Polestar Automotive Holding UK PLC (PSNY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Polestar business and outlook update conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the first speaker today, Bojana Flint, please go ahead.

Hello, everyone. I'm Bojana Flint from Polestar Investor Relations. Thank you for joining Polestar business and outlook update call. Joining me today are Thomas Ingenlath, our CEO; and Per Ansgar, our CFO. Before handing over to call to Thomas, I would like to remind participants that some of our comments today will be considered forward-looking statements under U.S. Federal securities laws and are subject to numerous risks and uncertainties that may cause Polestar's actual results to differ materially from what we have communicated. These forward-looking statements include, but are not limited to statements regarding the future financial performance of the company, production and delivery volumes, near-term outlook and medium-term targets, fundraising and funding requirements, macroeconomic and industry trends, company initiatives and another future events. Forward-looking statements made to their effective only as of today, and Polestar undertakes no obligation to update any of these forward-looking statements. For a discussion of some of the factors that could cause our actual results to differ, please review the risk factors contained in our SEC filings. As Polestar is adjusting the release date for the 2023 preliminary unaudited financial and operational results to later date in order to complete the first full year of compliance required by the Sarbanes-Oxley Act of 2002. We won't be in a position to discuss the matters pertaining to those results today. With that, I'd like to turn the call over to Thomas. Please go ahead.

Thank you, Bojana. Good morning, everybody. Good afternoon. Thank you for joining our call today. And as Bojana mentioned, I'm sitting here together with Per Ansgar who joined our company in January as the new CFO. And probably some of you have met before. But of course, this is our first analyst and investor call together. I'm delighted to have you here with us Per of course, happy for you to have joined us. Please, if you could do a brief introduction of yourself.

Thank you very much, Thomas, and good morning and good afternoon to everyone here. When Thomas approached me not so long time ago, I was very happy and excited to get to Polestar. I have been following Polestar quite a long time. And I think Polestar is a very interesting and a great brand, and I definitely believe in Polestar's future. I have close to 30 years in the automotive industry in Volvo cars, Ford Motor Company and also in GLE. So with that experience, I think I can add quite a lot to the Polestar business. And I've also seen, of course, Polestar in that area for quite a lot of times. I am very well aware of what we are doing here and what the future looks like. I know quite a lot of the people in the team here, so I'm happy to work with Thomas and his team, and I will also look forward to interacting with you going forward here. And by that, let me hand back over to Thomas.

Thanks, Per. Yesterday, we have made announcements that are very important for the future of Polestar. And I will start here today with the funding part. Now as you know, since we presented in November, the strengthened business plan, we have been very clear that we will require $1.3 billion in additional external funding to reach that cash flow breakeven moment in 2025. These were the 2 really main important anchor points of this announcement. And we are actually making good progress when it comes to this external funding. And of course, you can imagine very happy now that yesterday, we could announce the secured syndicate of leading global banks that comes together to approximately $1 billion for a 3-year loan facility. And that represents, of course, a very strong statement of confidence in Polestar and in our future. Now with this majority of the required funding secured, we will now focus on delivering on the business plan, including the cash flow breakeven. And second important part, the high teens gross margins in 2025. Alongside the funding, we set out other key actions within the plan, and I want to update you on our progress on those. We will benefit from a richer product mix, obviously, with the 2 SUVs coming in with high margins. And Polestar 4 sales are accelerating around the world, Polestar 3 is now in production in Chengdu. And on both cars, we will offer greater personalization for the customers increased tax and options. And with that, of course, that will lead as well to higher margins in this premium luxury segment. It doesn't stop here. We have the Polestar 5 that will be in production next year. And the prototype manufacturing is accelerating over the course of 2024 leading to the start of production in '25. The expansion of our manufacturing footprint is on track. We have hit important production milestones for both the Polestar 3 in South Carolina, U.S. and for the Polestar 4 in Pusan, South Korea. Both developments, they are, of course, very important steps for us to create that more diversified and derisked manufacturing footprint which will, on one hand, improve profitability in some of our core markets such as U.S., but as well, as I said, derisk our company Polestar. Marketing, distribution, we are making good progress. We have advancing efforts in optimizing our sales footprint to improve the profitability as we scale, of course, now with the cars in our portfolio, scaling the business now significantly. This work is led by Kristian Elvefors, who is our new Head of Sales, joined us well earlier this year together with Per. And he has made already in very short time lots of progress. For example, in Europe, where we are shifting some countries from a direct to an importer model and in the U.S. where we are transitioning towards a wholesale model. Cost management, of course, remains a priority, and our efforts are delivering results. In summer last year, we announced our first round of cost optimization and a 10% headcount reduction. And now Per is driving the work here even further. And we recently announced an additional 15% headcount reduction. And of course, Per is also focused on the CapEx, working capital, inventory management, all in all, to become leaner and more efficient as we continue to grow. Now before we move to the outlook, let me say a couple of words about last week's announcement regarding the future ownership structure. First foremost, of course, very pleased to have Geely Sweden now as a major shareholder. It's a more independent stronger Polestar, the position we are in now in with having Geely in the ecosystem. And as Geely stated, we will have, of course, stronger technological collaboration that has developed over the course of our product development very naturally over the last year. But they also confirm, of course, the ongoing financial and operational commitment to Polestar, including future fundraising activities. We welcome new shareholders, both institutional and retail, and of course, we maintain our great relationships with OVE Cars. OVE Cars will retain 18% stake in Polestar and on top of that, they have extended the shareholder loan by 18 months to the end of 2028, which is, of course, a clear sign of their continued trust and believe in our future. So let me hand over now again back to Per to give an update on the '24 outlook.

