Volvo, an Early Electric Car Adopter, Cuts off Funding for EV Affiliate Polestar — 2nd Update

By Dominic Chopping

STOCKHOLM--Volvo Car said it won't provide further funding to Polestar, the electric-car maker it created with Volvo's Chinese owner Geely--the latest EV retrenchment by the global auto industry.

The auto industry's pivot to electric vehicles has been rocked by setbacks this year, just as a flood of new battery-powered models is hitting showrooms.

Earlier this week, French automaker Renault said it has decided to cancel the initial public offering of its electric-car unit Ampere. Ford, meanwhile, has slashed production of its electric F-150 Lightning, a pickup truck that has generated major buzz since its launch. Rental-car firm Hertz has said it was dumping about one-third of its EV rental car fleet, replacing the cars with gas-engine vehicles.

Also earlier this week, Tesla--the world's most valuable automaker--warned of notably lower growth this year. Data earlier this year has shown a slowdown in EV sales growth in the U.S., automakers delaying or cutting back on plans and anxiety rising among dealership owners.

In a sign of investor unease about automakers' march toward an EV future, Volvo shares surged more than 20% Thursday on its decision to cut off funding to Polestar.

Volvo and Geely founded Polestar as a stand-alone EV maker, separate from Volvo's substantial in-house effort to go electric. Through a special-purpose acquisition company merger, the two listed it on Nasdaq in 2022.

Volvo has provided Polestar with loans totaling $1 billion. On Thursday, it said it will extend the repayment period for the existing convertible loan by 18 months to the end of 2028. But it said it would be concentrating its financial resources on Volvo's own needs.

The company said it was also evaluating a potential adjustment to its shareholding in Polestar, including a possible distribution of shares to Volvo Cars' shareholders, including Geely. "This may result in Geely Sweden Holdings becoming a significant new shareholder," it said.

Meanwhile, Volvo posted a rise in fourth-quarter revenue, driven by higher volumes and said it expects the growth rate in retail sales to increase this year as long as there are no major disruptions.

Net profit attributable to shareholders rose to 3.11 billion Swedish kronor ($299.2 million) from SEK2.46 billion a year earlier, as revenue rose 4% to SEK109.44 billion.

Analysts polled by FactSet had projected a net profit of SEK4 billion on revenue of SEK108.35 billion.

"We remain firm on our ambition to report an EBIT margin above 8% for 2026, and now do so based on expected revenues between SEK550 billion-SEK600 billion," Chief Executive Jim Rowan said.

"By the end of 2026, this calculates to a revenue compound annual growth rate of 11%-15% from 2023 to 2026."

In terms of total 2024 retail deliveries, Volvo aims for a higher year-over-year growth rate than in 2023.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

February 01, 2024 05:20 ET (10:20 GMT)

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