Volvo Cars to produce new US model amid tariff pressure

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By Marie Mannes and Nora Eckert

STOCKHOLM/DETROIT (Reuters) -Volvo Cars said on Tuesday it will begin producing a new hybrid model in the United States by the end of this decade as the Swedish auto maker continues to adjust to President Donald Trump’s tariff policies.

The new model, details of which have yet to be released, will be designed for the U.S. market and help Volvo boost the capacity utilisation at its South Carolina plant, the company said in a statement.

“It will take time until America is electric everywhere,” Volvo Cars CEO Hakan Samuelsson said in an interview. 

He described the larger hybrid model as “more an electric car, but with a Plan B. When the battery is flat, you have a combustion engine kicking in, but normally you’d drive it electric.”

Auto makers worldwide are scrambling to rethink their production strategies to contend with President Trump’s duties on foreign cars, part of his wider policy to boost U.S. manufacturing.

Volvo Cars’ CEO said in April the company would produce more vehicles in the U.S., and the group announced in July that it plans to start producing its popular XC60 mid-size SUV at the South Carolina plant from late 2026.

The factory currently builds only Volvo’s fully electric EX90 SUV and the Polestar 3, but production data shows that these models take up only a small fraction of the site’s annual capacity of 150,000 vehicles.

News of the new hybrid model coincided with Volvo’s 70th anniversary in the United States.

Volvo, long positioned as an EV trailblazer with the aim of phasing out all non-electric models by 2030, last year reversed course and said hybrids would remain part of its lineup. 

“By adding another model into production here, we’ll take a big step toward realising the full potential of our local manufacturing investments and workforce,” said Luis Rezende, president of Volvo Cars’ Americas operation.

A trade deal struck in July with the European Union cut U.S. tariffs on European cars to 15%, but the agreement has yet to take effect, with vehicles continuing to face a 27.5% levy.

Samuelsson said the 10% duties eliminated on auto imports from U.S. into Europe will also make selling its U.S.-produced EX90 vehicle abroad more attractive. 

“With this 10% reduction, we have the possibility to grow,” he said of Volvo’s operations in Europe. 

(Reporting by Marie Mannes in Stockholm and Nora Eckert in Detroit, editing by Terje Solsvik and Nick Zieminski)