Dive Brief:
- Volvo Group's truck customers are returning to previously planned replacement cycles as freight activity increases, the OEM said in its Q3 earnings report Friday.
- Truck order intake increased 61%, compared to a weak Q3 last year. Part of the uptick is due to some fleets putting orders in during Q3 that they normally would have put in during Q2, Volvo said. Truck deliveries were down by about 15,000 units YoY, Chief Financial Officer Jan Ytterberg said on the earnings call.
- Volvo reinstated guidance for 2020 after suspending it during its Q1 earnings report. The OEM projects it will sell 220,000 units in North America in 2020 and 250,000 units in 2021, CEO Martin Lundstedt said on the call.
Dive Insight:
Volvo anticipates an incremental ramp up of truck business after orders and deliveries tanked in Q2.
"We have now gradually built up a healthy pipeline of orders and are gradually adjusting upwards to meet those demands," Lundstedt said on the call. But this activity has put stress on Volvo's supply chain, as suppliers from tier 3 to tier 1 have decreased output during the pandemic, he said. Suppliers "now need to show good flexibility upwards," he said.
Demanding more from the Volvo supply chain has also put pressure on the company's logistics systems, Lundstedt said. Routes have changed, particularly in sea freight, he said, as has frequency. "And we [will] continue to put a lot of attention in this field, moving forward," Lundstedt said.
Volvo's global supply chain was disrupted as companies and governments began to take social-distancing measures in March, and production halted in most parts of the company's operations, Volvo said in April.
But lead times are now beginning to normalize, according to the CEO.
Cost discipline and demand has given the company "financial leverage," Ytterberg said. "That's what we have performed here in the third quarter, and that is what we need to secure going forward, as well."
Looking ahead to 2021, electrification is set to play a big role for Volvo. The OEM said it is "reinforcing" investments in fuel-cell and battery-electric technologies, as well as autonomous systems.
Serial production of the Volvo VNR Electric for North America will begin next year, as will serial production for the Mack LR refuse truck for North America. Volvo's joint-venture with Daimler on fuel-cell trucks is also progressing, and final contracts are set to be signed before the end of the year, the company said.
Volvo plans to provide more information about its electric business during its Capital Markets Day in November.
