Volvo Cars rushes after record year and plans to…

Swedish carmaker Volvo Cars’ (VOLCAR B) shares rose as much as 32% on Thursday, but were up 27% in the afternoon, following a stronger-than-expected earnings report and an announcement that it will stop financing subsidiary Polestar Automotive.

Volvo reported an increase of 10% compared to the previous year in the fourth quarter’s net sales to SEK 148.1 billion, which means a net sales for the full year 2023 of a total of SEK 552.8 billion. The adjusted operating profit rose to SEK 18.38 million from SEK 12.17 million for the same period in 2022.

The automaker says it is now entering the next phase of its transformation, including major investments to create and introduce new technology and future-proof production facilities. This means that the company will focus on developing Volvo Cars and concentrate its resources on “its own ambitious journey”.

“Volvo Cars is therefore evaluating a potential adjustment of Volvo Cars’ shareholding in Polestar, including a distribution of shares to Volvo Cars’ shareholders. This could result in Geely Sweden Holdings becoming a significant new shareholder,” the company writes in the year-end statement.

Volvo Cars owns about 44% of Polestar, according to LSEG data, after acquiring the company in 2015. The luxury electric vehicle brand has struggled against headwinds since it went public in June 2022, with analysts worried it had become a burden for Volvo’s resources.

“Wise of Volvo to distribute Polestar”

The most important news of the day was the planned spin-off of all, or parts of, the Polestar subsidiary, says Magnus Dagel in an analysis on Dagens industri.

“It is a much-needed rise in price as the share has developed very weakly recently. Before Thursday’s price surge, the share had halved since the IPO in autumn 2021,” says Dagel, adding that he believes the best way forward is to sell all of Polestar and invest everything in Volvo there “the conditions are actually quite good in the coming years.”

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

“The financial statements showed that 2023 was in many ways the best year ever. The sales of 709,000 cars are the highest ever and likewise the turnover of SEK 399 billion, up by a strong 21 percent from 2022. Volvo is also flagging for higher growth than that in 2024,” writes he.

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