Atif askar, Head of BD, strategy and M&A, traton
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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.
We’ve said it before, and it’s worth repeating the following: “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. Therefore, the additional costs and potential changes to customer operating models that switching to sustainable energy sources may require are criticial to everyone. I think our guest today, Atif Askar, head of strategy & M&A at Traton, provides exceptionally clear and intuitive answers to these questions. This is the third episode where we talk to a world leader in trucking. Before Traton, we hosted Jan Kronig, who plays a role like Atif but at Daimler Trucks, and before that our guest was Amy Davis from the world leader in commercial powertrains, Cummins Engine, where Amy leads efforts in new, carbon-friendly power sources.
Traton is a publicly traded holding company for a number of storied brands, most of which have decades of history, including names like Scania, MAN, VW Truck & Bus, Navistar, and Rio. VW Truck & Bus is probably the name that rings most familiar to most of our listeners. VW stands for Volkswagen, which in fact is the largest shareholder of Traton by far, but the companies are distinct. VW Truck & Bus, for example, sells commercial vehicles customized for markets such as Latin America and Africa. Navistar, a large U.S. truck manufacturer, was acquired by Traton last year for $3.7 billion. Overall, Traton’s range of offerings includes municipal, intercity, and travel busses, school buses, vans, heavy-duty trucks, and even construction vehicles. RIO is a global brand for digital services.
Overall, the company has about 25 billion euro of enterprise value, 35bn Euro of annual revenues, roughly 100,000 employees in 16 countries on every continent except Oceania. Traton doesn’t just have a presence in its areas of operation, but it is a major player in each area with tailored vehicles. It sold a record 272,000 vehicles in 2021.
Our conversation with Atif occurs after our podcast with Daimler, an episode Atif had listened to shortly before our taping. Daimler views hydrogen fuels as much more important for heavy-duty trucking than Traton, a subject of significant public discussion, and some of Atif’s commentary at the beginning of this episode is speaking to this difference of opinion. A couple more things: “bev” stands for BEVs, or battery electric vehicles. In trucking, “120 km” of annual operation is shorthand for 120,000 km traveled per year.
Without further ado, let’s get to it!
Ali Tabibian: Thank you everyone for joining us on this episode of Tech. Cars. Machines. Today we have a guest who runs strategy and M&A for another one of the very largest OEMs in the commercial trucking world and that's Atif Askar and I'm hoping I actually pronounce that name correctly because I'm much quite sure what I'll do is probably end the introduction right there and turn it over to you Askar. Thank you so much for spending time with us .
Atif Askar: Ali. Thanks for having me. It's pleasure to be here. And you pronounced but perfectly well I must say.
Ali Tabibian: Okay. I'm glad to hear that. Askar where are you joining us from today?
Atif Askar: I'm joining you from wonderful Berlin, a nice autumn evening and be flying to Munich tomorrow. So from Berlin today.
Ali Tabibian: Oh exactly. And tell me, so that's where you're located? Where is Traton headquartered?
Atif Askar: The headquarter of the group Traton is in Munich. We have the technical office in Sweden in Sodertalje. This is also where one of our brands is. And then we have additional locations in Lyle close to Chicago, that's Navistar's quarter and then in São Paulo in Brazil from trucks and buses.
Ali Tabibian: Excellent, excellent. And seems like you're working from home, is that still the case at Traton?
Atif Askar: Goes back and forth depending on the week. So we're back to office partly and partly working from home.
Ali Tabibian: Okay, that sounds great. Well once again, thank you for joining us. So I think the way to start is to really for you to give our listeners a sense of Traton, the company, your end markets, your applications, the geographies, what kind of vehicles you offer to match those applications. And then also a little bit about yourself. What would you prefer to start with a little bit more about your background or should we start with Traton at first?
Atif Askar: Yeah, would be short with my background if you like, we go deeper into Traton after this. I'm responsible, for strategy and M&A at Traton. Been with the company for eight years now. Had a different name before, but the whole building of this group and the purchasing of Navistar and also the IPO basically happened in the last five, six years. So before there was no Traton and probably for some of your listeners, Traton does not sound familiar. Our brands in the US, it's international and ICBus and in Europe and Brazil it's Scania, MAN and trucks and buses, Neoplan are probably more familiar.
Actually if you look at our footprint, we're basically I think in almost every country on the world at least with one brand, sometimes with two or three or even four. being for Scania and MAN certainly Europe for Brazil and then for Navistar North American segment, but again, present globally in total.
