Polestar Grapples with Escalating Trade War

Polestar Grapples with Escalating Trade War

Luisa Santos
3 min read

Polestar Faces Challenges Amid Escalating Trade War

Polestar, the electric vehicle company, is encountering significant difficulties as the international trade war intensifies. The US government is planning to raise tariffs on Chinese-manufactured EVs from 25% to 100%, while Europe may impose a 38% tax increase from July 4. This situation could have a severe impact on Polestar, especially as its flagship model, the Polestar 2, is entirely produced in China and carries a starting price tag of $49,900. To combat these tariffs, the company is contemplating the manufacture of future models like the Polestar 3 in South Carolina and the Polestar 4 in South Korea.

Despite recent improvements in sales, Polestar continues to face financial instability. In 2023, the company reported a net loss of $1.17 billion and failed to meet its sales target, delivering only 54,600 vehicles as opposed to the 60,000 target. Additionally, Polestar is grappling with decreased support and investment from Volvo, one of its major investors. The company is actively seeking additional funding, having secured a $950 million loan, and aims to achieve double-digit margins by the end of the year.

Key Takeaways

  • Polestar confronts 100% US tariffs on Chinese-made EVs, impacting the Polestar 2 model.
  • Polestar plans to relocate manufacturing of the Polestar 3 to South Carolina and the Polestar 4 to South Korea to evade tariffs.
  • In 2023, Polestar suffered financial losses amounting to $1.17 billion and experienced a 3% drop in revenue to $2.38 billion.
  • By leveraging its South Carolina facility, Polestar aims to achieve double-digit margins and break even by late 2025.
  • The company's share price has slumped by 8%, and it failed to meet its 2023 sales target of 60,000 vehicles, delivering 54,600.


The amplifying trade war, specifically the US's decision to impose a 100% tariff on Chinese EVs, has a substantial impact on Polestar, whose primary model is manufactured in China. This development adds further strain to Polestar's financial standing, already weakened by a $1.17 billion loss in 2023. In a bid to mitigate risks, Polestar intends to shift its production to the US and South Korea, aiming to achieve double-digit margins by the end of the year. However, this strategy faces challenges due to reduced investor support and fierce competition, notably from Tesla. In the short term, Polestar's sales and financial stability may suffer, while in the long term, its capability to adjust production and secure additional funding will be crucial for survival and market positioning.

Did You Know?

  • 100% US Tariffs on Chinese-made EVs:
    • The US government's decision to escalate tariffs from 25% to 100% on electric vehicles manufactured in China represents a significant economic policy with the aim of decreasing trade deficits and potentially safeguarding domestic industries. This move directly impacts companies like Polestar, whose primary model, the Polestar 2, is entirely manufactured in China, making it more expensive and less competitive in the US market.
  • Polestar's Strategy to Manufacture in South Carolina and South Korea:
    • To alleviate the impact of high tariffs, Polestar is strategizing to relocate some of its production to South Carolina for the Polestar 3 and to South Korea for the Polestar 4. This strategic shift aims to capitalize on lower production costs, evade tariffs, and potentially benefit from local incentives and subsidies, ultimately improving the company's financial health and global competitiveness.
  • Volvo's Reduced Stake and Funding in Polestar:
    • Volvo's decision to decrease its stake and funding in Polestar signifies a strategic reevaluation of investment priorities or a reassessment of Polestar's growth potential. This move places financial pressure on Polestar, compelling it to seek additional funding sources and potentially altering its operational and strategic direction. It mirrors the dynamics of investor confidence and the challenges encountered by electric vehicle companies in a volatile market environment.

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