Polestar starts EV production in U.S., avoiding EU and U.S. tariffs

Polestar moved one step further in avoiding major tariffs imposed on Chinese-made cars as the automaker starts production of the Polestar 3 large 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, which is majority owned by China's Geely, has been manufacturing its vehicles in China and exporting to overseas markets. The Polestar 3, made at Volvo's U.S. plant near Charleston, 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," CEO Thomas Ingenlath told Reuters on Aug. 14.

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.

In Europe, first half sales of the Polestar 3 were 180, according to Dataforce.

The company also plans to build its Polestar 4 coupe-styled SUV at a Renaut plant in Busan, South Korea, in the second half of 2024 for Europe and the U.S. Until then, deliveries in the U.S, expected to start later this year, will attract tariffs.

The U.S. and South Korea production have been part of Polestar's plan for some time to expand where it makes its cars. Polestar announced its U.S. production plans for the Polestar 3 in June 2021 while it announced plans to make the Polestar 4 in South Korea in November 2023.

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.

Ingenlath previously told Automotive News Europe that the first car that could be considered for production in Europe is the Polestar 7, which is due in 2027 at the earliest.

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 forward, 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.

Douglas A. Bolduc and Peter Sigal contributed