In a strategic move to navigate recent tariff challenges, Swedish electric-vehicle manufacturer Polestar has commenced production of its Polestar 3 SUV at a U.S. facility. This shift is aimed at circumventing the steep tariffs that the U.S. and Europe have imposed on vehicles produced in China.
The new production site for the Polestar 3 is located at Volvo’s South Carolina plant, marking a significant step for Polestar, which is predominantly owned by China’s Geely. Previously, Polestar vehicles were manufactured in China and exported globally. By shifting production to the U.S., Polestar hopes to mitigate the financial impact of these tariffs and maintain competitive pricing.
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Thomas Ingenlath, CEO of Polestar, revealed to Reuters that the majority of Polestar 3 units will be produced at the South Carolina facility. The plant is anticipated to reach full production capacity within two months, although Ingenlath did not disclose specific capacity details. The first deliveries to U.S. customers are expected to begin next month, followed by European deliveries.
In addition to the Polestar 3, Polestar plans to produce the Polestar 4 SUV coupes at a Renault Korea plant in South Korea starting in late 2024. This move is part of a broader strategy to diversify production locations. Until the South Korean plant is operational, the Polestar 4 models made in China will be subject to tariffs.
Polestar’s transition to U.S. and South Korean production aligns with its ongoing strategy to broaden its manufacturing footprint. The company also aims to establish a production partnership in Europe within the next three to five years, similar to its current alliances with Volvo and Renault.
The decision to ramp up production in the U.S. comes amid a challenging economic environment marked by high interest rates and a cooling consumer interest in electric vehicles. This shift is also a response to broader industry trends, including price reductions by market leaders like Tesla and adjustments in production strategies.
To navigate these challenges, Polestar is focusing on cost reduction strategies, including material and logistics optimization. The company’s goal is to enhance efficiency and achieve break-even cash flow by 2025.
As Polestar moves forward, its expanded production capabilities and strategic adjustments will be crucial in maintaining its competitive edge and meeting evolving market demands.
