Just a few years ago it would have been unthinkable: a valuation of the – relatively small – Volvo more than three times that of Renault. But thanks to the imminent electrification of the automotive world, there are now completely different things than size that count.
Automaker Volvo will go public next year, the company announced on Monday. It is aiming for a valuation of around 26 billion euros, according to those involved against the Financial Times.
Volvo, currently owned by the Chinese car brand Geely, has been toying with the idea of an IPO since 2018, but previously postponed it due to the trade war between the United States and China. Rumors circulated last weekend that the car manufacturer was putting the finishing touches to the preparations.
With the share issue, Volvo hopes to raise 2.46 billion euros. If the IPO succeeds, the company will be worth about as much as BMW and Mercedes parent company Daimler, both of which sell more cars. Renault is worth about 8.6 billion euros.
Volvo (approximately 41,000 employees) is aiming for the high valuation because it believes it can benefit from investors’ interest in electric car manufacturers. Recently, they have pumped billions into – often barely concrete and mainly existing on paper – start-ups that want to make new electric cars: the expectations of the market are high, the established names are not always well prepared and nobody wants ‘the new Tesla’. ‘ to miss.
Volvo is one of the established names that is well on its way in the field of electric driving. For example, it can use the electrical technologies of the Chinese parent company. Earlier this year, Volvo announced that it would only sell models without a fuel engine from 2030. It was particularly striking that this must be the case worldwide: some car manufacturers do take such dates into account in Europe, for example, but not necessarily outside of it.
IPO of daughter Polestar
Also crucial for the valuation is that Volvo itself has an interest in a new manufacturer of electric cars that investors see a lot in: Volvo owns 50 percent of Polestar. That company will also be listed on the stock exchange next year, it turned out last week – probably for around 17 billion euros. This flotation takes place through a so-called ‘special purpose acquisition vehicle‘: An empty stock shell takes over Polestar.
Presumably that will also bring Volvo itself a lot of money. The company has waited to announce its IPO until Polestar’s was announced, chief executive Hakan Samuelsson told the company on Monday. Financial Times. Following the Polestar valuation, investors were better able to estimate Volvo’s worth, Samuelsson said.
Volvo is originally a Swedish car manufacturer, but since 2010 it has been owned by Geely. That year, Ford sold the company for 15.5 billion euros, because it had run into financial difficulties due to the global economic crisis. Under the Chinese Geely, Volvo’s reputation improved and the company returned to profitability.
So far, the company is also seeing good results in 2021, while most car manufacturers are plagued by chip shortages. Volvo saw its sales rise to record highs in the first half of 2021. However, it announced on Monday that sales in September were again a lot lower than in September 2020. This was because Volvo was still suffering from the chip shortage.
A version of this article also appeared in NRC in the morning of October 5, 2021