PART I [Key Information](index=15&type=section&id=ITEM%203.%20KEY%20INFORMATION) The company faces significant risks across its business, operations, and financing, including a history of net losses and material weaknesses in internal controls [Risk Factors](index=15&type=section&id=D.%20Risk%20Factors) Polestar's operations are subject to a wide array of risks including dependency on partners, supply chain issues, intense competition, and regulatory challenges - The company has incurred net losses each year since its inception and had an accumulated deficit of **$3.7 billion** as of December 31, 2022[136](index=136&type=chunk) - Polestar's independent auditors have included a **'going concern'** explanatory paragraph in their report, indicating substantial doubt about the company's ability to continue operations without securing additional funding[137](index=137&type=chunk) - The company relies heavily on agreements with strategic partners **Volvo Cars and Geely** for R&D, IP licensing, purchasing, and manufacturing, and any disruption could materially harm its ability to operate[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - Operations are subject to significant risks specific to **China**, including reliance on Chinese manufacturing facilities and suppliers, potential government intervention, and complex data security laws[91](index=91&type=chunk)[158](index=158&type=chunk)[162](index=162&type=chunk) - **Four material weaknesses** in internal control over financial reporting were identified as of December 31, 2022, related to personnel, revenue recognition, intangible assets, and inventory controls[346](index=346&type=chunk) [Information on the Company](index=82&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) Polestar operates as a premium electric car brand with an asset-light model, leveraging partners for manufacturing while developing a product portfolio of six vehicles by 2026 [History and Development of the Company](index=82&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) The company became public in June 2022 through a business combination and has made significant capital expenditures in production tooling and R&D Capital Expenditures (in TUSD) | Year | Amount (TUSD) | | :--- | :--- | | 2022 | 380,457 | | 2021 | 504,774 | | 2020 | 400,793 | - Capital expenditures in 2023 are anticipated to be financed through a mix of equity or debt instruments, credit facilities, and related-party loans[393](index=393&type=chunk) [Business Overview](index=82&type=section&id=B.%20Business%20Overview) The company is a Swedish premium electric car brand accelerating sustainable mobility through an asset-light model and a direct-to-consumer sales approach Revenue by Type (in TUSD) | Revenue Type | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Sales of vehicles | 2,404,246 | 1,290,031 | 542,783 | | Sales of software and performance engineered kits | 21,308 | 25,881 | 35,434 | | Sales of carbon credits | 10,984 | 6,299 | 27,141 | | Vehicle leasing revenue | 16,719 | 6,217 | — | | Other revenue | 8,639 | 8,753 | 4,887 | | **Total** | **2,461,896** | **1,337,181** | **610,245** | Revenue by Geographical Region (in TUSD) | Region | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Europe, the Middle East, and Africa | 1,619,046 | 1,029,058 | 568,311 | | North America | 609,058 | 265,661 | 28,084 | | Asia and Australia | 233,792 | 42,462 | 13,850 | | **Total** | **2,461,896** | **1,337,181** | **610,245** | - Polestar plans to introduce three new electric vehicles by 2026: **Polestar 4** (2023), **Polestar 5** (2024), and **Polestar 6** (2026)[398](index=398&type=chunk)[399](index=399&type=chunk) - The company utilizes a digital-first, direct-to-consumer sales model, supported by **158 physical Polestar Spaces** and **1,116 service points** via the Volvo Cars network as of Dec 31, 2022[402](index=402&type=chunk) - A key long-term goal is the **Polestar 0 project**, aiming to create a truly climate-neutral production car by 2030[400](index=400&type=chunk)[449](index=449&type=chunk) - Polestar delivered approximately **12,000 vehicles in Q1 2023**[412](index=412&type=chunk) [Organizational Structure](index=100&type=section&id=C.