Polestar Automotive Holding UK PLC Q1 FY2025 earnings call

• Commercial Transformation: Growing sales points by 33% excluding China until 2026, focusing on a dealership model to make it easier for customers to experience cars, which helps in increasing sales and pre-owned sales.
• 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 saw increasing sales and won awards; manufacturing of Polestar 4 in South Korea to start in H2 2025; Polestar 5, a four-door grand tourer, expected to start sales later in 2025.
• Cost Reduction and Efficiencies: Reducing cost base, adapting ways of working, leveraging group architectures for R&D efficiencies, workforce reductions, optimized marketing spend, and working on cash management and inventory optimization.

In Q1 2025, Polestar reported a 76% increase in retail sales volume. Revenue grew by 84%. Gross margin improved to 7%, a 15 percentage point swing from the prior year. Net loss was $190 million, a decrease of 31% compared to the prior year. Adjusted EBITDA loss was $115 million, a decrease of 46%. Product segment performance: Polestar 2 accounted for 31% of volume, Polestar 3 for 19-20%, and Polestar 4 for 49% of volume. The higher margin models like Polestar 3 and 4 contributed to the revenue growth and margin improvement.

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

• Geopolitical developments causing uncertainty in the automotive industry.
• Impact of tariffs on car prices and consumer demand globally.
• Uncertainty around international tariffs and government regulations affecting cost structures.

Q: Could you talk about the impact of tariffs the U.S. is considering and how it affects demand?

A: Polestar has 75% of business in Europe, 11% in the U.S. with volume localized in Charleston, SC. Monitors tariffs closely, and localization helps, but needs to optimize costs and work through tariff effects.

Q: How is the transition to the new commercial strategy going, and where do you expect to be by end of year?

A: Transition from direct distribution to dealership model is ongoing, with plans to grow retail partners significantly during the year and next year.

Q: Can you provide examples of efficiency improvements and areas to focus on in 2025?

A: Cost efficiencies through ramping up models like Polestar 4, headcount right-sizing, cash optimization, and improving working capital management.

Q: What were the key drivers for the reduction in COGS per vehicle?

A: Improvement in gross margin mainly from product mix with more profitable models like PS3 and PS4, but tariffs add uncertainty to future COGS trends.

Q: What is the share of non-USMCA parts in Polestar 3 manufactured in South Carolina?

A: Main component is the battery, but specific share of non-USMCA parts not disclosed in detail.

Q: How explicit are contract manufacturing volumes in multi-year contracts with Volvo and Geely?

A: Have flexible agreements, but details not disclosed, with focus on ensuring sufficient capacity and good solutions in case of capacity bottlenecks.

Q: How do you plan to navigate Polestar through the next few years with equity value impaired due to trade changes?

A: Focus on strengths in Europe, where brand is well established, and continue growth in the U.S. while mitigating tariff impacts through cost optimization.

Q: Can you share the amount of income generated from sale of regulatory credits in Q1?

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

Q: How is liquidity position, and what about cash burn and additional capital needs?

A: Average cash burn of $100-120 million in 2024, working on reducing cash burn, with debt covenant at $5.5 billion, and actively working on new equity financing in coordination with Geely.

Q: Can you talk about model mix and pushing towards higher margin models?

A: Polestar 2 was 31%, Polestar 3 19-20%, Polestar 4 49% in Q1. Focus on exploiting momentum of higher margin models like Polestar 3 and 4.

Q: Any developments on the U.S. ban on China connected cars starting model year 2027?

A: Have dialogues and are focused on ensuring compliance with the new legislation for model year ’27.