Volvo's Brand Recognitionis not even in full swing, but already the automaker is mixing its production plans in response to mounting tensions in world trade. " Volvo has canceled plans to ship its US-built S60 sedan to China, Bloomberg reports, citing a press conference in Detroit with Volvo's head of Volvo's US operations, Anders Gustafsson. Production of the Charleston plant was destined for China, now the automaker will focus on manufacturing S60s for the US and Europe.
"We have a global manufacturing structure that allows us to maneuver in these challenging waters," says Bloomberg Gustafsson quotes as saying.
This is not the only reorganization in Volvo's supply chain, according to Bloomberg, Volvo will no longer import the XC60 SUV from China to the US, but will rely on European imports. Chinese limousine deliveries "drastically reduce."
Currently, vehicles traveling from China to the US have a duty of 27.5 percent. In retaliation for this tariff, which President Trump has levied to bring China to the negotiating table for more favorable trade agreements, China has applied a 40 percent duty vehicle imported from the US. The tariffs could disappear if China and the US form a new trade agreement. However, Volvo's decision to postpone its manufacturing efforts shows little confidence that the two countries will soon forge a new trade agreement.
The tariffs have hit Volvo pretty hard. As Bloomberg notes, Volvo does not use the tariffs as an excuse to raise prices for customers in the US, China and elsewhere. Rather, the automaker has collected these additional costs and given the end result the old. "We can not take tariffs in the long run," said Gustafsson in the run-up to the Bloomberg press conference. "It's huge."
And it will only get worse. While Volvo's new Charleston plant is only now building the S60, the next generation XC90 SUV will be built early next decade. If the automaker does not change its plans, it could sell one of its largest cash-cows at a loss in a very large market. Hopefully, this fledgling trade war will long before disappear, but if not, Volvo will have to think long and hard about what is being built where.
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