Early strategies are paying off: Asia now the Volvo Group’s second largest market

Last year, the Volvo Group’s Asian market grew bigger than Volvo’s North American market for the first time ever. Asia currently represents 24 percent of the Volvo Group’s sales, and is Volvo’s second largest market after Europe. “Because the Volvo Group entered the market early, we’re constantly gaining new, valuable knowledge about the market’s development. This allows us to position ourselves so that we gain a share of Asia’s growth,” comments Leif Johansson, President and CEO of the Volvo Group.

Ten years ago, the Volvo Group’s most important markets were Europe and the USA. This had been the case for many years, while sales in Asia were many times lower. Much has changed since then. During the 2000s, the Volvo Group’s strategic ventures have transformed Asia into one of the group’s domestic markets. Thanks to the acquisition of Japanese truck manufacturer Nissan Diesel, Chinese wheel loader manufacturer Lingong and Ingersoll Rand’s road construction machinery division, plus a truck and bus alliance with Indian Eicher Motors, the Volvo Group has significant industrial presence in Asia today.

“Our acquisitions have been very successfully integrated. The results are seen most clearly in countries where we entered the market fairly early, such as India – where Volvo has been selling buses and trucks since 1996," says Pär Östberg, senior Vice President and President of Trucks Asia.

In 2009, the Volvo Group was ranked 25th in the prestigious Wall Street Journal Asia 200 Survey – an annual ranking of Asia's 200 most successful companies. Moreover, Volvo came an impressive 9th in the category of Quality – one of Volvo’s core values.

“The Wall Street Journal’s survey provides proof that we’re headed in the right direction in the region. Asia is often associated only with China, but we’re present and expanding in many other Asian countries too. This ranking is a reminder of this,” explains Leif Johansson, President and CEO of the Volvo Group.

The Volvo Group’s Asian sales totalled SEK 40 billion in 2008, while almost 20,000 employees work in Volvo companies in Asia. Volvo's presence can be divided into the regions of Japan, China, India, Korea and Southeast Asia, where Volvo companies sell and produce trucks, construction machinery, buses and marine engines. Furthermore, the business units Volvo 3P, Volvo Powertrain, Volvo Parts and Volvo Financial Services assist with the sale of products, vehicle servicing and other services.

“We also have a large, efficient network of distributors doing an excellent job in the Asian countries,” comments Pär Östberg.

Besides sales of finished products, spare parts and vehicle servicing play a key role in Volvo's operations, representing 30-40 percent of sales. In addition, the companies Nissan Diesel and Eicher Motors export products made in Asia to Australia, Africa, the USA and the Middle East.

Japan is by far the Volvo Group's largest Asian market, due to the takeover and integration of truck manufacturer Nissan Diesel in 2007. Half of the Volvo Group's Asian sales and employees are in Japan. In autumn 2009, Nissan Diesel’s heavy and medium-heavy trucks reached 25 percent market shares in Japan bringing them close to Hino, Japan's leading truck manufacturer. Nissan Diesel’s success in its home country is largely ascribable to the trucks’ environmental performance. Nissan Diesel’s fuel-efficient engines benefits from the Japanese government's environmental initiative offering a discount to users who trade in their existing truck for a more environmentally friendly model. Today, 70 percent of Nissan Diesel’s trucks meet Japanese emission standards, the strictest emission standards in the world.
The acquisition of Nissan Diesel was expected to produce benefits of scale, saving the Volvo Group EUR 200 million per year after five years (2012) – and these benefits will be achieved.

“Nissan Diesel is a good example of how our expansion in Asia is good for the whole Volvo Group. We can all benefit from the technology developed in Japan, which is now winning market shares for Nissan Diesel’s fuel-efficient trucks. This applies to all our acquisitions and investments in Asia. We're not abandoning our traditional markets in favour of a new one – we’re creating synergies and benefits for the whole Group’s operations by achieving growth in new locations,” explains Leif Johansson.

The Volvo Group’s truck and bus business in India is something of a veteran in Asian terms, since it has been in progress for 13 years. Sales are rising steadily, and Volvo Trucks and Eicher Motors’s truck and bus operations jointly control almost 30 percent of India’s market for medium-heavy trucks. The takeover of Ingersoll Rand’s road construction machinery is reaping success in India, thanks to heavy Indian investment in infrastructure and an upswing in new road construction.

The Volvo Group bought out Korean Samsung Heavy Equipment in 1998, during the Asian financial crisis in the late 1990s, and thereby strengthened Volvo’s market position in Korea, where Volvo also sells and produces trucks from Volvo Trucks and Nissan Diesel.
Volvo acquired a majority share in Lingong, a Chinese wheel loader manufacturer, in 2007 as part of a drive to develop its construction machinery business. Volvo now has a sizeable market in China - on the bus side through two joint venture companies, and on the truck side through Volvo Trucks, Renault Trucks, Nissan Diesel and an alliance with the Chinese company Dong Feng Motors. In addition, Volvo Penta develops and sells engines in China.

“Without saying too much about the future, we've got clear product plans and the right development resources for all our Asian operations. Although we’re fairly confident that the region is on the brink of a strong growth trend, we also realise the importance of long-term planning, since it can take time to achieve a strong market position," concludes Pär Östberg.