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Polestar, the premium electric vehicle (EV) brand, has announced its decision to withdraw from the Chinese market by the end of 2025. This move comes after a poor sales performance in the country, selling only 69 units in the first half of 2025, with no sales recorded in April and May.
Factors Contributing to Polestar's Poor Performance
Several factors have contributed to Polestar's struggle in the Chinese market. One of the primary challenges is the intense competition from Chinese EV manufacturers, such as BYD and Geely, who have aggressively reduced prices by up to 34%. This price pressure significantly reduces market margins for foreign brands like Polestar, making it difficult to compete effectively.
Another factor is Polestar's strict EV-only strategy. Unlike some competitors, including Volvo, Mercedes, and Audi, Polestar has maintained an EV-only product lineup, rejecting hybrids or plug-in hybrid electric vehicles (PHEVs). This stance might limit its appeal in a market where hybrid options still have strong demand.
Market and tariff barriers also pose challenges. Despite China being the most mature EV market globally, the influx of low-cost Chinese EVs dominates consumer preferences. Additionally, the U.S. bans Chinese EV imports with high tariffs, pushing many manufacturers to focus on Europe and other markets instead.
Lastly, Polestar's delayed or limited new model introductions in China may weaken its competitiveness. The company's newer models, like the Polestar 7 and smaller affordable versions, are planned to be built in Europe and have release timelines extending to 2028 in markets like Australia.
Polestar's Future Plans
Globally, Polestar delivered 30,300 vehicles in the same period, marking a 51% year-over-year increase. The brand is focusing on expanding its presence in Europe and other markets, aiming to achieve profitability by 2025 amidst intense competition in the electric vehicle market.
Polestar's departure from the Chinese market signifies a significant shift for the brand. The online purchasing system for Polestar in China has been shut down, and test drives now require telephone appointments. The company currently operates only one direct sales store in China, located in Shanghai.
This decision does not come as a surprise, given Polestar's financial struggles. Since its NASDAQ listing in 2022, Polestar's stock price has plummeted by 90%. The brand reported negative net assets of 3.329 billion USD at the end of 2024, with total liabilities of 7.383 billion USD against 4.054 billion USD in assets. In 2024 alone, Polestar incurred 2 billion USD in net losses.
Despite a cash infusion of 200 million USD from Geely Holding Group's major investor, PSD Investment Limited, in June, industry analysts are not assured that Polestar's financial challenges can be fully addressed. The brand's future plans and strategies will be closely watched as it navigates the competitive global EV market.
- The financial strain experienced by Polestar, as evident in its 90% plummeting stock price and a net loss of $2 billion in 2024, might have led to the strategic decision to channel investments away from the highly competitive Chinese market and focus instead on expanding in more promising regions, such as Europe.
- To improve its financial position and ensure long-term viability in the competitive electric vehicle market, Polestar plans to allocate its financial resources towards increasing its presence in Europe and other profitable markets, and may consider exploring new technology-driven solutions to enhance the efficiency and appeal of its vehicles, potentially by partnering with notable finance institutions for innovative financing options for customers.
