Volvo announces $2.9 billion IPO as it looks to fund shift to electric cars and catch up with Tesla

Volvo Car Group AB will look to raise at least 25 billion krona ($2.9 billion) in an initial public offering the company is forging ahead with despite…

the global chip shortage.

Proceeds will help the Swedish carmaker owned by China’s Zhejiang Geely Holding Group Co. fund its shifts to fully electric cars and a direct-to-consumer sales and subscription model, the company said in a statement Monday. Geely intends to remain its largest shareholder with the first day of trading planned for this year.

“We have supported the transformation and growth of this iconic Swedish brand during a period of unprecedented change in our industry,” Geely Chairperson Eric Li said in the statement. “We will continue to support Volvo Cars as a majority shareholder in this ongoing global success story.”

Volvo’s listing plan got a boost from Polestar, the electric car company backed by the Swedish carmaker and Geely, which last month agreed to go public via a blank-check firm at a roughly $20 billion valuation. Once the deal is completed, Volvo expects to own close to 50% of the combined company.

The decision to list puts Volvo, founded in 1927 in Gothenburg, neck-and-neck with the four-year-old EV maker that will use the incumbent manufacturer’s production network. Volvo last year sold some 660,000 cars, and Polestar aims to deliver 29,000 vehicles in 2021 before adding new models to significantly grow its footprint.

“Volvo Cars is really making the transition, to the new way of owning as well as driving a car,” said Anders Oscarsson, head of equities at AMF, which intends to keep its holding in Volvo after the IPO. The carmaker is “open and transparent company that is full of innovations.”

The listing is set to be Sweden’s largest since telecommunications company Telia Co AB went public in 2000, raising $8.9 billion, and Europe’s second-biggest IPO so far this year after Poland’s InPost SA.

Sales Boost

As part of raising fresh funds, Volvo targets boosting sales to 1.2 million vehicles by 2025, it said Monday. Operating returns are set to rise to between 8% to 10% by then, compared with 3.2% last year, when Covid-19 related shutdowns hampered sales across all carmakers.

Other EV-only carmakers like NIO Inc., selling few vehicles but free from legacy businesses like making combustion engines, have seen their valuations rocket past the likes of BMW AG or Ford Motor Co. in a wake-up call to larger manufacturers.

Volvo going ahead with an IPO marks a high point for parent Geely Holding, who acquired the company from Ford in 2010 for $1.8 billion. Keeping much of its independence, the carmaker flourished under the new ownership with China becoming its largest market, followed by the U.S., Sweden and Germany. After successfully overhauling its lineup with cars like the XC90 SUV, Volvo…

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