Half Year 2024 Polestar Automotive Holding UK PLC Earnings Call

Yeah.

Good day, and thank you for standing by.

Speaker Change: Welcome to the pulse talk Q2, 'twenty 'twenty four results at this time all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation there'll be a question and answer session to ask a question Junior session you will need to press star one one on your telephone you will then hear an automated message advising you'll have just raised to withdraw your question. Please press star one one again.

Speaker Change: Please be advised that today's conference is being recorded I would now.

Speaker Change: Now I'd like to hand, the conference over to your first speaker today Liana Flint. Please go ahead.

Liana Flint: Thank you operator, Hello, everyone, but I honestly havent Pollstar Investor relations. Thank.

Speaker Change: Thank you for joining our results call today, covering the second quarter of 2024.

Speaker Change: I'm joined by Pat on Scott, Our CFO, who will give the financials and business update we will then open for unlisted retail investor questions.

Speaker Change: Before we start I will cover some housekeeping points as usual I would like to remind participants that many 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 post us actual results to differ materially from what has been communicated.

Speaker Change: These forward looking statements include but are not limited to statements regarding the future financial performance of the company production and delivery volumes financial and operating results near term outlook medium term targets fundraising and funding requirements macroeconomic and industry trends company initiatives.

Speaker Change: All the future events.

Speaker Change: Forward looking statements made today are effective only as of today and post undertakes no obligation to update any of its forward looking statements.

Speaker Change: 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.

Speaker Change: In addition management might take references to non-GAAP financial measures during the cold.

Speaker Change: And why we use non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measure can be found in the appendix of the press release and in the form 6K published today, we do.

Speaker Change: I would like to turn the call over to Pat. Please go ahead.

Pat: Thanks, John.

Pat: Once again I would like to welcome you all to this earnings call.

Pat: We meet again seven weeks after our Q1 release and hopefully you are.

Pat: <unk> had some restaurant vacation weeks in the meantime.

Speaker Change: As you know yesterday, we announced that we have the new incoming CEO, who will join us for future earnings call.

Speaker Change: Before I go into and cover the financials I would definitely like to take the opportunity to public yet personally.

Speaker Change: Two months for his immense contribution in shaping pollstar into the dealers.

Speaker Change: And forward thinking company it is today.

Speaker Change: <unk> is and will remain an iconic lead gen that pollstar.

Speaker Change: Have you seen the best for the future.

Speaker Change: Also I want to welcome Mike Schiller as incoming poached SCO. He brings over 25 years of experience in automotive industry particular in scaling businesses and you will have the opportunity to meet him in upcoming of course later on.

Speaker Change: So now let me turn to the financials.

Speaker Change: And to give an update on the Q2 results both in relation to Q1 as it is important to checkout progress through 2024 and on year over year comparisons for consistency.

Speaker Change: And talking of progress of course, I'm very pleased to say that we recently filed our audited results for 2023 on form 20-F, and we are now back on track with our more normalized reporting calendar.

Operator: Day, and thank you for standing by.

Operator: Welcome to the Polestar Q2 2024 results. At this time, all participants are not listening only mode.

Speaker Change: And by that we have cleared the reporting deficiency, we have had with NASDAQ.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during your session, you will need to press star one, one on your telephone. You will then hear an automated message advising your hand is raised. To destroy your question, please press star one, one again.

Speaker Change: In the coming weeks, we aim to use.

Speaker Change: All documents the management discussion and analysis and the Ias 34 report.

Speaker Change: With that let me start with the key movements.

Operator: Please advise that today's conference has been recorded.

Speaker Change: Q2 versus Q1 of 'twenty 'twenty four.

Bojana Flint: I would now like to hand the conference over to your first speaker today, Bojana Flint. Please go ahead. Thank you, operator. Hello, everyone. Bojana Flint here from Polestar Investor Relations. Thank you for joining our results call today, covering the second quarter of 2024.

We saw global vehicle say, so 13150 costs up more than 80%.

Speaker Change: Revenue was up close to 70% to 575 million and gross yourself with a small negative at $4 million versus Q1.

Speaker Change: The improvement in gross sales was driven by pollster to volume growth as well as initial deliveries of quarter, three and some normalization of revenue recognition at that with China JV.

Bojana Flint: I'm joined by Per Ansgar, RCAFO, who will give the financials and business updates. We will then open for analyst and retail investor questions. But before we start, I will cover some housekeeping points as usual. I would like to remind participants that many of our comments today will be considered forward-looking statements on the US Federal Security's laws and a subject to numerous risks and uncertainties. They may cause poll staff's actual results to differ materially from what has been communicated.

Speaker Change: Our underlying gross profit was still impacted by how you discount on poster too in a very competitive market and before we wrap up four 3% for deliveries.

Bojana Flint: These forward-looking statements include but are not limited to statements regarding the future financial performance of the company, production and delivery volumes, financial and operating results, near-term outlook and medium-term targets, fundraising and funding requirements, macroeconomic and industry trends, company initiatives and other future events. Forward-looking statements made today are effective only as of today and post-owned-to-take snobligation to update any of its forward-looking statements. For discussions, some of the factors that could cause our actual results to differ, please review the risk factors contained in our SEC filings. In addition, management might take references to non-gap financial measures during the call.

Speaker Change: We are managing selling general and administrative costs tightly and seeing benefit of our cost measures that we introduced in mid 2023, yet early 'twenty 'twenty four.

Speaker Change: Compared to more than 80% volume growth the SG&A in the quarter was up 6%.

Good result, which also board the extensive advertising activities proposed III and poster for global launches.

Speaker Change: Overall operating loss increased to 18 million to $242 million.

Speaker Change: Moving on to second quarter, 'twenty to 'twenty four versus second quarter 2023.

Speaker Change: I would like to flag the key movements.

Speaker Change: Revenue decreased 180 million or 70% due to lower global volumes and how your discounts.

Speaker Change: Gross yourself was similarly around breakeven is the impact of lower global volumes and higher discounts was offset by two factors.

Bojana Flint: A discussion of why we use non-gap financial measures and a reconciliation to the most directly comparable gap measure can be found in the appendix of the press release and in the form 6K published today.

Speaker Change: Which was an impairment release and some normalization of the revenue recognition related to the sales of cars to the China JV.

Per Ansgar: With that, I would like to turn the call over to Per. Please go ahead. Thanks, Pudjana.

Speaker Change: SG&A expenses were down $33 million or 13% as cost management actions.

Speaker Change: Research and development increased $36 million or around 75%, mainly due to post to IP amortization now being capitalized into inventory and therefore being part of our cost of goods sold.

Per Ansgar: Once again, I would like to welcome you all to this earnings call. We meet again seven weeks after our Q1 release and hopefully you have had some restful vacation weeks in the meantime. As you know, yesterday we announced that we have a new incoming CEO who will join us for future earnings call. But before I go into and cover the financial, I would definitely like to take the opportunity to publicly and personally thank Tumas for his immense contribution in shaping Polestar into the innovative and forward-thinking companies today. Tumas is and will remain an iconic legend at Polestar.

Speaker Change: Other operating income decreased $32 million, primarily due to foreign exchange effects.

Speaker Change: Operating loss decreased 32 million to $242 million.

Speaker Change: Moving onto cash flow highlights at the end of the period, we reported $669 million of cash and cash equivalents on the balance sheet as we continue to manage cash very prudently.

Speaker Change: In mid August we also secured up to 300 million of new external Monday.

Per Ansgar: We wish him the best for the future.

Per Ansgar: Also, I want to welcome Michael Lorscheller as incoming Polestar CEO. He brings over 25 years of experience in automotive industry, particularly in scaling businesses, and you will have the opportunity to meet him in upcoming calls later on.

Speaker Change: Operating cash outflow of 166 million since December including a positive inflow in the second quarter was less than the operating loss as management excess drove improved working capital.

Speaker Change: S guidance in our Q1 results, we expected to see lower working capital relative to sales and we have in this quarter really some 300 million most inventory and this trend will continue.

Per Ansgar: So now, let me turn to the financials. I plan to give an update on the Q2 results both in relation to Q1 as it is important to track our progress through 2024 and on year-over-year comparisons for consistency, and talking of progress. Of course, I'm very pleased to say that we recently filed our audited results for 2023 on form 20F and we are now back on track with our more normalized reporting calendar. And by that we have cleared the reporting deficiency we have had with NASDAQ. In the coming weeks, we aim to publish the usual document, the management discussion and analysis, and the IAS 34 report.

Speaker Change: It is fair to say that we ended 2023 with inventory higher than what we wanted or anticipated, but we took action that we have seen improvements in 2024, and especially in the second quarter.

Speaker Change: Investing cash outflow of $354 million was in line with plans and we direct our investments towards posted three four and five.

Speaker Change: Financing cash inflow was a net increase of $441 million with proceeds from 950 million club loan facility fully utilized.

Per Ansgar: With that, let me start with the key movements, Q2 versus Q1 of 2024. We saw global vehicles say it was 13,150 cars up more than 80%. Revenue was up close to 70% to 575 million, and growth result was a small negative at 4 million versus Q1. The improvement in growth was driven by Polestar 2 volume growth as well as initial deliveries of Polestar 3 and some normalization of revenue recognition at our China JV.

Speaker Change: However, we also made some repayments of loans and trade financing facilities, which are now largely undrawn and ready to deploy as we scale up volumes.

Speaker Change: Let me finish with the outlook, where the picture remains for stronger volumes in the second half and particularly going into the fourth quarter.

Speaker Change: Sales momentum seen in the second part just had a positive impact on the inventory levels and cash flow and we will continue to work hard on this like I said on the last call I am still the freak I like working with the cash flow I think this is very fun and obviously, it's very important.

Per Ansgar: Our underlying growth profit was still impacted by how you discount on Polestar 2 in a very competitive market and before we ramp up Polestar 3 and 4 deliveries. We are managing selling generally an administrative cut tightly and seeing benefit of our cost measures that we introduced in mid-2023 and early-2024. Compared to more than 80% volume growth, the SDNA in the quarter was up just 6%. A good result which also bought extensive advertising activities for Polestar 3 and Polestar 4 global launches.

We believe that there are lot of things that can be done on this front.

Speaker Change: That's not really the finances and moving into the recent business developments.

Speaker Change: We saw a significant uptick in deliveries in the second quarter compared to the first quarter.

Speaker Change: Sales team has really accelerated that effort to integrate well with our retail partners to ensure we have a strong platform to build upon in the second half of the year.

Speaker Change: Following the global media test us workforce of three important for the organization is now gearing up for regional media activities.

Speaker Change: And we are seeing growing demand for test drives slots and adding new capacity all the time.

Per Ansgar: Overall 2020-24 was the second quarter 2023. I would like to flag the key movements. Revenue decreased 118 million or 70% due to lower global volumes and higher discounts. Growth result was similarly around breakeven as the impact of lower global volumes and higher discounts was offset by two factors which was an impairment release and some normalization of the revenue recognition related to the sales of cost of the China JV. SDNA expenses were down 33 million or 13% with cost management actions.

Speaker Change: Paul stuff for started deliveries in Europe, just a few weeks ago.

<unk> group is already showing us how important it will be in our model lineup with its design power and stands attracting a wide customer base.

Speaker Change: We are continuing to develop our marketing effort with exciting poster for campaigns.

Speaker Change: Most of you who have seen the poll Walter Oman, Duplantis undersea Masada class from two of our most decorated Olympian and global Superstars are now driving a poster for <unk> brand ambassadors, we are very proud of that.

Speaker Change: One of the most important recent milestones of a poster at the start of production in South Carolina Port III.

Per Ansgar: Research and development decreased 36 million or around 75% mainly due to Polestar 2. IP amortization now being capitalized in inventory and therefore being part of our cost of goods sold. Other operating income decreased 32 million primarily due to foreign exchange effects. Operating lost decreased 32 million to 242 million.

Speaker Change: This makes posted three the first poster manufactured on two continents.

Speaker Change: Supports our commercial ambition in the U S where we are.

Speaker Change: <unk> always known how important it is to have a large luxury SUV that is built locally.

Producing costs in South Carolina, Diversifies, our manufacturing footprint and strengthens our competitive as a whole as we can export processed three to Europe and benefit from a more balanced trade in and out of U S.

Per Ansgar: Moving on to cash flow highlights, at the end of the period reported 669 million of cash and cash equivalent on the balance sheet as we continue to manage cash very brilliantly. In mid-August we also secured up to 300 million of new external money. Operating cash outflow of 166 million since December including a positive inflow in second quarter was less than the operating loss as management access drove improved booking capital. As guided in our Q1 results, we expected to see lower working capital relative to sales and we have in this quarter released some 300 million most inventory and this trend will continue.

Speaker Change: The first South Carolina produced cars are being handed over to customers in the next few weeks.

Speaker Change: As we grow RMR the lineup and look to expand our geographic footprint, we are putting significant effort into maximizing the value and efficiency of our <unk> distribution footprint.

Speaker Change: We have now several European markets operating under the non genuine agencies set up with more to come in new part is being brought on board. This enables us to engage in in all of our space investors increased conversion lasdun method to sell more cars in a more efficient way.

Per Ansgar: It is fair to say that we ended 2023 with inventory higher than what we wanted or anticipated but we took action and we have seen improvements in 2024 and especially in the second quarter. Investing cash outflow was $3.54 million was in line with plans and we direct our investments towards POSA 3, 4 and 5. Financing cash inflow was a net increase of $441 million, we put seeds from $950 million cloud loan facility fully utilized. However, we also made some repayments of add the loans and trade financing facilities, which are now largely undrone and ready to deploy as we scale up volumes.

Speaker Change: To wrap.

Speaker Change: This up we have created a strong momentum.

Speaker Change: In sales with more than 80% improvement in the second quarter, we have engaged our sales force and they are now really gearing up for the.

Speaker Change: Later part of this year operationally with three cost in production across two continents, and financially with 30% higher inventory turnover driving cost and working capital improvements.

Speaker Change: And with this we are confident of a stronger second half, particularly from the fourth quarter sales.

Speaker Change: Two P M in Suvs build.

Speaker Change: And thank you for listening and by that I hand over to the operator.

Per Ansgar: Let me finish with the outlook where the picture remains for stronger volumes in the second half and particularly going into the fourth quarter. Sales momentum seen in the second quarter has had a positive impact on inventory levels and cash flow and we will continue to work hard on this. Like I said on the last call, I am a bit of a freak, I like working with cash flow. I think this is very fun and obviously it's very important. I firmly believe that a lot of things that can be done on this front.

Thank you.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone you will then handle whats mated message advancing Johan database to withdraw your question. Please press star one again.

Speaker Change: We will now take our first question.

Speaker Change: Goodbye.

Speaker Change: And the first question comes from the line of Tobias <unk> from Redburn Atlantic. Please go ahead. Your line is now Nathan.

Tobias: Hi, good afternoon parent beyond thanks for taking my questions and good traffic again.

Per Ansgar: Let's now leave the financials and move into the recent business developments. We saw a significant uptick in deliveries in the second quarter compared to the first quarter. Our sales team have really accelerated their effort and work well with our retail partners to ensure we have a strong platform to build up on in the second half of the year. Following the global media test starts with Pulsar 3 and Pulsar 4, the organization is now getting up for regional media activities and we are seeing growing demand for test drive slots and adding new capacity all the time.

Tobias <unk>: I have three questions. Please.

