Polestar CEO Thomas Ingenlath recently discussed the company’s plans with Automotive News. So naturally, the CEO had a lot to say on the subject. However, if you own Gores Guggenheim (NASDAQ:GGPI) stock, one sentence by Ingenlath stands out in a good way.
Ingenlath’s comments in Automotive News laid out Polestar’s three-pronged production plan for China, South Carolina and Europe. However, it was what he said Polestar is and isn’t that caught my attention.
“The aim of the Polestar range is to be sportier and to have a stronger focus on the driver. Even if it’s an SUV such as the Polestar 3, it will have a sleek silhouette, meaning there will be less emphasis on cargo space and more emphasis on propulsion. It will also have a more daring design,” InsideEVs reported Ingenlath’s comments.
Sure, it’s excellent that Polestar plans to be sportier, more focused on the driving experience, than it does on being a luxury ride, but these particular words didn’t move me. However, what he said next did.
“A Polestar will be more progressive and avant-garde; therefore, it will not be loved by everybody, but it will address its fans,” Ingenlath stated.
The CEO came out and said Polestar wasn’t going to be Volvo (OTCMKTS:VLVLY) or some other brand looking for mass appeal. Instead, it would be a niche producer of EVs. In other words, he’s saying if you buy a Polestar, you’ll be getting something unique and special.
I’ve learned in recent years that businesses operating in the middle have less chance of success. This is because either your product or service appeals to the top 20% of household incomes or the bottom 20%. Anywhere in between makes it harder to gain customer loyalty.
Ingenlath wants customers that will be loyal to the Polestar brand. The higher the price point, the easier it is to pull off.
Polestar and GGPI Stock
As I stated in January, I think GGPI stock — soon to be PSNY once the merger is completed — is an excellent long-term buy, primarily because it already has sold 29,000 vehicles (2021), it expects to produce 65,000 in 2022 and 290,000 annually by 2025.
I also said that, at these prices, GGPI stock would seem like a steal in a few years.
“For aggressive, long-term investors who seek exposure to electric vehicles and don’t already own GGPI stock, it is an excellent name to buy. If you own the shares of the EV maker already, don’t worry about its poor performance recently,” I wrote in January.
“Barring unforeseen developments, Polestar ought to deliver considerable wealth to its patient shareholders in the future.”
In the six weeks since, it’s moved sideways. If you haven’t bought it, that’s great news because you still have time to get in before GGPI takes off post-merger.
The critical distinction about Polestar is that it’s not a startup. Its beginning dates back to 1996. It was established to help Volvo win the Swedish Touring Car Championship. The focus was entirely on internal combustion-powered vehicles.
In 2013, Polestar launched the Volvo S60 Polestar. However, according to Volvo, only 100 were made in the initial year. In 2014, it mass-produced both the S60 and V60 for sale in eight markets. In 2015, Volvo acquired Polestar’s high-performance business. Two years later, it made a move to electric-powered performance vehicles.
The rest, as they say, is history.
The Bottom Line
Fifty years from now, it might turn out that Polestar’s affiliation with Volvo did little to catapult it into the EV big leagues.
However, for now, it seems to have its feet on the ground, providing investors with very reasonable growth projections. As a result, I think its chances of survival are much higher than brands such as Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN).
Lastly, the fact that Ingenlath doesn’t want to be something to everyone suggests that he fully understands Polestar’s target market.
One sentence says it all.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.