In the end, it seems our suspicions about Volvo’s growing concerns regarding Polestar were justified. The renowned Swedish automaker has chosen to “step back” from its former sports car subsidiary, opting to sell its shares.

This development has been considered a positive turn for the Gothenburg-based brand. Volvo’s stocks soared by 27%, while Polestar witnessed a decline of 14%. As of the time of writing this article, there have been no official announcements regarding the specifics of Volvo’s withdrawal from Polestar.

Volvo and the Polestar Crisis

As previously suggested, Polestar has been undergoing a challenging period. In early 2024, the Swedish SEB bank—one of the country’s largest—declared the automaker as “worthless,” marking down its valuation from 18 billion SEK to zero.

Volvo, having invested substantial resources in Polestar, of which it currently holds half, began to view it as a burden. Consequently, Volvo has decided to offload all its shares to Geely, which owns the other half and also controls Volvo. This move positions Polestar as a brand wholly owned by Geely, aligning it with the majority of brands within the group. Geely will now be responsible for providing the necessary financial resources for Polestar’s future endeavors.

Björn Annwall, Volvo’s Vice Director, emphasizes the significance of Polestar for Volvo, referring to it as providing “crucial experiences” for the electric transition. Indeed, Volvo, like other automakers, is navigating the challenging shift from gasoline and diesel vehicles to electric ones.

Polestar’s Challenges in the Electric Car Market

Polestar, however, is facing more significant challenges than others due to the increasing presence of electric car manufacturers, both Chinese and non-Chinese, coupled with the slowdown in demand for electric vehicles. Even established Western companies like Volkswagen, General Motors, and Tesla have responded by lowering prices and scaling back production.

According to Berlingske, Volvo doesn’t seem overly concerned about competition from Chinese manufacturers. The premium sector, it argues, has customers who are less troubled by inflation and high-interest rates.

XC40 Recharge

Moreover, Volvo has worked to align the costs of an electric car with those of a combustion engine vehicle, exemplified by models like the compact EX30. However, a caveat to this assertion could be raised: many new entrants, particularly from China, are specifically targeting the premium market where Volvo feels safe.

Returning to Polestar, in the last week of January, it announced the dismissal of 15% of its employees in Sweden as part of a downsizing plan, affecting around 450 employees. Despite Polestar’s ambition to deliver approximately 160,000 cars by 2025, the path ahead appears challenging amidst the prevailing industry headwinds.

Source: Svenska Dagbladet, Berlingske


Related Posts