The dawn of
our business

Backed by Surahammars Bruk, Vagnfabriksaktiebolaget I Södertelge was founded in 1891 at a time when railways were the technological hype in Sweden. 

Now, more than a hundred years later and based on the same premises, Scania is a prospering global manufacturer of trucks, buses, engines and related services. It took the company 30 tentative years to find its focus, which it has stuck to ever since.

Vagnfabriksaktiebolaget i Södertelge stood for the Waggon Factory in Södertälje Ltd. Its owners were pinning their hopes on the flourishing market for railway rolling stock.

Despite the awkward shape of Sweden – 2,000 km from north to south – and the prevailing poverty, between 1850 and 1900 the state built a comprehensive network of standard-gauge railway lines covering the entire country, all the way to the scarcely populated regions in the far north. Connecting to this backbone was a multitude of small private lines, often sporting narrower gauge.

Sweden was a poor agricultural country, with industrialisation lagging far behind countries like England. A law on compulsory elementary school for all girls and boys was passed in the early 1840s. Around that time, massive railway construction got underway in southern Sweden.

During the 1860s, the country was struck by repeated poor harvests and ensuing famine. Democratic developments were slow in coming, leaving the masses powerless and without influence. The situation resulted in massive emigration. Between 1850 and 1920, more than 40 percent of the population sought their fortunes in other countries, primarily in America.

Operations were highly successful and management was tempted by influences from Germany to diversify into the budding car market. A young engineer, Gustaf Erikson, was employed to develop “automobiles and corresponding engines”.

The first Swedish automobile thus made its maiden trip in 1898 . It ran erratically and proved itself almost impossible to steer. Automobile construction was more difficult than expected. In 1901 all efforts finally resulted in a reliable and efficient engine design, which found use in a railway trolley , the company’s first production motorised vehicle. The engine propelled VABIS’ first truck , and its first series production passenger car. At Stockholm’s first automobile exhibition it encountered competition from Scania, a manufacturer of vehicles and bicycles in southern Sweden showing their first truck. The exhibition convinced both companies to continue on the automotive path.

Truck sales were off to a slow start for VABIS, however. The engine was good, but the chassis design was modified in several steps to comply with exacting customer demands. In practice, series production of trucks did not commence until 1906 and accelerated in 1909 . During the early 1900s, the manufacturers used automobile races to promote their products. 1909 saw the first truck competition in the outskirts of Stockholm, at which all competitors were awarded in view of the gruelling road conditions they had mastered.

The railway hype faded in the early 1900s, when the inventory of rolling stock had been saturated.

In 1907, VABIS’ management therefore shifted its focus to the automotive industry, opening a new factory exclusively for the production of “standard vehicles” and engines in Södertälje. The engines were also sold for industrial and marine applications.

The VABIS engineers were innovative, and in 1907, the first truck with a tipper body left the factory, as well as bus precursors in the form of trucks with replaceable passenger platforms.

But with no more money coming in from the once prospering railway business, the investment in own designs and in the new vehicle factory turned into a disaster. Scania, on the other hand had chosen to base its designs on foreign vehicles and on the assembly of purchased components – a method requiring lower initial investments.

From 1902, Scania was actually successfully selling cars to customers . The facilities were expanded and truck production started in earnest in 1908.

The first bus was built in 1911 and in 1912, a breakthrough was achieved in fire engines, a niche that would prove important for Scania-Vabis throughout the 1910s.

In 1914, a new competitive engine range was introduced, which remained in production until the mid-1920s. Behind the new engine design was a foresighted young engineer, August Nilsson. In 1915, he was appointed chief engineer, and was to head Scania-Vabis’ design work during more than 30 years. The head office was located in Södertälje. The company now started to expand its market, first by setting up dealerships in Sweden and neighbouring markets in Scandinavia. Odd deals were also made with markets as remote as Siam (Thailand) and Australia.

The expected upswing after the first world war failed to materialise, and the ensuing deflation meant pending disaster for Scania-Vabis. Large investments in production and in external sourcing of raw material like steel proved prohibitively costly.

The company’s business concept was to compete with large-scale production head-on with foreign competitors. But as soon as the import restrictions were lifted, the Swedish market was flooded with cheap, mass-produced foreign vehicles. Scania-Vabis stood no chance against such fierce competition.

Scania-Vabis entered the 1920s in a severe crisis. In 1921, the company went into liquidation. The company name was saved and Scania-Vabis could soon re-start operations. Gunnar Lindmark was appointed new managing director paving the way for a long stable period together with chief engineer August Nilsson.

All production was relocated to Södertälje, with the company focusing on heavy trucks and buses without competing head-on with run-of-the-mill imported vehicles. A new range of overhead-valve engines was also developed by August Nilsson and his team.

In addition, the creative engineering team under August Nilsson made several innovations based on these customer demands, which besides state-of-the-art powertrains, included hydraulic tipper gear and sand gritting equipment for trucks, as well as track drive for postal coaches.

Regular service buses started to operate throughout Sweden in the 1920s and this became a new, expanding niche for Scania-Vabis. The close cooperation with customers’ engineers not only challenged the company’s engineers to come up with innovative solutions, but also paved the way for survival and a customer focus strategy that remains to this day.