Volvo Financial Services originations drop 8%

Volvo Financial Services saw originations slide in the first quarter as construction equipment orders plunged at the parent company, partially offset by higher truck orders. 

The financing arm of Swedish OEM Volvo Group maintained a “solid” penetration rate and a relatively healthy portfolio in Q1, “although delinquencies and write-offs remained at the high levels that we have seen during previous quarters,” Chief Executive Martin Lundstedt said during today’s Q1 earnings call.  

Volvo Financial Services (VFS) is working to enhance its portfolio with expanded offerings, such as insurance products, he said. 

While Volvo Group continues to grapple with geopolitical uncertainty, the Iran war has not caused major supply-chain disruptions, Lundstedt said. 

Volvo hopes that its “flexible business model,” with an increased focus on aftermarket support and cost control, positions the company to “navigate potential short-term swings in demand,” he said.  

BY THE NUMBERS: VFS reported in Q1:

• New retail financing volume totaled 22.9 billion Swedish krona ($2.5 billion), down 8% year over year;
• Total financed units on a 12-month rolling basis rose 0.2% YoY to 66,486;
• Its credit portfolio was unchanged at $28.6 billion;
• Credit provision expenses increased 15.9% YoY to $38.7 million;
• Operating income fell 7.9% YoY to $92.7 million;
• Penetration rate on a 12-month rolling basis was 30%, up 1 percentage point YoY; and
• Credit reserves as a percentage of the portfolio was 1.35%, compared with 1.29% in Q1 2025. 

Meanwhile, Volvo Group’s Q1 results included:

• Net sales declined 9.1% YoY to $12 million; 
• Operating income totaled $1.2 million, down 19.5% YoY;
• Truck orders jumped 13.6% YoY to 62,755 units;
• Truck deliveries fell 2.7% YoY to 47,504; 
• Construction equipment orders dropped 49.9% YoY to 8,607; and
• Construction equipment deliveries decreased 49.5% YoY to 7,825. 

The drop in construction orders was largely attributed to Volvo’s divestment of its 70% stake in Chinese OEM SDLG, completed in September, according to today’s earnings release.

In Q1, Volvo also announced the closure of its Rokbak articulated hauler business because it no longer was profitable, with production set to stop in July.  

BIGGER PICTURE: Healthy replacement demand contributed to increased truck orders in Q1 after many operators delayed purchasing during the ongoing freight recession, Lundstedt said. 

Nearly 60% of dealers reported improving new-truck demand in Q1, and a little over 40% reported steady demand, according to an April 10 report by heavy-equipment research firm IronAdvisor Insights.  

Many operators are “forced to buy due to their fleet ages,” a Traton Group dealer stated in the report. “They are averaging around 400,000 to 600,000 miles before trading in. Most trade cycles are traditionally in the 300,000 to 500,000 range.” 

Regulatory changes and expected price hikes in 2027 are also accelerating orders, according to ACT Research.  

Shares of Volvo Group [OTC: VLVLY] were up 3.2% from market open to $34.92 as of market close today. It has a market capitalization of $71 billion.  

Editor’s note: All amounts have been converted to U.S. dollars. 

The fourth annual Equipment Finance Connect, a crucial industry event for equipment lenders and dealers, takes place at the C. Baldwin Hotel in Houston May 18-19. Learn more about the event and register here.