Sporting signature Polestar gold seat belts, the Polestar 2 will cost about 59,900 euros ($68,100) for its launch edition and can be driven for around 275 miles before it needs recharging - broadly in line with the Model 3's current price in Europe of 58,800 euros and about 260 miles range.

The Model 3 and Polestar 2 are cheaper than most of the electric models launched by traditional premium carmakers so far, as Tesla and Polestar bet mass market customers are on the verge of adopting battery technology. Both have also promised even lower prices later on.

Polestar's launch comes as Tesla is trying to ramp up Model 3 sales in Europe and China, where recent government subsidies and programmes are boosting the take-up of electric vehicles. A cut in subsidies in the United States, in contrast, is dampening demand in the Californian start-up's home market.

Tesla was dealt a setback this month after influential U.S. magazine Consumer Reports withdrew its endorsement for the Model 3, citing reliability problems. Analysts say Polestar has strong engineering as it is built on the Volvo platform.

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Polestar's chief executive told Reuters he hoped to sell "north of" 50,000 Polestar 2s annually within two or three years after deliveries start from the first half of 2020, but said how much production capacity the company sets up would depend on market conditions.

"If the market develops fine, I don't think the production volume will be the limitation. It depends much more on how the car resonates with the market, how the market develops and how the tariffs develop," Thomas Ingenlath said.

Carmakers including Volkswagen, Mercedes-Benz and BMW are beginning deliveries of premium electric cars unveiled over the past year as they try to muscle in on a market that Tesla has dominated so far.

Securing the electric market has become increasingly important as demand for traditional combustion engine vehicles slows in China and Europe, partly due to tariffs stemming from Washington's trade war with Beijing.

Although electric carmakers have also been affected, with Tesla having adjusted Model 3 prices in China after tariffs, Ingenlath said he expected electric sales to be supported by government subsidies and as the market grows from a low base.

Electric vehicle sales forecasts support this view.

Made at Polestar's facility in China, the Polestar 2 is the first of five fully electric vehicles that Volvo has promised.

The car, which Polestar hopes to largely offer via a Netflix-data-style monthly subscription model that covers insurance and maintenance costs, will be initially sold in China, the United States, Canada and six European markets.

Ingenlath said he expected Asia, North America and Europe to each account for roughly a third of sales, though China would be slightly larger.

Volvo, which owns half of Polestar with the rest held by its Chinese parent Geely, said earlier this year it was talking to investors about raising funds to support Polestar's electrification costs. Ingenlath said it was too early to give an update on how that was progressing.

REUTERS