COMPANY PROFILE -Volvo
Business Sector :Automobile and Construction Equipment
Operating Geography :Sweden, Europe, Global
About Volvo :
Founded in 1927, AB Volvo is a Swedish multinational automotive corporation headquartered in Gothenburg, Sweden with major focus on production, manufacturing and distribution of trucks, buses, construction equipment and marine solutions. AB Volvo group is second only to German Daimler AG in terms manufacture and production of number of heavy-duty trucks. Volvo Cars which was previously a part of Volvo group was sold off to Ford motors in 1999 and later to Chinese automobile manufacturing company Geely Holding Corp in 2010, though both AB Volvo and Volvo Cars share the same logo on their vehicles. The Group employs close to 100,000 people as of 2018.
Volvo’s mission statement as per their annual report is to “Driving prosperity through transport solutions.”
Volvo’s vision statement as per their annual report is to “Be the most desired and successful transport solution provider in the world.”
Volvo Revenue :
SEK 334.74 billion (FY ended December 31st 2017)
SEK 301.91 billion (FY ended December 31st 2016)
Ownership / Major shareholders :As of 30th June 2018, the major shareholders of the company are as follows –
1) Industrivärden (23.14%)
2) Geely Holding (15.64%)
3) Norges Bank Investment Management (5.34%)
4) SHB (5.08%)
5) Alecta (4.95%)
Competitive Analysis of Volvo
|1. Renowned name with strong brand equity|
2. Global market leader in luxury bus segment
3. Diverse brands and product portfolio
4. Joint venture with companies in high growth economies
5. Investments in R&D and technology driving innovation
|1. Stretched supply chain|
|1. Electric and hybrid segment in trucks and buses|
2. Demand boom in heavy duty truck and hybrid buses
3. Capturing growth in Asia and other emerging markets
|1. Takeover by Geely
2. Competition from rivals such as Scania, Daimler and new entrants such as Tesla
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Detailed SWOT Analysis of Volvo
1. Renowned name with strong brand equity: Volvo since its inception has been at the forefront of designing their vehicles in such a manner that in the case of an accident or any unforeseen circumstances the passengers riding in the vehicle stay safe. Taking the safety concerns a step further the company has developed a system wherein Volvo trucks, bus and cars will be sharing real time data through their cloud-based service “Connected Safety”, the system intends to work in such a manner that it will alert the driver of the vehicle about potentially hazardous road conditions or slowdowns. As the technology undergoes further more refinement and more vehicles are linked with such system in the future it has the potential to increase the road safety of the passengers. This technology is already at work in Volvo’s traditional markets such as Sweden, the Netherlands and Norway, so as to implement it on a bigger scale the company is in talks with other government agencies to introduce this feature in other countries as well. Such systems as developed by Volvo are also being currently tested by other rival companies such as Volkswagen and Toyota.
2. Global market leader in luxury bus segment: Volvo buses have crafted a path for themselves in the marker by being synonymous and closely associated to providing a luxurious experience for the commuters, Volvo buses in many areas have revolutionized road travel for commuters. Volvo manufactures two types of buses that are meant for city travel and those meant for long distance coaches and both the segments have been vastly successful in countries like India which are highly price sensitive markets but the passengers are willing to pay more because of superior service and quality of commute and safety offered than compared to its competitors. In India, more than a million passengers commute daily in a Volvo bus and operate in more than 35 Indian cities and through their Indian subsidiary Volvo Eicher Commercial Vehicles, Volvo group have been highly successful as the company have secured orders for supplying new buses to several state transport departments.
3. Diverse brands and product and services portfolio: Volvo group consists a total of 8 brands namely Volvo, Volvo Penta, UD Trucks, Terex Trucks, Renault Trucks, Prevost, Nova Bus and Mack Trucks, the operations of the Volvo group range from manufacturing vehicles meant for commute, logistics, construction, mining, quarrying, urban distribution services for providing long haul transportation. Of the total revenue of $39.75 Billion earned by the Volvo group in 2017 more than 66% of the revenue was from the truck business followed by the construction equipment and buses contributing 20% and 8% to the total revenue respectively. Also, Volvo is the second largest truck maker all over the world coming second only to their German rivals Daimler-AG. Services also contribute majorly to Volvos’ revenues accounting for 21% of Group net sales in 2017. The service portfolio comprises of insurance, rental services, spare parts, preventive maintenance, service agreements, assistance services and IT services.
4. Joint venture with companies in high growth economies: Volvo trucks have been able to capture a large percentage of market share in heavy-duty vehicle industry in high growth countries like China and India because of their joint venture with Dongfeng Motor Corporation of China and Eicher Motors of India. Volvo trucks are not operated and marketed in these two countries as a standalone brand but with their partner companies, Volvo has seen best results coming from the Light and Medium Duty Commercial Vehicles where the company was able to gather 33.5% and likewise the growth in bus segment grew from 6% in 2008 to 17.5% in 2017. Because of high growth in market share of light and medium commercial segments the company is targeting to capture more than 15% market share in heavy-duty commercial vehicle segment where it takes a distant third spot as Mahindra & Mahindra and Tata Motors occupy 85% of the Indian heavy-duty commercial vehicle market.
