Polestar Automotive Holding UK PLC Q1 FY2023 earnings call

• Delivered 12,076 cars in Q1 2023, up 26% year-on-year, with strong growth in key markets like the U.S., Canada, and UK.
• Polestar 2 remains a top seller in many markets, with upgrades and the BST 230 special edition. Polestar 3 debuted in North America and Polestar 4 was unveiled in China with production starting in Q4 2023 and deliveries in other markets from mid-2024.
• Reduced relative CO2 emissions per car sold by 8% in 2023. Adjusted global volume expectations to 60,000-70,000 vehicles for 2023 due to delayed Polestar 3 startup production and tougher macroeconomic conditions.
• Implemented a group-wide hiring freeze and 10% headcount reduction to manage costs, with cost savings expected in SG&A during the second half of 2023 and full effect in 2024.

In Q1 2023, Polestar delivered 12,076 cars globally, up 26% year-on-year. Revenue increased 21% from $452 million to $546 million. Gross Profit went from negative $7 million to positive $18 million with a gross margin up 3.4%. Selling, general and administrative expenses were down 11% at $189 million. Cash used by operating activities was $283 million, cash used for investing activities was $131 million, and cash provided by financing activities was $323 million. Polestar operates in 27 markets with over 140 sales locations and nearly 1,120 service points.

• Adjusted global volume expectations for 2023 to a range of 60,000 to 70,000 vehicles, representing 16%-36% annual growth.
• Polestar 3 startup production in Chengdu, China, now expected in early 2024, while Polestar Charleston, U.S., remains on track for mid-2024.
• Intensified cost management efforts, including a 10% headcount reduction and trimming development costs of certain car programs.

• Delayed startup production of Polestar 3 due to software development issues at Volvo.
• Tougher economic outlook for the automotive industry impacting volume and market conditions.
• Macro-economic factors affecting pricing and customer spending behavior.

Q: Could you dissect the change in vehicle forecast for the year and talk about pricing strategies?

A: The lower volumes are due to delayed Polestar 3 production and tougher market conditions. For Polestar 2, model year '24 starts with upgrades and price increases, balancing volume, margins, and price stability.

Q: What's the difference between regions in terms of sales efficiencies?

A: A broad base of 27 markets helps compensate for regional variations. For example, strong sales in the UK compensated for weaker sales in Nordic countries due to incentives.

Q: Talk about order trends and stimulation of new orders.

A: Order intake varies by region, with seasonality affecting Q1. Volumes are weighted towards the second half, with Polestar 2 model year '24 expected to drive growth.

Q: Comments on Polestar 4 pricing and comparison to competitors?

A: Polestar 4 has a price range of $60,000-$80,000, closer to Porsche Macan than Tesla Model Y, and shares customer-facing software with Polestar 3 but has independent development timelines.

Q: Supply constraints and pricing strategy in macro environment?

A: Q1 deliveries were a mix of demand and supply, with macro influencing price sensitivity and model mix. Pricing strategy balances price stability and market conditions.

Q: Update on South Carolina manufacturing and Hertz partnership?

A: Polestar Charleston, U.S., is on track for mid-2024. Hertz partnership continues with 65,000 cars to be delivered gradually over five years.

Q: Polestar's software development philosophy and partner relationships?

A: Polestar uses different technologies based on car price points, with shared customer-facing software. The complexity of electronic architectures has learning curves but benefits long-term, with no knock-on effect between Polestar 3 and 4 due to different platforms.

Q: Brand awareness in U.S. and how to increase it?

A: Polestar has increased aided brand awareness in the U.S. from 10% to 13% year-over-year. Active marketing campaigns in Q2 2023 and upcoming models like Polestar 3 and 4 will help build awareness.