Volvo Cars to Dilute Stake in Polestar: Strategic Shift Sparks Market Reaction

Shares of Volvo Cars experienced a decline on Friday following the announcement that the company intends to reduce its ownership stake in electric vehicle manufacturer Polestar by distributing 62.7% of its shares to its shareholders. The decision, as stated by the company in a Friday statement, aims to “enable Volvo Cars to concentrate its resources on the next phase of its transformation.”

At around 10:00 a.m. London time, the company’s stock was trading over 5% lower, though it managed to recover some of its earlier losses. Pending approval during the company’s annual general meeting in March 2024, Volvo is set to retain approximately 18% of Polestar’s shares.

Jim Rowan
Jim Rowan- President and CEO of Volvo

Volvo Cars President and CEO, Jim Rowan, explained, “As we have significant operational collaborations with Polestar and a financial relationship, it is logical for us to retain influence through a smaller 18.0 percent stake in Polestar.”

This move comes on the heels of the company’s recent announcement that it would cease funding for the struggling Polestar brand and consider adjustments to its holdings in the electric vehicle maker. Rowan characterized these changes as a “natural evolution” in the relationship between the two automakers. Polestar, once hailed as a promising electric vehicle company, has encountered difficulties in achieving success.

Pending approval, Volvo retains an 18% stake in Polestar
Pending approval, Volvo retains an 18% stake in Polestar, enhancing operational collaboration.

Earlier this year, it revealed plans to reduce its workforce by approximately 15%, citing “challenging market conditions.” In January, Polestar disclosed that it had fallen short of its 2023 delivery target due to factors such as low demand, ongoing inflation, and intense price competition fueled by rival electric vehicle manufacturer Tesla.

These challenges have led analysts to question its relationship with Volvo. Volvo Cars clarified on Friday that its majority shareholder, Chinese automotive company Geely Holding, “would continue to provide operational and financial support to Polestar.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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