Shares in Polestar (NASDAQ:PSNY) — an electric vehicle (EV) company backed by Volvo (OTCMKTS:VLVLY) and China’s Geely (OTCMKTS:GELYY) — are up more than 4% today. The movement in PSNY stock comes on hopes for the company’s new electric SUV, the Polestar 3, which “will be made in the U.S. starting next year.”
Polestar also said a lower-cost version of the new car will be made in the near future, “soon after the Polestar 3 begins production in South Carolina.” That EV will be eligible for subsidies under the Inflation Reduction Act.
This is all part of a plan to make Polestar a large EV brand, separate from its Chinese and Swedish roots.
PSNY Stock: Pole Position
Geely bought Sweden’s Volvo from Ford (NYSE:F) for $1.8 billion back in 2010. Since then, over the last decade or so, Volvo has regained some of the luster lost under Ford with a management style as much Swedish as Chinese.
Polestar, founded in Sweden, was then acquired by Volvo in 2015. The EV company came public through a special purpose acquisition company (SPAC) last year. Polestar’s CEO is Thomas Ingenlath.
The company recently launched the Polestar 3 at New York’s Hudson Yards. The press event had celebrities like actor Leonardo DiCaprio in attendance. Reporters drew comparisons to Volkswagen’s (OTCMKTS:VWAGY) Porsche cars. Unlike startups like Faraday Future (NASDAQ:FFIE), Polestar has the money to go into production. Geely, for instance, had about $4.8 billion in cash at the end of 2022 and positive operating cash flow.
Polestar is planning a $20 million ad campaign to introduce the SUV to U.S. buyers over the next three months. This includes showing the car around the country. The company had its first U.S. ad at last year’s Super Bowl in February 2022.
Initial production will start around mid-year at a Volvo plant in Chengdu, China “but then switch production for North America and other markets starting in mid-2024” out of a Volvo plant in Ridgeville, South Carolina. Polestar calls this use of partner plants an “asset light” model.
What Happens Next?
The market challenge of Polestar to Tesla (NASDAQ:TSLA) is far more serious than that of Faraday Future. Just don’t expect Polestar to sell many units in the United States until its lower-cost EV rolls out.
Investor hopes will ride on that vehicle’s competition to the Tesla Model Y.
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On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.