Truly Global Brand

The EV revolution is happening around the world. In countries like Norway, EV’s outsold regular combustion cars this year. Demand for EV’s in Asia is rising rapidly as well especially in China. For the first half of 2019, China accounted for 57% of all EV sales globally.

The lines are getting more blurred with multi-national firms chasing global demand. The Polestar of today has an interesting background. Volvo utilized a performance tuning racing division named Polestar to launch a new brand specifically focused on EV’s. The racing division was then renamed to Cyan Racing. Volvo has gone through a few rounds of various owners. From 1999-2010, Volvo was owned by Ford. The synergies never materialized and there seemed to be a lack of innovation and progress during this period. Then the brand was acquired by the Chinese company Geely Holding Group in 2010. From an external observation, it appears that Geely has been willing to invest heavily in Volvo and has also given the Volvo management team a significant amount of leeway in terms of product innovation and design.

The recent design overhaul and more efficient and streamlined platforms has led Volvo to a brand resurgence and numerous accolades.

The Panda in the Room

While it makes sense to manufacture Polestar vehicles in China, doing so brings with it a certain stigma as well as business risk. Most people around the world associate China with cheap labor, poor regulations and low quality. This reputation is well deserved. As China grew from a poor developing country, there was a tendency to cut corners to reduce costs. However, times have changed significantly and people underestimate the influence of the managing company in directing quality, labor practices and sustainability.

Quality is relative

A common misconception regarding quality is that it can’t be controlled. In fact, quality can be well defined and monitored. Many top brands including Apple, Ray Ban, Prada, Mulberry and many more. It is up to the brand owner to define the materials, process, QA and testing.

Even for a Chinese company trying to build a quality product such as BYD, there will be temptations to compromise and not truly understand the long term branding impact while focusing on short-term profitability. I am actually quite confident that a global quality brand such as Polestar/Volvo will be able to drive great quality in manufacturing. They are a customer brand at heart and understand the importance quality plays in that brand promise. If the Chengdu facility is any indication, quality will be top-notch.

Tariff Twist

Another issue with manufacturing in China has to do with the recent political tensions between the US and China. With the continued back-and-forth between US and China in this escelating trade war, one of the tactics being proposed is a 5-25% increase in auto tariffs. Most are hopeful some sort of deal with China will get finalized and we can begin to undo these tariffs but that does not seem likely to happen this year. So much anti-China sentiment has been built up in the media, even if a Democrat wins the white house next year, it may be difficult to appear to concede to China. Talks of tariffs may seem dull but indeed may be a major factor in how well Polestar does in the US. If Tariffs were unreasonable, there is likely plenty of demand in the rest of the world to build up momentum while all this eventually gets settled.