Volvo Cars is embarking on the tough task of launching a new brand, spinning off its Polestar performance line to sell high-performance electrified cars.
The move could force Volvo to make flashier cars than its current lineup of stylish but practical and safe vehicles. The new Polestar brand will compete in an emerging market that includes Tesla and BMW's i subbrand.
"The Volvo brand itself has a very, very good reputation, but it is a very practical reputation based on safety," said Rebecca Lindland, an executive analyst at Kelley Blue Book. "The Polestar name is emotional. In some ways you need to have this kind of separation."
Volvo has said it will produce its first fully electric vehicle in 2019, and the spinoff of Polestar signals it wants to be a major player in a flashier field.
Volvo CEO Hakan Samuelsson said he's confident the automaker is up to the task.
Volvo has intended to turn its Polestar unit into a stand-alone brand for high-performance electrified vehicles since taking over the company in 2015, Samuelsson told Automotive News Europe.
"We want to redefine the brand, moving it away from having gasoline-powered cars to offering electrification and something that we call progressive performance," he said.
Though the upcoming Polestar vehicles will share some resources with Volvo, they will no longer include the Volvo name — a move that could help the new brand shed Volvo's practical reputation, with the risk of taking away the credibility the Swedish name lends.
"Launching a new brand is really tough, it's a lot easier to do an association," Lindland said. "Just ask [Hyundai's] Genesis."
However, Volvo is banking on Polestar's racing reputation to carry its own weight. Polestar and Volvo began working together in 2012, when Volvo started offering Polestar-tuned variants of the V60 station wagon and S60 sedan under a cooperation agreement. Volvo bought Polestar in 2015 to start a performance line to rival Mercedes-AMG and BMW M models.
The Polestar arm has operated with its own management team, and with the goal of contributing 15 percent to Volvo's overall sales within five years of the acquisition. The performance line has also been considering electrification since its early days under Volvo.
"We have the order to push our electrification efforts forward, to make it more sexy," Niels Moeller, Polestar's COO at the time, told Automotive News Europe in 2015.
Though "sexy" electrification has always been a tenet of the Polestar badge under Volvo, the reshuffling of the brand, and its leadership team, indicates Volvo sees opportunity in the high-performance electric vehicle market.
"We have to recognize that Tesla has managed to offer such a car for which people are lining up," Samuelsson told a German newspaper in May. "In this area, there should also be space for us, with high quality and attractive design."
Tesla has been the dominant player in the luxury electric vehicle market thus far, while BMW has been offering its own variants with the i brand, and new startups such as Faraday Future and Lucid Motors are also trying to enter the space.
Volvo is tapping inside talent to ensure Polestar will be competitive. Thomas Ingenlath, Volvo's senior vice president of design, will be the CEO of the Polestar brand, with Jonathan Goodman, Volvo's senior vice president of corporate communications, serving as COO. Ingenlath has been credited with the sleeker and sportier designs of the scalable product architecture models, which includes the new 90 series vehicles and the recently launched XC60.
"If Volvo can leverage their practicality while making the new brand more emotional, they could do very well," Lindland said.
Douglas A. Bolduc contributed to this report.