Volvo juggling XC60 output to avoid U.S. tariffs

Volvo Cars is shifting XC60 SUV production for the U.S. market to Europe from China to avoid Washington’s new tariffs on Chinese imports, the Swedish carmaker said.

Volvo currently builds the XC60 premium midsize SUV in Sweden for European customers and in China for other markets including the United States.

“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,” Samuelsson told Reuters on Thursday, adding that the shift had already begun.

Washington this month slapped 25 percent tariffs on $34 billion in Chinese imports including models such as the XC60 and the S90 sedan that Volvo exclusively builds there. Beijing quickly retaliated with an increase in tariffs on U.S. goods.

Volvo recently opened its first U.S. plant near Charleston, South Carolina, where mass production of the new-generation S60 will start next month.

While the $1.1 billion investment offers some protection against mounting trade tariffs, Volvo remains dependent on imports in its fastest-growing market. Volvo’s U.S. sales rose 40 percent in the first half. During that period the automaker increased U.S. sales of the XC60 64 percent to 14,790 units, according to the Automotive News Data Center.

Sedans such as the S60 fell to below one-third of U.S. registrations in the second quarter from 38 percent a year earlier while SUVs such as the Swedish-made XC90 jumped from 62 percent to 67 percent, according to Autodata figures.

U.S. President Donald Trump is also threatening tariffs against car imports from Europe, where Volvo builds strong-selling models such as the XC40 SUV. The Peterson Institute for International Economics forecasts potential tariffs would raise vehicle prices between $1,400 and $7,000 for top-selling models, depending on a variety of factors including size.

Volvo has so far made no changes to its announced plans to focus on sedan production in Charleston, while importing its SUVs to the United States until production of the next-generation XC90 starts in South Carolina in 2021.

When asked about this Thursday Samuelsson told Automotive News Europe that Volvo’s answer is to tariffs is to “ramp up Charleston as fast as we can,” but he added that the automaker is joining in the lobbying effort against the tariffs because “they would be bad for the whole industry.”

He said that Volvo is not currently looking into adding the S90 sedan in Charleston. “You have to be careful when considering investing to mitigate tariffs,” the CEO told ANE. “We want see what happens first.”

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