Polestar secures $1.5b funding as Volvo reduces stake to 18%

February 29: Polestar takes $1.5b loan, Volvo to shrink its stake

EV brand Polestar has secured a three-year, US$950 million loan from a consortium of 12 global banks, including BNP Paribas, Natixis, Standard Chartered, BBVA, HSBC and SPDB.

The company added that it has a cash balance, as at 31 December 2023, of approximately USD 770 million ($1.2 billion).

This announcement follows news in early February that Volvo would respond to an 83% fall in Polestar's share price – which played a part in Volvo's own share price having halved over the past year – by cutting the spinoff brand's funding.

Volvo said it was evaluating "a potential adjustment to its shareholding ... with Geely Sweden Holding being the primary recipient."

Today's news confirms that the largest stakes in Polestar will now be held by Geely directly and its subsidiary, Geely Sweden Holdings.

Geely's owner Eric Li already owns a stake in Polestar, but the Geely holding company itself was not a direct shareholder before this latest change.

Presaging any suggestion that Polestar is now on a three-year lifeline, Geely CEO Daniel Li said: "We will retain our shares in Polestar and intend to participate in future financing activities when required."

Volvo will retain an 18% stake, confirming previously that it "will remain a strategic partner in areas across R&D, manufacturing, after sales and commercial".

Volvo Car boss Jim Rowan told The Financial Times in early February that Geely is “much more of a natural holding company” for Polestar, giving "clarity" to Volvo investors.

Speaking with Wheels Media today, a Polestar spokesperson said: "The new ownership structure enables Polestar to take its place within the group alongside other brands like Volvo, Lotus, Zeekr."

The huge external investment comes with conditions, however, including the establishment of "a comprehensive efficiency program". Like a number of large global companies in recent years, layoffs have been a big piece of finding those efficiencies. Polestar has already shed 10% of its workforce since mid-2023, and a further 15% will follow in 2024.

Polestar expects its fortunes to improve in the coming year, with the long anticipated market launch of its Polestar 3 and Polestar 4 SUVs.

Both will reach Australia this year.

Those two are likely to be Polestar's highest-volume models alongside the compact 2 sedan, but the brand still intends to launch its confirmed halo models: the large Polestar 5 "four-door GT" sedan and the Polestar 6 convertible.

Outlook for end of year: Expectation of volume growth, double-digit gross profit margin, with significant progress in the second half of 2024 as new SUVs reach full production.

“This marks a new phase in Polestar’s business,” said Polestar CEO and former Volvo design boss, Thomas Ingenlath. “The efforts of recent years are paying off: We improved our cost basis, secured financing and are ramping up our product offensive.

"Both SUVs now sharpen the brand, target one of the fastest growing segments in the industry and position us for strong volume growth and profit margin progression from the second half of 2024."

Mike Stevens

February 2: Volvo cuts Polestar's funding

Polestar’s current financial struggles look set to continue after Volvo Cars announced it will no longer provide the EV-only brand with further funding.

Alex Inwood

Volvo currently owns a 48 percent stake in Polestar, which was previously the Swedish brand’s performance-car division, however it is now preparing to cut financial ties and handball all future financial responsibility to their mutual parent company, Geely.

The news follows Polestar’s announcement it would cut 450 jobs globally, which is about 15 per cent of its entire workforce, as it looked to adjust to “challenging market conditions”.

Despite a promising pipeline of future product that includes the Polestar 3, 4 and 5, Polestar has failed to meet sales targets and been forced to cut spending as it struggled with low demand, high inflation and a price war with EV heavyweight, Tesla.

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Reuter’s reports [↗] Polestar’s share price has fallen by 83 per cent since it went public in June 2022.

Polestar revised its business plan in November 2023, though still said it required US$1.3 billion in “expected external funding” before it could reach its target of being cashflow break-even in 2025.

“Polestar Automotive, the Swedish electric performance car brand, welcomes Geely Sweden Holding as a potential direct new shareholder,” said an official statement on Polestar’s global website. “Volvo Cars is evaluating a potential adjustment to its shareholding in Polestar including a distribution of shares to its shareholders, with Geely Sweden Holding being the primary recipient. Volvo Cars will remain a strategic partner in areas across R&D, manufacturing, after sales and commercial.

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Polestar became a standalone electric-car brand in 2017 and currently sell two models in Australia: the Polestar 2, which is based on the Volvo XC40, and the recently confirmed Polestar 4 which will arrive in August.

The Polestar 3 large SUV, itself based on the Volvo EX90, is expected to arrive later this year.

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