Volvo Automobiles shares surged greater than 20% Thursday after the Swedish automaker introduced that it’s going to cease funding subsidiary Polestar Automotive.

Volvo earlier within the day reported a ten% year-on-year enhance in fourth-quarter web gross sales to 148.1 billion Swedish krona ($14.16 billion), bringing its full-year 2023 complete to 552.8 billion krona. Adjusted working revenue jumped to 18.38 million krona from 12.17 million for a similar interval in 2022.

The group introduced that it could hand stewardship of ailing luxurious automotive model Polestar over to majority Volvo shareholder, China’s Geely Holding, which has a 78.65% stake within the firm, in line with LSEG knowledge.

In its full-year report, Volvo mentioned Polestar is “getting into the subsequent thrilling part of its journey with a strengthened marketing strategy and price actions, however that the mum or dad firm’s focus is on growing Volvo Automobiles and concentrating its assets accordingly.

“We’re subsequently evaluating a possible adjustment to Volvo Automobiles’ shareholding in Polestar, together with a distribution of shares to Volvo Automobiles’ shareholders. This will lead to Geely Sweden Holdings changing into a big new shareholder,” the corporate added.

Volvo Automobiles CEO Jim Rowan advised CNBC’s Silvia Amaro on Thursday that this was a “pure evolution” within the relationship between the 2 carmakers.

“Clearly, we spun out Polestar as a separate firm a very long time in the past, and since then we have been incubating and dealing with Polestar for various years,” Rowan mentioned.

“Now, Polestar … they’ve have gotten a really thrilling future forward of them, they’ve moved from being a one-car firm to a three-car firm, they have two model new automobiles popping out very shortly, in actual fact within the first half of this 12 months, and that is going to take them to a brand new development trajectory.”

Volvo Automobiles holds round a 44% stake in Polestar, in line with LSEG knowledge, having acquired the corporate in 2015. The compatriot luxurious electrical automobile model has struggled since going public in June 2022, and analysts had been cautious that it had change into a drag on Volvo’s assets.

Rowan mentioned this felt like the correct time for Volvo Automobiles to start decreasing its shareholding of Polestar and for the corporate to “search for funding outdoors of Volvo.”

“That permits us and Volvo as effectively to completely concentrate on our development journey, particularly a number of the expertise investments that we have to make within the subsequent two-three years.”

In an announcement Thursday, Polestar mentioned it “welcomes Geely Sweden Holding as a possible direct new shareholder,” and that Volvo Automobiles will “stay a strategic companion in areas throughout R&D, manufacturing, after gross sales and industrial.”

“With our rising line-up of unique, efficiency automobiles, Polestar is in probably the most promising phases of its improvement,” Polestar CEO Thomas Ingenlath mentioned.

“We sit up for continued cooperation with Volvo Automobiles in addition to benefiting from even higher synergies with Geely on future oriented applied sciences.”