Core Viewpoint - Polestar's termination of its joint venture with Geely's Meizu marks a significant shift, indicating a potential exit from the Chinese market due to poor performance and strategic misalignment [1][2]. Group 1: Company Performance - In 2024, Polestar's sales in China were only 3,100 units, plummeting to 119 units in January-February 2025, far below Geely's expectations [3]. - Polestar's global sales reached 12,304 units in Q1 2025, a 76% year-on-year increase, primarily driven by the European market, which accounted for nearly 70% of total sales [3]. - The company's net loss expanded to $541 million in the first half of 2024, with cumulative losses exceeding $2 billion, and its stock price has fallen by 90% since its IPO, leading to multiple delisting warnings from Nasdaq [3]. Group 2: Strategic Challenges - Polestar's product lineup is limited, with only two models available, and its pricing does not compete effectively with brands like NIO and Li Auto [1]. - The company has faced significant management instability, with seven different heads for the China region in eight years, leading to a lack of strategic continuity [1]. - Geely has been consolidating its brands, closing underperforming ones and reallocating resources to more promising brands like Zeekr and Galaxy, further marginalizing Polestar [3][4]. Group 3: Future Outlook - Polestar plans to launch the four-door GT model Polestar 5 and the compact SUV Polestar 7 in late 2025, aiming for an annual sales growth of 30%-35% [4]. - However, the company’s product iteration speed lags behind Chinese competitors, and its brand recognition outside Europe is weak, raising doubts about its ability to reverse its current decline [4]. - If Polestar fails to solidify its position in the European market and achieve profitability by 2025, it may face severe survival challenges [4].

Core Viewpoint - Polestar Automotive announced the termination of the framework agreement with Meizu, leading to the cessation of operations for their joint venture, Polestar Technology [1] Group 1 - The joint venture will be responsible for settling all outstanding financial obligations and remaining debts to business partners, including external investors, before ceasing operations [1] - The agreement includes terms for the transfer of certain digital and other assets of the joint venture at a fair value agreed upon by both parties, ensuring Polestar can resume sales, customer service, and distribution in the Chinese market [1]

PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) The company faces significant risks related to partner dependency, capital needs, competition, and internal control weaknesses [Risk Factors](index=16&type=section&id=D.%20Risk%20Factors) Key risks include heavy reliance on strategic partners, the need for substantial additional capital, intense market competition, and identified material weaknesses in financial controls - Polestar's future growth is **heavily dependent on the successful and timely production of new models** like the Polestar 3 and 4[47](index=47&type=chunk) - The company's **reliance on partners like Volvo Cars and Geely** for manufacturing, R&D, and logistics creates significant operational vulnerabilities[50](index=50&type=chunk) - Polestar has incurred net losses since inception, requires substantial additional capital, and has **substantial doubt about its ability to continue as a going concern**[54](index=54&type=chunk)[55](index=55&type=chunk) - The company has identified **material weaknesses in its internal control over financial reporting**, which could impact financial statement accuracy and investor confidence[88](index=88&type=chunk) - A **dual-class voting structure** gives certain shareholders disproportionate voting power, limiting the influence of other ADS holders[89](index=89&type=chunk) [Company Information](index=53&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details Polestar's history, asset-light business model, global operations, and expanding electric vehicle portfolio [History and Development of the Company](index=53&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Polestar became a public company in June 2022 and has made significant capital expenditures financed through equity, debt, and credit facilities Capital Expenditures (TUSD) | Year | Amount (TUSD) | | :--- | :--- | | 2023 | 475,710 | | 2022 | 380,709 | | 2021 | 503,308 | - The company was established as a premium electric car brand by Volvo Cars and Geely in 2017 and **became publicly listed on June 23, 2022**[99](index=99&type=chunk)[101](index=101&type=chunk) [Business Overview](index=54&type=section&id=B.