Volvo Group reports strong Q4 results but caution for 2024

Sweden’s Volvo Group reported a 10% increase in fourth-quarter sales and mostly positive financial metrics for Q4 and 2023. But the truck, bus and construction equipment maker suggested softening sales this year as pent-up pandemic demand has largely been met.

Volvo posted net income of $1.16 billion, or 59 cents per diluted share, in the final three months of 2023, up 80.6% compared with $641.4 million, or 31 cents, in the same period a year earlier.

For the full year 2023, Volvo increased net sales by almost 80 billion Swedish kronor (SEK) ($7.65 billion) to SEK 553 billion. Adjusted operating income of SEK 77.6 billion compared to SEK 50.5 billion in 2022 for an adjusted operating margin of 14% compared to 10.7% a year earlier. 

“Coming into 2024, the market is moving from high demand to a more normal replacement-driven market,” CEO Martin Lundstedt told analysts on a conference call. 

Deliveries rose, orders fell

Volvo’s global truck deliveries rose by 4% to 65,625 in Q4. Orders fell 9% to 49,347 units.

A six-week strike by the United Auto Workers at Mack Trucks resulted in 9% fewer deliveries than a year earlier. Mack orders soared 72% during the October-December period.

Sibling Volvo Trucks North America reported 31,013 orders, down 17% from 37,210 units in Q4 2022. Deliveries rose 2% to 39,964 compared to 39,128.

Fleets have largely absorbed the pent-up demand that characterized 2022 and 2023, the company said. Lead times, particularly in Europe, have returned to more normal levels.

Electric truck slowdown

Bookings for fully electric trucks in Q4 declined by 7% to 1,090 vehicles. Deliveries increased by 127% to 1,285 vehicles.

“The underlying electric demand is good, and we have high quotation levels across regions,” Lundstedt said. “At the same time, we experienced [some] hesitation to take in new orders from the customer side. There is a little bit of wait-and-see mode that we think is rather natural.”

In the U.S. the Advanced Clean Fleets rule in California planned for Jan. 1 implementation was delayed by legal wrangling. That may give some fleets pause on timing a transition to electric trucks that are two to three times more expensive than conventional diesel-powered models.

“It will not only be a straight line,” Lundstedt said. “But we see that this transformation has just started.”

Preparing for long-term electric truck growth

Volvo is preparing for the long-term growth in electric vehicles toward its goal of eliminating 100% of fossil fuel-powered trucks by 2040. It paid $210 million to purchase the battery-making assets of Proterra Powered out of Proterra Inc.’s bankruptcy during Q4.

“This is the first step in creating a battery value chain for the group in North America,” Lundstedt said. “But it also adds on to the group’s overall battery capabilities.” Volvo expects the deal to close this quarter.

With all Volvo truck factories in Europe in serial production of electric trucks, the company can adjust to a mixed-model assembly between conventional and electric trucks.

Volvo earlier this week revealed a new four-model VNL lineup that goes into production in the third quarter this year in Virginia. The truck’s platform, six years in development, will be the basis of future trucks globally, including an autonomous-ready redundant chassis.

The Gothenburg-based company’s board proposed an ordinary dividend of SEK 7.50 a share and an extra dividend of SEK 10.50 a share. 

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