When it comes to which segments we're present in, also we have a portfolio across the range. So light duty, medium duty and heavy duty trucks in Europe and for Scania and MAN actually the heavy duty trucks above 60 tons are the ones where we have the biggest share, but especially with Navistar. And in Brazil we also have medium and light duty present. And then it's also present across the whole portfolio of applications. As you know, truck industry is always very, very fragmented when it comes to applications. There's no D truck so you can get everything from haulage trucks, distribution tankers, you name it. Firefighters, construction vehicles. And that's basically also the key competence of a truck manufacturer. You have not one model but you have a modular toolbox with which you build together different types of trucks since volumes are typically much smaller than BEV cars.
Ali Tabibian: Excellent. And in the US does Navistar have its own... Those are the Navistar brands you mentioned in the beginning or is there a Navistar truck running around here as well?
Atif Askar: No, Navistar is actually the name of the company, the legal name, and then the brands is International, coming from International Harvester long time ago and the school buses are branded ICBus.
Ali Tabibian: Is there one brand or another that tends to do most of the research and advanced engineering for the whole group or is the engineering distributed?
Atif Askar: Well we have engineering in all of our brands, you know need to bear in mind these brands not long go where independent, so every brand was a full line also when it comes to R&D but more and more we tend to cooperate in certain areas and are trying to use and move to a common modular toolbox so that you do not develop two engine platforms or two battery propulsion systems to eAxle. So I think that's the journey that the whole group is on to move towards a more integrated or cooperating R&D. But we do have engineers in all our locations. I think in total it's around 40,000 engineers that we have in Sodertalje and Munich and back in Lyle and in Brazil.
Ali Tabibian: I didn't ask the question that well, I should have said research and development and it sounds like R&D is being a little bit more centralized to prevent duplication and then application engineering basically clearly has to be distributed amongst the geographies and brands.
Atif Askar: Especially if it comes to them really doing the vehicle integration. Whereas if you think about the development of a new engine generation, that you can do centrally. So that's engineering, but we're in the process of introducing our new 30 liter platform and that has been developed by more central teams so to say, and then being rolled out and the application integration is then done locally.
Ali Tabibian: Excellent, Great. Thank you very much. So Atif I know a lot of your work recently has been about sustainability and what is the path that the group is undertaking to basically meet its own objectives and really comply with societal requirements and regulations. Tell us a little bit about how much of what you're doing is because you have to, how much of it is because meaning from regulatory pressure, how much of it is because it's becoming increasingly clear to everyone that the planet is on a path that's good for no one and it's driven by internal motivations? Where's the push coming from?
Atif Askar: Yeah, yeah. Ali, I think mandates cannot and should not be enough. And in fact if you look at one of our brand Scania, it was one of the first companies that adopted science based targets and formulated driving the shift to sustainable transport solution as their purpose much earlier than when the whole ESG topic came up and came more into focus. And actually now a strategy sustainability like value creation is one of the key pillars. Interestingly, it's not so much contradicting. I mean if you look at the science based targets and at the same time compare it with when is which technology like BEV trucks from TCO perspective better for our clients, what we would call market based targets. These two curves are not so much away from each other. So in the end, sustainability is also a way to be in front of the wave. So I think it is a valuable target in itself and it doesn't contradict with market and pure commercial target.
Ali Tabibian: That's very interesting. I think in the United States, I noticed about 10 years ago that regardless of what the politicians were saying, the first group of people that realized, listen, the drive to sustainability is going to happen and we just need to start on that path where the electric utility companies, that's why in this country, whether you look at California, which tends to be as we say here use the word progressive in terms of sustainability or Texas, which tends to be on the opposite side of the political spectrum, we're probably the country's largest and one of the world's largest producer of solar power and Texas is one of the world's largest producers of wind power. And so the utilities themselves have for a long time really been ahead of mandates. And it seems like what you're saying is that the commercial vehicle people essentially are on a path that they're not really going to deviate from almost regardless of what the mandates do.
Atif Askar: Yeah, definitely. Like transport and trucks today are connected with CO2 and with a significant CO2 footprint. And if you look at what it takes for that not to be the case in 10, 15 years from now, it's not rocket science. We can do it. I guess we'll come to it. So I think being on the forefront of this and pushing the limits, what you can do with electric vehicles and being a driver for it is an aim and a goal in itself and at the same time it makes complete economic sense to do this as well. So it's not even contradicting.
Ali Tabibian: Exactly. And I know we'll get to this a little bit more. Traton is basically a battery electric vehicle centric, a strategy that you have, and don't let me put words in your mouth, but that's probably fairly accurate of course description of what you're up to. I find that many executives outside the commercial vehicle industry, many investors, venture capitalists, et cetera, the model that they use for electrification, at least in their own mind is essentially the same way they would think about consumer vehicle electrification.