Thank you, Thomas. And as you heard, Thomas described a lot on our production and ramp-up of Polestar 3 and Polestar 4. We have started production of Polestar 3 in China. Polestar 4 has also started production, and we are delivering that to our Chinese market. Of course, now with lead times and logistics and also expanding to different markets of the world, we will see the global deliveries of those cars to commence in the summer here. And obviously, right now, we are fully focused on doing the final investment for those cars, building up the production capacity and also launching activities to secure strong sales in the second half of the year. Of course, now you understand that this year will be basically 2 different characters. The first half of the year will predominantly be based on Polestar 2 sales. While the second half of the year will be completely different with the actions we have taken, both on the cost side, but of course, much more importantly so on the deliveries of the 2 high-margin SUVs. This combination will give a volume momentum and drive higher margins into the second half of the year. And as we guided yesterday in our release, by the end of this year, we expect the volume growth that supports the 2025 targets on the volumes, and we also expect to double-digit gross margin in the later part of this year. With that, let me hand back to Thomas for concluding remarks and then we can go on to your questions.

Thanks, Per. So Polestar 3 production has started preparations in the U.S. plant, the second manufacturing footprint are in full swing. Polestar 4 sales picking up rapidly. Customers are falling in love with Polestar 4. And Polestar 5 the final prototype series are being built this year and that purpose-built factory dedicated to this SportsCar aluminum bundle technology. We have secured funding we announced yesterday and free cash in production. So we're making really major progress this here towards cash flow breakeven in '25. Our model lineup positions Polestar as the performance car brand in the electric age. And with the news of yesterday, we look with great, great confidence into the future of our company. So with that, I hand over to the operator for the Q&A session.

[Operator Instructions] Now we're going to take our first question, and it comes from the line of Tobias Beith from Redburn Atlantic.

Page 87 through 91 of the facilities agreement disclosed on Form 6-K yesterday, outlined the covenants on the new debt. Given volume declined sequentially in 4Q '23 despite having the full effect of Polestar 2 refresh and that retail sales in January appear to be weaker year-on-year. What gives you confidence that you're able to meet minimum revenue threshold of $5.4 billion this year, which you estimate is equivalent to retail sales of about 100,000 units.

This is Per. I can take that question. Obviously, when we closed the covenant, have been very happy to get, we are, of course, aware of the covenants and the covenants are built on the business plan that we presented late last year. That business plan took into account the somewhat more difficult market. So this is completely in line with our expectations. So we don't see a problem from that perspective.

Okay. Understood. On a pro forma basis, assuming all outstanding credit facilities are drawn, I calculate the Polestar onboard about $1 billion of new debt without reaching the total indebtedness covenant. Is the plan now to raise incremental capital via equity and use the headroom for refinancing and resizing the short-term working capital facilities outstanding?