%20Organizational%20Structure) Polestar Automotive Holding UK PLC is the parent company with significant subsidiaries across Europe, North America, and Asia for sales and service - The company operates through a network of wholly-owned subsidiaries in key regions, including Polestar Holding AB (Sweden) and Polestar Automotive USA Inc[517](index=517&type=chunk)[518](index=518&type=chunk) [Property, Plants and Equipment](index=103&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) The company employs an asset-light manufacturing model, using partner facilities in China and the US for current and future vehicle production - Polestar vehicles are currently manufactured at a plant in Luqiao, China, which is **owned and operated by Volvo Cars**[521](index=521&type=chunk) - Future production of the Polestar 3 will occur at Volvo Cars' facilities in **Chengdu, China, and Charleston, South Carolina, USA**[521](index=521&type=chunk)[522](index=522&type=chunk) - As of the report date, Polestar has committed to a plan to **sell its own low-volume manufacturing facility** in Chengdu, China[465](index=465&type=chunk)[524](index=524&type=chunk) [Operating and Financial Review and Prospects](index=104&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Revenue grew 84% to $2.46 billion in 2022, but the company recorded a net loss of $466 million and faces liquidity challenges requiring external financing [Results of Operations](index=108&type=section&id=A.%20Results%20of%20operations) Revenue increased 84% to $2.46 billion in 2022, while the net loss improved to $466 million due to a significant non-cash gain from earn-out rights Consolidated Statement of Loss Summary (in TUSD) | | 2022 | 2021 | 2020 | |:---|---:|---:|---:| | **Revenue** | **2,461,896** | **1,337,181** | **610,245** | | Cost of sales | (2,342,453) | (1,336,321) | (553,724) | | **Gross profit** | **119,443** | **860** | **56,521** | | Selling, general and administrative expense | (864,598) | (714,724) | (314,926) | | Research and development expense | (167,242) | (232,922) | (183,849) | | Listing expense | (372,318) | — | — | | **Operating loss** | **(1,286,280)** | **(994,839)** | **(440,488)** | | Fair value change - Earn-out rights | 902,068 | — | — | | **Net loss** | **(465,789)** | **(1,007,454)** | **(484,858)** | - **Revenue increased by 84% in 2022**, driven by higher sales volumes of the Polestar 2 across key markets[569](index=569&type=chunk)[570](index=570&type=chunk) - Gross profit margin improved in 2022 due to higher fixed cost absorption from expanded production, though partially offset by unfavorable currency exchange rates[578](index=578&type=chunk) - The 2022 net loss was significantly reduced by a **non-cash gain of $902.1 million** from the fair value change of earn-out rights and a **$35.1 million gain** from the fair value change of Class C Shares[567](index=567&type=chunk)[586](index=586&type=chunk)[587](index=587&type=chunk) [Liquidity and Capital Resources](index=112&type=section&id=B.%20Liquidity%20and%20capital%20resources) The company's liquidity is a critical concern, with negative operating cash flows and a heavy reliance on external financing to fund its growth and operations - Management has determined there is **substantial doubt about Polestar's ability to continue as a going concern** due to recurring net losses and negative cash flows[590](index=590&type=chunk)[1066](index=1066&type=chunk) Cash and Cash Equivalents (in TUSD) | As of December 31, | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | 973,877 | 756,677 | Consolidated Cash Flows Summary (in TUSD) | | 2022 | 2021 | 2020 | |:---|---:|---:|---:| | Cash used for operating activities | (1,083,423) | (312,156) | (57,050) | | Cash used for investing activities | (715,973) | (129,672) | (243,707) | | Cash provided by financing activities | 2,083,029 | 909,572 | 359,643 | - The SPAC merger in June 2022 provided **net cash proceeds of $1.42 billion**, a primary source of financing during the year[548](index=548&type=chunk)[624](index=624&type=chunk) - On November 3, 2022, Polestar entered into an 18-month term loan facility with shareholder Volvo Cars for **up to $800 million**[612](index=612&type=chunk) Contractual Obligations and Commitments as of Dec 31, 2022 (in TUSD) | | Total | Less than 1 year | 1-5 years | After 5 years | |:---|---:|---:|---:|---:| | Capital commitments | 396,261 | 283,400 | 112,861 | — | | Credit facilities, including sale leasebacks | 1,328,752 | 1,328,752 | — | — | | Lease obligations | 120,465 | 21,717 | 69,135 | 29,613 | | **Total** | **1,845,478** | **1,633,869** | **181,996** | **29,613** | [Non-GAAP Financial Measures](index=116&type=section&id=C.