On March 14, Iveco Group held a capital market day in Turin, Italy, to officially launch its new strategic plan for 2024-2028.
2024-28 Strategic Plan Highlights at a Glance
For the first time, the performance and plans of the five major business units - trucks, buses, defense, powertrain and financial services - were disclosed
Announced the transfer of ownership of the MAGIRUS Fire Protection Business Unit to Mutares, which is expected to close in January 2025
The main financial targets for industrial activities in 2028 include net income of around EUR 19 billion, adjusted EBIT margin of 7 to 8 percent and free cash flow of around EUR 900 million.
Group-level targets include adjusted net income of around 900 million euros and adjusted earnings per share of more than 3 euros
Announced a new partnership with Ford Ortesun Corporation on heavy-duty truck cockpit architecture
Further expand and deepen the strategic partnership with Hyundai Motor Company
The scene of Iveco Group's Capital Market Day
Following the first Investor Day in November 2021, Iveco Group has decided to hold the Capital Markets Day once again. This decision is based on the company's recent achievements: at the end of 2023, the Iveco Group has met and exceeded the previously set key targets for 2026 ahead of schedule.
According to the previous strategic plan for 2021, the Iveco Group's total net income from industrial activities is expected to be between 16.5 billion and 17.5 billion euros by 2026. In fact, by the end of 2023, the Group had achieved a net income of 15.9 billion euros, achieved good and stable growth, achieved its target of an adjusted EBIT margin of 5 to 6 percent from industrial activities in 2026 (3.6 percent in 2019) ahead of schedule in 2023, and achieved its target of 500 million euros in free cash flow from industrial activities in 2026 – in 2023, the Group's free cash flow reached more than 400 million euros, far exceeding the target trajectory set.
These achievements are due in large part to the Group's focus on product delivery and the close-knit team spirit that unites the Group's more than 36,000 employees worldwide to achieve a common mission.
Gerrit Marx
Chief Executive Officer of Iveco Group
"One of the Group's values, 'We go beyond the ordinary', underlines our spirit and vividly reflects our ambition to take on challenges and explore new paths. We've proven that we can deliver on our promises. Today, we're committing to a new program to accelerate our product portfolio, build stronger, more diverse partnerships, and accelerate our sustainability journey. The future paths and opportunities for the Group and its five divisions are both exciting and promising, and we will deliver on these promises. In addition, we will continue to explore great opportunities externally while unleashing our internal potential. We will always have the courage to go beyond the ordinary. ”
The scene of Iveco Group's Capital Market Day
Four key strategic pillars for the future growth of the IVECO Group
The IVECO Group's development path is based on four core pillars: innovation, financial discipline, partnership and sustainability. These four pillars not only drive the success of each business unit, but also enable the entire Group to work together to address external challenges and focus resources on targeted investment spending.
innovation
To keep the company at the forefront of rapid innovation, the IVECO Group plans to invest more than 5.5 billion euros between 2024 and 2028.
The company is focusing on innovation in three key areas: the energy transition, artificial intelligence and software-defined vehicles, and autonomous driving.
In terms of the energy transition, Iveco Group reaffirms its goal of achieving net-zero emissions by 2040. To achieve this, the Group has adopted a wide range of powertrain solutions, including green and zero-emission solutions, which are combined with the innovative vehicle pay-as-you-go business model GATE. GATE, a green and advanced transport ecosystem launched in Italy in mid-2023, is currently focused on Iveco Group's Zero Emission Vehicles (ZEVs), with a five-year vision to evolve into a platform open to other OEM vehicles.
Artificial intelligence is at the heart of Iveco's customer-centric innovation, which has enabled major breakthroughs in data analytics, human-computer interaction and software development. Software-defined vehicles powered by AI algorithms are expected to revolutionize the industry landscape, streamlining the vehicle renewal process and increasing customer productivity. In order to keep pace with the times, the Iveco Group has established its own software and analytical laboratory and plans to assemble a team of 500 professional engineers in the coming years.
