Polestar, a struggling luxury car brand in Sweden, has been given a funding lifeline of $950m (£750m), after Volvo dropped its support.
The company, which is known as “the Tesla of Europe”, announced on Wednesday that it had received a three-year loan through a consortium of twelve banks, including HSBC Standard Chartered, BNP Paribas and BNP.
This will allow the company to breathe a little more as they race to break even in 2019. Polestar previously stated that it would need $1.3bn to reach this point. This means it will also have to raise $350m.
The slowdown in EV sales, and the increased competition of low-cost Chinese brands are causing problems for the industry.
Volvo announced that it would no longer fund Polestar, after the European car manufacturer spun off in 2017, The decision came after Polestar failed to meet key goals.
Polestar had pledged to deliver 70,000 vehicles in 2023, a target that was already reduced from 80,000. But in November it said it could only manage 60,000.
The New York-listed company’s shares, which have fallen 80pc over the last year, are now trading 12pc higher after Wednesday’s announcement.
Volvo announced earlier this month that it would transfer responsibility for Polestar over to its Chinese parent company, Geeley. Geeley already owned a stake directly in the electric vehicle maker.
The company announced Wednesday that it would be changing its ownership. Volvo’s share will drop from 48pc down to 18pc, while China’s Geely takes around 23-24pc.
Geely founder Eric Li will retain 39pc of the company through PSD, his personal investment vehicle.
Thomas Ingenlath said that the loan agreement reflected “support of Polestar’s expansion course”.
He said: “We have strengthened our path towards cash-flow break-even target in 2025.”
Daniel Li, CEO of Geely Holding Group said that the Chinese company will provide “full financial and operational support” to the firm, as well as participating in future funding rounds.
He said that Polestar would have access to all the technologies and engineering expertise of Geely in order to achieve its global growth goals.
Polestar also pledged to cut costs in order to achieve profitability. This year it will cut 450 jobs, after cutting hundreds of jobs in 2023.
The company has four models, including two SUVs.