Volvo to Stop Funding Polestar, Hand Stake to Parent Geely

Volvo Announces Plan to Cease Funding Polestar

Volvo Cars announced on Thursday that it plans to stop funding its electric vehicle sub-brand Polestar and is considering distributing its stake in the company to its parent, Chinese automaker Geely [1].

This move comes after Volvo reported better-than-expected fourth quarter earnings [2]. The Swedish automaker said it would stop funding Polestar in a deal with Geely, which owns just over 97% of Volvo Cars [3].

Volvo’s share price jumped as much as 21% on the news Thursday morning [4]. Analysts said Volvo investors welcomed the news that the company would reduce its exposure to Polestar, which has struggled with production problems and quality issues in recent years [5].

Background on Polestar and Volvo Relationship

Polestar was launched in 2017 as a stand-alone electric performance car brand [6]. Originally a racing team acquired by Volvo, it was repositioned to take on Tesla with premium electric vehicles.

Volvo Cars has been the principal owner and funder of Polestar since its relaunch. As of December 2022, Volvo owned 49.5% of Polestar’s shares [7]. Geely held the remaining 50.5% stake.

Over the years, Volvo has invested billions into Polestar to help fund research, develop new cars, and build manufacturing facilities [8]. However, Polestar has struggled to turn a profit and has needed repeated cash infusions from its investors.

In its most recent earnings report, Volvo wrote down the value of its Polestar stake by $3.2 billion, indicating progress has been slower than expected [9]. And with a challenging global economy, it appears Volvo no longer has the appetite for continued high levels of investment.

Geely Will Take Over Funding Polestar

As part of the new agreement, Geely will take over responsibility for funding Polestar’s operations and growth plans [10].

Geely said it remains firmly committed to Polestar for the long term and believes there is a compelling opportunity with premium electric vehicles [11].

As the dominant stakeholder, Geely will have greater control to steer Polestar’s strategy going forward. This includes focusing more on the China market where EV sales are surging.

Meanwhile, Volvo will halt all funding into Polestar beyond what it has already committed for 2023. The deal is expected to close by mid-2024.

What Happens Next for Polestar?

Industry analysts have mixed opinions on Polestar’s future prospects under Geely’s full ownership [12].

On one hand, Geely has a strong track record of turning around struggling car brands – having done so already with Volvo, Lotus and others. Geely can leverage shared technology and manufacturing infrastructure to improve Polestar’s efficiency.

However, there are also challenges ahead. Polestar’s brand positioning as a premium EV rival to Tesla now looks questionable given its inability to scale successfully under Volvo funding. It may need to compete more directly with mid-market EVs from companies like Nio and Xpeng. Its manufacturing troubles have also damaged consumer confidence in recent years.

Regardless, Polestar remains one of the few pure-play EV brands with global name recognition. It has a window of opportunity to establish itself as a viable long term player in the rapidly growing electric vehicle market. Execution will be key if it hopes to stand out from the ever wider field of competitors.

1. https://www.reuters.com/business/autos-transportation/automaker-volvo-cars-stop-funding-polestar-quarterly-earnings-above-estimates-2024-02-01/

2. https://www.marketwatch.com/story/volvo-car-4q-rev-sek109-4b-b29f4a71

3. https://www.bloomberg.com/news/articles/2024-02-01/volvo-car-to-stop-funding-polestar-may-distribute-shares

4. https://www.cnbc.com/amp/2024/02/01/volvo-shares-jump-21percent-on-higher-sales-plans-to-stop-polestar-funding.html

5. https://www.cnbc.com/amp/2024/02/01/volvo-shares-jump-21percent-on-higher-sales-plans-to-stop-polestar-funding.html

6. https://www.marketwatch.com/amp/story/volvo-car-shares-surge-on-plans-to-halt-polestar-funding-f132e7a7

7. https://www.marketwatch.com/amp/story/volvo-car-evaluating-potential-reduction-of-shareholding-in-polestar-update-dc8c5244

8. https://www.cnbc.com/amp/2024/02/01/volvo-shares-jump-21percent-on-higher-sales-plans-to-stop-polestar-funding.html

9. https://www.marketwatch.com/story/volvo-car-shares-surge-as-itll-stop-funding-polestar-in-deal-with-parent-geely-4e37b422

10. https://www.msn.com/en-ca/money/topstories/volvo-cars-to-stop-funding-polestar-may-hand-stake-to-geely/ar-BB1hAW5A

11. https://www.bakersfield.com/ap/news/polestar-welcomes-geely-s-long-term-commitment-to-its-development-and-growth-as-an-independent/article_231d3321-f771-5ea9-9bd1-d76f3c6c2ffd.html

12. https://europe.autonews.com/automakers/volvo-may-hand-polestar-stake-its-parent-geely

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