Volvo Cars and owner Geely Holding said they would jointly spend RMB5bn (EUR640m, US$752m) to support the initial phase of Polestar's product, brand and industrial development.
The spend highlights the financial muscle and industrial and manufacturing expertise Polestar will have access to and establishes the fully consolidated Volvo Cars subsidiary as a stand alone electrified performance car company after it revealed its first production model in Shanghai.
The money would be used, among other things, to establish a manufacturing facility in Chengdu, China, marking a new chapter in the development of China as a manufacturing hub for Volvo Cars.
This will radically shorten the time Polestar needs to commercially launch its cars, giving it a strategic advantage compared with competitors. Volvo Cars and Polestar will also benefit from synergies in the development of next generation technologies such as shared procurement costs, joint development and economies of scale.
With China as a driving force behind the electrification of the global car industry, Polestar will spearhead the development of new technologies and enhance Volvo Cars' leadership within electrification and connectivity.
Polestar will also benefit from having privileged access to Volvo's global and well established manufacturing standards and expertise as it establishes its own manufacturing operations in Chengdu.
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