Volvo Cars is drawing closer to sister brand Polestar and its Chinese parent, Geely, through a pair of moves that signal the end of the Swedish carmaker’s long-running independence.
Volvo has long benefitted from an exclusive position within the Geely group, lending the brand a strong independence to safeguard its Swedish roots. But that privilege has expired, now that the company is facing dwindling profits due to the costly write-off of the failed EX90 and the extensive investment in a new Slovakian factory that it doesn’t need.
A new dawn
Measures are put in place under pressure from the CEO of the Geely Group, Li Shufu, the brand’s owner. He announced that Volvo must integrate more deeply into the brand constellation.
In the wake of this new dawn, Volvo announced at its annual general meeting that all global production of the Polestar 3 will be centered at its Ridgeville, South Carolina, plant, near Charleston.
Chinese production will cease, because Polestar has lost the battle in Shufu’s home country, where the brand is perceived as too Western and has completely fallen out of customers’ grace.
The XC60 was earlier announced to join the US production line, and Volvo also acknowledged that a new next-generation hybrid model for the American market will follow before 2030.
At the same time, Volvo will convert $274 million of an outstanding Polestar loan into equity, with a further $65 million to follow before the end of the second quarter. The result: Volvo’s stake in the electric performance brand will roughly double, rising from 9.8% to 19.9%.
This is a reversal of Volvo’s earlier plan, seeking to free itself from the burdened Polestar. Clearly, Shufu thinks differently. Then again, the operational rationale for closer collaboration is hard to dispute after a bruising 2025.
Made in China
Shufu didn’t shy away from delivering a straightforward speech. “Working in isolation will ultimately lead to a self-destructive path of obsolescence,” he told the shareholders, according to Investing.com. Next to Polestar, he called on Volvo to intensify cooperation with sister brand Geely Auto, which just recently launched in Belgium.
This news comes after Volvo has also become commercially responsible for Lynk & CO in Europe. More importantly, the change implies that research and development of new cars will partly move to China, though it is not clear to what extent and how this will affect jobs in that department.
CEO Hakan Samuelsson, who returned to lead Volvo in 2025 after his predecessor Jim Rowan was ousted, has publicly endorsed the shift. He has previously described deeper collaboration with Geely as a “great opportunity” rather than a threat.
Overcapacity looms
The pressure to integrate is compounded by a structural overcapacity problem that extends well beyond Volvo. Li Shufu noted at the AGM that Chinese auto plants collectively produce around 50 million vehicles per year against an annual demand of roughly 25 million.
Europe is not in a much better position. The ambitious targets of the Rowan era – 1.2 million vehicles by the end of 2025 – proved wildly unrealistic. The only way forward now seems to be integrating Chinese-built models into the European plants to avoid tariffs.
For Volvo Car Gent, the picture remains uncertain. Union representatives have indicated that production of the EX40 and EC40 is set to shift to Slovakia from 2027, with the next-generation 40 Series built on the new SPA3 platform. Whether Ghent, which lacks the tools for SPA3, eventually receives production of a Geely-family model to compensate is an open question.
What is now beyond doubt is that Volvo’s strategy is being rewritten at speed. The Polestar stake increase, the Charleston consolidation, the Lynk & Co distribution deal, and Li Shufu’s blunt words at the shareholders’ meeting all point in the same direction: Volvo becomes more Chinese and less Swedish.
