Volvo Car Group AB will look to raise at least 25 billion krona (US$2.9 billion / $3.93 billion) in an initial public offering the company is forging ahead with despite the global chip shortage.

Proceeds will help the Swedish carmaker owned by China’s Zhejiang Geely Holding Group Co fund its shifts to fully electric cars and a direct-to-consumer sales and subscription model, the company said in a statement Monday. Geely intends to remain its largest shareholder.

“We have supported the transformation and growth of this iconic Swedish brand during a period of unprecedented change in our industry,” Geely Chairperson Eric Li said in the statement. “We will continue to support Volvo Cars as a majority shareholder in this ongoing global success story.”

Volvo’s listing plan got a boost from Polestar, the electric car company backed by the Swedish carmaker and Geely, which last month agreed to go public via a blank-check firm at a roughly US$20 billion valuation. Once the deal is completed, Volvo expects to own close to 50% of the combined company.

The decision to listing puts Volvo, founded in 1927 in Gothenburg, neck-and-neck with the four-year-old EV maker that will use the incumbent manufacturer’s production network. Volvo last year sold some 660,000 cars, and Polestar aims to deliver 29,000 vehicles in 2021 before adding new models to significantly grow its footprint.

Other EV-only carmakers like NIO Inc., selling few vehicles but free from legacy businesses like making combustion engines, have seen their valuations rocket past the likes of BMW AG or Ford Motor Co. in a wake-up call to larger manufacturers.

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Volvo going ahead with an IPO marks a high point for parent Geely Holding, who acquired the company from Ford in 2010 for US$1.8 billion. Keeping much of its independence, the carmaker flourished under the new ownership with China becoming its largest market, followed by the U.S., Sweden and Germany. After successfully overhauling its lineup with cars like the XC90 SUV, Volvo this year set an ambitious goal to go fully electric by 2030.

Geely Holding previously pursued an IPO of Volvo Cars in 2018. It shelved the plans after investors balked at its proposed valuation of as much as $30 billion, people familiar with the matter said at the time. 

Companies have raised US$662 billion from IPOs globally during the first three quarters this year, according to data compiled by Bloomberg. That’s up from US$447 billion over the same period last year, when the Covid-19 pandemic reduced the number of listings.

In the first nine months of the year, Volvo sold 530,649 cars, a 18% increase on a year ago, though the company warned supplier shutdowns and material shortages like the global chip crunch will hurt output during the second half. 

This “will have an impact on revenue and profit, but Volvo Cars’ outlook for the full year 2021 still remains,” the carmaker said last month.

Photo: Volvo C40 Recharge Dawn Silver / Volvo Car Group