By on July 19, 2018

2018 Volvo XC60, Image: Volvo Cars

Unlike Volvo’s S90 sedan, which is built half a world away from its V90 wagon stablemate, the Chinese-owned Swedish automaker has some flexibility in where it sources its XC60 crossover. Two plants — one in China, one in Torslanda, Sweden — crank out the second-generation utility vehicle, but the U.S. market gets its full share from the Orient.

After the Trump administration imposed a tariff of 25 percent on Chinese-built vehicles, Volvo’s XC60 suddenly found itself dragging a financial anchor. Hardly a great situation for a model that outsold all other Volvos in the U.S. last month. To side-step the tariff, Volvo’s already making changes.

Say goodbye to the Chinese XC60.

According to Reuters, U.S.-bound XC60s will no longer hail from Sweden, leaving the S90, which has no other production facility, as America’s sole Chinese Volvo.

“We will of course reshuffle here and take XC60s for the U.S. … from our factory in Europe, and let China produce for other markets,” said Volvo Cars CEO Hakan Samuelsson. The shift is already underway, he added.

Some of the XC60s already on U.S. soil will be shipped to Europe to avoid unnecessary costs. “That’s the sort of fine-tuning we can do within our production process,” Samuelsson said.

Volvo recently opened its first U.S. assembly plant near Charleston, South Carolina. That facility will serve as home to the S60 sedan, as well as the next-generation XC90. With tariffs already in place between the U.S. and China, and with President Trump rattling the tariff sabre at Europe, Volvo feels the need to “ramp up Charleston as fast as we can,” Samuelsson told Automotive News Europe.

That said, the CEO claims he’s taking a wait and see approach on tariffs before considering adding the S90 to Charleston. Elsewhere in the brand’s lineup, the small XC40 crossover hails from Belgium, while the V60 wagon (revamped for the 2019 model year) sees assembly in both Sweden and Belgium.

In June, the XC60 outsold the XC90 in the U.S. by 77 vehicles, returning a monthly tally of 3,306 vehicles. The XC60’s 14,551 year-to-date sales falls just below the XC90’s volume.

[Image: Volvo Cars]

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33 Comments on “Volvo’s Already Shuffling Production to Avoid Tariffs...”


  • avatar
    jacob_coulter

    Look, tariffs work.

    I was confidently told that tariffs don’t change where products are manufactured and will only be a tax passed on to consumers.

    I’m also told that a tariff(tax) increase is the worse thing in the world and will destroy the economy by the same people that also think a tax cut is also the worst thing in the world and will destroy the economy.

    • 0 avatar
      srh

      Who told you that? That production resources will shift is not one of the many, many arguments against tariffs. It is, in fact, inevitable. Economic distortions caused by government actions are one of the largest costs businesses deal with. Of course they’ll respond.

    • 0 avatar
      jrhurren

      In this case, they “worked” by shifting production from not-USA1 to not-USA2. I would not call that a win.

    • 0 avatar
      ect

      “Look, tariffs work.”

      That must be why Smoot-Hawley was such a success….

    • 0 avatar
      bd2

      Volvo’s US plant was on the drawing board way before the notion of tariffs came up.

      The EU and Japan just forged an FTA and despite having numerous issues w/ China, the EU is forging closer ties with them as well.

      JLR and others have halted any expansion plans in the UK dues to Brexit, and depending how thongs fall out, may move more production out of the UK.

      • 0 avatar
        bd2

        Also, repeated tax cuts to the wealthy and corporations certainly increase the wealth disparity (now, the greatest since the age of the Robber Baron) and have repeatedly shown to have little to no impact on the economy/job growth (the Bush tax cuts didn’t prevent the Great Recession).

        Many Americans pine for the “good old times” of the 1950s-60s.

        But that was when the US had really high tax rates – which was to pay for benefits arising from the GI Bill (subsidizing higher education, home ownership, etc. for vets), infrastructure projects (US Interstate system) as well as paying down the WWII war debt.

    • 0 avatar
      brn

      They started building the factory three years ago. Planning was probably two years before that.

  • avatar
    TMA1

    “U.S.-bound XC60s will no longer hail from Sweden”

    I think you mean China?

    Toyota was circling the Commerce building with US-built Toyotas early this morning in protest of the proposed 232 tariffs. I snapped several photos, I’ll send them to you guys if I can get a decent internet connection.

