A wave of cold air came from Northern Europe. Polestar Motors just announced that it plans to lay off about 450 people worldwide. Although the number is not large, it still accounts for 15% of the total number of employees. As early as May last year, Polestar announced a recruitment freeze and tightened job positions. It seems that the situation in the past six months is still not optimistic. As a high-end electric vehicle brand born out of the Volvo brand, it has been targeting Tesla since its birth, but it seems to have been born at the wrong time, and its sales have been unable to increase. When sales were at their lowest, only 40 vehicles were sold in the Chinese market in a single month.
In June 2022, Polestar was listed on Nasdaq. In less than two years, it has fallen from the issue price of US$10 to about US$2.1 today, and its market value has shrunk by nearly 80%.
How can such a niche brand that maintains its own style avoid being eliminated?
All for cost reduction
Adjusting the company's business plan and optimizing its business and operational scale are the universal responses to layoffs.
"In terms of external spending, we will be making a series of reductions." A Polestar spokesperson said. "We have had to make a very difficult decision to reduce our headcount."
The purpose is to accelerate the improvement of Polestar Automobile's profit margins while reducing the company's total expenses in order to achieve cash flow breakeven by 2025.
It is worth noting that Polestar also had a layoff plan before. At that time, Polestar specifically stated that it did not involve the Chinese market. In May 2023, Polestar Motors announced that it would lay off 10% of its employees, bringing the number to 300, and also freeze the company's recruitment work.
Polestar Chief Financial Officer Johan Malmqvist claimed that the layoffs are based on the current macroeconomic environment and the company is working hard to control costs.
In addition to layoffs, Polestar Motors has also lowered its sales target for 2023 from the previous 80,000 vehicles to 60,000 to 70,000 vehicles. The official reason is that the new model Polestar 3 cannot be mass-produced and delivered on time in the summer of 2023 and needs to be postponed to the first quarter of 2024.
However, even so, Polestar failed to achieve the lowered target. The full-year sales volume in 2023 was only 54,600 units, which was still lower than the previously set minimum number of 60,000 units.
Sales in the fourth quarter of 2023 were only 1,280 vehicles, a year-on-year decrease of 8%. This also means that Polestar's full-year sales momentum is not sufficient, and has even begun to weaken.
Only eight months had passed before the second major layoffs came, with the number of layoffs reaching 750 in two waves.
In addition, just ten days ago, Polestar was "extremely short" by the Swedish banking industry leader, Skandinaviska Enskilda Banken (SEB), which re-adjusted Polestar's valuation and directly reduced it to "0" kronor.
This means that in the eyes of the Nordic bank boss, Polestar is "worthless".
According to Nordisk's assessment, it said it "cannot fail to see any value in Polestar". Polestar has guaranteed that if it receives a capital injection of 14 billion crowns (9.5 billion yuan), the company will become profitable in 2025. But Scandinavian Bank believes that this will be completely impossible to achieve.
SEB Bank was Volvo's main advisor when it went public and is one of the largest financial groups in Northern Europe. Its equity analysts believe that "Polestar has become a drag."
Sold 5,000 units domestically in three years
Many people may be unfamiliar with the Polestar brand. It was originally a Swedish car brand Polestar founded in 1996.
In 2005, it became Volvo's performance model supplier. In 2009, Volvo incorporated Polestar into its racing and performance vehicle R&D department. In 2015, Volvo fully acquired Polestar, which became Volvo's electrified high-performance R&D department.
Until Volvo was fully acquired by Geely, in October 2017, Volvo and Geely jointly announced the establishment of a high-end electric vehicle joint venture brand, which is now Polestar.
In June 2022, Polestar announced the completion of the corporate merger with the help of special purpose acquisition company (SPAC) Gores Guggenheim, landed on Nasdaq, and officially listed on the market. On the first day of listing, its market value reached US$27.6 billion, once surpassing traditional car companies such as Nissan and Renault.
However, backed by the two big trees of Volvo and Geely, Polestar reached its peak when it debuted, and what followed was a decline in performance along the way.
According to the latest data disclosed by Polestar, Polestar's total revenue in the first quarter of 2023 was US$550 million, which was lower than market expectations of US$570 million. The net loss was US$9 million. Overseas revenue accounted for as high as 98.6%, while the Chinese market revenue accounted for only 1.4%.
In the second quarter, Polestar's revenue was US$685 million, which was also very dependent on the British and Swedish markets, while revenue in the United States and China declined, and its net loss reached US$304 million, higher than US$228 million in the same period last year.
