Volvo To Stop Funding Polestar, Geely Might Take Over

The Swedish carmaker is going to pull the plug on financing the all-electric brand Polestar. In an announcement made public on Thursday, Volvo stated that the company is evaluating a potential adjustment to its shareholding in Polestar in what it calls a decisive transformation phase.

Volvo's shares in Polestar might be acquired by Geely, which would make the Chinese giant a significant new shareholder. Volvo currently has a 48-percent stake in Polestar. Both Volvo and Polestar are subsidiaries of Zhejiang Geely Holding Group.

This means that the Swedish carmaker will stop providing funding. However, Polestar will extend the repayment period for the existing convertible $1 billion loan by 18 months to the end of 2028.

Volvo's CEO Jim Rowan highlighted, in a statement for Financial Times earlier this week, that Geely is "much more of a natural holding company for Polestar."

Geely will continue to offer operational and financial support to Polestar, while Volvo will relocate funds from Polestar toward its own projects, developing EVs. This means that the entity launched as a standalone brand in 2017 will have to make do without the assistance of the Swedish brand. Before 2017, Polestar was Volvo's performance-oriented division.

Together with the decision to bail out, Volvo also announced a profit increase of 43 percent last year, which was a record in the company's 97-year history. The carmaker sold 113,419 electric and electrified vehicles worldwide last year, which is a 70 percent increase over 2022.

The figure includes the 35,000 sold in the United States, with 13,609 of them being electric. 16 percent of Volvo's total sales figures are represented by EVs.

For Polestar, things are the exact opposite. The brand has recently announced that it was planning to lay off 15 percent of its global workforce in an attempt to reduce costs.

Polestar is hoping that its newly introduced SUV, the 3, will gain traction and give the company a breath of fresh air while it failed to meet the sales targets last year. The Polestar 4 coupe SUV has recently arrived in Australia and Europe. But Polestar will continue to struggle in a market where Tesla is making the rules, continuing the price war every time it seems to trail behind.

Furthermore, the global EV sales slowdown is bad news for Polestar just as it is for everyone else in the business, considering that the brand has an almost entirely electric lineup to deal with, except for the Polestar 1, which is a plug-in hybrid.

Meanwhile, Polestar is trying to keep afloat and labels the move as totally positive as it tries to become "an independent strong brand."