%20Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted Operating Loss and Free Cash Flow to provide a clearer view of underlying business trends Reconciliation of GAAP and Non-GAAP Results (in TUSD) | Measure | 2022 | 2021 | 2020 | |:---|---:|---:|---:| | **Operating loss (GAAP)** | **(1,286,280)** | **(994,839)** | **(440,488)** | | Listing expense | 372,318 | — | — | | **Adjusted operating loss (Non-GAAP)** | **(913,962)** | **(994,839)** | **(440,488)** | | **Net loss (GAAP)** | **(465,789)** | **(1,007,454)** | **(484,858)** | | Adjustments for Adjusted EBITDA | (319,812) | (724,492) | 252,913 | | **Adjusted EBITDA (Non-GAAP)** | **(785,601)** | **(724,492)** | **(231,945)** | | Adjustments for Adjusted Net Loss | (564,840) | — | — | | **Adjusted net loss (Non-GAAP)** | **(1,030,629)** | **(1,007,454)** | **(484,858)** | | **Net cash used for operating activities (GAAP)** | **(1,083,423)** | **(312,156)** | **(57,050)** | | Additions to PP&E and intangible assets | (713,473) | (129,672) | (243,707) | | **Free cash flow (Non-GAAP)** | **(1,796,896)** | **(441,828)** | **(300,757)** | [Directors, Senior Management and Employees](index=123&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) The company is led by an experienced executive team and board, with compensation tied to performance and exemptions from certain Nasdaq governance rules [Directors and Executive Officers](index=123&type=section&id=A.%20Directors%20and%20Executive%20Officers) Polestar's leadership team and board comprise members with extensive experience in the automotive, technology, and financial sectors from major corporations - The executive team consists of **Thomas Ingenlath (CEO)**, **Johan Malmqvist (CFO)**, and **Dennis Nobelius (COO)**[674](index=674&type=chunk) - The Board of Directors is chaired by **Håkan Samuelsson**, former President and CEO of Volvo Cars[679](index=679&type=chunk) [Executive Officer and Director Compensation](index=127&type=section&id=B.%20Executive%20Officer%20and%20Director%20Compensation) Executive compensation includes salary, performance-based bonuses, and long-term equity incentives, while non-employee directors receive a fixed annual fee - The aggregate compensation for the three executive officers for the year ended Dec 31, 2022, was approximately **SEK 35.4 million (or $3.4 million)**[699](index=699&type=chunk) - The 2022 annual bonus program was based on five KPIs and resulted in a **payout of 106%** of the target bonus levels[701](index=701&type=chunk) - Non-employee directors receive an annual fee of **$200,000 ($350,000 for the chair)**, with half of the net fee used to purchase company ADSs[713](index=713&type=chunk) - The company adopted the **2022 Omnibus Incentive Plan** and the **2022 Employee Stock Purchase Plan** to provide long-term equity incentives[715](index=715&type=chunk)[717](index=717&type=chunk)[735](index=735&type=chunk) [Board Practices](index=136&type=section&id=C.%20Board%20Practices) The Board of Directors is divided into three staggered classes and has three standing committees, with exemptions from certain Nasdaq rules as a foreign private issuer - The Board is divided into **three classes (Class I, II, III)** with staggered three-year terms[761](index=761&type=chunk) - The Board has three committees: **Audit, Compensation, and Nominating and Governance**, with the Audit Committee consisting entirely of independent directors[767](index=767&type=chunk)[768](index=768&type=chunk) - As a **'foreign private issuer'** and a **'controlled company,'** Polestar is exempt from certain Nasdaq corporate governance requirements[779](index=779&type=chunk)[784](index=784&type=chunk) [Employees](index=139&type=section&id=D.%20Employees) As of year-end 2022, Polestar employed over 2,377 people globally and adheres to local collective bargaining requirements in several European countries - As of December 31, 2022, the company had more than **2,377 employees**[785](index=785&type=chunk) - Collective bargaining agreements are in place in **Sweden, Finland, the Netherlands, and Austria**[786](index=786&type=chunk) [Major Shareholders and Related Party Transactions](index=139&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) The company has a highly concentrated ownership structure and its operations are deeply integrated with related parties Volvo Cars and Geely through extensive agreements [Major Shareholders](index=139&type=section&id=A.