Speaker Change: As usual I'll ask them separately.

Are you able to provide some more detail on the sequential improvement in Cogs per external unit.

Speaker Change: Identify a 14% reduction which is quite notable.

Speaker Change: Thank you.

Speaker Change: To be us.

Speaker Change: Obviously, we are working hard on our cost reductions and they are.

Speaker Change: Several parts of that one.

Speaker Change: Obviously most of the costs, we are selling right now it is polestar. Two you would also then probably a little bit of a mix shift into that one year of what we see a gradually ease.

Per Ansgar: Pulsar 4 started deliveries in Europe just a few weeks ago. The SUV coupe is already showing us how important it will be in our model lineup with its design, power and stands attracting a wide customer base. We are continuing to develop our marketing efforts with the exciting Pulsar 4 campaigns. Both of you who have seen the poll water are among the plantings and the same as Stada Schaeuström. Two of our most decorated Olympians and global superstars are now driving a Pulsar 4 as our brand ambassadors. We are very proud of that.

Speaker Change: Improvements on the prices for <unk>.

Speaker Change: Raw material into the battery prices.

Speaker Change: A constant reduction of the cost for batteries, which is very helpful. We're also working very hard together with especially board who has developed the poster two and also AG Lee who is supporting us in negotiations on the commercial side. So.

We are expecting to see cost reductions even more going forward here.

Speaker Change: Okay, sorry, okay.

Per Ansgar: One of the most important reason milestone for Pulsar was the start of production in South Carolina of Pulsar 3. This makes Pulsar 3 the first Pulsar manufacturing onto continents. If the Pulsar commercial ambition in the US where we have always known how important it is to have a large luxury SUV that is built locally. Producing cars in touch Carolina diversifies our manufacturing footprint and strengthens our competitiveness as a whole as we can export Pulsar 3 to Europe and benefit from a more balanced trade in and out of the US. The first South Carolina reduced cars are being handed over to customers in the next few weeks.

Speaker Change: Okay understood.

Speaker Change: Perhaps maybe I can ask whether there was any sort of patents or any any releases.

Speaker Change: Exceptional in the second quarter.

Speaker Change: Versus the first quarter, yes, no it should not be.

Speaker Change: To my knowledge.

We are 100% sure.

Speaker Change: Okay great.

Speaker Change: Secondly, I observe a disconnect between operating income and free cash flow in the first quarter versus the second quarter. I was wondering if you can help me to understand that noncash operating adjustments and that the other parts of working capital in the second quarter.

Speaker Change: Is it just inventory that is responsible for the free cash improvement and Relatedly, what do you consider a normalized level of working capital Pollstar.

Per Ansgar: As we grow our model lineup and look to expand our geographic footprint, we are putting significant efforts into maximizing the value and efficiency of our existing distribution footprint. We have now several European markets operating under the non-genuine agencies set up with more to come and new partners being brought on board. This enables us to engage and involve our space investors in increased conversion, and ultimately to sell more cars in a more efficient way.

Yes, what we've done and as I said, we worked very hard with our cash flow and working capital we have reduced our inventory significantly here, especially in the second quarter and we will continue to work very hard with that one so the main reason for our good operating cash flow is good.

Speaker Change: <unk> of our inventory, especially in the second quarter $300 million around $300 million ish.

Per Ansgar: To wrap this up, we have created a strong momentum. In sales with more than 80% improvement in the second quarter, we have engaged our sales force and they are now really gearing up for the late part of this year. Operationally, with three cars in production across two continents and financially, we 30% higher inventory to know where driving cash and working capital improvements. And with this, we are confident of a stronger second half, particularly from the fourth quarter sales of the two premium SUVs build.

Speaker Change: Okay, Great and then my last question is relating to the pulsar III and pulse thoughtful.

Speaker Change: Would you describe both of those models is being sold out for 2024 in Europe and the U S as of today.

Speaker Change: Hold out sorry, sorry, please repeat that question I didn't fall off all of that one.

Speaker Change: Would you describe pulse top three and four is being sold out for 2024 in Europe and the U S. Well, if we start with Paul stuff for.

Per Ansgar: And thank you for listening and by that I hand over to the operator. Thank you.

Speaker Change: We will basically north launched the pollster four until very late this year so that question.

Operator: As a reminder to ask a question, you will need to press star one one on your telephone. You will then hear an automated message advancing your hand is raised. To enjoy your question, please press star one one again.

Speaker Change: We have not really started to deliver that.

Speaker Change: Yet we have not really started to take orders in on <unk> III.

We have.

Speaker Change: Large order book, both in Europe, and U S. But we are expecting that to grow more during the balance of the year as we are now starting to ramp up the test.

Operator: We will now take our first question. Please stand by.

Tobias Beith: And the first question comes from the line of the buyer's speech from Redburn Atlantic. Please answer my question and good to chat again. I have three questions, please. And as usual, I'll ask them separately. Are you able to provide some more detail on the sequential improvement in COG's per external unit? I identify a 14% reduction, which is quite notable. Thank you, Tobias. Well, obviously, we are working hard on our cost reductions.

Speaker Change: Our perspective, the test drives are extremely important to get the traction here. So we are working very hard with test drives and demo costs and yes, there is a little bit of anecdotal.

Speaker Change: Anecdotally I asked it to be.

Speaker Change: Speaking with some of our controllers in our European and European markets and one of them said that the poster for very appreciated when people get into the car and drive it but of course, there's a little bit of question Mark.

Speaker Change: Buying a car without really a window. So a lot of people wants to dry drive and test out of the cars.

Speaker Change: So from that perspective, yes, we have order books, but we're expecting more orders, especially now when we start to drive up the test drives.

Tobias Beith: And there are several parts of that one. And obviously, most of the costs we're selling right now, it is Polestar 2. So you would also then probably a little bit of a mix shift into that one here. But what we see gradually is improvements on the prices for raw material going into the battery prices. So you see a constant reduction of the cost for batteries, which is very helpful. We're also working very hard together with especially Volvo, who has developed the Polestar 2 and also with Gili, who is supporting us in negotiations on the commercial side.

Tobias <unk>: Tobias maybe if I can just wrap up on what Pat said in terms of the point about post our fall deliveries a poster for in the U S will never scheduled for very kind of late in 2024, we have definitely started deliveries across many European markets and that's really ramping up but it's hard to say that post a four in the year.

Speaker Change: <unk> is sold out because we never really planned to deliver eight until much later in the year in the U S.

Speaker Change: Alright, great helpful. As always thank you.

Speaker Change: Thank you for your questions.

Leland: Thank you Leland.

Tobias Beith: So we are expecting to see cost reductions even more going forward here. Okay, sorry, I'll understand. But perhaps maybe I can ask whether there was any sort of impairment or any releases that were exceptional in the second quarter? That's the third quarter. Yeah, no, it should not be to my knowledge, like that we have 100% sure. Okay, great. Secondly, I observe a disconnect between operating income and free cash flow in the first quarter versus the second quarter.

Speaker Change: Now take our next question please standby.

Speaker Change: The next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is now open.

Andres Sheppard: Hi, good morning, everyone. Thanks for taking our questions.

Andres Sheppard: Wanted to maybe start.

Andres Sheppard: With deliveries for the second half of this year, so roughly you've done about.

2500 deliveries so far year to date.

Speaker Change: Curious if you can give us a little color as to how we should think about the second half of this year in terms of deliveries and maybe also in terms of.

Tobias Beith: I'm wondering if you can help me to understand the non-cash operating adjust, and the other parts of working capital are the second quarter. Is it just inventory that is responsible for the free cash improvement? And relatedly, what do you consider a normalized level of working capital for Polestar? Yeah, what we've done. And as I said, we worked very hard with our cash flow and working capital. We have reduced our inventory significantly here, especially in the second quarter.

Speaker Change: The delivery mix between the polestar three and the polestar two obviously the post affordable house, probably the smallest breakdown, but just any color on how we should think about deliveries for the second half that delivery mix and what the impact will be on gross margins. Thank you.

Speaker Change: Thanks for the question.

Speaker Change: Obviously as we've said here, we will see volume growth gradually through the year. So you should expect third quarter to be better than before and then you should expect fourth quarter to be even higher up and especially you will see as we guided in our outlook that fourth quarter will be a strong from a volume perspective.

Tobias Beith: And we would continue to work very hard with that one. So the main reason for our good operating cash flow is a good reduction of our inventory, especially in the second quarter, around 300 million, around 300 millionish. Okay, great. And then my last question is relating to the Polestar 3 and Polestar 4. Would you describe both of those models as being sold out for 2024 in Europe and the US as of today?

You're right the polestar two.

Speaker Change: <unk> always said, we'll take a smaller portion of our sales going forward that car has been fantastic for us been a year.

Tobias Beith: Sold out. Sorry, sorry, please repeat that because I didn't follow follow that one. Would you describe Polestar 3 and 4 as being sold out for 2024 in Europe and the US? Well, if we start with Polestar 4, we will basically not launch the Polestar 4 until very late this year. So that question, we are not really started to deliver that car yet. So we are not really starting to take orders in on Polestar 3.

Speaker Change: Now we will need to put our focus on this poster and poster for so in the third quarter posted three will be a big vehicle in terms of sales.

Speaker Change: Hello.

Speaker Change: <unk> delivered both in U S and in Europe in the fourth quarter, you should expect the poster for to take a little bit higher lead in that one <unk> also start to deliver and use from that perspective.

Speaker Change: And from a gross margin perspective, we have said that our ambition is to have the double digit gross margin by the end of the year.

Speaker Change: Got it thanks, that's super helpful.

Speaker Change: Maybe just as a quick follow up.

Speaker Change: Was wondering if you can just give US a reminder of where you stand on your.

Tobias Beith: We have a large order book, both in Europe and US, but we are expecting that to grow more during the balance of the year as we are now starting to ramp up the test drive from our perspective, the test drives are extremely important to get the traction here. So we are working very hard with test drives and the Democrats. And yes, that's a little bit of an act of an act of delay after the meeting with some of our controllers in our European, European market.

Speaker Change: Capital need.

Speaker Change: There was another $300 million in external funding raised recently, so just curious.

Speaker Change: What that means for your.

Speaker Change: Upcoming capital needs. Thank you.

Speaker Change: Thanks for that question, if I start with our cash flow and appropriate portrayed must have not as a cash flow free care.

Speaker Change: But we worked hard with our test, we're making sure that we work with our working capital. So we have had and as Youll see on our first half of this year, our cash burn is significantly lower than the same period last year.

Tobias Beith: And one of them said it, the Polestar 4 very appreciated when people get into the car and drive it, but of course there is a little bit of question mark buying a car without a real window for a lot of people wants to drive drive and test drive the cars. So from that perspective, yes, we have order books, but we are expecting more orders, especially now when we start to drive up the test drives.

Speaker Change: A lot of good improvements there.

Speaker Change: We went out last year by the end of last year, saying that we had the need for $1 3 billion, we have secured $950 million on the club loan which was early.

Speaker Change: This year in the second quarter.

Tobias Beith: And Tobias, maybe if I can just wrap up on what Pair said in terms of the point about Polestar 4, the deliveries of Polestar 4 in the US were never scheduled for very kind of late in 2024. We have definitely started deliveries across many European markets and that's really ramping up, but it's hard to say that Polestar 4 in the US is sold out because we never really plan to deliver it until much later in the year in the US. Alright, great, helpful as always. Thank you. Thank you for your questions. Thank you. We will now take our next question.

Speaker Change: We also then said that we are looking for more equity. We also now have announced that we haven't been able to secure more depths financing around 300 medium, which is not fully drawn down yet here and so from that perspective, you could maybe say that we are up to that $1 3 billion and we are then also worked a lot with our working capital.

Operator: Please stand by.

Speaker Change: On top of that one as I also mentioned in my lead in speech here, we have our trade financing facilities, which is our working capital and that is largely on drawn for time being here. So let me now start to ramp up our production.

Speaker Change: In North America, and continue with the production in China, we have a lot of good working capital credit lines. So I don't see an immediate need from those perspective here, but obviously as we always said.

Andres Sheppard: The next question comes from the line of Andrews Shepherd from Kansas, if it's Gerald, please go ahead. Your line is not open.

Andres Sheppard: Hi, good morning, everyone. Thanks for taking our questions. I wanted to maybe start with deliveries for the second half of this year, so roughly you've done about 20,500 deliveries so far a year to date. Curious if you can give us a little color as to how we should think about the second half of this year in terms of deliveries, and maybe also in terms of the delivery mix between the Polestar 3 and the Polestar 2 obviously the Polestar 4 will have probably the smallest breakdown, but just any color on how we should think about deliveries for the second half that delivery mix and what the impact will be on cross margins.

Speaker Change: We are looking forward to more equity injections in the company.

Speaker Change: Wonderful Super Thank you.

Speaker Change: Paul and thanks for taking our questions I'll pass add thanks, thanks very much.

Speaker Change: Thank you.

Speaker Change: A reminder to ask a question you will need to press star one on your telephone or might be a name to be announced this year. Your question. Please press star one again.

Speaker Change: We will now take our next question please standby.

Speaker Change: And the next question comes from the line of Dan <unk> from Barclays. Please go ahead. Your line is now open.

Speaker Change: Hi, Trevor young on for Dan today.

Trevor Young: I had a couple questions here, if we could just go through first I wanted to drill down a little bit more.

Andres Sheppard: Thank you. Now thanks for the question. Obviously as we said here we will see volume growth gradually through the year so you should expect third quarter to be better than before and then you should expect fourth quarter to be even higher up and especially we'll see as we are guided in our outlook that fourth quarter will be strong from a volume perspective and you're right the Polestar 2 as we all always said we'll take a smaller portion of our sales going forward that has been fantastic for us many years and now we will need to put our focus on the Polestar 3 and Polestar 4.

Trevor Young: Tobias.

I was asking about this but I was just curious if you could perhaps quantify the benefit you called out gross profit related to the impairment and the normalization of revenue recognition on sales of vehicles to the China JV.

Jim: And Jim just as.

Speaker Change: An additional piece to that if you could just give a sense of.

Speaker Change: Any additional opportunity on polestar, two gross margin beyond batteries on that or if that is the main driver from here.

Speaker Change: Paul.

Andres Sheppard: So in the third quarter, Polestar 3 will be a big vehicle in terms of sales as we start to deliver both in U.S, and in Europe. In the fourth quarter you should expect the Polestar 4 to take a little bit higher lead in that one as we also start to deliver in U.S, from that perspective. And from a growth margin perspective, we have said that our ambition is to have the double digital margin by the end of the year. God, thanks very much.

Speaker Change: The main driver behind the gross margin in the second quarter. We have a couple of good news. Obviously, we did an impairment of inventory by end of 2023. So we had some good news on that one in the first quarter and also some good news in the.

Speaker Change: Second quarter.

Speaker Change: And we also had as we talked about we have a little bit of good news from basically moving around the revenue between the quarters between first quarter and second quarter. Then we also have bad news from a gross margin perspective, we did a little bit more of impairment couple of million dollars on some of the posts to us in specific markets.

Andres Sheppard: And maybe just a quick follow up was wondering if you can just give us a reminder of where you stand on your capital needs. Looks like there was another 300 million in external funding raised recently so just curious what that means that for your upcoming capital needs. Thank you. Thanks for that question. If I start with our cash flow and I probably portrayed myself now as a cash flow free care as I said that but we worked hard with our cash flow making sure that we work with our working capital.

