Mobility special

0:11Hello and welcome to The Entrepreneurs on Monocle Radio, the show all about inspiring people, innovative companies and fresh ideas in global business. Today's program is a mobility special that takes us from the road to the skies. First, we'll meet the CEO of Swedish EV maker Polestar to hear his optimistic plans for the year ahead. Being closer to the customer, that will generate more revenue. Our margin will improve because also we have better cars, we have more cars. Bringing all this together will give us the first level of profitability in 25. And later, we'll hop aboard Greece's first scheduled helicopter airline.

0:48Hospitality and the whole offering around it has been getting more and more upgraded in the last 10 years or so. But transportation still remains a complex issue. This is The Entrepreneurs with me, Tom Edwards.

1:08You're listening to The Entrepreneurs. And there is a focus on mobility. on this week's programme. And another special treat for you listeners, Chris Lord is in the studio alongside me. Chris, welcome. Good to be with you, Tom. Now, you've been very bit... Well, you're always a busy man, of course, but you've been particularly busy with some in-the-field reporting. The job you were born to do, Chris, we're going to go to Greece in a moment, but let's start with Polestar. I mentioned at the top of the show, really interesting business, origins on the track, high performance, EVs, Volvo acquisition a decade ago.

1:41So now the business is led by Mr. Michael Loescheller, and you went to chat to him. What did you talk to him about, Chris? Look, it's a really important moment for Polestar. And of course, it's been a mobility special, Tom, at a moment when you were immobile. I stepped in to do some of these interviews and to speak to some of these people that we're going to hear from today. But look, Polestar, a very interesting point. Back in August last year, they started making cars for the first time in a Volvo plant inside America itself, so in South Carolina. They've also currently scouting around, as we'll hear from Michael in a moment, scouting around for a location in Europe to make here in Europe.

2:15So a lot of what is happening in that brand and the thinking right now is adjusting to the way the world trade setup has changed in the last few years. As frankly, it's become much harder to make things in Asia as they started out, making all their cars in China and shipping them around the world. Now they're not nearshoring. They're actually shoring their industry and their manufacturing in the markets that they want to reach the most. And I started really, I think, with Michael, just asking him a little bit about what the most recent executive order from the White House regarding EVs means for his business.

2:50So in terms of EVs overall, I would say, first, EV markets are growing globally. They're growing, not at the linear speed we had hoped for, but they're growing. They're also growing in the US. and I'm actually optimistic because I see what customers want. They want emission-free mobility. They also want to have some excitement and we do all that with Polestar cars, right? We offer mobility without emissions, we have performance elements, we have an exciting design. We try to put all these things together and highlight this excitement and I'm sure by doing that, customers will vote for us. You're right that there is growth there and demand is there.

3:32But it is slowing. And I think in certain markets in Germany, in Japan, for example, last year, it was slowing the demand for electric vehicles. I wonder when there is the kind of rhetoric around these vehicles and the transition that you see, especially at the moment when it's charged up by Elon Musk and Twitter and X and so on. What does that mean for a brand like yours that is frankly pitching itself as a very cool brand, as something that is trying to grasp a design-minded consumer who cares about what the future looks like? I mean, first of all, you're right. There are markets where the growth is not there, but there are also reasons for it.

4:09For example, in Germany, my home country, I mean, if you change incentives from one weekend to the next, well, surprise, surprise, consumers do react to that. But if we go back a few years, like when we talked electrification, everybody was like, oh, what about the range? I mean, isn't that a big topic? range anxiety, right? I think the Germans even translated that they called it Reichweitenangst. I've never heard a word like this. Or a word so German sounding. Yeah, so now a couple of years later, I mean, look at the Polestar cars. We offer a range of 700 kilometers, so over 500 miles. So nobody talks about that anymore.

4:46So I think we need to tackle it step by step. The same with charging infrastructure. Everybody is excited, but also there we see improvements. More and more cars are coming to the market and they offer more than just electrification, right? So for example, you look at the Polestar cars, we combine it with software, with innovation. So yes, while there are lots of topics to work through, I'm optimistic because we have overcome many things. And with every new technology, with every transformation, there are obstacles on the way. Michael, I want to come to the products that you've got landing on the market imminently, very shortly new Polestar models about to drive out of various factories around the world but I want to actually pick up on your story a little bit because just outline for a little bit your journey from a traditional car maker the center of the most famous brands in the world you can talk a bit about that but also your your time then in the US and at the sort of coalface of this innovation just talk us through your journey of to Polestar a little bit.

