The global electric vehicle industry is currently undergoing a drastic reorganization. Swedish automaker Volvo’s luxury electric car brand Polestar is planning to stop funding due to management difficulties and transfer some of its stake in Polestar to China’s Geely, Reuters and Bloomberg reported. This led Volvo to stop providing additional funding to Polestar and transfer its stake in Polestar to Geely.
Last year, Volvo already cut about 1,300 jobs because of Polestar’s woes and delayed the launch of its new electric EX90 model because of software issues. That leaves Polestar needing an additional $1.3 billion in funding before it breaks even by 2025. But Polestar’s stock has fallen more than 87% since its debut in June 2022, making it difficult to raise new funds.
Volvo said, “Geely will continue to provide full operational and financial support to Polestar and will not provide any additional funding to Polestar.” The decision is also seen as part of Volvo’s strategy to control Polestar and simplify the sharing of technology and economies of scale.
Reuters reported that Polestar’s problems signal a “reorganization period” in the electric vehicle industry, and that this phenomenon has been accelerating recently. Traditional automakers, startups, and investors who have invested more than $1.2 trillion (about 1,600 trillion won) in the electric vehicle industry are facing difficult decisions to minimize losses. In particular, weaker companies are being forced out of the market or are under pressure to consolidate due to the recent slowdown in global demand.
“It’s definitely a time of transition,” said Andy Leyland of SC Insights. “EV startups need to start showing how to become profitable and compete with the big boys and the Chinese.” EV startups, including Rivian, Fisker, Arrival, Xpeng and Lucid, are struggling with rising costs. Fisker, meanwhile, recently renegotiated the terms of a debt deal to secure a strategic partnership.
