Volvo to cut funding to Polestar and may allocate shares to Chinese parent company

In a move that has sent ripples through the automotive industry, Volvo Cars has announced it will cut funding to Polestar and is considering offloading its shares in the electric performance car brand. This decision marks a pivotal moment in both companies’ histories, but one that would allow them to pursue their individual strategic visions more freely.

Volvo has announced it may relinquish its 48% stake, primarily to Polestar and Volvo’s shared parent company, Chinese automaker, Geely, who has said it will fully support Polestar as an independent brand.

This move shouldn’t come as a surprise. Originally a Volvo performance sub-brand, Polestar was split from Volvo to be a standalone electric car manufacturer in 2017. This move was orchestrated by Geely, but Volvo remained involved with the brand. However, as Volvo launches its own set of EVs, the confusion around the links between the brands appears to have come to a head with Volvo Cars announcing it will no longer fund the Polestar operation.

Volvo’s Polestar announcement part of annual report

In its full-year report, Volvo said that Polestar is “entering the next exciting phase of its journey with a strengthened business plan and cost actions,” but that the it is focussed is on developing Volvo Cars and concentrating its resources accordingly. “We are therefore evaluating a potential adjustment to Volvo Cars’ shareholding in Polestar, including a distribution of shares to Volvo Cars’ shareholders. This may result in Geely Sweden Holdings becoming a significant new shareholder,” the company added.

Volvo’s shares surged more than 26% after the Swedish automaker announced it would stop funding subsidiary Polestar Automotive. Polestar released an announcement saying that Volvo “will remain a strategic partner in areas across R&D, manufacturing, after sales and commercial.”

Volvo Cars, a global leader in automotive safety and innovation, established Polestar to focus on high-performance electric vehicles. Since its inception, Polestar has made significant strides in the electric vehicle (EV) market, distinguishing itself with its blend of Swedish design and cutting-edge electric powertrain technology.

Volvo Cars stated that this move would enable both Volvo and Polestar to accelerate their growth trajectories independently, capitalising on unique market opportunities and focusing on their respective core strengths.

Polestar will continue to push the boundaries of electric performance, focusing on developing pure electric vehicles that combine environmental sustainability with a thrilling driving experience. Volvo Cars, on the other hand, will concentrate on its ambition to become a leader in the premium electric car market, with a commitment to becoming a fully electric car company by 2030.

The automotive world is keenly watching this separation, anticipating the innovative developments and competitive dynamics it will bring to the electric vehicle industry.