Speaker Change: An enormous amount of money, but we have also moved as a part of our impairment assessment in our discussion on them or to say since we have more amortization of poster up in cost of goods sold.

Speaker Change: Were previously down in.

In R&D do you see that R&D.

And part of that has gone up into cost of goods sold so thats all kind of like the main drivers for that one here talking about gross margin.

Speaker Change: The polestar two Hess.

Andres Sheppard: So we have had an as you see on our first half of this year our cash burn is significantly lower than the same period last year to done a lot of good improvements there. We went out last year by the end of last year saying that we had the need for 1.3 billion. We have secure 950 million on the club loan which was early this year in the second quarter. We also then said that we are looking for more equity.

As I said, we have sold a lot of posted to us in the second quarter. Our plan as we talked about here from some of the other question is to have more focus now on posted a 3% posted for in our overall gross margin will improve with the with the deliveries of poster and poster forward, especially into the fourth quarter.

Andres Sheppard: We also now announce that we have been able to secure more depth financing around 300 million which is not fully drawn down yet here. So from that perspective, you could maybe say that we are up to that 1.3 billion and we have then also worked a lot with our working capital on top of that one as I also mentioned in my leading speech here. We have our trade financing facilities which is our working capital and that is largely un drawn for time being here.

Speaker Change: Understood.

Speaker Change: And then I guess just following up on specifically on the Pollstar for I know youre launching it in Europe and the U S. But I was just curious if you could give a little color on how close are for sales are trending in China, and then give a few examples of how the.

Speaker Change: Working with Geely on this platform has been a benefit versus the polestar two.

Speaker Change: Well, if I start with the benefit of working with Paul Julian. This one I think there are quite a lot of the benefit first of all it is produced.

Andres Sheppard: So I mean, I'll start to ramp up our production in North America and continue with production in China. We have a lot of good working capital credit lines, so I don't see an immediate need from those perspectives here. But obviously, as we always said, we are looking forward to more equity in the actions in the company. Thank you. Wonderful, super, super helpful, and thanks for taking our questions.

Speaker Change: In China, where we have been able to get there we needed to have a quite good cost base, having said that we're still working through the cost based on polls for.

Speaker Change: And you know the Chinese market is very competitive to be able to sell EV cars in China with decent margins you need to work with the costs. So.

Speaker Change: GL is doing that one and of course, it benefits us and we have.

Andres Sheppard: I'll pass. Thanks, thanks very much. Thank you.

Speaker Change: Aligned a lot of activities around the cost reductions on poster for so that is one benefit we have the other benefit is obviously the full R&D development, we are able to assess and use the bathroom to work so.

Operator: As a reminder to ask a question, you will need to press star one, one on your telephone and wait for your name to be announced. To destroy your question, please press star one, one again. We will now take on next question.

Daniel Roeska: Please, done by. And the next question comes from the line of Dan Levy from Barclays. Please go ahead.

Speaker Change: We can use software and.

Speaker Change: And kind of like yeah.

Speaker Change: Entertainment systems from European and Western perspective for those costs in Europe, and U S. And we can also use the China similar systems in China football stuff, which is very helpful for us the third very good.

Daniel Roeska: Your line is not open. I trouble young on for Dan today. I had a couple questions here if we could just go through. First, I wanted to drill down a little bit more to, Tobias kind of was asking about this, but I was just curious if you could perhaps quantify the benefit you called out to gross profit related to the impairment at least in the normalization of revenue recognition on sales of vehicles to the China JV.

Speaker Change: Support is that we are now also working with South Korea.

Speaker Change: To make this car.

Speaker Change: <unk> produced in South Korea for U S production and potentially also for other markets going forward and that is also of course supported by the <unk>. We have the teams very close by and so on so the progress on making poster for produced in South Korea in Tucson plant is progressing very well. So we expect that production to start.

Daniel Roeska: In just an additional piece of that, if you could just give a sense of any additional opportunities on Polestar 2 gross margin beyond battery on that. Or if that is the main driver from here. The main driver behind the growth margin in the second quarter, we have a couple of good news. Obviously we did an impairment of inventory by end of 2023. So we had some good news of that one in the first quarter and also some good news in the second quarter from a, and we also had, as we talked about, we have a little bit of good news from basically moving around the revenue between the quarters between first quarter and second quarter.

Speaker Change: Mid next year, which would be very helpful.

Speaker Change: <unk> deliveries from that perspective, then of course as you said how are we doing in China, the car's value very well received the Chinese market.

Speaker Change: Tough.

Many of the Chinese car brands are losing money on this as we have been.

Speaker Change: Making sure that we are balancing volume and margins in a good way our plan and our expectation is that by later this year. We will also start to deliver poster <unk> in China, and then into next year post a five into China and those two costs are significantly more.

Daniel Roeska: Then we also have bad news from a gross margin perspective. We did a little bit more of impairment, a couple of million US dollars on on some of the Polestar tools in specific markets, not not an enormous amount of money, but we have also moved as a part of our impairment assessment and our discussion on limitations. We have more amortization of Polestar 2's up in cost of goods sold, where we're previously down in, in R&Ds, you see that R&D is a significant lower and part of that has gone up into cost of goods sold.

Speaker Change: Especially the post of five premium luxury vehicles.

Speaker Change: We will target the more affluent Chinese customers. So that will continue to build the <unk> brand in China.

Speaker Change: Understood. Thank you if I could just squeeze in one more question here.

Speaker Change: Yeah.

Speaker Change: I appreciate that you saw the strong working capital improvement in <unk> on the inventory drawdown and quantified around $300 million.

Daniel Roeska: So that's all the kind of like the main drivers for that one here, but talking about gross margin. Again, the Polestar 2 has, as I said, we have sold a lot of Polestar tools in the second quarter, our plan as we talked about here from some of the other questions to have more focus now on Polestar 3 and Polestar 4 and our overall gross margin will improve with the deliveries of Polestar 3 and Polestar 4, especially into the fourth quarter.

Speaker Change: Just.

Speaker Change: I understand the focus on this it's obviously very important but how sustainable is this.

Speaker Change: Looking capital strength against the ramp of two new models historically.

Speaker Change: Ramping up of volumes.

Speaker Change: Working capital.

Speaker Change: If you could give us a sense of how youre going to balances in some of the levers you have to pull there.

Speaker Change: A couple of things on that one.

Speaker Change: We are working now very heavily with our.

Speaker Change: Partners. So so it's like what we are really.

Daniel Roeska: Understood. And then I guess just following up on specifically on the Polestar 4, I know you're launching it in Europe and the US, but I was just curious if you could give a little color on how Polestar 4 sales are trending in China and then give a few examples of how working with GLE on this platform has been a benefit versus the Polestar 2. Well, if I start with the benefit of working with Poled with GLE on this one, I think there are quite a lot of benefits.

Speaker Change: <unk> partners from this perspective, I mean, our retail partners, we are changing our sales model.

Speaker Change: In Europe, we are working very closely to our retail partners in U S. Wholesale models for example, and.

Speaker Change: And similar in China. So we are making sure that we can actually speed up.

Speaker Change: The sales process and the delivery process. So for example in Europe, we are taking a mess just to make sure that we can cap the lead time from the time that the car comes into to the ports in Europe until it's delivered in at.

Daniel Roeska: First of all, it is produced in China, where we have been able to gather with GLE to have a quite good cost base having said that we are still working with the cost base on Polestar 4. And you know the Chinese market is very competitive, so to be able to sell EV costs in China with decent margins, you need to work with the cost. He is doing that one and of course it benefits us and we have aligned a lot of activities around the cost reduction on Polestar 4.

Speaker Change: <unk> list and the SaaS model in the SaaS model in Europe is that we own the cars all the way up to hand over to to find those customers. If we can squeeze out quite some time, there, which we are able to do that would help us a lot and in conjunction with that one.

Speaker Change: <unk> production in U S for <unk> III will help us a lot because we will be much closer to.

Speaker Change: To the customers not only in U S. But also to the customers in Europe, because we we will start to produce <unk> in the.

Daniel Roeska: So that is one benefit we have. The other benefit is obviously the full R&D development. We are able to, as I said, use the best from two words. So we can use software and and kind of like entertainment systems from European and Western perspective for those cars. Europe and US and we can also use the China similar systems in China for Polestar 4, which is very helpful for us. The third very good support is that we are now also working with South Korea to make this car being produced in South Korea for US production and potentially also for other markets going forward.

Speaker Change: South Carolina for European production later, this year and we cut out quite many weeks from that perspective, So we will see a lower.

Speaker Change: Working capital as a percentage of revenue compared to history, but of course, if you are selling sneak that significantly more cost that will be.

Speaker Change: <unk> need of working capital, but as I said, we have basically 90% of our trade financing capacity.

Speaker Change: Utilized right now so we have a lot of more potential there.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: A reminder to ask a question you will need to press star one on your telephone only.

Daniel Roeska: And that is also of course supported by Geely. We have their teams very close by and so on. So the progress on making Polestar 4 produced in South Korea into Southland is progressing very well to expect that production to start meet next year, which will be very helpful for our US deliveries from that perspective. Then of course, as you said, how are we doing in China? The cars value are very well received.

Speaker Change: Phoenix to be announced.

We will now take our next question please standby.

Speaker Change: And the next question comes from the line of Danielle Raska from Bernstein Research. Please go ahead. Your line is now.

Danielle Raska: Hey, good morning. Good afternoon. Thanks for taking my questions. Maybe first can we talk a little bit about the tariff situation kind of what have you seen developing and then maybe to help us wrap our minds around the impact of this could you give us kind of a rough sense, how much tariffs have weighed on the gross margins in the past.

Daniel Roeska: The Chinese market is tough. Many of the Chinese car brands are losing money on their sales. We have been making sure that we are balancing volume and margins in a good way. Our plan and our expectation is that by later of this year, we will also start to deliver Polestar 3s in China and then into next year, Polestar 5 into China. And those two cars are significantly more especially the Polestar 5 premium luxury vehicles, which we will target the more affluent Chinese customers that will continue to build the Polestar brand in China.

Danielle Raska: And whether that is whether there is any change expected in the upcoming.

Danielle Raska: Coming quarters.

Danielle Raska: And then relating to that how does that relate to your statements earlier that you.

Danielle Raska: Hope to achieve double digit gross margins by the end of the year.

Danielle Raska: I think the second one.

Speaker Change: As already touched upon but I'd like to bring you back to free cash flow.

Danielle Raska: Yeah.

You have the working capital release, if I strip that out it kind of looks like youre ongoing cash burn.

Is largely unchanged if I look at the past couple of quarters, starting last year.

Daniel Roeska: Understood. Thank you. If I could just squeeze in one more question here. I appreciate that you saw the strong working capital improvement into Q on the inventory drawdown and quantified around 300 million. And I understand the focus on this. It's obviously very important. But how sustainable is this working capital strength against the ramp of two new models? Historically ramping up of volumes is a working capital headless. So I just, you know, if you give a sense of how you're going to balance this and some of the levers you have to pull there.

Speaker Change: We're between 407 million of cash during the quarter, if I add back the $300 million you said on Q2, and we're still at a 400 million cash burn. So how do you think that cash burn kind of changes.

Speaker Change: As you approach the volume scaling.

Speaker Change: Better gross margins in the upcoming quarters are you in a position to kind of give us, let's say a range. When you would expect that underlying cash burn to turn positive.

Speaker Change #100: Thanks for your question.

Speaker Change #101: I wrote them down there so let's see if I can cover all of them.

Daniel Roeska: A couple of things on that one is that we are working now very heavily with our partners. So it's like what we are really, when I say partners from this perspective, I mean our retail partners. We are changing our sales model in Europe. We are working very closely to our retail partners in US where we are wholesale models, for example, and similar in China. So we are making sure that we can actually speed up the sales process and the delivery process of example in Europe.

Speaker Change #102: In total it here first of all on the tariff side, yes to remind everyone again here that we have taken several decisions back in the time, which really are on the track of making sure that this is not a big deal for us going forward Charleston plant being the significant Ron or South Korea.

Speaker Change #102: South Carolina, where we will produce post arteries for U S, Canada for Europe, which we basically takeaway all.

Speaker Change #102: The province with tariffs so far this tariff situation has been 27, 5% in U S and with the announcement that came in.

Daniel Roeska: We are taking our measures to make sure that we can cut the lead time from the time that the car comes into to the port in Europe until it's delivered in at the deal. And the sales model in the sales model in Europe is that we own the cars all the way up to hand over to to final customers. If we can squeeze out quite some time there, which we are able to do that will help us a lot.

Speaker Change #102: Below a months ago, its up to about 102% that has not been implemented yet to my knowledge. It was not implemented like two weeks ago at least here, so still a little bit and when that's going to happen, but that is one of the big themes that will help us avoid entire is the second thing is as I said our plant in South Korea.

Daniel Roeska: And in Conjanks now that one, the production in US for Polestar 3 will help us a lot because we will be much closer to, to the customers, not only in you, but also to the customers in Europe, because we will start to produce Polestar 3s in South Carolina for European production like this here, and we cut out quite many weeks from that perspective. So we will see a lower working capital as a percentage of revenue compared to history, but of course, if you are selling significant the more cars, there will be a larger need of working capital. But as I said, we have basically 90% of our trade financing capacity, not utilized right now. So we have a lot of more potential there.

Speaker Change #103: Together with renewal, where we will produce postal force for Europe, and we are also now in deep discussions cannot plant also be used to supply poster force four for Europe, and then thirdly of course, our cost reduction activities, we have had to speed up significantly from the sponsor.

Speaker Change #103: As I said quite a lot of discussions both with Volvo cars and with Geely on actions to be made here. So we are looking into all of the car lines Costa to bolster for and.

Speaker Change #103: Posted three to really reduce the base cost of the car and there are quite a lot of opportunities. Although the costs are new you could expect that they would have been kind of like cost optimized from the beginning but.

Speaker Change #103: Historically, when you launch a car.

Speaker Change #103: You may have to take some quite a shortcut. So you could build in some costs. There are quite a lot of cost opportunities in some of the posters reinforce a four course here.

Operator: Great, thank you. Thank you. As a reminder to ask a question, you will need to press star 1, 1 on your telephone, and wait for your name to be announced. We will now take our next question. Please stand by.

Speaker Change #103: So that is really kind of like the starting point and as I said the U S tariffs, we will handle the polestar.

Daniel Roeska: And the next question comes from the line of Daniel Roeska from Bernstein Research. Please go ahead, your line is not open. Hey, good morning, Grafenoon. Thanks for taking my questions.

Speaker Change #103: Pollstar III production with the portal for being produced in South Korea, and then you also have like in that system in the U S. We should be able to use for some of our other car lines. So that is.

Daniel Roeska: Maybe first, could we talk a little bit about the terrorist situation, kind of what have you seen developing, and then maybe to help us wrap our minds around the impact of this? Could you give us kind of a rough sense how much terrorists have weighed on across margins in the past, and whether there is any change expected in the upcoming quarters? And then relating to that, how does that relate to your statement earlier that you hope to achieve double digit cross margins by the end of the year?

Speaker Change #103: The problem. If you then go to Europe.

Speaker Change #103: European Union announced.

Speaker Change #103: Terrorists.

Speaker Change #104: Kris normally the terrorists.

