A Chinese-made electric vehicle will hit U.S. dealerships this summer, offering similar performance and efficiency to the Tesla Model Y, the world’s best-selling electric vehicle, but for about $8,000 less.
The EX30 from Volvo Cars, the Swedish luxury brand owned by China’s Geely, is a foretaste of the strong competitive threat that U.S. automakers could face from Chinese electric vehicle makers that are far ahead of global rivals, particularly in terms of affordability.
Volvo’s $35,000 compact SUV window sticker hits the spot in the U.S. market, where most buyers can’t afford most electric vehicles. The competitive price reflects an unusual combination of Geely’s China-specific cost advantages and Volvo’s ability to avoid U.S. tariffs on Chinese cars because the company also has manufacturing facilities in the U.S., according to interviews with four sources familiar with Volvo and Geely’s strategy, and several US trade policy experts.
Chinese electric vehicle makers are able to undercut global competition largely because the country dominates the mining and refining of battery minerals and has a long commitment to electric vehicle development, including heavy government subsidies.
In addition, Geely has reduced manufacturing costs by combining supply chains and sharing platforms and parts with Volvo and other Geely brands, according to two senior Geely executives who spoke on condition of anonymity because they are not authorized to speak publicly speak.
Despite its aggressive pricing, Volvo is targeting high profit margins of between 15 and 20 percent globally with the EX30, a third Geely source said.
China’s dominance in electric vehicles will be on display at the country’s premier auto show in Beijing this week. In the Chinese market, the world’s largest market, dozens of domestic electric car brands are engaged in a price war while foreign automakers have steadily lost market share. Intense competition has prompted China’s largest electric vehicle makers, led by BYD, to accelerate exports of electric vehicles that can command higher prices and profits in less competitive overseas markets.
The EX30 will be among the few Chinese-made cars sold in the U.S., none of them from Chinese brands. Vehicles from China are currently facing tariffs of 27.5%, and calls from U.S. automakers and their political allies for higher trade barriers are growing louder.
However, according to U.S. trade law experts and a source familiar with Volvo’s tariff avoidance strategy, Volvo is entitled to duty drawbacks under a law that grants those companies with U.S. manufacturing sites – such as Volvo’s South Carolina plant – that also produce similar products export.
The U.S. government does not provide details about duty refunds to individual companies.
When asked about duty refunds, a Volvo spokesman said the company pays all legally required duties on cars and parts. She said that although Volvo is owned by Geely, it is operated independently and designs its cars in Sweden.
Geely declined to comment.
LEASING KEYS
The EX30 could become even cheaper if Volvo and its dealers take advantage of a loophole in the electric car policy created in the Inflation Reduction Act of 2022 and advocated by US President Joe Biden. The law reauthorized an existing $7,500 tax credit for electric vehicle buyers — but blocked the subsidy for cars with components from countries, including China, that are considered economic or safety risks.
However, the US Internal Revenue Service later determined that leased electric vehicles are considered commercial vehicles and are eligible for a similar $7,500 subsidy, with no restrictions on content in China.
That could bring the effective price of a leased EX30 to $27,500 – a compelling deal for a five-seat electric SUV that Volvo says will have a range of 275 miles and acceleration from 0 to 60 mph in five seconds. The EX30’s specs largely match those of Tesla’s Model Y, and Volvo dealers praise the comparison. (The Model Y has more cargo space.)
Last weekend, Tesla cut the price of the Model Y by $2,000 in the US as part of a series of global price cuts. This is the latest of many price cuts from Tesla as the company faces slowing demand and increased competition from Chinese electric vehicle makers.
Lance Morgan, sales manager at Volvo Cars Carlsbad in California, said his dealer has already taken deposits on each expected 2025 EX30.
“I think this could be a real game-changer for the entire brand,” he said.
Morgan said more than half of its customers who purchase currently available Volvo electric vehicles initially lease them to qualify for the U.S. tax credit – and then buy out the lease outright.
“Extinction” event
The EX30’s price and the enthusiasm it generates explain growing concerns among U.S. automakers about having to compete with low-cost Chinese electric vehicle imports.
The industry trade group Alliance for American Manufacturing said in February that cheap Chinese electric vehicles could lead to an “extinction event” for U.S. automakers. It warned that Chinese manufacturers could also avoid U.S. tariffs by setting up plants in Mexico within the North American Free Trade Zone and then exporting vehicles to the United States.
Chinese company BYD – which competes with Tesla for global electric vehicle sales – announced plans for a factory in Mexico in February. BYD offers a range of electric vehicles in China for less than $30,000, including an electric hatchback that sells for less than $10,000.
In February, BYD in Mexico City announced it would sell the same hatchback model in Latin America for about $21,000, still well below any U.S. electric vehicle.
Some US politicians are calling for higher trade barriers, including US Senator Josh Hawley, a Republican from Missouri.
Regarding Volvo’s tariff drawback strategy, Hawley said in a statement to Reuters: “Using taxpayer dollars to subsidize Communist China in the automotive sector is an affront to American workers.”
VOLVO QUALITY, GEELY COST
When Geely bought Volvo from Ford for $1.8 billion in 2010, it struck some analysts as an odd couple. Geely was an up-and-coming automaker from Hangzhou known for producing inferior imitations of Western cars, while Volvo had long been known for safety and elegant Scandinavian design.
The companies developed a Volvo growth strategy based in part on cost reductions through supply chain consolidation, giving the combined company the ability to reduce supplier costs.
“Our stated goal was to achieve ‘Volvo quality, Geely cost,'” said a Geely technical manager.
The plan worked. Since 2010, Volvo has almost doubled its global car sales, from 373,525 to more than 708,000 last year.
Geely and Volvo have created a series of shared platforms that allow Volvo and other Geely brands to share batteries, motors, transmissions and inverters for electrical energy management – all expensive EV components that are cheaper in bulk.
The EX30 rides on an electric vehicle platform that Geely calls SEA for “sustainable experience architecture,” according to Geely sources. A third Geely official called it the Russian doll of vehicle platforms because it can be modified to produce a wide range of large and small electric vehicles without major changes to the assembly line.
One of Geely’s technical managers said that 80% of the underbody components in SEA platform vehicles are now shared by Geely, Volvo and other related brands, including Smart, Lynk & Co. and Zeekr, which make vehicles for the Chinese and European markets .
IMPORT-EXPORT BUSINESS
In order to shift more of its production to China, Volvo had to contend with the punitive tariffs introduced by Republican US President Donald Trump in 2018 as part of a larger trade war and since supported by Biden.
At the time, a Volvo lobbyist called for a ban on its midsize SUVs imported from China, saying in an October 2018 letter that the tariffs would cause economic harm to consumers and auto workers. The U.S. Trade Representative rejected Volvo’s request, as well as a similar request from General Motors.
No specific models were mentioned in the lobbyist’s letter, but Volvo was importing its XC60 commercial vehicle from China at the time. To avoid tariffs, production for the US market was relocated to Europe.
Now Volvo has found another way to avoid tariffs on the EX30, and that’s through the U.S. Tariff Refund Program, which dates back to 1789. The program originally reimbursed companies for the duties they paid on imported raw materials when they used them to manufacture them of finished products used for export. Today it allows a much wider range of exports to offset taxes on similar imports.
For Volvo, this 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.
The rebate program, long used by U.S. automakers that source parts worldwide, has become increasingly popular amid the U.S.-China trade war. The total number of refund claims has more than tripled since the tariffs in 2018, from $1.3 billion to nearly $4 billion last year, U.S. Customs data shows.