The Iveco Group is currently testing autonomous driving technology on public roads in Europe. Collaborations with PLUS, a global provider of autonomous truck technology, and other truck manufacturers are key to achieving this development and accelerating commercialization. Today, these advanced technologies have provided drivers and fleet owners with highly automated driver assistance systems.
Financial discipline
The Iveco Group is committed to increasing its potential for generating cash flow and to control seasonal fluctuations as much as possible. At the same time, the continued focus on cost optimization and efficiency improvements will further reduce product costs and ensure a streamlined SG&A) structure. The Group aims to reduce costs by 50 basis points by 2028 compared to 2023.
The company's previous Operational Excellence Program set a target of €1 billion in savings between 2019 and 2026. By the end of 2023, the IVECO Group had saved 300 million euros in operating costs and achieved an additional profit of 600 million euros by increasing volumes, product mix and pricing strategies. Under the new plan, starting in 2024, the company aims to achieve an efficiency improvement target of EUR 1 billion, of which EUR 600 million will be completed in 2026 and another EUR 400 million in 2028. The company will accomplish this through a range of initiatives to reduce product complexity, optimize best-cost country sourcing strategies, maximize manufacturing efficiency, and leverage a combination of commercial and technical options.
In terms of investment, it is planned that the investment of 5.5 billion euros over the next five years will be spent on operating expenses and research and development. More than 50% of the total investment is not directed to projects that meet requirements such as government emission regulations, so the Group is able to quickly adjust its investments to meet the needs of the market environment when necessary. The Group will prioritise projects with strong returns on investment and will continue to explore external collaboration opportunities to ensure optimised spending and prudent investment decisions.
Partnerships
The IVECO Group's strategy includes partnering with like-minded and responsive organizations to accelerate the process of innovation.
Iveco Group is expanding and deepening its cooperation with Hyundai Motor Company in the field of electric heavy-duty truck solutions, including battery electric trucks and fuel cell electric trucks for the European market. Through the sharing of advanced technologies and resources, both parties expect to accelerate the transition to a sustainable future.
Since joining forces in March 2022, Hyundai Motor and Iveco Group have achieved a number of significant achievements together. It is worth mentioning that at the IAA Transportation Exhibition in Hannover in September 2022, the two parties exhibited the Iveco eDaily fuel cell electric vehicle for the first time. Subsequently, at the Busworld trade fair in Brussels in October 2023, the IVECO BUS E-WAY H2 hydrogen-powered city bus model was also unveiled for the first time. In February this year, the two companies announced that they had signed a supply agreement to build an Iveco brand pure electric light commercial vehicle for the European market based on Hyundai Motor's eLCV platform.
On March 14, Iveco signed a non-binding memorandum of understanding (MoU) with Ford Trucks, a heavy-duty commercial vehicle brand owned by Ford Otsun, to explore opportunities to develop heavy-duty truck cabin structures that meet the requirements of the new 2028/2029 regulations. This is the first step in the two companies to evaluate the potential for joint development of new products and technologies, such as cockpit components and systems.
Such partnerships offer triple benefits to all parties involved: reducing costs and expenses, ensuring compliance and competitiveness, and providing the necessary vehicle functionality without passing on costs to customers. These recently established partnerships, and their expected positive impact on investment and the economy, are not yet reflected in the company's currently announced strategic plan.
sustainable development
Sustainability is a core pillar of the Iveco Group's development. All of the Group's actions are aimed at making a positive impact on our employees and the wider community.
In the two years since its founding, the company has made significant progress towards achieving some of its key sustainability goals ahead of schedule, well above its previous target for 2026. By the end of 2023, the water recycling rate of Iveco Group's global facilities reached 64%, exceeding the original target of 60%, the proportion of women in management positions increased from 18.2% in 2021 to 24% by the end of last year, exceeding the target of 23% in 2026, the Net Promoter Score for Customer Experience increased by 20% compared to 2021, achieving the target three years ahead of schedule, and the Group is on track to achieve its goal of reducing workplace injuries ahead of schedule.
