• On the surface, GGPI stock benefits from cynical tailwinds.
• However, cost restrictions impose challenges for all EVs.
• GGPI might be worth a look, but vigilance is a must.

Just like with the coronavirus pandemic, no one in their right mind is happy about the geopolitical crisis in Ukraine. But undeniably, some cynical tailwinds stemming from residuals of the most recent crisis helps certain companies like electric vehicle (EV) manufacturer Polestar, which will merge with Gores Guggenheim (NASDAQ:GGPI). Over the trailing month since the Mar. 28 session, GGPI stock is up 5%.

Long before the Russian invasion, Polestar’s underlying industry was incredibly relevant. Thanks to Tesla (NASDAQ:TSLA) and its pioneering of fashionable EVs that could go the distance across multiple performance metrics, more people have warmed to the idea of making the electric transition. However, nothing incentivizes consumer behaviors more than a hit to the wallet, which is where GGPI stock enters the picture.

Because of gasoline prices breaking multi-year records, drivers are wincing every time they pull into the pump. Not too long ago in my part of town, the price per gallon was creeping toward $7, a real shocker. Therefore, GGPI stock is a clear beneficiary. No, the surging fuel costs don’t exclusively and directly boost Polestar. But the company just received an even more enticing marketing message because of outside circumstances.

But will that be enough to convincingly move the needle for Gores Guggenheim?

GGPI Stock is Tied to an Expensive Market

Conceivably, the terrible circumstances we’re witnessing — not just in Ukraine, but also here at home with soaring inflation — is at least a conversation starter for EVs. And with Polestar being a new outfit and thus qualifying for federal tax credits, GGPI stock certainly looks more interesting than some other competitors.

Further, local news in areas across the nation indicate that folks are considering making the switch. As gas prices reach and breach a certain threshold — which of course, due to regional economics will be different everywhere — EVs look all the more enticing. Thus, GGPI stock commands serious attention at this juncture.

However, the problem with EVs — whether you’re talking about Polestar or any other similar-class competitor — is that the platform is expensive on an upfront basis. For instance, the tax credit is not an immediate discount to the price.

As an Edmunds.com piece stated, “The federal incentive is usually referred to as a flat $7,500 credit, but it’s only worth $7,500 to someone whose tax bill at the end of the year is $7,500 or more.”

That fine print along with the rising costs of EVs themselves — because you’re not the only person thinking about making the transition — still puts EVs out of the reach of many households that want them.

The Cruel Catch-22 of EV Economics

What I’m about to say next does not exclusively apply to GGPI stock. Nevertheless, the Catch-22 of EV economics presents big challenges to any company that participates in this sector, especially those firms that are focused on EVs and nothing else.

The great dilemma about EV ownership is that those who would most benefit from it are the ones that can least afford it. That is alarmingly true during the new normal.

Who are the people that are hurting the most from high gas prices? Obviously, those who must drive to make a living. Since millions of white-collar workers are still largely operating remotely, that leaves people who must be on location to pick up their paystubs — think restaurant hosts, factory workers, retail service people — paying an undue share of the fuel cost spike.

Well, many of these folks (not all, to be clear) work in modest-income roles. With the double impact of inflation hitting virtually every physical goods sector, these workers are falling behind, not moving ahead. Certainly, you wouldn’t expect this professional demographic to buy EVs.

That is going to especially challenge companies that are focused on delivering more reasonable EVs, as opposed to premium offerings, such as Lucid (NASDAQ:LCID). Therefore, I would be cautious about GGPI stock.

Not a Bear but Definitely Not a Raging Bull

Since I have zero incentive to see GGPI stock move in either direction, I’m not here to propose a direct bear case. Since automotive purchases tend to invoke emotions, the design of Polestar’s offerings could drive much greater sales than skeptics anticipate.

However, I’m not decidedly bullish on the company either. Because it is choosing to attract the middle-to-upper-income crowd — as opposed to Lucid, which focuses on consumers that can afford cars commanding six-figure price tags — GGPI stock will likely be vulnerable to consumer economic dynamics.

Obviously, inflation is an important headwind within the aforementioned dynamics. Therefore, the best approach is to be prudent with GGPI should you be interested in acquiring shares.

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.