Polestar enters the stock market madness of electric car manufacturers

Barely 10,000 vehicles sold last year, and a market value higher than that of Subaru: the Swedish Polestar, who announced Monday its future IPO for a spectacular amount of 20 billion US dollars, confirms the surge in value electric car makers, like champion Tesla.

The owners of Polestar, the Swedish company Volvo and the Chinese company Geely, will soon introduce it to Wall Street. This small European competitor of Tesla, which notably counts the actor Leonardo DiCaprio among its shareholders, has only marketed two models since its creation in 2017 and in 2020 only sold 10,000 of its luxury vehicles made in China.

This considerable valuation would place the brand ahead of Renault, Tata Motors or Subaru.

The stock market ranking of car manufacturers is dominated by Tesla, with a valuation that has exploded since 2019 to reach more than 767 billion dollars, far ahead of Toyota and Volkswagen, yet the world’s leading manufacturers in number of vehicles.

Nearly a dozen new manufacturers have gone public: the start-up American Lucid and the Chinese firms NIO and Xpeng are also at the top of the ranking, neck and neck with their ancestors Ford, Ferrari and Hyundai. California pickup truck maker Rivian, backed by Ford and Amazon, is expected to join them soon with a large capitalization.

“The transition to electric vehicles is generating a lot of market enthusiasm,” underlines analyst Alexandre Marian, from AlixPartners. “In some cases, very high valuations suggested that the growth path would be faster than Tesla’s. But the risk is high. You have to admit that it is extremely complicated to develop as a car manufacturer. Many have broken their teeth ”, underlines the expert.

China’s Li Auto, which raised $ 1.1 billion when it was listed on the Nasdaq in 2020, saw its shares collapse when it went public in Hong Kong in August 2021, amid regulatory tightening of Beijing against technology companies. In the United States, Lordstown Motors announced in June that it was running out of money to produce its electric pickup truck on a commercial scale; its manager later resigned after a report emerged acknowledging that the company had made inaccurate statements about some pre-orders.

In the automotive industry, “the fixed costs are very high,” notes Jessica Caldwell of Edmunds. Not only do you have to have a large factory, but you also need to set up a whole supply chain for the many parts of a vehicle.

A meteoric expansion

Polestar offers “the dynamism of a young company” while taking advantage of “the industrial heritage and expertise of Volvo”, proclaimed Monday the boss of the brand, Thomas Ingenlath, in front of investors. “The revenue from the suit is to be used to fund major investments in models and the expansion of operations and markets,” Polestar said in a statement. The brand plans to make a profit from 2023.

Polestar, Volvo’s former sports brand, became a full-fledged manufacturer in 2017. The company is targeting nearly 290,000 sales per year in 2025 and expects to be present in 30 countries by 2023, its leaders said. To achieve this, Polestar plans to launch one car per year: a “luxury and sporty” SUV in 2022, then a luxury sedan. The Swede intends to rely on online sales and a few stores in metropolitan areas, but also on Volvo’s after-sales network.

Its valuation will be done through a merger with an entire company, Gores Guggenheim, financed by two American investment funds. The valuation of 20 billion dollars corresponds to three times the turnover targeted in 2023 and 1.5 times the expected sales in 2024, specifies the group. The transaction is expected to be completed in the first half of 2022, and listing is expected on Nasdaq.

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