The Donald Trump administration imposed a 25% tariff on imported foreign cars, effective from midnight on the 3rd (local time), prompting increased activity among European automakers. Companies that already have factories in the U.S. are considering expanding production within the country to avoid the tariff.
According to Bloomberg News, Hakan Samuelsson, Chief Executive Officer (CEO) of Volvo, said in an interview on that day, "We need to increase the number of vehicles produced in the U.S. and will have to move other models to that factory." Samuelsson added that Volvo is carefully reviewing which models to add to its U.S. factory.
Volvo established its first North American factory, the Charleston plant, in South Carolina in 2018 and is producing the large electric SUV EX90 and the Polestar 3 electric vehicle. Polestar is a Swedish electric vehicle company in which Volvo is the majority shareholder.
Previously, European cars were subject to a 2.5% tariff when exported to the U.S. However, President Trump claimed that Europe imposes a 10% tariff on U.S. cars, citing it as a prime example of unfair trade. Ultimately, on the 27th of last month, the U.S. announced it would impose a 25% tariff on all imported cars, leading to European cars facing a 10-fold increase in tariffs to 25% starting from the 3rd.
The reason Volvo is quickly reviewing its supply chain adjustments is due to painful experiences from the first term of the Trump administration. Bloomberg reported, "Volvo, which opened its South Carolina plant in 2018, canceled plans to export sedans produced there to China a few months after production began due to the U.S.-China trade war." In other words, local production in target export countries is the solution.
Mercedes-Benz Group AG is also considering moving production of other automobile models to the U.S. Jörg Burzer, head of production at Mercedes, noted that they are still evaluating the impact of the tariffs and are reviewing the relocation of production for other vehicle models to their U.S. factory to address cost issues arising from the tariffs.
Mercedes has operated a factory in Tuscaloosa, Alabama, since 1997, producing its flagship premium SUVs, the GLS and GLE models. However, Burzer did not specify which models would be moved to the U.S. factory.
Earlier on the 1st, Bloomberg News reported that Mercedes was considering halting sales of its compact SUV, the GLA, and other affordable models in the U.S. The GLA is sold in the U.S. starting at $43,000 (approximately 62.44 million won), and due to its originally low profit margin, there is a high possibility that the increased tariff costs will be passed on to consumers. Following the imposition of tariffs in the U.S., Mercedes appears to be undergoing supply chain adjustments.
Bloomberg News reported, "The 25% tariff from Trump had a significant impact on the automotive industry," while also noting, "Due to high demand for SUVs and a slow transition to electric vehicles, the U.S. remains an attractive market for companies like Mercedes and Porsche."