The Volvo Polestar is here, and it’s not looking good for the Swedish brands

Polestar, the electric vehicle (EV) brand launched by Volvo, is facing a challenging road despite its impressive lineup and commitment to sustainability. Their vision for a climate-neutral production car by 2030 (Polestar 0 project) captured the imagination, but financial realities threaten their progress. Early acclaim for the quality and design of Polestar vehicles, like the head-turning Polestar 2 and the luxurious Polestar 5 GT on the horizon, hasn’t translated to financial success. But it might be the end to their partnership and Volvo is looking to find its own EV series. Will this be the end to Polestar?

Who is Polestar?

Polestar isn’t just a car company; it’s a Swedish brand on a mission. In Gothenburg, Sweden, they use design and technology to push the automotive industry toward a sustainable future. Their focus is on high-performance electric vehicles (EVs), with a goal of having five on the road by 2026.

We’ve already seen the Polestar 2, a stunning electric performance fastback in 2019. The Polestar 3, an SUV built for the electric age, joined the lineup in late 2022. Currently, drivers can get behind the wheel of the Polestar 4, a unique SUV coupé that began its rollout in phases throughout 2023 and into 2024. Looking ahead, the future is electric for Polestar, with the Polestar 5, a four-door GT, and the Polestar 6, an electric roadster, both on the horizon.

But Polestar’s ambition goes beyond just creating exciting electric cars. They’re committed to making a real difference in the fight against climate change. Their Polestar 0 project is a groundbreaking initiative with the audacious goal of achieving a truly climate-neutral production car by 2030. This isn’t just about building a clean car; it’s about inspiring a sense of urgency within the automotive industry to move towards zero emissions.

History of Volvo Backing Polestar

Did you know Polestar started as a Swedish racing team in 1996 called Flash Engineering? It’s not that ancient compared to Volvo’s first appearance in 1927 in Gothenburg, Sweden, but you can see how both companies started on their own feet. The company only aimed to compete in the Swedish Touring Car Championship and take that Lightning McQueen win. However, the owner sold its assets to Volvo in 2005. That’s not how Polestar was born, though Volvo is not only a single parent to the new company; it’s a partnership between the Swedish Volvo and the Chinese Geely. Volvo’s parent company is also Geely.

Why is Polestar falling?

Polestar, a luxury electric vehicle (EV) brand launched by Volvo, is facing a tough road. The company fell short of its 2023 sales target, which had already been low for several times. This sales slump and ongoing financial losses have left Polestar needing a significant cash infusion of $1.3 billion just to break even in 2025. Their ability to raise this capital is hampered by a staggering 87% drop in stock price since their June 2022 debut.

To prevent collapse, Geely, the majority shareholder of Volvo, has stepped in to take over funding for Polestar. This financial backing is crucial for Polestar’s continued operations. Geely’s involvement highlights the broader challenges facing many EV startups. Developing and producing electric vehicles is expensive, and the initial years often have significant financial losses. These struggles are compounded by a recent slowdown in EV demand growth and a shift in investor sentiment, with less tolerance for ongoing financial losses. The situation could lead to consolidation within the EV industry, with smaller players like Polestar being absorbed by larger, more established automakers.

Why has Volvo dropped Polestar?

Volvo’s decision to sever financial ties with Polestar, its once promising electric vehicle (EV) brand, reflects the challenges facing the broader EV industry and Polestar’s own internal hurdles.

The initial euphoria surrounding electric vehicles has cooled considerably on the industry side. Once projected to be exponential, sales growth is expected to decline in major markets like Germany in 2024. This slowdown has forced companies to revise ambitious sales targets and re-evaluate their financial forecasts. Furthermore, competition in the EV space has intensified dramatically. Established automakers are aggressively entering the market with their own EV offerings, while low-cost Chinese manufacturers are putting pressure on prices, sparking price wars in key regions. Even Tesla, the current leader in the EV sector, is facing growth slowdowns, indicating a more cautious market than previously anticipated.