%20Business%20Overview) Polestar is a design-led EV brand with an asset-light model, a direct-to-consumer approach, and a goal to create a climate-neutral car by 2030 - Polestar's strategy focuses on **expanding its product portfolio to four models by 2025**, improving profitability, and diversifying its manufacturing footprint[108](index=108&type=chunk) Vehicle Portfolio and Timeline | Model | Type | Status | Production Start | | :--- | :--- | :--- | :--- | | Polestar 1 | Hybrid GT | Production ended 2021 | 2019 | | Polestar 2 | Performance Fastback | In production | 2020 | | Polestar 3 | Performance SUV | Production started | Early 2024 | | Polestar 4 | SUV Coupe | Production started | Late 2023 | | Polestar 5 | Luxury 4-door GT | Planned | 2025 | | Polestar 6 | Roadster | Planned | Early 2027 | - As of December 31, 2023, Polestar operates in 27 markets, utilizing **192 Polestar Spaces** and over **1,150 service points** via the Volvo Cars network[101](index=101&type=chunk)[128](index=128&type=chunk) - A joint venture with Xingji Meizu in China aims to develop a **unique operating system (Polestar OS)** to strengthen its position in the Chinese market[59](index=59&type=chunk)[128](index=128&type=chunk) Revenue by Type (TUSD) | Revenue Type | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Sales of vehicles | 2,319,947 | 2,386,454 | 1,299,196 | | Sales of software and performance kits | 18,994 | 21,308 | 25,881 | | Sales of carbon credits | 1,452 | 10,984 | 6,299 | | Vehicle leasing revenue | 17,421 | 16,719 | 6,217 | | Other revenue | 20,748 | 8,640 | 8,754 | | **Total** | **2,378,562** | **2,444,105** | **1,346,347** | [Organizational Structure](index=69&type=section&id=C.%20Organizational%20Structure) Polestar Automotive Holding UK PLC is the parent company of a global group with key subsidiaries in Sweden and Singapore - The company operates through a network of wholly-owned subsidiaries across key regions, with **Polestar Holding AB (Sweden)** and **Polestar Automotive (Singapore) Pte. Ltd.** being central to the structure[155](index=155&type=chunk)[159](index=159&type=chunk) [Property, Plants and Equipment](index=71&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company employs an asset-light model by using partner-owned manufacturing facilities and is expanding its production footprint globally - Polestar **leverages partner manufacturing facilities** to maintain an asset-light business model[160](index=160&type=chunk)[161](index=161&type=chunk) Key Manufacturing Locations | Facility | Operator | Model(s) | Status | | :--- | :--- | :--- | :--- | | Taizhou, China | Volvo Cars | Polestar 2 | In Production | | Chengdu, China | Volvo Cars | Polestar 3 | Production started early 2024 | | Charleston, SC, USA | Volvo Cars | Polestar 3 | Production expected summer 2024 | | Hangzhou Bay, China | Geely | Polestar 4 | In Production | | Busan, South Korea | Renault Korea Motors (Geely JV) | Polestar 4 | Production expected H2 2025 | | Chongqing, China | Geely/Polestar | Polestar 5 & 6 | Production expected 2025/2027 | [Operating and Financial Review and Prospects](index=72&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) The company's financial performance shows declining revenue and widening losses, with significant doubt about its ability to continue as a going concern [Results of Operations](index=76&type=section&id=A.%20Results%20of%20operations) In 2023, revenue decreased slightly while a significant increase in cost of sales led to a gross loss of $413.1 million and a net loss of $1.19 billion Consolidated Statement of Loss (TUSD) | | 2023 | 2022 (Restated) | 2021 (Restated) | | :--- | :--- | :--- | :--- | | **Revenue** | **2,378,562** | **2,444,105** | **1,346,347** | | Cost of sales | (2,791,643) | (2,343,302) | (1,336,688) | | **Gross (loss) profit** | **(413,081)** | **100,803** | **9,659** | | Selling, general and administrative expense | (949,683) | (838,367) | (685,049) | | Research and development expense | (158,406) | (174,916) | (234,019) | | **Operating loss** | **(1,479,966)** | **(1,285,103)** | **(960,125)** | | **Net loss** | **(1,194,831)** | **(477,455)** | **(969,298)** | - Global vehicle deliveries **grew 6% to approximately 54,600 cars** in 2023 from 51,549 in 2022[106](index=106&type=chunk)[183](index=183&type=chunk) - The 2023 gross loss was primarily driven by **impairments totaling over $440 million** related to intangible assets, PPE, and inventory[202](index=202&type=chunk) [Liquidity and Capital Resources](index=81&type=section&id=B.