By Deborah Mary Sophia and Marie Mannes

(Reuters) -Polestar will focus more on profitable Europe rather than the U.S and China, the company's CEO said on Monday, as the Swedish EV maker seeks to pull itself out of chronic losses and mounting debt.

Grappling with a cash crunch amid a broad slowdown in EV demand Polestar has made major strategic changes over the past few months after auto industry veteran Michael Lohscheller took over as a CEO.

Focusing on Europe, which accounts for 75% of sales, aggressive cost cuts and shifting to a traditional dealership have been some of the changes.

"Europe has absolutely the highest priority ... we focus a lot on our strengths and the strengths are really in Europe for sure - we have a good service network, a lot of dealers together with Volvo, our brand has a very good awareness," Lohscheller said on a call to analysts.

Its Polestar 4 model, priced at 57,900 euros in Germany, stood for nearly half of its sales in the first quarter, with its Polestar 3 that starts at 74,590 euros making up 20% of the around 12,304 vehicles sold in the quarter.

The increasing sales of the two models helped its net loss narrow to $190 million in the quarter, from $276 million a year earlier, while also aiding its gross margin in turning positive to 6.8% in the period from a negative margin of 7.7% last year.

Polestar's U.S.-listed shares rose as much as 5.5% before paring gains to trade down marginally.

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Polestar has tried to conquer both the U.S and China, with mixed results, and tariffs adding an extra burden.

While the automaker has sold the Polestar 3 - which is produced in America - to the market, the popular Polestar 4 has continued to be delayed to its customers and will not be shipped to the country until production starts in South Korea in the second half of this year.

Another upcoming model, Polestar 5, is also produced in China at a Geely-owned factory and is expected to start sales later this year.

This comes despite U.S slashing on Monday the tariffs on Chinese imports to 30% from 145%.

Polestar has also struggled to tap the very profitable market of China - where domestic rivals reign the market with cheaper models and superior tech - and ended in the quarter its partnership with Geely's Meizu.

(Reporting by Deborah Sophia in Bengaluru and Marie Mannes in Stockholm; Editing by Shailesh Kuber and David Evans)