Polestar turns to certified pre-owned to offset limited new inventory

LOS ANGELES — Electric vehicle brand Polestar has unveiled a certified pre-owned program to help drive business to its product-starved retailers. The program launches as the first Polestar 2 electric sedans are coming off their 36-month leases.

Polestar North America CEO Gregor Hembrough called the CPO program a "coming of age" moment for the Swedish brand, which launched its first and only mass-market model nearly three years ago.

"We've been in the marketplace long enough that we have lease returns; we have used cars that are coming back," Hembrough told Automotive News on the sidelines of an event here last week.

The remarketing program addresses a significant pain point for Polestar's fledgling retail network. With a new crossover product delayed by nearly a year and just one model — a sedan — to sell, some dealers say they lack enough throughput to justify their high-rent shopping center-based stores.

"Dealers are struggling to cover their expenses," a Polestar retailer, who asked that he not be identified, told Automotive News last month. "If you're looking at the cost of being in a shopping mall, it can be more expensive long-term than owning your building."

Matthew Haiken, CEO of Polestar Short Hills in New Jersey, said the CPO program will help sustain dealers through the lean times until the higher-volume Polestar 3 crossover arrives in stores later this year.

"It provides us a second car," Haiken said. "A real entry-level Polestar 2. We need it."

Remarketing also helps dealers defend their profit engine — the service department. Including scheduled maintenance ensures CPO customers get their vehicle serviced at a brand store rather than at an independent shop.

According to J.D. Power, franchised dealers sold about 2.48 million CPO vehicles last year, down 9.8 percent from 2021.

Hembrough said the used-car business "absolutely amplifies" awareness of the young brand.

"We're opening the aperture for customers who wouldn't traditionally be a Polestar customer because of affordability or how much they are willing to budget for a car purchase," he said.

Polestar will launch a digital marketing campaign starting in June to help jump-start the CPO program. Dealers will list the certified inventory on the company's website and on third-party car-shopping sites.

CPO vehicles cost dealers $1,395 to certify and carry a two-year unlimited-mile factory warranty on top of the remainder of the original four-year new-car coverage. They receive complimentary scheduled maintenance during that period.

"We want customers to have the same confidence in CPO vehicles as they would with a new Polestar," Hembrough said.

The CPO program will also help ensure that used Polestars remain in the brand's franchised dealer network.

"We've seen Polestars end up at off-brand independent dealers," Hembrough said. "We know that we have lease returns coming back into the marketplace, so we might as well get in front of this rather than working reactively."

CPO programs boost transaction prices and sales turnover, helping dealers raise their bottom lines.

According to Cox Automotive, in 2022, dealer profit on a premium-brand CPO vehicle was up to 6 percent higher than on a non-CPO vehicle. Transaction prices were about $1,650 higher than for noncertified cars, while CPO vehicles sold 10 days sooner.

Haiken said it takes time for a CPO program to impact vehicle pricing.

In the early days of Volvo's CPO program, there wasn't a discernible price delta between its certified and noncertified vehicles, Haiken said. But over time, CPO Volvos commanded nearly $4,000 more than noncertified ones.

"Without a profitable CPO business, a dealership doesn't make money," Haiken said. "It helps lift residuals, helps with the leasing and helps us sell cars a second and third time."