Polestar is bracing for an EV tariff war. It might not emerge unscathed

Date:

After major investor Volvo earlier this year decided to reduce its stake and cut funding for Polestar, the EV company went looking for $1.3 billion in new funding. It raised a $950 million lifeline three-year loan from a banking syndicate led by BNP Paribas and told investors it plans to raise the rest of the funds this year. Volvo parent Geely Holdings, a Chinese company whose investment portfolio includes Levasi, Lotus and Smart, became the company’s second-largest shareholder, while Volvo retained an 18 percent stake and still owes Volvo $1 billion through an outstanding convertible loan.

Polestar told investors that the plan is to achieve double-digit margins by the end of the year, and in its latest earnings call told investors that the company is “working intensively” to improve cash flow and still plans to break even by the latter half of 2025. The company’s new facility in South Carolina will play a big role in whether this can be achieved: analysts expect it to help production volumes and make its EVs eligible for the US EV tax credit of up to $7,500 depending on vehicle specifications, which will hopefully attract its customer base. Questions have been raised about whether Polestar will decide to stop selling the Polestar 4 in the US until 2025 when it shifts production to South Korea and thus avoid Chinese tariffs.

“Competition has increased and interest rates have risen significantly, which is why many companies like Polestar are still facing challenges in growing,” says Andres Shepard, senior equity analyst at financial services firm Cantor Fitzgerald.

Still, Polestar’s adjusted financial results for 2023, released on Friday after a long delay, dampened its prospects somewhat: Its net loss widened to $1.17 billion, operating losses widened more than 11 percent to $1.46 billion from $1.29 billion, and its revenue fell 3 percent to $2.38 billion. These losses were not offset by a 6 percent rise in car sales. Polestar did not meet its target of selling 60,000 vehicles in 2023 (down from 80,000 previously), having delivered 54,600 vehicles last year.

The delay in these results was a warning in itself: if they were released by July, Polestar was at risk of being delisted from the Nasdaq, a consequence of missing essential financial deadlines. The delay was attributed to accounting misstatements.

The company’s stock price has declined steadily over the past year, and was down 8 percent at the premarket open on Tuesday, which Ingenlath said was “not appropriate.” “We view that our current stock price does not reflect the value of our company — not now and not in the future,” he told investors.

This means that the gap between where Polestar is and where it wants to get to is much greater than expected. Projected revenue figures compiled by market analysis firm PitchBook show that the company is targeting 3.51 billion pounds ($4.43 billion) in revenue this year, and wants to increase that by 145.5 percent to 8.62 billion pounds ($10.9 billion) by 2026. That would be an ambitious feat for the current global head of sales, Kristian Elvefors, a former managing director of Volvo in the UK who took over from Mike Whittington earlier this year. Elvefors plans to expand the company’s retail footprint to Asia, Europe and Latin America in 2025, and allow customers to configure and order cars online. However, the troubling news is that car rental giant Hertz has put on hold plans to buy thousands of cars from Polestar this year, pulling out of an estimated $3 billion deal scheduled for 2022 that saw it promise to have a quarter of its fleet with Polestar by 2024.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Subscribe

spot_imgspot_img

Popular

More like this
Related

A Side Sleeper Test & Review Popular Body Pillows (2024)

being a party This can be challenging for the...

How to Protect Your Startup from Email Scams

For years, it's been claimed that the "end of...

Google is integrating DeepMind Gemini 1.5 Pro into robots that can navigate real-world environments

Google DeepMind on Thursday shared new advancements made in...