As the cost impact of Washington's trade war with Beijing spreads, Volvo has been shuffling manufacturing facilities for its models. The dispute has been squeezing capacity at Volvo's Ghent plant, the only site where the XC40 — the 2018 European Car of the Year — is currently produced.
Volvo, which is owned by China's Geely, said that starting April 8 it was also being manufactured in Luqiao, south of Shanghai.
"Demand for the XC40 has exceeded our most optimistic expectations," Volvo CEO Hakan Samuelsson. "Building (it) ... in Luqiao creates extra capacity, adds flexibility to our global manufacturing network and is a clear proofpoint of our strategy to 'build where you sell'."
The model has sold more than 100,000 units since its launch in late 2017.
The XC40 is based on a platform Volvo developed with Geely designed to share the costs of developing and manufacturing a competitive vehicle.
The platform, called Compact Modular Architecture, is shared by vehicles produced by sister brands Lynk & Co and Polestar, with Geely also planning to base a new Coupe SUV on it.
Automakers are going through one of their most uncertain periods, hit by trade wars, rising costs for developing electric cars and an industry downturn that has dented even the most profitable brands.
The Luqiao plant, owned by Geely and operated by Volvo, currently builds the 01 SUV sold by car subscription-focused brand Lynk & Co. Polestar, Volvo and Geely's electric performance brand, said separately on Friday that starting next year it would also use Luqiao to produce Polestar 2, its first fully electric sedan that is intended to rival Tesla's mass market Model 3.
Geely has forecast flat sales in 2019 due to uncertainty about domestic demand, while Volvo has said it expects margins to remain under pressure.