Polestar has secured a $950 million loan from a dozen banks, critical funds needed to continue its electric car plans, following Volvo’s decision to withdraw its financial support for the electric car industry.
Polestar said on Wednesday that the funds are needed to fund the next stage of its growth and cover the vast majority of its estimated financing needs. Funding 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 loophole for the publicly traded Swedish electric vehicle company owned by China’s Geely Holdings. However, it does not solve all his financial problems. Even with this new capital injection, the company said Wednesday it will continue to cut costs and seek efficiencies, including layoffs. Polestar, which has cut 10% of jobs from mid-2023, said it plans to cut another 15% this year. The company previously disclosed the 15% job cuts, which will affect around 450 people.
The funding comes amid declining demand for electric vehicles, particularly vehicles in the luxury and premium segments, as consumers look for better deals. At the company’s inaugural Polestar Day in Los Angeles last November, the automaker said next-generation vehicles and technology 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, the 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 South Carolina plant. Prototype production of the 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 cut its 48 percent stake in Polestar and let parent company Geely take 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 of Polestar, Geely will continue to provide full operational and financial support to the iconic performance car brand in the future,” said Daniel Li, CEO of Geely Holding Group and member of Polestar’s board of directors. “We will retain our shares in Polestar and intend to participate in future financing activities when necessary. Polestar will have full access to technologies and engineering know-how from Geely Holding to realize its global development goals.”
Polestar CEO Thomas Ingenlath said efforts to cut costs and improve margins are paying off as the company works towards its 2025 target of achieving cash flow break-even, annual volume of more than 155,000 and a gross margin of puberty.
“This marks a new phase in Polestar’s business,” he said in a statement. “The efforts of the past few years are paying off: We’ve improved our cost base, 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 margin evolution from the second half of 2024.”