And they really think about it the same way, which is really surprising how often you have to really restart the discussion from a very basic perspective. And I know one of the wonderful ways you try to do that is essentially start by making the point that commercial vehicles are capital equipment and therefore they're utilization rates and the total cost of ownership, how you calculate it is very different from a typical consumer vehicle which really only operates even in the United States between an hour and an hour and a half a day on average.
Take us a little bit through that really very instructive way that I've seen you typically start the education.
Atif Askar: Yeah, I think Ali, you're spot on. It starts with understanding that a truck is more a machine than a car. This truck has an owner and the owner makes a living with it or it belongs to a company and the company needs to make profits. Revenue is quite fixed. No one's going to give you more money because you brought your Amazon package with brand A, B or C. So the part you need to play with is the cost part of the total cost of ownership. Well there's a reliability element to it, but basically, mostly it's total cost of ownership.
And if you look at today's total cost of ownership of a typical long haul client, around 40% of the cost of this customer will be fuel costs. So it'll be the diesel. Now this is with that the one element where you have the biggest lever, so you need to look for a solution that most efficiently delivers a kilometer of transport.
And this is BEV. It has not been the case 10, 12 years ago. If you look back 10, 12 years ago, cost of a kilowatt hour of battery was around 1000 euros and people were expecting it to come down, but they were not expecting it to come down as fast as it did the last 10 years. So today we are around a 100 euros per kilowatt hours and that's a range where the battery cost actually is not decisive anymore. In our models we even assume a stagnating cost for it. Not seeing it too further come down because it reached the level where the really decisive factors are the cost for energy versus the cost for diesel versus the cost for hydrogen. And that equation always works out in favor of the BEV truck because the BEV truck needs just one third of the energy that the typical fuel truck would need and that has nothing to do with the fuel cells not being efficient enough or not being developed enough.
The whole process of making hydrogen out of energy and turning it back to energy is simply not an efficient process. So this is something you will not be able to compensate. So this 1:3 ratio and efficiency will stay and that makes it very difficult for future trucks to be cost efficient with the BEV truck. And that is especially on the long. Now, there is one aspect to it that of course has one limitation. You need to be able to charge this truck and in Europe it's every four and a half hours that you need to take a 45 minutes mandatory break. In the US you can drive for six hours, but you need to be able in that break to charge the truck for the next leg of your transport. And for a long, long time we were not able to answer this question, who's going to build this charging networking?
But since one year ago we have a answer. In Europe, the three big truck OEMs, which is the Volvo, Daimler and Traton joined the forces and together that's 75% of the market and founded joint venture commercial vehicle charging Europe and they have half a billion euros to build out the first 1,700 charge points. And that I think initiated a lot in industry that people are understanding that BEV trucks on the long haul are really coming and I think that's what we'll see. Again, we're not saying hydrogen will never happen, we just think it's a small niche where we'll really have an application in the truck industry where hydrogen is really more advantage than the BEV truck. And again, completely believing at the same time in hydrogen for example, the steel industry for fertilizers, industry-
Ali Tabibian: Chemicals.
Atif Askar: Yes. And that's little bit our position. When we started this journey, Ali, that was seven, eight years ago. To be honest, you would get a good laugh from managers in our industry about electric heavy duty trucks than a good discussion because the parameters were simply not there. But if you do the math right now, it's quite clear, quite obvious. And then we can talk about things like the energy grid et cetera, but we have looked at that as well and everything confirms for us even more that the mainstream application for long haul vehicles will be BEV vehicles.
Ali Tabibian: That's pretty interesting. Atif, let me maybe get it a little bit more into the details of some of the things you said and let's go back to the total cost of ownership calculation that you made. So there's the circle of cost, the pie chart of cost if you will, and the cost of acquiring the vehicle is there and about a little over 40% of that pie is really the cost of operating that vehicle. but the fuel cost of operating that vehicle. And I recall that pie, that calculation was done for a large truck, was it not? I think it was about $100,000 plus a vehicle purchase cost. What class of vehicle was that calculation for?
Atif Askar: Yeah, that calculation actually is a long haul vehicle that goes a 120, 130 kilometers a year-
Ali Tabibian: 130,000.
Atif Askar: And yes exactly. And I'm talking about the European in the US everything is a little bit longer distances and a classical long haul or line haul would be even driving longer. So that would be typical European long haul, 40% would be fuel as you said. And then you have one third of the cost is the cost for the driver, around 10% is the cost for the vehicle over the lifetime talking about a nice vehicle. And then you have another 10% and 10% for things like repair and maintenance, overhead costs of such a company.
