Geely-backed EV brand Polestar reported wider losses and a sharp deterioration in gross margin in the first quarter of 2026, with revenue stagnating despite volume growth as competitive pressures, tariffs, and adverse pricing dynamics offset cost reductions.
The Gothenburg-headquartered company posted a net loss of $383 million for the first three months of the year, more than double the $166 million loss in the same period a year earlier.
Immediately after the results were announced, Polestar shares were fallingy 4.3% to $18.60 during Thursday’s pre-market trading.
The company will host a conference call later on Thursday at 14:00 CET, with the CEO, Michael Lohscheller and Chief Financial Officer Jean-Francois Mady.
Revenue edged 0.2% higher to $633 million from $632 million, even as retail sales climbed 7.0% to a record-first-quarter 13,126 units.
Gross margin came in at negative 3.2%, down from positive 10.3% in the first quarter of 2025 — a 13.5 percentage point decline.
The company recorded a gross loss of $20 million, compared with a $65 million gross profit a year earlier.
“The first quarter saw us deliver strong volume growth in a very competitive market,” CEO Michael Lohscheller said in a statement.
“With implemented steps to improve our cost base being offset by more challenging market conditions, we are accelerating efforts to adjust our business model, become leaner and improve manufacturing efficiencies,” Lohscheller added.
Margin Compression Drivers
Polestar attributed the margin deterioration to four main factors: pricing pressure, EU and US tariffs, lower carbon credit sales, and one-off impacts.
Carbon credit sales totaled $21 million in the quarter, down from $29 million a year earlier.
Of the $21 million, $17 million was booked as revenue and $4 million as other operating income.
Adjusted EBITDA loss widened to $235 million from $96 million in the comparable period.
The company cited negative foreign exchange movements on operating liabilities tied to Chinese yuan exposure, alongside higher sales agent remuneration linked to volume growth, one-off personnel costs, and the timing of marketing events.
The product mix included fewer Polestar 3 vehicles and more Polestar 4 — partially offsetting margin pressure given the Polestar 4’s higher unit margin profile.
Cash Position Halves
Polestar‘s cash position fell to $676 million as of March 31, down from $1.159 billion at the end of December 2025 — a $483 million decline in a single quarter.
The company attributed the change primarily to the adjusted EBITDA loss, net negative working capital movement, and net repayment of financing facilities, partially offset by equity proceeds raised in the quarter.
Inventory levels reduced during the quarter, but the positive working capital impact was more than offset by cash outflows from settlement of payables.
$700M Equity Raise
Polestar raised $700 million in new equity from financial institutions during the first quarter to shore up the balance sheet.
Last February, the company secured $400 million from Feathertop Funding Limited — a special purpose vehicle consolidated to Sumitomo Mitsui Banking Corporation — and Standard Chartered Bank (Hong Kong) Limited.
In March, Polestar secured an additional $300 million from a consortium including Crédit Agricole CIB, Vida France S.A., Innovator Limited, and Proximaster Holdings Company.
Concurrent with their equity investments, each financial institution entered into a put option arrangement with a wholly-owned subsidiary of Geely Sweden Holdings AB.
Separately, Geely Sweden and Volvo Cars agreed to convert approximately $639 million of loans outstanding to Polestar into equity.
Volvo Cars converted $274 million on March 31 while Geely Sweden is expected to convert approximately $300 million and Volvo Cars an additional $65 million later in the second quarter.
On the same date, Volvo Cars extended the remaining $726 million shareholder loan to December 2031.
Loan Facility Renewals
Polestar renewed over $1.4 billion worth of facilities during the quarter.
In February, the Green Trade Finance Facility with a syndicate of global banks was restructured and renewed for €400 million, alongside approximately $570 million in working capital loans.
In March, approximately $380 million in working capital facilities were renewed.
An additional €50 million Green Trade Finance Facility expansion has been credit-approved by Fubon Bank (Hong Kong) Limited, subject to syndicate documentation completion.
The company confirmed it was in compliance with all covenants under its $950 million Club loan as of March 31, with revenue and debt-to-assets ratio covenant tests amended for Q1 2026 and the remaining test periods of the year.
“With the support from Geely Holding Group, we have implemented significant steps to strengthen our balance sheet and improve our debt and liquidity positions, and we continue to consider new equity and debt funding,” the company said.
Retail Network Expansion
The retail buildout continued in the first quarter, with Polestar adding 19 new sales points during the quarter to bring its global total to 230.
That figure is up 44.7% from 159 sales points a year earlier.
The company signed 14 new retailers, bringing total retail partners to 172 — an 8.9% increase from the end of December.
Polestar now operates in 28 markets, with service points reaching 1,241, up 4.3% year over year.
The company has guided for 250 sales points globally by the end of 2026.
“Commercially, our focus remains on scaling our business by expanding our retail network, especially in Europe, with plans to reach 250 sales points globally by the end of 2026,” Lohscheller said.
2026 Outlook
Despite its sales performance in the UK, Polestar is struggling to pick up demand in other markets across the globe.
The company quietly cut its 2026 sales growth target in February, alongside the announcement of what it described as the “largest model offensive in its history.”
Polestar guides for “low double-digit volume growth” in 2026 — implying roughly 10-15%.
The figures are about 20 percentage points below the 30-35% compound annual retail sales growth target for 2025-2027 set a year earlier.
Polestar met its 2025 guidance by delivering approximately 60,119 vehicles, a 34% year-over-year increase, with over 46,000 registered in Europe, according to data compiled by EV.
Under the previous target, Polestar had been on a path toward 78,000 to 81,000 deliveries in 2026.
The revised outlook implies roughly 66,000 to 69,000 units.
At the first-quarter run rate of 13,126 units, an annualised figure of approximately 52,500 would fall short of even the revised target — suggesting Polestar will need a significant second-half acceleration.
The company posted a $2.36 billion net loss for 2025 but crossed into adjusted gross profitability in the fourth quarter for the first time since going public.
Full-year revenue crossed $3 billion for the first time, climbing 50.3% to $3.06 billion.
Product Pipeline
Polestar‘s path to volume recovery rests on a four-model product offensive scheduled across the next three years.
A new Polestar 4 variant is planned for the latter part of 2026, followed by the all-new Polestar 2 in 2027 and the Polestar 7 compact SUV in 2028.
The Polestar 6 roadster is also planned.
“This will help us capitalise on our growing model line-up, which targets wider, more profitable segments,” Lohscheller said.
Production of the Polestar 7 is planned in Europe, marking a further step in Polestar’s manufacturing diversification beyond its existing North American and Asian footprint.
