Polestar lands $1B loan to keep EV plans on track

Polestar secured a $950 million loan from a dozen banks, critical funds needed to keep its EV plans moving forward following Volvo's decision to pull back its financial support of the electric automaker.

Polestar said Wednesday the funds were needed to finance the next stage of its development and covers a large majority of its estimated financing needs. The financing was provided by 12 international banks, including BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC and SPDB, in the form of a three-year loan facility. The company had about $770 million in cash at the end of 2023, according to regulatory filings.

The funding provides a critical stopgap for the publicly traded Swedish EV company owned by China's Geely Holdings. However, it doesn't solve all of its financial woes. Even with this new injection of capital, the company said Wednesday it will continue to cut costs and look for efficiency, including layoffs. Polestar, which has cut 10% of jobs since mid-2023, said it plans to make another 15% cut this year. The company previously disclosed that 15% job cut, which will affect about 450 people.

The financing comes amid softening demand for EVs, particularly vehicles in the luxury and premium segments as consumers seek better deals. At the company's inaugural Polestar Day in Los Angeles last November, the automaker said next-generation vehicles and tech would provide the spark needed to boost sales. But bringing new vehicles to market is a costly exercise with no guarantee of a sales win.

Polestar currently produces the Polestar 2, Polestar 3, which recently started production in China, and the Polestar 4. The company said it has successfully completed test production runs for the Polestar 3 at its factory in South Carolina. Prototype production of Polestar 5, a progressive performance GT, will also accelerate in 2024, the company said.

The $950 million loan follows Volvo Cars' decision last month to reduce its 48% holding in Polestar and let parent company Geely take over financial responsibility. Under the new structure, Geely Sweden Holdings will become the second largest shareholder and Volvo Cars will retain an 18% stake.

"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," Daniel Li, Geely Holding Group CEO and Polestar board member said in a statement. "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 said efforts to cut costs and improve margins are paying off as the company works toward a 2025 goal of achieving cash flow break-even, annual volume of over 155,000 and a gross margin in the high teens.

"This marks a new phase in Polestar's business," he said in a statement. "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."