Our mission is to drive prosperity through transport and infrastructure solutions. Our vision is to be the most desired and successful provider in this sector, across the globe.
We aspire to deliver leading customer satisfaction for all brands in their segments; to be the most admired employer in the industry, and to have industry-leading profitability. The Group’s values, Customer success, Trust, Passion, Change and Performance, serve as a guide to our day-to-day behavior and drive decisions on all levels of the organization. Our Code of Conduct outlines how we do business in the Volvo Group: ethically and in compliance with the law.
Our holistic approach to supporting our customers and their business needs is built upon a strong foundation of products, services and total solutions. Our aim is to help our customers to maximize uptime and productivity. We do this in several ways.
The Volvo Group sells its products under the Volvo, Volvo Penta, Rokbak, Renault Trucks, Prevost, Nova Bus, Mack and Arquus brands. We also partner in alliances and joint ventures in SDLG, Milence, Eicher, Dongfeng and cellcentric. By offering products and services under different brands, we address many different customer and market segments around the world.
The Volvo Group’s products have been developed to contribute to efficient transport and infrastructure solutions and to provide our customers with reliable uptime. We drive the development of electrified vehicles and machines as well as automated solutions for the benefit of customers, society and the environment. Sales of vehicles and machines build a population of products that requires spare parts and services.
In addition to vehicles and machines, our offering includes various types of services such as financing, insurance, rentals, spare parts, repairs, preventive maintenance, service agreements and assistance services. The range and flexibility of the offering means that solutions can be tailor-made for each customer to secure uptime and productivity. The service business contributes to balancing the fluctuations in the sales of new products and improving profitability over the business cycle. Growing the service business is an area of priority.
In addition to the mission, vision, aspirations, values and Code of Conduct we have decided on seven strategic priorities for the Volvo Group to capture growth opportunities and improve underlying performance. The strategic priorities will guide our decision making and result in action – but should not be seen as a detailed action plan. The order in which the priorities are presented does not reflect relative importance.
For the Volvo Group, the transition to a fossil-free society brings a deeper, broader, and more long-term engagement in our customers’ business, and a significant opportunity for growth.
The Volvo Group estimates that there is a potential to increase the revenues by more than 50% over the lifecycle when comparing an electric vehicle to a conventional version. This is primarily based on the increased sales value of an electric vehicle but also on increased revenues from autonomous solutions, new digital services and services connected to energy solutions. Other factors expected to drive growth are increased service contract penetration and an increase in the duration of the contracts.
The Volvo Group started series production of electric trucks up to 27 tons already in 2019 and has established leading market shares both in Europe and North America. In September 2022, Volvo Trucks started series production of heavy electric 44-tonne trucks. With the addition of electric versions of its most important product range, the Volvo FH, Volvo FM, and Volvo FMX, Volvo Trucks has six electric truck models in series production.
Furthermore, in early October we announced that Renault Trucks would open for pre-orders of heavy electric trucks for regional transport and urban construction. Production will start at the end of 2023.
In 2022, Volvo Trucks had a market share of 31.6% in heavyduty electric trucks in Europe and Renault Trucks had a market share of 24.2%. Also in North America, Volvo Trucks and Mack Trucks have a strong position in heavy-duty electric trucks with a combined market share of over 50%, according to our assessment. However, it must be emphasized that the volumes are still small. With a continued global roll-out of electric machines across markets in Europe, North America and Asia in 2022, Volvo Construction Equipment supports the journey towards emission-free job sites in a growing number of markets.
We also believe that autonomous solutions has the potential to bring a wide range of benefits to society. The introduction of self-driving vehicles and machines opens the way to transport systems that have a significantly reduced impact on the climate, are more productive, more energy efficient and safer. Since 2020, the Volvo Group has a business area focused on developing and commercializing industrial autonomous transport solutions: Volvo Autonomous Solutions.
Although autonomous solutions are in relatively early phases, we believe that they may offer a significant growth opportunity for the Volvo Group as they tap into substantial revenue pools that have not previously been addressed. Instead of selling a truck or machine, we can provide customers with complete transport systems, driving productivity for them and revenues for the Group.
The performance of the Volvo Group has improved substantially during the last few years. Our focus has been on gradual and consistent earnings improvement, reduced volatility in earnings and cash flow, as well as allocating capital in a disciplined way. We have great assets in our people, products, and services, as well as production sites, well-established dealer networks and customer relations. We have strong finances and are in a good position to be able to invest further in new technologies. Our aim is to excel on the basics as well as building resilience. This is key to our long-term profitability.
There are close to 3 million trucks, buses, and machines, produced by the Volvo Group in the last ten years, operating on or off-road.
We believe that the key to being successful is to create value for our customers by contributing to improving their profitability. By understanding our customers’ priorities and challenges, we are able to provide products and services that grow customers’ revenues and decrease their costs. Key areas to create value for our customers are offers that increase our customers’ productivity, secure uptime and increase fuel efficiency. By delivering customer value, we will also deliver value for ourselves, our owners and society.
The Volvo Group has in recent years gone through a substantial restructuring process in order to reduce structural costs and increase efficiency and is currently in a phase where focus is on organic growth and improved profitability through continuous improvement and innovation.
A clear and straightforward operating margin target supports the efforts to drive performance across the Group through the business cycle. The target also aligns with the way the Group and its business areas are challenged and measured internally. The Board’s target is for the Group’s operating margin to exceed 10% measured over a business cycle.
A debt-free industrial balance sheet, excluding pension and lease liabilities, enables the Volvo Group to better manage cyclicality in a capital-intensive industry and to secure competitive cost of funds for the Financial Services’ operation.
Target: The Volvo Group’s operating margin shall exceed 10% measured over a business cycle.
Outcome: In 2022, the operating margin amounted to 9.7% (11.6). In 2018–2022 the average operating margin was 9.9%. In 2022, the adjusted operating margin amounted to 10.7% (11.0). In 2018–2022 the average adjusted operating margin was 10.3%.
Target: The Industrial Operations shall under normal conditions have no net financial indebtedness excluding provisions for postemployment benefits and lease liabilities.
Outcome: At the end of 2022, the Industrial Operations had a net financial asset position of SEK 73.9 billion.
Target: Financial Services’ target is a return on equity of 12–15% at an equity ratio above 8%.
Outcome: In 2022, return on equity amounted to –0.3% at an equity ratio of 8.0%. In 2018– 2022 the average return on equity was 11.2%. In 2022, return on equity excluding a negative effect from provisioning of assets related to Russia amounted to 15.1%. In 2018–2022 the average return on equity excluding the adjustment related to Russia was 14.3%.
* Excluding a negative effect from provisioning of assets related to Russia