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Volvo said on Friday it plans to distribute 62.7% of its stake worth 9.5-billion krona (R17.63bn) in Swedish electric vehicle manufacturer Polestar to its own shareholders.
After completion of the proposed distribution, Sweden-based Volvo said it will retain an 18% stake in Polestar.
The heavy involvement by Sweden-listed Volvo in Polestar, where it owns around 48% of the shares, has been criticised by analysts who see the stake as a drag on Volvo's resources.
"As we have significant operational collaborations with Polestar and a financial relationship, it is logical for us to retain influence through a smaller 18% stake in Polestar," said president and CEO of Volvo Cars Jim Rowan.
The company said it has a financial relationship with Polestar through an outstanding convertible loan of $1bn (R19.16bn).
China's Geely, which is a majority owner of Volvo, will continue to provide operational and financial support to Polestar.
The stake distribution will be made through a 2:1 share split, followed by an automatic share redemption process, Volvo said.