Polestar to boost U.S. retail network by nearly 75% as new product arrives

CHARLESTON, S.C. — It's been a slog for Polestar retailers since the Swedish electric vehicle maker planted its flag in the U.S. in the maw of the pandemic.

Polestar, once a performance subbrand of Volvo Cars, launched when demand for battery-powered vehicles was hot and competition was not. But in the past four years, EV sales have cooled as the supply of new models from legacy automakers and startups has ramped up.

That has put Polestar — a fledgling brand with a single nameplate — in a pickle. U.S. sales of that vehicle, the Polestar 2 sedan, slumped 41 percent in the first half of 2024, according to Automotive News Research & Data Center estimates.

But Polestar is primed for growth. The automaker intends to grow its U.S. retail network to support a lineup that will triple in size this year with two premium crossovers.

"We've been waiting for that," Anders Gustafsson, the brand's newly minted North America boss, said at a media event to mark the start of U.S. production of the Polestar 3 crossover. "We are going to attract more than just sedan customers."

Sales of the midsize Polestar 3 began this month after a yearlong delay because of software issues related to a new platform shared with the Volvo EX90.

The lower-priced Polestar 4, a higher-volume coupelike crossover, follows in the fourth quarter.

Two more nameplates — a performance sedan and a swoopy convertible — are on the road map for the next two years.

The competition will be what it is, Gustafsson said. "But it's by far easier [to compete] if you have more than one car," he said, "and now we have three."

With new product reaching U.S. shores, Polestar is bulking up its retail footprint with plans to add 20 rooftops to its 27-store network by the end of 2025.

Gustafsson said Polestar retailers will be first in line for the new points. If there are not takers in an expansion market, Volvo retailers will be invited.

"We would like to keep the [retailer network] inside the Volvo family as long as we can," he said.

But Gustafsson put the kibosh on a key retailer wish — the ability to sell Polestar vehicles out of their Volvo showrooms.

Gustafsson said the customer experience should be different when buying a Polestar versus a Volvo. Selling Polestars from a Volvo store would erode some of that experience, he said.

"The passion around the brand needs to be there and it's tougher if you have two brands" under the same roof, he said.

As Polestar's addressable market broadens, the young brand will need to transform a retail strategy designed for a lower-volume sedan in less competitive times.

Polestar launched in the U.S. in 2020 with a radical low-cost retail model under which dealers skipped multimillion-dollar investments in Taj Mahal full-service dealerships for compact showrooms in swanky shopping malls and urban mixed-use developments. Polestar delivered customer-ordered vehicles to stores rather than having its franchised retailers carry inventory on their lots.

In the intervening years, Polestar tweaked the model and began furnishing stores with a handful of stock cars to satisfy impulse buyers. As demand for the Polestar 2 cratered amid intense competition, the automaker began wholesaling vehicles to some dealers.

Gustafsson said the retail model is due for another change to make the brand more proactive.

"The customer is not coming and knocking on the door anymore because competition is so tough," he said. "Dealers will be more involved and they will get cars that they can park outside the dealership."

Although dealer inventories will increase, "we will not overload them with 600 cars," Gustafsson said.

"Day supply is an important [metric] for manufacturers," he said. "But I'm more interested in days to turn," which is the time it takes to sell a vehicle.

"If we are not selling, then we don't need to push" vehicles on dealers, Gustafsson added.

Five weeks into his job at Polestar, Gustafsson said his mandate is clear — to ensure dealer profitability.

"If we don't have profitable partners, we are not going to attract good partners," the executive said. "If our partners are not making money, they are not going to be able to recruit and keep staff."

Gustafsson said "throughput is crucial" because it feeds dealership profit centers such as the used-car department, finance and insurance, and parts and service.

"If you don't have those revenue streams, you cannot pay your bills," said Gustafsson, who previously ran Volvo Cars' Americas region.

In addition to the new product, Polestar has another tailwind: a surge in Polestar 2 lease returns later this year and early next, which will feed dealerships' used-car departments.

"This is the first year that we have used cars coming in magnitude," Gustafsson said.

The executive is embarking on a roadshow to share his recovery plan with dealers one on one starting on the West Coast.

"I will first ask questions," Gustafsson said. "Then I will look into their eyes and ask, 'Do you trust me?' "