Speaker Change #104: China to Europe is 10% they have then.

Speaker Change #105: Basically announced different levers for different different brands. It ends up that the Volvo Polestar would have 19, 3%. If this is.

Speaker Change #106: Going to be implemented the good news is that it has been delayed from July into November at first so if there is a decision in the European Union to implement that it will happen in November of course still a lot of political discussions some of the member countries.

Daniel Roeska: And then I think the second one was already touched on, but I'd like to bring it back to free cash flow. You know, you had to work in capital relief. If I strip that out, it kind of looks like your ongoing cash burn is largely unchanged, right? If I look at the past couple of quarters starting last year, where somewhere between 400 and 700 million of cash burn a quarter, if I add back 300 million, you said on Q2, we're still at a 400 million cash burn.

Speaker Change #107: Europe are definitely not in favor of this one because they see that it would not benefit their industry.

Speaker Change #107: Countries or their market so little bit open from that perspective. The last thing on this one is that we are in constant dialogue with the European Union because there are a couple of different ways to avoid or defer or limit the impact of this one so I was actually earlier today in a meeting with the <unk>.

Daniel Roeska: So how do you think that cash burn kind of changes as you approach the volume scaling and the better cross margins and upcoming quarters? And are you in a position to kind of give us, let's say, a range when you would expect that underlying cash burn to turn positive? Thanks. Oh, thanks for your question. I wrote them down here. So let's see if I can cover all of them in in totality.

Speaker Change #107: And commission going through where we are what impact this would have and if these terrorists would actually support what the European Commission wants to achieve or is would actually be.

Daniel Roeska: First of all, on the terror side, I have to remind everyone again here that we have taken several decisions back in the time, which really are on the track of making sure that this is not a big deal for us going forward. Charleston plant being the significant one of South Carolina plant where we will produce post-atries for US, Canada, for Europe, which we basically take away all the problems with terrorists. So far, the terror situation has been 27.5% in US.

Speaker Change #108: Negative for what they want to see if the European Commission wants to protect European industry to be able to have European industries to develop the technology from a post op perspective, putting tariffs on the cost that we are importing from China.

Speaker Change #108: Completely make it different.

Speaker Change #110: A different way because we are investing a lot of technology in Europe from ourselves together with Volvo cars together with our suppliers. So of course, it would be better for pulse for the European.

Daniel Roeska: And with announcement that came in a couple of months ago, it's up to about 102%. And that has not been implemented yet to my knowledge. It was not implemented like two weeks ago, at least here. So still a little bit to see when that's going to happen, but that is one of the big things that will help us avoid in terror. The second thing is, as I said, our plant in South Korea together with Reno where we will produce post-at-force for Europe.

Speaker Change #108: Industry.

Speaker Change #108: We would have less or no increases of the tariffs. So we are in quite a lot of dialogues with those funds here. So so your question than on our gross margin above 10%. If it will happen. It will happen in November at some point in time here and we are importing quite total cost.

Before that one year and we are also working very hard to limit or at least mitigate some or all of that going forward here, but it will be a lot of hard work together with the European Commission here, So, let's see where we end up that one here then back to your question on your cash burn I think of course as we talked about.

Daniel Roeska: And we are also now in deep discussion. Can that plant also be used to supply post-at-force for Europe? And then thirdly, of course, our cost reduction activities we have had to speed up significantly from this one. So we have had, as I said, quite a lot of discussions both with Volvo cars and with Gili on actions to be made here. So we are looking into all of the car land post-at-force post-at-force and Polestar 3 to really reduce the base cost of the car, and there are quite a lot of opportunities.

Speaker Change #108: With working capital.

Speaker Change #108: It's helped us a lot.

Speaker Change #108: My anticipation is I said is that we will be able to keep the working capital, we're really and not to increase it.

Speaker Change #108: Relative levels that we have had.

Speaker Change #108: So so I see that as a less of a problem of course, the underlying cash burn is driven two things right now it's the gross margin that you see has been basically a breakeven gross margin. The last couple of quarters here, we will going forward have a positive gross margin with a post that reinforced our force.

Daniel Roeska: Although the cars on you, you could expect that they would have been like cost of the mass from the beginning, but historically also when you launch a car, you may have to take some quite short cuts, so you put buildings, some cost, there are quite a lot of cost of opportunities in some of the Polestar 3 and Polestar 4 cars here. So that is really kind of like the starting point. And as I said, the US terrorist we will handle with the Polestar 3 production, with the Polestar 4 being produced in South Korea, and then you also have like a netting system in US, which we will be able to use for some other car lines.

Speaker Change #108: And on top of that one of course, our investing cash flow is.

Speaker Change #108: I would expect this year to be kind of like a peak year and when we are putting all the money into post of reports of four in the last.

Speaker Change #108: R&D expenditure into pollster five so when we go into next year, our investing cash flow will go down as well so combination of keeping.

Daniel Roeska: So that is not the problem. If you then go to Europe, the European Union announced a terrorist increase, normally the terrorist from China to Europe is 10%. They have then basically announced different levels for different brands. It ends up that really Volvo Polestar would have 19.3%. If this is going to be implemented, the good news is that it has been delayed from July into November at first. So if there is a decision in the European Union to implement that, it will happen in November.

Speaker Change #108: Working capital.

Speaker Change #108: As lean as possible getting gross margin up and gradually reducing our investment levels will give us a better cash flow going forward and you will see that gradually coming especially into next year.

Speaker Change #108: Great Super helpful. Thanks Kara.

Speaker Change #111: Thank you.

Speaker Change #112: As a reminder to ask a question you will need to press star one on your telephone and what's your name to be announced to withdraw your question. Please press star one again.

Banana: As there are no further questions on the phone lines I would now like to hand back to banana for any questions from the retail.

Daniel Roeska: Of course, still a lot of political discussions. Some of the member countries in Europe are definitely not in favour. This one, because they say that it would not benefit their industry, not their countries or their markets. So a little bit open from that perspective. The last thing on this one is that we are in constant dialogue with the European Union, because there are a couple of different ways to avoid or defer or limit the impact of this one.

Banana: Thank you Sonya.

Pam: Pam are we going to go through the top three shareholder return shareholder questions that we have received in let's say technology platform. So Avi the amount and then we can answer them.

Avi: The first question as received rates Pollstar recently received the deficiency notice from NASDAQ what measures are leadership, taking to ensure compliance and to reassure shareholders the stocks and not be delisted in the future.

Daniel Roeska: So I was actually earlier today in a meeting with the European Commission going through where we are, what impact this would have, and if this terrorist would actually support what the European Commission wants to achieve or it would actually be negative for what they want to achieve. The European Commission wants to protect European industry to be able to have European industry to develop the technology. From a post-up perspective, putting terrorists on the cars that we are importing from China is completely making the different way because we are investing a lot of technology in Europe from ourselves together with Volvo cars together with our suppliers.

Pam: Okay.

Avi: Two things on that front first of all we had the deficiency on our reporting compliance that one was and I must say I'm very happy to to me.

Avi: Make sure that we had healed at one S refined our full year 2023, 4% in mid August so that Hasnt gone now that is very good.

Avi: Other deficiency is the share price being below one dollar and.

Avi: And.

Avi: We have been trading below $1 for quite some time. The last couple of days, it's been about $1 nine was about $1.

Avi: Also earlier in July so it's moving around there we have up to early next year to heal this deficiency.

Speaker Change #116: Our plan or our ambition is of course really to make sure now that with our increased deliveries and say some posted three inputs for and continue.

Daniel Roeska: So of course, it would be better for Poland and for the European industry if we would have less or no increases of the terrorists. So we are in quite a lot of dialogues with those ones here. So your question then, on our gross margin, about 10%. If it will happen, it will happen in November, at some point in time here, and we are importing quite a lot of cars before that one here, and we are also working very hard to limit or at least mitigate all of that going forward here.

Speaker Change #117: Continued good feedback from customers and you will gradually during the ESC that this starts to happen that the share price should go up below above and all that which is really what we think if you think about it pollstar if European based company.

Speaker Change #117: Good manufacturing and R&D and sales footprint globally, which can like stands out from all others and we have 170000 cars.

Daniel Roeska: But it will be a lot of hard work together with the European Commission here. So let's see what we end up with that one here. Then back to your question on your cash burn. I think, of course, as we talked about working capital, has helped us a lot. My anticipation, as I said, is that we will be able to keep the working capital very lean and not to increase it to the relative levels that we have had.

Speaker Change #117: On the road or close to that one.

Speaker Change #117: Our our company, which I think puts us apart from many of our.

Speaker Change #118: <unk> competitors of course.

Speaker Change #119: That is what we are targeting yes, and maybe just to sort of wrap up on the previous one.

Speaker Change #120: Always said and we are very mindful of that and board and management and monitoring the situation very closely when it comes to the $1 definitely Okay question number two which sort of links back to the previous question as well is very much what our current plans to increase the share of value.

Daniel Roeska: So I see that as the less of a problem. Of course, the underlying cash burn is breathing two things right now. It's the gross margin that you see has been basically breakeven, gross margin, the last couple of quarters here. We will go in forward, have a positive gross margin with a Pulsar 3 and Pulsar 4. And on top of that one, of course, our investing cash flow is, I would expect this year to be kind of like a peak year.

Speaker Change #120: Yes.

Speaker Change #119: Basically said most of that is I think again the.

Speaker Change #121: Business needs to demonstrate improvement and I think we have been doing that gradually through the year.

Speaker Change #121: We'll continue to do that absolutely I mean, we have said in the past involved and we are going to grow in the existing markets youre going to expand into new markets as well and we have fantastic products coming through so lots of exciting developments.

Daniel Roeska: And when we are putting all the money into Pulsar 3, Pulsar 4 and the last R&D expenditure into Pulsar 5, so when we're going to next year, our investing cash flow will go down as well. So combination of keeping a working capital as lean as possible, getting gross margin up and gradually reducing our investment levels will give us a better cash flow going forward. And you will see that gradually coming, especially into next year.

Speaker Change #122: And question three just a little bit more.

Speaker Change #123: Color there how do you plan to expose the brand more sell more cars and keep the stock value going up I think we all want to stock values to go up and.

Speaker Change #124: Couple of things one.

Speaker Change #125: We are a small small brand we don't have unlimited.

Speaker Change #125: Sources to do a lot of advertising campaigns, we are trying to find different ways to do it we have done a lot of media drives we did that here in spring in Spain Global meter dose you are moving that over now to more like local regional media would have to really get good coverage from from journalist we are when we do.

Operator: Great, that was super helpful, thanks Bill. Thank you. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Speaker Change #125: Our marketing campaigns, we are working much more targeted trying to reach the right type of of consumers, who really are interested in.

Bojana Flint: As there are no further questions on the phone lines, I would now like to hand back to Bojana for any questions from the retail. Thank you, Sonja. So, Per, we're going to go through the top three shareholder retail, shareholder questions that we have received on a state technology platform, so I'll read them out and then we can answer them. The first question as received reads, Polestar recently received the deficiency notice from Nasdaq.

Speaker Change #125: First off we are also working a lot with test.

Speaker Change #125: We are very sure about the test drives who will make a difference for post op people needs to come and drive out costs and experienced them.

Speaker Change #126: And on top of that is probably an asset we are expanding our geographic footprints in two ways, one expanding into new markets and markets. I mean, you can trace will be going to France. For example, next year, we will expand as an importer.

Bojana Flint: What measures are leadership taking to ensure compliance and to reassure shareholders that the stocks will not be delisted in the future? Two things on that first of all, we had the deficiency on our reporting compliance. That one was an Amazon very happy to make sure that we have healed that one as we filed our full age 2023, 420F in mid-August, so that has gone now, that is very good. The other deficiency is the share price being below $1, and we have been trading below $1 for quite some time.

Speaker Change #126: Setup.

Eastern Europe in some markets. We are also seeing what we can do in South America for example, and which I think is more important than we are now making some changes to our sales model. We are expanding the existing geographical network in many of the countries in Europe in U S and we.

Bojana Flint: The last couple of days, it's been above $1, also earlier in July, so it's moving around there. We have up to early next year to heal this deficiency. Our plan or our ambition is of course really to make sure now that with our increased deliveries and say some Polestar 3 and Polestar 4 and the continued good feedback from customers and you will gradually during the ESC that this does to happen that the share price should go up below $1, although it is really what we think.

Speaker Change #126: <unk> also changed SaaS model also engaging our investors and retailers in a completely different way and that will be the energy from them and the.

Speaker Change #126: Good costs will expand outside sales gradually this year and continuing into next year.

Speaker Change #126: Great.

Speaker Change #127: That's it okay. We have taken the first top three questions from the retail shareholders. So we can close the call and then I say, thank you very much for listening in here and we look forward to meet you here again quite soon when we are going through our third quarter results here in November.

Speaker Change #127: So well come back and thanks for listening in and thanks for your questions have a good day.

Bojana Flint: If you think about the Polestar, if European based company with a good manufacturing and R&D and sales footprint globally, which can like stands out from all others and we have 170,000 cars on the road or close to that one, so we are a company which I think puts us apart from many of our EV competitors. Of course, that is what we are targeting. Yeah, and maybe just to wrap up on the previous one, we always said and we are very mindful of that and boarding management and monitoring the situation very closely when it comes to the $1. Yeah, definitely.

Speaker Change #128: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change #128: Okay.

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Speaker Change #128: [music].

Bojana Flint: Okay, question number two, which sort of links back to the previous question as well, is very much what are current plans to increase the share value? Yeah, basically said most of this one, I think again, the business needs to demonstrate improvement and I think we have been doing that gradually through the year and we'll continue to do that. Absolutely, and you know, we have said in the past as well that we are going to grow in the existing markets, we're going to spread into new markets as well and we have fantastic products coming through, so a lot of exciting developments.

Speaker Change #128: Yes.

Speaker Change #128: [music].

Bojana Flint: And question three, just a little bit more colour there, how do you plan to expose the brand more, sell more cars and keep the stock value going up? Yeah, I think we all want the stock value to go up and a couple of things one, we are a small brand, we don't have unlimited resources to do a lot of that with us in campaigns, we are trying to find different ways to do it, we have done a lot of media drives, we did that here in spring, in Spain, global media drives, we are moving that over now to more like local regional media drives to really get good coverage from journalists, we are when we do our marketing campaigns, we are working much more targeted, trying to reach the right type of consumers who really are interested in poll stars, we are also working a lot with test drive as we are very sure about the test drives, we'll make a different for poll stars, people need to come drive our cars and experience them.

So.

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Bojana Flint: And on top of that, as Bojana said, we are expanding our geographical footprints in two ways. One, expanding into new markers and markers, I mean new countries. We will go into France, for example, next year. We will expand as an importer, set up, twist in Europe in some markers. We are also seeing what we can do in South America, for example. And which I think is more important when we are now making some changes to our sales model.

Bojana Flint: We are expanding the existing geographical network in many of the countries in Europe, in US. And we are also with the change sales model also engaging our investors and retailers in a completely different way. And that will be the energy from them. And the good cause will expand our sales gradually this year and continuing to next year.

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Speaker Change #128: Hello, everyone, Bryan Hanson Pollstar Investor Relations.

Speaker Change #129: Thank you for joining our results call today, covering the second quarter of 2024.

Speaker Change #130: I'm joined by Scott <unk>, our CFO, who will give the financials and business update we will then open for analyst and retail investor questions.

