Polestar announced on Wednesday that it has secured a $950 million loan from a bank syndicate, a move that helped to fill a gap left by Volvo Cars’ decision to stop funding the company. The news sent Polestar’s New York-listed shares soaring by 18.5%.
The company also revealed its forecast of double-digit gross profit margins by the end of 2024, a significant improvement from an expected flat outcome in 2023. This projection comes amid a cooling enthusiasm among investors for EV makers, as growth in EV sales has slowed and financial losses have mounted, particularly affecting startups. Price cuts by leading players Tesla and BYD have added further pressure.
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Polestar CEO Thomas Ingenlath emphasized the importance of the new funding, stating, “It is crucial for us to be able to concentrate on rolling out our car programs, and it provides the funds needed to complete the model program that we have with Polestar 2,3 and 4 this year, and the 5 joining in 2025.”
Unlike many pure-play EV startups, Polestar has had the support of two strong financial backers, Volvo Cars and Geely Holding. However, the company has still faced challenges, leading to target misses and job cuts.
The fresh funding comes at a critical time following Volvo’s announcement earlier this month that it would cease further funding of Polestar and hand over most of its stake to its shareholders, such as Geely. The three-year loan facility from 12 international banks is intended to help Polestar achieve its goal of cash flow break-even in 2025. In the auto industry, a carmaker can spend $1 billion to develop a single model.
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Polestar had previously stated that it would need $1.3 billion in external funding to break even in 2025. Geely CEO Daniel Li, also a Polestar board member, affirmed Geely’s continued backing of Polestar, stating, “Geely will continue to provide full operational and financial support to the iconic performance car brand going forward.”
He added, “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.”
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The banks extending the loan to Polestar include BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC, and SPDB. Polestar anticipates volume growth this year that will support its target for 2025 of more than 155,000 vehicles annually.
“Volume and margin progression are expected to be weighted towards the second half of 2024, as the two SUVs reach full production and global distribution,” the company stated, referring to the Polestar 3 and 4 models coming this year.
