Weaker markets and lower earnings
The Volvo VM is a truck developed specifically for the South American market, where it is used for regional transports and city distribution.
During 2012 market conditions varied between different parts of the world. In Europe, South America and Asia truck markets weakened while North America showed growth.
Demand in Europe slowed down gradually during the year while the development in North America was characterized by a strong first half and a weaker second half of the year. In Brazil demand recovered towards the end of the year. The Japanese market weakened during the second half of the year after governmental incentives to buy new, environmentall adapted trucks had run out in July.
Weakness in many markets
In 2012, the heavy-duty truck market in Europe 28 (EU minus Bulgaria plus Norway and Switzerland) reached 221,000 trucks, down by 9% compared with 2011. Given the macro-economic development it is difficult to assess the total market for heavy-duty trucks in Europe 29 for 2013. The current estimate is that the market will reach a level of about 230,000 heavy-duty trucks.
In 2012, the total North American retail market for heavy-duty trucks increased by 15% to 249,562 vehicles, compared with 216,080 in 2011. For 2013 the total market is difficult to assess, but it is expected to be at about the 2012 level of 250,000 heavy-duty trucks.
In 2012, the Brazilian market decreased by 22% to 87,430 trucks compared with 111,471 trucks in 2011. The total Brazilian market for heavy-duty trucks is expected to increase and reach a level of about 105,000 trucks in 2013.
In Japan the total market for heavy-duty trucks in 2012 rose by 28% to 31,800 vehicles (24,800). For 2013, the total Japanese market for heavy-duty trucks is expected to increase to about 35,000 trucks.
In India, the total 2012 market for heavy-duty trucks declined by 18% to 195,140 trucks (237,329).
In general the Volvo Group maintained its market positions, with the exception of Japan. In Europe the combined market share for heavy-duty trucks amounted to 25.7% (26.3) and in North America the combined market share was 18.3% (18.2). In Brazil market share increased to 18.2% (17.1) while it decreased to 17.5% (20.1) in Japan. In India the market share for Eicher amounted to 31.4% (30.5) in the medium-duty segment and to 3.9% (3.1) in the heavy-duty segment.
In 2012, net sales in the truck operations decreased by 3% to SEK 192,283 M (198,920) after a weak second half of the year. Operating income decreased to SEK 10,216 M (18,227), while the operating margin was 5.3% (9.2).
The lower operating income was a result of lower sales and low capacity utilization during the second half of the year as well as restructuring costs. Profitability was also affected by the high investment pace in research and development for the upcoming comprehensive product renewal and related launch costs in sales, production and aftermarket support. Among the projects are the new Volvo FH series, a new Renault Trucks range, a new range of trucks in the lower price segments in emerging markets, a new medium-duty engine range and research and development ahead of the new emission legislation Euro 6.
On July 5, Volvo Trucks presented an engine tailored for the Euro 6 environmental standards. Nitrogen oxide emissions will drop by 77% and particulate emissions will be halved from already low levels. First off the mark is Volvo’s D13 460 hp engine, which powers more than one-third of all Volvo trucks.
A completely new generation of Volvo FH was presented to the public in early September through parallel launches in some of the most important markets in Europe. It was also displayed at the automotive fair in Hannover where it received very positive reviews. The advanced technology of the new Volvo FH will create a new platform for strengthening Volvo Trucks’ competitiveness. Production will start in the spring of 2013.
In December it was announced that the full lineup of Volvo Group truck models in the US had been certified according to the 2014 greenhouse gas regulations.
New truck strategy and reorganization in EMEA
The new truck strategy, which is an important part of the goal to improve the operating margin by 3 percentage points, is described in detail starting in chapter Targets to secure improved Group profitability.
On January 1, 2013, the Volvo Group introduced a new organization for its truck dealer networks in Europe, the Middle East and Africa (EMEA). Implementation will be carried out during the year. The reorganization aims to capitalize more effectively on opportunities for the Group’s brands and products in line with the new strategy for the truck operation.