5:46Yeah very happy to do that. So, I mean, I'm an automotive now 24 years. I was with Volkswagen in Germany, but also in the US, obviously one of the real big car companies in the world. I then went to Opel first as a CFO and then as a CEO. And I would say working for traditional OEMs is very exciting. It's also not that easy because you have a lot of decisions to make, but in general, things are relatively well established. I went then to Vietnam for a short period of time and then I became the CEO of Nikola in Phoenix, Arizona. We developed fuel cell trucks, electric trucks, also like a startup company.

6:25And there obviously I learned, okay, if you do things for the first time, it's exciting. You can also do things very well the first time, but a lot of established things are also not there. And when I then arrived this September in Sweden, in Gothenburg with Polestar, I was so delighted to see the Polestar brand is so relevant, focusing on sustainability, on electric cars, but this in a performance-oriented way. And this was really good products. That's a very, very strong basis to start with. And now, obviously, we need to amend things. We change things on the sales side. But just having these products and the brand there, I find very, very exciting.

7:07But of course, in a young company, there are lots of things you need to set up, you need to correct, which probably in big traditional companies are there for 20 years already, right? But I feel we have a great opportunity with Polster to get things right, to try out also new things, and to be faster and better and more relevant for customers. It's an interesting journey, that, isn't it? because you start with something that's so much the backbone of German economy and the national story in so many ways. And then obviously you go out to a startup. I wonder when you then come to a company that's obviously got the backing of, you know, it's part of the Volvo family, if you like.

7:44It's part of that big structure. But then you've come with all that startup experience of doing something. Nikola, obviously a challenging company. It was doing something very original, still is, which is, as you mentioned, these fuel cell-driven trucks, hydrogen fuel cell and also electric-driven freight trucks intending to try and change the way America moves goods around. What is that experience in that startup? Remember, there's a lot of entrepreneurs listening to this, people who are setting out on their own business. What does that startup experience do for you when you then go back into something that's a little bit more of an institution within a country, shall we say?

8:20Yeah, so my experience is when you start something new, You have obviously a lot of ideas, put this into a business model, and then you start executing. But on that way of executing, my experience was it's really important to stay focused. You cannot do as a young company everything. And that's also what I like a lot about Polestar. We do electric cars. We do electric performance cars. We are focusing on key segments of the market and try to do this very well. Now, we are already in 28 markets, so that's also a lot. But this focus of things is so important because you can't do everything at the same time.

9:00You can't be in all markets, you can't be in all segments, and you can't launch cars at the same time. Be focused, do those things, do them right. And there, of course, we and young companies take risks and can do things faster, and I would also say better than the competition. And needless to say that the automotive industry is going through a very big transformation. And you have the big players, very well established. And then you have players like us. And we are very focused. And I think we will be very successful because we are so focused on few things and get them really right. You've stated that the target for 2025 is profitability with Polestar.

9:40in the climate that we've just been talking about, where there is some skepticism leaking into these people who are defining the conversation, certainly in the US right now around electric vehicles. Obviously, you've got a competitor over there, very, very high up in the form of Elon Musk with Tesla. But still, there is a skepticism leaking a little bit from some of these channels. How do you get to profitability this year? How do you keep that momentum that we have seen in all the years about excitement around electric cars? How do you keep that going as a brand, do you think, in this year and beyond to get to that goal?

10:14Yeah, so our new business plan, which we also announced last week, foresees a couple of, again, very focused elements. First, it's important for us as a young company that we grow. So we have defined clear gross targets, 30 to 35 percent over the next three years. That will happen because we have now a bigger portfolio. So in the past, we had only the Polestar 2. Now we have a Polestar 3 and Polestar 4 in the market. So more products are helping. But the other thing, back to let's be focused, we do many changes on the sales side. In the past, Polestar was acting through a direct-to-consumer online model.

