GM and Volvo denied US tariff exemption for Chinese-made SUVs
Despite both companies saying the exemptions would fund plants and operations in the US, they are now obliged to absorb the new 25% tariff
Washington/Stockholm — The US has rejected separate requests from General Motors (GM) and Chinese-owned Volvo Cars for an exemption to a 25% US tariff on their Chinese-made SUV models.
GM, the largest US vehicle maker, and Sweden’s Volvo both said they were aware of the respective denials of their nearly year-old petitions. Both companies have not raised the sticker price to account for tariffs, which came into play last July.
The denial of GM’s petition for its Buick Envision came in a May 29 letter from the US trade representative’s office saying the request concerned “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programmes”.
The mid-size SUV, with a starting price of about $35,000, has become a target for US critics of Chinese-made goods, including leaders of the United Automobile Workers union and members in key political swing states, such as Michigan and Ohio.
Buick Envision sales fell in the US by nearly 27% to 30,000 in 2018 and fell another 21% in the first three months of 2019. Only a small number of vehicles are built in China and sold in the US.
In May, the US trade representative’s office also rejected a request by Volvo Cars for its mid-size XC60 SUVs, its top selling US vehicle.
Volvo, which is owned by China’s Geely, already began switching production of US-bound XC60s from China to Europe in 2018 as part of a global shake up of production plans for most of its line-up in an effort to dodge tariffs.
A spokesperson said the XC60 shift, Volvo’s biggest move to mitigate the impact of tariffs, was completed in the Spring, meaning Volvo was no longer paying tariffs on XC60 imports and would not see any fresh cost impact due to the rejection.
Volvo had argued in its exemption request that it could “anticipate” the XC60 eventually being produced in its recently opened South Carolina plant, where it is building S60 sedans, but the spokesperson said no decision had been taken.
“[New production set-up] is a cost so that would, of course, depend on the permanence of tariffs and what the situation looks like going forward. It’s a continuous evaluation that we always do with the flexible manufacturing footprint,” she said.
Besides the shift, Volvo has also split production of its S60 luxury sport sedan between the two countries; altered some European production plans; and reduced shipments of its S90 sedan, which is only produced in China, to the US.
US retail sales for the S90 sedan this year to May were down 63.7% year-on-year, company data showed.
GM had argued in its request that Envision sales in China and the US would generate funds “to invest in our US manufacturing facilities and to develop the next generation of automotive technology in the US”.
GM said in 2018 that the “vast majority” of Envisions, about 200,000 a year, are sold in China. Because of the lower US sales volume, “assembly in our home market is not an option” for the Envision, which competes with such mid-size crossover vehicles as the Jeep Grand Cherokee and the Cadillac XT5.
Ahead of the July 2018 start for higher import tariffs, GM shipped in a six-month supply of Envisions at the much lower 2.5% tariff rate, Reuters reported in August 2018.