Volvo calls it quits with a unique, luxurious Tesla competitor.

The Volvo spin-off brand has been making EVs since 2017.

Feb 2, 2024 - 00:30

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Volvo calls it quits with a unique, luxurious Tesla competitor.

Volvo (VLVLY) - Get Free Report is making some major changes as it adapts to a changing automotive landscape.

Polestar electric vehicles (EV) at the company's showroom in New York City
Bloomberg/Getty Images

According to a Feb. 1 report by Automotive News, the Swedish automaker said it will cease its funding of EV luxury brand Polestar (PSNY) - Get Free Report and will transfer the responsibility for the marque over to its largest shareholder – Chinese automaker Geely (GELYF) - Get Free Report.

In a deal designed to take pressure off of the Swedish automaker, Volvo's 48% stake in Polestar will be transferred over to its parent company Geely, which will run the EV-centered luxury brand as an independent brand under its umbrella.

In a statement, the Chinese firm stated that it will fully support Polestar as an independent brand and that the move will not affect its 79% holding stake in Volvo. Additionally, Geely was also positive about Volvo's decision to focus its resources on its own EV developments.

A Polestar 2 BST Editin 270 is displayed during the Fully Charged live show at the Yorkshire Events Centre on May 19, 2023 in Harrogate, England.
Ian Forsyth/Getty Images

The relationship between Polestar and Volvo started on the racetrack. Originally a racing team fielding race-ready Volvos, Polestar would become Volvo's official tuning partner and would begin to sell modified versions of Volvo cars akin to Mercedes-Benz and its absorption of tuning house AMG to create Mercedes-AMG vehicles.

Volvo bought Polestar in 2015 and introduced it in its current form as an EV-centric marque in 2017, starting with the Polestar 1 coupe.

Polestar is one of many EV brands who have felt the effects of a broadening EV cooldown, which combined with a price war spearheaded by Tesla (TSLA) - Get Free Report last year has spelled trouble for the brand.

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The brand failed to meet its sales target of 60,000 vehicles last year, only managing to deliver 54,600 vehicles in 2023.

The news with Volvo and Polestar follows an announcement by the EV luxury brand last week that it will cut around 450 jobs globally, citing "challenging market conditions."