Building on these achievements, the IVECO Group has set more ambitious sustainability goals, including:
By 2026, 100% of electricity consumption will come from renewable sources ahead of schedule, a target that was originally planned to be achieved by 2030;
Recycle 75% of industrial water in global factories by 2026, up from the previous target of 60%;
By 2028, 30% of office positions will be held by women, and the Group has expanded the scope of its gender parity target to ensure that all stages of women's careers are covered.
Iveco Group's five business unit strategies and financial targets for 2028
On March 14, the Iveco Group announced the launch of a new financial performance reporting structure by business unit, which provides greater clarity on the performance of its five business divisions: Powertrain, Bus, Defense, Trucks and Financial Services. Each division has its own unique "infinite growth path" that reflects its performance, future goals, and potential upside.
The fire protection business unit (MAGIRUS brand) is not included in the new strategic business plan of the Iveco Group and is not included in the forecasted financial indicators. As stated in the Group's previous market announcement, the Group has formally signed an agreement to transfer the ownership of the MAGIRUS brand to the Mutares Group. This marks the beginning of a new start for the MAGIRUS brand, which has been "at the service of heroes since 1864", and will compete more efficiently in specific markets.
Powertrain Division
The Powertrain division is one of the world's top three independent engine manufacturers. The business unit's focus on internal combustion engines and electric powertrain development puts it in a unique position to ensure a sustainable and profitable future in the transition to alternative fuels and electrification.
With a diversified product portfolio and strong innovation capabilities, the Powertrain business unit aims to achieve net income of between EUR 5.5 billion and EUR 6 billion by 2028 (previously the target was around EUR 5 billion by 2026) and is committed to achieving double-digit profitability, which means an annual adjusted EBIT margin of around 100 basis points to reach 9.5 to 10.5 percent by the end of 2028.
Bus Division
Building on its full range of models and its focus on local communities, the Bus Division will invest 600 million euros between 2024 and 2028 in the development of advanced technologies to ensure its leading position in the industry, especially in the field of zero-emission vehicles.
The division aims to achieve net revenues of between €3 billion and €3.5 billion by 2028 and is actively expanding its business and optimizing its operations with a view to achieving profitability of 7-8%, almost doubling compared to 2022.
Defense Division
At IVECO Group, the Defense Division is an independent and self-sufficient business unit with an emphasis on technological innovation, operational excellence and strategic partnerships. The strength of this division lies in its ability to meet specific customer needs and its ability to continuously and reliably support the security of several countries around the world.
Supported by orders of more than 4 billion euros, the division is accelerating and expects net income of between 1.2 billion and 1.3 billion euros by 2028 with an adjusted EBIT margin of 12 to 13 percent.
Truck Division
The Trucks division will leverage Daily's and eDaily's leadership in light commercial vehicles, as well as its well-known Eurocargo range in the medium-duty truck segment, and increase profitability in the heavy-duty truck segment with the S-Way and S-eWay models. Technological innovation, financial discipline and strategic partnerships have all contributed to its success.
By 2028, the division aims to achieve net income of between 11 billion and 11.5 billion euros and an adjusted EBIT margin of around 7 percent.
Financial Services Division
The Financial Services division will continue its success while exploring new sustainable mobility solutions, including GATE, a 100% digital platform focused on serving medium- and long-term pay-as-you-go leasing of electric commercial vehicles.
By 2028, the division aims to grow its own portfolio of assets under management from €6.9 billion in 2023 to €8 billion to €9 billion and to achieve an adjusted EBIT of between €1.3 and €150 million.
Iveco Group's financial targets for 2028
Based on the development goals of each business unit, the IVECO Group has announced a Group-wide vision for 2028, which reflect the Group's commitment to sustainable growth, as well as the strength and confidence to deliver on those commitments.
The Iveco Group's financial targets for industrial activities in 2028 include:
Net income amounted to around EUR 19 billion
Adjusted EBIT margin of 7 to 8 percent
Free cash flow of around 900 million euros
Group level:
Adjusted net profit of around 900 million euros
Adjusted earnings per share exceeded 3 euros
In view of the fact that the Iveco Group has signed an agreement for the transfer of ownership of MAGIRUS, the above financial figures do not include the Fire Division.
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