Originally planned as the global production home of the remodeled S60 sedan, the Volvo Cars manufacturing campus near Ridgeville will — at least for now — share production of the automaker's newest vehicle with a plant in China.
Volvo's manufacturing site in Daqing, China, now will build S60 sedans for that country and other Asia-Pacific markets while the $1.1 billion plant off Interstate 26 in Berkeley County will supply the rest of the world.
The move is in response to a trade war and escalating tariffs between the United States and China that have forced Volvo to rethink its hiring and production strategies.
Hakan Samuelsson, the automaker's CEO, told reporters at this week's Los Angeles Auto Show that Volvo is slowing the production ramp-up at the Charleston-area campus, which was to have produced 50,000 cars in 2019.
That could impact hiring, although Volvo spokeswoman Stephanie Mangini said the plant is on target with original estimates to have 1,500 employees by early 2019.
Samuelsson said China's decision to impose 40 percent tariffs on U.S.-produced vehicles makes it too expensive to export S60s to that country. The tariffs are in retaliation for similar import duties President Donald Tump has imposed on Chinese-made goods.
"We ... thought Charleston could build cars for China," Samuelsson told USA Today. "That will not work."
The Ridgeville site will bring the first S60s to U.S. dealerships by the end of this year and will begin exports to countries other than China during the first quarter of 2019.
Chinese consumers bought 26,986 S60 sedans in 2017 — roughly 23.5 percent of the company's overall vehicle sales in that country. The 2017 total was down from the previous year and S60 sales have fallen again so far this year. Volvo had been building S60s at its Chengdu, China, plant.
Volvo, based in Sweden but owned by China's Geely Holding Group, is among several second-tier luxury vehicle producers in China with sales of about 114,000 vehicles in 2017. That compares with about 600,000 annual sales for brands like BMW and Mercedes-Benz. Volvo has said it wants to roughly double sales in China by 2020.
The S60 isn't the only vehicle to undergo a production shift due to tariffs. Earlier this year, Volvo started building U.S.-bound SUVs in Europe instead of China to avoid Trump's higher import taxes.
"That's the sort of fine-tuning we can do within our production process," Samuelsson told Reuters in July.
Volvo has said it plans to hire 2,000 people at the Ridgeville plant by the time the S60 reaches full production. Plans call for another 2,000 workers to be hired by 2021, when a second car — the XC90 SUV — joins the production line. Those projections could be lowered due to the tariffs, Samuelsson said.
The automaker predicted it would build 150,000 cars a year when both the S60 and XC90 were at their production peaks in the early 2020s.
While the number of cars Volvo builds won't impact the roughly $250 million in tax and other incentives South Carolina gave the automaker to locate near Ridgeville, employment numbers could eventually pose a problem. However, the state gave the automaker a long lead time to meet its contractual obligations.
According to Volvo's agreement with the state's Commerce Department, the automaker must hire at least 2,000 employees by the end of 2023 — and keep its payroll at that level or above for at least seven of the next 10 years — or it might have to pay back some of the incentive money.