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Higher Tariffs Could Lead to Tesla Rival Polestar Not Selling its Cars in the U.S.

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【Summary】Volvo's electric car brand Polestar might not sell its electric cars in North America if it faces higher tariffs due to the U.S.-China trade disputes.

Manish Kharinta    Mar 10, 2019 7:00 AM PT
Higher Tariffs Could Lead to Tesla Rival Polestar Not Selling its Cars in the U.S.
The Polestar 2 fully-electric vehicle (Photo: Polestar)

Polestar CEO Thomas Ingenlath recently said that the company might not sell its electric cars in North America if it faces higher tariffs due to U.S.-China trade dispute.

Polestar is Volvo's new electric car brand and has been preparing to enter the electric car segment a high-tech model designed to rival Tesla.

The Swedish electric car brand is planning to offer a portfolio of fully-electric cars, which include the Polestar 2, the company's contender against Tesla's mass-market Model 3. The Polestar 2 was showcased at the 2019 Geneva Motor Show earlier this week and is slated to go on sale next year.

The Polestar 2 offers 300 miles of all-electric driving range  with a price tag of $63,000. The vehicle happens to be the first mid-priced battery-powered model offered by a mainstream automaker.

The interior of the Polestar 2

Initially, Polestar predicted high-demand from the American market, including California the biggest market for electric vehicles, in its preview tour of the Polestar 2, but now the company is considering reevaluating its U.S. sales targets.

The current U.S. tariff on Chinese auto imports stands at 15 percent, which is reflected in the $63000 price tag of Polestar 2. The tariff reached 40 percent last summer, after China increased the tariff an additional 25 percent in response to the Trump administration tariffs on $200 billion worth of Chinese goods amid escalating trade tensions.

The Chinese government agreed to a truce in Dec 2018 and the tariffs will remain at 15 percent as negotiations continue.

Ingenlath said that any increase in import tariffs will reflect on the electric car's overall price tag, which will make it unreasonably expensive for customers.

He further elaborated that it will be economically more feasible for the company to expand in other untapped European markets, including Austria and Switzerland.

Other mainstream automakers are also caught in the crossfire of the U.S.-China trade dispute. To avoid tariffs, German automakers BMW and Daimler have relocated production facilities for some models to China. Even U.S.-based Ford Motor Company terminated its plans to sell the China-built Focus compact car in the U.S.

Due to the trade dispute, Volvo's parent company Geely delayed its U.S. IPO last year.

It is crucial for Polestar to manufacture its cars in China because the country happens to be the world's largest electric vehicle market. Volvo's parent company also enjoys substantial brand recognition in China, which is a promising business opportunity for Polestar.

Thanks to the company's global production system, Polestar can also build its cars at Volvo's South Carolina assembly plant, but Ingenlath reasons that this would be a risky move without building Polestar's brand recognition first.

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