Volvo-backed Polestar in talks to raise $500 million: Sources

Polestar, the electric-car maker controlled by Volvo Car AB and its owner Zhejiang Geely Holding Group Co., is in talks with investors to raise at least $500 million, according to people with knowledge of the matter.

The automaker is seeking a valuation of about $6 billion, said one of the people, who requested anonymity because the discussions are private. A funding round hasn’t been finalized, and terms could still change.

A representative for Geely in China wasn’t immediately able to comment. A China-based Polestar spokesman declined to comment, as did a Volvo China-based representative. Volvo representatives in Europe and the U.S. weren’t immediately responsive outside of regular business hours.

Gothenburg, Sweden-based Polestar, led by Chief Executive Officer Thomas Ingenlath, has been touted as a potentially fierce rival to Tesla Inc., currently the world’s No. 1 manufacturer of electric vehicles. Sales of the cleaner, more intelligent cars have been soaring in Europe and recovering in China as consumers opt for vehicles that are better for the environment.

Volvo Chief Executive Officer Hakan Samuelsson said last year that Volvo is seeking a valuation for Polestar that’s comparable with peers NIO Inc. of China and Tesla.

Polestar’s second vehicle, the Polestar 2, its first all-electric car, started production in March at Zhejiang Geely’s plant in Luqiao, China. In September, the automaker said it would put another car, the Polestar Precept, into production. That vehicle’s interiors will be made out of recycled PET bottles and cork vinyl as well as reclaimed fishing nets.

Electric cars release about 40% less carbon dioxide than an average internal combustion engine during operation, according to analysis by BloombergNEF.

Volvo Cars and Geely both form part of the stable of Chinese billionaire Li Shufu, who has a net worth of about $20.2 billion, according to the Bloomberg Billionaires Index.

Li, who also is also Daimler AG’s largest shareholder, has championed consolidation as a way for automakers to pool resources for initiatives like self-driving cars and electrification. He’s built a global carmaking empire over the past two decades, securing stakes in European legacy brands such as Lotus as well as investing in Malaysian auto company Proton.