Polestar’s 2024 hasn’t started in the best way. On one hand, the Swedish bank SEB, one of the largest in Sweden, devalued the brand from 12 billion crowns to zero on January 18th.
The overall value has decreased by 65% since 2022, now coupled with a stock value loss of 82% in the last year and a target stock price of 1.15 billion dollars per share. Consequently, Volvo and Geely, the two shareholders of the brand, might consider pulling the plug.
Polestar’s struggles could impact Volvo
Concerns about Polestar and Volvo had already been raised due to the similarity of their products compared to the initial expectations. Polestar was initially envisioned as a hypercar manufacturer, following the tradition of its impressive Polestar 1.
However, with Geely’s later acquisition of Lotus and the increasing difficulty in distinguishing Polestar from Volvo, Volvo and Geely might contemplate disengaging.
Polestar, maintaining the tradition of being a racing team, was supposed to be a hypercar manufacturer, as the stunning Polestar 1 had demonstrated. Of course, when that idea was conceived, Geely had not yet acquired Lotus, and in the meantime, Polestar’s cars seem increasingly challenging to understand and differentiate from Volvo. This is a stark contrast to Lynk & Co, another joint venture brand between Geely and Volvo, which is currently thriving thanks to a strong and well-established identity.
However, things have taken a different turn. Despite the initial enthusiasm that led to its IPO on the New York Stock Exchange in 2022, Polestar seems to be facing difficulties, losing 65% of its value since then. This issue is also dragging down Volvo, which, in turn, may lose more value due to its association with Polestar.
According to the Danish newspaper Berlingske, which reported on the SEB’s devaluation, Polestar owes Volvo 20 billion SEK (approximately 1.7 billion euros). This debt is partly because Polestar produces cars in Volvo’s facilities, a factor that has led some, including SEB, to doubt the project.
Moreover, while there are many Polestar 2 vehicles on the roads, a significant portion of them is leased. For instance, in Denmark, there are 4,945 Polestar 2 vehicles, but according to the Danish newspaper Berlingske and FDM (Forenende Danske Motorejere, the Danish Motorists Association), more than half of them are leased, as is the case in Norway and many in Sweden, precisely due to concerns about depreciation.
Geely and Volvo might privatize Polestar
The challenges continue as Polestar’s shares keep decreasing due to intense competition. Daniel Roeska, an analyst at Bernstein, suggests that Polestar is on the road to nowhere. Bernstein hopes to see the brand survive but not necessarily as an independent entity.
It would make more sense for Polestar to become part of the Volvo-Geely ecosystem without being a joint venture between the two. This is especially relevant because, since going public, Polestar has sought funds from its backers multiple times to secure new capital and double its production, raising doubts about its stability.
Facing tough competition
In summary, Polestar is a brand struggling amid fierce competition and the entry of numerous new premium electric car manufacturers, which seem to have a better ability to convince customers.
This competition is affecting everyone. While the current “Ivy League” of electric cars is a duel between BYD and Tesla, with their price cuts, others must strive to survive in a challenging sector. Once again, a comparison with smartphones seems apt: there was a period when an increasing number of new manufacturers entered the market, and many, both old and new, disappeared. The same might happen in the auto industry.
Even Volvo, for example, has lost 44% of its value in the last 12 months, although it has risen by 0.7% in recent days in Stockholm. This decline is certainly due to the Polestar effect but also to both internal and external competition. In contrast to its former racing team, Volvo seems to have an appealing response in its concept like the EX30, along with the advantage of a well-defined historical identity and reputation.
Sources: Berlingske, Automotive News Europe, Bloomberg