Yes. As we said before, when we presented our business plan late last year, we talked about getting more money into the company, a combination of loans and equity. Now we have almost $1 billion of loans. Obviously, we are looking into more equity. If you ask me as a CFO, would I be happy to have significantly more equity. Yes, I would like to have that. So we are preparing ourselves to fund more equity as soon as we think it's the right time to do that.

Per has come here about the right time. I mean, obviously, the order that gain now with the debt financing now and us progressing the company this year, the 2 SUVs coming to the business, really using now the system that we have installed and the sales organization in all the 23 countries. Of course, we feel that, that year will be very important for Polestar to develop as a company to actually prove the points that we have been always making about the advantage of an asset-light model and that our company with the 3 models in our lineup be in a much better position to actually portray that successful business model, and we are feeling much more confident that the equity round at that point in time will be a very good time to address this question.

All right. And just one last question. How does Polestar think about branding? If I have a look in China, for example, the new Polestar 4 gets the badging there. Do you think this causes confusion?

Since it's not a badging, it's a principle that the car industry is very familiar with. We are sharing technology with Volvo. We are sharing technology with Geely. We are building our Polestar 3 on technology that we share together with EX90. I think the proof point of us building a very strong identity as a Scandinavian design brand with our very unique technology features, obviously, always very customer-oriented, technology that you can experience. And the Polestar 4, as I highlight, I mean really introducing the virtual rear window with a much, much better rearview through the camera view then through the very limited view that we have through rear view. These are unique features that, of course, make the brand shine. I'm certainly very much driving the strong brand expression of each in our cars supporting that. And when you see how the Polestar 4 shine as a star and shows where people are very, very pleased about and have very good comments about how the car looks, how the card puts together a very attractive offer to the customers. And I certainly think that especially the Polestar 4 does a great job for our brand and positioning and offer.

And the next question comes from the line of Alex Potter from Piper Sandler.

So maybe the first question is on the headcount reductions. I'd be interested in hearing, I guess, the job functions that you're going to be reducing headcount in what had these folks been working on? And what operational sacrifices do you think you'll be making now that they will no longer be with the company?

A little bit to answer here. I mean, big times, this is a fairly general reduction in order to drive efficiencies. A company that has been growing that fast as Polestar, I think it's in every company, of course, I mean, if you look into it, you have this potential to drive efficiencies. That is not an unknown tool. And said, and this unfortunately, this measurement is for the organization, having said that and each and every individual. Having said that, it is not bad to once in a while actually squeezes efficiencies and get this higher performance out of the company. Having said that, there are certain elements of the buildup phase with Impulse, which of course, reached a certain degree of completion, and we are turning towards a different era in Polestar that is after building up all the tools and all the systems. We are now going into the phase we are using them. And of course, the strengthening of what it takes to sell the cars to actually be out there in the market and drive profitable sales is what we concentrate on now. And for example, building up a digital system that supports this rather in the completion phase. And there you have probably a higher portion than the 15% of the headcount reduction that you can execute.

Okay. That actually is a good segue into my next question. You mentioned in your prepared remarks a focus on the sales channel. I think you mentioned something about going to a wholesale model in the United States. Can you elaborate a little bit on how your go-to-market strategy is changing or growing?

Yes, I'd love to do that. In the very beginning, we took the decision to not go for the 100% direct sales model as we had it in the rest of the world in the U.S. because we just simply felt that would hinder us to go fast to market with all the lawsuits or whatever that would have been connected to pushing that through. So we indeed already had kind of a hybrid model working with dealers that sell our cars in a more traditional wholesale way, but we implemented still and hold on to some direct sales principles that we had here in Europe. And we actually found that, that is a very inefficient combination. And in the case where we have the dealers out there, we really embrace now that we use that to the full benefit of that wholesale model and really don't try to make a mismatch, but to go for this very clear principle there. In the rest of the world, especially, of course, now in Europe, we have our direct sales model. We see that the fairly theoretical idea of the beginning needs the evolution that we actually enable a certain degree of higher autonomy within the space, less central steering a bit more responsibility into the markets and into the individual spaces just in order to drive performance. And we are very convinced that Kristian will dive this into a very successful business model for us. So there's definitely a big, big plus to be gained working on this side.

