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Volvo Cars will stop funding its Polestar electric sports car brand and look at selling its shareholding to parent company Geely, as its latest results showed profits had been dragged down by the lossmaking business.
Polestar was spun out of Volvo and listed in 2022, but a key new model has been delayed and its shares have fallen 84 per cent in the past year on investor worries about the global electric vehicle sales slowdown. The business is seeking about $1.3bn of new funding.
Volvo, which owns 48 per cent of Polestar, will consider offloading its shares in the company to Geely, it said on Thursday, which would make the group a significant shareholder in Polestar. Geely’s owner Eric Li already owns a stake in Polestar but the Geely holding company does not.
Geely is “much more of a natural holding company” for Polestar, Volvo Cars’ chief executive Jim Rowan told the Financial Times on Thursday. While Polestar’s first two electric models, the Polestar 2 and 3, share technology with Volvo, its future models will be more closely based on Geely systems, he added.
He said the decision to end funding for Polestar brings “clarity” for Volvo investors. Last year it lent Polestar about $1bn, which will be repaid in 2028.
Polestar’s chief executive Thomas Ingenlath called the changes “totally positive” and said Geely’s “commitment to develop Polestar into an independent strong brand is crystal clear”. He added that talks on raising the $1.3bn were “well progressed”.
Volvo’s decision to cut ties with Polestar comes as the Swedish carmaker tries to boost its share price, which has halved over the past year. Its shares rose a fifth on Thursday following the announcement.
The Swedish carmaker’s profits fell 17 per cent to SKr14bn ($1.3bn) last year including losses from Polestar. Revenues rose 21 per cent to SKr399bn, while Volvo’s margins rose 18 per cent to 6.4 per cent once Polestar was stripped out.
Volvo said it was targeting an 8 per cent margin by 2026, through higher margins on new electric cars, as well as cost cuts across the business.