Speaker Change #131: But before we start I will cover some housekeeping points as usual I would like to remind participants that many of our comments today will be considered forward looking statements on the U S. Federal securities laws and are subject to numerous risks and uncertainties that may cause <unk> actual results to differ materially from what has been communicated.

Speaker Change #131: These forward looking statements include but are not limited to statements regarding the future financial performance of the company production and delivery volumes financial and operating results near term outlook medium term targets fundraising and funding requirements macroeconomic and industry trends company initiatives.

Speaker Change #131: And other future events.

Speaker Change #132: Forward looking statements made today are effective only as of today and postpone undertakes no obligation to update any of its forward looking statements.

Speaker Change #132: 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.

Speaker Change #132: In addition management may take references to non-GAAP financial measures during the call.

Speaker Change #132: Question of why we use non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measure can be found in the appendix of the press release and in the form 6K published today.

Speaker Change #132: I would like to turn the call over to Pat. Please go ahead.

Pat: Thanks, John.

Pat: Again, I would like to welcome you all to this earnings call.

Pat: We meet again seven weeks after our Q1 release and hopefully you have had some restful vacation weeks in the meantime.

Pat: As you know yesterday, we announced that we have a new incoming CEO, who will join us for future earnings call, but before I go into and cover the finances I would definitely like to take the opportunity to publicly and personally thank to mass for his immense contribution in shaping pollstar into the innovative and forward thinking company.

Thomas: It is today.

Thomas: Thomas is and will remain an iconic lead gen that pollstar.

Thomas: We wish him the best for the future.

Mike <unk>: Also I want to welcome Mike <unk> as incoming post as CEO. He brings over 25 years of experience in automotive industry.

Speaker Change #135: <unk> in scaling businesses and you will have the opportunity to meet him in upcoming.

Speaker Change #135: Coming of course later on.

Speaker Change #136: So now let me turn to the financials our plan to give an update on the Q2 results. Both in relation to Q1 as it is important to checkout progress through 2024 and on year over year comparisons for consistency.

Speaker Change #136: And talking of progress of course, I'm very pleased to say that we recently filed our audited results for 2023 on form 20-F, and we are now back on track with our more normalized reporting calendar.

Speaker Change #136: And by that we have cleared the reporting deficiency, we have had with NASDAQ.

Speaker Change #136: In the coming weeks, we aim to publish the usual document the management discussion and analysis and the Ias 34 report.

Speaker Change #137: With that let me start with the key movements Q2 versus Q1 of 2024.

Speaker Change #138: We saw global vehicle sales of 13150 costs up more than 80%.

Speaker Change #138: Revenue was up close to 70% to 575 million and gross yourself with a small negative at $4 million versus Q1.

Bojana Flint: Great. That's it. Okay.

Speaker Change #138: The improvement in gross result was driven by pollster to volume growth as well as in each of delivery as opposed to three in some normalization of revenue recognition at our China JV.

Speaker Change #138: Our underlying gross profit was still impacted by how you discount on post it to in a very competitive market and before we wrap up four 3% and four deliveries.

Speaker Change #138: We are managing selling general and administrative costs tightly and seeing benefit of our cost measures that we introduced in mid 2023, yet early 'twenty to 'twenty four.

Speaker Change #139: Impaired to more than 80% volume growth the SG&A in the quarter was up 6% a good result, which also board the extensive advertising activities for poster.

Speaker Change #139: And post a full global launches.

Speaker Change #139: Overall operating loss increased to 18 million to $242 million.

Speaker Change #139: Moving on to second quarter 2024 versus second quarter 2023.

Speaker Change #139: I would like to flag the key movements.

Speaker Change #139: Revenue decreased $180 million or 70% due to lower global volumes and higher discounts.

Speaker Change #139: Gross yourself a similarly around breakeven is the impact of lower global volumes and higher discounts was offset by two factors.

Speaker Change #139: Which was an impairment release and some normalization of the revenue recognition related to the sales of cars to the China JV.

Speaker Change #139: SG&A expenses were down $33 million or 13% as cost Spanish spent X cents.

Bojana Flint: We have taken the first top three questions from the retail shareholders, so we can close the call. Yeah. And then I just say thank you very much for listening in here. And I will look forward to meet you here again quite soon when we are going through our third quote results here in November. So welcome back. And thanks for listening in. And thanks for your questions. Have a good day.

Speaker Change #139: Research and development decreased $36 million or around 75%, mainly due to post to IP.

Bojana Flint: This concludes today's conference call. Thank you for participating. You may now disconnect. [inaudible] . . Thank you. Andres Sheppard, Andres Sheppard, Johan Malmqvist, Andres Sheppard, Andres Sheppard, Andres Sheppard, Andres Sheppard, Johan Malmqvist, Andres Sheppard, Johan Malmqvist, Andres Sheppard, Andres Sheppard,[inaudible][inaudible] Hello everyone, Bojana Flint here from Polestar Investor Relations.

Speaker Change #139: IP amortization now being capitalized into inventory and therefore being part of our cost of goods sold.

Bojana Flint: Thank you for joining our results call today covering the second quarter of 2024. I'm joined by Per Ansgar, RCFO, who will give the financials and business update. We will then open for unlist and retail investor questions.

Other operating income decreased $32 million, primarily due to foreign exchange effects.

Speaker Change #139: Operating loss decreased 32 million to $242 million.

Bojana Flint: But before we start, I will cover some housekeeping points as usual. I would like to remind participants that many of our comments today will be considered forward-looking statements on the US Federal Security's laws, and a subject to numerous risks and uncertainties that may cause false-pass actual results to differ materially from what has been communicated. These forward-looking statements include but are not limited to statements regarding the future financial performance of the company, production and delivery volumes, financial and operating results, near-term outlook and medium-term targets, fundraising and funding requirements, macroeconomic and industry trends, company initiatives and other future events.

Speaker Change #139: Moving onto cash flow highlights at the end of the period, we reported $669 million of cash and cash equivalents on the balance sheet as we continued to manage cash very prudently.

Bojana Flint: Forward-looking statements made today are effective only as of today, and post on-the-take snow obligation to update any of its forward-looking statements. For discussions, some of the factors that could cause our actual results to differ, please review the risk factors contained in our SEC filings. In addition, management might take references to non-gap financial measures during the call. A discussion of why we use non-gap financial measures and a reconciliation to the most directly comparable gap measure can be found in the appendix of the press release and in the form 6K published today.

Speaker Change #139: In mid August we also secured up to $300 million of new external mandate.

Bojana Flint: With that, I would like to turn the caller with a pass. Please go ahead. Thanks, Budyana. Once again, I would like to welcome you all to this earnings call. We meet again seven weeks after our Q1 release, and hopefully you have had some restful vacation weeks in the meantime. As you know, yesterday we announced that we have a new incoming CEO who will join us for future earnings call. But before I go into and cover the financial, I would definitely like to take the opportunity to publicly and personally thank too much for his immense contribution in shaping Polestar into the innovative and forward-thinking companies today.

Speaker Change #139: Operating cash outflow of 106 million since December including a positive inflow in the second quarter was less than the operating loss as management excess drove improved working capital.

Bojana Flint: Tumas is and will remain an iconic legend at Polestar. We wish him the best for the future. Also, I want to welcome Michael Lorscheller as incoming Polestar CEO. He brings over 25 years of experience in automotive industry, particularly in scaling businesses. And you will have the opportunity to meet him in upcoming calls later on. So now let me turn to the financials. I plan to give an update on the cute results both in relation to Q1 as it is important to track our progress through 2024 and on year-over-year comparisons for consistency and talking of progress.

Speaker Change #139: As guided in our Q1 results, we expected to see lower working capital relative to sales and we have in this quarter really some 300 million most inventory and this trend will continue.

Speaker Change #139: It is fair to say that we ended 2023 with inventory higher than what we wanted or anticipated, but we took action that we have seen an improvement in 2024, and especially in the second quarter.

Bojana Flint: Of course, I'm very pleased to say that we recently filed our audited results for 2023 on form 20 F and we are now back on track with our more normalized reporting calendar. And by that, we have cleared the reporting deficiency we have had with NASDAQ. In the coming weeks, we aim to publish the usual documents, the management discussion and analysis and the IAS 34 report. With that, let me start with the key movements, Q2 versus Q1 of 2024.

Speaker Change #139: Investing cash outflow of $354 million was in line with plans and we direct our investments towards posted three four and five.

Speaker Change #139: Financing cash inflow was a net increase of $441 million with proceeds from $950 million club loan facility fully utilized.

Speaker Change #139: However, we also made some repayments of loans and trade financing facilities, which are now largely undrawn and ready to deploy as we scale up volumes.

Bojana Flint: We saw global vehicles sales of 13,150 cars up more than 80%. Revenue was up close to 70% to 575 million and gross results of the small negative at 4 million versus Q1. The improvement in gross results was driven by Polestar 2 volume growth as well as initial deliveries of Polestar 3 and some normalization of revenue recognition at our China JV. Our underlying gross profit was still impacted by high discount on Polestar 2 in a very competitive market and before we ramp up, Polestar 3 and 4 deliveries.

Speaker Change #139: Let me finish with the outlook, where the picture remains for stronger volumes in the second half and particularly going into the fourth quarter.

Speaker Change #140: Sales momentum seen in the second quarter has had a positive impact on the inventory levels and cash flow and we will continue to work hard on this like I said on the last call <unk> be still the freak I like working with the cash flow I think this is a very fine and obviously, it's very important I firmly believe that a lot of things that can be.

On this front.

Speaker Change #141: That's not really the finances and move into the recent business developments.

Bojana Flint: We are managing selling generally an administrative cost tightly and seeing benefit of our cost measures that we introduced in mid 2023 and early 2024. Compared to more than 80% volume growth, the SNA in the quarter was up just 6%. A good result which also brought extensive advertising activities for Polestar 3 and Polestar 4 global launches. Overall, operating loss increased 18 million to 242 million. Moving on to second quarter 2024 versus second quarter 2023, I would like to flag the key movements.

Speaker Change #141: We saw a significant uptick in deliveries in the second quarter compared to the first quarter.

Speaker Change #142: Sales team has really accelerated their efforts and work well with our retail partners to ensure we have a strong platform to build upon in the second half of the year.

Speaker Change #143: Following the global media test us with <unk> III <unk> poster for the organization is now gearing up for regional media activities.

Speaker Change #143: And we are seeing growing demand for test drives slots and adding new capacity over the time.

Speaker Change #144: Paul stuff for started deliveries in Europe, just a few weeks ago. The SUV Coupe is already showing us how important it will be in our model lineup with its design power and stands attracting a wide customer base.

Bojana Flint: Revenue decreased 118 million or 70% due to lower global volumes and higher discounts. Gross results were similarly around breakeven as the impact of lower global volumes and higher discounts was offset by two factors, which was an impairment release and some normalization of the revenue recognition related to the sales of cost of the China JV. SNA expenses were down 33 million or 13% with cost management actions. Research and development decreased 36 million or around 75% mainly due to Polestar 2.

Speaker Change #144: Continuing to develop our marketing efforts with the exciting poster for campaigns.

Speaker Change #145: Some of you who have seen the poll Walter Oman Duplantis Embassy Mr. Questrom two of our most decorated Olympian and global Superstars are now driving a poster for as our brand ambassadors, we are very proud of that.

Speaker Change #145: One of the most important recent milestones of a poster at the start of production in South Carolina <unk> III.

Speaker Change #145: This makes posted three the first poster manufactured on two continents.

Bojana Flint: IP amortization now being capitalized in inventory and therefore being part of our cost of goods sold. Other operating income decreased 32 million primarily due to foreign exchange effects. Operating loss decreased 32 million to 242 million. Moving on to cash flow highlights. At the end of the period reported 669 million of cash and cash equivalent on the balance sheet as we continue to manage cash very fluently. In mid-August, we also secured up to 300 million of new external money.

Speaker Change #145: It supports our commercial ambition in the U S, where we have always known how important it is to have a large luxury SUV that is built locally.

Speaker Change #145: Producing costs and thoughts Carolina, Diversifies, our manufacturing footprint and strengthens our competitive as a whole as we can export processed 30 to Europe and benefit from a more balanced trade in and out of U S.

Speaker Change #146: The first South Carolina produced cars are being handed over to customers in the next few weeks.

Speaker Change #147: As we grow RMR the lineup and look to expand our geographic footprint, we are putting significant effort into maximizing the value and efficiency of our <unk> distribution footprint.

Bojana Flint: Operating cash outflow of 166 million since December, including a positive inflow in second quarter was less than the operating loss as management actions drove improved working capital. As guided in our Q1 results, we expected to see lower working capital relative to sales, and we have in this quarter released some 300 million most inventory, and this trend will continue. It is fair to say that we ended 2023 with inventory higher than what we wanted or anticipated, but we took action and we have seen improvements in 2024 and especially in the second quarter.

Speaker Change #147: We have now several European markets operating under the non genuine agency set up with more to come in new part is being brought on board. This enables us to engage in in all of our space investors increased conversion now is the method to sell more cars in a more efficient way.

Speaker Change #147: To wrap this up we have created a strong momentum.

Speaker Change #147: In sales with more than 80% improvement in the second quarter, we have engaged our sales force and they are now really gearing up for the.

Bojana Flint: Investing cash outflow of 354 million was in line with plans, and we direct our investments towards POSA-3, 4 and 5. Financing cash inflow was a net increase of 441 million, we put seeds from 950 million cloud loan facilities fully utilized. However, we also made some repayments of other loans and trade financing facilities, which are now largely undrone and ready to deploy as we scale up volumes. Let me finish with the outlook where the picture remains for stronger volumes in the second half, and particularly going into the fourth quarter.

Speaker Change #147: The later part of this year operationally with three cost in production across two continents, and financially with 30% higher inventory turnover driving cash and working capital improvements.

Speaker Change #147: And with this we are confident of a stronger second half, particularly from the fourth quarter sales of the.

Speaker Change #147: <unk> Suvs build.

And thank you for listening and by that I hand over to the operator.

Speaker Change #148: Thank you.

A reminder to ask a question you will need to press star one on your telephone you will then handle whats mated message advising Johan database to withdraw your question. Please press star one again.

Bojana Flint: Sales momentum seen in the second quarter has had a positive impact on inventory levels and cash flow, and we will continue to work hard on this. Like I said on the last call, I am a bit of a freak. I like working with cash flow. I think this is very fun and obviously it's very important. I firmly believe that a lot of things that can be done on this front.

Speaker Change #149: We'll now take our first question please standby.

Speaker Change #150: And the first question comes from the line of Tobias <unk> from Redburn Atlantic. Please go ahead. Your line is now Nathan.

Tobias <unk>: Hi, good afternoon parent beyond thanks for taking my questions and good stress again.

Per Ansgar: That's now really the financials, and moving into the recent business developments. We saw a significant uptick in deliveries in the second quarter compared to the first quarter. Our sales team have really accelerated their effort and work well with our retail partners to ensure we have a strong platform to build up on in the second half of the year. Following the global media test results for POSA-3 and POS-4, the organization is now getting up for regional media activities, and we are seeing growing demand for test drive slots and adding new capacity all the time.

Speaker Change #151: I have three questions. Please.

Speaker Change #152: As usual I'll ask them separately.

Speaker Change #153: Are you able to provide some more detail on the sequential improvement in Cogs per external units.

