Gores Guggenheim Stock Is Banking on the Wrong Car at the Wrong Time

Stocks to sell

The verdict is still out on the viability of Gores Guggenheim (NASDAQ:GGPI) stock.

A close up of a Polestar vehicle in front of a company sign.

Source: Jeppe Gustafsson / Shutterstock.com

Gores is a special purpose acquisition company (SPAC) with plans to merge with Polestar, an EV maker gaining serious attention. If you’re connected to the electric vehicle industry, the new normal presents both opportunities and frustrations.

On the positive end of the spectrum, the coronavirus pandemic forced millions of people to consider the benefits of EV ownership.

No matter how much combustion-powered cars have improved over the century-plus, they still require frequent maintenance. No one wanted to be around others early in the pandemic, presenting issues if you wanted to get an oil change.

Even today, if you need service for your car, you might end up waiting a while. Even the most mundane parts are hard to come by as a result of supply chain disruptions.

All things being equal, EVs are built with fewer moving parts. This translates to fewer frequent maintenance requirements, which then translates to worry-free ownership (for the most part).

You can have EVs sit in your garage for a long period of time without much ill effect. That’s yet another positive to check for GGPI stock.

But that doesn’t mean the pandemic was a 100% positive benefit for Polestar or any other EV manufacturer. In reality, since people drive on the roads less often now, new car purchases aren’t at the top of most households’ priority.

True, EVs can save on fuel costs longer-term relative to the price of electricity. But again, with fewer people on the road, high gasoline prices are no catalyst for GGPI stock.

GGPI Stock and the Wrong Polestar Ad

Interestingly, as my InvestorPlace colleague Eddie Pan pointed out, Polestar bought commercial time during the Super Bowl. The ad featured its Polestar 2. Pan rightly stated that “the Super Bowl is one of the biggest sporting events in the world.” So, coughing up the $6.5 million for a 30-second spot could be money worth spent.

Before you jump onboard GGPI stock, though, you might want to consider whether the Polestar 2 would be the appropriate showpiece.

Even though I get that it’s the “reasonably” priced EV (starting at $45,900), the broader economy is my concern about GGPI stock. As I mentioned in my interview with CGTN America anchor Sean Callebs, soaring consumer prices have left people into two camps: those who can save money as a luxury and those who have no choice but to.

With electricity bills across most states in the union creeping up — I looked at my utility bill in utter shock recently — the latter camp is expanding. Combined with the cost of borrowing money rising, working households could find themselves paying hundreds of dollars more per month, even if their lifestyle doesn’t change.

Well, those hundreds of dollars per month could be used to lease the Polestar 2 or finance it. Instead, inflation has now become the primary competitor to the Polestar 2.

Polestar the company might be promoting the wrong vehicle with its Super Bowl as. If anything, the firm should run ads for the Polestar 1. If you can afford a six-figure car, you’re not worried about inflation.

Needing Outside Help

If the pandemic never happened, I might have a different tune on GGPI stock. Prices would be stable, supply chains would be free-flowing and everyday folks would be interested in making the transition to electric.

We don’t have the luxury of pondering what-ifs, unfortunately. Instead, we’ve got to deal with the circumstances at hand. Presently, I’m just not sure if enough of the consumer base is ready or interested in making the shift to EVs.

In short, there are so many other concerns that need to be addressed that I’m still going to have to sit on the sidelines with GGPI stock, despite its recent momentum.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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