Amidst the rapidly shifting tides of the global electric vehicle industry, Volvo Cars has decided to pull the plug on its financial support for Polestar, the electric car manufacturer it co-founded with Chinese automaker Geely. Volvo is now considering the sale of its stake in Polestar, with Geely, which is Volvo’s majority shareholder, as a potential buyer.
Volvo announced the decision on Thursday, as part of its 2023 financial report. It spun Polestar off into its own company in 2017 and since the plug-in hybrid Polestar 1, it has produced only electric vehicles using Volvo technology.
However, difficult market conditions have meant that Polestar has struggled to make an impact in the EV segment, and it announced earlier this month that it had missed its 2023 delivery targets, which had already been reduced from the start of the year.
Read: Polestar Cuts 2023 EV Sales Forecast As Deliveries Slip To 13,976 Vehicles In Q3
The automaker says it is evaluating an adjustment of its stake in Polestar and may distribute its holdings to its shareholders. That will likely result in China’s Geely, which owns Volvo, becoming a more significant shareholder in Polestar.
The Chinese company will “continue to provide full operational and financial support” to the startup, Volvo says. The Swedish automaker plans to continue collaborating closely with Polestar across R&D, manufacturing, and after-sales — the startup’s vehicles can currently be serviced at Volvo dealerships.
On its behalf, Polestar expressed its enthusiasm for the prospect of Geely Sweden Holding becoming a new direct shareholder. Thomas Ingenlath, CEO of Polestar, commented, “With our expanding lineup of exclusive, high-performance cars, Polestar finds itself in one of the most promising phases of its development. We’ve successfully increased production and initiated sales in China, Europe, and Australia for the Polestar 4, and we expect the Polestar 3 to begin customer deliveries this summer. We eagerly anticipate further collaboration with Volvo Cars and the opportunity to leverage greater synergies with Geely on forward-looking technologies.”
Volvo Cars investors thrilled
The move was met with a positive response from investors, with Volvo’s share prices shooting up by 40 percent following the announcement, Reuters reports. However, it may throw the future of Polestar into question, which aimed to become a break-even company in 2025.
Analysts have criticized Volvo’s stake in Polestar as a drag on its resources. The Swedish automaker owns 48 percent of the brand’s shares, whose values are down 83 percent since Polestar went public in 2022.
“As we move into the next phase of our transformation, including deploying large-scale investments in the creation and adoption of new technologies and future-fit production facilities, our focus is on developing Volvo Cars and concentrating our resources on our own ambitious journey,” Volvo wrote while explaining the decision to divest itself.
The move will facilitate a “temporary rise in investment levels” to fund the development of technology that it believes will help it become a leader in next-generation mobility. The Swedish automaker says it’s also investing in Tesla-style mega casting, better electric motors, and new advancements in its manufacturing facilities.
