Record Sales vs. $1.1B Impairment: Polestar's Capital Restructuring

The EV maker banks on equity raises and debt conversions to fund its model offensive amid tariff headwinds.

PSNY · Earnings Call · 2026-04-17

Record Sales, Yet Heavy Losses

Polestar's 2025 was a year of contradiction: record-breaking retail sales and revenue, offset by a $1.1 billion impairment that turned the bottom line deeply negative. The company sold 60,100 cars, a 34% increase, exceeding its guidance. Revenue surpassed $3 billion, up 50% year-on-year. CEO Michael Lohscheller proudly declared, “2025 was a record year for Polestar in terms of retail sales. We delivered over 60,100 cars during the year, in line with our guidance of 30% to 35% growth and a new record for our young brand” — Michael Lohscheller, CEO · 2026-04-17. However, the financial performance was overshadowed by a massive impairment charge. CFO Jean-Francois Mady explained,

Gross margin was a negative 35% in 2025 due to impairment expenses of USD 1.1 billion for Polestar 2, Polestar 3 and internal development projects, which include Polestar 5.
Jean-Francois Mady, CFO · 2026-04-17

The impairment was driven by tariffs, pricing pressure, and slower demand in the premium EV segment, particularly in the US, where government policy shifts eroded the tax credit incentive and increased duty costs.

Capital Restructuring: A Lifeline from Shareholders

To navigate these headwinds, Polestar executed a decisive capital restructuring. Between June 2025 and March 2026, the company raised $1.2 billion in new equity, including $1 billion from December 2025 across three placements at $19.34 per share. This broadened the shareholder base and improved free float to over 40%. Crucially, the company secured agreements to convert $640 million of shareholder loans into equity, with Volvo Cars converting an initial tranche and Geely Sweden Holdings expected to follow. This debt to equity conversion not only reduces leverage but also demonstrates continued support from major stakeholders. CFO Mady noted, “On the funding of our operation and liquidity with strong support of Geely Holding, Polestar secured in total USD 1.2 billion of new equity investment from existing investors and external financial institution from June 2025 to March 2026.” — Jean-Francois Mady, CFO · 2026-04-17 Additionally, the company amended its club loan covenants for 2026 and secured $1.6 billion in new term facilities, reinforcing its liquidity.

Cost Discipline and the Road to Breakeven

Despite the losses, there are encouraging signs. Adjusted gross margin improved from -12.5% in 2024 to -0.7% in 2025, a swing of nearly 12 percentage points. This was driven by a favorable product mix (Polestar 4 representing over half of volume), carbon credit sales of $211 million, and relentless product cost reduction. The company achieved low double-digit cost reductions on the Polestar 4 through commercial negotiations and decontenting. Headcount was cut by 25%, yielding $100 million in SG&A savings. As CFO Mady stated, “We have achieved the target of a 3-digit million dollar amount in 2025 as we guided in January 2025 and expect a similar level in 2026.” — Jean-Francois Mady, CFO · 2026-04-17 This near-breakeven status on a gross profit basis is a significant milestone, offering a glimmer of hope for future profitability. However, the path forward is fraught with uncertainty. The US market, which accounted for only 7% of sales in 2025 (down from 14%), remains challenged. The company is localizing production—Polestar 3 in South Carolina and Polestar 4 in South Korea—to mitigate tariff impacts. In prior quarters, management acknowledged these pressures; in September 2025, CFO Mady remarked, “We are still currently, I would say, assessing all the external headwinds that Polestar is facing, so including tariffs, but also change in policies and regulations.” — Jean-Francois Mady, Chief Financial Officer · 2025-09-03 In November 2025, he also highlighted the cash burn issue: “So in term of cash burn and as I commented it in H1, so for the first semester, we have a monthly cash burn of around USD 136 million per month.” — Jean-Francois Mady, Chief Financial Officer · 2025-11-21 Now, with reduced CapEx and an improving operating performance, management expects cash burn to decline in 2026.

Model Offensive and 2026 Outlook

Polestar is betting on its largest-ever model lineup expansion to drive growth. Four new cars are planned: the Polestar 5 GT, a new Polestar 4 variant, a redesigned Polestar 2, and the compact Polestar 7. This model lineup expansion targets wider, more profitable segments and leverages the asset-light model with Geely's platform. The company reiterates low double-digit retail sales growth for 2026, with a greater share of Polestar 4. While the impairment will continue to weigh on comparable results, the underlying operational improvements and strengthened balance sheet provide a foundation. The next quarter's results, to be reviewed in three weeks, will be a key test.