Polestar’s problems don’t seem to be over. According to some analysts like Peter Wells, an economics professor and director of the Centre for Automotive Industry Research at Cardiff University, the only positive solution would be to return Polestar to being a sports car family within Volvo’s range.
Now, with ongoing financial issues throughout 2024, Geely has already decided to take the majority of shares, leaving Volvo with 18% to avoid any influence on it. They also replaced CEO Thomas Ingenlath, who resigned on August 27, 2024, after losses of $1.46 billion, partly due to the electric vehicle market crisis, especially in Germany. Ingenlath has been succeeded by Michael Lohscheller, who previously led Opel and is experienced with troubled brands. However, this may not be enough.
Not every brand can be like Cupra
In recent years, several new car brands have been born from a division of historic companies, once representing a special family of vehicles, more prestigious or uniquely successful. Only Cupra has achieved success, even surpassing its parent company Seat in sales and reputation, once its sporting division.
Cupra’s success can be attributed to its well-defined identity, crafted at its launch. Despite initial doubts from Volkswagen, Cupra’s bold aesthetics, sharp contrasts, specific colors, and a dedicated community known as the “Tribe” helped it stand out from Seat. Cupra represented a sportier, more youthful, contemporary, and affordable alternative to Audi, benefiting from some shared engines, while also differentiating from Volkswagen’s R or GTI ranges. Initially, Cupra vehicles were heavily modified Seats, similar to Abarth, and only recently have they had their own dedicated designs.
Other attempts have not been as successful. For example, FCA spun off SRT from Dodge, a brand already known for its sporty vehicles, in an effort to create an even sportier brand. The famous Viper was sold under the SRT brand for two years, from 2012 to 2014, before the brand was discontinued in 2021 after poor reception.
Similarly, PSA spun off DS Automobiles from Citroën as a high-end vehicle family. However, DS has faced multiple challenges: delayed vehicle development, cars that didn’t convince their target audience, and the formation of Stellantis. Within PSA, DS made sense as the French group lacked a brand to compete with BMW, Mercedes, and Audi. However, with Stellantis, Alfa Romeo, Maserati, and even Lancia already existed, so DS lost momentum and remains at risk.
Polestar’s case is different. Geely separated a sports division from a premium brand, initially launching with the hypercar Polestar 1, a fascinating vehicle originally a Volvo concept car. However, the strategy shifted, focusing on mid-to-high-end electric cars, with few standout elements and designs not far removed from Volvo’s own vehicles. Meanwhile, other similar brands like Zeekr and Smart were introduced, but only Zeekr has found success in China, while Volvo continues to perform well globally.
Polestar initially saw positive results, particularly in Denmark and Norway, where the Polestar 2 sedan (here our test drive) sold well. But by late 2023, things changed.
Polestar’s uture
As reported by Wired US, Andy Palmer, former COO of Nissan and former CEO of Aston Martin Lagonda, said, “Operating as a separate brand is extremely costly. You have huge marketing expenses without economies of scale.” This is especially true for Geely, which created several nearly new brands. Even Smart transitioned from making a much-loved compact car to offering yet another range of premium electric SUVs, requiring extensive marketing campaigns with initially low sales.
Palmer continues: “I think most people in the industry see Polestar as the electric version of Volvo, so having it as a separate brand doesn’t make any sense.” At least not for now. Polestar could become more interesting if it returned to producing high-performance cars, as demonstrated by models like the Polestar 2 BST and Polestar BST Concept.
Looking to the future, after Volvo cut investments in the brand at the beginning of 2024, Polestar secured a $950 million loan over three years from a consortium of banks led by BNP Paribas. At the end of August 2024, it raised an additional $300 million through a one-year revolving term loan. This vital funding was secured by Ingenlath and will now be handled by Lohscheller.
Lohscheller, an automotive industry veteran, took charge on September 3rd, working alongside Jean-Francois Mady, the new CFO and former Senior VP of Global Accounting Operations and Finance Transformation at Stellantis.
Mady replaced Per Ansgar, who, in late August, reassured investors that, despite Polestar’s share price falling below $1, “with increased deliveries and sales of Polestar 3 and Polestar 4, along with continued positive customer feedback, the share price should rise above a dollar.” Lohscheller and Mady now face the challenge of making Polestar “a financial success,” an already difficult task made more complex by the declining demand for electric vehicles in key European markets, except for France.
However, Polestar has a potential advantage: unlike the Polestar 2, which is produced in China and subject to a 19% tariff like the rest of the Geely group, the new Polestar 3 and Polestar 4 are made in the U.S. (North Carolina) and South Korea, potentially giving them an edge over rivals.
Many in the industry see Ingenlath’s replacement as a positive step. Ingenlath, an automotive designer, was considered “a bold experiment.” Palmer adds that “having executives with experience in automotive finance and production is almost mandatory,” a lesson Geely seems to have learned twice, as Lynk & Co, another brand in a joint venture with Volvo and in better shape than Polestar, also replaced its CEO, Alain Visser, with Nicolas Lopez Appelgren, who has extensive experience at Volvo.
Still, these new appointments may not be enough. The premium segment is saturated, with Palmer predicting, “we will see many automakers fail, especially those operating in the premium segment,” due to the sheer number of brands. Additionally, the separate identity from Volvo, which consumers struggle to understand, remains an unresolved issue. Peter Wells points out that the new executive team “must decide whether to maintain the brand as separate or reduce it to a sub-brand,” much like Hyundai’s Ioniq range or Geely Auto’s Galaxy range, initially intended to be independent brands but wisely repositioned as sub-brands.
