Polestar's Q1 2025: Unraveling Contradictions on Tariffs, Gross Margins, and Market Strategy

Tariff impact and sales strategy in the U.S., product mix and gross margin trends, market strategy and focus, transition to dealership model, and impact of tariffs on gross margins are the key contradictions discussed in Polestar's latest 2025Q1 earnings call.



Financial Performance and Margin Improvement:
- Polestar Automotive reported an 84% increase in revenue for the first quarter of 2025 compared to last year, with a significant gross margin improvement of 15 percentage points, resulting in a positive gross margin of 7%.
- The improvement was driven by a shift in product mix, with more sales of higher-priced models such as Polestar 3 and 4, and reduced costs through efficiency measures.

Commercial Transformation and Retail Sales:
- Polestar achieved a 76% increase in retail sales for Q1 2025, with a focus on expanding its sales points and growing its dealer network.
- The company aimed to increase sales points by 75% by 2026, emphasizing the importance of the dealer model for enhancing customer experience.

Model Line-up and Market Performance:
- The Polestar 4 contributed to 49% of the company's total volume in Q1, with strong demand in major markets, while the Polestar 3 accounted for 19-20%.
- The increased popularity of these models is attributed to their higher margins and the introduction of new features, such as the Qualcomm Snapdragon processor chip, in the Polestar 2.

Cost Reduction and Efficiency:
- Polestar implemented significant cost reduction measures, including a 25% reduction in headcount from 2023 to 2024 and improvements in working capital management.
- These efforts aimed to enhance profitability and resilience amid geopolitical uncertainties and changing tariffs.