A month after the U.S. increased tariffs on Chinese-made electric vehicles from 27% to 100%, Europe is expected to reveal a similar crackdown on Chinese EVs this week. In anticipation of European tariffs, Volvo has announced that it would divert production of certain models from China to Belgium.

According to anonymous company insiders interviewed by The Times of London, Volvo is diverting the production of the EX30 electric hatchback and EX90 SUV to Belgium to avoid potentially disruptive tariffs that the European Commission is expected to announce soon. Production of U.K.-bound models will also be moved to Belgium, sources close to the company said.

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An automotive trade war is brewing between China and the West.

Over the past couple of years, there has been a steady onslaught of cheap, high-quality Chinese EVs in Europe. The European Commission alleges that Chinese EVs are excessively subsidized. China rejects these claims. And now we're expecting a trade war.

Chinese carmaker Geely is the parent company of Volvo. The EX30 is manufactured at a Geely–owned plant in Zhangjiakou in northern China. The EX90 SUV is made at Volvo’s Daqing plant. Thankfully for the U.S. market, the three-row electric EX90 is also made at Volvo's plant in Charleston, South Carolina, so its American sales won't have to deal with any tariff headaches. The fate of the China-built EX30 is less clear. 

Diverting the production of both these models to Belgium means Volvo would no longer need to halt their sales in Europe and other markets. That’s something the brand was previously considering, according to the report.

Europe is on the brink of a major trade war with China due to an influx of cheap Chinese EVs that threaten homegrown carmakers. According to a Transport and Environment analysis, one in four EVs sold in Europe this year would be made in China. This includes models from BYD, Polestar, Tesla, MG and more. (The EU is expected to set lower tariffs on made-in-China EVs from BYD, Geely and Tesla, according to Reuters.)

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There’s also an ongoing anti-subsidy investigation into Chinese-built EVs by the European Commission. "Their price is kept artificially low by huge state subsidies. This is distorting our market," President of the European Commission, Ursula von der Leyen said in a speech at the European Parliament last year.

However, the broader European auto industry seems opposed to the impending crackdown on Chinese EVs. BMW, Mercedes-Benz and Volkswagen have all warned against the tariffs—HSBC estimates that German automakers generate 20-23% of their global profits from their operations in China.

The EX30 is a rare Chinese-made EV available in the U.S. as well. Because Volvo also has U.S. operations, like the South Carolina plant that also exports similar models, it qualifies for tariff refunds, according to trade law experts Reuters spoke to.

That means Volvo has so far offset the costs of those tariffs. Thanks to the cost advantages that come with Chinese manufacturing, the company hit a sweet spot with a $36,000 starting price, making it attractive for cost-conscious EV buyers. However, with tariffs on China-built EVs now at 100% instead of 27.5%, it's not clear if Volvo can absorb the impact like it once planned to.

Volvo EX30 Ice Drive

InsideEVs reached out to Volvo USA last week for clarification on how the new U.S. tariffs affect the EX30, but hasn’t heard back yet.

Meanwhile, globally, the EX30 has been an instant sales hit. In the first Q1 2024, Volvo delivered 14,500 units globally. In May alone, Volvo delivered 11,000 units.

The EX30’s production in Belgium was expected to begin in 2025 after the company announced “strong demand” last year. That plant was expected to play a supporting role in addition to Chinese manufacturing. It now looks like European production will be fast-tracked due to impending tariffs.

Whether Volvo will be able to maintain the cheap $35,000 starting price for the EX30 with European production is something we’ll find out in due course.

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