Swedish automaker Volvo Cars delivered a quarterly beat to close out 2023, then dropped a bomb: it may hand over control of struggling electric vehicle subsidiary Polestar to its majority shareholder Geely. Volvo shares roared over 20% higher on the news while Polestar stock spiked 10%.
So what does this dramatic move mean for investors in both companies? Let’s break it down.
Volvo posted rising sales and profits in its latest report Thursday, with Q4 net revenue up 10% year-over-year to 148.1 billion Swedish krona ($14.2 billion) and full-year sales surpassing 550 billion krona. But it was the company’s announcement regarding unprofitable Polestar that stole the show.
Volvo said it is “evaluating a potential adjustment” to its 44% stake in Polestar and may distribute shares to Volvo shareholders. This would likely make Geely, which already owns around 79% of Volvo, into a significant direct owner of Polestar as well.
Essentially Volvo is ready to stop bankrolling Polestar’s cash burns so it can focus resources on its core business. Volvo Cars CEO Jim Rowan said Polestar has “moved from being a one-car company to a three-car company” and has “two brand new cars coming out very shortly.” With exciting new EV models on deck, Polestar appears poised to stand on its own.
And Geely, an Chinese automotive group with deep pockets, seems willing to take over custody. Polestar welcomed Geely as a “potential new shareholder” and said Volvo will remain a key partner going forward.
For Volvo investors, the move signals the companyRowan said now feels like the right time for Volvo Cars to begin reducing its shareholding of Polestar and for the company to “look for funding outside of Volvo.”
“That allows us and Volvo as well to fully focus on our growth journey, especially some of the technology investments that we need to make in the next two-three years.”
In a statement Thursday, Polestar said it “welcomes Geely Sweden Holding as a potential direct new shareholder,” and that Volvo Cars will “remain a strategic partner in areas across R&D, manufacturing, after sales and commercial.”
“With our growing line-up of exclusive, performance cars, Polestar is in one of the most promising phases of its development,” Polestar CEO Thomas Ingenlath said.
“We look forward to continued cooperation with Volvo Cars as well as benefiting from even greater synergies with Geely on future orientated technologies.” can stop diverting funds to prop up Polestar and instead invest fully in its ambitious electrification and technology roadmap.
With Polestar in Geely’s hands and exciting new EVs hitting showrooms, both Volvo and its former subsidiary may finally be positioned to realize their full potential in the years ahead.