Volvo's U.S. assembly plant will go all-electric

CHARLESTON, S.C. — Volvo Cars has a new electric vision for its U.S. assembly plant in South Carolina.

The factory, opened three years ago, will become the company's first all-electric vehicle assembly plant, executives told Automotive News last week. And it will be the cornerstone of the Swedish automaker's ambitious plan to become an EV-only brand by 2030.

The 2.3-million-square-foot operation in Ridgeville, an hour northwest of Charleston, will be the "first company factory in the world building our all-new-generation all-electric cars — before Europe and before China," Volvo Cars CEO Hakan Samuelsson said. "This factory will ... also be the only plant in the Volvo Group which only makes full-electric cars."

The automaker previously said it would invest about $700 million at the site to build EVs.

"Charleston will play a very important role in our electrification strategy," Samuelsson said. "It's a huge investment that we are doing."

Since launching in fall 2018, the factory has operated at a fraction of its 150,000-vehicle annual capacity. Volvo built fewer than 26,500 S60 midsize sedans in Ridgeville last year during the pandemic, according to LMC Automotive data.

But starting late next year, the plant will begin assembling the first of two key electric crossovers. Volvo affiliate Polestar will launch production of a Porsche Cayenne-sized electric crossover there. More significantly, Volvo will begin production of a battery version of its bestselling XC90 large crossover in South Carolina.

LMC forecasts that Volvo could add production of an electric next-generation XC60 midsize crossover in late 2024.

The battery-electric vehicles, based on Volvo's new Scalable Platform Architecture platform, will feature advanced autonomous driver-assistance technology.

"We have developed a new technology, including an all-new architecture, which is all-electric. No compromises," Samuelsson said.

While EV adoption in the U.S. lags Europe and China, Volvo is betting that American buyers will catch up.

"We are convinced the premium car market will be electric," Samuelsson said, referring to passenger vehicles in general. By going all-EV, "we believe that is going to secure a better business, a better profitability for us, because being a sustainable brand is making us more premium," he said.

As with other aspects of its business lately, Volvo is taking a different tack with its U.S. manufacturing strategy.

While luxury competitors Mercedes-Benz and BMW have built their Southeastern U.S. plants into massive export hubs that ship the majority of their output to overseas markets, Volvo is taking a "build where you sell" approach.

The Ridgeville factory will mainly supply EVs to the Americas, said Javier Varela, Volvo Cars head of industrial operations.

"The intention is not to build a super hub for exporting from here," Varela said. "It is to have a facility that can deliver to this market and then contribute with flexibility to deliver to other markets."

Industry analysts say "build where you sell" is more profitable in the case of EVs because it reduces the logistics costs and complexity of exporting heavy, battery-laden vehicles overseas.

Building domestically also shelters Volvo from the unpredictability of trade wars and margin-busting tariffs. U.S. importers face a 27.5 percent tariff on China-made vehicles. That was a key reason Polestar decided to build its first electric crossover in South Carolina.

There also are environmental considerations.

"Producing where you sell the cars is a very favorable setup if you want to reduce your CO2 footprint," Polestar CEO Thomas Ingenlath said this month.

Even so, the strategy carries risk if there is a downturn in the local market or a pullback in demand, given the competitive pressure as vehicle models age, said Jeff Schuster, LMC's president of global forecasting. Volvo executives say the Ridgeville plant has the capacity to supply overseas markets, if warranted. And initially, the factory will be the global production center for the XC90 BEV.

The large crossovers "will be exported to Europe first and possibly China," Varela said.

But before the first EVs roll off the assembly line, a supply base must be established.

Volvo executives remained tight-lipped last week about the identity of their U.S. battery cell supplier. "We're still finishing the choice of suppliers for batteries for Charleston," Varela said.

However, Volvo also announced last week a joint venture with Swedish battery-maker Northvolt to set up a battery cell factory in Europe.

The company's $700 million investment includes the addition of a second assembly line at the Ridgeville plant and a battery pack assembly plant.

Other tasks are now in order. The work force will require training on BEV technology and battery assembly, said the plant's new boss, David Stenstrom.

"My first priority is getting the current team in shape," he said. "I have six months to do that."

Staffing up the factory floor is another area of focus. Volvo plans to triple the hourly production work force to about 2,500 in the next couple of years.

"I want to be the best plant," Stenstrom said. "If I'm competitive in cost and quality, I hope my boss will give me the next models as well."