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Scania Trucks are pictured at the booth of Swedish truck maker Scania at the IAA truck show in Hanover on Wednesday. The IAA 2014 will open its doors to the public on Thursday.
  • Why it matters

    Why it matters

    Many truck makers face difficulties as sales drop dramatically, and at the IAA international truck fair in Hanover, many see worse ahead.

  • Facts

    Facts

    • The Russian-Ukrainian political crisis is dampening sales not only in Russia but European-wide.
    • Key industry leaders expect anywhere from a 5 percent to 15 percent decline in truck sales.
    • Truck makers with a diverse customer base are likely to fare better, as some markets are doing well, like the U.S.
  • Audio

    Audio

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Scania chief Martin Lundstedt doesn’t lack self confidence. That’s not only true for his company but for the entire European truck manufacturing industry.

“In Europe we have Scania, MAN, Volvo, DAF and Daimler – a unique position in the world,” he said at the IAA truck manufacturing trade fair, which began on Tuesday in Hanover. When it comes to technology, Europe is far superior to other regions. “In what other industry do we enjoy such dominance?” he asked.

And it’s true that the road has been smooth for European truck makers. But their strong position can’t prevent a dry period ahead for the sector.

“Developments are not catastrophic,” said Leif Östling, the truck manager representative on Volkswagen’s board of directors. But markets are unsettled due to the situation in Russia and Ukraine.

This isn’t anything unusual for the sector. Traditionally, demand for trucks varies widely and most manufacturers can absorb a 30 percent drop in sales without running into trouble.

Customers are very unsure about the further developments in the world economy.

There are however voices that are predicting a harder landing next year. The situation is worse than it is being portrayed, said a manager at a German manufacturer. Customers are very unsure about further developments in the world economy.

“In Europe we don’t know what is going to happen in Russia so many customers are thinking twice about whether to invest in a new vehicle.”  These reservations were expressed in many discussions with potential buyers.

Daimler is expecting at least a 5 percent decline in Europe ― and that is if they are lucky, said Wolfgang Bernhard, an executive at Daimler, in charge of the truck sector.

Anders Nielsen, the chairman of the board of MAN Truck & Bus sees as much as a 10 to 15 percent decline as possible.

Especially glaring is the situation in Russia. The Russian market actually has a sales potential of 650,000 vehicles per year, according to Ferdinand Dudenhöffer, a professor at CAR-Institute at the University of Duisburg-Essen. This year there will be just 160,000 in sales.

Added to all of this is the foreign exchange rate. The strong euro is lowering truck sales.

The situation in Russia and the strong euro is lowering truck sales.

For the manufacturers it’s now about having a good regional mix. Business in North America and in some individual countries in western Europe and Asia remains good. But markets like Brazil, Russia or Turkey are showing signs of massive declines.

“Since we are represented in more than 100 markets worldwide we can compensate losses,” said Eckhard Scholz, board chief for trucks at VW trucks. He is expecting a certain equalizing effect. However he has it easier, as VW’s clients are made up of many small retailers, tradespeople and delivery services. Those who only make heavier vehicles are in a worse situation.

Scania chief Lundstedt is hoping for a different effect.

“We delivered many trucks in 2006 and 2007 to our customers. These now have to be replaced,” he said in Hanover. A sharp drop in demand in Europe is therefore not going to occur. At some point even the most robust truck gets to the end of its life.

Still, the sector is preparing itself for hard times, which means customers will delay new orders or extend expired leasing contracts for old vehicles.

“We need even more flexible cost models and work schedule models in the future,” said MAN chief Anders Nielsen.

Martin Murphy covers the steel, car and defense industries. Christian Schnell covers markets, share prices and initial public offerings and also writes about the automobile sector for the Companies and Markets section. To contact the authors: murphy@handelsblatt.com and schnell@handelsblatt.com

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