Speaker Change #154: Identify a 14% reduction which is quite notable.

Speaker Change #155: Thank you.

Speaker Change #155: Yes.

Speaker Change #156: Obviously, we are working hard on our cost reductions.

Speaker Change #157: There are several parts of that one and obviously most of the costs. We are selling right now. It is polestar. Two you would also then probably see a little bit of a mix shift into that one year of what we see a gradually ease.

Per Ansgar: POSA-4 started delivered in Europe just a few weeks ago. The SUV coupe is already showing us how important it will be in our model lineup with its design, power, and stands attracting a wide customer base. We are continuing to develop our marketing efforts with the exciting POSA-4 campaigns. Those of you who have seen the poll water are among the plantists and the same as Stada Schestrum, two of our most decorated Olympians and global superstars are now driving a POSA-4 as our brand ambassadors.

Speaker Change #157: Improvements on the year prices for mineral.

Speaker Change #157: On the raw material into the battery packs.

Speaker Change #158: The constant reduction of the cost for batteries, which is very helpful. But also working very hard together with especially vault <unk> developed the first two and also EG Lee who is supporting us in negotiations on the commercial side. So.

Speaker Change #158: We are expecting to see cost reductions even more going forward here.

Per Ansgar: We are very proud of that. One of the most important reason why POSA-4 was to start a production in South Carolina of POS-3. This makes POSA-3 the first POSA manufacturer on two continents. It supports our commercial ambition in the US where we have always known how important it is to have a large luxury SUV that is built locally. Producing cars in touch Carolina diversifies our manufacturing footprint and strengthens our competitive as a whole, as we can export for the three to Europe and benefit from a more balanced trade in and out of US.

Speaker Change #159: Okay, sorry, okay understood.

Speaker Change #160: Perhaps maybe I can ask whether there was any sort of patents or any releases.

Speaker Change #160: Exceptional in the second quarter.

Speaker Change #160: Versus the first quarter, yes, no it should not be.

Speaker Change #161: To my knowledge.

Speaker Change #162: We have a 100% sure here.

Speaker Change #162: Okay great.

Speaker Change #164: Secondly, I observe a disconnect between operating income and free cash flow in the first quarter versus the second quarter. I was wondering if you can help me to understand that noncash operating adjustments and that the other parts of working capital in the second quarter.

Per Ansgar: The first South Carolina reduced cars are being handed over to customers in the next few weeks. As we grow our model lineup and look to expand our geographic footprint, we are putting significant efforts into maximizing the value and efficiency of our existing distribution footprint. We have now several European markets operating under the non-genuine agencies set up with more to come and new partners being brought on board. This enables us to engage and involve our space investors in increased conversion, now's the method to sell more cars in a more efficient way.

Speaker Change #165: Is it just inventory that is responsible for the free cash improvement and Relatedly, what do you consider a normalized level of working capital pulsar.

Speaker Change #166: Yes, what we've done and as I said, we worked very hard with our cash flow and working capital we have reduced our inventory significantly here, especially in the second quarter and we will continue to work very hard with that so the main reason for our good operating cash flow is good.

Speaker Change #167: <unk> of our inventory, especially in the second quarter $300 million around $300 million ish.

Per Ansgar: To wrap this up, we have created a strong momentum. In sales with more than 80% improvement in the second quarter we have engaged our sales force and they are now really gearing up for the late part of this year. Operationally, with three cars in production across two continents and financially with 30% higher inventory to know where driving cash and working capital improvements. And with this, we are confident of a stronger second half, particularly from the fourth quarter sales of the two premium SUVs build.

Speaker Change #168: Okay, Great and then my last question is relating to the pulsar III and pulse thoughtful.

Would you describe both of those models is being sold out for 2024 in Europe and the U S as of today.

Speaker Change #169: Holdout, sorry, sorry, please repeat that question I didn't follow that one.

Speaker Change #169: Would you describe pulse top three and four as being sold out for 2024 in Europe and the U S. Well, if we start with Paul stuff for.

Per Ansgar: And thank you for listening and by that I hand over to the operator. Thank you. As a reminder to ask a question, you will need to press star one one on your telephone. You will then hear an automated message at the base and your hand is raised. To enjoy your question, please press star one one again. We will now take our first question. Please stand by. And the first question comes from the line of Tobias Beath from Redburn Atlantic.

We will basically north launched the pollster four until very late this year. So that's question.

Speaker Change #169: We have not really started to deliver that.

Speaker Change #170: So we have not really started to take orders in on <unk> III.

Speaker Change #170: We have.

Speaker Change #171: Large order book, both in Europe, and U S. But we are expecting that to grow more during the balance of the year. As we are now starting to ramp up the test from our perspective. The test drives are extremely important to get the traction here. So we are working very hard with test drives and demo costs and yes, there is a little bit of.

Per Ansgar: Please go ahead, your line is not open. Hi, good afternoon, parent, Beyanna. Thanks for taking my questions and good chat again. I have three questions, please. And as usual, I'll ask them separately. Are you able to provide some more detail on the sequential improvement in COG's personal unit? I identify a 14% reduction, which is quite notable. Thank you, Tobias. Well, obviously we are working hard on our cost reductions and there are several parts of that one.

Anecdotally anecdotal I asked it.

Speaker Change #172: Please deal with some of our controllers in our European and European markets and one of them said that the pull stuff for very appreciated when people get into the car and drive it but of course, there is a little bit of question Mark buying a car without really a window for a lot of people wants to dry drive and test out of the cars so from that perspective, yes.

We have order books, but we are expecting more orders, especially now as we start to drive up the test drives.

Tobias <unk>: Tobias maybe if I can just wrap up from what Pat said in terms of the point about pulse. Therefore, the deliveries a poster for in the U S will never scheduled for very kind of late in 2024, we have definitely started deliveries across many European markets and Thats really ramping up but it's hard to say that poster for India.

Per Ansgar: And obviously most of the costs we are selling right now, it is Polestar 2. You would also then probably see a little bit of a mix shift into that one here, but what we see gradually is improvements on the prices for raw material going into the battery prices. So you see a constant reduction of the cost for battery, which is very helpful. We are also working very hard together with especially Volvo has developed the Polestar 2 and also with Gili, who is supporting us in negotiations on the commercial side.

U S is sold out because we never really planned to deliver eight until much later in the year in.

Tobias <unk>: In the U S.

Speaker Change #173: Alright, great helpful. As always thank you.

Speaker Change #174: Thank you for your questions.

Speaker Change #174: Thank you.

Per Ansgar: So we are expecting to see cost reductions even more going forward here. Okay, sorry. Okay, understood. But Perhaps, maybe I can ask whether there was any sort of impairment or any releases that were exceptional in the second quarter, versus the first quarter. Yeah. No, it should not be to my knowledge that we have a hundred percent sure. Okay. Great. Secondly, I observe a disconnect between operating income and free cash flow in the first quarter versus the second quarter.

Speaker Change #175: We will now take our next question please standby.

Speaker Change #176: The next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Your line is now open.

Speaker Change #175: Yes.

Andres Sheppard: Hi, good morning, everyone. Thanks for taking our questions.

Andres Sheppard: Wanted to maybe start.

With deliveries for the second half of this year, so roughly you've done about.

Andres Sheppard: <unk>.

Speaker Change #177: 2500 deliveries so far year to date.

Speaker Change #178: Curious if you can give us a little color as to how we should think about the second half of this year in terms of deliveries and maybe also in terms of.

Per Ansgar: I'm wondering if you can help me to understand the non-cash operating adjustments and the other parts of working capital in the second quarter. Is it just inventory that is responsible for the free cash improvement? And relatively, what do you consider a normalized level of working capital for Polestar? Yeah. What we've done, and as I said, we've worked very hard with our cash flow and working capital. So we have reduced our inventory significantly here, especially in the second quarter.

Speaker Change #179: The delivery mix between the Pollstar for me in the Polestar, two obviously, the polestar horrible half probably the smallest breakdown, but just any color on how we should think about deliveries for the second half that delivery mix and what the impact will be on gross margins. Thank you.

Speaker Change #180: No. Thanks, Thanks for the question.

Speaker Change #181: Obviously as we've said here, we will see volume growth gradually through the year. So you should expect third quarter to be better than before and then you should expect fourth quarter to be even higher up and especially you will see as we guided in our outlook that fourth quarter will be a strong from a volume perspective.

Per Ansgar: And we will continue to work very hard with that one. So the main reason for our good operating cash flow is a good reduction of our inventory, especially in the second quarter. Around 300 million. Okay. Great. And then my last question is relating to the Polestar 3 and Polestar 4. Would you describe both of those models as being sold out for 2024 in Europe and the US as of today? Sold out.

Speaker Change #182: Youre right the polestar two.

Speaker Change #183: <unk> always said, we will take a smaller portion of our sales going forward that car has been fantastic for us many years and now we will need to put our focus on this poster and poster for so in the third quarter posted <unk> three will be a big vehicle in terms of <unk>.

Per Ansgar: Sorry. Please repeat that because I didn't follow that one. Would you describe Polestar 3 and 4 as being sold out for 2024 in Europe and the US? Well, if we start with Polestar 4, we will basically not launch the Polestar 4 until very late this year. So that question we have not really started to deliver that car yet. So we have not really started to take orders in on Polestar 3. We have a large order both both in Europe and US, but we are expecting that to grow more during the balance of the year.

Speaker Change #182: Hello.

Speaker Change #182: <unk> delivered both in U S and in Europe.

Speaker Change #182: The fourth quarter, you should expect the pollster four to take a little bit higher lead in that one <unk> also start to deliver in use from that perspective.

Speaker Change #182: And from a gross margin perspective, we have.

Speaker Change #184: Said that our ambition is to have the double digit gross margin by the end of the year.

Speaker Change #185: Got it thanks, that's super helpful and maybe just a quick follow up.

Speaker Change #186: Was wondering if you can just give US a reminder of where you stand on your capital needs.

Looks like there was another $300 million in external funding raised recently, so just curious.

Per Ansgar: As we are now starting to ramp up the test drive from our perspective, the test drives are extremely important to get the traction here. So we are working very hard with test drives and demo cars. And yes, there's a little bit of anecdote. An anecdote delay. I just had a meeting with some of our controllers in our European market. And one of them said it. The Polestar 4 very appreciated when people get into the car and drive it.

Speaker Change #187: What that means exactly your.

Speaker Change #188: Upcoming capital needs.

Speaker Change #189: No the answer to that question, if I start with our cash flow and appropriate portrayed must have not as a cash flow free care.

Speaker Change #190: As I said that but we worked hard with our cash flow, making sure that we work with our working capital. So we have had and as you see on our first half of this year, our cash burn is significantly lower than the same period last year.

Per Ansgar: But of course, there's a little bit of question mark buying a car without a rear window. A lot of people wants to drive drive and test out the cars. So from that perspective, yes, we have order books, but we are expecting more orders, especially now when we start to drive up the test drives. And Tobias, maybe if I can just wrap up on what Per said in terms of the point about Polestar 4, the delivery of Polestar 4 in the US were never scheduled for very kind of late in 2024.

Speaker Change #191: A lot of good improvements there.

Speaker Change #191: We went out last year by the end of last year, saying that we had the need for $1 3 billion, we have secured $950 million on the club loan which was early.

Speaker Change #191: This year in the second quarter.

Speaker Change #191: So the asset that we are looking for more equity.

Speaker Change #192: <unk> announced that we haven't been able to secure more depths financing around <unk>, which is not fully drawn down yet here.

Per Ansgar: We have definitely started deliveries across many European markets and that's really ramping up. But it's hard to say that Polestar 4 in the US is sold out because we never really plan to deliver it until much later in the year in the US. All right, great. Helpful as always. Thank you. Thank you for your questions. Thank you. We will now take our next question. Please stand by. The next question comes from the line of Andres Sheppard from Kansas.

Speaker Change #192: So from that perspective, you could maybe say that we are up to that $1 3 billion and we are then also worked a lot with our working capital.

Speaker Change #192: On top of that one as I also mentioned in my lead in speech here, we have our trade financing facilities, which is our working capital and that is largely on drawn for time being yesterday now start to ramp up our production.

Speaker Change #192: In North America, and continue with our production in China, we have a lot of good working capital credit lines. So I don't see an immediate need from those perspective here, but obviously as we always said.

Per Ansgar: It's Gerald. Please go ahead. Your line is not open. Hi, good morning, everyone. Thanks for taking our questions. Want to maybe start with[inaudible] about deliveries for the second half of that delivery mix and what the impact will be on cross margins. Thank you. Now, thanks, thanks for the question. Obviously, as we said here, we will see volume growth gradually through the year. So you should expect third quarter to be better than before and then you should expect fourth quarter to be even higher up.

Speaker Change #192: We are looking forward to more equity injections in the company.

Speaker Change #193: Wonderful Super Thank you Super helpful and thanks for taking our questions I'll pass add thanks, thanks very much.

Speaker Change #194: Thank you.

Speaker Change #195: As a reminder to ask a question you will need to press star one on your telephone or might be any P&L to withdraw. Your question. Please press star one again.

Speaker Change #196: We will now take our next question please standby.

Speaker Change #197: And the next question comes from the line of Dan <unk> from Barclays. Please go ahead. Your line is now open.

Trevor Young: Hi, Trevor young on for Dan today.

Trevor Young: I had a couple questions here, if we could just go through.

Trevor Young: First I wanted to drill down a little bit more.

Tobias <unk>: Tobias kind of.

Speaker Change #198: He was asking about this but I was just curious if you could perhaps quantify.

Speaker Change #199: Benefit you called out to gross profit.

Speaker Change #200: The impairment early and the normalization of revenue recognition on sales of vehicles.

Per Ansgar: And especially you will see as well guided in our outlook that fourth quarter will be strong from a volume perspective. And you're right, the Bullstar 2. As we all always said, we'll take a smaller portion of our sales going forward. That has been fantastic for us many years. But now we will need to put our focus on the Bullstar 3 and Bullstar 4. So in the third quarter, Bullstar 3 will be a big vehicle in terms of sales as we start to deliver both in US and in Europe.

Speaker Change #200: China JV.

And Jim This is Andy.

Jim: The additional piece to that if you could just give a sense of.

Jim: Any additional opportunities.

Jim: On Polestar, two gross margin beyond battery raw mats or if that is the main driver here.

Jim: Okay.

Speaker Change #201: The main driver behind the gross margin in the second quarter, we have a couple of <unk>.

Speaker Change #201: Good news, obviously, we did an impairment of inventory by end of 2023. So we had some good news on that one in the first quarter and also some good news in the.

Per Ansgar: In the fourth quarter, you should expect the Bullstar 4 to take a little bit higher lead in that one. As we also start to deliver in US from that perspective. And from a growth margin perspective, we have said that our ambition is to have a double digital smart margin by the end of the year. God, thanks very, very helpful. And maybe just just a quick follow up was wondering if you can just give us a reminder of where you stand on your capital needs.

Speaker Change #201: Second quarter.

Speaker Change #201: And we also had as we talked about we have a little bit of good news from basically moving around the revenue between the quarters between first quarter and second quarter. Then we also have bad news from a gross margin perspective, we did a little bit more of impairment.

Speaker Change #201: Below million U S dollars on some of the poster tools in specific markets.

