EV startup Polestar braces for two product launches in less than a year

LOS ANGELES — Electric vehicle maker Polestar is witnessing the downside of the "asset-light" strategy that is key to its rapid growth plan.

To operate fast and easy, Polestar is reliant on global partners to help produce its models. But when those partners can't deliver according to plan, Polestar's strategy can kneecap its growth.

That is what is happening to the Swedish startup.

Polestar is part of a portfolio of brands controlled by China's Zhejiang Geely Holding Group, which includes Volvo Cars, Lynk & Co and Lotus. The Chinese conglomerate's network of global factories, supplier networks and R&D centers allow the young brand to focus on product and technology rather than manufacturing or logistics, according to the plan.

But software-related hiccups in the development of Volvo's new SPA2 vehicle platform could complicate Polestar's ambitions to expand in the U.S. market.

The Polestar 3 midsize crossover, based on the SPA2 architecture, has been delayed by nearly a year, causing a cascading effect on Polestar's commercial strategy. The fledgling brand suddenly finds itself juggling back-to-back product rollouts.

The Polestar 3 is now expected in U.S. stores in the fourth quarter, and only about nine months later comes the coupe-style Polestar 4 crossover.

"When everybody is scared of one launch, how can we launch two cars from an industrial point of view?" wondered CEO Thomas Ingenlath in an interview with Automotive News on the sidelines of a Polestar 3 event here.

Polestar’s model of leveraging Volvo and Geely factories and engineering teams makes a rapid product rollout possible, Ingenlath said.

Polestar's predicament illustrates the downside of reliance on others for product development and manufacturing.

The delay of Polestar's first crossover and a critical U.S. model is hurting its retailers' bottom lines.

With just one model to sell, dealers say they don't have throughput to justify their investment in high-rent shopping center stores.

"A year earlier or later makes a difference in the marketplace where competitors are developing cars," said Ingenlath, a lanky German designer with a penchant for tailored suits and turtlenecks.

While Polestar can't fully control its destiny with the collaborative model, Ingenlath said it's still a more pragmatic approach for rapidly scaling up. By about mid-decade, Polestar will flesh out its model lineup with crossovers, a large sedan and a roadster.

"We would be in a completely different situation," Ingenlath said, if Polestar had instead decided to build its cars from scratch.

The CEO points to Tesla, the only automotive startup in recent history to achieve market scale, as an example of how long the go-it-alone strategy would take Polestar.

"Tesla has been doing this now for over a decade," Ingenlath said. "That definitely takes a long, long time."

The back-to-back launches that are coming will undoubtedly strain Polestar's marketing and commercial teams, but Ingenlath does not expect much sales cannibalization. The two models "are very different in what they represent and what they do," he said.

He described the Porsche Cayenne-size, high-riding Polestar 3 as more of a "true SUV."

In contrast, the sportier Polestar 4 is more of a "four-door GT but with a little bit elevated position."

Model pricing will also create differentiation.

The Polestar 3, starting at $85,300 including shipping, aims at the upper end of the premium crossover segment, while the Polestar 4 is more affordable luxury.

"A car from $60,000 reaches a completely different target audience than a car in the $80,000 range," Ingenath said.

Polestar's crossovers will be built at Volvo and Geely plants.

The Polestar 3 will be the brand's first U.S.-built model, with production at Volvo's 2.3-million-square-foot factory, an hour northwest of Charleston, South Carolina.

"Charleston is super important" for Polestar's ambitions in the U.S., Ingenlath said. The assembly plant will supply the global output of Polestar 3, except for China.

Domestic production is good from an economic point of view but also psychologically, Ingenlath said.

"It's such a strong signal for the U.S. market that we come here and produce a car that we sell here — and export the car from the U.S.," he said.

Due to its sticker price, the dual-motor Polestar 3 will not initially qualify for federal EV tax credits under the Inflation Reduction Act despite domestic production. But a new single-motor variant that should arrive in the second half of 2024 will be priced below the $80,000 threshold to claim the federal tax incentives of up to $7,500.

The Polestar 4, based on Geely's SEA platform, faces a hefty 27.5 percent U.S. tariff levied on Chinese imports, putting a wrinkle in the model's mass-market aspirations.

Ingenlath said the company is "evaluating" manufacturing options outside China.

The Geely group's global production network is "something we can leverage," the CEO said. "If there is an attractive and economically feasible solution, we will consider bringing [Polestar 4 production] somewhere else."

But locating Polestar 4 production stateside is unlikely because Geely would need a factory and supplier network here.

Ingenlath said it is "impossible" to build every model in the portfolio in every region in which they sell.

The Polestar 4 could also benefit from a U.S. trade agreement that allows the automaker to offset import tariffs with the export of U.S.-made models.

"The cars that we produce that we export help us to import the cars that we don't produce here," Ingenlath said.