Volvo, the Sweden-based, Chinese-owned carmaker, is seeking to head off protectionist sentiment in the US by exporting cars to China from an American plant.
The factory being built in South Carolina will employ 4,000 workers and produce a small sedan that will be sold in Europe and China starting in 2018.
Hakan Samuelsson, chief executive of Volvo Cars, said producing cars in the US for export, particularly to China, offers a powerful rebuttal to accusations that China is taking US jobs.
“From an American horizon we see that we create 4,000 jobs in South Carolina. Half of those jobs will be related to export to Europe and China,” said Mr Samuelsson, speaking at the Volvo booth in the Shanghai Auto Show.
“The Volvo trade flow globally is level, fair and balanced. It’s different than just setting up a factory in Mexico and selling into the US. It’s a global production system and good for everybody,” he said.
Volvo was bought in 2010 by Chinese domestic carmaker Geely, making it the only Chinese-owned carmaker now producing vehicles in China for export to the US — it exports the S90 sedan from a plant in the city of Daqing.
This could make the carmaker vulnerable to a worsening trade climate. US President Donald Trump has said he wants to level the trade playing field with China and has threatened steep tariffs.
Republican members of congress have also proposed a “border adjustment tax” as a way to address the US’s trade deficit by allowing companies to deduct exports but not imports from taxable profits.
Some US industrial lobbies have said it is time to practice “reciprocity” with China in sectors ranging from banking to autos where foreign investment in China is restricted by Beijing.
In China’s automotive sector, foreign companies must produce in China with joint venture partners, or else face 25 per cent tariffs. The US, meanwhile, puts a 2.5 per cent tariff on imported autos and does not restrict foreign companies’ investment.
James McGregor, chairman for greater China at Apco Worldwide, a business consultancy, said Geely appeared to be laying plans to ramp up exports and this meant they would have to think about keeping local markets open. “Their focus is going to be on exporting globally so they want to keep car trade free,” he said. “Manufacturing in the US is just smart politics,” he said.
Mr McGregor also said he did not see a big push to “rock the boat” by foreign carmakers in China. “As far as the big US automakers are concerned all they want is stability,” he said.
However, Mr Samuelsson is taking no chances. He said that Volvo’s “balanced approach” of selling vehicles made in China to the US, and vehicles made in the US to China, would help to counter any pressure from critics.
“This [the South Carolina plant] is very powerful argument in any discussion about border adjustment tax, so I think we have a good story and we will be ready to defend this. It’s about free trade and the benefits of free trade,” he said.
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