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Shares in Sweden’s Volvo Cars were on track for their worst day ever on Friday after China’s Geely sold part of its shareholding in response to investor concerns about the automaker’s small free float.
The Chinese carmaker is working to keep international investors on board as it pushes ahead with plans to float off various parts of its automotive empire.
The company plans to list the electric vehicles arm of sports car brand Lotus through a Spac deal later this year, and has filed for an IPO of its new Zeekr brand.
Both deals are fraught with geopolitical risks because of US-Chinese relations, as well as increased investor scepticism over the viability of EV start-ups.
Geely, which acquired Volvo from Ford in 2010, on Friday morning said its commitment to the carmaker remained “steadfast”.
Shares in Volvo were trading down 10.3 per cent on Friday, retreating from a previous drop of 14 per cent.
It said it had made the decision to “enhance” the value of the stock “through an increase of liquidity and offer more opportunities to generate sustainable long-term value for institutional and retail investors”.
After the sale completes, its shareholding in Volvo will be 78.7 per cent.
The Chinese carmaker sold a sliver of the business through an IPO in 2021, though was forced at the time to increase the amount of shares it floated after investor concerns it had too much control.
Proceeds of the latest sale would be used to fund global business development within Geely, the Chinese company said.
Volvo’s chief executive Jim Rowan said the increase in public float would benefit “both new and existing investors”, allowing a “wider base” of market participants to invest in the carmaker.
The Swedish carmaker has seen its shares fall in recent months amid concerns over its core profitability, which hinges on its latest model, the EX30.
The carmaker is aiming to raise margins to 8-10 per cent by 2025 or 2026, as part of a plan to match the profitability of premium rivals such as BMW.
It is also planning to phase out any engine models from its line-up by 2030, the most ambitious target of any established carmaker, even as concerns rise globally about appetite for electric cars.
Geely’s ownership of Volvo has seen a reinvention of the brand and allowed it to invest in electric vehicles and new safety technology such as driver-monitoring systems that it says will help slash accidents.
Volvo sold its engine-development unit to Geely last year, as part of a plan to de-risk the business as it pushes towards selling battery models only.
Geely’s initial plan to list Volvo’s shares in 2018 was scrapped in the midst of the US-China trade war under Donald Trump. The two companies then explored a merger of their two auto units, but ditched those plans the following year to focus instead on the Volvo IPO.
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