External factors force Polestar to revise its delivery forecast to the lower end of the previous range. This has halved its gross margin target over a potential slowdown in EV demand and global uncertainty.
Higher interest rates aimed at controlling inflation have affected consumer sentiment. Individuals seeking to purchase EVs encounter increased borrowing costs that cancel out price reductions offered by automakers to stimulate demand.
The company now anticipates delivering approximately 60,000 vehicles this year, compared to the previously estimated range of 60,000 to 70,000. In May, it had reduced the forecast from its earlier estimation of 80,000 vehicles. Additionally, Polestar expects to achieve a gross margin of 2% in 2023, down from the previously projected 4%.
To improve margins, Polestar plans a reduce costs initiative and has secured additional term loans from Volvo and Geely. Polestar’s Chief Financial Officer Johan Malmqvist emphasized that these actions are being taken due to the current challenging market environment, which has affected the company’s volume aspirations.
CEO Thomas Ingenlath stated that Polestar’s focus remains on profitability rather than increasing volumes. The company is reluctant to engage in price reductions as it targets the premium market over mass sales.
Polestar to revise its delivery forecast follows similar cautious statements from other industry leaders, including Tesla’s Elon Musk. General Motors, and Ford have both also expressed concerns about expanding factory capacity in the current high interest rate environment.
Additionally, EV startup Lucid also adjusted its full-year production forecast to align with deliveries more prudently.
Despite improvements in supply chain bottlenecks due to the pandemic, Polestar has faced challenges such as delayed production starts and intensifying competition, particularly from Chinese companies. These factors have necessitated job cuts to control costs.
After obtaining additional loans and implementing cost-cutting measures, Polestar estimates a need for around $1.3 billion in debt and equity funding until the company’s cash flow breaks even in 2025.
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