Volvo Shifts Strategy China Fuels Construction Equipment Growth

What drives a global leader in construction equipment to maintain strategic focus and identify new growth opportunities in a challenging market environment? Volvo Construction Equipment's (Volvo CE) second-quarter 2025 performance report may hold the answers. Despite sluggish markets in Europe and North America, the company has proactively adjusted its global strategy to better align with customer needs, enhance profitability, and achieve remarkable growth in China. This demonstrates both its strong market adaptability and signals new directions for future development.

In Q2 2025, Volvo CE faced complex challenges across global markets. While the overall construction equipment market showed growth with increased order intake and deliveries, uncertainty in Europe and North America led to declining sales, impacting overall performance. Key figures include:

• Net Sales: Decreased 6% to SEK 22.906 billion (from SEK 24.423 billion in Q2 2024). However, excluding currency effects, net sales grew 2%, with equipment sales up 2% and service sales remaining stable.
• Operating Income: Adjusted operating income declined to SEK 2.993 billion (from SEK 3.888 billion), with a corresponding adjusted operating margin of 13.1% (down from 15.9%).
• Order Intake: Net order intake increased 24%, with Volvo-branded orders up 26%, driven by strong performance in Europe and Asia. European dealers replenishing inventories contributed to this growth, while North American orders remained relatively low despite some improvement.
• Deliveries: Increased 11% year-over-year, reflecting improved production and supply chain efficiency.

Facing dynamic market conditions, Volvo CE implemented several strategic initiatives:

The company is expanding its global crawler excavator operations, investing in three major production hubs in South Korea, Sweden, and North America to meet growing global demand. This demonstrates long-term confidence in the excavator market and commitment to maintaining leadership.

Volvo CE agreed to sell its entire 70% stake in Shandong Lingong for SEK 8 billion to a fund primarily controlled by Lingong Group. This move optimizes its Chinese business structure and refocuses on premium markets.

The company announced a SEK 7 billion acquisition of Swecon's business in Sweden, Germany, and Baltic countries (including Entrack) from Lantmännen Group. As Volvo CE's primary dealer in these regions, this acquisition strengthens European solution sales capabilities and service operations while providing greater control over distribution channels.

Market performance varied significantly by region, with China standing out:

• Europe & North America: Overall equipment market declined 10%. European demand approached saturation with dealer inventories not fully converting to end-user sales, while North America saw reduced demand due to rental fleet adjustments and economic uncertainty.
• China: Achieved 26% growth, fueled by government stimulus policies for the property sector and strong demand for compact equipment, establishing China as a key growth driver.
• Other Markets: South America grew 8% with improved sentiment in Argentina and Peru, while Asia (excluding China) rose 6%, benefiting from expansion in Southeast Asia, the Middle East, Turkey, and India.

Looking ahead, Volvo CE remains committed to innovation and market development to address evolving customer needs. By refining products and services, deepening customer partnerships, and expanding in emerging markets, the company is positioned to maintain industry leadership and sustainable growth. With China's growing importance, Volvo CE's strategic adjustments reflect both responsive market tactics and long-term vision, suggesting a promising future through continued innovation and market engagement.