Excellent. Maybe one last one, maybe it's a slightly unfair question because Polestar 4 hasn't really been in the market for very long yet. But I know that you had mentioned Polestar 4 was going to be a major tool, especially in China. And obviously, it's being produced in China. So any of maybe the initial reaction, anything you can say about how Polestar 4 is being received specifically in the Chinese market?

Yes, the question is a bit early because, of course, it's at the moment in the phase where we see how journalists test drive results give feedback for us. While for the sales, of course, this is still a bit too early to have a conclusion on that. We have from the test drives, from the feedback of all the journalists, all the opinion leaders there in China. And I'd say it's surprising because this car gets a lot, a lot of credit for being actually a performance car, which we shouldn't be surprised about because that's what we are, the performance car brand. But obviously, this was never before that much in the focus in China and that they actually see now the actually great attribute and the performance of this car. And what we made out of this technology in terms of being a performance car. I think it's a very, very good starting point. Why that second element, which we think will be very crucial as well, it's not quite as dominant yet, and that is the Polestar OS, the software indexed car and its combination to the technology that we bring through the JV with Meizu, the mobile phone company. I think it's just well very clear. The mobile phone is in the event just in front of Beijing Motor Show in April coming to launch. So that element is actually going to be deployed only in the very near future. So I think then this smart device aspect of the Polestar 4 having this full integration of its own phone will be much more tangible and that experience is still to come. So we definitely see this market now building up. They have to do a lot of work in terms of building out the network. So the JV is very busy in launching the product, launching the phone and, of course, investing and building into the sales network of Polestar in China. But the first reaction of journals and people who drove the car very positive.

And the next question comes from the line of Winnie Dong from Deutsche Bank.

I was wondering if you can specifically comment on the order pattern or the even requirement that you're seeing specifically for Polestar 2 for the year? And given that a large quantity of volume for this year is going to be coming from that vehicle and Polestar 3 and 4 in the second half. So I was wondering if you can maybe basically comment on the demand environment for that vehicle and order trends for Polestar 2.

Well, Polestar 2 is good. We have, obviously, now a full year of the upgraded Polestar 2. And what we see is that it's equally working on one hand, the long, long range that we achieved with the rear wheel drive very positive reception for that. But at the same time, and especially since we made this now a very competitive offer kind of like, either you take the range or you go for a higher performance in the 4-wheel drive. That's something that is finding great interest. But I would love to emphasize as well one thing. Obviously, in 2023, our company, Polestar was very dependent on that one car. And we were very much interested in selling a very high number of Polestar 2, which, of course, in a difficult environment and use being very careful about the margins led us to a situation which was volume-wise, of course, always a bit tricky. That's totally different in 2024. We have the year, as Per explained, which is a bit split between first half where we're on car company, second half free cash. Obviously, with Polestar 3 and 4 joining over the course of this year, the volume proportion that the Polestar 2 has to take in our holistic sales is less than what the car had to perform in 2023. So that gives us, of course, a much greater chance to work with the car in a very favorable and good way. So we will see, as we said, a growth of volume in 2024, which is, I think, very nice differentiator to a lot of others. And of course, that is due to the fact that we were invested in that this product portfolio is coming live in 3 and 4 join and we can enjoy that kind of volume growth purely because we have now the 3 cars in our toolbox.

I think to add to that one. I think it's also very interesting to see that when we now launch the new cars, the interest of Polestar 2 also starts to pick up. We saw when we launched Polestar 4 in Europe on our website and our configurators and people who are putting in orders for Polestar 4 definitely also saw more interest in the Polestar 2 with test drives and order picking up and so on and so. We expect the Polestar 2 benefit from the launch of the other costs because more people we just see that Polestar is a very nice brand.

And then my second question is on the gross margin directional guidance you have for the year, reaching double digits by the end of this year and in high teens in 2025. I guess, first on the double digit towards the end of this year, I understand the coming on of the higher-margin vehicles is going to help with that. Is there any other drivers maybe on the cost side that you can also explain to you that helped you get there end of this year and then into next year?

