Volvo Cars to swap over $300 million of Polestar debt to equity to consolidate US manufacturing

GOTHENBURG, March 31 (Reuters) – Volvo Cars said on Tuesday it had agreed to convert into shares about $274 million in credit with its sister brand Polestar, in a move aimed at focusing production of the Polestar 3 electric SUV at its U.S. plant in South Carolina.

Volvo Cars will carry out a second conversion of about $65 million in the second quarter of 2026, at the completion of a similar swap of about $300 million by the companies’ ultimate parent Geely Holding.

Following the conversion, Volvo Cars, formerly the majority stakeholder in Polestar before divesting most of it to Geely in 2024, will double its stake in the company to about 19.9%.

“Our strong operational collaboration with Volvo Cars continues through manufacturing, our commercial operations and offering our customers access to one of the most extensive service networks in the industry,” Polestar CEO Michael Lohscheller said in a statement.

EFFICIENCY DRIVE

Polestar currently produces its Polestar 3 model in Charleston, South Carolina and in Chengdu in China. Following the deal, it will discontinue Chinese production, a company spokesperson told Reuters.

“The move to consolidate global Polestar 3 production in Charleston help generate efficiencies for both companies, whilst also underscoring our confidence in the plant and the role it plays in our manufacturing footprint,” Volvo Cars CEO Hakan Samuelsson said in a statement.

The choice signals tighter integration between Volvo Cars and Polestar, both majority‑owned by Geely Holding, as the Chinese group looks to cut costs, improve scale and share manufacturing capacity across brands.

It follows a slowdown in electric‑vehicle demand, particularly in the U.S., and mounting pressure from import tariffs that have forced automakers to rethink supply chains and manufacturing locations.

Like many other EV startups, Polestar has burned through significant amounts of cash in its push to achieve scale and consistently faced challenges managing its liquidity and debt levels.

When Samuelsson was brought back to reprise his role as Volvo Cars CEO for a two-year term, he was quick to state that he intended to further integrate with the other Geely brands. Shortly after, he announced that the Polestar 7 would be built in Volvo’s upcoming Kosice factory in Slovakia.

On Monday, Volvo Cars said it would become the exclusive distributor of Lynk & Co cars in Europe, another Geely sister brand.

(Reporting by Marie Mannes in Gothenburg and Alessandro Parodi in Gdansk, editing by Milla Nissi-Prussak)