Speaker Change #201: An enormous amount of money, but we have also moved as a part of our impairment assessment in our discussion on them or to say since we have more amortization of poster twos up in cost of goods sold there were previously down in.

Per Ansgar: Looks like there was another 300 million in external funding raised recently, so just curious what that means there for your upcoming capital needs. Thank you. Thanks for that question. If I start with our cash flow and I probably portrayed myself now as a cash flow free care, as I said that, but we worked hard with our cash flow, making sure that we work with our working capital. So we have had an as you see on our first half of this year, our cash burn is significantly lower than the same period last year to done a lot of good improvements there.

Speaker Change #202: In R&D do you see that R&D and.

Speaker Change #202: Part of that is going up into cost of goods sold so thats always kind of like the main drivers for that one here talking about gross margin.

Speaker Change #202: The polestar two Hess as I said, we have sold a lot of posted to us in the second quarter. Our plan as we talked about here from some of the other question is to have more focus now on posted a 3% posted for in our overall gross margin will improve with the with the deliveries of poster and poster for especially.

Per Ansgar: We went out last year by the end of last year, saying that we had the need for 1.3 billion. We have secure 950 million on the club loan, which was early this year in the second quarter. We also then said that we are looking for more equity. We also now announce that we have been able to secure more depth financing around 300 million, which is not fully drawn down yet here. So from that perspective, you could maybe say that we are up to that 1.3 billion and we are then also worked with our working capital on top of that one.

Speaker Change #202: Into the fourth quarter.

Speaker Change #202: Understood.

Speaker Change #203: And then I guess just following up on specifically on the Pollstar for I know youre launching it in Europe and the U S. But I was just curious if you could give a little color on how sales are trending in China, and then give a few examples of how the.

Speaker Change #204: Working with Geely on this platform has been a benefit versus the full start to.

Per Ansgar: As I also mentioned in my reading speech here, we have our trade financing facilities, which is our working capital and that is largely un-drawn for time being here. So when we now start to ramp up our production, in North America and continue with production in China. We have a lot of good working capital credit line, so I don't see an immediate need from those perspectives here, but obviously, as you always said, we are looking forward to more equity in the actions in the company.

Well, if I start with the benefit of working with Paul Julian. This one I think there are.

Speaker Change #204: Quite a lot of the benefit first of all it is produced.

Speaker Change #204: In China, where we have been able to get there we needed to have a quite good cost base, having said that we're still working through the cost based on post op for.

Speaker Change #204: And you know the Chinese market is very competitive so to be able to sell EV cars in China, we have decent margins you need to work with the costs.

Per Ansgar: Wonderful, super, thank you, super helpful and thanks for taking our questions out. I'll pass. Yeah, thanks, thanks very much. Thank you. As a reminder to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To restore your question, please press star one one again. We will now take our next question, please stand by. And the next question comes from the line of Dan Levy from Barclays, please go ahead, your line is not open.

Speaker Change #205: GL is doing that one and of course that benefits us and we have.

Speaker Change #205: Aligned a lot of activities around the cost reductions on poster for so that is one benefit we have the other benefit is obviously the full R&D development, we are able to assess and use the best from two words.

Speaker Change #205: We can use software and.

Speaker Change #205: And kind of like here.

Speaker Change #205: Entertainment systems from European and Western perspective for those cars in Europe and U S. And we can also use the China similar systems in China for pull stuff forward, which is very helpful for us the third very good.

Per Ansgar: I trouble young on for Dan today. I have a couple of questions here if we could just go through. First, I wanted to drill down a little bit more to Tobias kind of was asking about this, but I was just curious if you could perhaps quantify the benefit you called out to gross profit related to the impairment at least in the normalization of revenue recognition on sales of vehicles to the China JV and just as an additional piece of that, if you could just give a sense of any additional opportunities on Polestar 2 gross margin beyond battery on that or if that is the main driver from here.

Speaker Change #205: Support is that we are now also working with South Korea.

Speaker Change #205: To make this car being produced in South Korea for U S production and potentially also for other markets going forward and that is also of course supported by the <unk>. We have the teams very close by and so on so the progress on making poster for produced in South Korea, and some plant is progressing very well as do we.

Speaker Change #205: Expect that production to start mid next year, which would be very helpful. For our U S. Deliveries from that perspective, then of course as you said how are we doing in China, the car's value very well received the Chinese market is.

Per Ansgar: The main driver behind the crotes margin in the second quarter, we have a couple of good news. Obviously we did an impairment of inventory by end of 2023, so we had some good news for that one in the first quarter and also some good news in the second quarter. And we also have had as we talked about, we have a little bit of good news from basically moving around the revenue between the quarters between first quarter and second quarter.

Speaker Change #205: Tough.

Many of the Chinese car brands are losing money on this as we have been.

Speaker Change #205: Making sure that we are balancing volume and margins in a good way our plan and our expectation is that by later this year. We will also start to deliver poster <unk> in China, and then into next year post a five into China and those two costs are significantly more.

Per Ansgar: Then we also have bad news from a gross margin perspective. We did a little bit more of impairment, a couple of million US dollars on some of the Polestar 2s in specific markets, not the enormous amount of money, but we have also moved as a part of our impairment assessment and our discussion on amortizations. We have more amortization of Polestar 2s up in cost of goods sold, but we were previously down in R&D.

Speaker Change #206: Especially the post a 5% premium luxury vehicles, which we will target the more affluent Chinese customers. So that we continue to build the pulsar brand in China.

Speaker Change #207: Understood. Thank you if I could just squeeze in one more question here.

Speaker Change #207: Yeah.

Speaker Change #208: I appreciate that you saw the strong working capital improvement in <unk> on the inventory drawdown and quantified around $300 million.

Per Ansgar: You see that R&D is a significant part of that that has gone up into cost of goods sold, so that's all the kind of like the main drivers for that one here. But talking about gross margin, the Polestar 2, as I said, we have sold a lot of Polestar 2s in the second quarter. Our plan, as we talked about here from some of the other questions, to have more focus now on Polestar 3 and Polestar 4 and our overall gross margin will improve with the deliveries of Polestar 3 and Polestar 4, especially into the fourth quarter.

Speaker Change #208: Just.

I understand the focus on this it's obviously very important but how sustainable is this working capital strength against the ramp of two new models historically.

Speaker Change #209: Ramping up of volumes.

Speaker Change #210: Working capital.

Speaker Change #211: If you could give us a sense of how youre going to balances in some of the levers you have to pull there.

Speaker Change #212: A couple of things on that one.

Speaker Change #213: We are working now very heavily with our.

Per Ansgar: Understood, and then I guess just following up specifically on the Polestar 4, I know you're launching it in Europe and the US, but I was just curious if you could give a little color on how Polestar 4 sales are trending in China and then give a few examples of how working with Geely on this platform has been a benefit versus the Polestar 2. Well, if I start with the benefit of working with Paul with Jillian, this one, I think there are quite a lot of benefit.

Speaker Change #213: Partners. So so it's like what we are really.

Speaker Change #214: As a partner from this perspective, I mean, our retail partners, we are changing our sales model.

Speaker Change #215: In Europe, we are working very closely to our retail partners in U S. Wholesale models for example, and.

Speaker Change #215: And similar in China. So we are making sure that we can actually speed up.

Speaker Change #215: The sales process and the delivery process. So for example in Europe, we're taking our mass just to make sure that we can cap the lead time from the time that the car comes into to the ports in Europe until it's delivered in at.

Per Ansgar: First of all, it is produced in China, where we have been able to gather with Jillian to have a quite good cost base, having said that we are still working with the cost base on Polestar 4, and you know the Chinese market is very competitive, so to be able to sell EV cars in China, with decent margins, you need to work with the cost, so Jillian is doing that one, and of course that benefits us, and we have aligned a lot of activities around the cost reduction on Polestar 4, so that is one benefit we have. The other benefit is obviously the full R&D development, we are able to, as I used the best from two words, so we can use software and kind of like entertainment systems.

Speaker Change #215: At the dealers and the SaaS model in the SaaS model in Europe is that we own the cars all the way up to hand over to to find those customers. If we can squeeze out quite some time, there, which we are able to do that would help us a lot and in conjunction with that one.

Speaker Change #215: <unk> production in <unk>.

Speaker Change #215: U S. <unk> III will help us a lot because we will be much closer to.

Speaker Change #216: To the customers not only in U S. But also to the customers in Europe, because we we will start to produce <unk> in the.

Per Ansgar: From European and Western perspective for those cars in Europe and US, and we can also use the China similar systems in China for Polestar 4, which is very helpful for us. The third very good support is that we are now also working with South Korea to make this car being produced in South Korea for US production and potentially also for other markets going forward. And that is also of course supported by Jillian, we have their teams very close by and so on, so the progress on making Polestar 4 produced in South Korea into Southland is progressing very well to expect that production to start meet next year, which will be very helpful for our US deliveries from that perspective.

Speaker Change #216: South Carolina for European production later, this year and we cut out quite many weeks from that perspective, So we will see lower.

Speaker Change #217: Working capital as a percentage of revenue compared to history, but of course, if you are selling sneak that significantly more cost that will be a larger need of working capital, but as I said, we have basically 90% of our trade financing capacity not utilized.

Speaker Change #217: So we have a lot more potential there.

Speaker Change #218: Great. Thank you.

Speaker Change #219: Thank you as a reminder to ask a question you will need to press star one on your telephone.

Speaker Change #220: Panic to be announced.

Speaker Change #221: We will now take our next question please standby.

And the next question comes from the line of Danielle Raska from Bernstein Research. Please go ahead. Your line is now live.

Hey, good morning. Good afternoon. Thanks for taking my questions, maybe first could we talk a little bit about the tariff situation kind of what have you seen developing and then maybe to help us.

Per Ansgar: Then of course, as you said, how are we doing in China, the cars value are very well received, the Chinese market is tough, many of the Chinese car brands are losing money on their sales, we have been making sure that we are balancing volume and margins in a good way. Our plan and our expectation is that by later of this year we will also start to deliver Polestar 3s in China, and then into next year Polestar 5 into China.

Speaker Change #222: Our minds around the impact of this could you give us kind of a rough sense, how much tariffs have weighed on the gross margins in the past and whether that is whether there is any change expected in the upcoming.

Speaker Change #222: Coming quarters.

And then relating to that how does that relate to your statement earlier that you.

Speaker Change #222: I hope to achieve double digit gross margins by the end of the year.

Per Ansgar: And those two cars are significantly more especially the Polestar 5 premium luxury vehicles, which we will target the more effluent Chinese customers, so that will continue to build the Polestar brand in China. Understood, thank you. If I could just squeeze in one more question here. I appreciate that you saw the strong working capital improvement in 2Q on the inventory drawdown and quantified around 300 million. And I understand the focus on this, it's obviously very important, but how sustainable is this working capital strength against a ramp of two new models, historically ramping up of volumes of working capital?

Speaker Change #223: And then I think the second one was already touched upon but I'd like to bring it back to free cash flow.

Speaker Change #222: <unk>.

Speaker Change #224: You have the working capital relief, if I strip that out.

Speaker Change #225: Looks like your ongoing cash burn is largely unchanged right. If I look at the past couple of quarters, starting last year.

Somewhere between 400 700 million of Casper in a quarter.

Speaker Change #226: Add back the $300 million you said on Q2, and we're still at a 400 million cash burn. So how do you think that cash burn kind of changes as you approach the volume scaling.

Speaker Change #227: The better gross margins in the upcoming quarters are you in a position to kind of give us, let's say a range. When you would expect that underlying cash burn to turn positive.

Per Ansgar: So I just, if you give a sense of how you're going to balance this and some of the levers you have to pull there. A couple of things on that one is that we are working now very heavily with our partners. So it's like what we are really, when I say partners from this perspective, I mean our retail partners, we are changing our sales model. In Europe, we are working very closely to our retail partners in US where we are wholesale models, for example, and similar in China.

Speaker Change #228: Well thanks for your question.

Speaker Change #229: I wrote them down there so let's see if I can cover all of them.

Speaker Change #230: In totality. So first of all on the tariff side, yes to remind everyone again here that we have taken several decisions back in the time, which really are on the track of making sure that this is not a big deal for us going forward Charleston plant being the significant Ron or South Korea.

Speaker Change #230: South Carolina, where we will produce post arteries for U S, Canada for Europe, which we basically take away all the province with terrorists.

Per Ansgar: So we are making sure that we can actually speed up the sales process and the delivery process of, for example, in Europe, we are taking our measures to make sure that we can cut the lead time from the time that the car comes into to the port in Europe until it's delivered in. At the dealers and the sales model in, sales model in Europe is that we own the cars all the way up to hand over to to final customers, if we can squeeze out quite some time there, which we are able to do that will help us a lot.

Speaker Change #230: So far the tariff situation has been 27, 5% in U S.

Speaker Change #230: And with the announcement that came in a couple of months ago. Its up to about 102% that has not been implemented yet to my knowledge. It was not implemented like two weeks ago at least here, so still a little bit to see when that's going to happen, but that is one of the big things that will help us avoid inter is the second thing is as such.

Per Ansgar: And in Conjunction of that one, the production in US for policy three will help us a lot because we will be much closer to, to the customers, not only in you as but also to the customers in Europe because we will start to produce Polestar 3s in South Carolina for European production later this year. And we cut out quite many weeks from that perspective. So we will see a lower working capital as a percentage of revenue compared to history.

At our plant in South Korea, together, we know where we will produce Pollstar force for Europe, and we are also now in.

Speaker Change #230: Deep discussion Ken that plant also be used to supply posted 44 for Europe, and then thirdly of course, our cost reduction activities. We have had to speed up significantly from the sponsor we have had as I said quite a lot of discussions both with Volvo cars and with Geely on actions.

Speaker Change #230: To be made here. So we are looking into all of the car lines posted to bolster for <unk> and <unk>.

Per Ansgar: But of course, if you are selling significant the more cars, there will be a larger need of working capital. But as I said, we have basically 90% of our trade financing capacity not utilized right now. So we have a lot of more potential there. Great. Thank you. As a reminder to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced.

Kosta: Kosta <unk> III to really reduce the base cost of the car and there are quite a lot of opportunities. Although the costs are new you could expect that they would have been kind of like cost optimized from the beginning but.

Kosta: Historically, when you launch a car.

Kosta: You may have to take some quite a short cats that you could build in some costs that are quite a lot of cost opportunities in some of the posters reinforce therefore cause here.

Kosta: So that is really kind of like the starting point and as I said the U S tariffs, we will handle the <unk>.

Per Ansgar: We will now take our next question. Please stand by. And the next question comes from the line of Daniel Roeska from Bernstein Research. Please go ahead, your line is not open. Hey, good morning, good afternoon. Thanks for taking my questions. Maybe first, could we talk a little bit about the terrorist situation, kind of what have you seen developing, and then maybe to help us wrap our minds around the impact of this?

Per Ansgar: Could you give us kind of a rough sense how much tariffs have weighed on across margins in the past, and whether there's any change expected in the upcoming quarters. And then relating to that, how does that relate to your statement earlier that you hope to achieve double digit cross margins by the end of the year? And then I think the second one, it was already touched on, but I'd like to bring it back to free cash flow.

Kosta: <unk> III production with reports of ore being produced in South Korea, and then you also have like an active system in the U S. We should be able to use with some of our other car lines. So that is.

Kosta: Not a problem. If you then go to Europe.

Kosta: European Union announced.

