Polestar secures £750 million funding to target future growth

Polestar has secured $950 million (£750m) in new external funding that will help achieve its 2025 targets, including more than 155,000 annual sales and becoming cashflow break-even. The new funding is being provided by 12 international banks, including BBVA, BNP Paribas, HSBC and Standard Chartered, and takes the form of a three-year loan. The investment will help to fill a potential funding gap left after Volvo Cars said that it would stop funding Polestar. Electric-only performance brand Polestar was founded in 2017 as a joint venture between Volvo Cars and Zhejiang Geely Holding Group, which also owns Volvo. Volvo Cars currently holds a 48.3% stake in Polestar, which was listed on the Nasdaq stock exchange in 2022 – but has announced plans to distribute 62.7% of that holding to its shareholders. That will reduce Volvo's stake in Polestar to 18%, with those shares passing to Geely Sweden Holdings. Polestar currently has just one car, the 2, on sale, but it will be joined by the 3 and 4 this year. Company boss Thomas Ingenlath said that the funding from the banking syndicate "reflects our partners' support for Polestar's growth course". The investment comes at a time when Polestar is facing notable challenges. The first recently unveiled a "strengthened" business plan with revised targets for 2025 to become cashflow break-even, have an annual sales volume of more than 155,000 cars and have a gross margin in the high teens. The plan does involve what is termed a "comprehensive efficiency programme". Polestar said that 10% of jobs have been cut since mid-2023, with a further 15% set to follow this year. In a statement, Daniel Li, the boss of Geely Holding Group and a Polestar board member, said that "Geely will continue to provide full operational and financial support to the iconic performance car brand going forward". Li added that Polestar would be involved in future financing activies "when required" and would have access to Geely Holding technology and engineering. Polestar will retain an ongoing technical collaboration with Volvo. Ingenlath added that the arrival of the 3 and 4 this year “marks a new phase in Polestar’s business". He added: “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." Why Volvo is divesting its Polestar stake Volvo announced the plan to end the funding of Polestar as part of its 2023 financial results. The company is planning to further ramp up its electric car projects in the coming years, including what Volvo boss Jim Rowan called “large-scale investments in the creation and adoption of new technologies and future-fit production facilities”. He added that, as a result, “our focus is on developing Volvo Cars and concentrating our resources on our own ambition journey”. Rowan emphasised that the two firms would continue to work closely together, adding: “Volvo Cars’ and Polestar’s strong operational collaboration across R&D, manufacturing, aftersales and commercial will continue to the benefit of both companies.” The two firms are investing heavily in electric technology and are growing a range of cars built on shared platforms that have been co-developed or are provided by parent firm Geely. If Volvo does distribute its shareholding in Polestar, Geely Sweden Holdings would become a “significant” new shareholder in the performance brand. In a statement, Geely Holding pledged that it would “continue to provide full operational and financial support to the independent exclusive brand going forward”. The Chinese giant noted that increasing its stake in Polestar wouldn't require a reduction of its shareholding in Volvo. In a statement following the announcement of Volvo's plan to divest its shares in Polestar, Ingenlath said: “With our growing line-up of exclusive, performance cars, Polestar is in one of the most promising phases of its development.” He added: “We look forward to continued cooperation with Volvo Cars as well as benefiting from even greater synergies with Geely on future-orientated technologies.”