In a strategic shift, Volvo Cars has announced its decision to cease funding Polestar Automotive Holding, the luxury car brand jointly owned by Volvo and Geely Holding. Volvo, which owns approximately 48% of Polestar’s shares, saw its stock surge by more than 30% at the market open following the announcement. Analysts have criticised Volvo’s heavy involvement in Polestar, considering it a drain on resources for the Swedish automaker.

$!Volvo Cedes Control of Polestar to Geely

Challenges for Polestar in a Competitive EV Market

Polestar, like other new electric vehicle (EV) brands, has faced challenges, especially with the intensifying competition in the EV market, highlighted by Tesla’s price war. The brand recently fell short of its reduced delivery targets for 2023. Since going public in June 2022 via a merger with a special purpose acquisition company (SPAC), Polestar’s shares have declined by over 83%.

Geely Takes the Reins, Volvo Shares Soar

Volvo Cars’ decision to relinquish funding for Polestar has led to Geely Holding taking on the responsibility for the struggling luxury brand. This development has fuelled a significant surge in Volvo’s stock, rising over 30% at market open. While there were considerations of distributing Polestar shares to Volvo’s shareholders, Geely Holding has welcomed the decision, committing to providing operational and financial support to Polestar without reducing its shareholding in Volvo Cars.

$!Volvo Cedes Control of Polestar to Geely

Impact on Polestar’s Viability and Restructuring Efforts

Polestar, aiming for cash flow break-even in 2025, recently announced plans to cut around 450 jobs globally, citing challenging market conditions. The news raises questions about Polestar’s future viability, with analysts suggesting a potential integration of the brand into Geely. Despite these challenges, Volvo Cars reported a stronger-than-expected rise in fourth-quarter operating earnings, emphasising the growth of its battery-electric vehicle (BEV) margin from 9% to 13%.

$!Volvo Cedes Control of Polestar to Geely

Implications for Volvo and Geely Relationship

The move marks a shift in the dynamics between Volvo and Geely, with Geely expressing commitment to supporting Polestar independently. However, some analysts speculate a potential sell-down of shares in Volvo by the Geely ecosystem. The restructuring could reshape the landscape for both Volvo and Polestar in the competitive electric vehicle market.

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