5. Investments in R&D and technology driving innovation: Volvo-group has significantly invested in R&D and technology in emerging automobile areas such as automation, connectivity and electro-mobility. The group has also developed a framework, common product architecture and shared technology (CAST) which helps to free resources and capacity for developing new technologies. The more than 700,000 connected Volvo Group vehicles also serves the group an excellent platform for the future. Volvo has also entered into an agreement with Nanyang Technological University (NTU) in Singapore in 2017 for R&D of for autonomous electric 12-metre buses. The group’s investments in R&D amounted to SEK 16.1 billion for FY 2017 which comes to 4.8% of its net sales.
This section is available only in the 'Complete Report' on purchase.
1. Electric and Hybrid segment in trucks and buses: Volvo holds a distinction for introducing the world’s first fully electrically powered trucks meant for commercial use and are slated to be made available in the European market by the end of 2019. As of now the Volvo FL trucks are meant for intra city delivery of goods and garbage collection which offer a range of more than 200 kilometers or 124 miles on a single charge, the company is also working and planning to increase the range of such trucks to a significant level so that they can be used for inter-city operations. Besides this the Volvo have also started to test their electric buses in Scandinavia (mostly Denmark, Sweden and Norway) in a bid to replace the old and conventional diesel buses, currently Volvo is setting up its charging infrastructure to enhance the mobility of their vehicles which is due to be fully employed by March 2019, beside this the Volvo is trying to capture the other key European markets such as the UK, Germany, France and Poland.
2. Demand boom in heavy duty truck and hybrid buses: Sweden’s Volvo group outperformed the operating profit forecast which was $930 Million set by market experts but due to demand boom in the bus, heavy-duty truck and commercial vehicle segment both in North America and the European markets which are a stronghold of the Volvo group. The group earned an operating profit of $976 Million, besides this operating margin of the group rose from 8.9% in 2016 to 9.3% last year. The order intake of the group rose 29% last year which was expected to be around 21%, the company mostly saw increase in its heavy-duty truck segment and hybrid technology buses. The company has identified certain high growth markets such as India where they plan to ramp up the manufacturing of their hybrid buses because of the largely untapped and underutilized public transport and Volvo is setting a target to double their revenue in the next 4 to 5 years with a growth rate of 10 to 15% CAGR.
3. Capturing growth in Asia and emerging markets: Asia currently ranks third after North America and Europe in terms of market size and net sales for the Volvo group, Europe and North America contribute $17 Billion and $10 Billion to the global net sales of Volvo group but growth in these markets is low, whereas Asia which is still largely untapped by the company contributed $8 Billion to its net sales, keeping this in mind the Volvo group is focusing on China which is the fastest growing market for Heavy machinery equipment and vehicles. The Volvo group through its joint venture with Eicher motors in India is eyeing to tap the high growth Automobile industry in India in the commercial vehicle segment. The Volvo-Eicher Commercial Vehicle (VECV) saw its sales zoomed up by almost 50% in December 2018 as compared to December 2017 during which VECV sold 6087 and 4071 units respectively in India.
This section is available only in the 'Complete Report' on purchase.
Major Brands :
- Volvo Penta
- Terex Trucks
- Renault Trucks
- Nova Bus
Key Business Segments / Diversification :
Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :
|Nissan Diesel||Trucks||2007||Acquisition||The deal would help Volvo to expand in Asia and capitalize on the Japanese truck maker’s expertise.|
|Mack Trucks||Trucks||2000||Acquisition||The acquisition made Volvo group the world's second-largest maker of trucks and buses at that time|
|Renault Trucks||Trucks||2000||Acquisition||The acquisition made Volvo group the world's second-largest maker of trucks and buses at that time|
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References used in Volvo Analysis Report
1. VolvoGroup Annual Report 2017: https://www.volvogroup.com/content/dam/volvo/volvo-group/markets/global/en-en/investors/reports-and-presentations/annual-reports/annual-and-sustainability-report-2017.pdf
2. Telegraph - https://www.telegraph.co.uk/business/2017/07/20/volvo-hits-gas-electric-cars-geely-tie-up/
3. Reuters - https://www.reuters.com/article/us-geely-volvo-results/after-record-2017-geelys-volvo-cars-sees-more-growth-ahead-idUSKBN1FS0JL
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Volvo SWOT and PESTLE analysis has been conducted by Deepanker Pandey and reviewed by senior analysts from Barakaat Consulting.