Its Chinese owner is partially moving out of Volvo

Recently, the Chinese majority owner Geely Group is partially moving out of Volvo Cars, which plans to build a new production plant in Slovakia near Košice. The group is selling a portion of the shares, which would account for around three-quarters of the stake once the sale is completed.

The originally Swedish car company continues to insist on its ambitious plans, which are also related to the transition to exclusively electric cars or to production in Slovakia, where, according to the new investment plan, it plans to produce up to half a million electric vehicles per year.

However, the reality of the electric car market, as well as the more pessimistic than originally anticipated future of the market, do not count against her.

A solid relationship

Shares in Volvo Cars fell further in response to news that Geely, which bought the brand from Ford in 2010, was reducing its stake, despite saying the Chinese’s commitment to the Swedish carmaker remains “solid”.

In addition, proceeds from the latest sale are to be used to fund global business development within Geely, the Chinese firm said.

Although it is trying to keep international investors on board, as it continues its plans to sell off various parts of its automobile empire, it also plans to list an electric version of the Lotus sports car brand later this year. That is also why she has already applied for the subscription of shares of her new brand Zeekr.

But both deals come with some geopolitical risks due to strained relations between the United States and China, as well as heightened investor concerns about the viability of electric vehicle startups.

That is also why, in the initial reaction, Volvo shares fell by almost 15 percent, although they later corrected their decline to about ten percent. However, Geely quickly commented on the move by saying that it wants to create more space for institutional and retail investors in the future and thus allow Volvo to increase the future value of its shares.

It can be believed that the Chinese mean well with Volvo, but the market may eventually react differently. Geely’s original plan to list Volvo shares in 2018 was scrapped amid a trade war between the United States and China under Donald Trump.

The two companies then explored the possibility of merging their two divisions, but dropped those plans the following year and instead focused solely on Volvo’s IPO.

Ambitious plans

As Volvo CEO Jim Rowan said on the sidelines of recent events, the volume of publicly traded shares has increased, which will benefit both new and existing investors. This should enable a wider base of market participants to invest in the car company.

Overall, however, shares of the Swedish automaker have been volatile in recent months. More recently, they fell due to concerns about its future profitability, which depends on the latest model EX30 or the upcoming electric SUV EX90. This could also be produced in Slovakia.

The automaker aims to increase margins to eight to 10 percent by 2025 and 2026 as part of a plan to match the profitability of premium rivals such as BMW.

Source: Volvo Cars

However, just last month Volvo Cars made a surprising decision to end the production of the remaining diesel models by the beginning of next year.

So in a few months, it will produce the last vehicle with a diesel engine, making it one of the first car manufacturers to take such a step. And this despite the fact that worldwide concerns about the demand for electric cars are growing. However, this also applies to her other plans in Europe, which also directly affect Slovakia.

Numbers don’t play cards