Volvo, Polestar show US is fickle back-seat driver
BREAKINGVIEWS-Volvo, Polestar show US is fickle back-seat driver The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, June 30 (Reuters Breakingviews) - China’s Geely is getting bogged down on U.S. roads. The sprawling auto group founded by Li Shufu effectively controls both Volvo Cars VOLCARb.ST and Polestar PSNY.O. Yet Washington has given the $5.7 billion Sweden-based stalwart the green light to keep selling cars, while forcing the upstart $2.5 billion EV maker to hit the brakes. It smacks of fickle back-seat driving by U.S. regulators, but Polestar may well end up better off being excluded.
The decision stems from new rules to block China-linked connected cars. The New York-listed company revealed on Thursday that the U.S. had refused it “special authorisation” to keep selling stateside, a month after Volvo won the right to continue. It’s not clear why there’s a disparity, which makes the decision look odd. Polestar, after all, is a Volvo offshoot. Moreover, Li and the Geely group own just over half of the company, but almost 80% of Volvo.
Polestar, though, has worked extensively with Chinese suppliers such as ECarx ECX.O, implying changes to the tech stack would be needed to satisfy regulators. Doing that is possible, but cutting out Chinese supply chains sacrifices potential savings from shared procurement with the broader Geely group, whose myriad brands, including Zeekr and Lotus Technology LOT.O, sold over 4 million cars last year.
Continuing to sell in the U.S. comes with political pressure to produce onshore, too. Polestar only sold around 60,000 cars globally last year, not enough to support its own factory. Instead, it had committed to using Volvo's South Carolina plant for all of its new Polestar 3 models, adding the cost of exporting them to Europe and Asia. Its imminent departure leaves the $1.3 billion Volvo facility, which has created around 2000 jobs per the company, facing overcapacity.
Even if Polestar had won approval, special authorisations can last as little as a year and may be rescinded. Automakers require longer timeframes: developing a model takes as much as three years. All of that would strain Polestar, whose adjusted EBITDA loss more than doubled to $235 million in the first quarter from last year. Polestar’s stock has shed 7.5% since Thursday. But Volvo's shares are also down by a fifth since announcing its authorisation last month - more than fellow group company Geely Auto 0175.HK, or U.S. rivals such as General Motors GM.N and Ford Motor F.N .
Throw in U.S. President Donald Trump's auto import duties and the landscape becomes even harder to navigate. Global manufacturers are being asked to make multibillion-dollar investment commitments even as tariff rates and other controls are subject to political bargaining. Pursuing the American dream comes with significant risks.
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CONTEXT NEWS
The U.S. Commerce Department did not grant carmaker Polestar special authorization to sell cars under the Connected Vehicles Rule, which restricts the import and sale of cars with connected-vehicle technology linked to China beginning with the 2027 model year, according to an announcement from the company on June 26. Polestar’s New York-listed shares fell 5.9% to $18.97 on June 26 following the news.
Volvo Cars said on May 26 it received approval from the U.S. government allowing it to continue selling vehicles.
Geely founder Li Shufu holds 23% of Polestar, Volvo holds 20%, and Geely Sweden holds 12% following a series of recent debt-to-equity conversions and equity placements.
(Editing by Antony Currie and Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))