10:50So we were hoping that by displaying cars, people would order, let's say, at home. That is working to a certain extent, but it's not broad enough. So now we, in a way, go back to basics. we go to retail locations where qualified salespeople advise, give you consulting information and say, hey, this is the offer. This is how the car works. And ideally conclude also a deal with you. That's a big change. And back to my prior topic about let's be focused, right? So the cars are coming. We have launched them. Very good first phase of a young company like Polestar. Now going into the next chapter, it's important that we really do well on the sales side.

11:31Be closer to the customer and have more locations. And it's not so difficult. So we have today 140 locations where you can buy Polestars. We will increase this to 200 by the end of this year and 300 by the end of 26. It's not complicated. Stay focused on this being closer to the customer. That will generate more revenue. Our margin will improve because also we have better cars. We have more cars with better margins. And then, yes, the reality of a second phase of a startup or young company is also efficiency, cost reduction, optimization. Bringing all this together will give us the first level of profitability in 25.

12:11It's interesting because, you know, when you talk then about going back to basics or back to retail, of course, you're not talking about the forecourt, are you? You're not talking about big, the old dealerships of old. You know, I've been to many of the Polestar retail spaces, they are interesting. They are a boutique, if you will, for want of a better term. It's wrong to call them a showroom because there's a little bit more to it than that in a way. I just wonder, listening to this, people start thinking about what that looks like and how you reach a kind of consumer these days, the retail space for someone working in a luxury item, what does that need to do to get people excited?

12:47We were just talking about momentum around electric vehicles. And I appreciate you were just talking about getting to profitability. But when we come back to this question of keeping the momentum and excitement around electric vehicles, how can retail, how do you need to shape retail to make that work? Yeah, first of all, I think let's be pragmatic. Let's be straightforward. To your point, dealerships in the past, lots of requirements from OEMs like, okay, here are the 700 pages, what you need to fulfill. That is not what customers are looking for. I think it's important, and obviously to experience the car, also to test drive them in a location which is easy to get to.

13:23And then really have qualified people outlining to you, okay, what can the product do? Technology is really advanced in these days. How do you do software updates? I mean, our cars have core compute. You can do software updates. That's great, but it's good to explain it. I mean, how is the ADAS working? How is the Google built-in working? All need needs explanation, and I think it's really important that you have salespeople doing that. And then I would say make the customer experience as easy as possible, right? Therefore, we also have decided not being in the city centers where it's difficult to get, but going to locations where it's easy to get there, then experience the car because test drive, experience the car.

14:08That in most cases really is the purchase decision to say, yes, I want this or not. and that's what we try to do keep it simple look there are new products landing imminently i mean you've got the polestar 3 as you mentioned is now being manufactured in the u.s and i want to talk to you a little bit about the manufacturing the way polestar makes these cars but also the polestar 7 is moving into production in europe as i understand it and that is going to be an suv style model just start to talk us through that what's the experience of that car and what does it bring that's new here? And I think, you know, when we start talking about SUVs, even though it's maybe a compact SUV, again, can you get that kind of range that people, frankly, will expect from a sports utility vehicle like that, that they will want to go out and be confident they could go out in the wild as they would with their SUV?

14:57So we have made the decision to do the Polestar 7, and now we are wrapping up certain details, and we will make the final decision where exactly we produce a Polestar 7 in about two to three months. We have decided it will be in Europe, exactly for those reasons. So no tariffs and also like shipping cars around the world is not a future business model, really. I mean, being close where your customers are also fast then to market is a benefit. That's why we clearly decided it will be in Europe. And we, Polestar, do well in Europe. And in Europe, I mean, size of the car is also a topic. Our cars in general are relatively big, which is good for China and the US, but for Europe, it's really beneficial to have a smaller, a compact SUV.

15:43And also to the point of, I want to be in the places where the big profit pools are. The compact SUV segment is a big segment and is the fastest growing segment. So back to basics, why don't we go into the segment where the biggest profit pool is? And that is certainly the compact SUV. And I think a premium compact SUV in this segment can play a very interesting role, because at the moment, we don't see so many others positioned like this. That's the thought process. No rocket science. It's pretty straightforward as entrepreneurs, business people think, go where the profits are, where you have growth, and where you can make a quick impact.

