, most of these things are self-imposed, but as regulation is also on reflecting society, you see that the ruling, at least in Europe, which is quite tough, hits mainly the things which we would do probably ourselves too. So I would say you could feel that now self-imposed or by regulation, but it comes from the same reasoning.
Ali Tabibian:
The reason I said to what extent potentially does this focus go away is because in this country, in the 1970s, we had an oil shock. And these various oil shocks come along. And you can see how, while certainly the average vehicle has gotten more fuel efficient, an amazing amount of the fuel efficiency of the engines has been given up to just bigger vehicles and heavier vehicles. And we just really have lost focus on it several times. And so that's why for me, it's always interesting to see to what extent are we really going to learn the lessons this time. But I do think when the weather changes-
Jan Krönig:
But I think that's a great piece because if you think about it, in the '70s, that was really an external factor, or not external, but it was an oil shock.
Ali Tabibian:
That's right.
Jan Krönig:
So it was not something which came from inside the society. And that's, I think, which is really the difference now, because it's carried by people who say, "If you don't do that, we will not live in the world, we want to live through. At the essence, that's kind of it. And by that, the sustainability, so to say, is more sustainable because it's not driven by an external shock, it's something which is coming from society by itself.
Jan Krönig:
But just to add to that, I mean, if you really think about it, to decarbonize our industry, three things have to be in place. So one, we have to have all these products which can use either electric power or hydrogen, because these, and we'll come to that probably later, will be the two sources of zero emission vehicles. The next thing, and we should not forget about that, is the whole infrastructure, which has to be in place, so charging infrastructure for battery electric vehicles, and green hydrogen infrastructure for hydrogen trucks. And then the next piece, which has to be in place, that the total cost of ownership or the cost parity has to be there.
Jan Krönig:
And this is kind of a tricky formula because if one of them is zero, so if you don't have infrastructure, for example, I mean, then you cannot use our vehicles. And that's how we think about it, and also how we optimize the whole equation to make sure that what we are doing in terms of our vehicles is then also really translated in decarbonization of our industry.
Ali Tabibian:
Okay. Excellent.Tell us a little bit, maybe really break it down, sort of in a matrix or whatever framework you put to it, what are the challenges of your transition? How do you think about it, and how do you assign different fuels for different applications if that's where you're headed?
Jan Krönig:
Right. So let me start, first of all, how we view that decarbonization in terms of which kind of strategies we have. So I think we are thinking about that we'll have two kinds of propulsion systems. One is a battery electric vehicle, and one is a hydrogen electric vehicle, so fuel cell electric vehicle. So this is the basic of our strategies. Why do we have two different technologies? Because we see that on the hydrogen side, you have energy carrier with hydrogen, which allows you to put more energy on your truck. And by putting more energy on your truck, you will have longer range, which then will particularly support long-haul distribution, so that is the core application for hydrogen.
Jan Krönig:
On the battery electric side, we are pretty convinced you can use that tool of course, but that will limit you in range. And by that, you're rather on the medium-duty distribution side. And then you have on these two things, a great advantage for hydrogen, and a great disadvantage for battery. This is the core concept where we say, "We need to have two technologies behind zero emission vehicles."
Jan Krönig:
And both of them, by the way, have now different challenges. So let me go to battery electric vehicles first. In battery electric vehicles, the core challenge is to bring enough kilowatt hours to the truck, so if you want to get a range of 500, 600 kilometers, you kind of need also 500, 600 kilowatt hours on the truck. You can do your math now, so that means a lot of weight, but also a lot of cost because we are not that cheap, and then you can drive for this distance.
Jan Krönig:
So now comes in the point that if you use that, you have actually, and that's different from the passenger car side, the challenge that as a professional user, you have to manage not only the one thing range, you also have to take into consideration the routes to go from A to B, so the whole route optimization. Where does the driver has to stop? How long he wants to stop, has to stop? And then also of course, all the traffic information. So your optimization algorithm gets more and more complicated. And so the more you have to charge this truck, by the way reach, I mean, 500 kilowatt hour, just make your math, with the currently existent 100 and 150 kilowatts, it takes you five hours, approximately 350. You are down to two hours, not one and a half hours. Then with megawatt charging, which will be the future, you have around 45 minutes, which is the charging you want to have.
