Ailing Polestar moves production from China to South Korea

To avoid the sky-high toll walls in the United States, electric car manufacturer Polestar will not build its new model ‘4’ for the European and American markets in China, but in South Korea.

Polestar

held its investor day on Thursday and Friday after reporting disappointing quarterly figures the day before. This showed that the subsidiary of Volvo Cars and Geely will be working hard to get out of the red in the coming years.

In the coming years it will concentrate on the most important markets where it is already active, including Belgium. The brakes are also on the development of additional models: for the time being, Polestar will stick to the four models that it already sells or that will come onto the market within two years.

Polestar Chief Financial Officer Johan Malmqvist spoke of “more challenging market conditions,” using similar words to Tesla CEO Elon Musk and top executives from General Motors, Ford, Volkswagen and Mercedes-Benz. In recent weeks, they have all complained about a declining demand for electric cars.

Polestar has also signed a contract with Renault Korea Motors to produce units of the new sporty electric SUV Polestar 4 in the South Korean city of Busan from 2025. Initially, Polestar planned to build the 4 only at the Geely factory in Hangzhou Bay, China.

But the Polestar 4, like the large SUV Polestar 3, is the most important model for the brand in the crucial American market. However, the US imposes a 27.5 percent import tax on imports of cars made in China.

The brand had already decided to have the Polestar 3 built in the American Volvo Cars factory in Charleston. The first units will be produced there next summer. By now also building the Polestar 4 outside China, American import tariffs are avoided.

Polestar is owned by Geely and Volvo Cars, which in turn is also a Geely subsidiary. In our country, the brand only sells the Polestar 2, which is popular as a commercial vehicle. Nearly 2,000 of these have already been delivered in Belgium this year.

However, Polestar is having a hard time worldwide. This was evident from the third quarter financial results earlier this week. The company had to lower its full-year sales forecast for the second time this year. While at the beginning of this year it was expected that 80,000 Polestars would be sold, this was already reduced to ‘60,000 to 70,000’ in May. CEO Thomas Ingenlath now expects 60,000 cars to be sold this year. Last year Polestar delivered 51,000 cars.

In addition, the expected gross profit margin of 2 percent is only half of what was previously forecast. Polestar’s operating loss rose by a third to $261 million in the third quarter.

Investors are now considerably less enthusiastic about Polestar than at the time of the IPO 2.5 years ago. At the time, Polestar had a market value of $17 billion. Today, about $4 billion of that remains.

According to CEO Ingenlath, the goal remains for Polestar to get out of the red in terms of cash flow by 2025. Gross margins should therefore be well into the double-digit percentages. Until then, however, Polestar still needs extra money. The brand secured an additional loan of $450 million from Geely and Volvo Cars this week. That loan can be converted into shares by 2027. However, that is not enough. Ingenlath said at the investor day on Thursday that the company needs an additional $1.3 billion until 2025. A capital increase through the issuance of additional shares is not excluded.