Volvo warns chip stortage, supply-chain snarl will curtail truck production

The supply situation that's characterized by "disruptions, unpredictability and a lack of freight capacity" is delaying deliveries to customers, Volvo Chief Executive Officer Martin Lundstedt said

2 min read Last Updated : Oct 21 2021 | 10:41 PM IST

Volvo Group said the chip shortages and supply-chain snarls will continue to cap truckmaking, leaving the Swedish manufacturer with little choice but to turn away some customers.

Disruptions and stoppages in the production of trucks and in other parts of the group will continue, Volvo said Thursday. The company reported third-quarter adjusted operating profit of 9.4 billion Swedish kronor ($1.1 billion), beating the average analyst estimate.

The supply situation that’s characterized by “disruptions, unpredictability and a lack of freight capacity” is delaying deliveries to customers, Volvo Chief Executive Officer Martin Lundstedt said in a phone interview.

“We are talking about a couple of months at least longer, and in some certain regions and segments it could be considerably longer than that,” he said. “That is the reason also why it’s important to us to now manage the order board in conjunction with the order intake.”

Volkswagen AG’s Traton SE warned last month that the components shortage will depress third-quarter sales and affect business also next year. Volvo, on the other hand, had said that commodities and chip constraints improved in the three months through September.

Fewer Deliveries

Volvo managed to grow third-quarter sales but the chip crunch and additional supply-chain issues forced the company to stop production for “around a couple of weeks,” Lundstedt said on an earnings call. While demand is robust in Europe and North America, the manufacturer delivered slightly fewer trucks than in the three months through June.

Volvo was little changed as of 11:56 a.m. in Stockholm. The company’s shares have gained about 13% this year.

Volvo cut its forecast for the truck market in Europe and North America this year by 30,000 units. It expects the markets to grow again in 2022.

The manufacturer also warned of issues in China, where the market for construction equipment is “declining sharply” after several years of high demand.