Ali Tabibian: And then if you looked at a smaller vehicle, let's say class six vehicle, those typically, at least here in the states, we refer to them as class eight vehicles, the big tractor trailers class six vehicle. How would that pie chart change?
Atif Askar: It really depends on the use case. So it depends on what kind of operation do you do. Now just looking at the class A truck for example, there can be a long haul trucks that can run 130,000 kilometer, but there could also be a construction vehicle or a concrete pump and that is then only 20,000 kilometers a year. So it really depends on the use case. Now typically what you would see in a class six truck is that the energy costs are lower. So the cost for energy over the life cycle is lower in relation to the cost of the vehicle. If you electrify that vehicle, you would also need less battery. So also the cost increases smaller. I have the feeling if you look at for example, city buses or smaller vehicles or passenger cars, there's quite a consensus that this will be BEV vehicles.
I think the big discussion that is ongoing is about the long haul trucks where a lot of times the argument for fuel cells is they can do a longer distance and that is correct. Let's just do the analogy. Take a BEV truck that we want to run like a diesel truck. A diesel truck can have a 1000 litter tank. So with 1000 liters you can go 3000 kilometers and if you want to have the equivalent for this as a BEV truck, you would need round about 25 tons of battery. But the question is why would you do this? Why would you have this battery if you have the possibility to charge, you would not do this, you would just have as much battery as you need to come to the first charge point. I always compare this Ali with the airline. If a pilot stops in Berlin and he wants to fly to Munich and he's asked how much should we fill the plane, he would not say just fill it up.
He would say, that's the distance we need to go. Give me 10, 15% more and he will not take much more load. Otherwise on the end of the year he will see this 1% higher cost or 2% because he was carrying around fuel and it's a little bit comparable if you like this range answer to you cannot afford, if you are doing a business with a truck. You really need to optimize the whole process and that would require that you take a battery that really is dimensioned in a way that you only have as much as you need on your truck and that is technically between your start and the first charging point and then for the second leg.
And the funny thing is, Ali, a lot of our time the waste majority also of heavy duty trucks. They don't even go more than 500 kilometers a day. So for that use case, you would not even need to have the public charging in between. And I think that's the difference of perspectives that you can have, but we really believe that the one companies and the one customers that understand first and manage this process to manage the charging of a BEV truck can on that road, on that relation can offer transport much cheaper than others and they will sooner or later dominate the market because their costs will be much lower.
Ali Tabibian: That's really interesting Atif, because people look at let's say the Amazon delivery trucks or some of the local or school buses, et cetera, that are cost aside, at least from an operating perspective, easier to electrify. Basically the argument is they're not going that... That the route is not that long and there's a program stop at a charging location every night. They go back to the depot and I guess what you're saying is even for long haul it's not that different because there is a program stop due to driver fatigue or requirements to prevent driver fatigue. And so the only issue is can you map that program stop into where there is a charging point? Right?.
Atif Askar: Exactly. You need to have the public infrastructure and you need to have predictability makes it easier. These big expansive batteries, they want to be utilized and this is why we believe in BEV and long haul. The more you use them, the lower your cost will be. This is where they have the advantage. They're more expensive in buying them, but less expensive the more you use them. You know, could bring this example, the worst use case for battery would be Bill Gates. It's in the harbor the whole year and then once or twice a year Bill Gates decides to go on the yacht and then he wants to go a very, very long distance with it. Right?
Never. Battery will never work. But fortunately our industry is exactly the opposite. In the whole that you want to utilize the week, a lot of relations are predictable still there is some way to go. You need to build the infrastructure in your depot and public infrastructure. The only thing I'm saying is we don't think that is that impossible or that difficult, so it will take time, but it's quite predictable. Once this is built up, it's very, very difficult for any other technology to beat the TCO of a BEV truck and that's what counts in the end.
Ali Tabibian: Interesting. So take that a little further. It's fairly common for a US class A truck, and I think some areas in China, in Brazil, you would know much better than I have. I have similar route that they run. It's not unusual for them to have a 300 gallon roughly 1000 liter tank as you described, but my understanding was that with two drivers, that truck can basically stay on the road for 22 hours a day. Each driver can do 11 hours, they need a one hour break. How is that consistent with the four and a half hour... The math that you are typically doing, which is four and a half hours of operation and a 45 minute break. Take us through that comparison please.
Atif Askar: Yeah, of course. The most important point here is Ali in Europe and also in the US, there are not that many trucks that go with two drivers. Given the driver shortage that we have in everything, actually drivers discuss resource. You could now think about China, but then depending on the business case, it still would make sense to stop and have this 45 minutes extra to charge even if you driver needs to wait. If the difference in the TCO if is big enough, you can go a step further if you like Ali, right? Autonomous trucks, autonomous trucks that run 24 hours, now we can discuss when exactly they will come or not. Actually you could think an autonomous truck but then needs to have hydrogen, right? Because it needs to go this very, very long distances and can run 24 hours a day. Actually the autonomous trucks is the best use case you can have for a BEV.
