The true cost of US tariffs exposed: Volvo stares down the barrel of over $1.8 billion in losses thanks to trade wars as Kia EV9-rivalling EX90 large SUV and Tesla Model S-rivalling ES90 sedan are impacted

The effects of the US administration’s current trade war policies on the world’s automakers are yet to make themselves fully evident, but Volvo could be a canary in the coal mine, as it posts an ‘impairment charge’ of more than AU$1.8 billion relating to its EX90 large electric SUV and ES90 sedan.

The impairment charge, effectively a way for a company to indicate to its shareholders that it is writing off the value of something on-paper.

In this case the financial assumptions of the SPA2 platform, has been booked due largely to the fact that the Swedish company can no longer sell its upcoming Chinese-built ES90 sedan in the US or even Europe profitably thanks to new tariffs.

The company’s statement indicated that the long-term value of the entire SPA2 platform, which underpins the EX90 and ES90, was impacted by the trade barriers. Some of the enormous value write-off is associated with lost sales potential, while the rest is related to existing delays caused by software issues prior to the EX90’s launch, and research and development associated with the SPA2 platform.

"Given market developments such as import tariffs in the US, development and launch delays for the EX90 and strategic investment prioritisations, we have reassessed volume assumptions for these two cars. This has resulted in a lower than planned lifecycle profitability" said Fredrik Hansson, CFO at Volvo Cars.

The EX90 has the advantage of being built in the US at Volvo’s South Carolina plant and is exempt from (at least primary) tariffs.

The ES90 large sedan is only built in China and is embattled on multiple fronts, with US tariffs and European tariffs both impacting the model, which will now have to rely almost entirely on the Chinese market for its volume.

Hansson said investments made in the platform, software, and electric drivetrains will be used in next-generation platforms and are “key to realising our long-term electrification and software-defined vehicle strategy, putting Volvo Cars at the technological forefront of the auto industry."

The brand’s accompanying statement also reaffirmed Volvo’s “determination to become a fully electric car maker”.

Volvo’s nearly AU$2 billion on-paper loss is the latest real-world consequence for automakers in the new tariff environment. Further effects are expected to become evident at a later stage, with some predicting wait times on new cars could increase. This is because China has placed retaliatory export restrictions on some metals important for electric motors used in not just EVs but hybrid and combustion cars, too.

The EX90 sold in Australia is built in China with twin-motors and three-row of seats priced from $124,990 before on-roads. It offers up to 380kW/910Nm and up to 570km of driving range.