    • 0 avatar
      Secret Hi5

      That line confused me too! And this:
      “Some of the XC60s already on U.S. soil will be shipped to Europe to avoid unnecessary costs.” What are the “unnecessary costs?”

      • 0 avatar
        TMA1

        I believe the unnecessary costs are the tariffs. Presumably these are Chinese-built Volvos that are at the port, but have not yet paid duties, and therefore haven’t entered the country for consumption purposes. So they can be shipped back out without paying the duties, and replaced with some Euro Volvos.

        • 0 avatar
          sgeffe

          Wonder what that does with inventory to dealers?

          Is that allocated once the car arrives in port, or does the car arrive from overseas with a Monroney listing the destination dealer?

        • 0 avatar
          NN

          If they have entered the country prior to the tariffs taking effect (July 6th I believe) they have no tariff. If they enter after, what Volvo can do is re-export them to another market as long as they are not sold, and then file for tariff rebate. This is pretty common actually, as companies import parts that may have a tariff, use those parts for a finished good and then re-export the finished good. When they do that they can apply for a rebate on the tariff they paid for the components.

  • avatar
    Sub-600

    Gee, the U.S. misses out on a Chinese built Volvo. And the problem is…?

  • avatar
    namesakeone

    I’m honestly surprised that China doesn’t retaliate–like calling in America’s debt to China. Yet.

    • 0 avatar
      TMA1

      How exactly does China do that?

      • 0 avatar
        4drSedan

        TMA1, China would just cash in some or all of the 1.8 Trillion in US Bonds that they have purchased and currently hold. When you buy a bond you are literally loaning money to the US Government.

        But I’ve also read that holding such a large amount of US debt keeps the value of the Yuan low which makes Chinese crap cheaper for the world. By cashing in on their US debt, they would significantly increase the value of the Yuan and screw up their own economy as well. Chinese-American Standoff.

        • 0 avatar
          DC Bruce

          Dumping a large amount of bonds on the market will drive down the price of those bonds . . . inflicting large losses on the Chinese government.

          US Treasuries have no “put” rights. That is, the holder of a US Treasury security has no ability to force the US government to redeem it before its maturity date. So, the only choice left to China, or any other holder, of US Securities wanting to liquidate them is to sell them to someone else.

          As the saying goes, “When the bank lends you a small amount of money, it owns you; when it lends you a large amount of money, you own the bank.”

          • 0 avatar
            hreardon

            Bingo, DC Bruce. China dumping US Treasuries does nothing but make the Yuan more expensive, create losses for China, and help drive up US interest rates – which, in theory, then attracts other buyers of US Treasuries.

            The US doesn’t get hurt, China does.

          • 0 avatar
            brn

            Controlling the relative price of currency is a key reason China bought the bonds in the first place. Why mess that up?

        • 0 avatar
          schmitt trigger

          What was the saying? Something like:

          “You owe the bank one thousand dollars, the bank owns you.”

          “You owe the bank one million dollars, you own the bank.”

          In any case, thisChinese-American standoff is a financial MAD.

  • avatar
    Stumpaster

    Vorvo

  • avatar
    FreedMike

    Every day I’m shuffling…

  • avatar
    Garrett

    Comparative Advantage at work.

    It would be funny if we get all Swedish (and in the future, American made) made Volvos, while the Eurozone gets Chinese made ones.

    Frankly, I like the idea of companies having distributed manufacturing. Build ‘em where you sell ‘em.

  • avatar
    Lockstops

    America, one step greater again.

    The results keep piling up. Astounding times to live in (meaning horrible things too with the leftists tearing down civilised society).

  • avatar
    vehic1

    Lockstops: “leftists” aren’t the ones b*tching about a Free Press, and publicly loving up to murderous Russian strongmen – sorry.

    • 0 avatar
      Hummer

      Schumer didn’t seem to have any problems cozying up to a murderous Russian strongman over donuts. But I guess leftists prefer their kind to privately cuddle up to murderous Russian strongmen, from Obama telling ole Vlad he’d have more power after the election to Hillary illegally funneling 400M from Russia for her election.

  • avatar
    IBx1

    V I C T O R Y

  • avatar

    That ought to come across as odd: the Made in America XC-60 cheaper than the smaller Belgian-built XC-40.

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