Polestar, the Chinese conglomerate Geely’s electric vehicle division, will have a new CEO. Thomas Ingenlath, who has been the company’s CEO since it was established as a stand-alone automaker in 2017, is scheduled to retire on October 1. In his place, Michael Lohscheller will work to establish Polestar as a major player in the automotive industry rather than just making it operate as an electric vehicle start-up.
Over the past ten years, Michael Lohscheller has served as CEO of multiple other automakers. He oversaw Opel from 2017 until 2021 before taking a job as VinFast’s global CEO.
In just seven months, he left to join Nikola, a manufacturer of big rigs powered by hydrogen and batteries. According to his LinkedIn profile, he served as CEO and president of the company until September 2023.
Polestar, which offers three models at the moment, the Polestar 2, Polestar 3, and Polestar 4, had difficult sales first half of 2024. Around 20,200 cars were sold worldwide by the Geely subsidiary, a 27% decrease from the previous year.
Since import tariffs have increased, the aspiring automaker’s plans to expand into the United States have been almost hampered by the fact that all three models are currently being assembled in China.
At least domestically, its prospects are centred around the Polestar 3, which just started producing locally in South Carolina, avoiding expensive import taxes and minimising losses.
Polestar is aiming to compete against brands like Mercedes-Benz, BMW, and Porsche. Put differently, the company is placing its bets on expensive vehicles in a market that seems to prefer less expensive vehicles, so it will be interesting to see what the new CEO can do.
Challenges Faced By Polestar
Polestar’s first product, the Polestar 1, was only available in limited quantities and has been discontinued. The Polestar 2, which began deliveries in mid-2020, is considered the brand’s first truly mass-produced model on sale, and is only built at a plant in China’s Zhejiang province.
On October 12, 2022, the Polestar 3 made its global debut. On February 27, 2024, Polestar said that production of the Polestar 3 had begun in Chengdu, Sichuan, in southwest China. With the manufacturing line now extending to the United States, the Polestar 3 has become the first Polestar model to be produced in both China and outside of the world’s second-largest economy, supporting the company’s growth ambitions in North America, Europe and Asia.
By producing vehicles in the United States and China, Polestar will be able to serve North America, Europe and Asia markets more efficiently, reducing lead times and costs, the venture informed the media.
Polestar vehicles produced at the United States plant will not only be supplied to the American market, but will also be shipped to Europe. The company also plans to begin production of the Polestar 4 in South Korea by 2025.
Outgoing CEO Thomas Ingenlath said in August 2024 that the US plant is expected to reach full capacity in two months and will begin supplying the local customers in September 2024, followed by deliveries to Europe. Polestar sold 3,555 Polestar 2 sedans in the United States in the first half of 2024, Reuters said, citing Kelley Blue Book estimates.
Polestar’s production line expansion in the American mainland comes at a time when Europe and the US have imposed tariffs on EVs from China. The US Trade Representative’s Office (USTR) has already announced that in 2024, the tax on Chinese electric vehicles will rise from 25% to 100%.
However, Polestar has been undergoing a rough patch. The first quarter of 2024 saw a sharp decline in the venture’s EV sales. In the initial quarter of the year, the automaker delivered approximately 7,200 cars, which is approximately 40% fewer than in Q1/2023.
The sales at Polestar are a reflection of the current model change. With the arrival of the Polestar 4 and the impending launch of the Polestar 3, whose production has now commenced, the company is transitioning from a manufacturer of just one model, the Polestar 2, to a more varied portfolio.
Even though the Polestar 2 has been greatly improved for the 2024 model year, some prospective customers might be undecided right now about whether to go with the slightly larger Polestar 4 or the updated but out-of-date Polestar 2, or they might decide to wait for an electric saloon from a competitor.
Some 1,200 of the 7,200 cars delivered in Q1 were Polestar 4s. They were all delivered in China because the model won’t be available in Europe until later in the year. Nonetheless, Polestar is probably going to break the run of four straight quarters of declining sales. Since Q3/2022, the 7,200 units represented the lowest quarterly result.
