Swedish electric vehicle maker Polestar trimmed its 2023 delivery forecast on Wednesday to the lower end of its earlier guidance and halved its gross margin target, amid fears of a slowdown in EV demand and global economic uncertainty.
High interest rates to cool stubborn inflation have hampered sentiment as consumers looking to buy EVs face higher borrowing costs that largely offset price cuts by automakers to stimulate demand.
Polestar, which operates in 27 markets globally, said it would now deliver about 60,000 vehicles this year, down from between 60,000 to 70,000. It had reiterated that forecast just last month after slashing the target in May from the 80,000 it had estimated earlier.
The U.S.-listed company, founded by China’s Geely and Volvo Cars, also said it would achieve a gross margin of 2% in 2023, down from its prior 4% forecast.
The company said on Wednesday it would double down on cutting costs to boost margins and that it had secured additional term loans from Volvo and Geely totaling $450 million, maturing June 2027.
“These actions and these initiatives are done in the context of what is currently a more challenging market environment and that’s reflected in our volume aspirations,” Polestar Chief Financial Officer Johan Malmqvist said in an interview with Reuters.
CEO Thomas Ingenlath said Polestar, with its focus on premium rather than mass market sales, was chasing profitability rather than volumes and would shy away from cutting prices.
Wednesday’s revised forecast from Polestar came after market leader Tesla’s CEO Elon Musk last month flagged his concerns over expanding factory capacity until interest rates fall, in line with similar caution from General Motors and Ford.
EV startup Lucid cut its full-year production forecast on Tuesday “to prudently align with deliveries.”
Even as pandemic-driven supply chain bottlenecks eased, Polestar has grappled with a delayed production start and growing competition, especially from Chinese players, forcing the company to cut jobs to keep a lid on costs.
After the additional loans from Volvo and Geely and efforts to reduce costs, Polestar said it would need external funding of about $1.3 billion in debt and equity until cash flow breaks even in 2025. The company said it sees gross margin in the high teens with a total annual volume of about 155,000 to 165,000 vehicles in 2025.
Polestar reported cash and cash equivalents of $951.1 million as of the end of September, compared with $1.06 billion three months prior.
Revenue for the third quarter rose 41% to $613.2 million, driven primarily by increased prices of its vehicles, but higher expenses led to operating losses swelling 33% to $261.2 million. (Reporting by Abhirup Roy in San Francisco; Editing by Rod Nickel and Jamie Freed)