Polestar's CEO claims that 'pump anxiety' is fueling the demand for electric vehicles as fuel prices rise due to the war in Iran.

      Polestar CEO Michael Lohscheller mentioned to CNBC that "pump anxiety" has overtaken range anxiety as the primary concern for consumers, driven by increasing fuel prices due to the Iran war and the closure of the Strait of Hormuz, leading to a notable increase in electric vehicle (EV) demand. In March, EV registrations in the EU rose by 51%. Polestar also reported a widening net loss of $383 million for Q1, while revenue remained steady at $633 million, despite record deliveries of 13,126 vehicles. The company's gross margins turned negative due to factors like pricing pressure, tariffs, and currency fluctuations.

      For years, range anxiety was the major issue in the electric vehicle market. However, according to Lohscheller, consumer focus has shifted to the cost of fuel, as he introduced the term “pump anxiety” to reflect this change. The context is clear: following US and Israeli strikes on Iran on February 28, the Strait of Hormuz has been largely closed to commercial shipping, causing Brent crude prices to exceed $100 per barrel. In the UK, prices for petrol have jumped by over 25 pence per litre since early March, with diesel prices increasing nearly 45 pence, according to RAC Fuel Watch. Several markets in the EU are now seeing petrol prices above €2 per litre, prompting a widespread reevaluation of driving costs.

      Lohscheller claims that the cost dynamics have shifted significantly. He noted that previously people leaned towards EVs for idealistic reasons, but now financial considerations dominate their choices. This assertion is backed by data showing a 51% increase in EU electric vehicle registrations in March compared to the previous year, with Italy experiencing a 65.7% rise and Germany at 41.3%. In the UK, Polestar's market, both Chinese and European EV manufacturers are reporting increased online inquiries and test-drive requests.

      However, this trend isn't consistent across all regions. In the US, where petrol prices have surpassed $4 per gallon for the first time in four years, the response has been less pronounced. While used EV sales increased by 12% year-on-year in the first quarter, new EV sales haven't shown a comparable rise. Lohscheller highlighted the withdrawal of federal tax incentives and overall consumer uncertainty as factors limiting demand in the US.

      Polestar finds itself under pressure amidst these developments. The company, which operates under Geely and is based in Sweden, reported a net loss of $383 million in the first quarter, significantly higher than the $166 million loss from the same period a year prior. Revenue remained unchanged at $633 million, even with a 7% increase in vehicle deliveries reaching a record 13,126 units. Gross margins fell to negative 3.2% from a positive 10.3% last year, a decline attributed to pricing pressures, tariffs in the EU and US, reduced carbon-credit sales, and unfavorable currency trends due to a weakening yuan.

      The financial scenario reflects a paradox within the EV industry. While demand is climbing, competing costs are also increasing. Since Polestar manufactures primarily in China, its vehicles face US and EU tariffs intended to counteract China's production advantages. The company labeled the domestic Chinese market as "hyper competitive" and suggested that Europe needs to accelerate its responses.

      Lohscheller, who has led Opel and Vauxhall previously, stated that range anxiety is no longer a concern. The least expensive Polestar 2 now offers 344 miles of range according to the WLTP test cycle, while the dual-motor Polestar 3 SUV reaches 402 miles. Charging an 82-kilowatt-hour Polestar 2 overnight in the UK costs roughly £15, significantly lower than the fuel cost for equivalent petrol vehicles at current rates.

      However, the lower operational costs have not yet alleviated the apprehension about purchasing. Lohscheller acknowledged that the resale values of EVs remain problematic, trailing behind those of internal combustion vehicles. Market pressures from manufacturers needing to comply with the UK’s zero-emission vehicle quotas have led to aggressive pricing strategies that further depress used EV values. "I'm asking for stability," he noted regarding the regulatory landscape, expressing that frequent changes in rules are unhelpful.

      The impact of rising fuel prices is transforming automotive markets beyond Polestar’s segment. In March alone, BYD exported over 120,000 electric and hybrid vehicles, marking a 65% increase year-on-year. Renault has indicated that the conflict in the Middle East has initiated a "seismic shift" in EV adoption. The head of the International Energy Agency, Fatih Birol, remarked that countries may turn to renewables to mitigate geopolitical risks, calling the disruption in Hormuz the largest supply disturbance in the history of the global oil market.

      Ironically, the crisis that could hasten the shift to electric vehicles may also hinder the companies leading it. Increased energy costs elevate production expenses. Tariff barriers heighten competition costs across