Polestar Navigates Tariff Challenges with Localized Production Strategy
Tariff Impact on Electric Vehicle (EV) Industry
Despite a temporary reprieve from tariffs on auto imports from Canada and Mexico, the writing is on the wall for EV manufacturers. The 100% tariff imposed by President Biden on EVs and the 10% tariff on goods from China, where many EV components are sourced, have already taken a toll.
Polestar's Response and Localization Strategy
Polestar, an upstart EV company owned by Chinese automaker Geely, has been significantly impacted by the tariffs. Assembling its popular Polestar 2 model in China, the company has been forced to discontinue its availability in the United States due to the high tariff.
However, Polestar remains optimistic due to its global manufacturing footprint. CEO Michael Lohscheller emphasizes the importance of local production in the US to mitigate tariff effects. Polestar currently builds its Polestar 3 SUV in South Carolina, leveraging the cost advantages of domestic assembly.
Complex Manufacturing Footprint and Expansion Plans
Despite localization efforts, not all Polestar vehicles can be manufactured in the US. The upcoming Polestar 4 sports SUV will be built in South Korea, while the Polestar 5 sports sedan will be produced in Europe. These locations may expose Polestar to potential future tariffs.
Nevertheless, Polestar forecasts robust growth, targeting a 30-35% revenue growth rate and positive EBITDA by 2025. The company's portfolio expansion, including the upcoming Polestar 7 compact SUV, is expected to enhance profitability and position the brand competitively in the fast-growing electric vehicle segment.