EV Maker Polestar Begins U.S. Production as it Seeks To Avoid Toughened U.S. Tariffs

by Carl Malek | August 14, 2024

Polestar announces that it has begun U.S. production of Polestar 3 as the brand attempts to avoid tightened U.S. tariffs and reduce its dependency on Chinese facilities for vehicle production.

Volvo spin-off Polestar announced its beginning U.S. production of the Polestar 3 to avoid tariffs and gain access to consumer tax incentives.

When the Biden administration announced that it was tightening up tariffs on China, it put many companies in a bind as they were forced to scramble to come up with new plans to still sell their products in the U.S. One of these firms was EV maker Polestar with the company having a strong production presence in China due to Geely being its majority owner.

However, the toughened tariffs forced Polestar to rethink its production plans to avoid having to raise prices on their EV lineup which comes as the company is also struggling with cash burn. Polestar revealed that it has begun U.S. production of the Polestar 3 CUV which will now be able to avoid the tariff while keeping prices low for customers at the same time.

South Carolina facility will help give Polestar breathing room

South Carolina plant would help Polestar get access to certain tax credits and benefits while also avoiding the sting of tariffs.

The EV brand confirmed that the Polestar 3 will be built at Volvo’s assembly plant in South Carolina and it would be a noticeable shift in strategy with Geely keeping the bulk of new vehicle production for its brands in China before Biden’s actions yanked the floor out from under it. The Polestar 3 will be sold in the U.S. and Europe and moving production to the U.S. would help the brand maintain a strong value play for the 3 since it would not have to have its price increased due to the tariffs.

“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.

Ingenlath also confirmed that the plant would reach full production volume in two months but declined to reveal Polestar’s exact production capacity at the plant. The Polestar 3 will also have a strong focus on the U.S. market with the exec revealing that deliveries of the 3 would begin next month for U.S. buyers with European deliveries taking place later. The Polestar 3 is the brand’s first SUV model and is expected to help Polestar reach a lucrative slice of the EV market which it has looked at from afar with its car-only lineup. This will mostly be done with its E powertrain with the base model making 483 hp and getting 315 miles of range. Meanwhile, the optional Performance package bumps power up to 510 hp but range dips to 270 miles as a result.

Polestar facing other challenges

The stylish Polestar 4 is also being produced abroad but will be built at a plant in South Korea.

While Polestar’s announcement is a welcome step forward for the EV brand, it also highlights some of the challenges that the company is currently facing. High interest rates that were meant to stifle inflation have also caused EV demand to slump with Polestar being one of many EV brands that has had to endure this trend as demand for models like the Polestar 2 dries up.

In addition to decreasing demand, the company is also dealing with the fallout from massive losses that it posted in 2023 with the firm admitting that it lost over $1.17 billion during that period of time. These losses and increased cash burn have forced the company to make tough decisions about its production plans with the company already delaying the development of several new models and the launches of other models to try and preserve capital. As a result, the Polestar 3 will be a key model moving forward, with Polestar betting the proverbial farm on the model getting strong sales in the hotly contested utility vehicle market.

In addition to the 3, Polestar will also be making the Polestar 4 SUV coupe with the 4 being a style-focused option for buyers that want more flair in their EV purchase. The Polestar 4 is also attempting to avoid the sting of tariffs too with the company planning to build this model at a plant in South Korea which is partly owned by parent company Geely. The start of U.S. production in South Carolina and this plant in South Korea are part of a broader plan to spread out production capacity with Polestar attempting to reduce its reliance on Chinese facilities for vehicle production to minimize the impact of triffs on its vehicle buisness.