Jan Krönig:
And then you really have to put all these factors in place to make your asset usable. And that's the big challenge to get that. And if you then go to infrastructure and say you want to charge it, it's all about where you want to put your megachargers in the future to charge this truck, then you have to have for this charging station, first of all, enough space, and also enough charging power. So you're talking also easily in 10 to 20, to 30, to 40 megawatt you need, which is easily midsize city in the United States or even in Europe. And then you have to provide the power immediately.
Jan Krönig:
So that is kind of the challenge equation of what we are doing here, but we are trying how to support that, first of all, of course, with pretty good vehicles. You see that already with the eCascadia costs in Europe and the US, so I think we have the products available, but we are doing also now, and we just launched that in Europe, is to also support the charging infrastructure with, in Europe, we bundled up there with TRATON and Volvo to build the first on-road charging to support our trucks. And this is the thing, how you bring battery electric vehicles to life.
Jan Krönig:
On the hydrogen side, it gets of course in technology, so we are going here very much into the fuel cell direction where we have a joint venture with Volvo for fuel cells, which is called Cellcentric. Here, it's of course also about the on-vehicle technology, but then you have to really see where is the hydrogen coming from? Because hydrogen currently, particularly green hydrogen, is not something which is easily available. So here you really need to understand then how all the infrastructure companies will produce and then also deliver that energy carrier.
Jan Krönig:
On the other hand, if that is then available, the filling station hydrogen and also the logistics to it, and also the filling, will be pretty much comparable to what you experienced today. And for all these things we, of course, are talking and working together with companies now, which could support green hydrogen.
Ali Tabibian:
Wow. Thank you. That was a great education. I really, really appreciate it. How's the experience on the busing side with respect to electrification?
Jan Krönig:
Here, the experience is really good. And with our tower in Europe, we have shown it now in cities. For example, Nice to Frankfurt in Germany that we are electrifying a whole bus depot. And we can do that actually by really understanding every single route. And by that, you can optimize the vehicle, the operations of the vehicle, and then also tailor to the range the bus has. And by that, optimizing the whole bus operations. And for that, because it's all plannable, battery electric buses are a prime example how to operate electric vehicles.
Ali Tabibian
Maybe provide a little bit more resolution, if you will, Jan, in terms of the type of route or the type of distances. I guess you talked about distance, but are there types of routes, particular types of applications that lead to you to differentiate exactly where that electric applies versus where the hydrogen fuel? Is it mostly a matter of distance that that vehicle travels that day or between stations?
Jan Krönig:
I mean, it's basically weight and distance, but then it goes into details. I mean the perfect route for an electric truck is a daily route where you deliver goods from one point to the next, to the next, to the next. And then go home into your Depot and charge overnight, and do that every single day, completely plannable. That's by the way, why you see also in the bus business, which we, of course also bringing that city buses, electrification is great, because here you are, for every single bus, a completely plannable route. So you can predict whether battery range is enough or not. So if you're losing that optimization grid, so to say, then it gets always trickier for electric trucks. So if you have to first, the first on-highway charger, that's all doable, but of course, then you have to get that charge that has to be available, and then it can continue route and go somewhere else.
Jan Krönig:
So the longer and the more flexible you want to use your truck, the more optimization parameters you have to consider. In order to support that, we are building these charging networks so that of course our customers can do that as flexible as they want to. And then comes the limitation where I would say it gets really tough to use battery electric vehicles if you're then coming into daily ranges over 800,000, 900,000 kilometers per day. Because then if you look at how much you have to recharge, then a hydrogen truck most likely will always be a better than electric trucks in terms of efficiency of use.
Ali Tabibian:
That's right. It's interesting. One of the interesting things about hydrogen is people think of it as an alternative fuel, but it's also a means of storage.
Jan Krönig:
Absolutely.
Ali Tabibian:
Storage of electric power, essentially storage and transportation of electric power. And I think we did the math once. In the US, a modern class eight, long-haul vehicle has 3,000 kilometers of range, it has a 300-gallon tank, 1,200 liters or so, that it fills in 45 minutes as an apartment behind the cabin. And that truck goes for 2,000 miles on fuel. And I think we did the math once and it would take a 15,000 or 16,000 pound battery for that vehicle to come anywhere close to being able to handle. And by the way, it's also limited by the ambient temperature, etc.