In the third quarter, operating losses also reached US$261 million, an increase of 33% from US$196 million in the same period in 2022.
In the first three quarters of 2023, Polestar Motor's gross profit margin was only 1.1%. Continued losses and extremely low gross profit margins forced its two shareholders, Volvo and Geely, to continue blood transfusions.
At the end of 2022, Polestar's two major shareholders, Volvo and PSD Investment, provided an emergency blood transfusion of US$1.6 billion to Polestar. It should be noted that PSD Investment is Li Shufu's private investment company.
In October this year, Polestar submitted another document to the SEC (U.S. Securities and Exchange Commission) requesting permission to raise $1 billion.
Moreover, Polestar, which has "Chinese origins", compared with the performance in foreign markets, Polestar's performance in the domestic market lags behind. Almost no specific sales results in China have been announced to the public, but we can still find some clues.
In 2021, Polestar sold 2,048 new cars in China, accounting for only 7% of global sales; in 2022, Polestar's corresponding compulsory traffic insurance data was only 1,717 vehicles. As for sales in 2023, according to third-party platform data, annual sales are only 1,100 vehicles, a year-on-year decrease of 34%.
Since the delivery of Polestar's first model, in the past three years, Polestar's cumulative sales in the Chinese market have only been about 5,000 units. Today, Polestar is gradually being marginalized by the market.
5 CEOs in 6 years
Polestar's domestic sales continue to be sluggish, which is partly related to the frequent coaching changes in China. Polestar has changed five CEOs in China since its establishment 6 years ago.
In 2016, Volvo and Geely established the Polestar independent brand. At that time, Shen Feng, who was the president of Volvo Cars China R&D Company, served as Polestar global CTO and Polestar China CEO, but he resigned soon after.
In December 2017, NIO announced that Shen Feng, the former Polestar global CTO and China CEO, had joined NIO as Vice President of Quality and Chairman of the Quality Management Committee, responsible for its overall quality-related management work and reporting directly to Li Bin.
In March 2018, Polestar announced new personnel appointments. Wu Zhenhao, former Vice President of Volvo Car Group's Asia Pacific Product Department, served as President of Polestar China. However, he returned to Volvo after a year.
In March 2020, Polestar announced that Wu Zhenhao was transferred to Volvo Cars Asia Pacific to be responsible for strategy and business coordination. Gao Hong, the former senior director of Volkswagen China, served as president of Polestar China.
One year after Gao Hong took over, in March 2021, Polestar sent Nathan Forshaw as president of Polestar China and Asia Pacific, with overall responsibility for Polestar China and Asia Pacific business, reporting to Polestar CEO Thomas Inglath.
However, it is also difficult for foreign monks to recite sutras. In August last year, Feng Dan, who had served as Cadillac’s national sales director and business unit leader, took over the hot potato of Polestar China.
The result of frequent turmoil at the top is that product positioning has fluctuated and the strategic focus has repeatedly jumped between the European, American and Chinese markets.
At the end of 2021, Thomas Inglath directly stated that "the Polestar brand will subsequently adjust its focus to Europe and North America. By the middle of this century, the sales share in Europe will reach 40%, and the remaining sales share will be equally divided between the North American and Asian markets."
Last year, at the signing ceremony for the strategic cooperation between Polestar Motor and Xingji Meizu, Geely Chairman Li Shufu personally attended and delivered a speech. At that time, Shen Ziyu also said, “We must localize Polestar as soon as possible and promote the development of Polestar products based on the advantages of China’s intelligent software.
For Polestar, the cooperation with Xingji Meizu also means re-adjusting its strategic focus back to the Chinese market.
However, Polestar, which has returned to the focus of the domestic market, has ideas that are contrary to the Chinese market. At a time when the domestic new energy vehicle track is so busy, even Tesla has been cutting prices domestically in the past two years.
Polestar seems to have chosen to ignore the market situation in the domestic new energy vehicle field. Polestar CEO Thomas Ingrat said that it has not considered increasing sales through price cuts and promotions, which also means that the brand will still maintain its high-end positioning route.
In such a situation of involution, the market will not give niche brands many opportunities. In the new energy era, joint venture brands no longer have the filters of the past. Only when product development and sales operations keep up with the pace of the industry can they stand last.
Otherwise, we will only lose the world's largest automobile market and pay for our own indifference.