Volvo’s US factory should come after the brand turns around declining sales image

Volvo Cars, the Swedish automaker owned by China’s Geely, recently announced it would build a $500 million plant in South Carolina to support sales in the United States, the largest premium auto market in the world.

The company chose South Carolina as the site of a $500 million investment into a new production facility that will have an initial output capacity of 100,000 units annually. The plant would start construction work before the autumn starts and vehicles will start churning out the factory gates in 2018 – with a workforce of 2,000 initially and up to 4,000 “over the long term.” The Volvo assembly facility is one of many being planned in North America – though most of the recent investments have gone south, to Mexico. There, the automakers have found an auspicious climate: lower labor costs than in the US and Canada, no unions to worry about, a geostrategic position between the US and Latin America and a flurry of free trading agreements with numerous regions across the globe.

But the announcement made by the Swedish company, a Chinese subsidiary, comes with numerous questions. First of all – how will Volvo support the production run of 100,000 units if the US market is only asking for around 56,000 Volvos per year and the numbers have declined constantly even as the luxury auto market is booming? And the brand reputation is today, at best, dormant. The speculations are also rising – Volvo might have chosen the US location instead of a cheaper one in Mexico to alleviate potential criticism over the decision to import to the US the Chinese-made Volvo S60L, the first car made in the world’s largest auto market and then imported to the planet’s second biggest.

Via Forbes