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If you're thinking of getting a Polestar, you might want to keep in mind that the premium EV brand may not be a stand-alone for much longer, if predictions from auto industry analysts and academics are anything to go by. “Fold it back into Volvo,” advises Peter Wells, a business professor and director of the Centre for Automotive Industry Research at Cardiff University in Wales.
Polestar started life in 2005 as the brand name for a Volvo-tuning, gasoline-powered Swedish motorsports team. It was transformed into an EV marque when Volvo bought the team 10 years later. Polestar has operated independently of Volvo since 2017, but both still have production facilities next to each other in Torslanda, Sweden, and both have been ultimately owned since 2010 by automotive giant Geely of China.
Earlier this year, Volvo decreased its stake in Polestar to 18 percent and cut funding. Via an outstanding convertible loan, Polestar still owes the mothership $1 billion.
According to Andy Palmer, former COO of Nissan, the Sisyphean task of making Polestar profitable sooner rather than later can’t be done by cost-cutting alone. “I can easily imagine that there’ll be a conversation going on which considers making Polestar a sub-brand of Volvo, or a sub-brand of Geely,” says Palmer, who has four decades of experience in the automotive industry and was also formerly CEO of Aston Martin Lagonda.
Palmer adds: “Operating as a separate brand is extremely expensive. You’ve got huge marketing costs without having the economies of scale.”
And Polestar—which states it has sold 170,000 cars since it began—isn’t generally viewed as a stand-alone brand, says Palmer: “I think most people in the industry view Polestar as the EV version of Volvo, so having it as a separate brand doesn’t make any sense.”
After Volvo cut its funding earlier this year, Polestar secured a $950 million three-year loan from a banking syndicate led by BNP Paribas, and at the end of August raised a further $300 million in the form of a one-year revolving term loan facility.
This lifeline funding was secured under the leadership of CEO Thomas Ingenlath, a former chief designer for Volkswagen and Škoda. However, following losses deepening to $1.46 billion amid slowing EV demand, Ingenlath resigned from Polestar on August 27, although his LinkedIn page continues to state he’s still the Polestar CEO; his contract runs until October 1.
Ingenlath has been replaced as CEO by Michael Lohscheller, an automotive industry veteran who previously helmed Stellantis-owned car maker Opel. On September 3, Lohscheller was joined by Jean-Francois Mady, a former senior Stellantis beancounter (full title: Senior VP of Global Accounting Operations and Finance Transformation). Mady replaces Per Ansgar, who had been CFO on a transitional basis since January.
Ansgar told investors on an earnings call at the end of August that Polestar’s sub-$1 share price wasn’t optimal. “We have been trading below $1 for quite some time,” he said, adding ominously that “we have up to early next year to heal this deficiency.” Polestar's stock high since listing was more than $15 in November 2021—on August 7, 2024, it closed at just 63 cents.
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Nevertheless, Ansgar looked on the bright side: “With our increased deliveries and sales on Polestar 3 and Polestar 4, and continued good feedback from customers, the share price should go up above $1.”
In a press release, Lohscheller said new CFO Mady brings a “wealth of experience and best practice competence from our industry,” and that the pair’s goal is to “make Polestar a financial success.”
That’s a tough ask in today’s slowing EV market. In 2023, Polestar missed its sales target of 60,000 vehicles (lowered from 80,000 earlier in 2023), delivering 54,600 vehicles, the vast majority of which being the aging, and China-made, Polestar 2. The company revealed its revenue in the second quarter of this year had decreased by $319.6 million, or 26 percent, “due to lower global vehicle sales and higher discounts in a competitive market.”
Dislodging a design-led CEO and installing two numbers-focused executives is an obvious move, says Palmer, now the chair of Pod Point, a UK provider of EV charging stations.
Putting a designer at the head of Polestar had been a “brave experiment,” Palmer says, but adds: “I don’t know whether appointing accountants [in Ingenlath’s place] is automatically the right answer, but having executives with car industry experience that understand financing and the manufacturing of vehicles is kind of mandatory.”
Notwithstanding the new hires, Polestar could be on borrowed time as a stand-alone, says Palmer. “I think we’re going to see a lot of car companies fail, especially those operating in the premium space.”
Professor Wells agrees, but says that “appointing beancounters is not the only solution” for Polestar. “The key problem is that consumers don’t know what the brand is supposed to represent, and how it is distinguishable from Volvo. [The new executive team] have to decide whether they are going to keep it as a separate brand or reduce it to a sub-brand. In practical terms, the [sub-brand option] might be the best answer for them.”