Since its IPO, Polestar’s only reporting requirement has been to release quarterly data. Before that, the business only occasionally released its numbers. In contrast, Polestar delivered 12,076 cars in Q1-2023, all of which were Polestar 2s at the time. Nevertheless, the manufacturer missed its yearly goal of 60,000 units with roughly 54,600 deliveries, failing to match the performance from the record quarter of Q4-2022 with 21,000 units throughout 2023.
The year 2024 will be a “transitional year,” according to Polestar, since two new models will go on sale. The company plans to deliver between 155,000 and 165,000 units by 2025, so expectations are high.
Polestar had a very significant first quarter from a corporate standpoint in addition to the change in the model portfolio. In order to fund the next phase of development, the company first obtained new external financing in February, totalling USD 950 million from a group of international banks.
Clarification was also provided regarding Polestar’s ownership structure, with Volvo Cars holding an 18% strategic stake and Geely Holdings emerging as a new significant shareholder with approximately 24% of the company.
Company Stages A Comeback
In January 2024, Polestar announced its plans to cut around 450 jobs globally, or about 15% of its workforce, amid “challenging market conditions.” Just like any other automaker, the venture was feeling the heat of headwinds like poor EV demand, heavy price cuts, high interest rate regimes, lower subsidies, and supply chain issues.
Polestar in November 2023 trimmed delivery forecasts and outlined a revised business plan, aiming for its cash flow to break even in 2025 and to reduce its reliance on external funding from key owners Volvo Cars and Geely. It also announced plans to double down on cutting costs to boost profit margins.
As 2024 kicked in, Polestar was struggling in its goal of turning profitable, as it missed the revised 2023 delivery target due to factors like high inflation, low demand and a price war ignited by Tesla.
In the coming months, Polestar had to receive a notice of noncompliance with Nasdaq’s USD 1 minimum bid price requirement. The venture has time till January 2, 2025, to regain compliance by having a closing bid price that meets or exceeds the USD 1 minimum for at least 10 consecutive business days.
However, the venture has now shown signs of overcoming the odds, as it plans to expand its commercial footprint and retail operations across existing and seven new markets. France has emerged as the largest volume market for electric cars in the European Union after Germany, thereby representing a significant opportunity for the company. In addition, Polestar will launch in the Czech Republic, Slovakia, Hungary, Poland, Thailand and Brazil via local distribution partnerships.
Polestar 4 SUV coupés deliveries in Europe have already started. The European car line-up has expanded from one to three electric vehicles (EVs) with the addition of the Polestar 4 SUV. The company also offers the Polestar 2 and the Polestar 3 in Europe.
The venture has also appointed Philipp Romers as the Head of Design. With 25 years of experience in the automotive design industry, Romers joined the automaker from Audi, where his most recent position was Head of Exterior Design. He designed the current Audi A6, among other vehicles. Before his stint at Audi, Romers was a designer at Volkswagen, where he was involved in the design of the Volkswagen Golf 7 and Passat B8.
The Road Ahead
Polestar’s immediate challenges are delayed model launches, missed delivery targets, and a gradual separation from its co-founder, Volvo Cars. Michael Lohscheller will officially take over as CEO on October 1, stepping into a tough role, which will require him to initiate a major cost-cutting strategy aimed at achieving profitability and cash flow breakeven by 2025.
Additionally, the company needs to tread a cautious path amid the punitive tariffs from the European Union, the United States, and Canada on China-made EVs. Polestar may require reducing its dependence on Chinese manufacturing.
“Michael Lohscheller’s extensive leadership background contrasts with Ingenlath’s design-focused career, who was Volvo Cars’ senior vice-president of design before taking the helm at Polestar in 2017. The leadership change also underscores Polestar’s shift away from its Volvo roots. This year, Polestar appointed a new chair, Winfried Vahland, replacing Hakan Samuelsson, a former Volvo CEO. The company also recently changed its head of design to another executive with Volvo ties,” reported CEOWorld Magazine.
“Polestar’s evolving relationship with Volvo is evident in its production strategy. While the Polestar 2 and 3 models are manufactured in Volvo facilities, the Polestar 4 is produced in a Geely-run factory and does not rely on Volvo’s platform, a trend expected to continue with future models. Volvo Cars has reduced its stake in Polestar from 48% to 18%, signalling a strategic withdrawal. Meanwhile, Geely, now Polestar’s majority shareholder, remains committed to supporting the EV maker, including providing further financial assistance,” it added.