Polestar Announces an Electric SUV. It’s a Tesla Model Y Competitor.

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Polestar, the electric-vehicle start-up born from Volvo, has a new SUV model. The news likely will give shares of the SPAC merging with Polestar a shot in the arm.

Polestar announced Tuesday it will premiere the Polestar 3 in October. Adding a sport-utility vehicle to its lineup opens up more of the car market to the new EV manufacturer.

It’s the second all-electric model for the company. The Polestar 1 was a high-end hybrid sports car. The Polestar 2 is an all-electric sedan on sale now. The Polestar 2 starts at roughly $46,000.

A long-range Polestar 2 gets about 270 miles on a single charge and generates about 231 horsepower from one electric motor. A long-range, dual-motor version generates about 476 horsepower and gets about 260 miles of range on a charge.

Full Polestar 3 specifications aren’t available yet, but the company said it will use two electric motors, which should generate in the range of 500 horsepower. The SUV will be quick.

Polestar is targeting about 370 miles of per-charge range using a larger battery pack. The vehicle will likely be comparable in price and trim to a

Tesla

(ticker: TSLA) Model Y.

“Polestar 3 is the SUV for the electric age. Our design identity evolves with this high-end large luxury EV, with a strong, individual brand character,” said CEO Thomas Ingenlath in the company’s news release. “With this car, we bring the ‘sport’ back to the SUV, staying true to our performance roots.”

Polestar is merging with the special purpose acquisition company

Gores Guggenheim

(GGPI) in a deal that values Polestar stock at roughly $21 billion, based on 2.1 billion shares outstanding when the merger is complete. The transaction will raise about $1 billion for the EV start-up. The merger vote is scheduled for June 22.

Gores stock, which will become Polestar, is flat in early trading, following the SUV announcement. That isn’t so bad. The

S&P 500
and

Dow Jones Industrial Average
are both down about 0.5%.

Coming into Tuesday trading, Gores stock has fallen about 14% this year. That’s better than stock in many other EV start-ups.

Rivian Automotive

(RIVN) and

Lucid

(LCID) shares have dropped 72% and 50% in 2022, respectively. Rising interest rates and inflation have sapped some investor enthusiasm for businesses that don’t yet generate free cash flow.

Building a car business is expensive, and EV start-ups aren’t expected to generate free cash flow for years. Polestar projects it will be break even, from a free-cash-flow perspective, in 2024. That year, the company expects to sell about 225,000 units from four models. The Polestar 4 and Polestar 5 models are coming after the Polestar 3.

The $1 billion raised in the merger isn’t as much as some other EV start-ups have amassed. Rivian’s initial public offering brought in almost $14 billion. Polestar, however, already has a manufacturing plant in China. The company’s backers include Volvo, which is owned by the parent of Chinese car company

Geely Automobile

(175.Hong Kong).

Polestar capital spending in 2022 is projected to be about $600 million. Rivian, by comparison, is planning to spend about $2.6 billion on capital this year.

Write to Al Root at [email protected]