Polestar details ‘significant doubt’ over future
The future of one of the world’s leading makers of electric vehicles is up in the air as it haemorrhages money, confuses buyers and struggles to sell cars.
The chief executive of struggling car maker Polestar says it will continue operating despite significant challenges.
Polestar lost more than $US1 billion ($1.5bn) in the second quarter of the year and published a warning to investors that the company’s current performance may “cast significant doubt about Polestar’s ability to continue as a going concern”.
The brand, owned by Chinese giant Geely, makes most of its cars in China, the world’s largest market for electric cars.
But Polestar has effectively stopped selling cars in China.
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The brand’s US share price has crashed from $15.33 in November 2021 to $0.32 today.
Its UK research and development centre also has laid off the majority of staff as the brand prepares to launch the $200,000 Polestar 5 electric sedan they were working on.
A statement for investors said that “management assessed Polestar Group’s ability to continue as a going concern and evaluated whether there are certain events or conditions, considered in the aggregate, that may cast significant doubt about Polestar’s ability to continue as a going concern”.
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“As a result of this assessment, management identified a material uncertainty that casts doubt on Polestar Group’s ability to obtain sufficient financing to support its cash flow needs and ensure ongoing compliance with its debt covenants,” it said.
That phrase is not a new element of Polestar’s financial statements.
And Polestar chief executive Michael Lohscheller refuted suggestions the company’s accounts look ugly, pointing to increases in sales and revenue of more than 50 per cent.
Polestar, like Volvo, is part of the broader Geely group.
The Chinese giant owns several other brands including Geely, Zeekr and Lotus, and investment from Geely is crucial to Polestar’s continued existence.
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“We have a clear going concern and we have support, Lohscheller said.
“Operational indicators show in the right direction and we do the right things.”
Polestar’s boss says the $US1 billion loss relates to soft sales in the US, triggered by import tariffs implemented by US President Donald Trump.
“Truth is we had to impair the Polestar 3, very much driven by the US situation,” he said.
“And that’s obviously a one-time impact we had to book, and that’s why you get then headlines like ‘hey the losses are big’, but I think if you split the story in two pieces, operational performance is good, we do the right things, and that’s the encouraging piece.”
CONFUSING STRATEGY
While rival brands such as Volkswagen, Mercedes and BMW are lobbying for the European Union to soften its stance on a combustion engine ban for 2035, Lohscheller wants it to remain in place.
The German executive is adamant Polestar is on the right track for the long term, doubling down on its EV-only strategy that rules out hybrid vehicles of any kind, and said “if we did hybrids, we would lose a lot of customers”.
Polestar’s chief also refuted suggestions the brand’s naming strategy is confusing.
The brand named its cars Polestar 1, Polestar 2, Polestar 3, 4 and 5 in the chronological order they were offered to the market, as opposed to using numbers that reflect size, class or performance similar to BMW’s 3, 5 and 7 Series sedans.
Loscheller said any changes to the naming strategy “would probably even create more confusion”.
But the brand is set to break its own protocol. The $200,000 Polestar 5 was set to be followed by a $300,000 Polestar 6 roadster, but the brand is set to postpone the latter roadster in favour of a cheaper Polestar 7 compact SUV that should sell in much larger numbers.
Lohscheller said the brand must “go into the volume segments”.
“That’s why the Polestar 7 has to come as quickly as possible and that’s the priority compared to a Polestar 6,” he said.
“Then we will do the Polestar 6.
“Of course everybody loves the Polestar 6, no question.
“Everybody wants to have it, but I we need to walk before we run here.”
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