Storm Clouds Gather Over Polestar 3 & Volvo EX90

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Volvo Cars and its Polestar division appear to be doing quite well. Polestar delivered about 12,000 cars worldwide in the first quarter of this year — up more than 25% from the previous year. In addition, it is getting ready to introduce the Polestar 3 — a premium electric SUV intended to compete head-to-head with the mighty Porsche Cayenne. Then there is the somewhat more modestly priced Polestar 4 — a sedan/hatchback/SUV/coupe creation that aims to be all things to all people —  in the pipeline as well.

Volvo EX90 & Polestar 3 Delayed

Volvo has just introduced the EX90, a battery-electric alternative to the hugely popular XC90 large SUV, and is making noises about an upcoming sibling, the EX30, a smaller, entry level SUV due out in 2023. From all outward appearances, Volvo and Polestar are doing just fine, with both production and sales of their electric cars ramping up nicely.

So it was surprising last week when Polestar announced it is cutting its production guidance for 2023 from 80,000 to as little as 60,000 cars (70,000 remains a possibility) and trimming its workforce by 10% to help lower expenses. Polestar said the start of production for the Polestar 3 will be delayed until the first quarter of 2024 instead of the mid-2023 start originally planned.

Why is that? Let’s jump to a Volvo press release on May 11. The rather bare bones statement said:

“The Volvo EX90 is a very exciting and important car for Volvo Cars, representing the start of a new era for the company and introduces a new generation of technology – hardware and software.

“Demand for the Volvo EX90 remains high and to ensure a high-quality introduction of the car and to maximise customer benefit from its technology from day 1, Volvo Cars needs additional time in software development and testing and is adjusting the planned start of production timing. Production is now expected to begin in H1 2024.”

Polestar Pinpoints Software Issues

That’s it? Yes it is……officially. But a news release from Polestar provides some much needed context. Its press release says quite a bit more than the terse Volvo statement.

“Polestar was recently informed that additional time for final software development of the new all-electric platform shared by Volvo Cars is needed and that the start of production of Polestar 3 is now expected in the first quarter of 2024.

“In light of this and the economic environment affecting the automotive industry, Polestar now expects 2023 global volumes of 60,000 – 70,000 vehicles, representing annual growth of 16% – 36%, following record deliveries of 51,491 last year. There is no change to the start of production of Polestar 4, which is expected for China in the fourth quarter of 2023, and for other markets in early 2024.

“Polestar is intensifying its focus on cost management, including a global hiring freeze and 10% headcount reduction, driving greater efficiencies across the business.

“Thomas Ingenlath, Polestar CEO, comments: ‘We are taking necessary steps to strengthen Polestar in the near-term. While production of Polestar 3 will now start in the first quarter of 2024, the successful launch of Polestar 4 last month means that we add two strong offers in the attractive electric SUV market in 2024. I am confident that we will deliver on our growth ambitions and path towards profitability.’ “

The Tesla Effect

Okay, so after the global pandemic and the supply chain issues that ensued, and just when we thought things would get back to normal, new challenges have emerged that appear to be putting more roadblocks in the path of the EV revolution.

Some of those new challenges stem from central banks around the world increasing interest rates in an attempt to cool overheated economies that were fueled by gargantuan economic relief programs enacted to ease the dislocations caused by the pandemic, but there are other factors at work as well.

A big one is the new initiative by Tesla to adjust the prices of its vehicles almost hourly (that’s a bit of an exaggeration, but still…) No doubt there is method to this madness, but it has sent shockwaves through the industry as legacy automakers find that making electric cars at a profit is now even harder than it was before.

The jury is still out on whether the new pricing strategy at Tesla will increase sales — the results so far have been mixed. Elon Musk has hinted that he would sell his cars at zero profit if that’s what it takes to have a fleet of robotaxis on the road when (and if) Tesla resolves the issues it has experienced with its autonomous driving software. Musk apparently believes that the revenue for autonomous cars will be great enough to offset the lack of profits at the current time.

There could be a more sinister side to what Tesla is doing. Historically, oil, railroad, and steel magnates have been able to drive their competitors out of business by accepting losses in the short term in order to monopolize markets and make excessive profits in the future. It’s a pretty common tactic.

With Tesla apparently enjoying the highest profit margins in the industry, it could use its market power to keep some of its competitors from succeeding. Already Lucid and Fisker have announced lowered sales targets, and Rivian appears to be at a critical juncture as well.

Computers Continue To Confound

The computer revolution is both a blessing and a curse to the auto industry. Software issues are roiling things at Volkswagen, where they led to former CEO Herbert Diess being shown the door last year. Then last week, the entire management team at Cariad, Volkswagen’s dedicated computer software division, was removed (although the head of personnel was allowed to stay).

Porsche and Audi have grown restive with the constant delays. They need advanced automated driving systems to attract customers to their upcoming electric offerings and they aren’t one bit happy with the delays. Now there are news reports that Level 4 autonomy may be delayed by up to 4 years and that the new electric Porsche Macan and Audi Q6 e-tron will launch with an updated version of the current software package while work on the Software 2.0 platform continues. As we reported recently, Volkswagen will collaborate with Mobileye as it struggles to get its digital house in order.

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The Takeaway

We dislike any news that suggests the EV revolution will be delayed but it seems there are some significant challenges that will need to be addressed, and the sooner the better. On the other hand, who is to profit from cars that largely drive themselves, owners or manufacturers? From the frenzy around automated driving systems, it seems pretty clear what is driving this mad dash into the digital future.

Proponents of self-driving vehicles point out that such systems should substantially reduce the carnage on the roads at present. More Americans die in road accidents each week than perished on September 11, 2001, and yet that statistic is met with a dismissive shrug by the vast majority of people. ADAS advocates enthuse that cars are too dangerous to allow people to drive them, but let’s think about that for a moment.

If we are prohibited from driving cars, won’t we be forfeiting part of our freedom? What about Dinah Shore and her advice to “See the USA in your Chevrolet?” And won’t our cars feed a continuous stream of personal data back to who knows who about where we go and when and how often and who is riding with us? The reduction in fatalities and injuries is laudable, but do we need to build a digital prison for ourselves in order to accomplish that goal?

These are the sorts of questions that get bandied about during a Sunday brunch of egg white omelets and fire-roasted veggies at CleanTechnica headquarters. We report; you retort. Please feel welcome to share your thoughts with us in the comments.