Volvo to stop funding Polestar as Geely readies bailout

Volvo to stop funding Polestar as Geely readies bailout

Automotive News Europe — 2024-02-01

Automotive Industry

Volvo Cars will stop providing funding to Polestar and will transfer responsibility for the brand to China's Geely, which is Volvo's majority shareholder.

Volvo's heavy involvement in Polestar, where it owns about 48% of the EV maker's shares, has been criticized by analysts who see the stake as a drag on Volvo's resources.

Zhejiang Geely Holding Group, the parent of both brands, is preparing to provide more funding to Polestar as part of a potential redistribution of shares to relieve pressure on Volvo.

Geely said on Thursday that it will fully support Polestar as an independent brand. This will not affect its 79%

Geely also welcomed Volvo's decision to focus its resources on its own development.

The proposed deal would see Volvo transfer some its 48% stake in Polestar to Geely, Volvo said on Thursday.

The redistribution of shares follows a slower-than-expected ramp up at Polestar, together with a broadening EV cooldown that has dragged its shares to a record low.

Since its US listing in 2022 via a merger with a special purpose acquisition company, or SPAC, Polestar's shares are down 83%.

Like other new EV brands and startups, Polestar has struggled to make headway, particularly since Tesla started a price war last year.

Polestar delivered 54,600 cars in 2023, short of its target of 60,000 cars.

Polestar would need to inject an additional $1 bn over the next 12 months to keep it afloat, analysts at Bernstein said in a note last week, advocating the nameplate should not be independently listed.

Polestar last week said it plans to cut about 450 jobs globally, or about 15% of its workforce, amid "challenging market conditions."

It also said in November that it would try to reduce its reliance on external help, publishing a revised business plan, which included getting additional loans from Volvo and Geely.

The news could raise questions about the viability of Polestar, which aims to become cash flow break-even in 2025. Some analysts have said it could make more sense to fold Polestar into Geely.

Volvo's battles

Volvo, which previously owned Polestar as a sporty sub-brand, has been fighting its own battles and last year started to cut 1,300 jobs, part of a drive to reduce costs across global operations.

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

Volvo on Thursday reported a bigger than expected rise in fourth-quarter operating earnings, posting operating income excluding joint ventures and associates of 6.7 bn Swedish crowns ($644 m), up from a year-earlier 3.9 bn.