Volvo shares experienced a significant surge of over 24% following the announcement that the Swedish automaker intends to cease funding its subsidiary, Polestar Automotive. The boost came on the heels of Volvo’s fourth-quarter report, revealing a 10% year-on-year increase in net sales to 148.1 billion Swedish krona ($14.16 billion), contributing to a full-year 2023 total of 552.8 billion krona. The adjusted operating income for the same period rose to 18.38 million krona from 12.17 million in 2022.
In a strategic move, Volvo hinted at transferring control of Polestar, a struggling luxury car brand, to Geely Holding, the majority shareholder in Volvo. The full-year report emphasized that Polestar is entering a promising phase with a strengthened business plan, but Volvo aims to prioritize its core development and is contemplating a potential adjustment to its shareholding in Polestar. This may involve distributing shares to Volvo Cars’ shareholders, potentially making Geely Sweden Holdings a significant new shareholder.
Volvo Cars CEO Jim Rowan characterized this development as a natural evolution in the relationship between the two companies. Having spun out Polestar as a separate entity years ago, Volvo has nurtured and collaborated with Polestar during its transition from a one-car company to a three-car company. Rowan highlighted Polestar’s exciting future with two new cars set to launch in the first half of the year, propelling it into a new growth trajectory.
Despite Volvo Cars currently holding a 44% stake in Polestar since its acquisition in 2015, the luxury electric vehicle brand has faced challenges since its public debut in June 2022, prompting concerns that it might be draining Volvo’s resources. Rowan expressed the belief that now is the opportune moment for Volvo Cars to reduce its shareholding in Polestar, enabling the subsidiary to seek external funding independently.
By doing so, both Volvo and Polestar can concentrate fully on their growth trajectories and essential technology investments in the coming years. The move signifies Volvo’s commitment to strategic focus and resource allocation in line with the evolving needs of both companies.