Polestar’s Path to Profitability Hits a Speed Bump
The electric vehicle (EV) market has been experiencing a slowdown, and Swedish EV maker Polestar is no exception. After reporting disappointing sales figures for 2024, the company’s U.S.-listed shares took a hit, plummeting around 8% in premarket trading.
Scaling Up Proves Challenging
Backed by China’s Geely, Polestar has been struggling to expand its business amidst weakening demand for electric vehicles and increasing competition from established manufacturers. To address these challenges, the company has undergone significant changes, including a major management overhaul. Industry veteran Michael Lohscheller took the reins as CEO in October, bringing with him a team of new executives, including a head of design, board chair, finance chief, and chief operating officer.
Strategic Review Yields Sobering Results
Shortly after assuming his role, Lohscheller launched a comprehensive review of Polestar’s business. The results, announced on Thursday, paint a more conservative picture than previously expected. The company now anticipates achieving positive free cash flow after investments in 2027, a significant delay from its initial forecast of 2025-end. Furthermore, Polestar expects a mid-teens percentage decline in revenue for 2024, rather than the previously projected flat revenue. The company’s gross margin is also expected to be negative.
New Funding Secured, But Debt Mounts
To address its financial needs, Polestar has secured over $800 million in 12-month term loan facilities from several banks. While this funding will be used to repay old loans, it will also increase the company’s current debt to around $4.4 billion. Polestar is set to report its fourth-quarter results on March 6, which will provide further insight into its financial situation.
A Long Road Ahead
Polestar’s revised forecast and increased debt underscore the challenges facing the EV maker. As the company navigates this difficult landscape, it will be crucial to monitor its progress and adjust its strategy accordingly. With the right approach, Polestar can still achieve its goal of becoming a profitable and sustainable business.
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