In response to market challenges, Polestar has retooled its business plan, announcing more conservative delivery estimates for 2023 and unveiling a series of measures aimed at enhancing efficiency and profitability.
The company, in its third-quarter earnings report, disclosed a cut in its longstanding 2025 deliveries target, acknowledging the need for additional funding to break even by that year. Polestar is now targeting a gross profit margin “in the high teens” for 2025, with an annual volume projection of 155,000 to 165,000 vehicles—significantly lower than its initial goal of 290,000 vehicles.
The Swedish automaker, which delivered 51,491 vehicles in 2022, now aims to deliver approximately 60,000 vehicles in 2023, signaling a more cautious approach from its original goal of between 60,000 and 70,000 vehicles. The gross margin for the year is expected to be around 2%, down from the earlier target of 4%.
To support its revamped strategy, Polestar has secured $450 million in new loans from its founding investors, Chinese automaker Geely Automobile Holding providing $250 million, and Geely subsidiary Volvo Cars providing $200 million. While these funds will aid in implementing cost-cutting measures, Polestar anticipates the need for an additional $1.3 billion in external funding to achieve break-even cash flow in 2025.
“By having taken the necessary steps to re-work our business plan, we are reducing costs and improving efficiencies to create a more resilient and profitable Polestar – and reducing our funding need at the same time,” said Thomas Ingenlath, Polestar CEO.
Despite facing financial challenges, Polestar says it remains committed to its upcoming models. The Polestar 3, a large electric SUV, is on track for production in China in Q1 2024 and in the US in the summer. Additionally, the Polestar 4, a smaller crossover SUV, is set to begin production in China this month, with deliveries expected to start in early 2024.