Volvo will stop funding Polestar, in a move that will give its parent, China's Geely, greater control of the EV brand.
But according to Volvo, in terms clarified on Friday, it won't completely let go. It will retain about 18% of Polestar shares, while the rest of it will go to Volvo's shareholders—allowing its majority owner Geely to boost its share.
The news comes after Polestar announced that it missed already-reduced 2023 delivery targets. The brand's shares have plunged since it went public in June 2022 via a merger with a special purpose acquisition company (SPAC).
Geely owns around 80% of Volvo, so this would give the Chinese automaker more direct control over Polestar. It might also make it easier for Geely to sell down its stake in Volvo in the future, Reuters noted, adding that Polestar's stock hasn't performed especially well since a 2021 initial public offering (IPO), either.
In a statement from the automaker, Volvo CEO Jim Rowan said that it was "logical" for it to keep some influence in Polestar. Earlier in the month, in an interview with CNBC, Rowan called the move a "natural evolution" for Polestar, saying the time was right to look for other sources of funding for the brand to continue its growth. For now though, the two brands are connected by more than just stock ownership.
Polestar began as a racing team closely aligned with Volvo, and it evolved into a performance brand and factory "tuner" for Volvo before Geely launched it as a standalone brand in 2017. That resulted in the Polestar 1 plug-in hybrid first, in 2019, followed by the Polestar 2 in 2020. The U.S.-built Polestar 3 electric SUV is due this year, and a smaller Polestar 4 electric SUV built in South Korea will arrive next year.
Polestar has been pulling in its own direction already, with plans to make its own motors and other propulsion components. The brand's next model, the Polestar 3 SUV, still shares many components with the Volvo EX90, though
2024 Polestar 2 single motor
That leaves the Polestar 2 as the brand's only model for now, but it's been steadily improving. The 2024 Polestar 2 marks a switch to rear-wheel-drive and rear-wheel-biased, and it's a better car than what originally arrived.
In the U.S. Polestar has been able to take advantage of Volvo's dealer service network. With more distance between the brands, that may cast some uncertainty into whether the arrangement will continue.
UPDATED, adding information to clarify a report originally published Feb. 2