By Marie Mannes
STOCKHOLM (Reuters) - Polestar (NASDAQ:PSNY) said on Wednesday it had raised a $950 million loan from a bank syndicate, helping to fill a gap left when Volvo (OTC:VLVLY) Cars said it would stop funding the electric carmaker, sending its New York-listed shares 18.5% higher.
Polestar also forecast double-digit gross profit margins by the end of 2024, against an expected flat outcome in 2023.
Investors' enthusiasm for EV makers has cooled as growth in EV sales has slowed and financial losses have piled up, making life especially hard for startups. Price cuts by leading players Tesla (NASDAQ:TSLA) and BYD (SZ:002594) have added to the pressure.
"It is crucial for us to be able to concentrate on rolling out our car programs, and it provides the funds needed to complete the model program that we have with Polestar 2,3 and 4 this year, and the 5 joining in 2025," CEO Thomas Ingenlath told Reuters.
Polestar differs from many pure-play EV startups in that it has had two strong financial backers that co-founded the company, Volvo Cars and Geely Holding.
However, it has still struggled, which has led to target misses and job cuts.
The fresh funding comes at a crucial time after Volvo said this month it would cease further funding of Polestar, and hand over most of its stake to its shareholders such as Geely.
The three-year loan facility from 12 international banks is intended to help Polestar achieve its goal of cash flow break-even in 2025. In the auto industry, a carmaker can spend $1 billion to develop a single model.
Polestar had previously said it would need $1.3 billion in external funding to break even in 2025.
Geely CEO Daniel Li, also a Polestar board member, said the Chinese automaker would continue backing Polestar.
"Geely will continue to provide full operational and financial support to the iconic performance car brand going forward," Li said in Polestar's statement.
"We will retain our shares in Polestar and intend to participate in future financing activities when required," he added. "Polestar will have full access to technologies and engineering expertise from Geely Holding to realise its global growth targets."
Banks extending the loan to Polestar include BNP Paribas (OTC:BNPQY), Natixis, Standard Chartered (OTC:SCBFF), BBVA (BME:BBVA), HSBC, and SPDB.
Polestar said it expected volume growth this year that would support its target for 2025 of more than 155,000 vehicles annually.
"Volume and margin progression are expected to be weighted towards the second half of 2024, as the two SUVs reach full production and global distribution," the company said, referring to the Polestar 3 and 4 models coming this year.