Volvo and Polestar Are Parting Ways Amid Struggling EV Sales

In the wake of diminishing electric vehicle (EV) sales, automakers Volvo and Polestar will be separating financially. Volvo will no longer support Polestar financially, with Chinese parent company Geely stepping in to take over the operational and financial reins for the fledgling EV maker. Geely is no stranger to taking on car brands — the multinational also owns Volvo and has a 51 percent stake in Lotus.

The Split

According to a report from Car and Driver, Volvo announced in a press release that it will no longer give any money to Polestar. However, they will continue to work together on the research, development, and manufacturing of some vehicles. The press release also states that Geely will likely become a “significant new shareholder” due to Volvo’s departure.

Volvo is an example of the benefit of selling EVs and internal combustion engine (ICE) vehicles as the demand for electric cars continues to decline worldwide. It’s worth noting that the best-selling automaker of 2023, Toyota, managed to take the sales crown even though only 0.926 percent of total units delivered were EVs.

Polestar only sells one model in the United States, the Polestar 2, and as a young company, its lineup is still tiny, though the company is looking to expand it soon. For now, though, Polestar continues to struggle financially due to its tiny lineup and slow rollout of its EVs. According to Car and Driver’s report, Polestar’s shares have declined more than 83 percent since the company went public in June 2022. Meanwhile, Volvo’s stock has risen over 30 percent since the company announced that it would no longer financially support the struggling EV maker.

Polestar addressed its financial issues in Volvo’s press release, stating that the company has worked to reduce its “external funding need” to around “$1.3 billion until” it reaches its “targeted cash flow break-even” point next year. After Volvo bowed out, the EV maker indicated it was making meaningful progress in securing its needed external funds.

Next Steps for Polestar

Outside of Geely swooping in with external funding, Polestar must start selling cars to get things on track. Will parent company Geely deciding to foot the bill make a dent in the situation for an automaker that only sold 6,736 units in the U.S. last year? Polestar sold an anemic 55,000 units worldwide in 2023, according to a report from Autoweek.

While companies like Tesla and BYD are making big moves and showing significant growth in the EV game, Polestar only managed 6 percent year-over-year sales growth. Right now, Polestar is looking like the runt of the litter in the EV market.

However, it has the Polestar 4 bowing in the U.S. this year, which has no rear window. It’s already launched in Australia, Europe, and China. At the same time, the Polestar 3 electric SUV will make its stateside debut in the next few months after the automaker had to delay its release due to software issues. Beyond 2024, Polestar has plans to release an exciting sedan and a stunning roadster, the 5 and the 6, respectively.

If its 2024 offerings don’t make waves in the market, the 5 and 6 are unlikely ever to hit the road, no matter how beautifully Polestar has realized its designs.