Polestar Executives Push Out Cash Flow Targets
If you’ve noticed a dearth of news about Polestar Automotive Holdings, it’s not imagined. On Jan. 16, the company gave its first business update since it announced global third-quarter volumes in October 2024.
On a conference call, which was preceded by Polestar executives releasing their fiscal Q3 results and a slate of news about its upcoming cars and financial plans, newly installed President and CEO Michael Lohscheller spoke about the company’s goals for 2025 and beyond.
“Really, 2024 transitional year for Polestar,” he said. “We are well positioned now going into 2025 with the right cars, with the right distribution and obviously a much, much better focus on significant cost reduction and increasing efficiency.”
Polestar added to its lineup last year through the launch of Polestar 3 and, in some places, the Polestar 4.
2025 is shaping up to go similarly: The Polestar 4 will make its U.S. entrance and leaders announced the Polestar 5, a performance-focused sedan, will come in the second half of the year. But that’s not all: Polestar 7 has also been announced as a compact crossover that marks Polestar’s debut in the SUV segment.
The vehicle is expected to begin production in Europe, where CFO Jean-Francois Mady said he expects the majority of sales will be. Further out is Polestar 6, a sports car offering that has no set release date.
Of its current lineup, Lohscheller expects Polestar 3 and 4 to be the most profitable, saying the two made up nearly half of all orders at the end of 2024. This year, he projects that share to grow to “60%, 65% plus.” That doesn’t mean Polestar 2 will fall on the backburner, though, according to Mady.
“We don't want to give up on Polestar 2 profitability,” he said. “Our plan is to attack the product cost reduction… We have already in mind to re-engineer some part of the Polestar 2 in order to protect [its profitability] and to improve the margin on the car.”
Setting 2025 targets
Speaking of cost reduction, it’s part of a three-pronged plan for Polestar to hit two important financial goals in 2025 and beyond: A compound annual growth rate of 30% to 35% between 2024 and 2027, and a positive adjusted EBITDA in 2025, followed by growth in 2026, and leading into positive free cash flow in 2027. That timeline is longer than what executives had expressed in the past, having wanted to hit a goal of being cash flow positive by the end of 2025.
“High-level growth, margin improvement, especially on product mix and cost reductions” is how Lohscheller and his team plan to hit that EDBITDA goal. Keeping it and growing it, however, is a different matter, as Mady explained.
Right now, he said, Polestar has been “actively working” with its manufacturing partners and suppliers to reduce manufacturing and material costs, as well as combing through R&D, capex, and other spending. Part of that attempt will be seen in Polestar 7; its launch will also be the beginning of Polestar’s move to a single vehicle platform, which will reduce capex costs and shorten development timelines.
Sales tactics changes
While Lohscheller praised Polestar as a “well positioned brand,” he also admitted a lot of things need to change at the company, starting with its sales and distribution.
“The company has done a good job setting up the direct-to-consumer baseline, now the key task is making sure that the active selling through retail partners is improving,” he said.
The main change is a shift in strategy from showing (direct to consumer) to active selling (retailer model) by adding “more locations closer to customers and more qualified salespeople” to keep customers informed. Polestar has 140 retail locations and leaders want to grow that number to at least 200 this year. The company is already well on its way, with plans to go from five to 25 spaces in Sweden and eight to 20 in the United Kingdom in a span of 12 months.
2025 will also see executives aggressively target France, which Lohscheller called “one of the biggest BEV markets in the world” that Polestar vehicles are well-suited for.
Later down the line, he also expressed intentions to expand into eastern and central Europe in 2026, with a Latin America and southeast Asia entrance at a later time.
Production dynamics and Q3 financials
Production-wise, Polestar plans to continue with its asset-light approach: Although it has manufacturing facilities in Charleston, South Carolina, as well as China, South Korea, and Europe, Polestar doesn’t directly own any of them. Instead, the plants are controlled by parent companies Volvo and Geely.
The decision to manufacture local to Polestar’s market could be even more important in its cost reduction strategy, in light of what Mady called the “tariff situation.” Proposed tariffs by President Donald Trump would see heavy charges added to Chinese imports to the United States.
“Obviously, tariffs are a challenge we have to work through, and we want to really manufacture locally and not only for the tariff situation,” Mady said. “But also in terms of optimizing our cost. I think the times where you ship cars around the world is a little bit over.”
A look at Polestar’s financials reveals why Lohscheller and his team are going heavy on cost reduction initiatives and higher sales: Q3’s $551 million in revenue was a 10% decrease year-over-year, and the company has been burning through between $100 million and $150 million every month. Its cash balance lost $450 million between January 2024 and September 2024, nearly half of its original $951 million.
The Q4 and full-year outlook was similarly negative. According to a press release, Polestar expects a “mid-teens percentage decline” in revenue for the full year 2024 and a negative gross margin similar to 2023.
Executives also said the fourth-quarter product mix was “negatively impacted” by lower-than expected Polestar 3 and Polestar 4 sales. In Q3, retail sales totaled 12,548 vehicles, an 8% decline year over year. The negative mix, alongside “one-time events,” such as a market value inventory adjustment, made for a “difficult” Q4.
Polestar will release its Q4 and full-year results on March 6.
Shares of Polestar (Ticker: PSNY) have been on a gradual decline over the past six months, hitting a recent low of $0.85 per share. After releasing its business outlook, Polestar’s share price rose slightly throughout the day on Jan. 16, going up two cents from its opening $1.09 per share, before dropping to close at $1.08.
