Swedish EV maker Polestar starts U.S. production, avoiding heavy tariffs

Swedish electric-vehicle maker Polestar moved one step further in avoiding major tariffs imposed on Chinese-made cars on Wednesday when the automaker began production of its Polestar 3 SUV in the United States.

Steep tariffs recently imposed by U.S. and Europe on cars made in China have prompted many automakers to speed up plans to move parts of their production to other countries.

Polestar, majority owned by China’s Geely, has been manufacturing its vehicles in China and exporting to overseas markets. The Polestar 3, made in Volvo’s U.S. plant in South Carolina, will be sold to customers in the U.S. and Europe.

“If you look at the bulk of volume that we will produce of Polestar 3, of course, the majority of that volume will be here coming out of the South Carolina factory,” Chief Executive Thomas Ingenlath told Reuters on Tuesday.

Production at the plant was expected to reach full volume in two months, he said, but declined to disclose Polestar’s capacity at the facility. Deliveries to U.S. customers from the plant will begin next month followed by deliveries to Europe, Ingenlath added.

Polestar sold 3,555 Polestar 2 sedans, its first battery powered car, in the U.S. during the first half of the year, according to Kelley Blue Book estimates.

The company also plans to build its Polestar 4 SUV coupes at a South Korean plant of Renault Korea, part owned by Geely, in the second half of 2024 for Europe and the U.S. Until then, deliveries of the 4 in the U.S, expected to start later this year from China, will attract tariffs.

The U.S. and South Korea production have been part of Polestar’s plan for some time to spread out where it makes its cars.

Production in Europe has also been part of its ambition. Ingenlath said that the company hope to partner with an automaker to produce its cars in the region in the next three to five years, similar to its existing partnership with Volvo and Renault.

The transition to U.S. production comes as high interest rates to tackle inflation have soured consumer appetite for EVs, prompting companies, including market leader Tesla, to slash prices and leading to job cuts and delayed production plans.

Going ahead, Polestar, which cut jobs earlier this year, will focus on reducing the cost of materials and logistics, and increase efficiency to reign in costs in order to push cash flow to break even in 2025, Ingenlath said.