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    Home » News » Polestar, a Chinese-made EV, hits U.S. market in sign of China’s global ambitions
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    Polestar, a Chinese-made EV, hits U.S. market in sign of China’s global ambitions

    James MartinBy James MartinNovember 26, 2022No Comments10 Mins Read
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    When Shannon Harrison bought an electric vehicle from a Dallas-area dealership in the summer, she didn’t know it was made in China.

    She wasn’t even necessarily looking for an electric car. She just wanted a hybrid, or something fuel-efficient to lower her gas bill, but dealers had limited supply amid widespread auto shortages. That’s when a salesman mentioned an electric brand that she’d never heard of before: Polestar.

    The car, which is designed in Sweden, doesn’t widely advertise that it is manufactured in China. But its arrival on the U.S. market is a sign of China’s ambitions to become a major exporter in an industry it has never previously conquered — automobiles.

    For all its success dominating other businesses, China took a back seat to foreign automakers in the gasoline era. Chinese consumers bought a lot of domestically manufactured cars, but often favored foreign brands such as Volkswagen, General Motors and Toyota over homegrown models. And while China became a big exporter of car parts, it didn’t manage to do the same with finished vehicles.

    The arrival of the electric era is giving China another chance, because EVs have fewer parts and are easier to produce, at a time when component shortages are limiting EV supplies and creating an opening for companies that can deliver quickly. Chinese manufacturers have poured billions of dollars into developing an electric-vehicle industry, with heavy financial support from the state. Domestic EV brands have captured the lion’s share of electric sales inside China, and some, including BYD, Nio and Great Wall Motor, are starting to surface in overseas markets, posing new competition to traditional automakers.

    Chinese manufacturers began ramping up EV production before most Western rivals did, giving them a “significant advantage” in manufacturing efficiency, said Matthias Schmidt, founder of Schmidt Automotive Research in Berlin. China’s central and regional governments accelerated this push by heavily subsidizing domestic EV factories, charging infrastructure and consumer EV purchases, and by protecting Chinese battery makers from foreign competition.

    “Now that they have reached scale, the Chinese are looking to export to Western markets,” Schmidt said. “They built up a lot of skills and competencies in their own market while Western [manufacturers] have been relative laggards.”

    This Midwestern factory was dead. Electric vehicles revived it.

    But as trade tensions between China and Western nations rise, Beijing’s export ambitions are facing obstacles, including the 25 percent import tariff slapped on Chinese vehicles by the Trump administration, and new U.S. tax credits designed to incentivize purchases of EVs and batteries made in North America. Analysts say negative consumer sentiment about China might also undermine sales, although some buyers may not know or care much where their vehicles are manufactured.

    “I didn’t know it was made in China,” Harrison said of her $65,000 Polestar. “As far as I’m concerned, as long as the car itself is a well-made car that gets me where I need to go … its place of origin doesn’t play too much into my decision.”

    Polestar is controlled by Chinese billionaire Li Shufu, founder and majority shareholder of Zhejiang Geely Holding Group, a big auto manufacturer in China that expanded overseas in 2010 by buying Volvo Cars of Sweden. Volvo and Geely then founded Polestar as a separate company in 2017, placing its headquarters in Volvo’s hometown of Gothenburg, Sweden.

    Polestar’s top managers and car designers work in Sweden. The company’s main vehicle, the Polestar 2, is manufactured at a plant in Luqiao, China, that also produces an electric Volvo model. The company says it is on track to deliver 50,000 Polestars to customers in 27 countries this year, about double its deliveries in 2021, its first full year in production.

    “Unlike most of our peers, our global ambitions, they are a reality, not an aspiration,” Polestar chief executive Thomas Ingenlath, a longtime car designer and executive at Volvo and Volkswagen, told investors on a Nov. 11 call.

    The automaker bills itself as a Swedish brand competing for well-heeled buyers. It barnstormed the United States this year with a Super Bowl ad throwing shade on rivals, promising viewers that it had no plans for “conquering Mars” a la Tesla founder Elon Musk, or to get bogged down in a VW-style “dieselgate.”

    Polestar is still a relatively small player in the United States, having sold about 6,900 vehicles in the first nine months of this year. By comparison, Ford sold about 28,000 Mustang Mach-E electric cars over the same period, while Tesla sold roughly 140,000 each of its models 3 and Y, according to data provider Wards Intelligence.

    Harrison encountered the car in the summer while shopping at a dealer that sells Volvo and Infiniti cars. She liked it after a test drive — “it had a ton of pickup,” she said — and bought it on the spot. Not long afterward, a strut mount in the car’s suspension broke, a problem she sensed when “the steering wheel started going weird.” The dealer fixed it after a roughly six-week wait for parts, and “other than that, the car has been wonderful,” Harrison said.

    The car’s price ranges from $50,000 to $75,000 depending on options, according to Arya Farahmand, finance manager at the dealership. Most customers pay $60,000 to $70,000, he said.

