Tesla’s (TSLA) Swedish electric vehicle rival Polestar (PSNY), which is battling profitability and debt issues, has just gotten some relief. Volvo Cars (VLVLY) has agreed to convert $339 million of its credit to the sister brand into shares.
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This credit-to-equity conversion will raise Volvo Cars’ stake in Polestar to almost 20%, giving greater ownership control to Geely (GELYF), the Chinese auto giant that owns both brands. Specifically, Volvo Cars will first convert $274 million into shares and follow it up with an additional $65 million during the second quarter of this year.
As part of the arrangement, production of the Polestar 3 luxury SUV will shift from Chengdu in China to Volvo Cars’ plant in Charleston, South Carolina, Polestar told Reuters. This comes as carmakers are rethinking their electric vehicle strategy in the face of a rollback in U.S. emissions rules and EV tax credits under President Donald Trump’s administration.
In addition, Gothenburg, Sweden-based Volvo Cars has moved up the maturity date of the rest of its credit to Polestar to 2031. That outstanding balance is estimated at $661 million.
Polestar Races for Liquidity amid Debt
The debt relief comes as Polestar — whose shares have fallen by about 20% since the start of the year and roughly 46% over the last 12 months — continues efforts to manage its finances. In December, the company secured $300 million in new financing from Spanish and French financial institutions and signed a $600 million term loan deal with a Geely-owned lender.
Recently, the Swedish EV maker implemented a 1-for-30 reverse stock split to avoid being delisted from Nasdaq. However, Michael Lohscheller continues to plot a turnaround through a reset in market focus and sales strategy — Polestar called 2025 its “best year ever” for retail sales.
Is Polestar a Buy or Sell?
On Wall Street, analysts have a Moderate Sell consensus rating on Polestar’s shares. This is based on two Sells assigned over the past three months.
Moreover, the average PSNY price target of $15 indicates about 12% downside risk from current trading levels.
