The record sales electric vehicles (EVs) enjoyed in 2023, don’t appear to apply to EV spinoffs, The Wall Street Journal Heard on the Street team reports.
For example, Volvo Car recently announced it would no longer provide funding to Polestar Automotive, which was spun out of Volvo in 2017 as an EV joint venture with Geely, Volvo’s majority owner. Additionally, Volvo is considering distributing its Polestar stock to shareholders, The Wall Street Journal reports.
Volvo’s goal would be to remove itself from the shareholdings so Geely ends up owning most of both companies directly. Currently Geely partially owns Polestar through Volvo. The arrangement likely won’t matter much for Polestar minority shareholders, but it eliminates a financial problem for Volvo.
“As we move into the next phase of our transformation, including deploying large-scale investments in the creation and adoption of new technologies and future-fit production facilities, our focus is on developing Volvo Cars and concentrating our resources on our own ambitious journey,” Volvo said in a release. “We are therefore evaluating a potential adjustment to 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.”
“With our growing line-up of exclusive, performance cars, Polestar is in one of the most promising phases of its development,” Thomas Ingenlath, Polestar CEO, said in a statement. “We have successfully ramped up production and started sales in China, Europe and Australia of Polestar 4 and Polestar 3 is expected to start first customer deliveries this summer. We look forward to continued cooperation with Volvo Cars as well as benefiting from even greater synergies with Geely on future orientated technologies.”Unfortunately for Volvo, its EV involvement didn’t play out as planned. The car manufacturer held an initial public offering (IPO) in 2021 and its estimated half stake in EV brand was seen as a plus, according to The Wall Street Journal. Polestar agreed to merge with a special-purpose acquisition company (SPAC) that valued it at $20 billion, but funding issues and model launch delays dropped Polestar’s market value to $4.6 billion.
French automaker Renault followed a similar plan and scrapped its plans to spin off its own EV business, Ampere, through an IPO. The venture was more attractive when valuations were higher (about $8.65 billion), but enthusiasm has waned since then.
“In 2022, Renault Group had announced its intention to proceed with an IPO for this entity,” the company said in a release. “The latest calendar referred to the first half of 2024, depending on market conditions. Renault Group considers that the current equity market conditions are not met to optimally pursue the IPO process in the best interests of Renault Group, its shareholders and Ampere.”
Renault Group said it will continue to fund Ampere’s development until it reaches breakeven in 2025.
“I’m extremely proud of our teams who created in less than two years the best answer to top global players competition with Ampere,” Renault Group and Ampere CEO Luca de Meo said in a statement. “By setting up a 100 percent focused EV and software business, we built in record time an agile and competitive entity. We have the start-up mindset which allows us to constantly innovate. This is exactly what will make Ampere successful in this new challenging environment. Today, we took a pragmatic decision. We are all focused on executing our strategy and building our track record to create value for all our stakeholders.”
“Cash-burning EV spinouts seem to be the last thing investors want to own right now,” The Wall Street Journal Heard on the Street team said.
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