Despite a record first quarter, Polestar Automotive Holding UK PLC has announced two cost-cutting measures as it continues to burn cash. Despite a 21% revenue increase to $546 million compared to last year, the company’s operations went through $283 million in cash during the quarter and executives invested an additional $131 million intellectual property.
The company ended the quarter with $884 million in cash (after borrowing more than $320 million) and its leaders said they are still looking to sell either equity or debt—hence the cost-cutting plans. The first measure will be a global hiring freeze, stopping the company from adding around 800 roles planned for the year. The second is a 10% headcount reduction, or roughly 300 employees, which will return the company to its 2022 employment level of 3,000. CEO Thomas Ingenlath said the reduction would be “structured” across all markets and savings would be realized in the second half of 2023.
But that wasn’t the end of the bad news from Ingenlath and his team. Production of their Polestar 3, the company’s new SUV which debuted earlier this year, has been pushed back to Q1 2024, as opposed to beginning later this year. The delay is due to Volvo Group, Polestar’s largest shareholder, needing more time to complete the software development of the new platform the vehicle will be on.
“This means that startup production in Chengdu, China, is now expected in early 2024. Importantly, the start of manufacturing Polestar Charleston, U.S.A., is still on track for mid-2024. And the adjustments to Polestar 3 does not impact Polestar 4, as they are based on different platforms,” Ingenlath said.
In a snowball effect, the delay also means a production guidance reduction—a move they aren’t alone in. Rival EV producers Fisker, Rivian and Lucid have also slashed production goals. Polestar now aims to make 60,000 to 70,000 vehicles this year, as opposed to the previous goal of 80,000. The company delivered 51,491 cars last year and has delivered 12,076 so far in 2023. If it reaches its 70,000 target, annual growth rate would be 36%.
Shares of Polestar (Ticker: PSNY) dropped nearly 7% May 11 after reporting earnings before the bell, opening at $3.70. By the afternoon of May 15, they had fallen further to $3.28. Over the last six months, they have steadily declined 41% from a November high of $8.00, cutting the company’s market capitalization to just over $8 billion.