Volvo Car Soars After Announcing Polestar Exit, Record Sales

Sweden's Volvo Car jumped 27% after it said it would seek to divest its stake in ailing luxury EV maker Polestar.

Johanna Englundh 1 February, 2024 | 2:15PM
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Grille of a Volvo car

Shares of Swedish automaker Volvo Car [VOLCAR B], which is majority-owned by China's Geely, surged as much as 32% at Thursday's open and traded 27% higher on Thursday afternoon.

In the earnings report, released before regular trading opened, Volvo reported a 10% year-on-year increase in fourth-quarter net sales to 148.1 billion Swedish kronor, bringing its full-year 2023 total to 552.8 billion kronor. Adjusted operating income jumped to 18.38 million kronor from 12.17 million for the same period in 2022.

Volvo Cars is "evaluating a potential adjustment of Volvo Cars' shareholding in Polestar, including a distribution of shares to Volvo Cars shareholders. This may result in Geely Sweden Holdings becoming a significant new shareholder", the company wrote in its year-end report.


Volvo Cars further announced that Geely will continue to provide full operational and financial support to Polestar going forward, and as a result, Volvo Cars will no longer provide additional financing to its part-owned electric car subsidiary. However, the company will extend the repayment period of the existing convertible loan by 18 months to the end of 2028.


Volvo Cars holds a stake of about 44% in Polestar, according to LSEG data, having acquired the company in 2015. The luxury electric vehicle brand, also based in Sweden, has struggled since going public in June 2022, and analysts were wary that it had become a drag on Volvo's resources.


Why Is Volvo Ditching Polestar?


The most important news of the day was the planned spin-off of all, or part, of Polestar, analyst Magnus Dagel writes in Swedish daily Dagens Industri


“This is a much-needed jump for the share price, as it has performed very weakly recently. Before Thursday's price surge, the share price had halved since the IPO in the fall of 2021”, Dagel says and adds that he thinks the best way forward is to sell all of Polestar and invest everything in Volvo, where the opportunities are “actually quite promising in the coming years.”


The weak development of its share price has wrongly led many to believe that the company is also developing poorly, Dagel explains.


“The earnings report showed that 2023 in many ways was the best year ever. Sales of 709,000 cars are the highest ever, as is turnover of SEK 399 billion, up a strong 21 percent from 2022. Volvo is even flagging for higher growth than that in 2024”, he writes.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Volvo Car AB Class B32.20 SEK-0.02

About Author

Johanna Englundh  Johanna Englundh is an editor for Morningstar in Sweden 

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