Why? Because it's going even more kilometers. This truck is running all the time. So the operational costs are really, really elemental. On the other side, what's the cost of an autonomous trucks having an additional stop a day or two additional stops as compared to the fuel cell track? The cost is almost nothing because there is no driver cost. Basically it's the depreciation of the vehicle in that 45 minutes or calculating over a year, one tenth. And even there you could argue depreciation is less because you're not using it. So the more you use the vehicle, the better it becomes.
And again, there are a couple of use cases where you have the benefit of the fuel cell truck, but I think it is important to take the right decisions when we are on a level of Europe or the US which infrastructure want to invest in the next 3, 4, 5 years or which recommendations we can give to our customers because they will not afford to have all types of trucks and have an hydrogen truck and a grid connection in their day port. So the better we can explain them and understand for them what's the most likely outcome, what's probably the best technology for you, the better.
Ali Tabibian: That's very interesting and thank you for describing it the way you are because it helps make it really intuitive. For example, even in today's world that trucker there is a certain fuel savings per liter or per gallon that would make him or her leave the highway, go 10 minutes away, fuel there and come back in 10 minutes to the highway. There's some math that would make that rational. And what you're basically saying is that math is strong enough for electric propulsion that " Going out of your way by 45 minutes, meaning taking a 45 minutes stop by the highway that you weren't expecting to or wouldn't otherwise need to with diesel." That math works is essentially what you're arguing.
Atif Askar: Exactly.
Ali Tabibian: Okay.
Atif Askar: Yeah, you have by the way, this going out of the road, you have this in Europe is, well I think it's 80% of the drivers that go up to five minutes off the highway to get the cheaper or the better location at a place to charge off the highway. Yeah, and again, it's not the question and that's always difficult if you look at trucks. Look, we have in Europe 4% of our trucks are gas engines. We do gas engines. Two or 3% of our trucks have four axles. We do trucks with four exles. For us as a OEM Ali, it's not even that difficult to build a fuel cell versus a BEV truck because the fuel cell truck has everything a BEV truck has as well. It has an eAxle that's the battery management system, power electronics, it has a battery which is by the way not small because you want to operate the fuel cell in the optimal pace.
The only thing you do is you take out a couple of batteries, then you put on a fuel cell and there are companies like Cummins, all the time with the trucks. For us it's much easier to have a fuel cell truck and a BEV truck coming out of the same line. I think the more challenging question is then for our customers. Do they need their stronger grid connection? And then for economies, for countries, governments, what should they invest in? Should they invest in hydrogen gas pipeline or should they invest in infrastructure? So in charging infrastructure. And there is I think where you have the important decisions. Ali,
Ali Tabibian: That's very, very interesting. I appreciate you really putting some detail into it. Let's look at it from the customer's perspective and we'll come back to the charging infrastructure let me ask you about the level of expertise that's inside your customer that would allow them to absorb all of this. What do you think the constraints are for the customers to be able to adopt these solutions and to what extent is it their responsibility, the government's responsibility or something that you want to add to your offerings to make that transition smoother for everyone?
Atif Askar: Yeah, and I think here, Ali, all the stakeholders need to play a role. For the customer of course, it's a challenge. They need to understand how to charge a vehicle or how to allow for charging on their premises, how to find and understand how they can charge on the highway. So they will need to start working with this topic. And as you said, if you look at it, there is money to gain because the best transport is overall cheaper. So the cost cake is smaller and you can share the benefit between the customer and the OEMs and other players. And by the way, the financing of vehicles is typical task that OEM has. So we are prepared. Let's probably the first thing to finance the vehicle for the customer. As you said, there is a collateral and we need to think about residual values then of BEV vehicles because we do not have a whole lot of years of experience for that.
But it's absolutely doable. Then we are spending a lot of effort early into being able to offer consulting on one hand and then solutions, complete solutions in corporation with partners on the other so that in every region we can offer someone that the customer can work with to get charging, network charging for example. And then finally, I think also the governments play an important role here. Especially in the first wave. I think these kind of companies that stop this journey first that they should get subsidies for it, they should get incentives to it.
Some tax or benefits or certain subsidies for buying the vehicle because by the way, a lot more we need to have help with when it comes to the infrastructure for charging. Where I think we can also get much faster just if you think about the time it takes to get a grid connection or to allow certain utilities, a preemptive build out of charging infrastructure. We're currently doing it for passenger cars and in Europe or in some countries, you cannot preemptively build this out also for trucks. So we should have rules that since this is a no regret move, we have both on the radar already. But I think it'll require all the stakeholders to work together much closely. Also we with for example, utility providers over the charging joint venture to make it fly.
