Trade War Watch: Volvo Worried About New U.S. Factory, Germans Want Tariffs Killed Entirely
The ground beneath the factory Volvo Cars opened Wednesday in South Carolina grew shakier after company executives warned that the U.S.-China trade dispute could undo plans to create up to 4,000 auto jobs in the state.
As you probably know, Volvo is currently owned by Chinese automaker Geely — which has a lot to lose if trade relations break down. Geely intends to export Volvo’s American-built cars to markets outside the United States. The situation’s a problematic one, as Volvo also imports the bulk of its U.S. market vehicles and any economic hurdles would surely gum up the works.
“If you have trade barriers and restrictions, we cannot create as many jobs as we are planning to,” Volvo Cars Chief Executive Hakan Samuelsson told Reuters during the factory’s opening.
While not a done deal, the automotive tariffs are a very real threat. China already imposes strict fees on imported vehicles (25 percent) and the White House seems to be looking for some kind of payback. While the United States levies a very low fee on imported cars (just 2.5 percent), its truck tariff is extremely high. The Trump administration’s trade proposals would hit imported cars with the existing 25 percent truck tariff. A U.S. tariff matching China’s is already scheduled to impact Chinese-built vehicles starting in early July.
Meanwhile, German automakers have begun voicing their support for the abolishment of all import tariffs for cars flowing between the European Union and the United States. Earlier this week, U.S. ambassador to Germany Richard Grenell brought the proposal to the industry as a possible way to avoid the brewing trade war. The deal would mean removing the EU’s 10-percent tax on auto imports and America’s 2.5-percent fee. It’s certainly a possible solution for Europe, but it doesn’t directly address the problems with China.
“We want to export and if suddenly China and Europe have very high barriers, it would be impossible,” Samuelsson said of Volvo. “Then you have to build the cars there. And then all cars will be more expensive, you have to invest more tooling and have every model in every country. That’s against all the logic of modern economies that trade with each other.”
Volvo claims it intends to hire about 4,000 workers once its new factory reaches full manufacturing capacity. Presently, it only has around 900 employees, but says it needs roughly 1,500 by the end of 2018 to meet production goals.
[Image: Volvo Cars]
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- Keith Maybe my market's different. but 4.5k whack. Plus mods like his are just donations for the next owner. I'd consider driving it as a fun but practical yet disposable work/airport car if it was priced right. Some VAG's (yep, even Audis) are capable, long lasting reliable cars despite what the haters preach. I can't lie I've done the same as this guy: I had a decently clean 4 Runner V8 with about the same miles- I put it up for sale around the same price as the lower mile examples. I heard crickets chirp until I dropped the price. Folks just don't want NYC cab miles.
- Max So GM will be making TESLAS in the future. YEA They really shouldn’t be taking cues from Elon musk. Tesla is just about to be over.
- Malcolm It's not that commenters attack Tesla, musk has brought it on the company. The delivery of the first semi was half loaded in 70 degree weather hauling potato chips for frito lay. No company underutilizes their loads like this. Musk shouted at the world "look at us". Freightliners e-cascads has been delivering loads for 6-8 months before Tesla delivered one semi. What commenters are asking "What's the actual usable range when in say Leadville when its blowing snow and -20F outside with a full trailer?
- Funky D I despise Google for a whole host of reasons. So why on earth would I willing spend a large amount of $ on a car that will force Google spyware on me.The only connectivity to the world I will put up with is through my phone, which at least gives me the option of turning it off or disconnecting it from the car should I choose to.No CarPlay, no sale.
- William I think it's important to understand the factors that made GM as big as it once was and would like to be today. Let's roll back to 1965, or even before that. GM was the biggest of the Big Three. It's main competition was Ford and Chrysler, as well as it's own 5 brands competing with themselves. The import competition was all but non existent. Volkswagen was the most popular imported cars at the time. So GM had its successful 5 brands, and very little competition compared to today's market. GM was big, huge in fact. It was diversified into many other lines of business, from trains to information data processing (EDS). Again GM was huge. But being huge didn't make it better. There are many examples of GM not building the best cars they could, it's no surprise that they were building cars to maximize their profits, not to be the best built cars on the road, the closest brand to achieve that status was Cadillac. Anyone who owned a Cadillac knew it could have been a much higher level of quality than it was. It had a higher level of engineering and design features compared to it's competition. But as my Godfather used to say "how good is good?" Being as good as your competitors, isn't being as good as you could be. So, today GM does not hold 50% of the automotive market as it once did, and because of a multitude of reasons it never will again. No matter how much it improves it's quality, market value and dealer network, based on competition alone it can't have a 50% market share again. It has only 3 of its original 5 brands, and there are too many strong competitors taking pieces of the market share. So that says it's playing in a different game, therfore there's a whole new normal to use as a baseline than before. GM has to continue downsizing to fit into today's market. It can still be big, but in a different game and scale. The new normal will never be the same scale it once was as compared to the now "worlds" automotive industry. Just like how the US railroad industry had to reinvent its self to meet the changing transportation industry, and IBM has had to reinvent its self to play in the ever changing Information Technology industry it finds it's self in. IBM was once the industry leader, now it has to scale it's self down to remain in the industry it created. GM is in the same place that the railroads, IBM and other big companies like AT&T and Standard Oil have found themselves in. It seems like being the industry leader is always followed by having to reinvent it's self to just remain viable. It's part of the business cycle. GM, it's time you accept your fate, not dead, but not huge either.
@ hreardon: Hear, hear. I agree 100% with that comment. However won't doing so offend Mr. Putin?
Extra credit to DenverMike for coining the term “BAFOism”, lol. Example: A BAFOism will likely include the phrase “chicken tax”.