%20Liquidity%20and%20capital%20resources) The company's liquidity is under pressure due to negative operating cash flows, requiring heavy reliance on external and related-party financing Cash and Cash Equivalents (TUSD) | As of December 31 | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 768,927 | 973,877 | Consolidated Cash Flows (TUSD) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Cash used for operating activities | (1,859,842) | (1,089,295) | (314,555) | | Cash used for investing activities | (439,399) | (709,044) | (126,937) | | Cash provided by financing activities | 2,093,304 | 2,082,486 | 909,237 | - Polestar secured significant related-party financing, including a **$1 billion term loan from Volvo Cars** and a **$250 million term loan from Geely**[173](index=173&type=chunk)[217](index=217&type=chunk) - Total contractual obligations and commitments as of December 31, 2023, amount to approximately **$4.87 billion**, with $3.18 billion due in less than one year[227](index=227&type=chunk) [Critical Accounting Estimates](index=87&type=section&id=F.%20Critical%20accounting%20estimates) Financial statements rely on critical estimates for revenue recognition, asset impairment testing, and fair value measurements of financial instruments - Polestar **changed its revenue allocation method** in Q4 2023 to an expected cost-plus-margin approach, reflecting more mature sales data[239](index=239&type=chunk)[481](index=481&type=chunk) - The company identified **four distinct Cash Generating Units (CGUs)** for impairment testing, a change from the previous single-CGU approach[241](index=241&type=chunk)[506](index=506&type=chunk) - An **impairment loss of $351.2 million** was recognized for the Polestar 2 CGU in 2023 due to decreased forecasted demand[241](index=241&type=chunk)[506](index=506&type=chunk) - Fair value of financial liabilities is measured using complex models with **significant unobservable inputs (Level 2 and 3)**, making them sensitive to market changes[243](index=243&type=chunk)[244](index=244&type=chunk) [Directors, Senior Management and Employees](index=91&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's board structure, executive compensation, incentive plans, and employee base - The Board of Directors is divided into **three classes with staggered three-year terms**, and a majority must be independent for three years post-business combination[297](index=297&type=chunk) - Aggregate compensation for executive officers in 2023 was approximately **SEK 39.5 million (approx. $3.9 million USD)**[272](index=272&type=chunk) - Non-employee directors receive an annual fee of **$200,000 ($350,000 for the chair)**, with 50% of the net fee used to purchase company ADSs[280](index=280&type=chunk) - As of December 31, 2023, the company had over **2,515 employees**, with a significant presence in Sweden, China, the UK, and the USA[310](index=310&type=chunk) [Major Shareholders and Related Party Transactions](index=103&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) The company is a controlled entity with extensive operational and financial agreements with its major shareholders, Volvo Cars and Geely Major Shareholder Ownership (as of Dec 31, 2023) | Name of Beneficial Owner | Approximate Percentage of Outstanding Shares | | :--- | :--- | | Li Shufu | 81.8% | - Polestar has **extensive related party agreements** with Volvo Cars and Geely for R&D, IP licensing, manufacturing, and other core services[136](index=136&type=chunk)[326](index=326&type=chunk) - Polestar has a **$1 billion term loan facility with Snita (Volvo Cars)** and a **$250 million term loan facility with Geely**, both featuring equity conversion options[326](index=326&type=chunk)[327](index=327&type=chunk) [Financial Information](index=123&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section references the consolidated financial statements and notes the company's policy of not paying dividends - The company has not paid any cash dividends to date and **does not intend to in the foreseeable future**, expecting to reinvest earnings into operations[350](index=350&type=chunk) [The Offer and Listing](index=124&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) Polestar's ADSs and warrants are listed on the Nasdaq stock market under the symbols 'PSNY' and 'PSNYW' - Class A ADSs are listed on Nasdaq under the symbol **'PSNY'**[352](index=352&type=chunk) - Class C-1 ADSs (warrants) are listed on Nasdaq under the symbol **'PSNYW'**[352](index=352&type=chunk) [Additional Information](index=124&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers material tax considerations for ADS holders, including PFIC status, and notes the absence of exchange controls - The company does not believe it was a **Passive Foreign Investment Company (PFIC)** for the 2023 taxable year but notes the determination is complex[75](index=75&type=chunk)[371](index=371&type=chunk) - Dividends paid by the company are **not expected to be subject to U.K. withholding tax**[374](index=374&type=chunk) - Transfers of ADSs through DTC are not expected to attract U.K. stamp duty, but **transfers of the underlying ordinary shares generally will**[75](index=75&type=chunk)[375](index=375&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=131&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks including foreign currency, interest rate, credit, and