Polestar Automotive Holding UK PLC Q1 FY2025 earnings call

Commercial Transformation - Signed up new dealers across all markets, aiming to grow sales points by 75% until 2026; grew sales points by 33% excluding China in Q1 compared to last year. ### Maximizing Model Line-Up - Launched updated model year '26 Polestar 2 with new technologies; Polestar 3 achieved a five-star Euro NCAP rating and high child occupant protection score; Polestar 4 sales increased in major markets, with manufacturing of SUV coupes in Busan, South Korea starting in H2 2025; Polestar 5 expected to start sales later in 2025. ### Reducing Cost Base - Adjusting ways of working and structures, taking steps to realize efficiencies in R&D organization due to future cars being based on group architectures; pausing financial guidance for 2025 but reaffirming 30%-35% per annum growth target between 2025-2027.

Retail sales for Polestar increased by 76% compared to the previous year. Revenue grew by 84% driven by sales of Polestar 3 and 4. Gross margin improved to a positive 7%, representing a 15 percentage point swing. Polestar 2 accounted for 31% of total volume in Q1, Polestar 3 was around 19-20%, and Polestar 4 was 49%. Revenue contribution was significantly boosted by the higher-priced Polestar 3 and 4 models.

Paused financial guidance for 2025. Reaffirmed growth target of 30% to 35% per annum between 2025 and 2027, reflecting ambitions and continued growth in the EV sector.

Geopolitical uncertainty, including international tariffs and government regulations that may impact costs and sales; challenges related to potential reallocation of manufacturing capacity by contract manufacturing partners; uncertainty around the impact of U.S. regulations on China-connected cars.

Q: Talk about the impact of U.S. tariffs and how Polestar is adjusting.

A: 100% of Polestar volume in U.S. is localized in Volvo plant in Charleston, SC; monitoring tariffs closely, which accelerates need to bring costs down; U.S. is an important growth market but need to optimize costs and work through tariffs.

Q: Revisit supplier base or sales footprint.

A: 75% of volume in Europe with strong growth; focus on Europe with new markets like France; U.S. is a growth market but need to stay competitive cost-wise.

Q: Progress of new commercial strategy with dealers.

A: Transition from direct distribution to dealership model is ongoing; started growing retail partners, with more to come during 2025 and beyond.

Q: Examples of efficiency improvements.

A: Headcount efficiencies, having decreased headcount by 25% from 2023 to end of 2024 and continuing; cash optimization to improve working capital management as inventory levels impacted cash flow in 2024 but improving in Q1 2025.

Q: COGS per vehicle and tariffs.

A: Gross margin improvement mainly from product mix with more profitable PS3 and PS4; too early to say COGS trajectory due to tariff uncertainties, which is why guidance for 2025 is paused.

Q: Share of non-USMCA parts in South Carolina production.

A: Main component is the battery; no specific reference to comparison with other OEMs' U.S. production in terms of Chinese content.

Q: Explicitness of contract manufacturing volumes with Volvo and Geely.

A: Have flexible agreements, but details not disclosed; Polestar 4 production in China and Korea is significant in size.

Q: Navigating Polestar through equity impairment due to trade changes.

A: Europe is key market with strong brand awareness and growth; U.S. is a growth market but need to mitigate tariff impacts; focus on strengths in Europe and manage U.S. growth with cost optimization.

Q: Income from sale of regulatory credits.

A: Not communicating CO2 credit sale in Q1, but confident of reaching three-digit millions USD target in 2025.

Q: Liquidity position and cash burn.

A: Average cash burn of $100-120 million in 2024; need to decrease cash burn, working on new equity with Geely and potential investors.

Q: Model mix and profitability.

A: Polestar 4 is the biggest portion of volume (49%) in Q1, which helps with margins as SUVs have better margins; product mix is moving in the right direction to improve profitability.