The Volvo EX90 is assembled at the automaker's factory in Ridgeville, S.C.

The sprawling U.S. assembly plant that Volvo Cars powered up in the summer of 2018 signaled a bold ambition to expand into the world’s second-largest auto market.

But seven years later, Volvo has failed to capitalize on the $1.4 billion investment.

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The 2.3 million-square-foot factory in Ridgeville, S.C., about an hour northwest of Charleston, was designed to turn out 150,000 vehicles annually.

According to Automotive News Research & Data Center estimates, Volvo built 20,000 vehicles there last year — 13 percent of its capacity. Production of the S60 sedan ended a year ago, leaving just two electric crossovers: the Volvo EX90 and Polestar 3.

“Auto assembly plants require a utilization rate of at least 50 percent to break even,” analyst Jeff Schuster said.

Volvo’s industrial predicament can be traced to poor product decisions and a mistimed bet on electric vehicles.

The factory was challenged from the start as Volvo struggled to find skilled production talent in a largely rural area of South Carolina. There also has been churn in plant leadership.

Given the factory’s sustained losses, coupled with a more recent slump in Volvo’s global sales and financial performance, some question whether the Swedish automaker has the financial firepower to persist with its U.S. manufacturing effort.

“Volvo can minimize the damage by cutting shifts and slowing the lines, but it doesn’t reduce the fixed costs,” Schuster said.

Volvo considers hybrid crossover production

If Volvo is having second thoughts about U.S. production, it’s not showing them.

Volvo is “fully committed” to the South Carolina plant, a spokeswoman said in a statement. She described the industrial operation as a “key strategic advantage” in Volvo’s plan to “build where we sell.”

To boost factory utilization, Volvo is considering building a higher-volume model, potentially the midsize XC60 hybrid crossover, in the U.S.

“We want to bring in something rather fast, and something selling in good numbers, so something midsize core is a good guess,” Volvo Cars CEO Hakan Samuelsson said in mid-May.

However, that would require pouring several hundred million dollars more into the factory.

“The question Volvo has to ask internally is: If we do this, is it the right plan that gets the plant to where it needs to be in volume?” Schuster said. “Or, do we cut our losses now?”

It’s a valid question as a global sales slide taxes Volvo’s balance sheet.

The automaker, which is majority-owned by China’s Geely Holding, reported a 60 percent plunge in first-quarter operating income.

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Volvo has lost more than two-thirds of its value since its 2021 initial public offering and has become a target for short sellers.

In May, the company announced a corporate restructuring to cut expenses by 1.5 billion Swedish crowns ($140 million). The automaker will jettison about 15 percent of its salaried workforce.CEO Hakan Samuelsson sees U.S. tariffs as an opportunity to revive production at Volvo's near-dormant South Carolina assembly plant.

Tariffs create threat but also opportunity for Volvo

President Donald Trump’s 25 percent tariff on imports creates an existential crisis for Volvo, which ships in 90 percent of the vehicles it sells in the U.S.

Yet, it also gives Volvo a reason to keep the lights on in South Carolina.

Samuelsson sees Trump’s tariffs as an opportunity to revive production in the U.S.

Globalization is being “dismantled,” Samuelsson said April 3 during the automaker’s annual general meeting.

“To get around these high 25 percent import tariffs, we need to look at localizing more, increasing the volumes in the factory, and getting the volumes up to get the cost down,” Samuelsson said.

Analyst Sam Fiorani suggested that it would be prudent for Volvo to make the additional investment and build the “right products” in South Carolina, rather than walking away from its U.S. manufacturing investment so early.

“With the current tariff climate, Volvo could find it challenging to continue in the U.S. profitably without domestic production,” said Fiorani, vice president at AutoForecast Solutions.

Mistimed bets by Volvo on sedans, EVs

Production in South Carolina began with the third-generation S60 in a market that was shifting away from sedans.

Automotive News estimated that the factory made nearly 40,000 sedans at the peak in 2019.

The S60 “was the wrong vehicle for the market,” Schuster said. “Not that there isn’t a market for sedans, but you’re not going to get the volume required to get up to capacity.”

Volvo had planned to build the XC90 large crossover — a vehicle more in tune with the U.S. — in Charleston in 2021.

But that plan got derailed when Volvo pivoted toward an all-electric strategy to capitalize on post-pandemic demand and government backing of zero-emission vehicles.

Last year, Volvo began building the battery-powered EX90 at the U.S. plant, followed by the Polestar 3.

That bet also proved to be wrong once early demand for EVs fizzled.

Volvo eventually backed off its EV-or-bust strategy to instead lean on its more practical plug-in hybrid models.

“Volvo established the plant with a plan to grow as the market and the brand transitioned to electric vehicles,” Fiorani said. “But the EV market has not developed to the level the automaker planned for.”

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