Polestar expands to mid-America

Electric vehicle maker Polestar started small in the U.S. last year. But this year, the Swedish startup will turn it up a notch.

The Volvo Cars affiliate will expand its U.S. retail network beyond the first handful of stores it has in California and New York City. Polestar plans to spread across the continental U.S., from Seattle to Miami, with locations in 13 states and Washington, D.C. By the end of 2022, the automaker hopes to have 35 stores, Polestar USA chief Gregor Hembrough told Automotive News last week.

But as Polestar ventures beyond EV-friendly California, the young brand will face a test. Selling battery-powered vehicles in frosty Minnesota could take more convincing than in sunny California.

Since September, Polestar retailers have been focused on delivering cars to early reservation holders. Now, the focus has turned to driving new business to the brand, Hembrough said.

"We've got to move our mindset from fulfillment to generation," he said.

Polestar's digital-first retail model proved fortuitous for a brand that

launched in a pandemic. The strategy eschews high-dollar dealership investments for small, low-cost "Spaces" in malls and mixed-use urban developments. The stores are 2,000- to 2,500-square-foot information centers run by franchised dealers selected from Volvo's retail network. Polestar vehicles are serviced at the dealers' Volvo stores.

Polestar's online shopping model, with contactless test drives and vehicle pickup and deliveries, has become mainstream as the auto industry figures out how to do business in the age of COVID-19. But the pandemic taxed Hembrough and his team as the startup struggled for early market traction.

"I've learned more over the past 24 months than I have over the last 24 years," Hembrough said. "We underestimated how long it would take to put together a Polestar Space and how to get into the market as quickly as we needed it to."

As the U.S. economy slowly pulls away from the worst of the pandemic, Hembrough is turning his focus to growth. Polestar will need retail momentum.

The automaker this year will introduce two less expensive variants of the Polestar 2 fastback in the U.S. A midsize crossover is expected to follow in 2022.

New stores will open by early spring in Austin, Texas; Boston; and Denver. In the second half of 2021, Polestar anticipates having showrooms in Atlanta, Dallas, Detroit, Minneapolis and Phoenix.

"We've gone into very easy, friendly markets and EV-forward markets as our first pass," Hembrough said. "As we move into 2021, we will expand into incremental markets."

Polestar's retail road map is targeting cities with growing EV acceptance and expanding charging infrastructure, and where the automaker is seeing consumer interest.

"Through our digital model, we're trying to understand where the hand-raisers are coming from, where we are starting to see demand percolate," Hembrough said.

That research indicates that EV interest extends beyond coastal hubs.

"With the advent of EV charging infrastructure, with the price reduction on home charging, the buoyancy of tax incentives on the cars, I'm starting to quickly realize that there aren't that many non-EV-friendly markets in 2021," Hembrough said.

Even for a digital-focused brand such as Polestar, having brick-and-mortar retail locations will be key to driving volume in Tier 2 EV markets.

"We're gaining a lot of interest in these markets," Hembrough said. "However, by not having a physical location in that market, we're still seeing consumers that are somewhat hesitant."

The stores located in high-traffic locations serve as a marketing tool, creating awareness for the brand.

They allow Polestar to "engage consumers who don't know about the brand yet but will stop in and learn more about this new electric vehicle," Hembrough said.

Polestar also is bulking up its U.S work force.

The past year showed "we were understaffed in field representation roles," Hembrough said. "We need to have more boots on the ground to help our Polestar Spaces get up and get running."

Polestar also is working to source U.S.-based suppliers of dealership materials to help get retail stores open faster. The automaker's main supplier is in Germany.

"You place an order and it could take anywhere from eight to 12 weeks before those supplies find their way to U.S. shores," he said. "By working with U.S. suppliers for things like the showroom elements, we're going to enable a faster turnaround" in store openings.

As Polestar expands its network, the focus will be on profitability over volume.

"One of the components of profitability is to continue to have good throughput. So we will not be putting Spaces on top of Spaces," he said. "We want to make sure that we grow where the demand is going to be."