Achi news desk-
A Chinese-made electric vehicle will hit North American dealerships this summer offering similar power and efficiency to Tesla’s Model Y, the world’s best-selling EV, but for about US$8,000 less.
The EX30 from Volvo Cars, the Swedish luxury brand owned by China’s Geely, foreshadows the fierce competitive threat US automakers could face from Chinese electric vehicle manufacturers that have surged far ahead of global competitors, especially in terms of affordability.
The US$35,000 window sticker of Volvo’s compact SUV hits a sweet spot in the North American market, where most buyers can’t afford most electric vehicles. The competitive price reflects an unusual combination of Geely’s China-specific cost advantages and Volvo’s ability to avoid US tariffs on Chinese cars because it also has US manufacturing operations, according to interviews with four sources familiar with Volvo and Geely strategy and a number of US trade policy experts.
Chinese EV makers can undercut global rivals largely because of the nation’s dominance of battery mineral mining and refining, as well as its longstanding commitment to electric vehicle development, including heavy government subsidies.
In addition, Geely has cut manufacturing costs by merging supply chains and sharing platforms and parts with Volvo and other Geely brands, according to two senior Geely managers, who spoke on condition of anonymity because they are not authorized to speak publicly.
Despite its aggressive price, Volvo is targeting big margins on the EX30 of between 15% and 20% globally, a third Geely source said.
China’s EV dominance will be on display this week at the nation’s premier auto show in Beijing. In the Chinese market, the world’s largest, dozens of domestic EV brands are fighting it out in a price war while foreign automakers have gradually lost market share. The intense competition has driven China’s biggest EV makers, led by BYD, to accelerate the export of EVs that can hold higher prices and profits in less competitive overseas markets.
The EX30 will be among only a handful of Chinese cars sold in the US, none of which are from Chinese brands. Vehicles from China currently face a 27.5% tariff and increasingly tough calls for higher trade barriers from US automakers and their political allies.
But Volvo is eligible for tariff rebates under a law that awards them to companies with manufacturing operations in the US – such as Volvo’s South Carolina plant – that also export similar products, according to US trade law experts States and a source familiar with Volvo’s tariff avoidance strategy.
The US government does not release details of tariff rebates to individual companies.
Asked about tariff refunds, a Volvo spokesman said the company pays all required legal duties on cars and parts. He said Volvo, although owned by Geely, is independently operated and designs its cars in Sweden.
Geely declined to comment.
Lease gap
The EX30 could be even cheaper if Volvo and its dealers use an EV policy loophole enacted in the 2022 Inflation Reduction Act, championed by US President Joe Biden. The legislation reauthorized an existing $7,500 tax credit for electric vehicle buyers – but blocked the subsidy​​​​ for cars with components from countries, including China, that are considered an economic or security threat.
The US Internal Revenue Service later determined, however, that leased electric vehicles qualify as commercial vehicles and are eligible for a similar subsidy of $7,500 with no restrictions on Chinese content.
That could bring the effective lease price of an EX30 to $27,500—a compelling proposition for a five-seat electric SUV that Volvo has said will have a 275-mile driving range and a five-second 0-60 mph time. The EX30’s specs closely match Tesla’s Model Y, and Volvo dealers point to the comparison. (Model Y has more cargo space.)
Last weekend, Tesla dropped the price of the Model Y by $2,000 in the US as part of a series of global discounts. It’s the latest of many Tesla price cuts as it faces rising demand and tougher competition from Chinese electric vehicle makers.
Lance Morgan, sales manager for Volvo Cars Carlsbad in California, said his dealership has already taken deposits for every 2025 EX30 it expects to allocate.
“I think this could be a bit of a game changer for the whole brand,” he said.
Morgan said more than half of his customers who buy currently available Volvo EVs lease them initially to qualify for the US tax credit – then buy the lease right away.
‘Extinction’ Event
The EX30’s price and the buzz it generates help explain US automakers’ growing fears of having to compete with low-cost Chinese electric vehicle imports.
Industry trade group the Alliance of American Manufacturers said in February that cheap Chinese EVs could cause an “extinction-level event” for US automakers. He warned that Chinese manufacturers could also avoid US tariffs by setting up plants in Mexico, inside the North American free trade zone, and then exporting vehicles to the US.
China’s BYD – which competes with Tesla for the global electric vehicle sales crown – announced plans in February for a factory in Mexico. BYD offers a variety of EVs for under $30,000 in China, including an electric hatchback that sells for under $10,000.
In Mexico City in February, BYD announced that it would sell the same hatchback in Latin America for about $21,000, which is still well below any US electric vehicle.
Some US politicians are calling for higher trade barriers, including US Senator Josh Hawley, Republican of Missouri.
Referring to Volvo’s tariff rebate strategy, Hawley said in a statement to Reuters: “Using taxpayer dollars to subsidize China’s Communist auto sector is an insult to American workers.”
Volvo quality, Geely cost
When Geely bought Volvo from Ford in 2010 for $1.8 billion, it struck some analysts as an odd pair. Geely was a high-end Hangzhou carmaker known for producing lower-quality knockoffs of Western cars while Volvo had a long-standing reputation for safety and sleek Scandinavian designs.
The companies came up with Volvo’s growth strategy which relied in part on reducing costs by merging supply chains, giving the company combined leverage to reduce supplier costs.
“Our goal was to achieve ‘Volvo quality, Geely cost’,” said one Geely engineering manager.
The plan worked. Since 2010, Volvo has almost doubled its global car sales, from 373,525 to more than 708,000 last year.
Geely and Volvo have created a series of shared platforms that allow Volvo and other Geely brands to share batteries, motors, gears and electric power management inverters – all high-cost EV components that are cheaper in high volumes.
The EX30 rides on an electric vehicle platform Geely calls SEA, for “sustainable experience architecture,” Geely sources said. A third Geely official called it the Russian doll of vehicle platforms because it can be adapted to produce a wide variety of large and small EVs without major changes to assembly lines.
A Geely engineering manager said 80% of the underbody components in SEA platform vehicles are now shared among Geely, Volvo and other related brands including Smart, Lynk & Co and Zeekr, which make vehicles for Chinese markets and European.
Import-export business
Moving more of its manufacturing to China required Volvo to face punitive tariffs enacted by Republican US President Donald Trump in 2018, as part of a larger trade war, and which has since been supported by Biden.
At the time, a Volvo lobbyist asked for a ban on its mid-size SUVs imported from China, saying in an October 2018 letter that the duties would cause economic harm to auto consumers and workers. The US Trade Representative denied Volvo’s request, as it did a similar request from General Motors.
The lobbyist’s letter did not name specific models but Volvo imported its XC60 utility vehicle from China at the time. He switched production for the US market to Europe to avoid the tariffs.
Now Volvo has found a different way around the tariffs for the EX30, through the US customs drawback program, which dates back to 1789. The program originally reimbursed the tariffs paid on raw materials imported to companies if they used them to build finished products for export. Today, it allows a much wider variety of exports to offset taxes on similar imports.
For Volvo, it means exports of its larger EX90 electric sport-utility vehicle built in South Carolina can be used to offset imports of the EX30 from China.
The handicap program, long used by US automakers that source parts globally, has grown in popularity in the US-China trade war. Total drawback claims have more than tripled since the 2018 tariffs, from $1.3 billion to nearly $4 billion last year, according to US Customs data.
(Reporting by Norihiko Shirouzu and Chris Kirkham. Editing by David Clarke, Claudia Parsons and Brian Thevenot)
