Reuters Next: Volvo CEO says plan for Mexico truck factory on track despite US tariff threat

PACCAR

09/01/2025 04:14

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      Volvo's Mexico factory aims for North American and Latin
American markets
    

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      Trump's tariff threats affect automotive sector
investments in
Mexico
    

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      Volvo delays Swedish battery production, refines green
strategy
    

  
 (Adds electric truck customers in paragraph 11)
    By Abhirup Roy and Marie Mannes
       LAS VEGAS, Jan 8 (Reuters) - Sweden's Volvo Group
 VOLVb.ST  is proceeding with its planned $700-million
heavy-truck factory in Monterrey, Mexico, CEO Martin Lundstedt
told Reuters on Wednesday, even as President-elect Donald Trump
threatens to impose U.S. tariffs on imports of vehicles and
other goods.
    The maker of Volvo and Mack semi-trucks has targeted growth
in North America, which accounts for about 30% of company
revenue, as a strategic priority and expects the plant to start
operations in 2026. It expects the factory to deliver vehicles
to the United States, Mexico and Canada, as well as to Latin
America. 
    Trump has said that immediately after his Jan. 20
inauguration, he will sign all necessary documents to begin
charging a 25% tariff on imports from Mexico and Canada unless
those countries clamp down on illegal immigration and fentanyl
trafficking.
    The Mexico project is at an "early stage that is
continuing," Lundstedt said in a Reuters NEXT Newsmaker
interview on the sidelines of CES 2025, an annual tech
conference in Las Vegas. He said Volvo has options to use the
plant for sales outside the United States.
    "This is not a replacement of our American facilities," he
said.
    Depending on what happens with U.S. tariffs, Volvo's Mexico
factory may or may not send trucks to the U.S., he added. 
    Volvo's U.S. factories currently make 100% of the trucks it
sells in the United States. The company has been investing in
plants in Virginia, Maryland and Pennsylvania to expand that
capacity, Lundstedt said.
    Volvo, Daimler Trucks North America  DTGGe.DE , PACCAR
 PCAR.O  and TRATON  8TRA.DE  supply nearly all of the
heavy-duty trucks in North America, said Erik Smith, a director
in the automotive and industrial practice at AlixPartners.
    Of those, Volvo is the only one without a footprint in
Mexico, "which is likely why they are looking at establishing
one," Smith said.
    Trump's tariff proposals have sent a shockwave through the
auto manufacturing sector because a swath of passenger car
makers, including BMW  BMWG.DE , Toyota  7203.T  and General
Motors  GM.N , have invested in factories in Mexico to take
advantage of lower labor costs and business-friendly policies.
    Volvo also has agreements to provide electric semi-trucks to
customers such as online retailing giant Amazon.com  AMZN.O  and
Danish logistics firm DSV  DSV.CO .
    Lundstedt said Volvo expects high-volume production at a
planned battery plant in Sweden to begin a couple of years later
than the original target of 2029-2030.
    Volvo had said in September it would delay construction of
the plant by one or two years and said at the time it was
uncertain if this would affect the start of manufacturing.
    Volvo wants to be at the forefront of green investments,
including in zero-emissions trucking, but is refining its
strategy to adjust for market factors, Lundstedt said. 
    That is because it does not want to be "fighting all the
windmills alone, like Don Quixote and Sancho Panza," he said,
referring to fictional characters from the famous novel.

 (Reporting by Abhirup Roy in Las Vegas and Marie Mannes in
Stockholm; Writing by Lisa Baertlein; Editing by Rod Nickel and
Jamie Freed)
 ((mailto:marie.mannes@thomsonreuters.com; +46 8 502 423 82;))