Luxury electric vehicle maker Polestar is crediting new federal tax rules on EVs with lifting its leasing business.
Polestar North America CEO Gregor Hembrough said lease volume on the Polestar 2 fastback had ticked 3 to 4 percentage points higher in mid-March than the prior month. He attributed it to a “very competitive” 36-month lease offer that includes the $7,500 commercial clean vehicle tax credit now available on EV leases.
The Polestar 2 lease starts at $469 a month, down from $529 in February.
“We’re starting to see indicators that consumers are going back to leasing in the EV segment,” Hembrough told Automotive News.
Leases account for 60 percent of Polestar 2 deliveries, up from 40 percent a year ago.
Historically a growth engine for luxury automakers, leasing has slowed since the pandemic and supply chain challenges cratered inventories and factory incentive spending.
Edmunds’ data shows luxury new-vehicle lease penetration plummeted to 26 percent in the fourth quarter of 2022 compared with 53 percent in the same quarter of 2019, pre-COVID.
The new leasing momentum is critical for Polestar retailers, who are struggling with limited volume from a single model as they invest in high-rent urban stores.
The Volvo affiliate delivered 9,874 Polestar 2 electric fastbacks in the U.S. last year.
Meanwhile, the higher-volume Polestar 3 midsized crossover is nearly a year behind schedule and won’t arrive stateside until late 2023. The U.S. will be the largest single market for the Polestar 3, with North America accounting for a quarter of global sales.
One Polestar retailer said he is “super frustrated” by the lack of throughput.
“Dealers are struggling to cover their expenses,” said the source, who requested that he not be identified. “If you’re looking at the cost of being in a shopping mall, it can be more expensive long term than owning your building.”
And while the first Polestar 3 vehicles will arrive by year-end, volume likely won’t ramp up until next summer when U.S. production begins at Volvo’s factory near Charleston, S.C.
“That’s a long time from now for dealers to keep going,” the retailer said. “There’s going to be a lot of pressure on margins.”
Hembrough acknowledged the challenge facing his retailers.
“I know the traffic has not been what they wanted,” the exec said. “The handover has not been what they wanted, but at the same time, we’re looking at all these other ways that we have an influence in the marketplace, and we’re acting upon those.”
In addition to being able to offer a lower price, Hembrough is leaning on marketing to drive foot traffic into stores.
“We are far more tactical in our advertising about highlighting the $7,500 clean air rebate and a very competitive lease payment,” Hembrough said.
Polestar 2’s model year 2024 update, which delivers rear-wheel drive, a more powerful motor, and a new front fascia design, could rekindle consumer enthusiasm for the three-year-old model.
The automaker has pulled forward plans to build the order book for the Polestar 3, investing $20 million in a media campaign in the second quarter to drive awareness of the new model and the young brand.
“So a TV campaign to drive brand awareness,” Hembrough said, laying out his marketing plans. “Drive consideration in a segment which is now moving to more lease orientation. And then, with a one-two punch on April 4, we start overlaying it with the incremental media creative for Polestar 3.”
Hembrough said he is doing what he can to help the brand’s 28 stores manage until the high-volume crossover arrives.
“What I can do is put more media into the marketplace,” he said. “The things that we have a tough time influencing are growing interest rates and consumer confidence. We’ve got to navigate this the best way that we can.”