That's a good question. Obviously, SUVs generally have higher gross margins than other cars like that is one of the main driver, but we also have worked quite a lot of it how the revenue, how we package the cars in terms of options and packs, et cetera. So that will improve our revenue. We are also working very hard on the product cost that will also support. The other thing, which is also very important going into our sales and marketing strategies, like we are also working very hard to really find what I call the right sales channels to really make sure that we sell cars where they are most profitable customers are existing. So all of these 3 things will add to it.

The fourth this is, we should really put into that equation as well the start of production of Polestar 3 Chengdu and let's face it, being in the U.S. producing for the U.S., of course, gives the Polestar 3 well complete different base when it comes to duties and stuff that, of course, is a good factor.

And the next question comes from the line of Itay Michaeli from Citi.

Just actually want to follow up on the gross margin question. I was hoping you can maybe provide a little bit more detail on kind of what you're assuming for your kind of general EV pricing by the end of the year versus now as well as roughly what kind of sales mix you're assuming across the portfolio of percent of Polestar 3 and Polestar 4 perhaps as well as roughly if you can share any kind of high-level thoughts on the regional mix kind of that you're assuming to get there?

I can start a little bit on that one. Obviously, we talked about Polestar 2. They are kind of like being there on similar levels through the year. And then we add on the Polestar 3 and Polestar 4, they have, of course, significantly higher mixes. So that will definitely help. And yes, I would say that, of course, if you have the same level of Polestar 2, you will see that the increased volumes then will basically be done on the Polestar 3 and Polestar 4 so forth, obviously. From a regional mix, we see that we don't really have a lot of sales last year in China, so that will be a pickup. My view is that Europe will be very an important market and also U.S. and especially as Thomas said, when we start to produce Polestar 3 in Charleston, that is a really good car for the U.S. market and being produced in Charleston with no duties, et cetera. That will be significant improvement on our gross margins and mixes.

We have for 2025 that makes of 40-30-30 in mind, which is Europe 40, 30 U.S., 30 China and 2024 will be the transition year towards that. When we come from a situation in 2023, where obviously, Europe was an overwhelming portion China very, very little. And then U.S., there is kind of this constant 30%. So it's a transition year where we go towards this 40-30-30.

Now we're going to take our next question. And the next question comes from the line of Dan Levy from Barclays.

I wanted to follow up, and I think you made comments earlier, perhaps you could comment on the expected channel mix in 2024. Obviously, you've been a little more reliant on the fleet channel in 2023. I think you gave some media comments that you would reduce reliance. So maybe you could just comment on channel mix in 2024 mostly for Polestar 2, but any comments on dynamics for Polestar 3 or 4 as well.

Thanks for that question. Obviously, we have been, from time to time dependent on larger fleet sales. That is a position where we are moving away from, as I said, we are improving our sales channel mix. We expect now when we launch cars in the U.S. Polestar 3 and later on also Polestar 4, which are very good for the U.S. market, they will get a lot of customers in the lease channel, which is a normal way to sell cars in U.S., which we think is a good margin. In Europe, you have a completely different setup. We have put in a lot of more focus to really get to what we call smaller fleets like small companies or medium-sized companies. So we sell 3, 4, 5, 10, 20 cars because that's where we can really get good margins on those customers. So that has been a clear effort especially in the European region to get into that sale channels in a more clear way.

Okay. And as far as the mix into the company fleet, which is a little different from something like rental car, how does the profitability of sales into company fleet? How is that compared to retail?

Not bad at all. I mean, it's very important that you make that difference because, indeed, this is actually very healthy and good business. So we have, I think, invested a lot of effort and manpower in actually establishing these contracts and be out there and be in a lot, a lot of company car scheme because this is a very good and profitable business. So that's where I think the strength of Polestar Europe as well comes from because we have that understanding that a big, big portion of what you think is the private customers actually reached through this company cost channels, and you have to be active in these have contracts to be on the radar of these customers.

Understood. And then maybe we could just follow up with the announcement from Volvo cars earlier in the month, and they're refocusing. Perhaps you could just give some parameters on how, if at all, just changes the operational relationship between yourselves and Volvo as far as the manufacturing, the platform sharing any other resource sharing as well?

