As noted elsewhere in these pages, the truck industry had long been expecting 2020 to be a bad year, but its fate now lies firmly in the hands of the coronavirus, and May truck registration data published by the European Automobile Manufacturers Association (ACEA) makes for difficult reading. Commercial vehicle registrations across the European Union (EU) decreased by 44.4% in May, with the sharpest declines felt in Spain, down 59% year-on-year (y-o-y) and Germany (-47.9%). The impact of the pandemic is all too plain to see: a ‘routine’ cyclical downturn would have produced far less dramatic numbers.
Nonetheless, the May registrations were a slight improvement over the previous month as markets began relaxing lockdown restrictions. New heavy truck (>16t) registrations across the EU fell by 59.7% to 11,783 units in May, and by 41.1% y-o-y to 76,232 in the first five months of the year. This included a 41.9% decline in France, followed by Germany (-36.8%), Spain (-32.1%) and Italy (-29%). May also saw EU demand for new medium and heavy (MHCV, > 3.5t) trucks shrink by 56.9%, the 11th consecutive month of decline, and a fall of 38.6% y-o-y in the first five months to 95,174 units, with France (-41%), Germany (-33.4%), Spain (-30.9%) and Italy (-29.4%) hardest hit.
The combined impact of COVID-19 and a long-anticipated cyclical downturn in the truck industry have been a major setback for Volvo Trucks in 2020. The same is true for all truck makers, but for Volvo, this will mean a reduction in consolidated sales in 2020 of almost 90,000 units compared to 2019. According to a new Automotive World forecast, even after five years of recovery—a period which will include Volvo’s sale of UD trucks—the Group’s sales in 2024 will only be back to levels last seen in 2017, and well out of reach of the 2019 peak of 221,600 units.
The 2008 credit crunch was the last time the truck industry suffered negative net orders, but in March 2020, Volvo saw a 75% decline in net order intake compared to February; this subsequently turned negative as cancellations exceeded orders for new trucks in the wake of lockdowns in most major truck markets. Volvo has been here before; in the third quarter of 2008, the truck maker’s European truck orders fell 99.7% year-on-year, sliding into negative territory in Q4. All truck brands—including Volvo Group brands Renault and Mack—suffered declining orders, but it was the speed of order cancellations for the Volvo truck brand that stood out, especially after its experience in 2008.
The new Automotive World report, ‘Strategy update: Volvo Group – 2020 edition’ provides a comprehensive review of Volvo’s operations, from its joint venture with Daimler on hydrogen fuel cell technology to its sale of UD Trucks, and its recent announcement of 4,100 white collar job cuts in response to coronavirus-related falling demand.
“In an investor presentation during October 2019, one of Volvo Group’s key themes was of building resilience. At the time, it was anticipating cyclical downturns in 2020 across most of its major truck and bus markets, with South America being the one exception,” notes Jonathan Storey, the author of ‘Strategy update: Volvo Group – 2020 edition’. “A desirable quality at all times, that resilience, including record net cash in the industrial division at the end of 2019, is standing the company in good stead as the impact of coronavirus has markedly steepened the downturns in all its markets, taking demand well below the levels which the company had anticipated.”
The report analyses the company’s position, and how these actions will shape its production outlook over the next five years. Market conditions are currently tough for all automakers and truck manufacturers, but Storey retains some optimism. “While 2020 is not going to be anything but a bad year for Volvo,” he concludes, “the company has put itself in good shape to weather the storm.”