Polestar Halts 2025 Financial Outlook as U.S. Tariffs Threaten EV Growth

Polestar, the Swedish electric vehicle (EV) manufacturer, has paused its 2025 financial guidance, citing escalating U.S. tariffs on Chinese imports and regulatory uncertainty. The decision, announced in April 2025, underscores the growing challenges facing global automakers as trade tensions intensify. Despite reporting a 76% year-over-year surge in Q1 2025 sales (to 12,304 units), Polestar’s shares fell sharply, reflecting investor anxiety over its ability to navigate a rapidly shifting landscape.

The Tariff Crisis: A Direct Hit to Polestar’s Supply Chain

Polestar’s woes stem from punitive U.S. tariffs targeting Chinese-manufactured goods. Key measures include:
- A 145% tariff on Chinese imports under Executive Order 14257, which was raised from 34% in April 2025 amid escalating trade tensions.
- De minimis tariff hikes, increasing duties on low-value shipments from 30% to 90%, and postal item fees to $150 by June 2025.

These tariffs directly impact Polestar’s Chinese-made models, including the Polestar 2 (Zhejiang) and Polestar 3/4 (Chengdu/Ningbo). The 145% levy forces the company to either absorb massive costs—potentially eroding margins—or pass them to consumers, risking demand. For context, a $40,000 Polestar 2 now faces a tariff-driven price hike of $18,000, making it uncompetitive in the U.S. market.

Market Reaction: Shares Lag Amid Sector-Wide Caution

Polestar’s stock (PSNY) has underperformed the broader market in 2025. While its trailing 12-month return (26.62%) outpaces the S&P 500 (7.93%), its YTD performance (2.86%) lags significantly behind the index’s 7.59%. This divergence reflects investor skepticism about tariff-related risks:

• Supply Chain Disruptions: Polestar’s reliance on Chinese manufacturing leaves it vulnerable to delays and cost overruns. For instance, the Polestar 2 was temporarily removed from its U.S. website due to prohibitive tariffs.
• Regulatory Uncertainty: The company faces unresolved issues with its 2024 annual report, delayed until May 14, 2025, and repeated postponements of quarterly earnings releases. These delays raise governance concerns, compounding tariff-driven anxiety.

Strategic Shifts to Mitigate Tariff Impact

Polestar is pivoting to reduce reliance on China:
- U.S. and European Manufacturing: Plans to produce the Polestar 7 compact SUV in Europe aim to bypass tariffs while capitalizing on regional demand.
- Premium Pricing Strategy: A focus on higher-margin models like the Polestar 3 and 4 (which contributed to 76% Q1 sales growth) aims to offset margin pressures.

CEO Michael Lohscheller has also targeted disgruntled Tesla owners with discounts, a move to stabilize U.S. demand. However, these efforts face headwinds:
- Production Costs: Shifting production to Europe or the U.S. requires significant capital, diverting resources from innovation.
- Competitor Pressure: Tesla’s Model Y and Rivian’s R1S continue to dominate the premium EV segment, leaving little room for price hikes.

Risks and Long-Term Outlook

Polestar’s long-term targets—30–35% annual sales growth through 2027—rely on resolving tariff and supply chain challenges. Key risks include:
- Geopolitical Volatility: Conflicts in Gaza and Ukraine could disrupt critical supply chains (e.g., lithium from Ukraine).
- Regulatory Headwinds: New U.S. tariffs on Chinese-made batteries and semiconductors could further strain margins.

Despite these risks, Polestar’s fundamentals remain robust. Its Q1 sales growth and premium product mix suggest underlying strength, while its climate neutrality goals (zero emissions by 2040) align with ESG trends.

Conclusion: A Risky Bet Unless Tariffs Ease

Polestar’s paused guidance and tariff-related turmoil make it a high-risk investment in 2025. While its shares have outperformed the S&P 500 over the past five years (89.80% vs. 86.61%), near-term uncertainty looms large.

Investors should weigh:
- Upside: Potential margin improvements from premium models and European production, plus long-term growth in EV demand.
- Downside: Tariff-driven price hikes could slash U.S. sales, while delayed reporting and regulatory risks cloud visibility.

Final Take: Polestar’s stock (PSNY) offers growth potential but requires patience. A resolution to U.S.-China trade disputes—or a strategic pivot to untariffed markets—could unlock value. Until then, cautious investors may prefer established players like Tesla or Rivian, which face fewer geopolitical headwinds.

Data sources: Polestar SEC filings, Reuters, Cars.com, and Polestar’s 2025 investor presentations.