16:24Polestar has come of age, if you like, in a very interesting period of economics, global economics, you know, in a sense that when you started out as a brand, you were manufacturing largely in China. That was where the most of the cars that came to market were starting their lives. Then we had obviously the Trump presidency, number one, and we had tariffs on Chinese-made vehicles and things had to start changing tack. Then we had the talk of nearshoring and friendshoring and getting closer. I just wondered now, you guys are sort of leaping to the next bit, which is say, well, rather than be near the markets that we want to sell to, we need to be in the markets we need sell to and so of course you have your u.s plant is online now in south carolina was this ever as you understand and i appreciate you've only come on in september michael but as you understand things was this always part of the plan or is this essentially how brands and businesses are having to change i mean i think there's that you know is this a push and a pull or was this ever part of the plan well this has developed over time in fairness like when polestar was was founded evs was was a big topic very few competitors and everybody was like super excited okay here's a Polestar 2, which is a very successful car.

17:29More than 170 ,000 Polestar 2s have been sold. That's a big achievement for a company which is so young as Polestar. But then things have developed, right? I mean, Terris came in, more models, and therefore the manufacturing strategy we have is very important. It's very intelligent to produce locally in the US, now with the Polestar 7 also in Europe, but we also produce in Korea, the Polestar 4, for the US and at a later stage also for Europe. Why do we do that? Because it's without tariffs, right? So, I mean, these things do develop over time. In fairness, we are living in a time where you have lots of changes and the automotive industry is always right in the middle of all the changes, be it a new president in the US, be it changes everywhere.

18:15But I think we have found very good solutions. And for me, it's always important are those robust setups, right? I mean, are they also working when times get more difficult? And I feel we have made good solutions. Your old company, Volkswagen, is doing interesting stuff in terms of the people that it's working with right now. And it's fostered a lot of startups, frankly. Rivian being one of them, Scout Motors on the East Coast of the US, both of whom are essentially building software for Volkswagen in most cases. That's essentially the interest that Volkswagen has. Just help me understand, someone who's seen every side of this cube, if you like, you know, the old OEMs, the old big manufacturers, the legacy brands, you know, where do you see that they sit these days in this EV question, if you like, you know, in a way, they're having to look to upstarts to teach them to do, in a sense, what's the most basic thing, which is the programming, aren't they?

19:08Yeah, and now we need to talk a bit about software, because it's so important in the car industry. And And I need to do a 30-second advertising for Polestar because the Polestar 3 really has the first software-defined vehicle. And why is that important? Because you can do then over-the-air updates. And that is really what I think some other competitors in the U.S. and China have done. The Europeans are behind. And I'm so happy that we can do it because customers are delighted about this. So you drive a Polestar 3. You get a notice like, okay, please do the over-the-air update. The next day you feel your car has improved.

19:42you love it and you actually got this for free but you know your company is taking care of you and i think this is the future and even if there are things you want to improve from the company point of view you can do that in a very easy way that's i think really the future everybody else will do that and the european competitors you mentioned will do the same but it's also fair and it's my role also to highlight that polestar has it already today with the polestar 3 which is a competitive advantage is we want to make sure that people understand it and really say oh the Polestar 3 has really the core compute it is a software defined vehicle where I can do these over the updates which I think is really exciting and really makes the product better and the customer happier.

20:29So you know we've talked about your manufacturing that's happening in the US you've also got plans for a European manufacturing base for the Polestar 7 to be confirmed where that will be. But also, you know, we've touched on your huge expansion of retail spaces by 2026. You're also going to start selling in France in 2025, aren't you? Even a tricky moment for France's economy. Yeah, that's correct. And back to the point of focus. We want to enter new markets and we will. But 2025 is all about France. Why are we very optimistic about that? First of all, the EV market in France is relatively big.

21:06We understand Europe very well. We have very competent French management. Now we're looking for French retail partners. We have all the processes there and Polestar is really doing well in Europe. So therefore this year the focus is really on France making sure we have a successful launch with our new products. And then 2026 onwards we will look at other markets. But again let's not do everything at the same time. We are very focused 2025 on the French market introduction. And would you ever consider making these cars, these Behold Star 7s, in Western Europe, in an old manufacturing base like France?

