Volvo Financial Services portfolio shrinks 8.6% in 2025

The financing arm of construction equipment and commercial vehicle manufacturer Volvo Group saw new business volume slide in 2025 despite an uptick in financed units. 

The decline in volume came as Volvo Group grappled with the freight recession in North America, with truck sales primarily driven by replacement demand for aging fleets, President and Chief Executive Martin Lundstedt said during today’s fourth-quarter earnings call.  

Still, Volvo Financial Services (VFS) reported “sound portfolio performance” in the face of transportation industry woes, although delinquencies and charge-offs increased slightly in Q4, Lundstedt said. 

The captive is also benefiting from a focus on embedding insurance products into financing offers, he said.  

BY THE NUMBERS: VFS reported these full-year results in today’s earnings statement:  

• New retail financing volume totaled 109 billion Swedish krona ($12.3 billion), down 5.3% year over year; 
• Total financed units on a 12-month rolling basis rose 2.2% YoY to 66,682; 
• VFS’ credit portfolio decreased 8.6% YoY to $28.9 billion;  
• Credit provision expenses jumped 39.8% YoY to $164.7 million; 
• Operating income fell 4.3% YoY to $437.6 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 10.4%, down from 13% at the end of 2024. 

Meanwhile, Volvo Group’s full-year results included:  

• Net sales fell 9% YoY to $54 billion; 
• Operating income dropped 27.2% YoY to $5.5 billion; 
• Truck orders declined 3.5% YoY to 193,810 units; 
• Truck deliveries fell 7.5% YoY to 202,911; 
• Construction equipment orders rose 0.6% YoY to 53,800; and 
• Construction equipment deliveries dropped 7.9% YoY to 51,634.  

STATE OF PLAY: Like other OEMs, Volvo Group continues to feel the strain of tariffs. The company wrestled with higher tariff expenses in Q4, with a net impact of $90.2 million, which had a “significant impact on financial performance,” Chief Financial Officer Mats Backman said during the call.  

“What we foresee is about [$112.6 million] in net effect in the first quarter,” he said.  

Volvo is working to navigate the varying tariffs in each segment, Backman said, noting that “different business areas are kind of going in different directions now.” 

NOTEWORTHY: Volvo Group’s Penta segment, which makes industrial engines and power systems, saw orders increase 20.6% YoY in 2025 to 40,422 and deliveries rise 10.9% YoY to 39,543, partly driven by the data center construction boom, Lundstedt said. 

Volvo Penta recently launched a low-emission gas engine to further strengthen its “position to meet the global energy demand across many segments,” he said. 

Volvo and Caterpillar are among the OEMs aggressively pursuing data-center opportunities as their energy segments swell.  

MARKET REACTION: Shares of Volvo [OTC: VLVLY] were up 2.2% from market open to $36.56 as of market close today. It has a market capitalization of $74.4 billion.  

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

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