Has Volvo Offloaded Polestar To Geely?

Volvo Cars announced its decision to cease financial support for Polestar Automotive Holding, transferring responsibility for the struggling luxury car brand to Geely Holdings, Volvo's top shareholder in China. The news significantly boosted the Swedish automaker's stock by over 30% at market open.

Analysts have criticised Volvo Cars' substantial involvement in Polestar, where it owns approximately 48% of the shares, viewing this stake as a burden on Volvo's resources. Like other emerging EV brands, Polestar faced challenges, especially with the impact of a price war initiated by Tesla last year.

Earlier this month, Polestar revealed that it fell short of its already-reduced delivery targets for 2023. Since going public in June 2022 through a SPAC merger, Polestar's shares have seen a decline of just over 83%.

Volvo Cars also contemplated transferring Polestar shares to its own shareholders, potentially making Geely a major direct owner in the brand.

In a separate statement, Geely welcomed Volvo's decision, expressing its commitment to providing full operational and financial support to the independent Polestar brand. Crucially, Geely clarified that this support would not lead to a reduction in Geely Holding's shareholding in Volvo Cars. However, analyst Bernstein suggested the possibility of the Geely ecosystem selling down its shares in Volvo.

Facing challenging market conditions, Polestar announced plans to cut around 450 jobs globally, constituting about 15% of its workforce. The company, in Nov, aimed to reduce its reliance on external assistance by publishing a revised business plan, including seeking additional loans from both Volvo and Geely.

The developments raise questions about the viability of Polestar, and if it would be better to integrate Polestar into Geely.