Yes. I'm almost tempted to make a complete distinction between the one thing is, which is how much shares Volvo has in Polestar. And on the other hand, our contracts, our arm's length relationship with Volvo when it comes to developing cars, manufacturing cars and as well servicing cars. I mean these are the 3 major areas where we, of course have on both sides, the intention to keep it flowing and continue with that without any disturbance of the amount of shares that Volvo would have in Polestar. I mean it's almost strange to think in the very beginning when we were listing Polestar it was one of the stories to be told that Volvo's ambition is not to keep forever that big amount of almost majority of shares of 48%. It was almost a promise to the market to say that Volvo, at some point, would reduce the ownership and there would be a bigger free float and more other investment possible into Polestar. Now this came maybe from a strange angle when it comes to communication wise, but it's the same effect, our company going up, opening for other investors the opportunity to invest into Polestar one thing. Our relation when it comes to working together operationally with Volvo untouched of that. And we've just come from our regular alignment meeting where we go through our contractual business and stuff. This is, of course, something which will completely continue, and we have to give that confirmation to each of our business partners, our customers. This is, of course, something which they can build on where we can build. And the business is well important for Volvo, they can build on having the revenue of servicing our cars, manufacturing our cars and when it comes from time to time engineering our cars. We have already before had, of course, as well other relationships. We have a Polestar 4 being produced in a Renault factory in Busan, and we have, of course, a big, big benefit of participating in the tech and innovation that's happening there within Geely. And I think we would be very falsely advised if we would not embrace the speed and the power that there is on that side when it comes to electric technology and software and stuff. So that type of diversification of our relationships with other parties not only doing things together with Volvo, but using a bit the broader Geely group, I think that's absolutely a good and healthy and beneficial development for Polestar.

I think it's important to add also that the cooperation with Volvo, which is very close doesn't stop here. As Thomas said, we had our aligner meeting earlier today. We discussed kind of what are some of the future steps of the development of the cars duomo upgrades and so on, but we are also talking more distinctly about what are the next steps in our commercial operation. Can we work together in some markets in the retail network in some of being import, et cetera. So it's a continuous dialogue. It has not stopped that also from that perspective, no change at all as of then.

And let's elaborate on that. I mean you know that we have built our network in Europe, in the U.S. even despite the fact of the direct sales model, we always contacted, reached out to Volvo retailers and invited them to become Polestar investors, and investors in terms of investing into a Polestar space. And that was a very good beginning. It has been successful for both parties. And when we now with the free cars, with the volume growing discuss expanding our network, our presentation in the markets. Of course, we do that together with the Volvo dealers, and they are our partners and going further in that. So this is just one example where hopefully, people see that this is actually continuing to be a very fruitful cooperation with Volvo.

And the question comes from the line of Andres Sheppard from Cantor Fitzgerald.

I just wanted to follow up on the capital raise. I think we touched on this briefly, but would you mind just reminding us or refreshing us what is the expected outstanding amount that you'll need to raise still? And how are you thinking about timing for that? I know we touched on equity, but just curious on the timing and curious on the incremental amount that you think you'll need to fulfil.

We're very happy to come back to this very important point today because let's face it. I mean that is for us a very important moment where we cover of the $1.3 billion that we have as the funding until we have cash flow breakeven that we have covered $1 billion of that, to be precise, $950 million. So you can do the math, what's left. And Per can answer thinks about handling the rest.

Of course, there are different angles to that one. Of course, we are looking through all the time trying to see can we improve our cash flow, limit our investments, et cetera, to make sure that we are even limiting this gap. Having said that though, as I said before, as the CFO, I would like to have more equity into the company because over time, we need to have a different structure with the balance sheet. Again, as we see the opportunity, we will take that and try to do some equity raising here to both to make sure that we don't have this remaining need and also to strengthen our balance sheet.

