Volvo will no longer fund EV startup Polestar

  • Stock Market News
Volvo will no longer fund EV startup Polestar
Credit: © Reuters.

Volvo Cars announced on Thursday that it will no longer financially support Polestar Automotive (NASDAQ: PSNY ) and will transfer responsibility to China's Geely Holding, Volvo's top shareholder. The announcement led to a more than 30% increase in Volvo's stock at market open, while PSNY sank more than 12%.

Critics have questioned Volvo's heavy involvement in Polestar, where it owns approximately 48% of the shares, viewing it as a drain on Volvo's resources. Like other EV brands, Polestar faced challenges, exacerbated by a price war initiated by Tesla last year. Polestar recently revealed it fell short of its reduced delivery targets for 2023.

Since going public in June 2022, Polestar's shares have plummeted by over 83%. Volvo Cars is contemplating transferring Polestar shares to Volvo's shareholders, potentially making Geely a significant direct owner in the brand.

Geely in a separate statement welcomed Volvo's decision to focus its resources on its own development.

"Geely Holding will continue to provide full operational and financial support to the independent exclusive (Polestar) brand going forward," the Chinese group said.

However, analysts at Bernstein believe that there is a strong possibility that Geely could sell down its shares in Volvo.

Shares of PSNY are down 12.31% in early trading Thursday morning.

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