Berkeley County, South Carolina, has been chosen as the site where Volvo Cars will have its first plant in the U.S. An investment of $500 million is being made for the Swedish brand to get a bigger share of the premium market in North America. Construction will start this year with production expected to begin in 2018.
The annual target output from this plant is 100,000 vehicles. Chinese automaker Geely GEELY.UL, which acquired Volvo Cars from Ford in 2010, is making this investment to rebuild a brand that got into trouble during the economic crisis. Volvo Cars Chief Executive Hakan Samuelsson said that this clearly shows how committed the company is to reviving its U.S. business.
Volvo is making this move while the luxury car market in North America is becoming tougher. Competitors have been boosting capacity. Many of them have chosen Mexico due to its lower wages, access to the U.S. and some other export markets where there are free-trade agreements, and its non-unionized workforce.
It’s expected that total production capacity in North America will increase by over 10% in the next five years to 19.6 million light vehicles in 2020, according to predictions from WardsAuto. New plants make up majority of these gains. Other luxury automakers that have newly announced plans to raise their production in the region are Audi, BMW and Mercedes-Benz.
After Geely bought Volvo, the automaker has increased its model investments and has even gotten two plants in China on top of its two older factories in Europe. Its sales in the U.S. dropped 8% to 56,000 units last year. This production investment is said to be the key to a promise in the medium term to get back to having annual deliveries of 100,000 units.
In addition, Volvo is facing local competition from Lincoln and Cadillac as $14.5 billion has been invested to beef up their lineups. Samuelsson admitted that market conditions in the U.S. are tougher but he is adamant that Volvo’s plans will proceed smoothly. He said that Volvo is a “very different” premium brand.
He added that Mexico was on the long list of places being considered for the plant but it later came down to either Georgia or South Carolina. Among the factors that made Volvo lean towards South Carolina are its transport links, which include access to the harbour. Samuelsson clarified that union representation wasn’t a relevant consideration.
Rather, logistics was very significant for a factory that will be importing many parts and will be exporting vehicles too. About 2,000 jobs will be created by this new plant, according to an environmental permit application filed for the Berkeley County site.
No details were given about its longer-term production goals. However, it said that it will eventually have up to 4,000 workers, implying that the initial 100,000 vehicle output may double if sales targets are reached. [source: Volvo]