Luxury Electric Vehicle from Volvo's Green Line Encounters Problems
Volvo Launches Sustainable ES90 Amidst Tariff Challenges
Volvo Cars has unveiled its new flagship battery-electric luxury sedan, the ES90, boasting one of the smallest lifecycle carbon footprints of any model the company has ever produced. However, the vehicle's profitability is being threatened by tariffs, particularly in North America.
Vanessa Butani, head of global sustainability at Volvo Cars, reaffirmed the company's commitment to sustainability, stating that Volvo goes beyond existing legislation and has clear ambitions in this area. The ES90 is a testament to this commitment, with real, FSC-certified wood used in its cabin and a carbon footprint of just 26 tons when using energy from wind farms.
However, the U.S.'s 100% tariff on Chinese-made BEVs has led Volvo to decide not to sell the ES90 in the United States. This tariff, along with import tariffs and EU tariffs on Chinese BEVs, has resulted in a SEK 11.4 billion ($1.23 billion) non-cash impairment charge for Volvo in the first quarter of 2025.
In contrast, the European Union has imposed lower tariffs on Chinese EVs, although these vary depending on the level of state subsidies and cooperation by Chinese companies. The EU applies countervailing duties targeted by company, splitting firms into cooperating companies (lower tariffs) and non-cooperating ones (highest tariffs), but these rates are generally much less severe than U.S. tariffs.
The ES90 will enter most European markets later this year priced from €71,000 ($82,900). Customers can choose a Nordico upholstery option made from recycled material such as PET bottles and bio-attributed material.
The ES90 is built on the same platform as its SUV sibling, the EX90, at Geely's plant in Cixi, Zhejiang, China. However, the EX90's lifecycle profitability has been affected by significant launch delays in the past and subsequent additional development costs.
Fredrik Hansson, chief financial officer at Volvo Cars, stated that the lower than planned lifecycle profitability is due to market developments, import tariffs, development and launch delays for the EX90, and strategic investment prioritizations.
The ES90 comes with Volvo's world-first battery passport, based on blockchain technology that allows the company to track the origin of raw materials and the overall health of the battery. The vehicle is built with about 29% recycled aluminum, 18% recycled steel, and 16% recycled polymers and bio-based materials.
In summary, while the ES90 represents a significant step forward in terms of sustainability, tariffs are posing a significant challenge to its profitability, particularly in North America. The U.S.'s 100% tariff on Chinese-built BEVs and high duties on key battery materials substantially increase production and import costs, negatively affecting profitability and potentially leading to higher consumer prices or constrained sales. The EU's lower and more differentiated tariffs are less punitive but still represent a factor increasing costs and squeezing margins for Volvo's Chinese-made BEVs sold there.
- Despite the ES90's commitment to environmental-science and use of renewable energy sources, the financial implications are significant due to the high tariffs on Chinese-built BEVs in the United States, affecting both its profitability and affordability for consumers.
- In the realm of technology and finance, Volvo Cars is employing blockchain-based battery passports to trace the origin of raw materials and the battery's health, promoting transparency and sustainable practices in the science and technology sectors.