Ali Tabibian: So Atif, for the 45 minute charging math to work with the type of vehicles that you're describing, the ones that really need to go only about four and a half, five hours, which should cover essentially most people's needs. What does that charger need to look like and how far is it from what's currently available?
Atif Askar: If you look at today's chargers, if you take the one you have at home, it would be typically 11 or 22 kilowatts. Then if you look at chargers that you have on the road can go up to a hundred hundred 50 kilowatt hours. The same standards called CCS allows to for charging up until 350 kilowatts. So we are talking about MCs that's twice as much as the highest standards can provide today. The MCs standard that will be introduced by the way, goes from seven 50 up to around three megawatts. How different is it? You need to cool the cord of this charger. You need to do this with CCS 350 kilowatt Isabelle. What is new is you also need to cool the pluck and on off of the side and also on the charger side, you could have seen some initial prototypes on the IAA. So it is a step change in technology, but also nothing that is specifically difficult to build. So it's more how exactly do you do this? What kind of design do you have? How do you do this specific connection, but the standard is there. So it's
Ali Tabibian: Possible. does the grid itself need to change between the transmission line and the point of delivery of this electricity? Or is that wiring, if you will, in that underground and overhead infrastructure already capable of handling all of this?
Atif Askar: You have typically connection to the normal grid. And depending on how many of these MCs standards you have, you will have a connection to the mid voltage or to the high voltage grid that is out there. So it'll rather change where you connect. Now if you connect to high voltage, you need to have the transformation yourself to then distributed to the different dispenses. But no, it's just been a question of how many chargers you have and that defines what kind of connection do you need.
Ali Tabibian: Excellent. All right. Like you said, it doesn't seem that it's not science fiction. These are things we can do today.
Atif Askar: No, it's doable.
Ali Tabibian: So Atif, for the 45 minute charging math to work with the type of vehicles that you're describing, the ones that really need to go only about four and a half, five hours, which should cover essentially most people's needs. What does that charger need to look like and how far is it from what's currently available?
Atif Askar: If you look at today's chargers, if you take the one you have at home, it would be typically 11 or 22 kilowatts. Then if you look at chargers that you have on the road can go up to a hundred hundred 50 kilowatt hours. The same standards called CCS allows to for charging up until 350 kilowatts. So we are talking about MCs that's twice as much as the highest standards can provide today. The MCs standard that will be introduced by the way, goes from seven 50 up to around three megawatts. How different is it? You need to cool the cord of this charger. You need to do this with CCS 350 kilowatt Isabelle. What is new is you also need to cool the pluck and on off of the side and also on the charger side, you could have seen some initial prototypes on the IAA. So it is a step change in technology, but also nothing that is specifically difficult to build. So it's more how exactly do you do this? What kind of design do you have? How do you do this specific connection, but the standard is there. So it's
Ali Tabibian: Possible. does the grid itself need to change between the transmission line and the point of delivery of this electricity? Or is that wiring, if you will, in that underground and overhead infrastructure already capable of handling all of this?
Atif Askar: You have typically connection to the normal grid. And depending on how many of these MCs standards you have, you will have a connection to the mid voltage or to the high voltage grid that is out there. So it'll rather change where you connect. Now if you connect to high voltage, you need to have the transformation yourself to then distributed to the different dispenses. But no, it's just been a question of how many chargers you have and that defines what kind of connection do you need.
Ali Tabibian: Excellent. All right. Like you said, it doesn't seem that it's not science fiction. These are things we can do today.
Atif Askar: No, it's doable.
Ali Tabibian: Excellent. And so certainly in the field of infrastructure, which is really probably the most critical part of all of this, I think you and I were talking before and we sort of had a little bit of a laugh saying, everybody focuses on can you make a BEV, can you make a hydrogen fuel cell vehicle, et cetera. The vehicles the least complicated part of the problem in some ways, right? It's the infrastructure and then the after sales sort of support and post retirement services that probably the customers are most worried about. What? And you didn't really wait for somebody else to come up with the infrastructure solution. You got together with Volvo and Daimler and formed probably the most interesting industry consortium that I know of to bring sustainability infrastructure to customers. Tell us about that Atif.
