How, during a trade dispute, Volvo brought a low-cost Chinese EV to American soil

The Swedish luxury brand Volvo Cars, which is owned by China’s Geely, has a model called the EX30 that suggests the severe competition that Chinese electric vehicle producers may pose to American automakers.

TFD – Dive into the impact of Chinese electric vehicles on American automakers amidst the ongoing U.S.-China trade war. Learn how the drawback program and Volvo’s EX30 model signify the challenges and opportunities in the EV market, shaping the future of automotive competition.

This summer, an electric car built in China will be available at American dealerships. It will cost roughly $8,000 less than the world’s best-selling Tesla Model Y and have power and efficiency comparable to that of the Model Y.

The Swedish luxury brand Volvo Cars, owned by China’s Geely, has a model called the EX30 that looks ahead of its time and represents a serious threat to U.S. automakers from Chinese EV producers who have surpassed their international competitors in terms of affordability in particular.

A sweet spot is reached in the US market by the $35,000 window sticker of Volvo’s small SUV, as most purchasers cannot afford most EVs. According to interviews with four sources familiar with Volvo and Geely strategy and several U.S. trade policy experts, the competitive price reflects an unusual combination of Geely’s cost advantages specific to China and Volvo’s ability to evade U.S. tariffs on Chinese cars due to its U.S. manufacturing operations.

Chinese EV manufacturers are able to undercut international rivals in large part because to their long-standing commitment to EV development, which includes significant government subsidies, as well as their dominance in the mining and refining of battery materials.

Furthermore, two senior Geely managers—who spoke on condition of anonymity because they are not authorized to talk publicly—said that Geely has reduced manufacturing costs by combining supply chains and sharing platforms and parts with Volvo and other Geely brands.

According to a third Geely insider, Volvo is aiming for significant profit margins of 15% to 20% worldwide for the EX30, despite its competitive pricing.

This week, China’s biggest car exhibition in Beijing will showcase the country’s superiority in electric vehicles. Dozens of local EV brands are engaged in a pricing battle in the world’s largest market, China, while international automakers are steadily losing market share. The fierce rivalry has forced China’s largest electric vehicle manufacturers, led by BYD, to increase EV exports in order to raise prices and make more money in less cutthroat international markets.

There won’t be many Chinese-made vehicles available in the US market, and the EX30 won’t be one of them. Currently, Chinese cars are subject to a 27.5% tax, and American automakers and their political friends are calling for even stronger trade barriers.

But Volvo is eligible for tariff refunds under a law that awards them to firms with U.S. manufacturing operations — such as Volvo’s South Carolina plant — that also export similar products, according to U.S. trade law experts and a source familiar with Volvo’s tariff-avoidance strategy.

Details on specific company-to-company tariff refunds are kept confidential by the US government.

Asked about tariff refunds, a Volvo spokesperson said the company pays all legally required duties on cars and parts. Despite being owned by Geely, she noted, Volvo is a privately held company that develops its vehicles in Sweden.

Geely said he would not comment.

The EX30 could get even cheaper if Volvo and its dealers use an EV-policy loophole enacted in the Inflation Reduction Act of 2022, championed by U.S. President Joe Biden. The bill preserved the $7,500 tax credit that was previously available to EV buyers, but it prohibited the reimbursement for vehicles that used parts sourced from nations considered to be a security or economic danger, such as China.

However, the U.S. Internal Revenue Service subsequently found that leased electric vehicles are eligible for a similar $7,500 subsidy without any restrictions on China-content as they qualify as commercial vehicles.

This might result in an effective lease price of $27,500 for an EX30, which is a very attractive deal for a five-seater electric SUV with a 275-mile driving range and a five-second 0-60 mph performance, according to Volvo. Volvo salespeople are highlighting the remarkable resemblance between the EX30’s characteristics and those of Tesla’s Model Y. (There’s greater cargo space in the Model Y.)

As part of a series of worldwide price cuts, Tesla dropped the Model Y by $2,000 in the US last weekend. With demand waning and fiercer competition from Chinese EV manufacturers, this is the most recent in a string of price reductions for Tesla.

