Considerably weaker demand in Europe

The downturn in demand in Europe has been more severe than previously expected. The financial turmoil and credit tightening has led to a very cautious approach among customers when it comes to deciding on investing in new trucks. During the quarter, gross order intake in Europe amounted to approximately 20,000 trucks, consisting of both new customer orders and some changed orders. The explanation to why the net order intake only amounted to 115 trucks is that a review of the order book was carried out in close cooperation with customers. The review resulted in that approximately the same number of orders that were received during the quarter was taken out of the order book. This cleaning out of the order book has opened up production slots that in some cases have been filled by orders from customers in regions such as the Middle East and some parts of Asia where delivery times have been long. The lead time for trucks manufactured in the European industrial system is back to normal levels.

Against the backdrop of the high registration numbers during the first eight months of 2008 and present delivery rates from the industry, the total European market (Europe 29) for heavy trucks is expected to grow by 0–5% during 2008 compared with 2007. The previous forecast was a growth of 10%. To forecast the market demand in Europe in 2009 is difficult given the uncertain economic development and the financial turmoil, but the Volvo Group’s truck operations is at present time in the process of adapting the industrial system to meet a significant decline in Europe.

Order bookings in North America continued to be on a low level due to the ongoing sluggishness of the US economy, high fuel prices, softness in housing construction and the financial turmoil. Altogether, the heavy truck market in North America is now expected to decline by approximately 10% in 2008 compared to 2007. The previous forecast was for a market on the same level as in 2007. The North American market is expected to start recovering from present levels, primarily driven by replacement demand. However, the timing of a recovery is difficult to predict as customers currently are putting off investments in new trucks due to the financial turmoil and the uncertainty about the development in the American economy.

The total Japanese market for medium duty and heavy duty trucks is expected to decline by about 15% during 2008 from the level of 89,000 trucks during 2007. The previous forecast was a decline of 10–15%.