How Luminar’s fateful Volvo deal drove the company into bankruptcy

In early 2023, Luminar was on a roll. After going public during the pandemic and signing a key deal with Volvo, the company has added Mercedes-Benz and Polestar as customers for its “lifesaving” lidar sensors. Founder and CEO Austin Russell called it an “inflection point” as Luminar prepared to integrate these sensors into its first production vehicles.

Volvo in particular was all about its technology. The Swedish automaker, which has spent decades building its brand around the idea of ​​making the safest cars, was the first to jump into integrating laser-based sensors into its vehicles. Volvo initially used Luminar to provide 39,500 LiDAR sensors during the contract signed in 2020. In 2021, Volvo increased that to 673,000 units. And in 2022, Volvo has increased the number of sensors again to 1.1 million.

Three years later, Luminar is now in bankruptcy. The company already has a deal in place to sell one semiconductor-focused subsidiary and is considering selling its lidar business during the Chapter 11 process that began Monday.

Initial filings in the bankruptcy case shed new light on how Luminar’s foundational deal with Volvo fell apart and how that breakup helped push the once-promising startup to the breaking point.

Big promises, big fixes

Luminar has made “significant upfront investments in plant, equipment and workforce” to meet demand from Volvo in 2022, according to a statement written by Robin Chiu, Luminar’s newly hired chief restructuring officer. The company built a manufacturing facility in Monterrey, Mexico, and spent approximately $200 million preparing to manufacture iris slider sensors for Volvo’s EX90 SUV.

But problems were already starting to appear at Volvo, Chiu said. The automaker has postponed the launch of the EX90 SUV to 2023 because it needs to do more “software testing and development,” the automaker said. And in early 2024, Volvo has reduced its planned volume of iris sensors by 75%, Luminar said. (Volvo did not immediately respond to a request for comment.)

Luminar’s other deals began to deteriorate as well. According to Chiu, Polestar (a subsidiary of Volvo) quietly abandoned the integration of Luminar’s lidar sensor “because the vehicle’s software ultimately couldn’t use that feature.” According to Chiu, Mercedes-Benz terminated the purchase agreement for Luminar’s iris sensor in November 2024 because the LIDAR maker “failed to meet ambitious requirements.”

(Mercedes-Benz signed a new deal with Luminar for the next generation of Halo riders in March 2025, but at the time of the bankruptcy Luminar had “no future projects” with the German automaker, Chiu wrote.)

This left Luminar with Volvo as its only major customer.

The company never diversified beyond the automotive industry and avoided other applications such as defense and robotics. In fact, Russell founded Luminar in 2012 with the goal of bringing lidar from these fields into the automotive space to accelerate the adoption of self-driving cars.

It wasn’t until March that Russell started talking about expanding beyond the automotive field, after Luminar signed a deal with construction equipment company Caterpillar. Just two months later, Russell abruptly resigned following an ethics investigation from Luminar’s board of directors.

“More bad news.”

Chiu explained that Volvo remained committed to achieving its lifetime order of 1.1 million units in 2024, despite the drop in production. Therefore, Luminar continued to move forward based on that premise.

But signs of stress were showing. Luminar laid off 20% of its workforce in May 2024 and expanded its outsourcing of LIDAR sensor manufacturing. In September 2024, the company further strengthened its workforce reductions and restructured parts of its business. Another round of layoffs occurred in May 2025, after Russell resigned.

In September, “Volvo delivered even more bad news,” Chiu wrote. The automaker has decided to offer lidar as an option on the EX90 going forward, rather than making it a standard feature as originally planned. Volvo also told Luminar that it would shelve lidar on future vehicles “as a cost-cutting measure.”

“This change reduced Volvo’s estimated lifetime sales by approximately 90 percent,” Chiu wrote.

Luminar told Volvo on October 3 that it believes this is a violation of the agreement the two companies first signed in 2020. The dispute became public on October 31, when Luminar told shareholders in a regulatory filing that it would stop shipping sensors to Volvo. The Swedish automaker sent Luminar a letter terminating the contract two weeks later.

Chiu’s filing says Luminar began selling lidar sensors intended for Volvo into neighboring markets “to recover sunk costs,” but it was too late.

“As relations with Volvo deteriorated, [Luminar] “Although we have worked vigorously to find new customers, in the end we were unable to enter production for new customers in a timely manner. In addition, the public Volvo dispute resulted in a decline in sales due to widespread market concerns about Luminar’s financial future,” Qiu wrote.

The future of what’s left of Luminar now rests in the hands of creditors and the courts. The company is seeking judge’s approval to sell its semiconductor subsidiary to Quantum Computing for $110 million and hopes to negotiate with multiple bidders for its lidar business.

According to the filing, Luminar already has significant interest in the LiDAR business. Chiu wrote in January that the company hired investment bank Jefferies to evaluate the sale after receiving an “unsolicited takeover offer.” Luminar received “additional unsolicited inbound expressions of interest in acquiring the company” over the summer and fall. This includes Russell’s submission through the new AI Lab in October.

As TechCrunch reported on Monday, Russell plans to continue bidding on Luminar’s remains as the bankruptcy case moves forward.