Polestar is raising nearly $1 billion, expecting revenue to improve in 2024

Polestar said on Wednesday it had secured a $950 million loan from a bank, helping to fill the gap left by Volvo Cars, which announced it would stop financing the automaker.

Polestar is also forecasting double-digit gross profit margins by the end of 2024, while results are expected to be flat in 2023.

Investor enthusiasm for EV manufacturers has waned as EV sales growth slows and financial losses mount, making life difficult for startups. Price cuts by major players Tesla and BYD have added to the pressure.

“It is important for us to be able to focus on the launch of our car programs, and this provides the funds needed to complete the prototype program we have with Polestar 2, 3 and 4 this year, and the 5 that will join us in 2025,” CEO Thomas Ingenlath told Reuters.

Polestar stands out from most start-ups specializing in electric cars in the fact that it has benefited from the support of two major financial backers, Volvo Cars and Geely Holding, which founded the company.

However, the company ran into problems, leading to overshooting of targets and job cuts.

The new funding comes at an important time after Volvo said this month it would stop funding Polestar and hand over a majority of its shares to shareholders such as Geely.

The three-year loan provided by 12 international banks aims to help Polestar reach its goal of financial parity in 2025. In the automotive sector, the manufacturer can spend a billion dollars to develop a single model.

Polestar previously said it would need $1.3 billion in external financing to break even in 2025.

Geely CEO and Polestar board member Daniel Li said the Chinese automaker will continue to support Polestar.

“Geely will continue to provide full operational and financial support to the performance car brand,” Li said in a Polestar statement.

“We will retain our stake in Polestar and intend to participate in future financing activities if necessary,” he added. “Polestar will have full access to Geely Holding’s technology and engineering expertise to achieve its global growth goals.

The banks that gave the loan to Polestar are BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC and SPDB.

Polestar said it expects volume growth this year, which will allow it to reach its annual target of around 155,000-165,000 vehicles by 2025.

“Volume and margin development is expected to be concentrated towards the second half of 2024, when both SUVs will reach full production and global distribution,” the company said, referring to the Polestar 3 and 4 models that will arrive this year. (Reporting by Marie Mannes, editing by Ben Klayman and Mark Potter)