From Chengdu To Charleston: Volvo Sets Up Shop In South Carolina

May 11, 2015

Last month, we talked about an interesting trend in auto manufacturing -- namely, the fact that many foreign car companies are building factories in the American South. Today, we can add another automaker to the list: Volvo, which is setting up shop in South Carolina.

According to a press release from Volvo, the new facility will be located in Berkeley County, near Charleston, and it will cost around $500 million to construct. Once completed, the factory will be capable of building up to 100,000 vehicles per year, and it will employ a workforce of around 4,000.

Why would Volvo do such a thing? There are several reasons, including:

1. It furthers Volvo's sales and infrastructure strategy. Volvo has spent much of the last several years getting back up to speed after being sold off by Ford in 2010. Now, the company has set a goal of selling 100,000 vehicles per year worldwide. (Volvo hasn't set an official date to reach that goal, though, merely saying that it's a "medium term target".) To do that, it will need to expand its production and distribution infrastructure. The South Carolina plant will give Volvo its first North American facility, joining the two that the company already operate in Europe and two in Asia.

2. It keeps costs down. The dollar is very strong right now, which increases the cost of building cars on foreign soil and importing them to America. Manufacturing those vehicles within the U.S. will slim some expenses and boost profits. 

3. It keeps labor in check. One of the reasons that automakers are flocking to the American South is because Southern states are right-to-work states. That gives unions less sway and cuts labor costs.

4. It may make Volvo (and Geely?) more palatable to U.S. consumers. Like it or not, many Americans remain wary of the "Made in China" label. By creating cars in the U.S., Volvo can get around that pesky perception problem. And if the factory starts building Geely's rumored cars for the U.S. market, it could make them more palatable, too.

Volvo expects to break ground on the new facility this fall, with production to begin in 2018.

For more on this story, check out our colleagues at MotorAuthority.com.

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