Volvo Cars will stop funding its Polestar electric sports car brand and look at selling its shareholding to parent company Geely, as its latest results showed profits had been dragged down by the lossmaking business.

Polestar was spun out of Volvo and listed in 2022, but a key new model has been delayed and its shares have fallen 84 per cent in the past year on investor worries about the global electric vehicle sales slowdown. The business is seeking about $1.3bn of new funding.

Volvo, which owns 48 per cent of Polestar, will consider offloading its shares in the company to Geely, it said on Thursday, which would make the group a significant shareholder in Polestar. Geely’s owner Eric Li already owns a stake in Polestar but the Geely holding company does not.