For its part, Polestar has struggled to keep pace with this evolving landscape. Despite critical acclaim for the quality and design of its vehicles, the company remains deeply unprofitable. Polestar fell short of its ambitious sales targets in 2023, a troubling sign for a company still in its early stages. This lackluster performance and a broader market slowdown have sent Polestar’s stock price plummeting. These financial woes have made it difficult for Polestar to secure additional funding, further hindering its ability to compete effectively.

What is Volvo facing?

Volvo is facing challenges in ramping up its in-house electric vehicle development. Thus, they are no longer willing to shoulder the financial burden of supporting Polestar. The resources needed to propel Volvo’s EV ambitions necessitate a shift in priorities, leaving Polestar on its own to navigate the increasingly competitive marketplace. While Volvo maintains that Polestar’s newfound independence is a “natural evolution,” the decision suggests a diminished confidence in Polestar’s ability to achieve profitability in the current climate. Investors seem to share this sentiment, with Polestar’s stock price dropping sharply on the news, while Volvo’s stock price conversely experienced a significant jump. The parting of ways between Volvo and Polestar underscores the harsh realities of the EV market, where only well-funded companies with a clear path to profitability will likely survive.

What the Volvo and Polestar disagreement means to the EV industry

The parting of ways between Volvo and Polestar signals a strategic shift within the electric vehicle (EV) industry, with potential ramifications for companies and consumers.

Chinese automaker Geely, already a major player through its ownership of Volvo, will take the reins at Polestar. This strengthens Geely’s position in the EV market, particularly in the US, where its other brands haven’t succeeded. For Polestar, this translates to more freedom in design and engineering. This could lead to a more distinct brand identity, potentially featuring a bolder design aesthetic influenced by Geely and potentially introducing more advanced Chinese EV technology to American consumers.

Volvo’s motivations for maintaining a partial stake in Polestar are likely twofold. First, continued collaboration on platforms and technology sharing could still be beneficial. Second, a thriving Polestar under Geely could indirectly positively reflect on Volvo.

In the short term, things will likely remain unchanged for current Polestar owners. They’ll likely still be able to rely on Volvo service centers for maintenance. However, the long-term picture suggests a growing distinction between Volvo and Polestar vehicles. Polestar might evolve into a brand focused on performance and potentially more daring design, possibly incorporating design cues and technology from Geely.

From an industry perspective, this move underscores the growing clout of Chinese automakers in the global EV market. Geely’s success with Polestar could pave the way for other Chinese brands to finally gain a foothold in the US market, a market they’ve struggled to penetrate.

Conclusion

The parting of ways between Volvo and Polestar marks a turning point for the electric vehicle brand. While Polestar has the potential to carve its own path under Geely’s wing, the road ahead is uncertain. The success of Polestar’s gamble on a more independent future hinges on their ability to leverage Geely’s resources effectively, navigate a cutthroat market, and capture the hearts (and wallets) of environmentally conscious car buyers. This situation is a cautionary tale for other EV startups, highlighting the need for a clear path to profitability in a rapidly evolving landscape. Only time will tell if Polestar can weather the storm and emerge as a leader in the electric car revolution.

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Frequently Asked Questions

What is polestar?

Polestar is an electric car brand jointly owned by Volvo Car Group and Geely Holding. It focuses on electric performance and offers robust and sustainable vehicles designed for the future.

What is Volvo Car’s relationship with Polestar?

Volvo Car Group is Polestar’s former parent company. The two companies collaborate closely on EV technology and design, with Polestar serving as the group’s high-performance arm. Now they’re both owned by Geely.

What does Polestar Engineered mean?

Polestar Engineered refers to a performance package offered by Polestar that enhances the power and handling of specific Volvo models. It includes upgrades to the powertrain and chassis for a sportier driving experience.

What is the Polestar 2?

The Polestar 2 is an all-electric SUV produced by Polestar. It boasts impressive performance capabilities, advanced technology, and a sleek design, making it a popular choice among electric car enthusiasts.