Polestar (PSNY) stock slid 8.7% on Thursday after the luxury electric vehicle maker cut its near and long-term production forecasts and is raising new funding from its backers, Volvo Cars and China’s Geely.
Polestar said it now sees 2023 deliveries of approximately 60,000 vehicles for the year and a gross margin of approximately 2%. In May, the company had called for a 60,000-70,000 delivery target, which itself was lowered from the 80,000 target it gave in March of this year.
Looking longer term, Polestar issued a “strengthened business plan,” which stated the company is now aiming to have total annual production volume of approximately 155,000-165,000 EVs by 2025 and a gross margin in the “high teens,” with cash flow break-even status reached in 2025 as well. Polestar said enhanced product mix, reduced cost structure, and refocused approach to the US and China will help it reach those profitability targets.
Polestar had previously said before its reverse-SPAC IPO in June 2022 that it would aim to sell 290,000 cars by 2025.
“By having taken the necessary steps to re-work our business plan, we are reducing costs and improving efficiencies to create a more resilient and profitable Polestar — and reducing our funding need at the same time,” CEO Thomas Ingenlath said in a statement today. “Achieving cash flow break-even already in 2025 will show the strength of our asset-light business model. Margin over volume is our way forward.”
Polestar, which is backed by Volvo Cars and Geely (which owns Volvo), uses facilities and gets production support from the two automakers, but is building its own assembly plants as well. In terms of new funding, Volvo is providing an additional $200 million in loans with Geely making $250 million available. Both of these loans can be converted to equity in the future.
That being said, the company stated it will still require $1.3 billion in “external funding” until it can achieve cash flow break-even status in 2025.
With its new financing in place, Polestar announced at its “Polestar Day” in Santa Monica on Thursday that its upcoming Polestar 3 SUV is on track for production next year, with deliveries beginning in Q2. The sportier Polestar 4 coupe SUV begins production in China next week, with first deliveries occurring before the end of year. Finally the Polestar 5 sports sedan, which will now feature StoreDot fast-charging technology as well as new SK higher power batteries, will be coming be “coming soon,” with a 2024 launch date expected.
As for its Q3 numbers, Polestar reported revenue of $613 million, a jump of 41% from a year ago, with its gross profit slipping 11% to $3.6 million. Polestar said gross profit was hurt by “irregular supplier charges related to batteries and semiconductors” and inventory impairments.
In terms of deliveries, Polestar reported 13,976 units delivered globally, up 51% from a year ago.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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