Volvo: A tale of two markets

by SR on April 27, 2012

North America truck sales great, Western Europe horrible

Running total of Volvo truck deliveries year-to-date in Western Europe to March 2012

The world’s second-largest truck maker Volvo reported its first quarter earnings yesterday. Dozens of analysts will have commented on the results so I will refrain from adding to that particular storm of noise as I have no value to add. However, I did think the charts on monthly truck deliveries (released in parallel with the results) were striking in that they showed the enormous contrast between the situation in North America (below) and the state of play in Europe (above).

Simply put, truck deliveries in Western Europe (above) are already down significantly year-to-date when compared to 2011, while cumulative truck deliveries in North America (below) are going gangbusters. Management tried to put a positive spin on Western Europe in the call, suggesting that they are looking at raising output for their Renault brand and hinting at fleet replacement demand later in the year. Considering the likely state of investment in Europe this year and looking at the direction of the line in the chart above, it seems unlikely to me that Volvo’s truck deliveries can avoid a substantial year-on-year decrease. Meanwhile North American deliveries are already well ahead of last year and look likely to continue in that direction.

Running total of Volvo truck deliveries year-to-date in North America to March 2012

The third chart shows global deliveries year-to-date. Strength in North America offsets weakness in Europe, with Asia tracking at this point in line with last year in unit terms. Overall, there’s not much growth. Contrast to the very strong expansion in earnings that I expect for the Toyota group auto parts suppliers such as Denso and you can see why I prefer to avoid commercial vehicles (such as forklifts) and road trucks for now.

Running total of Volvo truck deliveries year-to-date worldwide to March 2012

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