Will Trump’s China trade war mess up Polestar’s U.S. challenge to Tesla?
The Polestar 2, the first electric car to go straight up against Tesla’s Model 3, is due to go on the market in the U.S. by summer 2020. But will it?
If the trade war between China and the U.S. gets much worse, the car, made at a factory in Luqiao, China, would rise in price, depress demand, and cause Polestar to send fewer cars to the U.S. market, said Thomas Ingenlath, Polestar’s chief executive.
If tariffs rose high enough, the car might not be sold in the U.S. at all – although Polestar is sticking with plans to start selling the Polestar 2 here by next summer.
Polestar is a new electric car brand from Volvo, which is owned by Chinese automotive giant Zhejiang Geely Holding Group, known as Geely for short.
The Polestar 2 is a sporty electric sedan with 275 miles of range, priced between $45,000 and $65,000 before federal and state incentives, which can reduce that by as much as $10,000 for many California buyers.
The company plans to build roughly 50,000 of the cars in its first year of production. Up to about 40% will be sold in China, Ingenlath said. Norway, which offers heavy incentives for electric cars, will be its No. 2 market.
Right now Polestar plans to sell about 30% or so of the first year’s run in the U.S. and Canada. “We would embrace free trade as in the interests of the consumer,†Ingenlath said. While all international companies must operate in a world where trade barriers are common, and Volvo’s U.S. plans have been made with existing tariffs factored in, Polestar won’t export cars to countries where rising tariffs make a product’s price “ridiculous,†he said, but will “scale up or scale down†U.S. plans depending on tariff levels. Tariffs on China-made cars sent to the U.S. are currently set at 25% by the Trump administration.
Ingenlath was in the Bay Area last week for the big Google I/O developers conference. Polestar (and Volvo) plan to use the Android Automotive operating system as the base for their infotainment systems.
Relaxing with a cappuccino at Four Barrel Coffee in San Francisco’s hip Mission District, the former Volvo head designer said that Android’s open development platform, where third-party software writers that meet Polestar’s requirement can add applications, is one way to differentiate the Polestar 2 from the Tesla Model 3.
There are other “big differences,†he said. One is the design, which he insists “pushes the borders†more than the Model 3. Customer opinions on car design are mostly subjective, and Ingenlath damned the Model 3’s looks with faint praise: “The Model 3 feels very fresh. It has a prototype quality to it, it’s very primitive in some form.â€
Quality will set the Polestar apart from the Tesla, he said. Well aware that the Model 3 currently faces serious issues with misaligned body panels, infotainment screens that go black, and batteries that don’t work, Ingenlath said, “We’ll be much more professional in doing a complete product. More professional knowledge about processes, materials, long-term quality.†Tesla declined to comment.
And he insists the Polestar 2 will handle better. It won’t reach the breakneck 3.2-second zero-to-60 time of a performance-version Model 3 — Polestar will come in under 5 seconds, he said, but added: “Tesla is so focused on acceleration. Performance [for most consumers] is not about the race track. The big question is, when you approach the next corner, how will you go around it?â€
Whether any of this matters, at least in the U.S., remains to be seen. It’s unclear whether most Tesla buyers are fans of electric cars, or just fans of Tesla and its CEO, Elon Musk. The Model 3 is outselling all other electric cars by a wide margin. But sales of all Tesla models fell 40% in the first three months of this year. If momentum fades, it could be bad news not just for Tesla but for electric cars in general, which in 2018 still represented just 2% of the U.S. auto market, though 7.8% of new cars sold in California.
Tesla and Polestar will face an onslaught of competition over the next few years. In the luxury and near-luxury segments, Jaguar and Audi already have electric cars available. Porsche will follow later this year with its first all-electric, the Taycan. Mercedes-Benz will follow. BMW has plans to add bigger models to the subcompact i3 all-electric it has been selling for years. Volkswagen, in the wake of its diesel cheating scandal, is going all out on EVs.
Ingenlath is confident that EV sales growth is set to take off around the world, especially in places such as China and Norway, with laws and financial incentives juicing customer interest. The company will soon begin selling its Polestar 1, a limited edition and expensive ($155,000) plug-in hybrid, and plans to follow the Polestar 2 with an SUV and other vehicles at more earthbound prices.
He credits Musk with jump-starting the electric-car phenomenon. “People five years ago were dismissive of a car that made no sound,†Ingenlath said. “That’s one of the biggest contributions Tesla made to the car industry, to tear down these kind of borders.â€
Polestar won’t be following Tesla’s push for full self-driving cars and robo-taxis, however. Musk recently said Teslas will be ready by the end of the year to drive themselves and announced plans to start a robo-taxi driverless ride-hailing service in 2020. Safety experts and some players in the driverless car industry said that timeline is too aggressive.
“I don’t see that in the near future,†Ingenlath said of fully driverless cars. “You might technically be able to do it. But to integrate it with everyday traffic in a safe way? That’s a big obstacle.†Polestar cars will be equipped with the latest in driver-assistance technologies, he said.
The robo-taxi service Musk promised is “part of Tesla’s story,†Ingenlath said. Musk “can say something like that and get away with it. I couldn’t get away with claims about these kind of things.â€
Twitter: @russ1mitchell