I would love to pick one thing up here. And that is, of course, this question about the $1.3 million. We have $1 million of $1.3 million covered. And then the elephant in the room, but this is $1.3 million real. And I really would love to emphasize how serious we take that and how much when we develop as a company and when we face the next month ahead. For us, this is an incredible serious and important task to keep this, maintain that wholly that we say, okay, this is the frame which we have, and that's where we work in. And all the billions that we invested, they, of course, are invested into good staff, our product portfolio, the 5 cars that we will have developed in 2025. And this is very predictable, very predictable costs that we have, very predictable investments. And we know exactly 2024-2025, what is still to be done. Other fact, sales volume stuff. I mean, yes, of course, that can fluctuate, but this is stuff that we can handle and which will not create the big black hole that they talked about. So we are very serious and very confident about this $1.3 million.

Got it. That's super helpful. I appreciate all that color. Maybe just as a quick follow-up. With the incremental 15% reduction in the workforce, I know you're not guiding OpEx for gross margins, but I'm curious how should we be thinking about OpEx and gross margins for 2024, given this reduction in terms of maybe modelling.

If you do a little bit of the math, we did 10% last year, which kind of like start to flow through from a headcount perspective this year. When we now do 15%, there is obviously a delay on it. It's like some markets or countries you can do it quickly in Sweden, you need to go through like a process with union negotiations and layoffs and so on. So you will gradually see that coming to the year. And hence, that we see that the later part of the year will be significantly stronger than the first half of the year.

Now I would like to hand over to Bojana Flint for retail shareholders' questions.

Thank you, Nadia, and thank you to everyone who has submitted their questions. As usual, we're going to take top 3. These are top 3 voted questions by retail shareholders. I'm going to read them out and then Thomas and Per will answer them. So the top question was share prices continue to be catastrophic despite Polestar 4 launch and strong TV advertising, there appears a little hope for improvement. I'm sure this concern is shared by fellow investors. Please explain the causes and define a convincing plan for recovery. Thomas, would you like to start?

Yes, right. I'll take this one off. Obviously, we strongly believe that our shares are undervalued. And whenever we talk about it, try to find out, it is, of course, the very big thing was always the overhang with our question mark behind the funding. And it's rarely that we had a question about our brand, so many people love our brands who love our cars. That's always a question about the funding. And I think that is, of course, as much as it's important for us to have the money for the remaining investment is as well an incredibly important moment in order to give that opportunity for our share price to develop because that question mark is gone. Then we have the other effect, free float was another thing that the free float of cars, is not sufficiently big. This will be a 6% plus for our free float. So we end up, of course, with, at the end of the day, an 80% free float, which is a much healthier figure than we had before. So that should, of course, help as well and be a big game changer. Yes. That's my answer for this one.

Okay. Great. Second question is with recent changes in funding, do you think the previous statement of making a profit by 2025 is still achievable? And I think, Per, we talked about you maybe answering this, but profit, we have always guided to cash flow breakeven. So our answer is going to land on that.

No, that's correct. Thank you, Bojana. What we said in our press releases and what we talked about today here is really that we are confident on achieving our 2025 targets on our volume guiding and on our gross margin targets. And basically, what we are also saying is that with the launch of the Polestar 3, Polestar 4 coming into production firstly and then starting to be sold and hitting the roads during the second half of this year, we see that the gross margin and the volume will pick up very nicely. So leaving this year, we will more or less be on the trajectory to meet the 2025 targets. So we are confident of meeting that cash flow breakeven for 2025.

Great. And then the third question is what's the future of Polestar after Volvo exited as a partner? We have already had that question earlier. So it's not an exit and nothing changes.

To clarify, Volvo is still our strategic partner. It's not an exit close collaboration continue. I just use the time now and to extend and go again back to the share price. The 2 things that I said is one thing, but there is, of course, another thing 2024, back to it. We will have the expense of our product portfolio. We have 2 high-margin SUV is joining in a time where it's very difficult for anybody to achieve, we will achieve volume growth, we will achieve margin growth. I mean, that year will just simply be much, much more of a proof point of the asset-light model that we have been promoting some for such a long time. So I think time will tell. I think that time has come 2024, that it becomes that much more as well in our figures and our financials readable, what kind of good company we are building here. So I hope that will, of course, attract people to buy our shares.

Perfect. And with this, we are done. Thank you very much for everyone who joined the call, both on the call and the webcast. And we're always here with any additional questions that you might have.

Thank you very much for taking the time.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.