Polestar secures billion-dollar investment, but it may not be enough

Polestar has secured $US950 million ($AU1.46 billion) in external funding, as the electric-car company begins to forge its own path – but even by its own admission, it may not be enough.

Polestar made the latest announcement less than a month after Volvo revealed it would stop funding the brand – with Polestar previously being Volvo's performance division, before being spun off as an electric-vehicle sister brand.

Both Polestar and Volvo are owned by Chinese automotive giant Geely – with the new ownership structure meaning the two Swedish brands now sit shoulder-to-shoulder within the group – though the latest financing was externally raised through 12 international banks on a three-year loan.

With Geely now directly owning Polestar – rather than the brand being held within its subsidiary Volvo – it gives the brand greater access to engineering and software development, as well as having a line of credit from its Chinese parent company.

A spokesperson for Polestar Australia told Drive the new billion-dollar funding "highlights [the banks'] belief in the business model, and the ability of Polestar to reach cash flow breakeven in 2025."

In early February 2024 – when the announcement was made that the two Swedish brands were cutting financial ties – Polestar admitted it required approximately $US1.3 billion ($AU2 billion) in external funds to secure its future, with the latest funding falling short.

While the latest funding falls short of that amount, representatives for Polestar are "very confident" in the company's ability to raise the additional funds required.

The company recently announced it would need to lay off 15 per cent of its global workforce – following a 10 per cent cut in mid-2023 – with the company reporting an operating loss of $US735 million ($AU1.1 billion) for the first three quarters of 2023.

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Despite this, Polestar's CEO Thomas Ingenlath remains positive.

"This marks a new phase in Polestar’s business," Mr Ingenlath said in a written statement.

“The efforts of recent years are paying off: We improved our cost basis, secured financing and are ramping up our product offensive.

"Both SUVs now sharpen the brand, target one of the fastest growing segments in the industry and position us for strong volume growth and profit margin progression from the second half of 2024."

While the Polestar 3 has been delayed due to software problems from within Volvo, the new ownership structure will now allow Polestar to lead development on future vehicles without having to necessarily rely on Volvo. The Polestar 4 is still on track, according to company representatives.

However, Volvo says it will maintain an 18 per cent stake in the brand and continue collaborating across research and development, manufacturing, and aftersales.

For Australian owners, servicing at Volvo dealerships will remain.