    Several U.S. buyers said they chose Polestar because the car was available amid a recent car shortage caused by a global scarcity of semiconductors.

    In Detroit, the chip shortage has left the city eerily short of cars

    Sunil Paul, a San Francisco tech entrepreneur whose company sells access to EVs through subscriptions, bought a Polestar about a year ago after a test drive. “It’s got great handling and style. It checks a lot of boxes like adequate range and great performance,” he said. “When you’re taking a turn it stays exactly where you want it.”

    At the time he bought it, the fact that the car was made in China wasn’t a major consideration for him. He felt it was even important to support a variety of EV manufacturers, to “encourage diversity of EV supply.” Over the past year, though, growing tensions with China “have caused me to think more carefully about it,” he said.

    “The U.S. also needs its own supply chain that it can rely on,” Paul said. And mounting concern over China’s authoritarian bent “does make me wonder what should be the support level for Chinese cars,” he said.

    Buyers of Polestar 2 and other made-in-China EVs aren’t eligible for federal subsidies adopted under the recent Inflation Reduction Act, which provides tax credits up to $7,500 for purchases of EVs assembled in North America. Over time, qualifying vehicles must also have increasing levels of battery content originating in North America or allied nations, a rule aimed at reducing China’s control of global battery production.

    Dennis Nobelius, Polestar’s chief operating officer, said he doesn’t believe the company has suffered much by being shut out of the U.S. tax credit. “We are a premium car … and we can deliver on the attributes that the customer is searching for. So there is still nice demand,” he said in an interview.

    Consumers may be surprised to learn that even some familiar Western brands are manufacturing their EVs in China before selling them in Western markets. BMW is building its iX3, an electric SUV, in China for export to Europe and other countries, and plans to do the same with some electric Mini models. And Tesla has been exporting thousands of vehicles from its Shanghai factory to Europe, though its new Berlin factory is expected to take over most European production.

    For now, perhaps because of the barriers to entering the U.S. market, some Chinese EV manufacturers are targeting Europe and other regions more aggressively than the United States. Nio, based in Shanghai, is selling its ET7 sedan in the Netherlands, Germany, Denmark, Sweden and Norway, and has said it aims to enter the U.S. market in 2025.

    The next China trade battle could be over electric cars

    China’s largest automaker, the state-owned SAIC, which bought the British MG brand in the early 2000s, is selling several electric MG models in Europe, including a budget hatchback that starts at about 26,000 pounds (about $31,500). And Shenzhen-based BYD, which stands for Build Your Dreams, last month launched three EVs for sale in Europe at the Paris Motor Show, including the compact Atto 3 SUV.

    Wei Jianjun, chairman of Great Wall Motor, which is launching a new budget EV in Europe called the Ora Funky Cat, said the company is still learning how to cater to different tastes and demands in overseas markets. In a recent interview with China Business Journal, Wei cited brand image as a major hurdle, especially in Europe and the United States.

    “It’s probably not just Great Wall Motor that is facing such a plight: it is a common pain point for most Chinese car brands,” Wei said. “Cars are different from other products because it takes longer to promote and involves a lot of challenges. We cannot make a judgment based on a year or two; we have to make a development strategy for at least 10 years ahead.”

    In an emailed statement, BYD said it is selling electric cars and buses in dozens of countries and is leaning on local employees for a “solid understanding of the local markets.”

    “In the future, BYD’s [electric] cars will enter more markets and will be manufactured as well as sold globally,” the company added.

    The arrival of Chinese brands in Europe — combined with U.S. moves to protect North American EV producers — is causing some tension among European politicians. In a newspaper interview on the eve of the Paris auto show, French President Emmanuel Macron urged European consumers to buy cars made in the European Union.

    And during the auto show, Macron walked past the BYD display without “taking the briefest of glances at the Chinese stand,” according to Schmidt, who attended the show and interpreted Macron’s walk-by as a snub — and a sign that protectionist measures could increase in the E.U., where import tariffs on Chinese vehicles are currently 10 percent.

    Carlos Tavares, chief executive of Jeep and Peugeot manufacturer Stellantis, has repeatedly urged Europe to do more to protect local automakers. “Conditions here are easier for Chinese carmakers to compete than for Western carmakers in China,” he said in October. “The E.U. is wide open and it is not acceptable.”

    To get around some U.S. protectionism, Polestar has said that starting in 2024, it will begin manufacturing the new Polestar 3 — a luxury SUV starting at $80,000 — at a Volvo-owned factory in South Carolina.

    Mitchell Forst of Charlottesville said that the company’s pledge to make the Polestar 3 in the United States made him feel “a little better” about buying a Polestar 2 last year, which he did in part because the car was available more quickly than a Tesla was at the time.

    “Obviously, I would have loved a car made in the U.S., but that wasn’t in my options,” he said.

    Andrew Van Dam, Christian Shepherd and Lyric Li contributed to this report.



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