Polestar, the Swedish electric-vehicle manufacturer, has taken a significant step in bypassing heavy tariffs on Chinese-made cars by commencing production of its Polestar 3 SUV in the United States. Recent tariffs imposed by the United States and Europe on cars manufactured in China have prompted numerous automakers to accelerate their plans to shift production to other countries. As Polestar is primarily owned by China’s Geely, the company has been producing its vehicles in China and exporting them to international markets. However, with the introduction of the Polestar 3, manufactured in Volvo’s U.S. plant in South Carolina, the company will now be able to sell directly to customers in the U.S. and Europe.
Polestar’s decision to produce the Polestar 3 in the U.S. signifies a shift in the company’s manufacturing strategy. Chief Executive Thomas Ingenlath stated that the majority of the Polestar 3 volume will come from the South Carolina factory, highlighting the importance of this move. While he did not disclose the plant’s capacity, Ingenlath did mention that production at the facility is expected to reach full volume in two months. Deliveries to U.S. customers will commence next month, followed by deliveries to Europe.
During the first half of this year, Polestar sold an estimated 3,555 units of its Polestar 2 sedan in the U.S., according to Kelley Blue Book. To expand its production capabilities further, Polestar plans to manufacture its Polestar 4 SUV coupes at a South Korean plant owned by Renault Korea, part of Geely, starting in the second half of 2024. Until then, the company will face tariffs on deliveries of the Polestar 4 to the U.S., which are expected to begin later this year from China.
Polestar’s strategy to diversify its production locations has been in the works for some time. The goal is to reduce reliance on manufacturing in China and spread out production globally. Alongside the U.S. and South Korea, the company has also been considering production in Europe. Ingenlath expressed the company’s intention to collaborate with an automaker in the region within the next three to five years, similar to its current partnerships with Volvo and Renault.
Polestar’s decision to shift production to the U.S. comes at a time when the EV industry is facing challenges due to high interest rates aimed at curbing inflation. These rates have dampened consumer demand for EVs, leading companies like Tesla to reduce prices and implement cost-cutting measures. Polestar, which has already made job cuts this year, plans to focus on cost reduction in materials and logistics, as well as increased efficiency, to improve cash flow and break even by 2025.
In conclusion, Polestar’s move to produce the Polestar 3 SUV in the United States marks a significant step towards avoiding tariffs on Chinese-manufactured vehicles. By diversifying its production locations, the company aims to mitigate the impact of tariffs and tap into new markets. With plans to expand production to South Korea and potentially Europe in the coming years, Polestar is positioning itself for long-term success in the rapidly evolving EV industry.