Polestar CEO Predicts Price Increases Due to Tariffs

Michael Lohscheller, the CEO of Polestar, has expressed concerns regarding potential price hikes for new vehicles as a consequence of increased tariffs by the U.S. government. The company, which is a subsidiary of Volvo and owned by the Chinese automotive group Geely, is particularly sensitive to these developments in trade policy.

Recently, the U.S. administration has put significant pressure on global trade with its tariff strategies. Following a period of intense negotiations, the government announced that it would impose an additional 10 percent tariff on numerous countries for a duration of 90 days. This timeframe is typically adequate for diplomatic discussions, but the current climate is far from normal, leading auto manufacturers to anticipate rising vehicle prices in the medium term.

Lohscheller noted that while Polestar and other companies can implement short-term strategies to mitigate immediate financial impacts, it is unrealistic to expect these measures to stave off price increases indefinitely. He believes the automotive industry will ultimately pass on these additional costs to consumers, despite efforts to counterbalance them through operational efficiencies.

Polestar has primarily concentrated its production in Asia but also manufactures vehicles in its South Carolina facility to cater to the U.S. market. Currently, all electric vehicles imported from China are subject to a 100 percent tariff established by the previous U.S. administration under President Biden, which also threatens broader tariffs on parts imported from various countries, affecting all automotive manufacturers.

In response to the changing market dynamics, Lohscheller emphasized the importance of localizing production. He highlighted the South Carolina plant as a crucial asset that could facilitate the expansion of production capacity for both Polestar and Volvo. The company is also exploring opportunities to source more components from U.S.-based suppliers or those located closer to its manufacturing site, as relying on long-distance shipping is not sustainable for future business models.

In addition to addressing these tariff-related challenges, Polestar has reported a significant increase in vehicle deliveries, with a year-over-year growth of 76 percent, totaling 12,304 units. To compete with Tesla, which has dominated the electric vehicle market for years, Polestar is offering incentives, such as a $5,000 discount for Tesla drivers interested in leasing a Polestar 3, effectively making the total leasing cost $20,000 lower.

Despite Tesla's strong market position, experts predict that the brand may experience some reputational damage due to recent political actions taken by its CEO, Elon Musk. Polestar's sales in the U.S. surged by 74 percent, while figures in Germany reflected a substantial increase of 35.5 percent. Lohscheller attributes this growth not only to direct sales through showrooms but also to enhanced partnerships with dealerships, recognizing that personalized customer guidance remains a critical aspect of the car-buying experience.