Jan Krönig:
Right.
Ali Tabibian:
So I think I'm so glad we're talking a lot about hydrogen because people keep thinking electric. That's where the market caps are, that's where the attention is. But for a lot of applications, it just doesn't really work. Not in the sense of the vehicle not being able to run on batteries even, but just, you have to have energy delivered to it at the right time.
Jan Krönig:
Absolutely. Yeah.
Ali Tabibian:
And quickly, because these are commercial vehicles. They're not designed to sit around doing nothing, right?
Jan Krönig:
Yeah. No, no, I couldn't agree more. And also, as I said, and you touched upon it, also putting the infrastructure in there, is if you look at it for a limited amount of battery electric vehicles, that won't be any problem, even let's call it if you're in the ramp up to put the infrastructure in there. But if you want, for every single truck in the future, the charging network, then you probably will get even all these charging stations in there then to provide the energy at the day that you need it. This will be then a huge challenge.
Ali Tabibian:
And I'll get to the charging infrastructure in a second, we talked about battery electric, we talked about hydrogen fuel cell. Presumably there are variants inside of these in terms of the particular type of electric vehicle. And presumably, since you don't know exactly when that transition will be substantially complete, if you will, presumably you're also maintaining some development path for the combustion engines. I know it's more fun to have all these things doing, but is it an advantage or a disadvantage to be vertically integrated when there are multiple platforms like this that need to be developed? Would it be easier to have one or two global manufacturers manufacture commercial-grade electric vehicle power trains, etc., and for you to purchase from them? Or do the players, are they big enough individually to handle all of this at the same time comfortably?
Jan Krönig:
So in terms of vertical integration, and I mean, you're kind of right there coming from the heritage that we experience, that by optimizing every single piece of it, you can make the system much more efficient. What we are seeing now in the electric world that actually a similar logic also applies. So that it's of course about the one, or the two, or the three pieces to optimize them, but to get the system right, particularly if they have a battery, an eDrive, and cooling, which you then optimize, then you can make your vehicle much more efficient and get then the last mileage out of it.
Jan Krönig:
And that's why I would argue a certain degree of vertical integration makes extremely sense, whether you really have to go to every single depth of cell chemistry, for example, I would say, let's see. But to understand it is important. So there, I would say vertical integration helps. Do you have to be present in every single technology? That would be for me rather, the more important question here, I think it's all about investing wisely and looking for partners, so that you share your risk, and by that also the chances, and to see that you get together with people who can help you to go for the right direction.
Ali Tabibian:
It's interesting, Jan, I was obviously trying to make the question a little more controversial for fun, but in my experience, the companies that think that they don't need to be vertically integrated in certain key aspects, the ones that say, "We don't need, we can outsource a lot," either have a lot of market power in the sense that they can force the vendors to develop exactly what they want, as opposed to something that serves a broader environment, because they are the economy of scale as the prime contractor, or they don't know who their customers are, and to a degree of precision, that's good for a long-term success. If you know who your customers are and you know them really well, it's really hard not to be vertically integrated. It really is.
Ali Tabibian:
Let's go back to the concept of actually delivering the energy source, whether electricity or hydrogen, or whatever it needs to be. I mean, clearly in the past, Daimler and other trucking companies, truck companies, not trucking companies, but truck companies. I mean, you don't own gas stations, you don't really have any of these things. So that's another degree of embracement of the value chain, if you will, of delivering your solution that you're now involved with, so I'll go back to the original question. They're the best companies in the world, and Daimler, as you said, is sort of number one in its space, but how much does that strain the organization to have to now really expand further into the ability to enabling its end customers to actually embrace a solution? What does that say about the customer's readiness to use the solution?
Jan Krönig:
Yeah, I mean, it says that the customer, and also us and the whole industry, has to learn how to operate zero emission vehicles. And I think what we are doing by also exploring now charging infrastructure, at least putting the stone into the water, so to say, that also others follow and will develop, is to explore that together with our customers. And you'll know this is something which I think we in Daimler Trucks, but also our really focus with our brands and customers are doing already, that we are seeing, "Hey, we are here to help the customer being successful."
