Polestar secures $1 billion loan to keep its electric vehicle plans on track


Polestar has secured a $950 million loan from a dozen banks, critical funds needed to continue its electric vehicle plans after Volvo’s decision to withdraw financial support for the electric automaker.

The North Star said on Wednesday that the funds were needed to finance the next stage of its development and covered a large majority of its estimated financing needs. 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. The company had about $770 million in cash at the end of 2023, according to regulatory filings.

The financing is a crucial interim solution for the publicly traded Swedish electric vehicle company owned by China’s Geely Holdings. However, this does not solve all of his financial problems. Even with the new infusion of capital, the company said Wednesday it would continue to cut costs and pursue efficiencies, including through layoffs. Polestar, which has cut 10% of its jobs since mid-2023, has announced plans to make additional cuts of 15% this year. The company previously announced a 15% job cut, which would affect around 450 people.

The financing comes amid slowing demand for electric vehicles, particularly vehicles in the luxury and premium segments, as consumers look for better deals. At the company’s first Polestar Day in Los Angeles last November, the automaker said next generation vehicles and technologies would provide the spark needed to drive sales. But bringing new vehicles to market is a costly exercise with no guarantee of commercial success.

Polestar currently produces the Polestar 2, the Polestar 3, which recently began production in China, and the Polestar 4. The company said it has successfully completed production testing of the Polestar 3 at its South Carolina factory. Production of prototypes 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 reduce its 48% 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 comprehensive operational and financial support to the iconic performance car brand,” said Daniel Li, CEO of Geely Holding Group and member of the Board of Directors of Polestar. Polestar, in a press release. “We will retain our shares in Polestar and intend to participate in future financing activities when necessary. Polestar will have full access to Geely Holding’s technologies and engineering expertise to achieve its global growth goals.

Polestar CEO Thomas Ingenlath said efforts to cut costs and improve margins are paying off as the company strives to meet a 2025 goal of breaking even. cash flow, an annual volume greater than 155,000 and a gross margin of around 15%.

“This marks a new phase in Polestar’s business,” he said in a statement. “The efforts of recent years are bearing fruit: we have improved our cost base, obtained financing and intensified our product offensive. The two SUVs now strengthen the brand, target one of the fastest growing segments in the industry and position us for strong volume growth and profit margin expansion from the second half of 2024.”


Leave a Comment

Your email address will not be published. Required fields are marked *