Atif Askar: Yeah, and the aim for this Ali was really to accelerate this whole development. We have this chicken and egg problem. No one will buy electric trucks if he thinks he cannot charge them and no one will build up chargers if there are no electric trucks. So we can now sit there and complain or do something. So this is why the OEMs decided to take a significant amount of money, which is half a billion euro and say, "Okay, let's build something which is in front of the wave," and which starts to build this out. The number of points that we will build out, it will not be sufficient. But that's not the point. I think the point is accelerating the beginning of this S-Curve into electrification and show clearly and set a signal that we are committed to this. That we are not only doing this because we are pushed to, we really want to drive the shift and in 10, 15 years we want to be in a situation where most of the trucks are electric.
So we built a joint venture, one third owned by each of the three big OEMs, but acting quite independently with a lot of knowledge. The CEO of the company from me and has a long, long experience in doing charging for passenger cars. So a lot of the things she hears like will this ever work? It sounds very familiar to her and we are very positive and very excited that this is happening and that we are the first ones doing it and not coming after other startups or whoever have started this, but that we are pushing the change there as the big OEMs. And I think it's a strong sign, it's a three big OEMs do this with 75% of market share on the continent.
Ali Tabibian: And you've provided a vehicle essentially for governments to contribute to in whatever way makes sense for the government. what is the name of the joint venture by the way?
Atif Askar: The name of the joint venture is Commercial Vehicle Charging Europe but the brand name of the locations will be different. It will soon be made public. We haven't published it yet. But-
Ali Tabibian: You don't want to break news on this podcast?
Atif Askar: No. I'll leave this to our friends from the joint venture, but they will announce the cool name. The company itself is located in in where there's also a lot of talent coming there and they're running strong. The management team we met a few weeks ago is really, really excited to make this fun.
Ali Tabibian: And they are doing everything essentially. They're procuring land, they're procuring electric power, they're setting up the charging stations. It's souped to nuts or is it more or about converting existing fuel stations, petrol fuel stations to electrification? How much from scratch is this work?
Atif Askar: Yeah, the joint venture is basically a charge point operate. So they will need to get the hardware, which is already pioneering work as you probably know the MCS standard allowing for the 750 kilowatt, you need to charge a big battery in 45 minutes. It's just being introduced and being certified. So they buy the hardware, they develop the Charge Point Operator software and then they need to get hold of real estate with the respective grid connections and will build out the locations. And typically if you look at also other players in the passenger world in this area, it's a mix Ali. It can be greenfield, it can be brownfield. In certain countries you partner up with certain parties because they have access to locations that are interesting. So it will be a mix and it is different from country to country in Europe and US probably a little bit more homogeneous, but there might be different interesting partners to talk to in order to get locations and in some countries it makes more sense to build it from scratch and buy the land and do it on your own.
Ali Tabibian: Well, so this is really much essentially well capitalized startup. It's really going to develop its own business plan. There's no particular built in set of relationships or set of objectives or ways to do things that was prescribed to the joint venture. That's really quite something. Now this works out to around 300,000 euro per station. That sounds low. It seems like... Did I do the math correctly? Is it 300,000 euros per station?
Atif Askar: It's not per station but per charge points. So if we say 1,700 charge points, this is basically a dispenser or a charger the math wouldn't work.
Ali Tabibian: And do you think that's enough to give, at least on the most significant roots, give customers confidence that they can buy an electric vehicle and there will be plenty of common roots that will have the appropriate charging infrastructure?
Atif Askar: Yeah, I think for the next three, four years we have a good nucleus so to say. But for Europe in total, it's by far not enough. We will need much more locations. I mean there are some estimations from for example in Europe, so the association of the truck companies. So I think with that we'll get something around 5% of what we will need long term if you look 15, 20 years. But if you look at it Ali, even if you now start selling electric truck, it takes quite a while until the rolling fleet has a significant amount of electric trucks. So this is why in the beginning it's really addressing the key roads to start extending that technology and as it increases the share of BEV vehicles in the rolling fleet, of course you need to build this out, but also there I have the feeling once you prove that this is running, getting access to capital or scaling this will not be the challenge. It took someone to get this starting because it's really the first heavy duty fast charging joint venture in the world that we set up so far.
Ali Tabibian: Given the ramp that this is going to take, it's going to take time to convert the fleet, how much should companies like Traton and the world be spending aggressively to make current diesel engines more efficient? It seems like we could wait for all of this stuff to happen, but in the interim there's a lot of good to be done with more efficient diesel engines. Tell us about that and how Traton thinks about that.
Atif Askar: Yeah, look, we very much believe in electrification and we announced this target to have 50% of our new vehicles in 2030 being BEV. But until 2030 we'll still sell a lot of combustion engines. So the engines we sell should be as efficient as possible and this is why we probably developed the last generation of our 30 liter platform of engines, which is the key engine in our industry and we just rolled it out for another store in the US and we see a fuel efficiency increase with a couple of other changes on aerodynamics of 15% and that's huge. So while we're shooting to change to death, at the same time we should make use of any technological developments that we have to make the current combustion engine that will be around for some time even if you aggressively push as efficient as possible. And that's happening with our current common base engine that we're rolling out.
