Polestar Automotive Holding UK PLC announced that Volvo Cars will convert $274 million of its outstanding shareholder loan into Polestar equity. The conversion, priced at 95 % of the 30‑day volume‑weighted average price of Polestar shares up to March 27, will reduce Polestar’s debt load and increase its equity base, tightening the company’s balance sheet in support of its U.S. manufacturing plans in South Carolina.
The transaction follows a $300 million debt‑to‑equity conversion by Geely Sweden Holdings earlier in 2026, and it will lift Volvo’s stake in Polestar to 19.9 %. The remaining $661 million of the shareholder loan will be extended to December 2031, underscoring continued shareholder support for Polestar’s growth initiatives.
Polestar’s financials have been under pressure: the company posted a net loss of $1.6 billion in the first nine months of 2025 and recorded negative gross margins of –6 % in Q3 2025 and –97.2 % in Q2 2025. Its debt‑to‑equity ratio stood at –130.8 % and –2.15 in Q2 2025. By converting debt into equity, Polestar will lower its interest expense, improve its debt‑to‑equity ratio, and enhance liquidity, providing a stronger foundation for future capital expenditures and product development.
Polestar is also consolidating production of its flagship Polestar 3 in South Carolina to avoid the >100 % tariff on vehicles imported from China. Leveraging Volvo’s U.S. manufacturing facility and the potential for federal EV tax credits, the move is expected to reduce production costs and improve operational efficiency, which could help mitigate margin compression caused by pricing pressure and tariff exposure.
"We are grateful for the continued support from Volvo Cars in helping us to strengthen our balance sheet and reinforce our liquidity profile," said Polestar CEO Michael Lohscheller. He added, "Our strong operational collaboration with Volvo Cars continues through manufacturing, our commercial operations and offering our customers access to one of the most extensive service networks in the industry.”
The debt‑to‑equity conversion signals Polestar’s focus on financial resilience and positions the company to pursue its ambitious product roadmap, including the upcoming Polestar 5 launch in summer 2026 and further model expansions through 2028. By reducing debt and strengthening equity, Polestar aims to improve its financial flexibility and support the scaling of its U.S. operations and future capital projects.
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