21:44I mean, look, in these days, it's not so difficult to find factory capacity which is available. I think bringing all the elements together, like the platform, the cost competitiveness, and we will announce that final decision in two to three months. And as I said, it's an important long-term investment decision. That was Michael Loescheller, the CEO of Polestar, talking to our Chris Lord a little bit earlier. And you can find out more about the business and their exciting plans for 25 and beyond by heading to polestar.com.

22:23You're listening to The Entrepreneurs with me, Tom Edwards, and also with me, Chris Lord still gathered around the studio one table here at Midori House. Chris? Great to be with you, Tom. I'm glad to see you back in fighting form after your time away. Yes, exactly. It was a choppy couple of weeks. Listen, we're on the road, as we so often are, at Monaco. We've been talking EVs, of course, on the highways. But now we're looking to the skies and we're heading to Greece, which might surprise some. Super interesting business. Lots of innovation here. Tell me about this next mobility interview, Chris, that you did.

22:56And Hopper is a really interesting hop-on, hop-off helicopter company operating around the islands of Greece. You know, famously, Greece is a country with many charms that exists well off the beaten track. And one of the challenges of getting around that country is, you know, you either have to get on a ferry, which can be slow and quite often quite costly, even though you're only going quite relatively a short distance, or you take planes, which means you have to go through the rigor of going through domestic travel, going to an airport, all that kind of thing. hopper trying to corner what is a i think a change in travel picture for a lot of people where they're willing to spend a little bit more to get rid of some of the rigors that we've come associated with especially when it comes for short haul domestic uh journeys get rid of some of the rigors that we've come to know so well of you know very you know taking your shoes off at security having to undress when you want to just get into the departure lounge you know all those kind of things you can be very quick on your helicopter and off you go in a very very short period of time.

23:55And so I spoke to the chief commercial officer, Dimitris Kosofas, just about why this business has got its moment up in the air right now. So essentially what we've seen as a paradox in the tourism space in Greece in the last few years is that hospitality and the whole offering around it has been getting more and more upgraded in the last 10 years or so. But transportation still remains a complex issue. I think that for most islands, you'd need at least the three to four hours ferry ride. Or if you're lucky for one of them to have an airport, then you can get there in an hour's time. But then again, you know, some of them also entail a complex trip involving both a ferry and an airplane ride.

24:38And so I look at your destination, your route map right now, you're obviously going from Athens, but also you're heading as far as to Mykonos, to Patmos, to Botryhele, to Santorini. You've got an expanding route map all across these islands. But in a way, what you've brought to the table of travel there in Greece right now is it's about making it accessible at almost a sort of private jet level accessibility without the big cost. Is that right? Absolutely. Affordability was indeed one of the key factors we identified very early on in the process. Dimitris, our CEO and second-time founder, he essentially saw the gap in the market on his way actually to Patmos on a trip.

25:20He was attending a wedding. And there was an opportunity there, getting the sharing economy working for us and making helicopter travel accessible. And essentially, just to give you more context, what is happening is that private flights on helicopters have been operating for a few years in Greece, as everywhere else in the world. But what happens there is that most of the times you would see that one of the two legs of the trip is actually coming back with a helicopter empty. So we made a bold move trying to get that helicopter trip, the empty leg, as we call it in the industry, to make it as full as possible so that we can make the economics work.

25:58and that's how we launched the innovative model of shared helicopter rides from Athens to the Greek islands as a starter and potentially you know expanding to further places abroad and we'll see in the future. Now it's interesting you know you talk there about making it more affordable but I think for most people listening to this they will think of helicopter rides as frankly an exclusive way to travel. Can really you keep the cost down simply by flying full helicopters? Is that just the way you can keep costs down? How else can you make this accessible? I'm looking at some of your one-way fares.

26:32They go from around 160 to 350 euros, which, frankly, is not worlds away from what you'd pay for a typical domestic flight. So how on earth can you keep it that low? Well, it's all a matter, I mean, it's a combination of how many seats on a helicopter you can fill based on, you know, how you price the service. And I think, you know, it's still early days, but we're finding the right sweet spot that makes sense for both customers as well as the business. And from what we've seen from the first few months of operation, because we only launched in May 2024, but having transported a few hundreds of passengers in the last few months, we see that pricing, especially for travelers coming from abroad, is very appealing.