Polestar to drop $20 million in Q2 to market its first crossover

Polestar plans to launch a $20 million marketing campaign in the second quarter as the Swedish electric vehicle maker primes the pump for its first crossover in the truck-dominated U.S.

The investment will surpass Polestar's marketing spend in the first quarter of 2022 when the fledgling EV brand splurged on a Super Bowl commercial.

The Volvo Cars affiliate will spend more on marketing the Polestar 3, a Porsche Cayenne-size crossover, to Americans in the second quarter than in the past nine months combined, Polestar's North American boss Gregor Hembrough told Automotive News.

That indicates how much is riding on the Polestar 3 crossover, which will arrive in the U.S. in late 2023, nearly a year behind schedule.

North America, consisting of the U.S. and Canada, will be Polestar 3's largest market, accounting for about 25 percent of the global sales, Hembrough said.

With the new model, Polestar is aiming for the core of the U.S. luxury market.

While the U.S. luxury sedan segment targeted by the Polestar 2 will hit 379,000 in sales, Hembrough said, premium midsize crossover sales should reach about 625,000 vehicles this year.

"I want a piece of that pie sooner in the year so we can prepare ourselves for the throughput that's going to come later in the year," he said.

To build a robust order book ahead of the model's launch, Hembrough has pulled forward a "multi-pronged" marketing initiative by two months.

The campaign will launch April 4, involving online, television and outdoor advertising to raise awareness of both the new model and the brand.

Meanwhile, a 12-city product roadshow, kicking off in New York City on Tuesday, will allow Polestar 3 reservation holders and other early adopters to kick the proverbial tires.

Drumming up interest in the Polestar 3 is one thing. Meeting that pent-up demand will be quite another.

The Polestar 3 shares a platform with Volvo Cars' next-generation EX90 full-size crossover. Software issues related to the platform complicated the development of both models, a source told Automotive News last year.

Polestar 3 will enter mass production at Volvo's assembly plant in Chengdu, China, midway through 2023 and then launch at Volvo's Ridgeville, S.C., factory a year later.

Hembrough said he is confident Polestar 3 will hit its U.S. launch targets.

"Right now, we are at the level where the stability and the security of the production plan will hold true," he said. "We are tracking exactly where we need to be to reach our full-year sales goals."

Dealer display vehicles should arrive in stores in the summer.

"We are making sure that the U.S. marketplace is first in the production line," Hembrough said.

But the new crossover will be competing for EV buyers' attention and wallets against several better-established brands when it begins rolling into Polestar's boutique-like urban stores.

With a sticker starting at $85,300, including shipping, the new model will be hobbled on price right out of the gate. At that price point, the Polestar 3 won't be eligible for federal EV tax credits under the Inflation Reduction Act. The law caps the $7,500 incentive on electric utility vehicles above $80,000. And while the Polestar 3 will be produced in the U.S. next year, meeting another eligibility criteria, it's unclear if the vehicle will meet the legislation's battery production and raw material sourcing requirements.

Hembrough declined to disclose where Polestar 3 batteries will be sourced. But he expressed confidence that the "well-contented" Polestar 3 will stand up to the competition.

"We've got a good story to tell around high standard content, competitive range and high performance," Hembrough said. "We're going to lean into it."

Hembrough said Polestar 3 will launch with a "competitive" lease offer and qualify for up to $7,500 in commercial clean vehicle tax credits.

"If you have to start putting money into the marketplace, there's probably a problem with the value equation on the product," Hembrough said. "So far, we haven't felt that's going to be an issue for us."

While Polestar expands its lineups, the automaker will stick with its small-footprint retail strategy.

The digital-first retail model avoids high-dollar dealership investments, relying instead on low-cost "spaces" in malls and mixed-use urban developments. Those stores are essentially information centers of 2,000 to 2,500 square feet run by franchised dealers selected from Volvo's retail network. Polestar vehicles are serviced at the dealers' Volvo stores.

But the Polestar model is evolving as the brand enters less EV-friendly coastal markets and brings higher-volume product.

Polestar has debuted a new store format called Destination for suburban markets. Those standalone stores, located in easy-to-access sites, typically feature larger showrooms, perform vehicle hand-overs to customers and can include service departments.

The expansion is about giving Polestar dealers options, rather than issuing a mandate, Hembrough said.

"We're not saying, 'An SUV is coming, everybody's got to destroy their showrooms and build something new, and it's got to be bigger,'" he said. "This allows the dealership an opportunity to do something fitting for the marketplace but still is very much within the brand."

Polestar's central stock inventory strategy won't change with the arrival of SUVs. Dealers don't stockpile inventory — instead, they carry just 10 to 12 units for impulse buyers.

"We will not go into a wholesale business model," Hembrough said. "Most of the floorplan and inventory holding costs will continue to be on Polestar."