On Wednesday, Polestar announced securing a $950 million loan from a bank syndicate, filling a gap left by Volvo Cars’ decision to cease funding the electric carmaker. This development resulted in an 18.5% surge in its New York-listed shares.
By the end of 2024, Polestar anticipates achieving double-digit gross profit margins, in contrast to a flat outcome expected in 2023.
Investors’ enthusiasm for EV manufacturers has waned as EV sales slowed and financial losses accumulated. This has made life especially difficult for startups. Price cuts by major players Tesla (TSLA.O) and BYD (002594.SZ) have exacerbated the pressure.
“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,” Thomas Ingenlath, Polestar’s chief executive officer, told.
Polestar differs from many pure-play EV startups in that it was founded by two strong financial backers: Volvo Cars (VOLCARb.ST) and Geely Holding (GEELY.UL).
However, it has continued to struggle, resulting in missed targets and job cuts.
At a critical time, Volvo announced earlier this month that it would stop funding Polestar and hand over the majority of its stake to its shareholders, including Geely. The additional funding comes as a response to this development.
Twelve international banks have provided Polestar with a three-year loan facility to aid the company in achieving cash flow break-even by 2025. In the auto industry, developing a single model can incur costs of up to $1 billion.
Polestar had previously declared that achieving break-even by 2025 would necessitate securing $1.3 billion in external funding.
Geely CEO Daniel Li, who is also a member of Polestar’s board, stated that the Chinese automaker will continue to support Polestar.
“Geely will continue to provide full operational and financial support to the iconic performance car brand going forward,” Li said in a Polestar statement.
“We will retain our shares in Polestar and intend to participate in future financing activities when required,” he went on to say. “Polestar will have full access to technologies and engineering expertise from Geely Holding to realize its global growth targets.”
Banks, including BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC, and SPDB, extended Polestar’s loan.
Polestar projected volume growth for this year, anticipating that it would contribute to achieving its 2025 target of producing 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, which will be available this year.
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