en.Wedoany.com Reported - Volvo Construction Equipment has started construction of a crawler excavator assembly plant in Eskilstuna, Sweden, with a total investment of SEK 700 million (approximately EUR 64 million), scheduled for completion in 2028. This move is a strategic decision by the company to enhance local supply capabilities and supply chain resilience amid the trend of European industrial manufacturing shifting overseas.
The new factory will have a building area of 30,000 square meters and an annual production capacity of up to 3,500 machines, covering excavators in the 14 to 50-ton class. The production line adopts a hybrid modular layout, capable of assembling both pure electric excavators and traditional fuel-powered models. This flexible production arrangement allows Volvo CE to dynamically adjust the output ratio of electric and diesel products based on market demand changes, effectively hedging against uncertainties in the electrification process of medium and large excavators.
The factory will primarily serve European customers, aiming to shorten delivery lead times, reduce long-distance logistics risks, and lower carbon emissions from cross-continental transportation. The site in Eskilstuna is already home to Volvo CE's global headquarters, largest R&D center, and existing component factory, helping to further integrate production resources and strengthen cluster effects.
This investment is part of Volvo CE's global expansion plan totaling SEK 2.5 billion, covering Sweden, the United States, and South Korea, leading to a regionalized manufacturing layout—each factory primarily serves its local market rather than relying on a few global export hubs. After production begins, all key product lines of Volvo CE will be manufactured in Sweden, including articulated haulers in Braås, wheel loaders in Arvika, excavators in Eskilstuna, and cabs in Hallsberg.
Excavators are the largest single product category in the European construction equipment market. Industry analysis firm Mordor Intelligence estimates the market size at approximately USD 34 billion in 2025, growing at a mid-single-digit annual rate. Volvo CE notes that demand for large excavators in Europe has expanded by 50% since 2010. Meanwhile, Chinese manufacturers including SANY, XCMG, and Zoomlion are accelerating their entry into the European market with cost competitiveness and expanding local support networks. In this competitive landscape, proximity to customers becomes a structural advantage for European manufacturers. The new factory builds a dual strategic pillar of defense and offense by shortening the feedback loop between regional customers and the plant, and reducing the impact of tariffs and exchange rate fluctuations on equipment trade.
Swedish Prime Minister Ulf Kristersson and Deputy Prime Minister Ebba Busch attended the groundbreaking ceremony. In her speech, Busch described earthmoving machinery as a national capability tool, stating that industrial capacity is crucial for economic security and strategic autonomy. Martin Lundstedt, President and CEO of AB Volvo, said that long-term investment in industrial capacity and skills is vital for the competitiveness of both Volvo Group and Europe.
The construction of the factory still requires environmental and building permits, expected to proceed in the first half of 2026. This shows that even within Europe, strategically significant industrial projects must follow regulatory timelines. For contractors and investors, the Eskilstuna factory sends a signal: in a fragmented trade environment, at least one major European OEM is choosing to anchor production capacity near core markets, using resilience, delivery speed, and political support as competitive advantages.
Melker Jernberg, President of Volvo CE, placed the new factory within the company's long industrial heritage, stating that Sweden has been a natural part of Volvo CE's industrial journey for nearly two centuries, and the new investment will enhance global competitiveness and strengthen the robust industrial base.
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