The Volvo C40 Recharge electric SUV is on display at Volvo’s “Volvo Cars New Era” press conference held at the Shilla Hotel in Seoul, South Korea on March 14, 2023.
Han Myung-koo | Wire Image | Getty Images
Volvo Cars Shares surged more than 24% on Thursday after the Swedish automaker announced it would stop funding subsidiary Polestar Automotive.
Volvo reported earlier in the day that fourth-quarter net sales rose 10% annually to 148.1 billion Swedish kronor ($14.16 billion), bringing its full-year 2023 total sales to 552.8 billion Swedish kronor. Adjusted operating income jumped to 18.38 million crowns from 12.17 million crowns in the same period in 2022.
The group announced it may hand over management of troubled luxury car brand Polestar to Volvo’s major shareholder Geely Holding.
Volvo said in its full-year report that Polestar “is entering the next exciting stage of its journey with strengthened business plans and cost actions, but the parent company’s focus is on developing Volvo cars and focusing its resources accordingly.”
The company added: “We are therefore assessing possible adjustments to Volvo Cars’ stake in Polestar, including a distribution of shares to Volvo Cars shareholders. This could result in Geely Sweden Holding becoming a significant new shareholder.”
Volvo Cars Chief Executive Jim Rowan told CNBC’s Silvia Amaro on Thursday that this was a “natural evolution” of the relationship between the two automakers.
“Obviously, we spun off Polestar as an independent company a long time ago, and we’ve been incubating Polestar and working with Polestar for many years since then,” Rowan said.
“Right now, Polestar… they have a very exciting future ahead of them, they’ve transformed from a one-car company to a three-car company, and they’re going to launch two completely new cars very soon, in fact. It’s in the first half of the year and that will put them on a new growth trajectory.”
Volvo Cars acquired Polestar in 2015 and holds about 44% of the company, but the fellow luxury electric car brand has struggled since its launch in June 2022, and analysts worry that it has become a drag on Volvo’s resources.
Rowan said that now is the best time for Volvo Cars to start reducing its stake in Polestar and “find funds outside of Volvo.”
“This allows us and Volvo to fully focus on our growth journey and in particular some of the technology investments we need to make over the next two to three years.”
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