Volvo: Record Year and Withdrawal from Polestar?

2023 was a mixed year in Torslanda, where Polestar and Volvo have their headquarters: While Polestar missed its targets and now has to lay off employees, it was a record year for Volvo: With the sale of 113,419 electric cars, representing a 70 percent increase over the previous year and a 16 percent share of total global sales volume, Volvo Cars further solidified its position in the electric vehicle market. Additionally, the record sales of 708,716 vehicles of all powertrains led to a revenue increase of 21 percent to 399.3 billion Swedish kronor and an operating profit increase of 43 percent.

However, Polestar's result is causing concern, prompting Volvo to now review its stake and further investments. Electric car manufacturer Polestar was able to increase its 2023 deliveries to 54,600 by only a thin six percent. At that time, the Swedish-Chinese Volvo sister brand had delivered 51,500 vehicles to customers.

This step marks a turning point in Volvo's participation strategy and underscores the effort to more precisely allocate its financial resources to the further development of its technology and production infrastructure. The decision not to pump further financial resources into Polestar and instead review the stake was revealed in the course of publishing the business results for 2023. Volvo Cars is considering transferring shares to its shareholders to better focus on its own ambitious goals.

Geely will have to expand its influence on Polestar and take greater financial risks

The realignment also encompasses Geely strengthening its influence on Polestar through its Swedish subsidiary, while Volvo Cars is extending an existing loan to Polestar by 18 months. Despite the financial restructuring, the Swedes emphasize that Polestar is entering a promising growth phase with a robust business plan and restructured management, even though the brand missed its targets for 2023 and had to undergo significant staff reductions.

Originally a private company specializing in modifying Volvo models, Polestar has evolved into an independent electric car brand under the Volvo and Geely umbrella. The newly announced financial decoupling between Volvo Cars and Polestar is intended to leave operational synergies in research and development, manufacturing, and sales unaffected, as these cooperations continue to benefit both parties.

The EX30 is expected to achieve very good margins

By 2025, Volvo plans numerous investments encompassing electrification, software, computing architectures, connectivity, data collection and analysis, mega-casting, next-generation e-motors, and battery technology. These strategic investments are expected to lead to significant cost savings and profitable growth in the next generation of Volvo electric cars. Additionally, Volvo aims to improve the margins of its electric vehicles, starting with the current EX30 model, which is expected to achieve gross margins of between 15 and 20 percent.