Polestar Automotive Holding, the luxury electric vehicle (EV) maker, is set to receive a significant boost in funds as it plans to expand its production capacity. Volvo Car AB will provide $200 million in new financing, while an affiliate of Zhejiang Geely Holding Group Co., the Chinese automotive conglomerate, will contribute an additional $250 million. Both Volvo and Geely are also extending their existing loans to Polestar until 2027.
The additional funding comes as Polestar aims to double its production over the next two years. The company plans to break even on a cash-flow basis by 2025 and expects to produce a minimum of 155,000 vehicles annually by that time. However, the firm has revised its production forecast for this year to approximately 60,000 vehicles, lower than the earlier projections of up to 70,000 and the initial target of 80,000.
Polestar, whose largest shareholder is Geely Holding chairman Li Shufu, has faced challenges in gaining market share due to delays and increased competition. The company has been striving to resolve supply chain issues, particularly involving batteries and semiconductors.
In the third quarter, Polestar reported an adjusted loss of $214 million before interest, taxes, depreciation, and amortization, surpassing last year's loss of $176 million. The company attributed the decline in gross profit margins to higher inventories and supply chain challenges. However, the quarter also saw a 41% increase in revenue from the previous year, reaching $613.2 million, driven by higher sales volumes and price hikes.
The cash injection from Volvo and Geely comes with an optional equity conversion feature. In a recent securities filing, Polestar hinted at its intention to raise up to $1 billion in additional funds. The EV start-up was previously a subsidiary of Sweden's Volvo Car, which is itself owned by Geely.
With increased financial support from its key backers, Polestar aims to strengthen its position in the EV market and overcome the obstacles that have hindered its growth in recent years. The additional funds will not only aid in expanding production capacity but also enable the company to invest in research and development for future EV models.