President Joe Biden’s announcement of new 100% tariffs that target potential Chinese EV imports and battery production has made ripples internationally. In theory, the tariffs are meant to fend off an impending swarm of EV imports from China and stop the country from completely dominating the EV battery supply chain. Yet, they could have some unintended consequences for brands that already exist in the United States.
While in Madrid for the Polestar 3 and Polestar 4 international launch, Biden officially brought the hammer down on the tariff right in the middle of the Sino-Swedish brand’s most important debut of its future models.
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Polestar Is Intertwined with Geely
Recently, Polestar became even more intertwined with Chinese automaker Geely. As of February 2024, the Geely owns 72% of Polestar. The remaining 18% is controlled by Volvo.
I had a quick conversation with CEO Thomas Ingenlath to find out just how the brand plans to deal with this, but things aren’t exactly clear for anyone right now.
“All effects that come now, we have to analyze and see what works, and what doesn’t work," Ingenlath said. "We need more clarity, and ultimately we [need to know] what are actually the rules."
Indeed, the entire auto industry seems totally caught off guard by the tariff announcement. At an event in Detroit this week, General Motors President Mark Reuss said the automaker was also still studying the immediate effects of the new rules, including their potential impact on future battery partnerships.
Right now, Polestar in particular feels fairly vulnerable to all sides of the tariff. True, some of the brand’s efforts are less impacted than others; when the Polestar 3 enters production it will be built in South Carolina, so it won't feel those effects.
Similarly, the U.S. versions of the Polestar 4 won’t come from the Hangzhou, China plant, but actually, a new plant in South Korea (formerly a Renault-Samsung factory) that should be operational before the end of the year.
But that doesn’t mean Polestar is out of the woods yet.
Both the Polestar 3 and Polestar 4 use batteries made by Chinese battery provider CATL. Import tariffs on those batteries went from 7.5% to 25%, potentially adding thousands of dollars to the vehicle’s build cost.
Even worse off is the Polestar 2 sedan. All of them are made in China, meaning it is now subject to an import tariff that is now four times as high as it was before. When directly asked if pricing would change on the Polestar 3 and 4 after the tariffs, Polestar’s representatives said the brand had no plans on altering things from what was announced a few weeks ago.
So as far as we know, the Polestar 4 will continue to start at $54,300 before destination fees, and the Polestar 3’s pre-destination fee price of $73,400 will continue to hold true for the foreseeable future.
There’s no word on how long the brand will take it on the chin for the Polestar 2, though. Given the company’s not-so-strong stock price and slow sales performance, it is really in a vulnerable place here. It’s volume-selling, the entry-level model is now shaping up to be a catastrophic money loser.
In a similar vein, while I was in China, Geely’s Vice President Ruiping Wang said that one of her biggest goals is to continue to streamline the brands Geely has control over, through the use of more shared parts, streamlined development, and common platforms.
When asked, Ingenlath said this was a positive move, and said that Polestar’s continued access to the Geely toolbox would be an asset for the company.
However, given that Geely’s toolbox means that Polestar would be pulling more from China-made and China-designed assets, how exactly would Polestar outmaneuver the ire of the tariffs that could come with using more Geely parts? It’s not at all clear, there are no perfect clean solutions yet.
Still, Polestar officials remains seemingly optimistic, even if they're wagging a finger at the Biden Administration’s decision.
“As a global company headquartered in Sweden, listed on NASDAQ in New York, and operating across 27 markets, we believe that free trade is essential to speed up the transition to more sustainable mobility through increased EV adoption," a company spokesperson said via email. "Production of Polestar 3 is set to begin in South Carolina in the summer, diversifying our manufacturing footprint and supporting job creation and economic growth in the region. This important SUV for us will be built in the USA for U.S. and Canadian customers as well as for export to European markets."
We won’t know exactly how these tariffs will shake out, until they shake out.
Contact the author: kevin.williams@insideevs.com
