Volvo Group posts solid Q3 results but sees slowdown ahead

Sweden’s Volvo Group reported slightly higher deliveries but fewer truck orders in the third quarter as it prepares for a slower market in 2024.

Volvo is the first of the four major OEMs to report results for the July-September period, typically the slowest of the year. Paccar Inc., Traton Group and Daimler Truck will report in coming weeks.

“We have successfully mitigated cost inflation with price management and continued to handle disturbances in the supply chain,” Martin Lundstedt, Volvo Group CEO, said in a report on the period.

By the numbers, Volvo reported these year-over-year Q3 figures:

A 9% increase in net sales to 132.4 billion Swedish kronor(SEK) or $12 billion.
Adjusted operating income of SEK 19.1 billion compared to SEK 11.9 billion a year ago.
Adjusted operating margin of 14.4% compared to 10.3%.
Return on capital employed of 33.7% compared to 27.4%.

Truck orders declined by 27% to 47,202 vehicles in the quarter as inflated backlogs from pent-up demand are built and delivered. Volvo deliveries increased 4% compared to Q3 2022 to 55,274 trucks.

Volvo Group CEO Lundstedt: ‘We … forecast lower market levels for next year’

“We expect our major truck markets to continue to be strong throughout this year as we continue to deliver from our large order books to customers, but forecast lower market levels for next year,” Lundstedt said.

Volvo maintained its North American industry estimate of 330,000 heavy-duty trucks for full-year 2023. It forecast industry sales of 290,000 in 2024.

“We continue to keep a high level of flexibility to manage any mid-term changes in demand,” Lundstedt said.

The slowdown in freight in the U.S. market comes amid a shift from consumer goods purchases prevalent during the pandemic to services like restaurant deliveries and vacation travel.

Thousands of truck drivers who jumped into the business to capitalize on record spot per-mile rates are surrendering their Department of Transportation authorities and either signing on with for-hire carriers or leaving the business altogether.

North American orders decreased by 7% to 17,355 trucks in Q3. Deliveries increased 13% to 15,041 vehicles, reflecting a reduction in the backlog — the time from when an order is placed to its delivery. Volvo Trucksʼ heavy-duty truck market share through August decreased to 9% from 10.3% a year earlier. Mack Trucksʼ market share was flat at 6% compared to 5.9%.

The United Auto Workers struck Mack Trucks for the second time in four years on Oct. 8. Talks resume Thursday toward a settlement after 3,900 union-represented employees rejected a tentative agreement by 73%.

Together, Volvo Trucks North America and Mack Trucks held 15% of the North America market share, trailing market leader Daimler, the parent of Freightliner and Western Star trucks, at about 40% and Paccar, whose Kenworth and Peterbilt models account for about 30% share. Traton’s Navistar International brand is the smallest of the four OEMs.

Volvo touts its early lead in electric vehicles. It booked 1,600 orders — including transit buses — in Q3 for an annual pace of nearly 6,000, small in comparison to diesel trucks but growing. Volvo delivered 1,100 electric trucks and buses during the quarter.

“It takes time, but we see that this is a strong momentum,” Lundstedt said on a call with analysts Wednesday.

During the quarter, Volvo Group, Renault Group and CMA CGM Group agreed to collaborate on zero-emission last-mile deliveries, the fastest-growing segment in battery-electric adoption. Renault and Volvo already cooperate on small trucks. The goal is an all-new generation of electric, software-defined vans combined with end-to-end digital and physical services.

Volvo’s SuperTruck 2 adopts European rigid design chassis

Volvo’s fuel cell truck advances but battery-electric is biggest push

Volvo Group surges to Q2 profit record amid signs of a cooldown

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