Exclusive – Volvo shifts production to avoid tariffs, chases record sales

PARIS– On Thursday, Chief Executive Hakan Samuelsson told Reuters, “Volvo Cars is juggling production of its top-selling SUV to avoid U.S. import tariffs, as the Swedish carmaker set its sights on a fifth straight year of record sales”.

Volvo, whose Chinese parent Geely is weighing up a stock market listing for the company, currently builds the compact XC60 in Sweden for European customers and in China for that market and others including the United States. The company is shifting XC60 SUV production for the U.S. market to Europe from China to avoid Washington’s new duties on Chinese imports, Samuelsson said in an interview after unveiling a 29 percent increase in second-quarter operating profit.

“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,” the CEO said, adding that the shift had begun. Chinese XC60 production previously shipped to U.S. dealers would be reallocated to markets including Europe, he said. Pledging to hit the fifth record in 2018, Samuelsson said Volvo was “well positioned for a new period of sustainable global growth”.

The company recently opened its first U.S. plant in South Carolina, now ramping up S60 sedan production. While the $1.1 billion U.S. investment offers some respite from rising trade barriers, the company remains dependent on importing SUVs and large sedans into its fastest-growing market. Volvo’s U.S. sales rose 40 percent in the first half. Speaking in Hong Kong last month, Geely Chairman Li Shufu said higher tariffs would bring price increases and may ultimately force Volvo to diversify its U.S., Chinese and European production to assemble more models in each region.

“We will have to invest in producing a higher number of car models locally,” the South China Morning Post quoted him as saying.

Washington this month slapped 25 percent tariffs on $34 billion in Chinese imports including cars, and Beijing quickly retaliated with an increase in tariffs on U.S. goods. President Donald Trump is also threatening tariffs against car imports from Europe, where Volvo has two assembly plants.

by Sawan Kumar on August 1, 2018

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