Jan Krönig:
And now we experience, if we don't at least start with infrastructure, then the customer's lost and we will not do our best to go after decarbonization of our industry, because as I said, I mean, the truck alone is great, and I can assure you, we have the best trucks, but without charging the truck, it's nothing. And that's what we are doing. And then on the other hand, of course, it comes into play that we are seeing that if you do then, and that's by the way, also interesting, charging, and you have the right trucks, then you can optimize that again, then you can get to other charging times, which then also for the customer is again something which has an advantage for the customer. And then if the customer chooses our truck, of course, for us.
Ali Tabibian:
Exactly, it's actually in a lot of the world of technology, and now maybe I'll go into it very briefly here in a second, but first I'll say my humble suggestion, Jan, as a financial professional, is to keep some of these efforts somewhat independent inside of the organization and don't integrate them too much because in the end, the financial benefit to your shareholders will be when these solutions have an independent life to them, and you can spend them off or sell them, or for financial gain. And I'll tell you an example, the whole Tech. Cars. Machines podcast series, and a lot of the things we do in the space started several years ago when we were working for Qualcomm, when we started thinking about what happens when all these technologies, including the battery technologies that are being developed for the mobile environment, starts spilling into the world of things, and big things in your case.
Ali Tabibian:
And the history of Qualcomm is that currently they sell intellectual property and some semiconductors designed around a particular protocol called CDMA, but to get people to adopt it, 20, 25 years ago, they had the protocol, they made the semiconductors, they made a handset, which they sold, I can't remember who they sold it to, they had parts of the frequency spectrum that they acquired, they made base stations that they eventually sold to Ericsson, to basically be able to provide a reference design for the adoption. And now it's a very successful company, it's sold the frequency to AT&T, it's sold the base stations to Erickson. I think it sold the handsets to Nokia, and it's now back to the core offering that it always wanted to have. Jan, how consistent, or how common is the belief in hydrogen in the trucking world? Is it where Daimler is the leader, and really considering hydrogen as a key leg, or are there others who are saying, "No, I think we can just do batteries"?
Jan Krönig:
I think this is, battery and hydrogen, there are, when you see that different perspective to it, so there are also voices who are saying, "You can do everything with battery." There's, I think, not that many voices, "you can do everything with hydrogen," but they are, I think, equally many who say, "It's better to do it with hydrogen and with battery." I think where everyone agrees that battery vehicles will be first, because batteries are sooner available than a green hydrogen, as I said.
Jan Krönig:
And then it's all about how competitive at the end of the day in terms of PCO, the hydrogen trucks will be. And as I said, if you really want to go to these long mileages. And also as you said, I mean, support the customers in their ecosystems, how they are driving that today, then there will be a case for it, because otherwise, if you're not providing the range and the efficiency, then the customer has to change their business model. And this is something which builds an additional cost for them.
Ali Tabibian:
In the development of hydrogen as a reliable source for commercial transportation, what are the first couple things that need to happen for a hydrogen fuel cell vehicle in your world, to be able to have some near-term applications? What are the couple key things? Is it fueling stations on a couple key roots, or is it the development of better fuel cells, or what's the key hurdle there?
Jan Krönig:
So the key hurdle is right now, really the timely infrastructure, and not only have hydrogen, but green hydrogen, because I mean, otherwise we probably would have the same probably with diesel. And the next thing is then the fuel cell itself here, the technology is, I mean, you can see that from us, we already have now the first vehicles in our test fleet and they are running, and so with the technology gets tested, so this also of course has to be fine-tuned to serious production, but the fuel technology won't be the hurdle to scale hydrogen trucks.
Ali Tabibian:
Let's talk a little bit about some of the things that I know are not mainstream, but just a little fun to talk about. What about some of the buzz that's happened recently? I know the British government has spent a few million dollars on some centers that are thinking about burning hydrogen directly, in a combustion setting, versus needing to convert it to electricity via a fuel cell. Is that something that's at all realistic, or is it just a research project really at this stage, a science project?
