Should Volvo take Polestar (PSNY) private? Investment research firm weighs in
Should Volvo take EV maker Polestar (PSNY) private? Investment research firm Bernstein says it may make more sense.
Polestar built high-performance vehicles alongside Volvo for over two decades. After Geely bought out Volvo, Polestar was established as an independent electric vehicle brand in 2017.
The brand’s first passenger vehicle, the Polestar 1, was a hybrid that offered up to 78 miles of all-electric range. Polestar’s first all-electric vehicle, the Polestar 2, was revealed in February 2019.
Since launching the Polestar 2 over three years ago, Polestar has expanded into 27 markets globally. The Polestar 2 has become a top seller in key EV markets like Norway, Sweden, Germany, and others.
Polestar hit a milestone with its 150,000th Polestar 2 rolling off the line last August. However, the EV maker has struggled to gain ground with rising competition.
The EV maker delivered 54,600 vehicles last year, up 6% from 2022. Despite cutting its delivery target in November, Polestar still missed it by over 5,000 units. Initially, Polestar expected to deliver 80,000 vehicles last year.
Polestar believes its upcoming electric SUV and first CUV will help spark demand. After delaying Polestar 3 production, the company is expected to begin building the electric SUV in early 2024.
Meanwhile, Polestar 4 production began in China in November. The EV maker sold 880 Polestar 4 models in China last year.
Should Volvo take Polestar private?
Polestar’s deliveries fell in the last three months of the year due to a “challenging market,” according to CEO Thomas Ingenlath.
The EV maker now expects 2023 gross profit margins to be around break-even from the previously revised 2% target (down from 4%).
Although the delivery growth pushed revenue up to $367.7 million (+25%) in Q3, higher costs led to gross margins falling 63% to $36.3 million.
The rising costs led to an operating loss of $261 million (+33%). Polestar had $951.1 million in cash at the end of September, not including an additional $450 million loan from Volvo and Geely.
Polestar’s stock has fallen over 62% in the past 12 months and is down over 85% from its all-time highs.
Bernstein analyst Daniel Roeska said in a note that Polestar is “on a road to nowhere.” The note added, “We love the innovative asset-light strategy, we like the cars, but we don’t think the company should be a stand-alone equity.
The investment research firm is initiating coverage on Polestar’s stock with an underperform rating. It also gave it a $1.15 target share price, suggesting over 40% downside.
Roeska said that although “we would like to see the concept and brand survive,” it believes it “would make more sense for Polestar to eventually fold back into the Volvo Cars-Geely ecosystem.
Ingenlath defended the EV maker, saying, “Anybody interested in the value of the company only needs to go to the ticker to see that it is trading at $4 billion worth.”
He didn’t reveal whether Volvo or Geely was pushing Polestar to go private. Ingenlath did say, “It’s our own interest to not make this company always dependent on being funded by our shareholders.”
Electrek’s Take
Despite Q4 deliveries slowing, Polestar has a lot to look forward to. Its first electric SUV, the Polestar 3, is expected to launch soon.
In the US, the Polestar 3 will start at $83,900. It will come in two configurations – a long-range dual motor and a performance pack version. Both will be powered by a lithium-ion battery with 111 kWh capacity.
The standard version (starting at $83,900) will include up to 300 miles EPA range. The performance version will include 517 hp and 671 lb-ft of torque for a 0 to 60 mph sprint in 4.6 seconds. It will feature a 270-mile range for an MSRP of $89,900.
The electric SUV will face stiff competition, including the Rivian R1T, Tesla Model Y (and Model X), and BMW iX.
Polestar will also scale production of the Polestar 4 in China. The brand is deploying a “targetted approach” with key EVs hitting major auto markets.
Other EV startups, including Lucid, have struggled to gain traction, with new EVs flooding the market. Price cuts from leaders like Tesla and BYD have made it hard for rivals to compete.
Source: Bloomberg
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Environment
Toyota the EV battery supplier? Honda will use them to power up its 400,000 hybrids in the US
Toyota is now a battery supplier? That’s the plan. Honda will use Toyota’s batteries to power up its around 400,000 hybrids sold in the US.
Toyota will supply batteries for Honda hybrids in the US
Toyota’s $14 billion battery plant in North Carolina is ready for business. The facility will begin shipping out batteries next month, and it looks like Toyota already has its first customer.
According to a new Nikkei report, starting in fiscal 2025, Toyota will supply batteries for the roughly 400,000 Honda hybrids sold in the US.
Honda currently uses batteries from China and Japan for vehicles sold in the US, but the company is (like most) preparing for changes under Trump.
Honda’s electrified vehicles, including EVs and hybrids, accounted for over a quarter of US sales last year. The company sold over 308,500 hybrids and 40,400 electric vehicles in the US in 2024. The batteries will likely be used in the CR-V and other Honda hybrid vehicles.
Earlier this month, an extra 10% tariff on imports from China took effect. And that’s on top of the 10% imposed in February.
