Moving forward with expansion, Polestar shifts its focus from China to Europe in pursuit of development
In the rapidly evolving electric vehicle (EV) landscape, Polestar, the premium EV subsidiary of Geely, is repositioning itself towards a more Europe-centric strategy. This move comes as the brand grapples with underperformance in China, the world's largest EV market.
Despite manufacturing vehicles in China, Polestar sold only about 3,000 units in the Chinese market last year, according to industry reports. This low sales figure is in stark contrast to local competitors, such as BYD and Chery, which dominate the market with their agile development cycles and competitive pricing.
Polestar's European focus, premium positioning, and recent plans to produce the upcoming Polestar 7 compact SUV in Europe aim to avoid US tariffs and meet stringent EU sustainability standards. However, this strategy, while beneficial for growth in Europe, may reduce Polestar's appeal or competitive pricing in China, where local brands excel in cost and speed.
The brand's limited appeal in China may be due, in part, to its perception as 'too European'. This, coupled with fierce competition, geopolitical trade tensions, and the impact of US tariffs, has collectively constrained Polestar's ability to capture significant Chinese market share.
In contrast, Polestar's sales in Europe have shown promising growth. This year, sales have increased by 76%, driven by the popularity of the Polestar 3 and 4 models and the expansion of a physical retail network. Polestar's expansion in Europe will continue, with plans to increase the number of physical retail locations.
However, Polestar continues to face financial challenges, and the success of its strategic focus on Europe remains uncertain. The long-term financial profitability of the brand is yet to be determined.
The brand's premium prices may also limit its appeal in Eastern Europe. To address this, Polestar aims for a 30-35% compound annual retail sales growth in Europe from 2026 to 2027.
Polestar's pivot towards Europe comes as it halts exports of its Chinese-made Polestar 2 to the U.S. due to the 125% tariff imposed by President Donald Trump. The brand is re-evaluating its entire production strategy as a result of these tariffs.
The European EV market is crowded, with established players like Tesla, VW, Stellantis, and others aggressively competing for market share. Despite these challenges, Polestar is optimistic about its future in Europe, aiming to sell no more than 3,120 cars in China in 2024, accounting for only 7% of its total worldwide sales.
In conclusion, Polestar's strategic shift towards Europe is a response to the challenges it faces in the Chinese market. While the brand continues to face financial hurdles and competition in the crowded European market, its focus on premium models and expansion in Europe offers potential for growth.
- Polestar's strategy to produce the Polestar 7 compact SUV in Europe is aimed at avoiding US tariffs and meeting stringent EU sustainability standards, suggesting a focus on both the technology and finance industries.
- Amidst the fierce competition in the European automotive industry, Polestar's sales have shown promising growth with a 76% increase this year, hinting at business success.
- Polestar's pursuit of a 30-35% compound annual retail sales growth in Europe from 2026 to 2027 indicates a promising future for the brand, particularly in the technology sector, as it adapts to the rapidly evolving electric vehicle landscape.