Jan Krönig:
Well, I would say it's definitely more than a research project, for that also too many are looking at it. If you look at it, it's a technology which should never should fall out of sight. If you just go to the pure figures, facts and figures, you see that the efficiency of a combustion engine hydrogen is lower than fuel cells, in terms of how much hydrogen it eats. Then you also still have an engine, which is a combustion engine, so you still would have to deal with exhaust, which you have to clean, which adds other problems. And then, if you look at the performance of engines like that, they will be most likely more suited to special applications.
Jan Krönig:
But it's definitely something, I mean, if you would listen to all these engineers, which are doing that, and that's great about these engine engineers, there might be solutions to most of it. And then it comes down to, first of all, can it be really done in a timely manner? So what will be the speed out of it? And second of all, is a combustion engine in the future, still something which we as society will want, or will allow for all the applications we want to do? And this will be by the way, I would say also different from region to region, whether you will have a completely agnostic regulation that you say, yeah. I mean, zero emission vehicle, you can do that with any type of technology or you might have other regions where you see ZEV means really no emissions, so no emissions at all, no exhaust. And then by that you might rule out them here and there, the potential for technology.
Ali Tabibian:
Interesting. One of the-
Jan Krönig:
And then this is not yet set. I mean, that's open how this game will go off.
Ali Tabibian:
Is there a timeframe where you can say our transition to EVs and hydrogen fuel cell vehicles will be 20% of our deliveries, 10% of our deliveries? Is there a forecast, and nobody's going to hold you to it, but what's the sense when that transition in unit volume will take place?
Jan Krönig:
So we have committed to have our emissions to neutral sales in the trade market out there latest till 2039. And till 2030, we'll see up to 60% of zero emission vehicles in the trade market. How much up to 60% that will be, it really depends on how the market, and the cost per T, and the infrastructure develop. So, because of that, as I said, does not develop, you might have a much lower...
Ali Tabibian:
So let's talk about that a little bit, maybe. What is it that would be most helpful for you to see from governments, from startups, the venture community, the proponents of hydrogen, the proponents of electric building additional electric distribution capability? What are the most immediately useful things you would like to see from your ecosystem? And you pick which parts of the ecosystem you'd like to talk about.
Jan Krönig:
So I would say, and we discussed a lot, infrastructure is key. In hydrogen, and in electric, and for charging. And here, I think, and I already see that at least in Europe, that in charging, they are more mid-size to big-size company investing into it. I think this is important that that happens. And I think on the hydrogen side, I think it's important that here, and that also by the way happens, big companies are investing into the production of green hydrogen and then the transport back to Europe, US, that's needed. And this is the type of investment which already takes place and should continue to take place.
Ali Tabibian:
It's interesting, Jan, I know we keep coming back to infrastructure a lot, but that's actually in itself, very revealing in the sense that what I'm taking away from this is that from where you sit, you are less concerned about your ability as Daimler to deliver vehicles that meet the sustainability criteria, and it's much more about the people in your ecosystem, being able to provide fuel to them and basically support their use in the field. Actually, let me ask you about the use in the field for a second. Do the people know in the field? How good are they at repairing these vehicles and servicing these new power trains, and are they really the same people that 10 years from now will be able to do what are much more sophisticated power trains in some ways?
Jan Krönig:
Yeah. I mean, we are training now our field staff in the US, and also in Europe, we are rolling out our e-vehicles to make sure that they can repair them, we will need different qualifications for them, so we are running now requalification programs here to enable our staff to do that. You need different skills, but it's not something you cannot do. I mean, it's something which is safe to be repaired, and which you can really do and service. And this is kind of in our control, this is something we are doing daily to retrain people to whatever product innovations we put to the market. And at least the feedback we're currently having is that we are doing a good job there and our vehicles can be serviced throughout the world.
Ali Tabibian:
I'll make a couple comments here. And then, and then I'll turn it back over to you to basically talk about whatever else we might have missed. One comment is, as you know, I travel a fair bit in this world of trucks and trucks production. And one of the interesting things, when you discuss Daimler, is that whether friend or competition, or what is it? Coopetition of the other institution, invariably, there's a lot of respect for Daimler engineering.
Ali Tabibian:
So I think in terms of what our listeners have taken away, what they want to read between the lines here, however they want to interpret it, I think what they're getting here is a sense for what really the most well-respected technical organization in the field, certainly one, if not the most certainly tied for first, however many way tie you want, it's a really interesting degree of respect in the community, and I think that's why we're so happy to have this conversation because where you can take it at least shows where the leading organization can take it. Not necessarily that everybody else could follow, but at least what's possible. And that's important.
