PSNY Stock vs. ZK Stock: Can Polestar and Zeekr Withstand EU Tariffs?

Geely-controlled Polestar and Zeekr have both seen their share prices reverse in 2024 amid a sector slowdown and EU tariffs on EVs imported from China. International expansion will be key for the future growth of PSNY stock and ZK stock.

In a market that is dominated by big names like BYD [BYDDF], Tesla [TSLA] and XPeng [XPEV], two smaller electrical vehicle (EV) brands have been making inroads in Europe.

Polestar [PSNY] and Zeekr [ZK] are both subsidiaries of Geely [GELYF] that serve the luxury end of the market.

This stock spotlight will look at how Polestar and Zeekr are faring in Europe amid growing competition. It will also discuss what their ties to China’s Geely mean for the two companies in light of the EU’s recently introduced tariffs on EVs imported from the country.

Zeekr Considers European Product; Polestar Announces New CEO

In the wake of the EU imposing tariffs on EVs built in China, Zeekr is reportedly considering producing models on the continent. Zeekr CEO Conghui An told Bloomberg in July that localization plans were in the works and an announcement should be made in due course. The company would not build a new factory. Instead, it would use a manufacturing facility belonging to one of Geely’s European brands, like Volvo [VLVLY], or its partners.
 
Conghui An added that he was disappointed that the EU had announced the tariffs, believing “they will have a certain impact on Zeekr’s international development”.
 
As brands controlled by Geely, both Zeekr and Polestar models will be hit with a tariff of 19.3%, which is on top of the EU’s standard 10% duty on car imports.
 
At the end of August, meanwhile, Polestar announced that CEO Thomas Ingenlath would be stepping down at the end of September. His replacement, Michael Lohscheller, previously served as CEO of Stellantis [STLA]-owned brand Opel.
 
Ingenlath joined Polestar back in 2017 and oversaw the release of its hybrid Polestar 1 and its first battery electric Polestar 2, as well as the Polestar 3 and 4 crossovers.

PSNY Stock Jumps on CEO News

Polestar’s leadership change has helped PSNY stock to surge 116.98% in the past month through September 6, a stark contrast to its declines of 38.94% since the start of 2024 and 57.53% in the past year.

The Zeekr share price has not fared much better. ZK stock is down 45.79% since its IPO on May 10 of this year but up 3.79% in the past month.

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Polestar and Zeekr Struggle to Post Operating Profit

Polestar and Zeekr’s sales in Europe are starting to grow as the two EV makers enter new markets, but remain relatively small compared to the EV giants.

For example, according to Marklines, a provider of monthly auto industry sales data, Polestar sold 109 units in the Netherlands in July, accounting for 0.4% of the total EVs registered during the month. Zeekr sold 78 units at a market share of 0.3%. In comparison, Tesla and BYD shifted 1,145 and 317 respectively, making up 4.3% and 1.2% of the total registrations for July.

Expanding into more international territories and growing their market share will be key for Polestar’s and Zeekr’s future prospects.

Polestar incurred a $242.3m operating loss in Q2, which still represents a 12% improvement on the $273.6m loss reported in the year-ago quarter. The EV maker “remains confident of a stronger second half of the year”, it said in its earnings release. Meanwhile, Zeekr reported an operating loss of RMB1.72bn, an increase of 25.5% on Q2 2023’s operating loss of RMB1.37bn.

Source: Nasdaq; Yahoo Finance
 
Both Polestar and Zeekr appear fairly valued considering their low P/S ratios and significant revenue growth in the next fiscal year.

PSNY and ZK Stock: The Investment Case

The Bull Case for Polestar and Zeekr

With the tariffs recently imposed by the EU, Polestar is looking to expand its retail footprint in the UK, the company announced on September 2. The UK will be one of the first European markets where Polestar moves to a non-genuine agency sales model, in line with the company’splan to reach profitable growth in 2025.

The company is targeting entry into seven new markets next year, including Brazil and Thailand.

Zeekr entered into the Indonesian and Malaysian markets in June 2024; it is aiming to have expanded into more than 50 markets in total by the end of the year, up from 25 in July.

Successful international expansion, especially in countries outside the EU, should help to offset any weakness that may be imposed by the bloc’s tariffs.

The Bear Case for Polestar and Zeekr

Both EV makers have struggled to turn an operating profit in recent quarters as demand for EVs slows down across the whole industry.

Polestar plans to break even by 2025, but whether it can achieve this will depend on thesuccessful execution of its expansion plans. A spokesperson told Reuters in July that “mitigating measures”, such as price cuts, will have to be taken to achieve this target, although they ruled out job cuts.

Zeekr has previously said it is hoping to break even before the end of 2024.

Conclusion

Polestar and Zeekr have plans to grow their international footprint to offset any impact from the EU’s tariffs. However, continued demand slowdown and increased competition could possibly hamper operating profits and future growth — at least in the near term.

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