significant liquidity risk - The company is primarily exposed to **foreign exchange risk** from fluctuations in CNY/SEK, GBP/SEK, and USD/SEK rates[247](index=247&type=chunk)[528](index=528&type=chunk) - A **1% parallel shift in interest rate curves** would impact profit or loss by approximately **$10.0 million** as of Dec 31, 2023[251](index=251&type=chunk)[534](index=534&type=chunk) - **Liquidity risk is significant**, as the company depends on short-term credit facilities and flexible payment terms from related parties[255](index=255&type=chunk)[537](index=537&type=chunk) [Description of Securities Other Than Equity Securities](index=131&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section outlines the fees payable by ADS holders to the Depositary for various services ADS Holder Fees | Service | Fee per ADS | | :--- | :--- | | Issuance of ADSs | Up to US$0.05 | | Cancellation of ADSs | Up to US$0.05 | | Cash distributions | Up to US$0.05 | | Annual Service Fee | Up to US$0.05 | PART II [Controls and Procedures](index=134&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management and the independent auditor identified material weaknesses in internal controls, resulting in an adverse opinion on their effectiveness - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2023[386](index=386&type=chunk) - The independent auditor, Deloitte AB, issued an **adverse opinion on the effectiveness of the company's internal control** over financial reporting[398](index=398&type=chunk)[399](index=399&type=chunk) - **Material weaknesses were identified** in four components of the COSO framework: Control Environment, Control Activities, Information and Communication, and Monitoring[389](index=389&type=chunk) - Specific deficiencies include a **lack of sufficient accounting expertise**, inadequate segregation of duties, and ineffective controls over key financial areas[390](index=390&type=chunk)[391](index=391&type=chunk)[394](index=394&type=chunk) - Management is undertaking **remediation efforts**, including hiring additional finance resources and enhancing policies and procedures[396](index=396&type=chunk) [Principal Accountant Fees and Services](index=138&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section details the fees paid to the principal external auditor, Deloitte AB, for audit and other services in 2022 and 2023 Principal Accountant Fees (TUSD) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | 15,720 | 11,159 | | Audit-related fees | 268 | 412 | | Tax fees | 3 | — | | All other fees | 10 | — | | **Total** | **16,001** | **11,571** | [Corporate Governance](index=139&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer and controlled company, Polestar follows most Nasdaq rules but utilizes certain governance exemptions - Polestar is a **foreign private issuer and a controlled company**, exempting it from certain Nasdaq governance rules[410](index=410&type=chunk)[309](index=309&type=chunk) - The company voluntarily complies with most Nasdaq rules but **does not require its compensation and nominating committees to be composed entirely of independent directors**[410](index=410&type=chunk) [Cybersecurity](index=140&type=section&id=ITEM%2016K.%20CYBERSECURITY) The company maintains a cybersecurity program with board oversight and has experienced no material incidents in the last fiscal year - Polestar's cybersecurity risk management is integrated into its enterprise risk program, with **oversight from the Audit Committee**[413](index=413&type=chunk)[414](index=414&type=chunk) - A dedicated Information Security Team, led by a CISO, and a **third-party 24/7 Security Operations Center (SOC)** are in place to manage threats[413](index=413&type=chunk)[415](index=415&type=chunk) - **No material cybersecurity incidents** were experienced during the last fiscal year[413](index=413&type=chunk) PART III [Financial Statements](index=140&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the audited consolidated financial statements, which include an adverse opinion on internal controls and a going concern warning - The auditor's report expresses an unqualified opinion on the financial statements but an **adverse opinion on internal control over financial reporting**[440](index=440&type=chunk) - The auditor's report notes that the need for additional financing raises **substantial doubt about the company's ability to continue as a going concern**[441](index=441&type=chunk)[468](index=468&type=chunk) - The financial statements for 2022 and 2021 have been **restated to correct immaterial errors** primarily related to inventory and expense accounting[182](index=182&type=chunk)[473](index=473&type=chunk) [Exhibits](index=141&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including material contracts and corporate documents

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)