Kosta: Terrorists.

Kosta: Kris normally the terrorism.

Kosta: China to Europe is 10% they have then.

Speaker Change #232: Basically announced different levers for different different brands. It ends up that delayed Volvo Polestar would have 19, 3%. If this is.

Speaker Change #233: Going to be implemented the good news is that it has been delayed from July into November at first so if there is a decision in the European Union to implement that it will happen in November of course is still a lot of political discuss since some of the member countries.

Per Ansgar: You know, you had to work in capital relief. If I strip that out, it kind of looks like your ongoing cash burn is largely unchanged, right? If I look at the past couple of quarters starting last year, where somewhere between 400 and 700 million of cash burn a quarter, if I add back 300 million you said on Q2, we're still at a 400 million cash burn. So, how do you think that cash burn kind of changes as you approach the volume scaling and the better cross margins and upcoming quarters, and are you at a position to kind of give us, let's say a range when you would expect that underlying cash burn to turn positive.

Speaker Change #233: Europe are definitely not in favor of this one because they see that it would not benefit their industry their.

Speaker Change #233: Are there countries or their market so little bit open from that perspective. The last thing on this one is that we are in constant dialogue with the European Union.

Speaker Change #233: There are a couple of different ways to avoid or defer or limit the impact of this one so I was actually earlier today in a meeting with the European Commission going through where we are what impact this would have and if these terrorists would actually support what the European Commission wants to achieve.

Per Ansgar: Thanks. Oh, thanks for your question. I've wrote them down here, so let's see if I can cover all of them in totality. First of all, on the tericide, just to remind everyone again here that we have taken several decisions back in the time, which really are on the track of making sure that this is not a big deal for us going forward. Charleston plant being the significant one of South Carolina plant, where we will produce poster trees.

Speaker Change #233: Or it would actually be.

Speaker Change #233: Negative for what they want to see if the European Commission wants to protect European industries to be able to have European industries to develop the technology from a post op perspective, putting tariffs on the cost that we are importing from China is completely making the different.

Per Ansgar: For you as Canada, for Europe, which we basically take away, all the problems with tariffs. So far, the tariff situation has been 27.5 percent in the US, and with the announcement that came in a couple of months ago, it's up to about 102 percent. That has not been implemented yet to my knowledge. It was not implemented like two weeks ago at least here. So still a little bit to see when that's going to happen, but that is one of the big things that will help us avoid interiors.

Speaker Change #234: A different way because we are investing a lot of technology in Europe from ourselves together with Volvo cars together with our supplier. So of course, it would be better for pulse for the European Index.

The industry is.

Speaker Change #234: You would have less or no increases of the tariffs. So we are in quite a lot of dialogues with those funds here. So so your question than on our gross margin above 10%. If it will happen. It will happen in November at some point in time here and we are importing quite total cost.

Per Ansgar: The second thing is, as I said, our plant in South Korea, together with Reno, where we will produce poster forest for Europe, and we are also now in deep discussion. Can that plant also be used to supply poster forest for Europe? And then thirdly, of course, our cost reduction activities. We have had to speed up significantly from this one. So we have had, as I said, quite a lot of discussions, both with Volvo cars and with Gili on actions to be made here.

Speaker Change #234: Before that one year and we are also.

Speaker Change #234: Working very hard to limit or at least mitigate some or all of that going forward here, but it will be a lot of hard work together with the European Commission here, So, let's see where we end up that one here and back to your question on your cash burn.

Speaker Change #234: Of course, as we talked about working capital.

Speaker Change #234: That's helped us a lot.

Speaker Change #234: My anticipation is I said is that we will be able to keep the working capital, we're really and not to increase it to the relative levers that we have had.

Per Ansgar: So we are looking into all of the car lines, poster two, poster four, and Polestar 3 to really reduce the base cost of the car, and there are quite a lot of opportunities. Although the cars on you, you could expect that they would have been, like, cost-optimals from the beginning, but historically also, when you launch a car, you may have to take some quite short cuts, so you could build in some costs.

Speaker Change #234: So I see that as a less of a problem of course, the underlying cash burn is driven two things right now it's the gross margin that you see has been basically a breakeven gross margin. The last couple of quarters here, we will going forward have a positive gross margin with the postal III and post our fourth.

Per Ansgar: There are quite a lot of cost opportunities in some of the Polestar 3 and Polestar 4 cars here. So that is really kind of like the starting point. And as I said, the US terrorists, we will handle with the Polestar 3 production, with the Polestar 4 being produced in South Korea, and then you also have, like, a netting system in the US, which we will be able to use for some other car lines, so that is not the problem.

Speaker Change #234: And on top of that one of course, our investing cash flow. If I would expect this year to be kind of like a peak year and when we are putting all the money into post <unk> post a four and the last.

Speaker Change #234: R&D expenditure into pollster five so when we go into next year.

Speaker Change #234: Investing cash flow will go down as well so combination of keeping.

Per Ansgar: If you then go to Europe, the European Union announced a terrorist increase, normally the terrorists from China to Europe is 10%. They have basically announced different levels for different brands. It ends up that Gilly Volvo Polestar would have 19.3%. If this is going to be implemented, the good news is that it has been delayed from July into November at first. So if there is a decision in the European Union to implement that it will happen in November, of course, still a lot of political discussions.

Speaker Change #234: Working capital.

Speaker Change #234: As lean as possible getting gross margin up and gradually reducing our investment levels will give us a better cash flow going forward and you will see that gradually coming especially into next year.

Speaker Change #234: Great that was super helpful. Thanks, Karen.

Speaker Change #235: Thank you.

Speaker Change #236: As a reminder to ask a question you will need to press star one on your telephone and what's your name to be announced to withdraw your question. Please press star one again.

Speaker Change #236: As there are no further questions on the phone lines I would now like to hand back to Diana for any questions from the retail.

Diana: Thank you Sonya.

Diana: So we're going to go through the top three shareholder return shareholder questions that we have received and assay technologies platform. So I'll read them out and then we can answer them.

Per Ansgar: Some of the member countries in Europe are definitely not in favour. This one, because they say that it would not benefit their industry, not their countries or their markets. So a little bit open from that perspective. The last thing on this one is that we are in constant dialogue with the European Union, because there are a couple of different ways to avoid or differ or limit the impact of this one. So I was actually earlier today in a meeting with the European Commission going through where we are, what impact this would have, and if this terrorist would actually support what the European Commission wants to achieve, or it would actually be negative for what they want to achieve.

Speaker Change #238: The first question as received rates Pollstar recently received a deficiency notice from NASDAQ what measures are leadership, taking to ensure compliance and to reassure shareholders that the stocks will not be delisted in the future.

Speaker Change #239: Two things on that first of all we had a deficiency on our reporting compliance that one was and I must say I'm very happy to to make sure that we had healed at one <unk>, our full year 2023 or four months NTS in mid August So that has gone now that is very good.

Speaker Change #239: The other deficiency is the share price being below one dollar.

Per Ansgar: The European Commission wants to protect the European industry to be able to have the European industry to develop the technology. From a post-up perspective, putting terrorists on the cars that we are importing from China is completely making the different different way, because we are investing a lot of technology in Europe, from ourselves together with all the cars, together with our suppliers. So of course it would be better for Poland, for the European industry if we would have less or no increases of the terrorists.

Speaker Change #239: And.

Speaker Change #240: We have been trading below $1 for quite some time the last couple of days, it's been about $1 nine talks about <unk>.

Speaker Change #240: Also earlier in July so it's moving around there we have up to early next year to heal this deficiency.

Our plan or our ambition is of course really to make sure now that with our increased deliveries and say some posted three impulse for and continue.

Speaker Change #240: Continued good feedback from customers and you will gradually during the ESC that this starts to happen that the share price should go up below above and all that which is really what we think if you think about it pollstar if European based company.

Per Ansgar: We are in quite a lot of dialogues with those ones here. So your question then, on our gross margin, above 10 percent, if it will happen, it will happen in November, at some point in time here, and we are importing quite a lot of cars before that one here, and we have also working very hard to limit or at least mitigate some or all of that going forward here. But it will be a lot of hard work together with the European Commission here.

Speaker Change #240: Good manufacturing and R&D and sales footprint globally, which can like stents out from all others and we have 170000 cars.

Speaker Change #240: On the road or close to that one.

Speaker Change #241: Our our company, which I think puts us apart from many of our.

Per Ansgar: So let's see what we end up with that one here. Then back to your question on your cash burn. I think, of course as we talked about working capital has helped us a lot. My anticipation, as I said, is that we will be able to keep the working capital very lean and not to increase it to the relative levels that we have had. So I see that as a lessover problem. Of course the underlying cash burn is driven two things right now.

Speaker Change #242: <unk> competitors of course.

Speaker Change #243: That is what we are targeting yes, and maybe just to sort of wrap up on the previous one we always said and we are very mindful of that and board and management and monitoring the situation very closely when it comes to the $1 definitely Okay question number two which sort of links back to the previous question as well is very much what our current plans to.

Speaker Change #243: Increase the share value.

Speaker Change #244: Yes, yes, yes.

Basically said most of that is I think again the.

Per Ansgar: It's the gross margin that you see has been basically breakeven, gross margin, the last couple of quarters here. We will go forward, have a positive gross margin with a POSTA-3 and POSTA-4. And on top of that one, of course our investing cash flow is, I would expect this year to become like a peak year. And when we are putting all the money into POSTA-3 and POSTA-4 and the last R&D expenditure into POSTA-5, so when we go into next year, our investing cash flow will go down as well.

Speaker Change #244: Business needs to demonstrate improvement and I think we have been doing this gradually through the year.

Speaker Change #244: We'll continue to do that so absolutely I mean, we have said in the past as well, but we are going to grow in the existing markets that you're going to spread into new markets as well and we have fantastic products coming through so lots of exciting developments.

Speaker Change #244: And question three just a little bit more.

Speaker Change #244: Color there how do you plan to expose the brand more sell more cars and keep the stock value going up yes, I think we all want the stock values to go up and.

Per Ansgar: So combination of keeping a working capital as lean as possible, getting gross margin up, and gradually reducing our investment levels will give us a better cash flow going forward. And you will see that gradually coming, especially into next year. Great, that was super helpful. Thanks, Bill. Thank you. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced.

Speaker Change #245: Couple of things one.

Speaker Change #246: We are a small small brand we don't have unlimited.

Speaker Change #246: Sources to do a lot of advertising campaigns, we are trying to find different ways to do it we have done a lot of media drives we did that here in spring in Spain Global media diaspora of moving that over now to more like local regional media would have to really get good coverage from from journalist we are when we do.

Per Ansgar: To withdraw your question, please press star 1-1 again. As there are no further questions on the phone lines, I would now like to hand back to Bojana for any questions from the retail. Thank you, questions that we have received on a state technologies platform. So I'll read them out and then we can answer them. The first question as received reads, Polestar recently received the deficiency notice from Nasdaq. What measures are leadership taking to ensure compliance and to reassure shareholders that the stock will not be delisted in the future?

Speaker Change #246: Our marketing campaigns, we are working much more targeted trying to reach the right type of of consumers, who really are interested in.

Speaker Change #246: First off we are also working last week test.

Speaker Change #246: We are very sure about the test drives who will make a difference for post our people needs to come drive out costs and experienced them.

Per Ansgar: Two things on the last one. First of all, we had the deficiency on our reporting compliance. That one was an Amazon. I'm very happy to make sure that we have healed that one as we filed our fully 2020 F in mid August. So that has gone now. That is very good. The other deficiency is the share price being below $1. And we have been trading below $1 for quite some time. The last couple of days, it's been above $1 online.

Speaker Change #246: And on top of that is probably an asset we are.

Speaker Change #246: Bending our geographic footprints in two ways, one expanding into new markets and Mark because I mean, you can trace will be going to France. For example, next year, we will expand as an importer.

Speaker Change #246: Set up.

Speaker Change #246: Eastern Europe in some markets. We are also seeing what we can do in South America for example, and which I think is more important than we are now making some changes to our sales model. We are expanding the existing geographical network in many of the countries in Europe in U S and we are.

Per Ansgar: It was above $1 also earlier in July. So it's moving around there. We have up to early next year to heal this deficiency. Our plan or our ambition is of course really to make sure now that with our increased deliveries and say some Polestar 3 and Polestar 4 and the continued good feedback from customers and you will gradually, during the ESC, that this does to happen, that the share price should go up below above $1, although it is really what we think.

Speaker Change #246: <unk> also changed SaaS model also engaging our investors and retailers in a completely different way and that will be the energy from them and the.

Speaker Change #246: Good costs will expand outside sales gradually this year and continuing into next year.

Speaker Change #246: Great.

Speaker Change #247: That's it okay. We have taken the first top three questions from the retail shareholders. So we can close the call and then I say, thank you very much for listening in here and we look forward to meet you here again quite soon when we are going through our third quarter results here in November.

Per Ansgar: If you think about it, Polestar is European-based company with a good manufacturing and R&D and sales footprint globally, which can like stand out from all others. And we have 170,000 cars on the road or close to that one. So we are a company which I think puts us apart from many of our EV competitors. Of course, that is what we are targeting. Yeah, and maybe just to sort of wrap up on the previous one, we always said and we're very mindful of that and bored in management and monitoring the situation very closely when it comes to the $1 threshold.

Speaker Change #247: So well come back and thanks for listening in and thanks for your questions have a good day.

Per Ansgar: Yes, definitely. Okay, question number two, which sort of links back to the previous question as well is very much what are current plans to increase the share value? Yeah, basically said most of this one, I think again, the business needs to demonstrate improvement and I think we have been doing that gradually through the year and we'll continue to do that. Absolutely, and you know, we have said in the past as well that we are going to grow in the existing markets, we're going to spread into new markets as well and we have fantastic products coming through.

Per Ansgar: So a lot of exciting developments. And question three, just a little bit more colour there. How do you plan to expose the brand more, sell more cars and keep the stock value going up? Yeah, I think we all want the stock value to go up. And a couple of things one, we are a small small brand. We don't have unlimited resources to do a lot of advertising campaigns. We're trying to find different ways to do it.

Per Ansgar: We have done a lot of media drives. We did that here in spring in Spain, global media drives. We are moving that over now to more like local regional media drives to really get good coverage from journalists. We are when we do our marketing campaigns, we are working much more targeted trying to reach the right type of consumers who really are interested in poll stars. We are also working a lot with test drive as we are very sure about the test drives.

Per Ansgar: We will make a different for poll star people needs to come, drive our cars and experience them. And on top of that, as Bojana said, we are expanding our geographical footprints in two ways. One, expanding into new markers and markers in new countries. We will go into France, for example, next year. We will expand as an importer setup to Eastern Europe in some markers. We are also seeing what we can do in South America, for example.

Per Ansgar: And which I think is more important when we are now making some changes to our sales model. We are expanding the existing geographical network in many of the countries in Europe, in US. And we are also with the change sales model also engaging our investors and retailers in a completely different way. And that will be the energy from them. And the good cause we'll expand our sales gradually this year and continuing to next year.

Per Ansgar: Great. That's it. Okay. So we have taken the first top three questions from the retail shareholders. So we can close the call. Yeah. And then I just say thank you very much for listening in here. And I will look forward to meet you here again quite soon when we are going through our third court results here in November. So welcome back. And thanks for listening in and thanks for your questions. Have a good day.