Volvo has announced an extensive round of cost cutting in response to a variety of pressures on profitability.  That’s a response to “increased pricing pressure and new tariffs (which) have decreased our operating profit” according to CEO Håkan Samuelsson. That’s led the firm to initiate “additional cost measures within the company on top of already planned measures” in a program worth two billion Swedish Krona ($212.9 million) in costs into 2020. 

Cost cutting is just one of six major strategies firms have used to tackle tariffs, as outlined in Panjiva’s research of Jun. 14. Volvo had also previously announced plans to abandon sales of the Polestar electric vehicle in the U.S. in response to tariffs.

While Volvo is owned by Geely, a Chinese company, Panjiva data shows that 45.9% of the firm’s U.S. seaborne imports came from Sweden in the past three years with China accounting for just 2.8% – it’s direct exposure to China from U.S. import tariffs should be minimal. 

In the second quarter of 2019, imports from Volvo’s home country have increased by 5.6% year over year by volume, holding steady compared to explosive year over year growth from other European countries.

Imports from France grew by 312.0% year over year over the same period, surpassing imports from Germany and Belgium which rose 48.4% and 35.9% respectively. By contrast imports from Brazil have dropped by 35.8% year over year in the second quarter.

The high exposure to Europe leaves Volvo Cars vulnerable to the ongoing section 232 automotive industry review being carried out by the Trump administration. A decision on whether to apply tariffs, and specifically to exports form the EU, is not due until November. That leaves Volvo facing supply chain decision making uncertainty for several months yet.

Chart segments car related imports imports associated with Volvo by selected countries by TEU by three month average.  Source: Panjiva

There was a spike in shipments to Volvo’s plant in Berkeley, South Carolina, via the Port of Charleston in 2018 as a result of the start of production of the S60 sedan.

Charleston has seen an increase in shipment volumes associated with Volvo cars by 440.1% year over year in the second quarter. Volumes to larger east coast ports have seen a reduction as goods land closer to the plant.

The Port of Norfolk saw a 4.1% year over year decrease in volumes shipped, and the Port of Newark saw a 26.1% year over year reduction. Production of Volvo’s XC90 SUV is expected to commence in 2022 at the same plant.

Chart segments car related shipment volume by selected ports associated with Volvo on a monthly and three month average basis.  Source: Panjiva