Volvo Cars picks South Carolina to supply toughening U.S. market

Mon May 11, 2015 6:52am EDT
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By Edward Taylor

PARIS/DETROIT (Reuters) - Sweden's Volvo Cars has chosen a site in South Carolina for a $500 million investment in its first U.S. plant, it said on Monday, targeting a bigger share of the increasingly competitive North American premium market.

Work will begin this year on the factory in Berkeley County, with production due to start in 2018 and quickly reach 100,000 vehicles a year.

The investment is part of a drive by China's Geely GEELY.UL, which bought Volvo Cars from Ford (F.N: Quote) in 2010, to rebuild a brand that ran into trouble in the financial crisis.

"This is a clear sign of commitment to the revival of our U.S. business," Volvo Cars Chief Executive Hakan Samuelsson said in embargoed comments made before the announcement.

But the move coincides with toughening competition in the North American luxury car market.

Rivals have been ramping up capacity, with many choosing Mexico for its lower wages, non-unionized workforce and access to the United States and other export markets under a raft of free-trade deals.

In total, North American production capacity is set to rise more than 10 percent over five years to 19.6 million light vehicles in 2020, according to WardsAuto forecasts -- with most of the gain coming from new plant investments.

Germany's Audi (VOWG_p.DE: Quote), BMW (BMWG.DE: Quote) and Mercedes-Benz (DAIGn.DE: Quote) are among luxury carmakers that have recently announced new production capacity in the region.   Continued...

The Volvo logo is pictured on a car in a car dealership showroom in Riga August 18, 2014. REUTERS/Ints Kalnins