It is sometimes said that our character is revealed most clearly in how we handle adversity. If this is true for people, it is equally true for companies. If you want to understand the nature of Scania, looking at how we have responded to the challenges of the past 12 months would be a good place to start.
2022 was a tough year for Scania. Just as it looked as though the supply problems of the previous year were beginning to be resolved, a new wave of economic and political turmoil swept over Europe and the rest of the world, with Russia’s invasion of Ukraine leading to an energy crisis and a spike in inflation and interest rates. As a result, our truck business was hit by a range of ongoing problems, from component shortages to a lack of drivers, causing disruption in our delivery flows to customers.
Dealing with these problems would be hard at the best of times. It is especially challenging during a period of major internal transformation. Changes for Scania during the year included the switchover to our new Super driveline: one of the biggest industrial projects in Scania’s history. The year also saw the ongoing changes to Scania’s operating model as well as further integration with the TRATON GROUP. At the same time, our industry is undergoing a seismic shift that is changing the very nature of our business.
“The launch of our new range of BEV trucks in June was a milestone in electrification.”
President and CEO, Scania and traton group
As technologies such as digitalisation and automation will transform the way we deliver transport services, we are preparing for the future by investing in new business models that lie beyond our core capabilities. All of this is happening at a time when we are driving the biggest shift in technology that our industry has ever experienced: the transition to electrification.
Throughout these difficult and disruptive times, Scania people responded in the way they always do; they rose to the challenge magnificently. Time and again, our people were there for our customers, working tirelessly to resolve flow problems, deliver vehicles and keep them on the road.
Here, I want to make a special mention of our colleagues in Ukraine. In the face of the most challenging conditions imaginable, their dedication to supporting customers and partners has been extraordinary. Following the invasion, the Scania team went above and beyond to keep operations running, including working in the basement below the Kyiv office as air defence sirens sounded and missiles hit the capital. Thanks to their efforts, Scania was able to keep trucks rolling in Ukraine, helping the country rebuild critical infrastructure and keeping supply lines to Europe open. Despite the war, we continued to invest in Ukraine and opened a new workshop in the Brovary region in 2022. Scania’s actions were commended by the Ukrainian Foreign Minister, who urged other Swedish businesses to follow Scania’s example and resume operations in the country as quickly as possible. This is a truly heroic achievement, and I believe it says much about the spirit of Scania: a company that never gives up on its customers, no matter the odds.
2022 also marked the end of our presence in Russia, following the country’s invasion of Ukraine. We have now successfully divested our commercial business as well as our finance business in Russia, and our production site in St Petersburg is being liquidated. Ending our business in Russia after 29 successful and profitable years was a major decision, but Russia’s actions have made it impossible to continue.
A sustainability milestone
Amid the challenges, there were also reasons to be hopeful. Despite the economic shocks, demand for transport remained high, with a strong resurgence in demand for buses. The year also saw significant business highlights for Scania. Our service business grew by over 20 percent, with workshop hours, digital services and our spare parts business all growing strongly. Demand for our power solutions has doubled in less than five years, and continues to grow. Financial services continued to do an outstanding job in difficult circumstances. The roll-out of the Super driveline continued, and although deliveries have been slower than planned, it has received exceptionally positive feedback from customers who have experienced it. Everyone at Scania should be proud of these achievements.
To ensure stable delivery flows going forward, we set up a task force focused entirely on solving the disturbances in our flows. By the fourth quarter 2022 we had already begun to see positive progress as a result of the excellent work of the task force, with deliveries to customers increasing.
Above all, we stayed focused on our overarching purpose: to drive the shift to a sustainable transport system.
The launch of our new range of battery electric vehicles (BEV) trucks in June was a milestone in electrification for Scania. This is our first line of BEV heavy vehicles designed for regional haulage, and the trucks have had a great reception from customers, with strong demand and pre-order numbers. The launch takes us closer to providing electric solutions for any heavy commercial vehicle application, from urban deliveries to forestry and mining. As well as safeguarding our future competitiveness, delivering on our electrification roadmap is key to reducing our carbon emissions in line with our science-based targets. We are still in the beginning of our electrification journey but started to see good momentum this year with orders of battery electric (BEV), plug-in-hybrid (PHEV) and hybrid (HEV) trucks and buses growing from low levels by almost 400 percent.
The volatility we faced throughout the year underlines the need to build adaptability and resilience into our organisation. For that reason, perhaps the most important strategic decision we made this year were the changes we introduced to our strategic framework. The new framework ensures that all of us at Scania have a shared focus on executing our strategy and delivering on our purpose across our business. The framework also futureproofs our business by helping us work with the agility and pace that our unpredictable business environment demands.
To ensure we have an operating model that can support our strategy, Scania is undergoing an internal transformation, and we are now at a stage where we in practice start implementing the changes to make them “business as usual”. Scania’s transformation is also crucial to accelerate the ongoing strategic integration with the wider TRATON GROUP. In 2022, we made major progress within TRATON in creating a common industrial organisation that can draw from the global competence and the capacity from all four brands in the TRATON family. The integration is progressing well, and I am proud to see how well the brands are working together across all levels and functions. We at Scania have made a huge contribution to the process by sharing the things we do really well: our modular principles, our systematic way of working, our financial services and our ability to work across functions.
At a time of major transformation, when it feels as though everything is changing around us, it is important to remember that some things remain constant. The first of these is our purpose, and our new strategic framework is designed to make this more tangible for everyone here at Scania.
Another constant is The Scania Way. By acting consistently according to our values over many years, Scania has developed an enviable reputation and some of the strongest customer relationships in our industry. Standing firmly behind our values as we transform our business does not impede our progress, in fact it depends on it. Our new strategic framework reflects this, ensuring that The Scania Way continues to guide everything we do, now and in the future.
Part of being an adaptable, creative organisation is about being open to different perspectives – which is why Skill Capture (our approach to diversity and inclusion) is so important to our transformation. We want to be the benchmark for diversity and inclusion within our industry. Skill Capture is taking us in the right direction, ensuring that Scania continues to be a company where a diversity of voices and experiences are welcomed and valued.
Living by our actions
When I look back at what Scania has achieved this year, I see a company that lives not just by its words but through its actions. The pilot partnerships we have engaged in throughout the year to develop our BEV trucks are a great example of this. Trialling new heavy electric vehicles with customers in demanding real-world environments, including the tough arctic climate of Northern Sweden, is not only key to Scania’s product development process, it also shows the world that no application is too heavy for electrification.
Our outstanding progress in developing digital services for customers is another example of how Scania walks the talk. Game-changing, data-driven services recently launched by Scania include ProCare, our maintenance service that monitors the health of vehicles in real time and allows customers to plan proactively for repairs, thereby avoiding unnecessary downtime. The success of tools such as these shows that Scania is not just talking about exploring new business opportunities in the digital services space – we are making it happen, here and now.
We approach our own sustainability performance in a similar way, holding ourselves accountable for our progress through targets that are backed by science and evidence. We were the first in our industry to set science-based targets for reducing our carbon emissions and, in 2022, we took another major step towards decarbonising our business by becoming the first to set supply chain carbon reduction targets. The new targets cover materials identified as carbon hotspots in our production process: batteries, steel, aluminium and cast iron.
So, when leaving a challenging year behind us, and as we continue to transform our business to prepare for the next chapter in Scania’s story, I want to thank everyone in the Scania family – including our customers, our partners, our investors and our people – for their resilience and support during this difficult year. By embracing change while drawing from the strengths we already have in our fantastic organisation, I know Scania will emerge stronger and in an even better position to deliver for our customers.
President and CEO, Scania and TRATON GROUP