EU carmakers’ strategic U-turns point them in the right direction

{"text":[[{"start":12.34,"text":"When periods of exuberance come to a close, ideas that once seemed to make a lot of sense no longer do. "},{"start":18.319,"text":"So it is in the European car industry. "},{"start":20.749000000000002,"text":"Slowing growth of electric vehicle sales has caused a series of corporate U-turns. "},{"start":25.179000000000002,"text":"While sharp swerves are never fun, the change in direction is sensible. "}],[{"start":30.01,"text":"A decision by Volvo Cars on Thursday to cut loose its premium EV brand Polestar is the latest example of a strategic about-turn. "},{"start":37.614000000000004,"text":"Earlier this week, Renault axed plans to float its EV unit Ampere. "},{"start":41.732,"text":"A mooted initial public offering of Volkswagen’s battery unit, meanwhile, also looks some way off. "}],[{"start":48.5,"text":"The wheels have not come off the EV market entirely. "},{"start":51.742,"text":"Sales growth in Europe is expected to come in at about 5 per cent in 2024 — a sharp slowdown from 2023’s 14 per cent growth, but hardly a crash. "},{"start":61.059,"text":"The market had simply overestimated the pace of change. "}],[{"start":64.57,"text":"EU carmakers, traditionally plagued with vast conglomerate discounts, aimed to attract sky high valuations for their EV arms. "},{"start":72.112,"text":"The hope was to achieve those enjoyed by Tesla, which trades at more than 58 times forward earnings, and Vietnam’s VinFast. "},{"start":79.267,"text":"Now that the market’s enthusiasm has waned — shares in VinFast are down 85 per cent over the past six months — “unlocking value” through corporate action looks less attractive. "}],[{"start":89.64999999999999,"text":"The strategic rationale for EV listings was always tenuous. "},{"start":93.54199999999999,"text":"Polestar, with sizeable investment needs and operationally reliant on Volvo and its Chinese parent Geely, was not an obvious candidate for a standalone equity story when it listed in 2022. "},{"start":103.89699999999999,"text":"Worse, Volvo retained 48 per cent. "},{"start":106.877,"text":"With the Swedish carmaker facing big EV-related capex needs of its own, a spin-off that hands Polestar to its ultimate shareholder Geely looks like a better plan. "},{"start":115.619,"text":"Volvo’s stock rose by about a quarter on Thursday. "}],[{"start":119.66,"text":"At Renault, too, shareholders welcomed the decision to keep Ampere within the fold. "},{"start":124.939,"text":"Lex has argued that EVs will be a key pillar of the group’s value creation in future. "},{"start":129.53199999999998,"text":"But given Renault does not need capital to fund its transition, it is right to hold on to Ampere for the time being. "}],[{"start":136.56,"text":"The slowing pace of EV adoption is good news for traditional European automakers, which have been slow to transition. "},{"start":143.139,"text":"Stellantis, which has taken a particularly cautious approach, has outperformed Tesla in the past 12 months. "},{"start":149.18200000000002,"text":"If the EV revolution takes longer to materialise legacy automakers should have more time to align themselves with their EV-focused peers. "}],[{"start":156.23000000000002,"text":""}]],"url":"https://creatives.ftacademy.cn/album/140648-1706842051.mp3"}