Volvo to Dump Most of its Shares in Struggling Polestar

Volvo Cars looks like it is backing away from its struggling former sub-brand Polestar, reporting intentions to dump most of its stake in the company.

The Polestar brand started life as a tuning shop competing against Volvo cars in the Scandinavian Touring Car Championship in the 1990s before being bought by Volvo Cars in 2015 and run as its performance-car wing until being spun off into a standalone battery-electric vehicle company owned jointly by Volvo and parent company Geely.

In a Volvo Cars company statement, the automaker makes its announcement in reaction to Polestar reporting that, after an analysis conducted in 2023, it had to lower the value of its assets related to its Polestar 2 model by $329.7 million, resulting in an impairment charge of $240.5 million.

Reuters reports Polestar has incurred a further charge of about $120 million owing to lower-than-expected demand in some markets, which led to a drop in the value of its unsold cars. Net loss widened to $1.17 billion in 2023 from $481.5 million in the prior year.

Volvo Cars’ statement reads: “Volvo Cars will include an adjustment in its second-quarter results 2024 that will be based on Volvo Cars' ownership of 48.3 % as of year-end 2023. It will, however, be largely offset by positive effects in the second quarter 2024 from the distribution of Polestar shares and decreased ownership to 18%, which was completed on 8 May 2024. The positive effects mainly relate to release of previously eliminated internal profits based on the change of ownership share.”

Following Fisker’s struggle to avoid liquidation, many in the automotive industry fear Polestar could be next of the western BEV makers to hit the skids as U.S.-listed shares of the company fell 3.1% to $0.80. The stock has slumped more than 63% this year.

Demand for premium high-ticket BEVs is slowing dramatically as consumers choose gas-hybrid-powered vehicles without the range anxiety and lack of public charging infrastructure that plagues BEV owners in many nations around the world.

The company had postponed multiple quarterly financial reports, citing accounting misstatements in 2021 and 2022, and has rectified metrics in its 2023 annual results statement.

Polestar reported revenue of $2.38 billion for fiscal year 2023, down 3% from $2.45 billion from 2022, citing higher discounts and lower sales of carbon credits. It also reported a gross loss of $414.7 million for the year, compared with a gross profit of $98.4 million a year earlier.