Volvo on Friday said it planned to reduce its stake in Polestar by 62%, and cease funding the electric vehicle startup as it focuses funding its own transformation into a fully electric brand.

The shares in Polestar will be distributed to Volvo's own shareholders, the biggest of which is Zhejiang Geely which owns 79.5% of the company. The move will give Geely more control of Polestar. Geely's chairman, Li Shufu, is also a major shareholder of Polestar with a 39% stake.

At Polestar's current share price, the shares are valued at around $921 million. After the close of the deal, Volvo will still retain about 18% of Polestar.

In a statement, Volvo CEO Jim Rowan said it was “logical” to retain some influence in Polestar given the close collaboration between the two companies.

2024 Polestar 2

2024 Polestar 2

Polestar, which was originally a Swedish racing team and then the performance arm of Volvo before becoming a standalone EV brand in 2017, currently shares technologies, production facilities, and other commercial operations with Volvo. Polestar also has a loan owed to Volvo.

Polestar, which become a public company in 2022, won't have to completely fend for itself. Geely will continue to provide funding, while the collaboration between Volvo and Polestar will also continue.

Polestar is also expected to grow its sales sharply in 2024 with the arrival of the Polestar 3 and Polestar 4 SUVs. Polestar last year delivered approximately 54,600 vehicles, mostly the Polestar 2 hatchback. That tally is 6% higher than 2022's deliveries.