Volvo Car Halts Funding for Polestar Electric-Car Maker

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Industry Setbacks Amidst the Electric Vehicle Boom

The global auto industry’s transition to electric vehicles has encountered a series of setbacks in recent times. This comes at a time when there is a surge in the number of new battery-powered models entering the market.

Renault, a leading French automaker, recently announced the cancellation of the IPO for its electric-car unit, Ampere. Additionally, Ford has scaled back production of its highly anticipated electric pickup truck, the F-150 Lightning. The decision by rental-car firm Hertz to replace one-third of its EV rental fleet with gas-engine vehicles further reflects the challenges faced by the industry.

Unfavorable developments are also emerging from leading electric vehicle manufacturer Tesla, whose growth projections for this year have been lowered. Earlier in the year, data showed a slowdown in EV sales growth in the U.S., prompting some automakers to delay or reduce their electric vehicle plans. This has led to increasing concerns among dealership owners.

Investor Reaction to Volvo’s Decision

Against this backdrop, Volvo Car has made a significant move by announcing that it will no longer provide further funding to Polestar. Polestar was established as an electric vehicle manufacturer by Volvo and its Chinese owner Geely, separate from Volvo’s extensive in-house electric vehicle efforts. The company was listed on Nasdaq in 2022 following a merger with a special-purpose acquisition company.

Interestingly, this decision by Volvo has prompted investor enthusiasm, with the company’s stock surging more than 20% on Thursday. This suggests a degree of unease among investors regarding the industry’s push towards an electric vehicle future.

As the auto industry continues to grapple with challenges and reassess its strategies, it is evident that the road to widespread electric vehicle adoption is not without hurdles.

Volvo Extends Repayment Period for Polestar Loan

Volvo has announced that it will extend the repayment period for the existing loan provided to Polestar by 18 months, pushing the deadline to the end of 2028. However, Volvo clarified that it will prioritize its financial resources towards its own needs.

Additionally, the company is currently assessing a potential adjustment to its shareholding in Polestar. This includes considering the distribution of shares to Volvo Cars’ shareholders, including Geely. As a result, Geely Sweden Holdings may become a significant new shareholder.

In positive news, Volvo reported an increase in fourth-quarter revenue, citing higher volumes as the main driving force. The company remains optimistic about the growth rate in retail sales for the coming year, barring any major disruptions.

Net profit attributable to shareholders rose to 3.11 billion Swedish kronor ($299.2 million) from SEK2.46 billion in the previous year. Revenue also saw a 4% increase, reaching SEK109.44 billion.

Analysts had projected a net profit of SEK4 billion on revenue of SEK108.35 billion, according to FactSet.

Chief Executive Jim Rowan expressed confidence in achieving their goals, stating, “We remain firm on our ambition to report an EBIT margin above 8% for 2026.” He further explained that this target is based on expected revenues between SEK550 billion-SEK600 billion and would result in a revenue compound annual growth rate of 11%-15% from 2023 to 2026.

Looking ahead, Volvo aims to achieve a higher year-over-year growth rate for total retail deliveries in 2024 compared to 2023.

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