Polestar has received a much-needed boost to its future plans as it secured a $950 million loan from twelve banks. This financial support follows Volvo’s recent decision to withdraw its backing of the electric automaker. The company announced on Wednesday that the loan will cover most of their estimated financing needs and is provided by international banks such as BNP Paribas, Natixis, and Bava. Polestar’s regulatory filings show that they had a cash reserve of $770 million at the end of 2023.
The loan provides crucial relief for the Swedish EV company, which is publicly traded and owned by Geely Holdings of China. However, it doesn’t fully resolve their financial struggles. In order to become more efficient, the company plans to continue cutting costs, including layoffs. Already, Polestar has reduced its workforce by 10% since mid-2023, with plans for an additional 15% cut this year. This will affect about 450 employees, according to the company’s previous announcement.
This influx of funding comes amidst a decrease in demand for electric vehicles, especially in the luxury and premium segments. Customers are searching for better deals, which puts pressure on Polestar to deliver new vehicles and technology that will reignite interest. However, these ventures are costly and there is no guarantee of a sales win.
Currently, Polestar’s production lineup consists of the Polestar 2, Polestar 3 (recently starting production in China), and Polestar 4. The company reports that they have successfully completed test runs of the Polestar 3 at their South Carolina factory. Additionally, they plan to accelerate prototype production of the Polestar 5, a progressive performance GT, in 2024.
This new loan of $950 million follows Volvo Cars’ decision to decrease its 48% ownership in Polestar and hand over financial responsibility to their parent company, Geely. Under this new structure, Geely Sweden Holdings will become the second largest shareholder, while Volvo Cars will retain an 18% stake.
Geely Holding Group CEO and Polestar Board Member Daniel Li stated, “As a strategic partner and direct shareholder in Polestar, Geely will continue to provide full operational and financial support to the iconic performance car brand going forward. We will retain our shares in Polestar and intend to participate in future financing activities when required. Polestar will have full access to technologies and engineering expertise from Geely Holding to realize its global growth targets.”
Polestar CEO Thomas Ingenlath is pleased with the progress made in cost-cutting and improving margins, as the company works towards its 2025 goal of cash flow break-even, annual volume of over 155,000, and a gross margin in the high teens. He stated, “This marks a new phase in Polestar’s business. The efforts of recent years are paying off: We improved our cost basis, secured financing and are ramping up our product offensive. Both SUVs now sharpen the brand, target one of the fastest growing segments in the industry and position us for strong volume growth and profit margin progression from the second half of 2024.”
