Swedish EV maker Polestar (PSNY) saw its stock rise 5% in premarket trading on Thursday after achieving a major milestone by starting production of its Polestar 3 SUV in South Carolina. The move is a way, among other things, to avoid US tariffs on China-made EVs.

Polestar, founded in 2017 and spun off from Volvo and parent company China’s Geely in a merger in 2022, will use Volvo’s existing factory in the Charleston suburb of Ridgeville, S.C., to build its Polestar 3, a full-size EV SUV similar to Volvo’s upcoming EX90 EV.

The timing is critical for Polestar. It assembles its Polestar 2 sedan crossover and Polestar 3 at a facility in Chengdu, China — and those cars are subject to the US tariffs of 100% on Chinese-made EVs, a policy implemented by the White House earlier this year. All Polestar 3 EVs sold to US customers will be made at the South Carolina plant, Polestar said. That means they won't be subject to tariffs.

Polestar didn’t push the start of US production of the Polestar 3 ahead due to the new tariffs. The decision and timing were planned years ago, Polestar CEO Thomas Ingenlath said in an interview with Yahoo Finance. “It was a strategy that we have kicked off years ago; it's the first step of our journey, of course a very, very big day and exciting day for us here in South Carolina,” Ingenlath said from the factory floor.

Polestar’s strategy is an “asset light” one: The company intends to use existing technologies and assembly plants owned by its partners — Volvo and Geely — to develop and build its cars cheaply and efficiently.

The asset-light business model meant Polestar cars were going to be built in places with cheaper labor costs, like China. But recent legislation in the US and Europe is putting a strain on manufacturing in some countries, and localizing production — if possible — may be the way to go.

There are other benefits to localization, according to Ingenlath.

“[Protectionism is] not the only reason why we would globalize our manufacturing footprint; there are certain logistic reasons as well, environmental reasons you want to be as close as possible [to the end market],” Ingenlath said as an example, but added that Polestar “cannot produce each and every car everywhere … it will be impossible for a company like Polestar to produce each and every car in each and every country.”

Companies like Polestar need to find the right balance, he said, weighing cheaper manufacturing and supply chain costs on one hand and geopolitics, logistics, and goodwill from being locally made on the other. Polestar will build the Polestar 3 in South Korea starting in 2025, meaning the vehicle will be built in three different countries.

Finding that balance is a difficult task for an upstart like Polestar and its chief executive, whose background is in automotive design. (He’s designed cars for Skoda, Volkswagen, Volvo, and Polestar. )

The CEO said the Polestar 3 is a “key product” for the company in the US market — especially in the luxury premium segment. “It's certainly a perfect fit ... the fact that we are producing for the US market, in the US, and offer that all-electric premium SUV ... gives it that extra importance," he said.

The SUV, he added, represents the “core of our company" and will be on sale in the US later this year starting at $74,400.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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