Recall sets back EV push by China's Geely to beat Tesla in Europe

 Polestar venture by Volvo unit to repair software glitch causing vehicles to stop

Chinese carmaker Geely and Swedish subsidiary Volvo Cars face a setback with their Polestar 2.   © AP

HAMBURG, Germany -- The Polestar 2, one of the first Chinese-built electric vehicles to be embraced by European drivers, is now facing a full recall in an embarrassing setback for Geely Automobile Holdings and its Swedish subsidiary Volvo Cars.

A spokesman for Polestar told Nikkei Asia that the company had requested owners of the nearly 2,200 Polestar 2 vehicles on the roads in Europe and China to bring their cars to authorized service centers to address a software glitch that caused several vehicles to stop abruptly. No accidents have been reported in connection with the problem.

"This is a safety-critical recall that requires a software update to rectify an internal logic fault in the battery energy control module," the spokesman said.

Geely and Volvo launched their Polestar venture in 2017. The Polestar 2, its first full electric vehicle, is designed to challenge Tesla head-on, with technology and a price that place it between Tesla's Model 3 and Model Y.

The first vehicles were delivered from Polestar's factory in Zhejiang Province to European customers in August. Last month, the Polestar 2 ranked third in sales in Norway -- a bellwether market for electric vehicles -- with 928 sold, compared with 1,116 Model 3s and 1,974 Volkswagen ID. 3 cars. The Polestar 2 has a starting price of just under 60,000 euros ($70,700) in continental Europe, including routine service for three years.

"[This] is surely a very annoying mistake for Geely during the market introduction stage, as it reduces trust in the brand," said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. "Any additional quality issues arising in the next few months would be poisonous."

Chinese carmakers have little to show for more than a decade's worth of efforts to crack Western auto markets. Earlier market entrants such as Brilliance Auto Group and Jiangling Motors fared poorly in local crash tests and failed to catch on with the region's car buyers.

But the rise of electric vehicles has given Chinese producers a new opening. Aiways, a Shanghai-based startup, has also recently started sales in Western Europe and other companies are aiming to launch in the region next year.

Geely, whose chairman Li Shufu is the single largest shareholder of Daimler, acquired Volvo from Ford in 2010, injecting fresh capital and technology into the iconic but fading Swedish carmaker. In 2018, Geely set up an engineering center in the small German town of Raunheim, snapping up engineers and other staff from the nearby headquarters of Opel Automobile which has been shrinking after an ownership change.

Michael Dunne, chief executive of China-focused automotive advisory company ZoZo Go, said he found the Polestar 2 to be impressive during a test drive in California last month. A key challenge for Polestar, he said, will be to establish a strong brand name, something that can take years for a car company, especially in the premium segment.

"These days, the hardest thing for automakers to master is software, with the business of writing lines of code being complex and fast-changing," Dunne said. "This recall is a relatively serious setback because it is related to vehicle safety."

Dunne said China badly needed to boost auto exports to address massive excess capacity. The country's automakers can build 40 million vehicles a year but annual domestic sales are slowing to less than 25 million.

Overseas shipments during the first half of 2020 declined 20% to just under 400,000 vehicles.

"They need to find new markets to keep factories and factory jobs humming at home," Dunne said.