Volvo is contemplating a substantial expansion of its electric vehicle (EV) production footprint in the United States. According to a recent report, the company is exploring the possibility of either expanding its existing factory in Charleston, South Carolina, or establishing a brand new manufacturing facility in the country.
The driving force behind this expansion strategy is, to a significant extent, the aim to leverage the green incentives offered under President Joe Biden's Inflation Reduction Act (IRA). This act offers tax credits to EV buyers, provided their chosen vehicle meets specific criteria. Eligible buyers can receive tax credits of up to $7,500, contingent on the make and model of the car.
However, an interesting twist emerged earlier in the year when the U.S. government tightened restrictions on battery sourcing from China and certain other “foreign entities of concern.” This development resulted in Volvo's EV models losing their eligibility for these tax credits.
In light of these changes, Volvo is now looking to enhance its partnership with the Swedish startup Northvolt for battery procurement. Notably, Northvolt recently announced its intentions to construct a substantial $5-billion battery gigafactory in Quebec, destined to serve as its key North American production facility.
Volvo's move aligns with a broader trend in the automotive industry, with various manufacturers responding to the IRA's incentives by planning the construction of battery production facilities in North America. Notable examples include Hyundai and Rivian's plans for plants in Georgia, BMW's significant investment of $1.7 billion in South Carolina for manufacturing and batteries, and Volkswagen's construction of a battery plant in Ontario alongside its ID.4 production in Tennessee.
Volvo, predominantly owned by China's Geely, is renowned for its strategic approach to locating production sites to minimize tariffs, reduce costs, and mitigate political risks. The company currently operates manufacturing facilities in China, Sweden, Belgium, and is in the process of establishing another in Slovakia. In 2017, Volvo inaugurated its South Carolina manufacturing facility, which currently produces the new Volvo EX90 and the Polestar 3.
Notably, Volvo made a groundbreaking commitment in March 2021 by becoming one of the first legacy automakers to declare its intention to transition to an all-electric future by 2030. The company has since been actively phasing out internal combustion engine (ICE) and hybrid vehicles, achieving impressive results.
In a bid to further its EV ambitions, Volvo recently introduced a new business unit called Volvo Cars Energy Solutions. This unit is dedicated to the development and promotion of energy storage and charging-related technologies, including innovative concepts such as bidirectional charging, encompassing vehicle-to-home, vehicle-to-grid, and vehicle-to-load systems. Volvo is clearly steering its course toward a greener and electrified future in the United States and beyond.