%20Major%20Shareholders) Ownership is highly concentrated, with Li Shufu as the ultimate beneficial owner of approximately 88.5% of the company's shares, giving him significant control - As of December 31, 2022, **Li Shufu is the beneficial owner of 1,866,576,927 shares**, representing approximately **88.5%** of outstanding shares[794](index=794&type=chunk)[795](index=795&type=chunk) - The company has a dual-class share structure where **Class B shares have ten votes per share**, concentrating voting power with Class B shareholders[352](index=352&type=chunk)[790](index=790&type=chunk) [Related Party Transactions](index=141&type=section&id=B.%20Related%20Party%20Transactions) Polestar's business model relies heavily on a wide range of transactions with its related parties, Volvo Cars and Geely, for core operational functions - Polestar has a term loan facility with Snita (a Volvo Cars subsidiary) for **up to $800 million**, available for 18 months from November 3, 2022[810](index=810&type=chunk) - The company has numerous agreements with Volvo Cars and Geely for **R&D, IP licensing, manufacturing engineering, logistics, and component supply**[468](index=468&type=chunk)[812](index=812&type=chunk)[822](index=822&type=chunk) - Polestar 2 is manufactured under contract at the Luqiao plant operated by Volvo Cars, with Polestar 3 production planned for Volvo Cars' plants in China and the US[830](index=830&type=chunk)[473](index=473&type=chunk) - Key shareholders have declared their intent to **subscribe for their pro rata share of any equity offerings** by the company until March 31, 2024[892](index=892&type=chunk) [Financial Information](index=163&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) The company provides consolidated financial statements, is subject to legal proceedings in the normal course of business, and does not intend to pay dividends - The company has **not paid any cash dividends** to date and does not intend to pay any in the foreseeable future, expecting to reinvest earnings into operations[900](index=900&type=chunk) - Polestar is subject to various legal proceedings from the normal course of business, but no specific material unfavorable rulings are reported as having occurred[899](index=899&type=chunk) [The Offer and Listing](index=163&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) The company's Class A ADSs and Class C-1 ADSs are listed on the Nasdaq Stock Market under the ticker symbols 'PSNY' and 'PSNYW' - Class A ADSs are listed on Nasdaq under the symbol **'PSNY'**[902](index=902&type=chunk) - Class C-1 ADSs are listed on Nasdaq under the symbol **'PSNYW'**[902](index=902&type=chunk) [Additional Information](index=164&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides details on corporate governance, material contracts, and key tax considerations for security holders, including its non-PFIC status for 2022 [Taxation](index=164&type=section&id=E.%20Taxation) The company outlines material U.S. and U.K. tax considerations, including its status as a non-U.S. corporation and its belief that it was not a PFIC in 2022 - Polestar does not believe it was classified as a **Passive Foreign Investment Company (PFIC)** for its taxable year ended December 31, 2022[295](index=295&type=chunk)[947](index=947&type=chunk) - The company does not expect to be treated as a **U.S. corporation for U.S. federal income tax purposes** under Section 7874 rules[297](index=297&type=chunk)[924](index=924&type=chunk) - Dividends paid by the company are **not expected to be subject to U.K. withholding tax**[957](index=957&type=chunk) - Transfers of ADSs through the Depository Trust Company (DTC) are **not expected to attract U.K. stamp duty** or stamp duty reserve tax (SDRT)[292](index=292&type=chunk)[959](index=959&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=173&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks inherent to its global business operations, including foreign currency, interest rate, credit, and liquidity risks - The company is exposed to market risks including **foreign exchange risk, interest rate risk, credit risk, and liquidity risk**[657](index=657&type=chunk) [Description of Securities Other Than Equity Securities](index=173&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) Holders