Volvo Automobiles Suffers a $1.2 Billion Financial Loss Due to US Customs Duties and Manufacturing Hiccups
Volvo Cars, the Swedish automaker owned by China's Geely automotive group, is facing significant hurdles in the U.S. market, particularly with the production and sales of its ES90 and EX90 models.
The Volvo ES90, a luxury sedan scheduled to join the Volvo lineup this year with a starting price of around $75,000, is currently unable to be sold profitably in the United States due to a 25% U.S. import tariff. This tariff, imposed by former U.S. President Donald Trump in April, pushes costs so high that selling the ES90 in the U.S. market is currently unprofitable. The tariff effectively cancels the ES90’s profit margin in the United States and also puts margin pressure on European sales due to similar tariff challenges there.
On the other hand, the Volvo EX90 all-electric SUV, which was planned to debut this year with a starting price of $81,000 and is manufactured in South Carolina, experiences cost burdens due to tariffs on European-sourced components, adding an extra 25% cost. Additionally, launch delays and software issues have further damaged the profitability and sales trajectories of the EX90.
These tariff pressures and related production delays have led Volvo Cars to take a $1.2 billion non-cash impairment charge in Q2 2025. This charge reflects the reassessment of volume assumptions and lowered expected lifecycle profitability of the ES90 and EX90.
In response to these tariff-driven financial and operational challenges, Volvo Cars' CEO, Hakan Samuelsson, announced in early 2025 that the company intends to increase production in its South Carolina plant and is likely to move ES90 manufacturing to the U.S. This move aims to overcome tariff barriers by producing the ES90 locally, thereby avoiding the high import tariffs imposed on Chinese-built vehicles.
The following table summarises the impact of tariffs on the ES90 and EX90 models:
| Model | Production Location | Impact of Tariffs | U.S. Manufacturing Plans | |----------|----------------------------|------------------------------------------|----------------------------------------------| | ES90 | China | 25% tariff on U.S. import reduces profitability, making U.S. sales currently unprofitable | Plans to move production to Volvo’s U.S. plant in South Carolina to avoid tariffs | | EX90 | South Carolina | Tariffs on European components add 25% cost, plus launch delays and software issues affect profitability | Production already in U.S., but affected by component tariffs |
This shift in manufacturing strategy for ES90 production reflects Volvo's response to tariff-driven financial and operational challenges and is part of a broader effort to improve the profitability and market position of its electric vehicles in the key U.S. market.
[1] Volvo Cars Announces $1.2 Billion Charge Due to U.S. Tariffs and Production Delays Affecting ES90 and EX90 (2025, May) [2] Volvo Cars to Cut 3,000 Jobs as U.S. Tariffs Hurt Profitability (2025, May) [3] Volvo to Move ES90 Production to U.S. to Avoid Tariffs (2025, April)
The Volvo ES90, due to a 25% U.S. import tariff, currently faces challenges in the United States, as the tariff pushes costs so high that selling the ES90 becomes unprofitable. In response, Volvo Cars aims to overcome tariff barriers by moving ES90 production to the U.S., particularly to its plant in South Carolina.
The tariffs on European-sourced components add an extra 25% cost to the Volvo EX90, which is manufactured in South Carolina and has also been affected by production delays and software issues, harming its profitability.
