Sweden’s Volvo Group reported a 10% increase in fourth-quarter sales and mostly positive financial metrics for the fourth quarter and 2023. But the maker of trucks, buses and construction equipment suggested easing sales this year as pent-up pandemic demand has been largely met.
Volvo reported net income of $1.16 billion, or 59 cents per diluted share, in the final three months of 2023, up 80.6% compared to $641.4 million, or 31 cents, in the same period a year earlier.
For the full year 2023, Volvo increased its net sales by about 80 billion Swedish krona ($7.65 billion) to 553 billion Swedish krona. Adjusted operating income of SEK 77.6 billion compared to SEK 50.5 billion in 2022 with an adjusted operating margin of 14% compared to 10.7% in the previous year.
“By 2024, the market will move from high demand to a more natural replacement-based market,” CEO Martin Lundstedt told analysts on a conference call.
Deliveries increased, orders decreased
Volvo Trucks’ global deliveries rose 4% to 65,625 trucks in the fourth quarter. Orders fell 9% to 49,347 units.
A six-week strike by the United Auto Workers union at Mack Trucks resulted in a 9% drop in deliveries compared to the previous year. Mac orders rose 72% from October to December.
Volvo Trucks North America reported 31,013 orders, down 17% from 37,210 units in the fourth quarter of 2022. Deliveries rose 2% to 39,964 from 39,128.
Fleets have largely absorbed the pent-up demand that characterized 2022 and 2023, the company said. Lead times, especially in Europe, have returned to more normal levels.
Electric trucks slow down
All-electric truck bookings in the fourth quarter fell 7% to 1,090 vehicles. Deliveries increased by 127% to 1,285 vehicles.
“The underlying demand for electricity is good, and we have high price levels across the regions,” Lundstedt said. “At the same time, we have experienced (some) hesitation in taking new orders from customers. There is a bit of a wait-and-see mode which we think is fairly normal.
In the United States, California’s Advanced Clean Fleets Rule, which was scheduled to be implemented on January 1, has been postponed due to legal wrangling. This could cause some fleets to pause on timing the switch to electric trucks, which are two to three times more expensive than traditional diesel-powered models.
“It’s not just going to be a straight line,” Lundstedt said. “But we see that this transformation has only just begun.”
Prepare for long-term electric truck growth
Volvo is poised for long-term growth in electric vehicles to meet its goal of eliminating 100% of fossil fuel-powered trucks by 2040. It paid $210 million to buy the battery manufacturing assets of Proterra Powered after 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 to the overall battery capabilities of the range.” Volvo expects the deal to close this quarter.
Since all of Volvo Trucks’ plants in Europe produce electric trucks in series, the company can adapt to assembling hybrid models between conventional and electric trucks.
Earlier this week Volvo unveiled a new four-model VNL lineup that will go into production in the third quarter of this year in Virginia. The truck platform, which took six years to develop, will be the basis for future trucks globally, including a redundant chassis ready for autonomous driving.
The Gothenburg-based company’s board of directors proposed an ordinary dividend of SEK 7.50 per share and an additional dividend of SEK 10.50 per share.
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Click for more FreightWaves articles by Alan Adler.
