“Demand for transport equipment is based on economic growth. The outlook in many of our markets is not particularly bright in the short term, but growth will return in the longer term. This is why we will continue to invest in increased production and service capacity, and we will also boost our research and development efforts,” said Scania’s President and CEO Martin Lundstedt at the company’s Capital Markets Day in Södertälje, Wednesday, September 26, 2012.
Scania is carrying out a number of investments which will lay the groundwork for the company to take advantage of future growth opportunities.
Scania’s scenario of a production capacity of 150,000 vehicles per year and a continued expansion of the service business is based on an economic recovery in Europe and continued growth in emerging markets. Demand for efficient logistics is increasing in many sectors, driven among other things by a greater focus on reduced environmental impact. This implies business opportunities for Scania.
“By increasing our understanding of logistics systems, regardless of whether it concerns a mine or a retail company, we can package products and services that lead to lower transport costs, i.e. have a positive effect on the customers’ bottom line. It is a matter of supporting the customer with knowledge about the transport task and being able to supply services during the entire life cycle of vehicles, enabling them to be utilised in an optimal manner for increased profitability and reduced environmental impact.”
One example is the Ecolution by Scania concept now being introduced in European markets, which involves Scania setting targets for fuel consumption together with the transport company. Vehicles and services-related products are specified for the lowest possible fuel consumption, given the transport task. The service also includes driver training and follow-up. All parameters are followed up, allowing the customer to continually receive feedback to ensure more efficient driving. Whenever possible, alternative fuels are used to further reduce carbon dioxide emissions.
“Solutions such as Ecolution by Scania represent a great opportunity to strengthen our sales of service-related products,” says Lundstedt.
Transport companies’ demands for highly productive vehicles are also increasing outside Europe, and Scania sees great potential to strengthen its presence in a number of markets. More Scania vehicles on the roads in these markets will also mean increased sales of parts and other services.
Emerging market countries such as China are facing huge changes. According to a World Bank report, estimated logistics costs in China in 2010 amounted to almost 20% of the country’s GDP, compared to less than 10% in Europe.
“Demand for Scania’s products and services in Asian markets will grow in line with increasing demand for more efficient logistics systems,” says Lundstedt.
Jan Ytterberg, Chief Financial Officer, also spoke at Scania’s Capital Markets Day. He emphasized that Scania, in its growth scenario, continues to impose strict flexibility requirements in order to be able to meet fluctuations in demand. Historically, Scania has coped with sharp declines in demand while retaining positive earnings.
“By building most of the increased production capacity at existing production facilities and by working with a certain proportion of employees on fixed-term temporary contracts, we can also maintain good flexibility going forward. Rising sales of service-related products will also help to support profitability over the economic cycle,” says Ytterberg.