COMMENT: Volvo lauches against sombre outlook

London: Volvo, the world second largest truck maker launched its first all-new vehicle in 20 years today against a backdrop of decline in European truck sales that has already prompted Germany’s MAN to adopt a recruitment freeze and Fiat Industrial’s Iveco to plan closing five truck plants.

Truck sales are an extraordinarily accurate barometer of econimic activity,  so the fortunes of truck makers reflect prospects for the wider ecomomy.

Developing new trucks is a long-term business. Volvo’s new FH truck took US$1.7bn of investment and five years to develop. “This is a huge undertaking for us and one could also say that it is actually one of the largest industrial projects in Sweden,” said Volvo’s chief executive Olof Persson at a news conference at the group’s Gothenburg headquarters.

The new truck is to sell for about €5,000 more per vehicle than its predecessor and will come first to the European market, with production planned for early next year, before launches in market. “Normally, at this point in time, you need to come through July and August and then have September when everybody is back from vacation and the system is back and running again,”  said Persson. “You can’t time these kind of launches on the basis of the economic cycle.”

Volvo, like other truck makers, is facing the uncertainty of whether the weak performance in July and August has been a seasonal problem with the market coming back in September, or whether the market will weaken further. Volvo is forecasting that the European market for heavy trucks will be about 230,000 units this year, a decline of only 5%.

Volvo’s rivals are also glum, but all are a far cry from the collapse experienced during the 2008/09 financial crisis, when the entire global market went from top gear to a virtual standstill within months. Market leader Daimler does not rule out a European market contraction in the medium and heavy segment of up to 10% this year, while MAN has forecast a 5- to 10% drop for commercial vehicles. Daf, part of  Paccar, the US company, has taken a similar view.

September’s sales will show which forecast is the more accurate and provide and indicate expected overall economic performance in Europe.

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