Polestar Downgraded On Price Cuts, Anti-China Concerns: '2024 Will Be A Make-Or-Break Year'

Electric vehicle (EV) company Polestar Automotive Holding PSNY recently lowered the starting price of its soon-to-be-released Polestar 3 vehicle.

An analyst sizes up the future of the company.

The Polestar Analyst: Piper Sandler analyst Alexander Potter downgrades Polestar from Overweight to Neutral and lowers the price target from $3 to $2.

Related Link: Polestar CEO Remains Positive About EV Sales In 2024 Despite Challenges

The Analyst Takeaways: Price wars for electric vehicles and concerns of Anti-China sentiment in Europe are negatives for Potter moving forward for Polestar.

"We like Polestar's emotive designs, but given the relentless nature of recent EV price cutting, we're concerned about PSNY's relatively high price points," Potter said.

The analyst said comments from European regulators also hint that tariffs on imported Chinese electric vehicles could be a major talking point. Polestar's vehicles are currently made in China.

"Relative to Chinese peers, PSNY is better-positioned to relocate production, but this would be time-consuming initiative that may put 2025 financial targets at risk in our view."

Potter said there are concerns for the company to hit its financial targets in 2025 with the price war and import concerns.

"2024 will be a make-or-break year for Polestar due to the newly-launched Polestar 3 and Polestar 4 SUVs. Neither contributed meaningfully in 2023, and arguably, the entire PSNY thesis depends on their success."

Price cuts could see consumers shop around for cheaper offerings from Polestar rivals like Tesla, BYD or other Chinese competitors, the analyst warns.

The analyst sees a scenario of investor and majority owner Geely acquiring the company rather than "continuing as a quasi-independent company."

"Until Polestar establishes itself as a brand worthy of mention alongside Porsche, we think it might make more sense as a premium marquee within the Geely family."

Potter lowers delivery estimates for 2024, 2025 and 2026. The analyst expects the company to delivery 87,000 units in 2024, compared to 54,600 deliveries in 2023.

PSNY Price Action: Polestar shares are up 3% to $1.61 on Friday versus a 52-week trading range of $1.30 to $4.96. Shares of Polestar are down 59% over the last year.

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