Volvo to Cut Funding for Polestar in Major Transformation Phase
In a shocking announcement, Swedish carmaker Volvo revealed that it will no longer provide financial support to the all-electric brand Polestar. The decision comes as Volvo evaluates a potential adjustment to its shareholding in Polestar, marking a decisive transformation phase.
Geely, a Chinese giant and current owner of both Volvo and Polestar, might acquire Volvo’s shares in Polestar, making it a significant new shareholder. Volvo currently holds a 48-percent stake in the brand.
While Volvo’s decision to pull the plug on financing may seem drastic, Polestar will have some breathing room. The existing convertible $1 billion loan repayment period will be extended by 18 months, giving Polestar until the end of 2028 to repay the loan.
Volvo’s CEO Jim Rowan expressed his belief that Geely is a more suitable holding company for Polestar. Geely will continue to provide operational and financial support to Polestar, while Volvo will redirect funds towards its own EV projects. This means that Polestar, which was launched as a standalone brand in 2017, will have to navigate the industry without the assistance of Volvo. Prior to 2017, Polestar operated as Volvo’s performance-oriented division.
In addition to the decision to cut funding, Volvo announced an impressive 43 percent increase in profits last year, marking a record in the company’s 97-year history. The carmaker sold a total of 113,419 electric and electrified vehicles globally, representing a 70 percent increase compared to 2022.
Out of the total sales figure, 35,000 vehicles were sold in the United States, with 13,609 of them being electric. EVs accounted for 16 percent of Volvo’s overall sales.
Unfortunately, the situation is quite different for Polestar. The brand recently revealed plans to lay off 15 percent of its workforce worldwide in an effort to reduce costs.
Polestar is relying on its newly introduced SUV, the 3, to gain traction and revitalize the company after failing to meet sales targets last year. The Polestar 4 coupe SUV has also made its way to Australia and Europe. However, Polestar continues to face challenges in a market dominated by Tesla, which consistently engages in price wars whenever Polestar falls behind.
Furthermore, the global slowdown in EV sales has had a negative impact on Polestar, considering its almost exclusively electric lineup, with the exception of the Polestar 1, a plug-in hybrid.
Despite the difficulties, Polestar remains optimistic and views this move as an opportunity to establish itself as an independent and robust brand.
