Volvo truck deliveries | US great but poor overall

by SR on June 21, 2012

Regional divergence just gets more apparent

Volvo North America truck deliveries, cumulative year-to-date (units)

  • Conclusion: Er, buy US truck plays? In our previous post on the global No.2 truck supplier Volvo’s April 2012 truck deliveries we noted that North American truck sales were going bananas, while US truck-related stocks had generally performed very badly over the previous 12 months (we have more on US auto parts stocks performance below). Well, Volvo’s truck delivery figures for May 2012 were released on 18 June and although North American deliveries for May itself were mediocre, year-to-date North American deliveries are still up 40.9% year-on-year in an otherwise lacklustre global truck market. The chart above (click for a larger image) shows not only that deliveries in North America so far in 2012 (the red line) are not only ahead of 2011 (the blue) line but also that the gap appears to be widening. Normally in our commentary we throw in a reference to the position relative to 2008, which was the pre-global financial crisis peak year for most auto-related markets, but Volvo already passed 2008 deliveries (the green line) in 2011 and by a huge margin. I have repeatedly voiced my doubts as to whether this US strength can be sustained, and so far the market is happily proving me wrong. Meanwhile, since our previous posts some of the lagging stocks we mentioned have shot up – market taking notice at last?
  • Total deliveries: 19,734 units (-2.6% YoY, +6.7% MoM, -0.4% YoY for Jan-May 2012). Total deliveries from January to May 2012 are tracking pretty much exactly in line with those of the previous year, which is another way of saying that there’s no growth. As you can see in the chart below (click for a larger image), the red line (2012) is on top of the blue line (2011) and both are some way behind 2008 levels (green line). I note that 2011 had a very strong finish to the year, which will make for difficult comparisons for 2012 in the second half of the year. As just noted, deliveries have fallen 0.4% YoY for the January to May 2012 period, and this continues a gentle slide after the +0.2% YoY for the January to April 2012 period and +1.9% for the January to March 2012 period.

Volvo Total worldwide truck deliveries, cumulative year-to-date (units)

  • South America struggling, Volvo behind market? You may have noticed an item in the media about General Motors scaling back output in Brazil. That’s not surprising, given that the market there, which is by far the largest in South America, is far from good. In cumulative terms, Brazil’s sales are down 3.7% YoY for the period from January to May 2012 – not great for this much-touted beneficiary of the global commodities boom. Within that, passenger cars have suffered the most, falling 4.9% YoY year-to-date. Commercial vehicle (which I define as simply all vehicles that are not cars or light trucks) sales are down 2.6% YoY over the January to May period. Compared to that, Volvo’s South American truck deliveries over the same period are down 19.5% YoY. That’s a bit deceptive, because a quick cross-check with the surprisingly copious Fenabrave monthly release shows that truck sales in the narrow definition have fallen by 13.5% YoY so far in 2012, but Volvo does look as if it’s underperforming the market. In the chart below (click for a larger image) the red line shows 2012 deliveries in South America, only just ahead of 2012 deliveries (the purple line) and well behind the blue line marking 2011 deliveries.

Volvo South America truck deliveries, cumulative year-to-date (units)

  • Western Europe unsurprisingly dire. I don’t want to add to the noise on Europe, so I will keep this brief. Western European cumulative deliveries for January to May are down 20% YoY. Now that looks very similar to the -19.5% YoY we just mentioned for South America, but there’s a big difference: Western Europe accounted for 28.7% of Volvo’s worldwide deliveries in May 2012 whereas South America made up only 10% of the total, so the impact of Western Europe is far larger. Eastern Europe deliveries came to 1,817 units in May 2012 (9.2% of the total) and this region has been doing pretty well. Year-to-date, cumulative deliveries are up 1.9% YoY and even in the single month of May deliveries rose by 8% YoY. So when we look at “Europe” as a whole for Volvo, the impact of Western Europe is dampened a little by the solid performance the East. Overall, European deliveries have fallen 16% YoY for the January to May 2012 period. The chart immediately below (click for a larger image) is for Western Europe. The chart below that (click for a larger image) shows recently monthly deliveries for Europe as a whole compared to the previous peak, which was recorded in October 2007. As you can see, recent deliveries are only 53.3% of that record level. A sobering reminder of Europe’s capacity problems.

Volvo Western Europe truck deliveries, cumulative year-to-date (units)

Volvo Europe truck deliveries, showing recent monthly truck deliveries compared to peak (units)

  • Asia’s modest gains a solid performance. Asian truck deliveries fell by 1.3% YoY in May 2012 to 3,948 units, but cumulatively for the January to May 2012 period the region is still up 2% YoY. As the chart below (click for a larger image) shows, deliveries for the month of May 2012 fell below not only 2011 levels (blue line) but also below 2010 (purple line).

Volvo Asia truck deliveries by month and year (units)

  • Truck parts stocks: performance is where you cut it. One client acknowledged that share price performance over the previous 12 months had been dire, but pointed out to me that if you measure performance from the bottom recorded by the S&P500 on 3 October 2011 to 16 May 2012, which was the end date I used in the calculations in my previous post, Dana (+31.5%) and American Axle (+28.1%) had outperformed the index itself. He was right, but I still feel that using market tops and bottoms as a base point for share price performance is arbitrary in a bad way – if you could regularly pick such turning points perfectly, surely you would have retired long ago. I think trailing 12-months performance is a reasonably yardstick here because throughout that period, US truck sales have been very strong, so one would think that there would be some justification to buy and hold the shares of those companies that have exposure to the US truck market (exactly how much exposure they have is a question for your favourite auto parts analyst). The chart below (click for a larger image) still seems to me to show that the more “trucky” stocks such as Modine, Meritor, Federal Mogul and American Axle have underperformed the “car parts” stocks. Perhaps the more important point is that a majority have underperformed the S&P500 in a year where auto and truck sales in the US are doing very well.

US truck and auto parts stocks, performance year-to-date in 2012

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