Polestar Automotive Holding UK Plc Q2 FY2023 earnings call

• Record second quarter with 36% growth in deliveries vs. last year, totaling ~28,000 vehicles in the first half. Strong growth in established and new markets.
• Upgraded Polestar 2 launched with improved specs (longer range, faster charging, reduced carbon emissions). Polestar 3 available in retail spaces globally; Polestar 4 on track for Nov 2023 production start, with first China deliveries end-2023 and global early 2024.
• Joint venture with Xingji Meizu Group for software/user experience; collaboration with Mobileye for autonomous driving in Polestar 4.
• Expanded retail footprint in Porto (Portugal), Chengdu (China), Houston/Palm Beach (US), and planned openings in UK and Canada. Adopted Tesla's charging standard for US/Canada sales from 2025.
• Ongoing cost management efforts to improve margins, working with shareholders on funding options.

In Q2 2023, revenue increased 16% to $685 million from $589 million in the prior year, driven by higher Polestar 2 deliveries and price increases. However, gross profit decreased from $61 million to a negative $1 million. Key factors affecting cost of sales included higher contract manufacturing costs ($52 million), supplier charges for semiconductors and batteries ($18 million), and inventory impairment ($10 million), partially offset by a positive foreign currency effect ($12 million). Polestar 2 deliveries were a significant contributor to revenue growth, but mix, product variant, and discounts impacted the top line.

• Expect 60,000-70,000 vehicle deliveries in 2023, representing ~16%-36% annual growth. Stronger second half anticipated due to easing supply chain disruptions and lower raw material costs.
• Reaffirmed full-year gross margin guidance of ~4%, driven by improved profitability from Polestar 2 model year '24 sales, clearing of model year '23 inventory, and easing supply chain and raw material costs.

• Macroeconomic uncertainty impacting mix, price sensitivity, and funding.
• Supply chain disruptions and raw material costs affecting cost of sales and profitability.
• Dependence on key partnerships (e.g., Mobileye, Xingji Meizu) and market acceptance of new models (Polestar 3, 4) for future growth.

Q: On launch timing of Polestar 4 versus Polestar 3, differences in platforms and learnings A: Thomas explained that Polestar 3 is a high-seating SUV, while Polestar 4 is an SUV coupe with lower price point. Polestar 4 production starts Nov 2023, Polestar 3 in mid-2024. Learnings from software and competence development were highlighted.

Q: Macro situation and mix/price sensitivity A: Johan mentioned mix effect, higher discounts, and FX impact, expecting improvement in channel and product mix as model year '23 inventory clears Q: Drivers for higher deliveries in second half A: Thomas noted the model year '24 Polestar 2 and new markets, but growth more tied to model year '24 rollout Q: Margin expectation for second half A: Johan said improvement from model year '23 inventory clearing, supply chain easing, and lower raw material costs Q: Liquidity situation A: Johan discussed cash on balance sheet, funding sources (short-term facilities, shareholder support), and ongoing cost management Q: Hertz partnership and delivery guidance A: Thomas said Hertz partnership ongoing, deliveries to grow in Q3 towards Q4 peak Q: Capital needs and equity/debt A: Johan said considering both equity and debt, working closely with owners on funding options Q: Sequential gross margin bridge and balance sheet A: Thomas explained Q2 margin impact from costs, Tobias asked about backlog and financing, Thomas responded on working capital and funding plan Q: Impairment and Polestar 4 volumes A: Thomas said inventory impairment was on finished PS2s, Polestar 4 production start Nov 2023 with Q4 volumes to come Q: Mix in second quarter and future uplift A: Johan and Thomas talked about fleet mix, car rental, and future uplift from higher ASP models like Polestar 3 and 4 Q: Retail shareholder questions on stock, market presence, production, and autonomous driving A: Thomas addressed stock undervaluation, market expansion efforts, SC production start mid-2024, and autonomous driving integration with Mobileye