Ali Tabibian: And how often do these common base engines get the platform to upgrade? Is it every seven or eight years? 10 years?
Atif Askar: Yeah, it depends whether you have some kind of performance step or whether you are really doing a complete new engine so to say. This one was really completely newly thought through and that you would do probably rather every 20 years and every five years you probably do a performance step for an engine and typically, you spend a lot of money to get 2 or 3% more fuel efficiency compared to the same engine in the same region. That gives you also a feeling, Ali, how sensitive our customers are regarding TCO, why the TCO calculation of a truck is so important. And you mentioned that three to 4% that typical trucker has as until the 14th of December to pay back costs in the last two weeks, then you're really making your profit. So they will be very, very much calculating of the benefits of a BEV vehicle. So this is why this concept is so important in our industry.
Ali Tabibian: Wow. So basically this common base engine was such a big revision if you will, that this is essentially it. You're going to make incremental improvements and really after this it's all battery electric. That's quite amazing.
Atif Askar: That was probably the last engine platform that we have developed.
Ali Tabibian: Let me open it up to point to a couple things that might be interesting to talk about but we can talk about anything else in the last few minutes. One is you talked about what governments. We clearly talked about, what the industry is doing to help itself and what government might do to help with charging infrastructure. Are there interesting things you'd like startups to contribute to your journey and what are your predictions, hopes and concerns? As for all of our sakes, we hope your journey is successful. Literally mean we live in California here between monsoons and fires. We got plenty to hope for. A good reason to hope for your success.
Atif Askar: Yeah. I agree Ali. Look when it comes to startups, I think they can contribute a lot. We are in the beginning of electrification, I think we will see the next S-Curve of performance steps for batteries. For example, when we have a solution to industrialized solid state batteries or to come up with the next fancy cell chemistry and I think there's a lot of R&D to be done to make these batteries more efficient. We can do a lot with software also when it comes to the vehicle such like making EAR routing possible by interconnecting the data from the TMS and the state of the vehicle and calculating what's the best way to operate it.
I think there are so many areas that electrification touches that there is ample space for startups to be innovative and contribute to that. And I see that will be necessary and I'm convinced that we will see jumps in the efficiency of battery. Every calculation we did so far in our models is really with lithium ion batteries, current technology evolutionary getting better and not like a jump to a solid state battery. That's a game changer in itself. Predictions, hopes going forward-
Ali Tabibian: Or concerns.
Atif Askar: Or concerns. That's funny Ali. I think we're in the middle of a disruption but it's one of the most predictable disruptions you can have. So I think our children will get back to us and say, " You could have done the math. What was too complicated?" You look at the PCO and the cost of the batteries, so it's not Apple coming around with a new iPhone and everyone is surprised that things are changing. It's a very, very predictable disruption and today our products are contributing significantly to CO2 in the world and I think we need to act and importantly we need to act quickly. Let's not talk about whether the engines are stopped in 2040 or 2045 or 35. Let's rather talk what can we do here and now building up charging infrastructure, getting the best running because this the fastest and most efficient way to decarbonize transportation.
And if I need to close with any words, it would be just bearing in mind that if you have 10 thousands vehicles that are working with combustion engines today taken off the road one year earlier, that's 1 million tons of CO2 reduced every year. And that's what we should be striving for. Doing it quickly with the most efficient and fast available technology may also an interesting thing, it's not that much green energy that is required on top. We need the math for Germany for example. Assuming 50% of the rolling fleet in Germany is electric, you can do the math, it's been 150,000 vehicles. You calculate with, a 120, 130 kilometers per year per vehicle and with the efficiency that you typically have 1.1, 1.2 kilowatt hours per kilometer, you come up with 20 terawatt hours per year and that number sounds huge, but we produce around 450, 500 terawatt hour of energy in Germany every year and it's comparable on the European level. So it's three to 4% more energy that we need to create in over a time of 12 years. I think that's doable.
Ali Tabibian: Yeah, yeah, that's nice. That's nice to know. So Atif, thank you so much for spending time with us. It's a wonderful, a treasure trove of information and I mean that sincerely and we can't hit wait to publish it and have people already utilize all these insights and hopefully from the perspective of your audience and some of the people you want to hear your arguments, this will be a piece of collateral that will be useful to you as well.
Atif Askar: Thank you very much, Ali, for having me. It's been a great pleasure.