Polestar’s Revised Forecast and Margin Target

Polestar has cut down its delivery forecast for 2023 and reduced its gross margin target, citing concerns about a slowdown in EV demand and global economic uncertainty. The company now expects to deliver about 60,000 vehicles this year, down from the previous estimate of 60,000 to 70,000. Additionally, Polestar has revised its gross margin target to 2 percent for 2023, down from the earlier forecast of 4 percent.

The decision to trim the forecast and margin target comes as high interest rates have dampened consumer sentiment, making it more challenging for people to buy EVs. Despite price cuts by automakers to stimulate demand, the higher borrowing costs have offset these efforts.

To address the challenges, Polestar is focusing on cutting costs and has secured additional term loans from Volvo and Geely amounting to $450 million. The company aims to boost margins through cost-cutting measures and is prioritizing profitability over volumes. Polestar’s CEO, Thomas Ingenlath, emphasized that the company will not compromise on prices and is committed to chasing profitability rather than volumes.

The revised forecast from Polestar reflects the current market environment, which has been challenging for EV manufacturers. The company has faced delays in production, increased competition from Chinese players, and the need to reduce costs, including job cuts, to manage expenses.

Looking ahead, Polestar anticipates the need for external funding of about $1.3 billion in debt and equity until it achieves cash flow break-even in 2025. The company aims to achieve a gross margin in the high teens with an annual volume of about 155,000 to 165,000 vehicles in 2025.

Despite the challenges, Polestar reported a cash position of $951.1 million as of the end of September and a 41% increase in revenue for the third quarter, driven primarily by higher vehicle prices. However, operating losses also increased by 33% due to higher expenses.

In summary, Polestar’s decision to revise its delivery forecast and gross margin target reflects the evolving market dynamics and the company’s strategic focus on profitability amidst the changing landscape of EV demand and economic conditions.