Ali Tabibian:
The other thing I'll mention since we've talked about hydrogen a fair bit, and I think it's kind of missing in the general understanding of the space is in electrification, it's not clear who the really big industrial or existing players in the market are, who would be really big winners in electrification. In other words, there are big players for whom electrification is a necessity because of their concern for sustainability or the demands of regulators, and so on, and so on. But if I look at the world of hydrogen, there are enormously capable entities, mainly the oil companies that have an extraordinary incentive, and hydrogen being a big part of the solution versus just electricity, because in electric vehicles, they don't have much of a role to play unless they substantially transition.
Ali Tabibian:
But when it's about producing molecules, producing... What is it? Gas, and then compressing it into a liquid and transporting it around the world, producing it where the right type of electric... Oil companies are extraordinary large, and extraordinary capable, and extraordinarily powerful organizations. And they have an enormous vested interest in this field. And oddly enough, they're very good at describing it to you when you talk to them, but I don't really think they've done as much as they could in terms of really going around to the world of industry and embracing it and saying, "Tell us what we can do to make this all happen."
Jan Krönig:
I think your last aspect is really interesting about the oil companies. I think that you also will see a change in hydrogen because at least in Europe, but probably also elsewhere, the understanding gets more and more that, of course, I mean, transport is one application of hydrogen. But if you really want to decarbonize the society and country, then hydrogen is probably the one energy source, which really you can do it. Because, and of course, I mean, probably there are a couple of countries which you can do only electricity without storing, with water, wind, and solar, that there might be a couple but not that many. And for other countries you will have to import energy, and if you want to import green energy, that will be in some type of form, hydrogen.
Jan Krönig:
And that's why I'm really thinking if that is then the case, and you have hydrogen as a primary energy carrier, by the way, and that closes the loop to the oil companies like diesel today, then you will come to the point where you use this energy carrier for many other applications, which also will then fuel hydrogen and oil trucks. So that's probably one thing which gets a little bit underestimated by looking between the lines of battery and hydrogen.
Jan Krönig:
I think the next piece is, in this transition from combustion engines to zero emission vehicles, because if you want to, the transition for us in this decarbonization, we are talking a lot about these things, I see engines are getting less and what happened there, but at the end, that's what I'm seeing more and more as an organization, you also can view it in a different way. Hey, there's a completely new market rising, zero emission vehicles, which of course, I mean, you have to invest in them, you will have new propulsion systems and so on, but at the end you will have also another logic, how they are operated.
Jan Krönig:
There are other markets like charging, they are developing. As you said, I mean, there are a couple of players, which might be interesting for them to do that, but they're completely new market developing, and I think this can be also viewed as a chance. And it would be arrogant to say we already have completely figured out how to capitalize that, but at least I would say, and probably there are also others, but I think we have a good plan on how to see ZEV and see the market share rising, it's a chance.
Ali Tabibian:
Absolutely. And the ZEVs they'll open up exactly like you said. Here's actually an interesting example. I went with a friend who was picking up his Tesla here locally. And the delivery room was a very big room, was all indoors. They were delivering vehicles indoors. And when you think about this, it's like, "This really wouldn't work if people were turning on gas engines-"
Jan Krönig:
You're right.
Ali Tabibian:
"Inside of this room." And everybody would be choking to dead in a very short order. And for these vehicles to be able to let's say, drive into warehouses and deliver to specific locations inside a very large warehouse, as opposed to in the depots outdoors. I mean, those are very interesting opportunities for reconfiguration of a lot of the industry that's really not there when you're emitting fumes.
Ali Tabibian:
So Jan, I want to thank you very much for doing this with us, I think as our listeners can probably guess, just based on the time zone differences, this is Jan really doing us a favor on his Friday afternoon and spending some time with us here. And I really appreciate it, Jan. It was wonderful for us and I hope it was at least kind of interesting for you to have done this. I'm very thankful for it.
Jan Krönig:
Yeah. Thank you very much, Ali. It was really a lot of fun, extremely interesting. And thank you for having me.
Ali Tabibian:
Excellent. Thank you very much.