BEIJING, November 23 (TMTPOST) – Nasdaq-listed Polestar has reached an agreement with Geely Holding Group and Renault Korea Motors to produce the Polestar 4 model at Renault Korea Motors' Busan factory from the second half of 2025, targeting the North American and Korean markets.

Polestar is an electric car company,  backed by its shareholders Volvo Cars and Zhejiang Geely Holding Group. In June 2022, it went public on the Nasdaq through a merger with a Special Purpose Acquisition Company (SPAC). Polestar's main selling models are the Polestar 2. The Polestar 4 just rolled off the production line in China, set to start deliveries to Chinese customers by the end of 2023.

Polestar is eager to expand its sales volume and improve its financial situation. The third-quarter financial report released on November 8 shows that Polestar delivered a total of 42,000 cars in the first three quarters, generating revenues of $1.84 billion, but its operating losses reached $735 million. The carmaker expects to deliver 60,000 cars in the entire year of 2023, with an anticipated annual gross profit margin of only 2%. In March 2023, Polestar had initially forecasted annual sales of 80,000 cars with a gross profit margin similar to 4.9% of 2022.

By the end of the third quarter, Polestar's cash and cash equivalents stood at $950 million. It still needs $1.3 billion in funds to achieve break-even by 2025 according to its anticipation. On November 8, Polestar secured an additional $450 million in regular loans from shareholders Volvo Cars and Geely Holding Group.

Polestar plans to produce and sell four models by 2025, with an annual delivery target of 155,000 to 165,000 vehicles. The upcoming Polestar 4 and Polestar 3 will bear the bulk of the sales volume. Another model, the Polestar 5, is set to be released in 2024 with an expected higher selling price.

Both the Polestar 4 and Polestar 3 are targeting the three major electric vehicle markets: China, Europe, and the United States. However, these two models will adopt a detour strategy to enter the US market.

According to the original plan, the Polestar 4 would be produced only in Geely Holding Group's factories in China. However, exporting these cars from China directly to the US is not feasible due to the 25% tariffs imposed on Chinese cars by the US amid the 2018 trade dispute, which remains in effect. The "Inflation Reduction Act" passed by the U.S. in August 2022 also categorizes Chinese companies as sensitive entities, excluding them from preferential measures.

The production of the Polestar 4 at Renault Korea Motors' factory in South Korea aims to circumvent some of the U.S. government's tariff restrictions on China. South Korea has a free trade agreement with the U.S. and enjoys several exemptions under the "Inflation Reduction Act," unlike China. Renault Korea Motors currently has three major shareholders: French automaker Renault, Geely Holding Group, and South Korean Samsung.

The Polestar 3 might be produced in both China and the US. Polestar plans to utilize Volvo Cars' factory in South Carolina, with the production of vehicles expected to commence in the summer of 2024.

However, there are still uncertainties. The U.S. Treasury Department has not yet issued guidelines on sensitive entities. According to the definitions in other US laws, foreign sensitive entities include entities owned, controlled, or administered by North Korea, China, Russia, and Iran. Generally, "ownership" and "control" refer to being held or controlled by the government or other state-owned institutions, and the definition of "administration" is not clear. Although Polestar is a Swedish brand, its primary shareholder is essentially Chinese-funded Geely Holding Group.

The slight improvement in Sino-US relations recently might create opportunities for Chinese electric vehicle companies.

ZEEKR Intelligent Technology Holding Limited submitted a prospectus to the U.S. Securities and Exchange Commission (SEC), planning to issue American Depositary Shares (ADS) and list on the New York Stock Exchange, according to a statement of Geely Automobile (00175.HK) released on November 10. ZEEKR is a high-end intelligent electric vehicle company separated from Geely Automobile. Previously, many domestic startup car companies gave up halfway in their process to go public in the US.

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