Volvo Cars will stop financing Polestar and transfer the brand’s responsibility to Geely.

The significant involvement of Volvo in Polestar, where it holds approximately 48% of the electric vehicle manufacturer’s shares, has been criticized by analysts who view this investment as a burden on Volvo’s resources. Zhejiang Geely Holding Group, the parent company of both brands, is preparing to provide more funding to Polestar as part of a potential redistribution of shares to alleviate the pressure on Volvo.

An expected announcement
Geely stated on Thursday that it would fully support Polestar as an independent brand, with no impact on its 79% stake in Volvo. Geely also praised Volvo’s decision to focus its resources on its own development. According to the proposed agreement, Volvo would transfer a portion of its 48% stake in Polestar to Geely, Volvo announced on Thursday.

A stock turnaround expected
This redistribution of shares follows a slower-than-expected ramp-up at Polestar, combined with a general cooling down of the electric vehicle market, causing its shares to plummet to a record low. Since its listing in the US in 2022 through a merger with a special-purpose acquisition company, or SPAC, Polestar’s shares have fallen by 83%.

Difficult first steps
Like other new electric vehicle brands, Polestar is struggling to make progress, especially since Tesla launched a price war last year. Polestar delivered 54,600 cars in 2023, below its target of 60,000 cars. According to Bernstein analysts, Polestar would need an additional billion dollars in the next 12 months to stay afloat, recommending that the brand should not be independently listed.

Polestar announced last week its intention to cut approximately 450 jobs worldwide, or about 15% of its workforce, due to “difficult market conditions”.

In November, it also stated that it would seek to reduce its reliance on outside assistance, releasing a revised business plan that included obtaining additional loans from Volvo and Geely.

This news could raise questions about the viability of Polestar, which aims to achieve financial balance in 2025. Some analysts have suggested that it might make more sense to integrate Polestar into Geely.

Volvo’s challenges
Volvo, which previously owned Polestar as a performance sub-brand, faces its own challenges. Last year, it began cutting 1,300 jobs as part of an initiative to reduce costs globally.

The automaker is also dealing with software development issues that have delayed the launch of the brand’s new electric models, the EX30 and EX90.

On Thursday, Volvo announced a larger-than-expected increase in its operating profit for the fourth quarter, reporting an operating profit, excluding joint ventures and associates, of 6.7 billion Swedish kronor (644 million dollars), compared to 3.9 billion kronor the previous year.

With information from Automotive News