of the company's American Depositary Shares (ADSs) are responsible for various fees for issuance, cancellation, and other services ADS Holder Fees and Charges | Service | Fee | | :--- | :--- | | ADS Issuance (excluding initial deposit) | Up to US$0.05 per ADS issued | | ADS Cancellation | Up to US$0.05 per ADS cancelled | | Cash Distribution | Up to US$0.05 per ADS held | | Stock Dividend / Rights Distribution | Up to US$0.05 per ADS held | | Annual ADS Service Fee | Up to US$0.05 per ADS held on record date | - ADS holders are also responsible for paying taxes, registration fees, currency conversion costs, and other reasonable out-of-pocket expenses[972](index=972&type=chunk) PART II [Controls and Procedures](index=176&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were not effective as of year-end 2022 due to four material weaknesses in internal control over financial reporting - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were **not effective**[982](index=982&type=chunk) - **Four material weaknesses** in internal control over financial reporting were identified related to insufficient qualified personnel, revenue recognition, intangible assets, and inventory controls[982](index=982&type=chunk) - Remediation actions completed in 2022 include designing an internal control framework and strengthening the finance function with new personnel[984](index=984&type=chunk) [Corporate Governance and Other Matters](index=177&type=section&id=ITEM%2016.%20%5BReserved%5D) The company has an audit committee financial expert, has adopted a code of conduct, and is exempt from certain Nasdaq governance rules as a foreign private issuer - The Board has determined that **Carla De Geyseleer** qualifies as an 'audit committee financial expert'[988](index=988&type=chunk) Principal Accountant Fees (in TUSD) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | 11,159 | 491 | | Audit-related fees | 412 | — | | Tax fees | — | — | | All other fees | — | 2,306 | | **Total** | **11,571** | **2,797** | - As a foreign private issuer, Polestar is **exempt from certain Nasdaq corporate governance rules**, such as requiring fully independent compensation and nominating committees[998](index=998&type=chunk) PART III [Financial Statements](index=180&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) The audited consolidated financial statements reflect significant revenue growth alongside continued net losses, with the auditor's report noting a going concern uncertainty Consolidated Statement of Financial Position Summary (in TUSD) | | Dec 31, 2022 | Dec 31, 2021 | |:---|---:|---:| | **Total assets** | **3,942,451** | **3,309,693** | | Total current assets | 2,180,334 | 1,606,986 | | *Cash and cash equivalents* | *973,877* | *756,677* | | **Total liabilities** | **(4,076,094)** | **(3,187,197)** | | Total current liabilities | (3,252,502) | (3,040,716) | | **Total equity** | **133,643** | **(122,496)** | - The independent auditor's report includes a **'Going Concern' paragraph**, noting that the company's need for additional financing raises substantial doubt about its ability to continue[1030](index=1030&type=chunk) - Critical audit matters identified by the auditor include **revenue recognition** for vehicle sales and the **existence, completeness, and valuation of inventories**[1035](index=1035&type=chunk)[1039](index=1039&type=chunk) - The merger with GGI was accounted for as a reverse recapitalization, resulting in a **non-cash, one-time listing expense of $372.3 million**[1057](index=1057&type=chunk)[1283](index=1283&type=chunk) [Exhibits](index=181&type=section&id=ITEM%2019.%20EXHIBITS) This section provides an index of all exhibits filed with the annual report, including foundational corporate documents and various material contracts - The exhibits include the company's **Articles of Association, ADS Deposit Agreements, and the Business Combination Agreement**[1008](index=1008&type=chunk)[1009](index=1009&type=chunk) - Numerous material contracts are filed as exhibits, including service, license, and manufacturing agreements with **Volvo Car Corporation and various Geely entities**[1010](index=1010&type=chunk)[1011](index=1011&type=chunk)[1012](index=1012&type=chunk) - **Certifications by the Principal Executive Officer and Principal Financial Officer** pursuant to the Sarbanes-Oxley Act are included[1018](index=1018&type=chunk)