With more expected, including a 25% increase in vehicles imported from Japan, automakers are tightening up their supply chains.
A 25% tariff on Japanese vehicles, up from 2.5% currently, is estimated to cost the six major Japanese automakers about $20 billion in the US.
Tariffs on imports from Mexico and Canada could cost Honda roughly $4.7 billion alone. Teaming up with Toyota to use its batteries for its hybrids is part of Japan’s broader global plans to ween off dependence on China and others for batteries and other emerging tech.
The new US plant, Toyota Battery Manufacturing North Carolina (TBMC), is over seven million square feet, or about the size of 121 football fields.
As Toyota’s first in-house battery factory outside of Japan, the plant could be a game changer as Trump’s tariffs take effect. Securing Honda as a buyer will already help Toyota cut costs as it ramps up output.
Toyota plans to ramp up electrified vehicle (EV, PHEV, and hybrid) sales in North America from around 40% last year to 80% by 2030.
Electrek’s Take
Trump’s tariffs are already causing havoc, with nearly every automaker warning that they put the US further behind. Overseas automakers are not the only ones feeling the heat, either.
The “Big Three,” GM, Ford, and Jeep maker Stellantis all build vehicles in Canada and Mexico. GM cut output at its plant in Mexico in January, where the electric Chevy Equinox, Blazer, and Honda Prologue are made. Stellantis halted operations at its Brampton Assembly Plant in Canada last month, where it was expected to launch the Jeep Compass EV production. What’s next?
For Toyota, it looks like its $14 billion bet to build batteries in the US is already paying off. Now, we just need it to introduce more EVs.
After unveiling three new electric SUVs in Europe last week, including the updated bZ4X, Toyota hinted more is on the way for the US. Check back soon for updates.
What do you think? Do you want to see more Toyota EVs in the US, like the new C-HR+? Let us know your thoughts in the comments.
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Environment
If Musk wants to sell Tesla cars to conservatives, Tesla needs stores and service in red states
Elon Musk wants to sell Tesla cars to conservatives, but if that’s the strategy, the automaker should start with having stores and service centers in red states and rural areas.
It’s no secret that Elon Musk’s approval ratings with progressives have been plummeting over the last few years and even more so in the previous few months.
Since he has control over Tesla and he is the only official spokesperson since he let go of the PR department in 2020, the CEO is dragging the automaker along for the ride.
This is a problem for Tesla as Democrats are much more likely to buy electric vehicles than Republicans:
Tesla’s sales have been crumbling over the last few months, and after the stock crashed 15% last Monday, President Trump held a controversial commercial for Tesla with Musk on the steps of the White House on Tuesday.
A day later, it was reported that Musk plans to give Trump another $100 million in political donations.
It was an apparent attempt to try to promote Tesla to Trump’s fans: conservatives.
Based on a Tesla inventory check and new order delivery timeline, we reported that the Trump ad appeared to have little to no impact on the demand for Tesla vehicles.
It could be that people see through Musk and Trump’s quid pro quo and, therefore, don’t value Trump’s “Tessler” endorsement seriously. Still, there’s also a more practical reason why Trump’s fans and conservatives generally don’t buy more Tesla vehicles: the locations of Tesla’s stores and service centers (hat tip to Ben).
Even if some Trump fans were interested in buying a Tesla after the White House commercial last week, they might have been turned off by the idea of having to drive several hours to a store or service center.
Tesla does not have stores or service centers in Alabama, Arkansas, North and South Dakota, Kansas, Montana, Nebraska, or Wyoming.
In some cases, it’s not entirely Tesla’s fault, as some of these states have laws against Tesla’s direct sale models. They force automakers to go through third-party franchise dealerships. This is an abuse of old state laws aimed at protecting dealers against unfair competition from the automakers they represent.
Car dealer lobbies use their influence on state legislatures to use these laws to block Tesla, Rivian, Lucid, and other automakers who never had franchise dealerships from operating their own stores and service centers.
But on top of not having locations in several red states, Tesla also primarily has locations in urban areas, whereas conservatives disproportionally live in rural areas.
The automaker has several dead zones and doesn’t operate locations in smaller cities and towns where there are several Ford, GM, Toyota, and other car dealers:
While it certainly does happen, it’s hard to convince someone to buy a car if they have to drive several hours to pick it up and have it serviced.
Electrek’s Take
In short, it’s not only harder to convince conservatives, on average, to buy an electric vehicle, but Tesla is also not correctly set up to sell and service cars in conservative regions of the US.
Though, I think that’s a small part of the problem.
Cars are not supposed to be political.
Even if Tesla successfully converted a significant percentage of conservatives to electric vehicles, it wouldn’t stop the company’s brand destruction.
Tesla’s reputation amongst Democrats and independents has sharply decreased over the last few years, and especially over the last few months, and that’s thanks to Elon Musk alienating them.
It’s tough to be a successful consumer product company when you have alienated 50% or so of your market.
Tesla is basically becoming the MyPillow of Trump’s second term.
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