Polestar setbacks mount as costs surge

Swedish electric vehicle maker Polestar reported a wider loss for the second quarter after tariffs and intensifying price pressure led to an impairment charge on its Polestar 3, sending its US-listed shares down.

US trade tariffs on global partners have hit the automotive industry hard, with automakers including Polestar scrambling to adjust supply chains and shift manufacturing to mitigate the effect.

Polestar reported a net loss of $1.03 billion for the quarter ended June 30, compared with a loss of $268 million a year earlier.

The company slashed the recoverable value of the Polestar 3 to $25 million, leading to a $739 million impairment charge.

Sweden-based Volvo Cars, which produces the Polestar 3 in its South Carolina factory, also booked a similar impairment charge in the second quarter related to its ES90 and EX90 due to tariffs and launch delays.

"We will not grow in the US at any cost, because the financial exposure is then too high," Polestar said in a post-earnings call.

The company added that 77 percent of its sales were generated from Europe, while 8 percent came from the US in the first half of this year.

"We think their big problem is going to be EV demand in the absence of incentives combined with liquidity," said Garrett Nelson, senior equity analyst at CFRA Research.

Like many other EV startups, Polestar has burned through significant amounts of cash in its push to achieve scale and consistently faced challenges managing liquidity as well as debt levels.

The company initially aimed to reach cash flow break-even by 2025 but adjusted it in January to 2027, before suspending its forecast due to the uncertainty brought on by tariffs.

While it has long risked breaching certain debt covenants, the company repeatedly negotiated amendments with its lenders and said it had agreed with creditors to revise some of the covenants to remain compliant in the second half of the year.

Polestar also said it had handed over 177 cars as collateral, as part of a financing deal.

While a number of startups including Fisker, Lordstown and Arrival have gone under after running out of funds, a few have backers willing to continue funding loss-making operations.

VinFast's founder has kept the Vietnamese EV maker going as it tries to break even by the end of 2026, while Lucid has received around $8 billion in investments from Saudi Arabia's Public Investment Fund.

Polestar secured a $200 million equity investment from Geely owner Li Shufu through PSD Investment in June.

Reuters