Just one company sells Chinese-made EVs in the U.S. Here's how it's navigating Biden's new tariffs.

By Victor Reklaitis

Polestar has been moving away from having its EVs made in China before this month's news about U.S. tariffs

President Joe Biden's new tariffs on Chinese electric vehicles are widely viewed as not having much immediate impact, and that's because such EVs aren't widely sold in the U.S.

China's EVs are "rightly seen as a future threat," but Biden's tariffs on those vehicles and other key Chinese products are "more protective/symbolic than currently disruptive," Wolfe Research analysts said in a note.

There is one company that's selling Chinese-made EVs in the U.S. - Sweden-based Polestar (PSNY). The company last month said its ownership structure has changed so it's 24% owned by Chinese automotive giant Geely (HK:175) and 18% owned by Volvo Cars (SE:VOLCAR.B), which itself is majority-owned by Geely.

Analysts at Citi said they asked Polestar about the higher U.S. tariffs and indicated that the EV maker is still evaluating the Biden administration's announcement. But the analysts also emphasized that Polestar had been moving away from having its EVs made in China before this month's news about U.S. tariffs.

The increased U.S. tariffs had been expected by analysts, with a Raymond James team in early April seeing "strong signals that elevated tariffs on Chinese cars are highly likely."

"As a reminder, production of the Polestar 3 is expected to begin in South Carolina this summer, with Polestar 4 being produced in South Korea," the Citi analysts said in a note on Wednesday. "Polestar is also looking at adding European manufacturing for future vehicles."

The Polestar 3 and Polestar 4 are both SUVs, and the latter was unveiled for the U.S. market in March at an auto show in New York City.

Polestar itself made a similar point as Citi's team in a news release last month.

"Polestar is making significant progress in diversifying its manufacturing footprint, in order to improve profitability of its key markets, including the U.S.," the company said. It said Polestar 4 production was expected to expand to South Korea in the second half of 2025.

Polestar offered a similar comment to MarketWatch late Thursday as it did to Citi's analysts, saying it was evaluating the Biden administration's announcement of tariff increases.

"As a global company headquartered in Sweden, listed on NASDAQ in New York and operating across 27 markets, we believe that free trade is essential to speed up the transition to more sustainable mobility through increased EV adoption," the company also told MarketWatch in a statement.

"Production of Polestar 3 is set to begin in South Carolina in the summer diversifying our manufacturing footprint and supporting job creation and economic growth in the region. This important SUV for us will be built in the USA for U.S. and Canadian customers as well as for export to European markets."

Citi's analysts stressed in their note that Polestar's American business has been limited, saying sales of the Polestar 2, a sedan, amounted to 7,500 last year, or just 14% of global volume.

The Citi analysts currently have a rating of "Neutral/High Risk" for Polestar's stock, with a price target of $1.70. Polestar shares closed at $1.28 on Thursday and have lost 43% in the year to date.

From Barron's archives (January 2024): Polestar stock is 'on a road to nowhere.' There is a solution, though.

-Victor Reklaitis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-18-24 1238ET

Copyright (c) 2024 Dow Jones & Company, Inc.