Tesla ( TSLA 3.23% ) is the premier electrical car (EV) maker within the U.S. proper now, promoting extra battery EVs than all different producers mixed. It has a 72% share of the overall market.
Cox Automotive says that not solely does it dominate the EV market, however Tesla additionally offered extra luxurious autos within the U.S. than Audi, BMW, Lexus, and Mercedes-Benz.
However the electric car market is getting extra crowded, and Tesla had an 80% share of the market only one 12 months prior. One of many latest entrants into the U.S. electrical house is Polestar, a Swedish producer backed by Volvo ( VLVL.Y 0.71% ) that may quickly be going public by means of a reverse merger with particular function acquisition firm (SPAC) Gores Guggenheim ( GGPI -2.80% ).
A luxurious pedigree
Polestar acquired its begin as Volvo’s luxury EV nameplate whose Polestar 1 carries a $155,000 price ticket. It started promoting its latest EV, the $46,000 Polestar 2, within the U.S. earlier this 12 months, making it a viable various to the Tesla 3, which has a base worth of $42,700.
Though Tesla’s inventory is down 20% from its all-time excessive, it stays 80% above the low level it hit virtually one 12 months in the past and is greater than 1,700% increased than the place it traded in 2019.
For traders who might really feel they missed the best progress interval of Tesla and marvel if Polestar may emulate that trajectory by way of car gross sales and inventory worth — Gores Guggenheim shares stand solely $1.89 above their $10 per share IPO provide worth — let us take a look at whether or not the EV upstart may have the ability to tackle Tesla.
Revving its engine
Polestar’s gross sales are taking off, with the EV maker reporting in January that it had “delivered on its international gross sales goal of 29,000 autos in 2021, representing year-on-year progress exceeding 185%.”
That got here because of the variety of markets it sells in increasing to 19 from 10 in 2021, whereas retail areas greater than doubled to over 100. Polestar says it expects that quantity to develop to 150 by the top of 2022, and to be in a minimum of 30 international markets by the top of 2023.
Tesla has a world footprint too, and its just lately opened Berlin manufacturing facility will enable it to extra readily attain prospects in Europe. Nevertheless, Bloomberg is reporting that the Gigafactory will solely produce 30,000 EVs this 12 months as an alternative of the anticipated 75,000, and it will not see a ramp-up in manufacturing till 2023 (the plant has the capacity to make 500,000 vehicles).
It is also seen manufacturing suspended for 3 weeks at its Shanghai facility as China locked down the area once more over a COVID-19 outbreak — a lack of about 40,000 autos produced — and it is potential manufacturing may very well be suspended by means of Could.
Whereas even the lowered numbers exceed something Polestar is doing, Tesla had over a decade to construct as much as these ranges and Polestar is admittedly simply getting began.
Essential business backing
Polestar additionally has vital business backing and help. Though Volvo is in competitors with the luxurious EV upstart, additionally it is an investor and can nonetheless be a part-owner of it following its reverse merger (Chinese language automaker Geely owns Volvo Automobiles and can management a majority of Polestar’s voting pursuits too).
Volvo’s involvement has been, and can continue to be, vital to Polestar’s success. Whereas its autos have been made beforehand at Geely’s manufacturing plant in China (the plant is now owned by Volvo), it is going to have a second Volvo-owned facility in South Carolina the place the brand new Polestar Three SUV can be produced. Polestar can also be utilizing Volvo’s service community for car upkeep on its automobiles.
A take care of Alphabet to develop the world’s first built-in Android-powered car working system for Polestar was signed by means of Volvo. Later this 12 months, Qualcomm‘s Snapdragon Cockpit Platform will assist energy the system.
However Polestar is signing its personal agreements now, akin to these with ChargePoint ( CHPT -5.25% ) and Electrify America to offer charging stations for its autos, together with offers with Enterprise and Hertz to promote EVs to their rental fleets.
Caught in a site visitors jam
But as talked about earlier, the EV market is turning into thick with competitors — not solely from different pure-play EV producers like Lucid and Rivian, however outdated line producers akin to Ford and Common Motors and Polestar’s former guardian, Volvo, too.
Whereas tax credit performed a job in EV adoption early on, Tesla reached maturity on qualifying for them in 2018 and has not seen gross sales dented. It can nonetheless be a menace, however the Polestar 2 nonetheless qualifies for the complete $7,500 credit score, so its worth can be rather more aggressive in comparison with Tesla.
Finally, there may be nonetheless a large and growing market for EVs, particularly as automakers akin to Ford and GM promise to section out gas-powered automobiles over time, and lots of European international locations are mandating fossil gasoline autos be eradicated. But with many producers entering into the void, will probably be laborious for anybody firm to face out.
Can Polestar match Tesla’s progress trajectory? I would not depend on it, even when Tesla’s market share continues to erode. However that does not imply Polestar (by means of the Gores Guggenheim clean examine firm) cannot nonetheless be a very good wager on the electrical car future. Simply do not anticipate it to observe that very same meteoric path.
This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis – even certainly one of our personal – helps us all assume critically about investing and make selections that assist us grow to be smarter, happier, and richer.
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