Polestar Secures $950m Loan to Propel EV Production

Polestar, the Swedish electric vehicle (EV) manufacturer, announced on Wednesday that it had successfully secured a substantial $950 million loan from a syndicate of banks. This injection of capital fills a crucial gap left by Volvo Cars’ decision to discontinue funding the electric carmaker, providing a significant boost to Polestar’s financial stability and growth prospects.

The news of the loan sent shares of Polestar soaring by over 25% on the New York Stock Exchange, reflecting investor optimism and confidence in the company’s future trajectory.

In addition to securing the loan, Polestar also outlined ambitious forecasts, aiming for double-digit gross profit margins by the end of 2024, a notable improvement from the expected flat outcome in 2023. CEO Thomas Ingenlath emphasised the importance of the funding in enabling Polestar to focus on expanding its car programs, particularly highlighting the upcoming Polestar 2, 3, and 4 models slated for release this year, with the Polestar 5 set to join the lineup in 2025.

Unlike many pure-play EV startups facing financial challenges, Polestar benefits from strong financial backing from Volvo Cars and Geely Holding, its co-founders. However, the company has still encountered difficulties, including target misses and workforce reductions.

The recent funding comes at a critical juncture following Volvo’s decision to halt further financial support for Polestar, signalling a shift in ownership and responsibility to its shareholders, notably Geely.

The three-year loan facility, provided by a consortium of 12 international banks, is aimed at supporting Polestar’s objective of achieving cash flow break-even by 2025, a milestone crucial for the company’s long-term sustainability. In an industry where significant investments are required for product development, the loan provides essential financial support for Polestar’s ambitious plans.

Geely CEO Daniel Li reiterated the Chinese automaker’s commitment to supporting Polestar, affirming Geely’s intention to retain its shares in the company and participate in future financing activities as needed. Polestar will also continue to benefit from Geely’s technological expertise and engineering capabilities to drive its global growth initiatives.

The banks involved in extending the loan to Polestar include BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC, and SPDB, among others, underscoring the confidence of the financial sector in Polestar’s potential and strategic direction.

Looking ahead, Polestar anticipates volume growth in the coming years, with projections supporting its target of producing more than 155,000 vehicles annually by 2025. The company expects significant progress in volume and margin expansion, particularly in the second half of 2024, driven by the full-scale production and global distribution of its upcoming SUV models, the Polestar 3 and 4.