Volvo’s EX30 is expected to reach U.S. dealers this summer, as it appears the company has found a way around U.S. tariffs — and may even get a tax break.
We’ve been sounding the alarm over the past several months about what will happen once cheap Chinese-made automobiles find their way into the U.S. market, warning that it will lead to an “extinction-level event for the U.S. auto sector.”
Well, it appears that moment is almost here.
Reuters recently reported that Volvo is about to begin selling its EX30 to U.S. consumers. A compact electric sport utility vehicle, the EX30 is similar in power and efficiency to Tesla’s Model Y, but comes with a price tag of $35,000 — $8,000 less than the Model Y. And because of a loophole in the Inflation Reduction Act, if consumers opt to first lease the EX30, that cost could drop to $27,500.
Swedish-born Volvo is now owned by China’s Geely, and the EX30 is manufactured in China. While vehicles from China currently face a 27.5% tariff — a trade enforcement mechanism that has thus far prevented Chinese-made autos from entering the U.S. market — Volvo is in a unique position as it maintains auto plants in the United States, including in South Carolina. That manufacturing presence has allowed the company to get around the tariffs, Reuters explained:
Shifting more of its manufacturing to China required Volvo to confront the punishing tariffs enacted by Republican U.S. President Donald Trump in 2018, as part of a larger trade war, and since supported by Biden.
At the time, a Volvo lobbyist requested an exclusion for its mid-size SUVs imported from China, saying in an October 2018 letter that the duties would cause economic harm to consumers and auto workers. The U.S. Trade Representative denied Volvo’s request, as it did for a similar request from General Motors.
The lobbyist’s letter didn’t name specific models but Volvo imported its XC60 utility vehicle from China at the time. It switched production for the U.S. market to Europe to avoid the tariffs.
Now Volvo has found a different way around the tariffs for the EX30, through the U.S. duty drawback program, which dates to 1789. The program originally refunded companies the tariffs they paid on imported raw materials if they used them to build finished products for export. Today, it allows a much broader array of exports to offset taxes on similar imports.
For Volvo, it means exports of its larger EX90 electric sport-utility vehicles built in South Carolina can be used to offset imports of the EX30 from China.
But the cost of the EX30 may decrease even further, thanks to the loophole in the IRA that I mentioned above:
The legislation reauthorized an existing $7,500 tax credit for EV buyers—but blocked the subsidy for cars with components from countries, including China, that are deemed an economic or security threat.
The U.S. Internal Revenue Service later determined, however, that leased EVs qualify as commercial vehicles and are eligible for a similar $7,500 subsidy with no China-content restrictions.
That could bring a leased EX30’s effective price to $27,500—a compelling offer for a five-seater electric SUV that Volvo has said will have a 275-mile driving range and a five-second 0-60 mph time. The EX30’s specifications closely match Tesla’s Model Y, and Volvo dealers are touting the comparison. (The Model Y has more cargo room.)
There’s already strong interest in the EX30; a sales manager from one dealership in California told Reuters that they’ve already received deposits for every EX30 they plan to sell. Tesla also appears to be feeling the pressure, lowering the price of the Model Y by $2,000.
While the EX30 is priced very competitively — in part, at least, because it has access to the resources of the Chinese government — its price tag is straight up high compared to some of the plans other Chinese state-owned and supported automakers have, including one electric SUV that could sell for an astonishingly low price of $14,000. That artificially cheap price tag no doubt would drive U.S. automakers — who abide by strong labor and environmental laws — out of business.
This isn’t a question of whether American automakers are able to innovate and compete; as we noted in our recent On a Collision Course report, China’s government has invested absolutely massive amounts of money and resources into its auto sector, and has laid out a plan to dominate global industry.
Policymakers have taken notice, with some calling for increased tariffs on Chinese-made vehicles; Sen. Sherrod Brown (D-Ohio) recently came out in support of an outright ban. There’s little doubt that stronger trade enforcement is needed, alongside other policy measures to take on the existential threat posed by Chinese auto imports. Now, the question is really whether policymakers are up to the task.
Regardless, one thing is now very clear: This is no longer a theoretical exercise. Once the first Made in China EX30 hits an American auto lot, the U.S. auto industry is in a new era.