Could Lynk & Co’s ‘Volvo in Cheap Clothes’ plans in the US be scuppered by Trump taxes?

The plans by Lynk and C0 to sell Volvo-based cars on a contract similar to a mobile phone could be jeopardised in the US by Trump’s proposed import taxes.

It was only in October last year that Lynk & Co arrived as a new type of car company – owned by China’s Geely, as is Volvo – and promising a bright new dawn in the US, Europe and Asia for car ‘ownership’. But those plans could be about to go awry in the US.

President Trump has only been in office for five minutes, but it does look like there is going to be new level of protectionism to deal with before long, a chunk of which is likely to be targeted at the car industry.

Trump is already threatening US car makers with 20% tariffs for any cars they build in Mexico and then import in to the US, and it’s hard to see imported cars from China escaping similar treatment.

Of course, the US is already somewhat protective of its indigenous motor manufacturers, making it almost impossible for non-US makers to import pickups, slapping a huge 25% import duty on such vehicles (currently, US import duty on cars is 2.5%). 

Geely Senior VP Alain Visser told Reuters:

The possibility that the United States would impose a tax or tariff on imported cars is a risk…that’s an open question but we’re going to offer employment in the U.S. so we believe there’s a positive business case to let us in.

Lynk & Co’s cars are based on Volvo’s soon-to-arrive new 40 Series (we’re expecting the new Volvo XC40 to arrive in Shanghai in April), including the Lynk & Co 01 with a plug-in hybrid or BEV marketed at prices competitive with regular ICE cars.

Geely are aiming at chunks of the market dominated by Honda and Toyota in the US, and plan to use small shops dotted around the country to sell car contracts just like mobile phone contracts, effectively bypassing the dealer network completely. 

That is itself is going to be a big obstacle, but if Trump does slap tariffs on imported cars it seems likely Geely & Co will serve the extra grief and concentrate on Europe and Asia.