Sales manager Lance Morgan of Volvo Cars Carlsbad in California revealed that their store has already collected deposits for each of the anticipated 2025 allocation of EX30s.

He stated, “I believe that this has the potential to completely transform the brand.”

According to Morgan, more than half of his clients who purchase Volvo EVs that are currently on the market first lease them in order to be eligible for the US tax credit, then quickly buy out the lease.

The expense and excitement surrounding the EX30 contribute to the explanation of American manufacturers’ growing concerns about having to compete with low-priced Chinese EV imports.

The Alliance for American Manufacturing, a trade association for the industry, warned in February that low-cost Chinese EVs would force American automakers to face “extinction-level events.” It forewarned that by establishing manufacturing in Mexico, inside the North American free trade zone, and then exporting automobiles to the US, Chinese manufacturers might likewise evade US tariffs.

In February, China’s BYD, a competitor to Tesla in the worldwide EV sales race, revealed plans to build a plant in Mexico. BYD offers an array of EVs for less than $30,000 in China, including an electric hatchback that sells for less than $10,000.

BYD declared in February in Mexico City that it will retail the identical hatchback for roughly $21,000 in Latin America, which is still significantly less than any electric car sold in the United States.

A number of American lawmakers, including Republican senator from Missouri Josh Hawley, are advocating for greater trade restrictions.

Hawley said Reuters in a statement that “using taxpayer dollars to subsidize Communist China’s auto sector is an affront to American workers,” in reference to Volvo’s tariff refund plan.

When Geely bought Volvo from Ford in 2010 for $1.8 billion, it struck some analysts as an odd pairing. Geely was an upstart automaker from Hangzhou known for producing lower-quality knockoffs of Western cars while Volvo had a long-standing reputation for safety and sleek Scandinavian designs.

The businesses devised a growth plan for Volvo that included combining supply chains to reduce costs and provide the merged business the power to negotiate lower supplier prices.

“Our stated goal was to achieve ‘quality of Volvo, cost of Geely’,” one Geely engineering manager said.

The strategy was successful. Volvo’s global automobile sales have nearly doubled since 2010, rising from 373,525 to over 708,000 last year.

In order to share expensive electric vehicle (EV) components that are more affordable in large quantities, Geely and Volvo have developed a number of shared platforms that enable Volvo and other Geely brands to share batteries, motors, gearboxes, and electric power-management inverters.

According to Geely sources, the EX30 is driven by a platform for electric vehicles called SEA, which stands for “sustainable experience architecture.” The Russian doll of vehicle platforms, according to a third Geely official, is its ability to create a broad range of large and small EVs without requiring significant assembly-line modifications.

According to a Geely engineering manager, Geely, Volvo, and other associated companies that produce automobiles for the Chinese and European markets currently share 80% of the underbody components in SEA-platform vehicles. These brands include Smart, Lynk & Co., and Zeekr.

Shifting more of its manufacturing to China required Volvo to confront the punishing tariffs enacted by Republican U.S. President Donald Trump in 2018, as part of a larger trade war, and since supported by Biden.

In a letter dated October 2018, a Volvo lobbyist asked for an exemption for the company’s mid-size SUV imports from China, claiming that the levies would hurt auto workers’ and consumers’ bottom lines. The proposal from Volvo was turned down by the U.S. Trade Representative, just as General Motors’ request was as well.

Although no specific models were mentioned in the lobbyist’s letter, Volvo was importing its XC60 utility car from China at the time. To get around the tariffs, it moved production for the US market to Europe.

Volvo has now discovered an alternative method of avoiding the duties on the EX30 by utilizing the 1789-established U.S. duty drawback mechanism. When the program first started, businesses who used imported raw materials to create completed goods for export were reimbursed for the tariffs they had to pay. These days, a far wider range of exports are able to offset import tariffs.

For Volvo, this means that imports of the EX30 from China can be countered by exports of its larger, South Carolina-built EX90 electric sport-utility vehicles.

Amid the U.S.-China trade war, the drawback program—which American automakers that source parts internationally have long employed—has become more and more well-liked. According to U.S. Customs data, total drawback claims have more than quadrupled since the 2018 tariffs, rising from $1.3 billion to over $4 billion in the previous year.