Volvo formally unveiled its redesigned S60 sedan on Wednesday and offered a look at the company's first US plant.
The Swedish carmaker that is owned by China's Zhejiang Geely Holding Group Co invested $1.1 billion in the plant in Ridgeville, South Carolina,about 30 miles from Charleston. It is scheduled to start producing the mid-size S60 for US and international markets later this year. The factory also will make the company's XC90 crossover sport utility vehicle (SUV) in 2021. The plant could employ about 4,000 people and make 130,000 vehicles a year, according to Volvo.
"We will export as many cars from this factory as we will import in the US; Volvo will in three years' time have a neutral balance of trade. That is a good example of how trade with cars should work in an open and free economy," said Volvo Cars CEO Hakan Samuelsson, according to the Associated Press.
The auto industry is caught in the crossfire of the current trade dispute between China and the US. The Trump administrationimposed 25 percent tariffs on vehicles imported from China, of which there are few. China, which announced recently that it will reduce tariffs on most imported vehicles from 25 percent to 15 percent, is planning to retaliate with 40 percent tariffs on US vehicles starting July 6.
The Gothenburg, Sweden-based Volvo imported all of the 81,651 vehicles it sold in the US last year, and imports will still make up 87 percent of its deliveries to American consumers in 2019, according to LMC Automotive estimates.
David Zoia, editorial director of WardsAuto.com,believes that the South Carolina plant may give Volvo some cover should the trade dispute linger or intensify.
"Given the current trade climate under the Trump administration, the US plant could be even more critical to Volvo's ability to supply the US market than when it was initially conceived (in 2015). But even without any additional trade barriers, the plant will play a key role in the automaker's efforts to grow volume and keep costs down," he said in an email.
Car sales in China and the US are slumping, while surging SUV and crossover sales have led to some manufacturers like the Ford Motor Co to curtail sedan offerings in favor of additional SUV and crossover utility vehicle (CUV) production.
Zoia doesn't believe that Volvo is mistiming the market by producing sedans.
"In the US, 35 percent of Volvo sales remain cars so that segment is still an important one for the brand. However, I would anticipate Volvo adding CUV production at the US plant in the future to utilize more of its capacity and maximize its investment," he wrote in an email.
Rebecca Lindland, executive analyst for Kelley Blue Book, noted that the company made the product decision several years ago. "The sedan market has slumped rather abruptly. I would have preferred them to start with the XC90, but that's not coming until 2021," she said in an email.