Volvo Cars Announces Strategic Changes and Increased Investment

Volvo Cars, the Swedish automaker, has recently made significant announcements regarding its investment strategy and collaboration with electric vehicle (EV) startup Polestar. As part of its plan to enhance its own investment endeavors, Volvo Cars has decided to stop providing funding to Polestar.

In a statement, Volvo Cars revealed that it is currently evaluating potential adjustments to its shareholding in Polestar. This may involve a distribution of shares to Volvo Cars shareholders, while Geely, which currently holds 79% of Volvo, would become a notable new shareholder in Polestar. However, Geely will continue to offer complete operational and financial support to Polestar moving forward. Additionally, Volvo Cars will be extending the repayment period for an existing convertible loan.

Despite these changes, both Volvo and Polestar will still maintain their collaboration in various areas such as research and development, manufacturing, and other related functions.

Furthermore, Volvo Cars is revising its goals for the future. While the company is still aiming for an earnings before interest and tax margin above 8% by 2026, it has adjusted its revenue range to be between 550 billion and 600 billion Swedish kronor ($57 billion). In 2023, Volvo Cars achieved a margin of 6.4% excluding joint ventures on a revenue of 399.3 billion kronor.

As part of its updated strategy, Volvo Cars intends to significantly increase investments in several key areas. These include electrification, software development, core computing architectures, advanced connectivity systems, data capture and analytics capabilities, mega casting technologies, next-generation e-motor and battery technology, smart cabin features, and a new advanced manufacturing facility.

In terms of financial outlook, Volvo Cars anticipates relatively neutral free cash flow generation over the next two years.

This strategic shift marks an important step for Volvo Cars as it strengthens its commitment to innovation and further establishes its position in the electric vehicle market.