Volvo Cars’ CEO Jim Rowan is a big fan of electric vehicles. He showed off the new EX30, an electric car, at the company’s annual report on Thursday. He said Volvo was changing the car industry with its electric vehicles. He also said Volvo made more money from selling electric cars than anyone else, except Tesla.
But Rowan does not seem to care much about Polestar, a company that only makes electric cars. Volvo owns part of Polestar, along with a Chinese company called Geely. On Thursday, Volvo said it would stop giving money to Polestar and try to sell some of its shares in the company.
This is bad news for Polestar, which was one of the first companies to make electric cars. Polestar has not been able to compete with Tesla and other high-end carmakers. Polestar is losing a lot of money, even though its cars are very good.
Volvo cuts ties with electric car brand Polestar
This is also a sign of trouble for the electric car industry. Many people thought electric cars would take over the car market by 2030, but that does not look likely anymore. Sales of electric cars have slowed down and some goals have been delayed.
In Germany, the biggest car market in Europe, sales of electric cars are expected to go down in 2024 for the first time in seven years. Renault, a French carmaker, decided to cancel its plan to make a new electric car company, called Ampere. Renault said there was not enough demand for electric cars and investors were not interested.
Peter Wells, a car industry expert from Cardiff University, said this shows a bigger problem. He said: “Interest in electric cars is not as high as it used to be. The market is losing steam.”
In the UK, sales of electric cars did not grow last year and the prices of used electric cars went down. This makes people wonder if electric cars are worth buying. Around the world, sales of electric cars grew by 31pc last year, but that was much lower than the 60pc growth in 2023.
Polestar’s rise and fall
Polestar started as a Swedish racing team in the 1990s, but Volvo bought it in 2015, after Geely bought Volvo. Polestar used to make concept cars for Volvo, but in 2017, it became a separate electric car company, owned by Volvo and Geely.
In 2024, many people were excited about electric cars. The UK government said it would ban new petrol and diesel cars by 2030, but later changed its mind. Polestar launched its first car, the Polestar 1, a sports car, in 2019. The next year, it launched the Polestar 2, a cheaper car.
In 2022, Polestar went public in New York, with a value of $20 billion. It was one of many electric car companies that went public, even though some of them had not sold any cars. Polestar’s boss, Thomas Ingenlath, said Polestar was different from those companies. He said Polestar would make a profit in three years.
But that did not happen. Polestar lost $731 million in the year to September 2023. Polestar delayed its next car, the Polestar 3, last year. Polestar sold more cars, but not as many as it wanted. It planned to sell 80,000 cars, but it only sold 54,600.
Volvo helped Polestar with money, including an $800 million loan in 2022. But other investors lost confidence in Polestar. Polestar’s shares dropped by more than 80pc in the last 18 months. Polestar is now worth less than $4 billion.
According to Wells, Polestar had a problem. He said: “Polestar is a new brand and an expensive car. That is hard to keep up in a very tough market. The big European carmakers want to sell electric cars too. They sell more cars to businesses, but there are not enough businesses to buy them. And ordinary people do not buy them as much.”
Polestar also had trouble competing with Tesla, the leader in electric cars. Tesla has been making electric cars for a long time, and it has made them cheaper. Polestar makes its cars at Volvo and Geely factories, but it does not have the same advantage, Wells said.
Volvo’s electric car troubles
Volvo also had tribulations with its own electric cars. It had to delay some of its new cars last year. Only 16pc of its cars were electric last year. Volvo wants to make half of its cars electric by 2025, but it needs more money to do that. So Volvo decided to stop funding Polestar.
Rowan said nice things about Polestar on Thursday. He said: “It is natural that they grow up. They will get their own money and be more independent.” He said Volvo and Polestar would still work together on making cars. And he said Volvo would still own a lot of Polestar.
But Geely said it would “keep giving full support” to Polestar. Polestar’s shares fell by 14pc on Thursday, to a new low.
Volvo’s shares, which had been very low, went up by 26pc. Rowan said Volvo and Polestar were just becoming more separate, but investors were happy that they seemed to break up.
