Volvo 2005 Annual Report Download - page 12

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An industry with
long-term growth...
Demand for the Volvo Group’s products is increasing due to the general economic develop-
ment with rising trade among the various regions of the world, growing transportation needs
and an increasing need to build new infrastructure.
The Volvo Group is active in an industry that is cyclical with an underlying growth rate in
mature markets of about 4% over a business cycle. In growth regions, such as Asia and Eastern
Europe, the rate of increase is considerably higher.
Under transformation
Increasingly stringent environmental requirements are a factor that has contributed to rising
costs for product development and manufacturing. One of the main reasons is that substantial
investments are required to conduct research and development into new technologies to
reduce emissions from vehicles and into supplementary fuels and alternative drivelines. To
ensure that these costs are spread among larger volumes, a consolidation process is under
way among manufacturers through mergers and acquisitions.
In mature markets in the US and Europe, the truck industry has been consolidating for sev-
eral decades and has made considerable progress, also with several intercontinental acquisi-
tions. In other areas, such as the construction equipment sector, the pressure for consolidation
is expected to increase.
At the same time, in growth markets, new competitors have grown into significant regional
players. This structural transformation is creating opportunities for the Volvo Group, which has
a strong financial position.
New opportunities
The Volvo Group occupies an established position in European and North American markets,
which are showing relatively firm underlying growth. However, the fastest growth rates are
noted in parts of the world where the Group had very insignificant operations just 10–15 years
ago. In these markets, such as Asia, the Volvo Group intends to grow.
China and India are examples of markets that have already reached a considerable size and
in the future will become even more important for the Volvo Group’s development. The market
in Eastern Europe is also growing strongly and the Group is well positioned to capitalize on the
market trend.
8 Volvo Group 2005