Polestar gets $1.6 billion infusion to tackle 2023

Swedish electric vehicle maker Polestar crouches on the starting line of a growth sprint that will see it launch three models and sell 290,000 vehicles by mid-decade.

It's an ambitious goal in the best of times. These are anything but for the auto industry, which grapples with supply chain bottlenecks, surging raw material costs and softening demand.

Now, Polestar is getting a $1.6 billion shot of new capital to cushion it against market turbulence.

Five-year-old Polestar's affiliate and shareholder Volvo Cars will provide an 18-month $800 million loan. The other major shareholder, PSD Investment Ltd., controlled by Chinese billionaire Li Shufu, is committing an equal amount through direct and indirect financing and liquidity support.

The financing "allows Polestar to focus on delivering more cars to more customers," CEO Thomas Ingenlath told analysts on a quarterly earnings call Friday. "We are on track developing the company, our product portfolio, our business."

Polestar said the new investment will help capitalize the company through 2023.

The funding "allows us time to unlock a broader range of longer-term financing alternatives when conditions in the capital markets improve," CFO Johan Malmqvist said.

Polestar's stock has shed more than half its value since June 24, when the automaker went public through a merger with a special-purpose acquisition company.

Canaccord Genuity Managing Director George Gianarikas said Polestar's ability to tap deep-pocketed shareholders is fortunate, given tightening capital markets.

"It's not always the company with the best business plan or product that wins, but the one with the best balance sheet," Gianarikas said. "Companies that raise money at the right time survive well past their sell-by date just because they have a lot of money in the bank."

Polestar delivered about 30,400 cars globally in the first nine months of this year and is on track to sell 50,000 units by year end. The remaining 20,000 vehicles are built.

Starting next year, the automaker will flip on the growth afterburners as it launches the first of two high-volume models.

The Polestar 3 midsize crossover will arrive in U.S. stores in late 2023. The EV maker expects to sell 24,000 units globally next year, increasing to 67,000 in 2024 and 77,000 in 2025.

The Polestar 4 crossover coupe follows in 2024. Polestar expects to sell 43,000 units globally that year and 79,000 in 2025.

Further down the road is a flagship sedan model and a halo roadster to rival the Porsche 911.

The new funding will help "safeguard the car programs," Malmqvist said. "With the three product launches we have over the next three years, we are focused on delivering on those milestones and for those products to then start generating revenues."

Polestar posted a smaller third-quarter operating loss as revenue more than doubled, and the company cut spending.

The automaker reported an operating loss of $196.4 million, compared with $292.9 million a year ago. Sales rose to $435.4 million from $212.9 million in the quarter.

Polestar warned that higher raw battery material costs will start to hurt later in the year. But Malmqvist said the automaker is proactive about managing costs ahead of the headwinds.

"We're not waiting for times to get worse," he said. "In light of the current market backdrop and the macro environment that we have and is likely to persist, we are very stringent in our spend, specifically as it relates to our operational costs."

Polestar executives declined to say when they expect to reach profitability.

"Given all the current market uncertainty, we are not going to give guidance on a specific point in time," Malmqvist said on the earnings call. "We do expect to break even within the context of us reaching our 290,000 volume plan."