During its $7 million Super Bowl ad, a little-known electric vehicle brand called Polestar took aim at incumbent Tesla and traditional player Volkswagen, bragging in its 30-second spot that the brand has “no conquering Mars” ambitions and “no Dieselgate” scandal—referring to Elon Musk’s space ambitions and VW’s 2015 emissions fraud debacle.
But that’s big talk from the Volvo spinoff. Polestar’s sales lag Tesla’s 30-fold, and its cars cost more, too, mostly because Polestars are imported from China.
Polestar, which launched its first model in 2017, is a joint venture between Sweden-based Volvo Cars and Zhejiang Geely Holding, the third largest automaker in China in terms of sales. Although calling it a “joint venture,” as Polestar does, is a little misleading, since Geely also owns Volvo.
Geely, which is privately owned by businessman Li Shufu, bought Volvo in 2010 for $1.8 billion—the largest overseas acquisition by a Chinese carmaker at the time. And while Geely maintained Volvo’s manufacturing sites in Europe and the U.S., the Polestar brand is manufactured in China, at Geely’s plant in Sichuan province, in southwest China.
Polestar’s origins in China make it difficult for the brand to compete with Tesla on price in the U.S. because Polestar pays a 27% import tax on its vehicles as a result of Trump-era trade tariffs. In the U.S., a Polestar 2 costs close to $60,000, while a fully loaded Tesla Model 3 retails for roughly $54,000.
Next year, Polestar hopes to begin producing an SUV at Volvo’s U.S.-based manufacturing site, which will help it cut costs and potentially boost sales. According to the company’s annual report, Polestar sold 29,000 units worldwide last year, up 185% on the year before. But that’s a far cry short of the 936,000 units Tesla sold globally.
Polestar is preparing to go public on the Nasdaq through a SPAC merger, which the group inked last September, valuing the company at $20 billion. Polestar will join several of its Chinese rivals trading on U.S. bourses after its debut in the second half of this year.
Last August, Guangzhou-based Xpeng raised $1.5 billion in an IPO on the New York Stock Exchange, only weeks after Beijing-based Li Auto raised $1.1 billion on the Nasdaq. The two EV makers trailed Shanghai-based Nio, which debuted on the NYSE with a $1 billion IPO in 2018.
Unlike its Chinese rivals, however, Polestar might manage to steer clear of the scrutiny Washington has recently piled on Chinese listings. In December 2020, Congress passed a bill that granted the Securities and Exchange Commission permission to delist Chinese companies that fail to comply with the regulator’s audit processes.
Beijing often denies the SEC access to audit documents of Chinese companies, citing national security concerns. Under the new U.S. law, any Chinese company that fails to provide audit documents requested by the SEC will be delisted from U.S. markets within three years.
But Polestar, despite its Chinese ownership, is headquartered in Sweden, which means SEC auditors may be able to gain access to audit documents more easily than if the company were based in China. That could make the group’s long-term play in the U.S. a little more sustainable.
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