Polestar Automotive Holding Uk Plc Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tobias Beith - Redburn Atlantic. - Analyst : Good afternoon, Thomas, Per, and Bojana. Lovely to chat again. My first question relates to the second-quarter volumes. I must admit it's quite surprising. I was wondering whether you could disclose how many Polestar 4s were sold in the period to your Chinese joint venture like you did in the fourth quarter and the first quarter of this year.

Question: Tobias Beith - Redburn Atlantic. - Analyst : All right. Understood. And proportionately, volume of Polestar 4 was twice impactful in the first quarter than it was in the fourth quarter of last year. But the gross margin before impairments seems to have remained negative. Are you able to discuss this for me and outline how it turns profitable?

Question: Tobias Beith - Redburn Atlantic. - Analyst : All right. And a final one from me. I noticed that in certain key countries, the estimated delivery dates for new Polestar 3 or Polestar 4 is before year end. And also, a cheaper, single-motor variant has already been released in Europe. Are you able to comment on demand versus order supply for these models, please?

Question: Tobias Beith - Redburn Atlantic. - Analyst : All right, understood. Thanks, Thomas. Just in case, helpful clarification. The point that I was trying to make is that in key markets that you're not sold out for this year, i.e., the order book doesn't extend through to year end but presumably, you've purchased vehicles, that your purchasing quantities spans through to probably sometime next year. So I just wanted to understand that dynamic, but your answer was very helpful. So I'll pass on the line. Thank you, all. Thank you.

Question: Andres Sheppard - Cantor Fitzgerald - Analyst : Hi, good morning. Good afternoon, everyone. Thank you for taking our questions. I wanted to start -- maybe Thomas or Per, can you help us just understand the -- maybe help us quantify the impact of the announced tariffs? Just curious how that has been impacting you. And how will that change once the facility in the Carolina is up and running? Thank you.

Question: Andres Sheppard - Cantor Fitzgerald - Analyst : Got it. That's very helpful. I appreciate all that color. And maybe as a quick follow-up, one for you, Per, is, can you just remind us, with slightly less than $800 million in liquidity, what is that -- what do the capital needs look like for this year? And how are you thinking about that in this environment? Thank you.

Question: Andres Sheppard - Cantor Fitzgerald - Analyst : Understood. Thank you very much. I'll pass it on. Thank you.

Question: Daniel Roeska - Bernstein - Analyst : Good afternoon. Good morning, everybody. Thanks for making time and taking the questions. I apologize for the slight background noise here. You just mentioned your relationship with Geely. May I ask for an update on your negotiations on the revenue covenants, where you stand on that? Thanks.

Question: Daniel Roeska - Bernstein - Analyst : Yeah, thanks for that. And I mean if you extrapolate the trends you just mentioned and the higher sales you're expecting for Q3 and Q4, would you say -- would you today say, from today's perspective, that you are on track to hitting the revenue covenant in '24?

Question: Daniel Roeska - Bernstein - Analyst : Okay. That's great. That's very encouraging. You and Thomas also mentioned the actions you're taking to mitigate the tariff impact. Overall, how has that influenced your view on when achieving cash flow breakeven might be possible? Do you think it's -- you're able to mitigate the entire impact and still reach cash flow breakeven next year? Or has the tariff situation, the reshifting of global production, has that delayed that by a couple of months?

Question: Daniel Roeska - Bernstein - Analyst : Thank you. And then maybe last one for me, a broader question for maybe both of you. I mean, Thomas, you just outlined the amazing reception the cars have had. I think everybody is looking forward to getting those out to customers. But more broadly, right, essentially, cash flow breakeven end of next year if all goes well. The liquidity on hand may just be enough, knock on wood. What do you need from markets in the next 12 months, right? So where do you need support from your non-Geely shareholders? What would you -- what would be your message to them? How can they support you in that journey in the next few quarters?

Question: Daniel Roeska - Bernstein - Analyst : Yeah. And Per, I mean, you hit the nail on the head, of course, perfectly. Could you give us some color on your thinking there? Because external equity comes in many shapes and forms, right? How have discussions with strategic shareholder -- how have they been going or any signs where you say, look, this is giving you confidence for the upcoming months that the plan you have in mind will come to fruition?

Question: Daniel Roeska - Bernstein - Analyst : Thank you both very much for the comments.

Question: Dan Levy - Barclays Estimates - Analyst : Hi. Good morning, and apologies some background noise. I wanted to start with just a question on volume trajectory. And I recognize you're just working on the immediate term now, but this path to cash flow breakeven, you said, was contingent on reaching or was based upon reaching 155,000 units of volume next year. You did 20,000 in the first half. Maybe you can just conceptually bridge for us the key drivers of how we get to this much larger run rate that's implied in the full-year path. We recognize there's going to be ramping on the localized facilities and ramping on three and four. But maybe you can just give us a sense of just sort of the conceptual bridge to getting the volume to where you need to be without using discount. Thank you.

Question: Dan Levy - Barclays Estimates - Analyst : Thank you. And then maybe just as a follow-up, you talked about expanding into other markets, expanding within your current markets. I know some of these are import markets where you said there's not a lot of resource required. But maybe you can just unpack the plans to expand your volume. What is the cost of this? To enter these new markets, how much incremental cost are you taking on? And then maybe you could just remind us, beyond 3 and 4, how much resources you are allocating toward next-gen products for Polestar 5 or beyond. Just wondering what actions you're taking to mitigate maybe some of the near-term pressure on the cost side in that regard.

Question: Dan Levy - Barclays Estimates - Analyst : Thank you.

Question: Tobias Beith - Redburn Atlantic. - Analyst : Hi. Thanks for taking two more of my questions. I was wondering if you could discuss the financial impact of shifting to a non-genuine agency model in Europe, specifically its impact on vehicle gross margins, operating margins, and working capital.

Question: Tobias Beith - Redburn Atlantic. - Analyst : Okay. And then on operating margin and working capital, does it alleviate Polestar in any way from marketing expenses? And on a working capital perspective, does it offload inventory to your dealers?

Question: Tobias Beith - Redburn Atlantic. - Analyst : Okay, understood. And then just finally, it is encouraging to hear working capital being managed. And presumably, one of those actions that has been -- or one of the actions that has been taken is purchasing fewer vehicles from Volvo and Geely. I was wondering, how flexible are these purchase agreements that you have for contract manufacturing? And could there be further underutilization charges this year?

Question: Tobias Beith - Redburn Atlantic. - Analyst : Okay, understood. Thanks again.