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Wells says Polestar, which was contacted for this piece, hasn’t distanced itself sufficiently from Volvo. “There’s not enough space between the design language of the two brands,” he offered. Indeed, Volvo’s new EV flagship, the EX90, is basically a family-friendly version of the Polestar 3, as it has nearly the same underpinnings.
To set itself as truly apart from Volvo, Polestar should have provided more “visual differentiation,” says Wells, as well as offering “differences in terms of performance, but also the other features in the car.” He adds that Polestar “needed to have better surprises and delights” rather than “position [its] cars as being a slightly higher price than a Volvo equivalent.”
And Polestar is one of many EV brands exposed by a falling tide, he believes. “In a growing market, there’s room to make mistakes,” says Wells. “But in a static or depressed market, the pressure [to be profitable] is intense.” The new executives should “fold [Polestar] back into Volvo to a greater extent, and accept that it will be a niche brand for quite some time to come.”
Polestar’s branding problems began early, says Wells. “It was odd that [Polestar was] started by [Volvo] acquiring this high-performance petrol business, and then rebadging it as an electric premium brand.” That was a “mistake,” judges Wells. “[Polestar] was also too slow to bring product into the market and too slow to make money when the sun was shining.”
Polestar’s new plant in South Carolina should help it dodge the latest US tariffs against China-manufactured cars, but avoiding these extreme costs is “just part of the story,” says Wells, venturing that current market volatility has many causes, not just protectionist ones.
This market volatility is a “blip,” said Dominic Vergine, the CEO of British startup Monumo, a company that applies machine learning and AI to improve EV powertrains. “I see technology coming through on the battery side and on the engineering side in EVs that are going to lower costs,” he says, which is an opportunity that brands such as Polestar could leverage, he suggests. “There is going to be a huge shift in engineering over the next decade because of what AI is enabling, and the early adopters of this technology will be much more successful than the laggards.”
Vergine places Polestar into a second tier of EV brands. “Are they as well known as Tesla? No. Are they better known than BYD? Yes. But they’re second tier, and that’s a challenge for the new executives.”
“Whether Polestar stays as a stand-alone brand likely won’t be their decision to make,” says Vergine. “I’m assuming that Geely must have a greater strategy for Volvo and Polestar. The new executives will be charged to run a very competent ship, keep the budget down, and then changes will be made once the market lifts again.”
Wells agrees with the assessment that today’s slowing market is temporary. “We know that in terms of the big picture, we are very close to the edge. We’re most likely to exceed the 1.5 degrees centigrade threshold this year, so the pressure of doing something about climate change will only grow. Despite the short-term pressures, despite the issues around not being able to sell enough electric vehicles and the emergence once again of hybrids—despite all of that, in the long term, the market will go electric.”
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However, for stand-alone EV brands like Polestar, the tide may rise too late. “How long will [Polestar] be able to continue to fund the business under current circumstances?” asks Wells. “The upmarket part [of the auto business] is too crowded” for every premium EV brand to survive, he says. “[Polestar] haven’t been able to sell enough cars to justify all the costs [of manufacturing and marketing]. Yes, they have beautifully designed cars, but they can’t sell enough of them. That’s the grim reality.”
This is due at least in part to Polestar’s relative lack of brand recognition, which is not an issue for the 97-year-old Volvo. “Who is Polestar?” asks Stephanie Valdez Streaty, director of industry insights for Cox Automotive, publisher of the Kelley Blue Book vehicle valuer. “The average consumer doesn’t know. If I asked 10 of my friends, maybe only two or three would have heard of Polestar.” But all of them have heard of Volvo. “It will be critical for the new CEO to get in there and really increase their brand awareness," she says.
According to Streaty, the rollout to customers this month of the sporty built-in-the-USA Polestar 3 SUV could boost the brand's bottom line. "US consumers love SUVs," she says. "So depending on how that rollout goes, it could be effective for Polestar." Lohscheller will certainly be hoping so, especially considering the swing needed from the China-made Polestar 2 sales to the new models.
Polestar 3 has a starting sticker price of $74,800, with the highest-spec 3 Long Range Dual Motor Plus & Performance costing $86,300. The Polestar 4 SUV coupé (which, despite the numbering convention, sits in price and size between the 2 and the new 3) has no rear window, but four doors.
“I think [Polestar] has a great sustainability story,” says Streaty, “and building in South Carolina is going to help them, but when you’re competing against legacy brands with a long-established retail network, it’s tough to be a stand-alone.” Indeed. Just ask Fisker.
