Volvo Cars swaps $300M of Polestar debt for equity; Polestar 3 now built only in the US
Volvo Cars converted more than $300 million of Polestar debt into shares and concentrated all Polestar 3 production at its Charleston, South Carolina plant.
What was changed
On March 31, 2026, Volvo Cars said it had agreed to convert more than $300 million of sister brand Polestar's debt into shares, in a move aimed at focusing production of the Polestar 3 electric SUV at its Charleston, South Carolina plant. Polestar will discontinue Polestar 3 production in Chengdu, China, and build the model only in South Carolina. CEO Hakan Samuelsson said consolidating global Polestar 3 output in Charleston helps generate efficiencies for both companies while underscoring confidence in the plant's role in the manufacturing footprint.
Both Geely-owned brands had been battling cash issues and a delayed EV ramp-up as US electrification ran weaker than expected and duties hit cars whose production relied heavily on Chinese plants. The Polestar 3 shares its design, technology and price band with Volvo's flagship EX90, whose slow sales — just over 16,000 units globally in 2025 against Charleston's production capacity of up to 150,000 — contributed to a group impairment of more than $1 billion booked in July 2025.
Under the deal Volvo carries out an initial conversion of about $274 million and a second of about $65 million in the second quarter of 2026, doubling its Polestar stake to about 19.9 percent, and extends the maturity of its remaining $661 million credit to 2031. Geely Holding is separately expected to swap credit worth about $300 million into Polestar shares. Samuelsson, brought back in 2025 for a two-year term, had already launched efficiency measures including 3,000 job cuts and placed the Polestar 7 in Volvo's upcoming Kosice factory in Slovakia.
Why it worked
Polestar 3 was split between Chengdu and Charleston while weak US demand and duties punished China-reliant production, so one US plant cuts cost and tariff exposure.
The same-platform, similarly priced EX90 sold just 16,000 units in 2025 against 150,000 of Charleston capacity, feeding an impairment of over $1 billion.
Converting debt into shares recapitalises cash-strapped Polestar without a fresh cash outflow the way new lending would require.
Single-site Polestar 3 output reinforces the cost synergies both Geely sister brands need, as Polestar CEO Michael Lohscheller said in the statement.
What can be applied
When two sister brands sell near-identical vehicles into one demand pool, consolidating production and converting debt to equity repositions both faster than fresh lending would.
Aftermath
The initial conversion of about $274 million was set in motion at the March 31, 2026 announcement, with the second $65 million tranche due in the second quarter of 2026 to lift Volvo's stake to about 19.9 percent. Chengdu output of the Polestar 3 ends and Charleston becomes the model's only plant. Polestar remains reliant on its owners: Geely Holding has said it aims to rank among the world's five leading automakers with global sales of more than 6.5 million vehicles by 2030, and Volvo still holds $661 million of Polestar credit now maturing in 2031.