Volvo drops Polestar

In fact, Geely was already the main investor in Polestar to the extent that 80% of Volvo shares are owned by Geely. In the future, Volvo will therefore no longer draw on its own funds to ensure investments in Polestar. By freeing itself from this financial burden, Volvo will be able to improve its profitability and increase its investments in its own range of vehicles.

The stock markets immediately reacted well with a sudden increase of more than 30% in the value of Volvo Cars shares (VOLCARb.ST) before stabilizing in the morning at an increase of a little more than 20%, or around $34 per share. Despite this positive boost to Volvo’s stock, we are still far from the value of nearly $56 in February 2023.

Volvo is not giving Polestar the chance to see the results of its recent initiatives, including the announcement of the elimination of 450 jobs in the organization, which represents approximately 15% of employees. Following a formal request, Polestar hoped to see the injection of additional loans from Volvo and Geely in order to give itself the tools to ensure its financial recovery. On this account, Polestar hoped to exit deficits during the year 2025.

Being directly affected, Geely Holding did not remain silent in the face of this announcement from Volvo Cars. Geely welcomes Volvo’s desire to ensure its destiny without having to support Polestar. The extent of the investment will have to be seen, but Geely does not want to abandon Polestar: “Geely Holding will continue to offer all operational and financial support to the exclusive and independent Polestar brand in the future. »

Our opinion

Polestar is on a financial tightrope. So much so that we are entitled to wonder if the company will be able to weather the storm. In 2023, overall sales targets were initially 80,000 vehicles worldwide. As we are still waiting for the launch of SUVs (3) and sedans (4), we are focusing here on a single model, the Polestar 2.

However, faced with a slowdown in demand and very strong pressure from other manufacturers, Tesla not to mention it, Management forced a 25% reduction in forecasts to 60,000 vehicles. Even taking into account, overall, for the year 2023, Polestar has only sold 54,600 vehicles. We must make the comparison, Tesla sold more than 500,000 Model 3s in the same period. It is certain that the two companies do not have the same production capacity, but you should know that the Chinese factory in Luqiao is not operating at full capacity on the Polestar 2 assembly line.

Although Tesla sets the standards in the world of electrification, the Polestar 2 is far from being a dunce. The manufacturer is constantly improving it, notably in 2023 then in 2024, to keep the product up to date. Additionally, Tesla is extremely aggressive with pricing and hurts anyone who messes with it. However, the 2 is superior to the Tesla 3 in many ways and has demonstrated superior reliability to the 3 over the years. She’s not perfect, but certainly doesn’t deserve such great unpopularity.

With this announcement from Volvo, it is difficult to know how Geely will manage Polestar. Polestar plans to launch two new models in 2024 with the SUV 3 ($99,900), built on the same platform as the Volvo EX90 and the bold 4 sedan (estimated between $75,000 and $95,000). If we look at Geely’s attitude towards Lotus, another of its acquired divisions, Chinese investments have enabled the creation of a collection of new products including the Evija, Emira, Electre and Emeya. Polestar was seeking to position itself higher up the range than Volvo, but if the company wants to make profits and move forward, it should look at the design of a more compact and, above all, more affordable model to gain market share. This is all the more true since Tesla does not hide its intentions to launch a US$25,000 model in the coming years.