Volvo Drops 5% As It Reduces Stake in EV Maker Polestar

Volvo Cars has announced a significant reduction in its stake in Polestar, the electric vehicle manufacturer. By planning to distribute 62.7% of its Polestar holdings to shareholders, Volvo aims to refocus its resources towards its own transformation in the evolving automotive sector. 

Shares in Volvo fell by over 5% in early trading in London, reflecting investor reaction to the restructuring of assets.

The proposed change would leave Volvo with an 18% stake in Polestar. Volvo executives have emphasized the continued operational and financial ties between the two companies, justifying the retained stake as a means to maintain influence and collaboration with Polestar.

This adjustment follows Volvo's announcement earlier in the month to halt funding to Polestar, indicating a recalibration of its investment in the electric vehicle sector amidst Polestar's performance challenges. 

Polestar, once celebrated as a shiny new thing in the electric vehicle market, has faced hurdles including lower-than-expected demand, inflationary pressures, and competitive pricing dynamics, notably influenced by Tesla's strategies.

The reduction in Volvo's stake comes at a time when Polestar cut its workforce by 15% and acknowledged falling short of its 2023 delivery targets.

Despite these changes, Geely Holding, Volvo Cars' majority shareholder, affirmed its commitment to supporting Polestar operationally and financially, highlighting the interconnectedness of the companies within the broader automotive landscape. 

This move marks a pivotal moment for Volvo as it navigates through the complexities of the electric vehicle industry, aiming to optimize its portfolio and strategic focus amidst shifting market conditions.