Volvo Buys Polestar in Bid to Compete With Germans

Volvo S60 and V60 Polestar, model year 2016
Source: Volvo

After working together for several years, Volvo has finally purchased the performance tuning company Polestar for an undisclosed amount of money.

“Driving a Volvo Polestar is a special experience. We have decided to bring this experience to more Volvo drivers, placing the full resources of Volvo behind the development of Polestar as the model name for our high-performance cars,” said Hakan Samuelsson, president and chief executive of Volvo Cars.

Current Polestar employees shouldn’t have to worry about losing their jobs, as the current plan is for Volvo to absorb all of Polestar. Plans change, but Volvo is also intent on increasing the number of Polestar-badged vehicles it produces each year, which should make those jobs even more secure. This year, Polestar is expected to produce around 750 vehicles, but in the near future, that number could double to 1,500.

This purchase will effectively turn Polestar into a high-performance division of Volvo that competes with the likes of BMW’s M division and Mercedes-Benz’s AMG. Both companies are experiencing increased demand for their performance-tuned vehicles even as most vehicle trends are moving towards smaller engines and increased emphasis on fuel economy.

Volvo has made significant strides in recent years to turn itself into a truly-competitive luxury brand, but it still lacked a performance division. Starting in 1995, the company began using an “R” badge to denote high performance vehicles. The first model to wear that badge was co-developed with Porsche and called the 850 T-5R. More recently, though, Volvo’s “R” line became an “R-Design” line that offers significantly less of a performance increase.

Volvo and Polestar have been collaborating in motorsports since 1996, though, and in 2013, Volvo started selling official Polestar-tuned vehicles in limited numbers. While Polestar was already acting as Volvo’s high-performance division, bringing the tuner in-house will give Volvo the opportunity to develop performance versions of even more of its vehicles.

Source: Volvo
Source: Volvo

Despite Volvo having a current lineup that’s significantly more competitive than it’s been in recent years, convincing customers to abandon more entrenched brands requires more than offering a high quality product. Its reputation as a safety leader is still mostly intact, but it now has the added liability of being owned by Chinese automaker Geely since 2010.

Without Geely’s cash, Volvo would probably have never survived the recession in 2009 that claimed more than a few automakers. Being Chinese, though, and now offering the first car for sale in the U.S. that was built in China, Geely’s ownership of Volvo has the potential to make improving sales even more difficult.

But selling performance-tuned vehicles has the potential to bring positive attention to Volvo’s cars and get potential customers excited about Volvo again. From a financial perspective, it was also probably less expensive to purchase Polestar than it would have been to build a performance division from scratch.

While Cadillac has certainly had its struggles over the past few years, there’s no doubting that developing V-versions of the second generation CTS lineup gave its image a major boost. No one actually needed a 556-horsepower sports sedan, much less a 556-horsepower station wagon, but being willing to build high performance vehicles got people excited about Cadillac and helped it shed its image as a brand for retirees.

Using Polestar’s expertise, Volvo has the opportunity to do something very similar with the next generation of high-performance Volvos. The Polestar S60 is already a pretty cool car, but with only 40 units being sold in the U.S. this year, it’s incredibly rare and difficult to find. If Volvo wants the Polestar name to carry enough weight to rival AMG and M, it’s going to have to increase the number of vehicles it produces every year.

With a line of high quality, desirable, and competitive performance vehicles to sell and with more widespread distribution, the upcoming first generation of Volvo’s in-house tuned Polestars could be exactly what the company needs to pull a Cadillac and take itself to the next level.

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