Volvo, Geely Merging Combustion Engine Operations in a Move to EVs

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【Summary】Volvo and Geely announced plans to combine their engine operations into one company, as the automaker looks to shift toward a lineup with only electrified vehicles.

Original Vineeth Joel Patel    Nov 20, 2019 6:00 AM PT
Volvo, Geely Merging Combustion Engine Operations in a Move to EVs

The sun is beginning to set on the internal combustion engine's reign as the primary form of movement for vehicles. Electric cars, hydrogen vehicles, and electrified models are starting to gain traction and becoming more affordable. In an interesting move that will cement its shift toward electrified powertrain, Volvo and the Swedish automaker's parent company Geely announced plans to combine its engine operations in a standalone company, reports The Detroit News.

Cutting Costs To Focus On EVs
On its own, Volvo produces approximately 600,000 engines for automobiles. By taking this step with Geely, the standalone company would increase output of diesel and gasoline-powered motors to 2 million. That, as the outlet points out, gives the companies more scale to cut costs. Giving other automakers its engines is also one aspect of the plan of branching its engine operations into a separate entity.
As the outlet points out, money's getting tight for automakers as they begin the switch to electrified-heavy lineups. According to forecasts by HIS Markit, electric vehicles are expected to increase from 2 percent to 12 percent of new-car production by the next 10 years. Other things bringing profits down include trade wars, slowing automobile sales , and constricting emissions regulations.
For Volvo, relying on Geely to help with engine production will help the Swedish brand focus on engineering electric powertrains . "It's not like the combustion engine is going to be a growing business," said Hakan Samuelsson, President & CEO of Volvo Car Group. "The right thing to do is to consolidate and seek synergies. And the earlier you do that, the stronger you will be."

Changes Are Coming
Volvo doesn't believe that any jobs will be eliminated because of the changes. As Alan Baum, an independent auto analyst, claims, it all comes down to how quickly the automotive scene switches gears to go to fully electric cars.
"The extent that you move to fully battery-electric, you obviously displace those white-collar and blue-collar combustion-engine people," stated Baum, claiming that some staff might be able to transfer to another area within the companies. "If they remain heavily involved in the supply chain, perhaps in a way they weren't in combustion engines, then they would in fact absorb some of that transition."
To meet its goal of having fully electric cars accounting for half of its global sales by 2025, while the rest of the vehicles will have gas-electric hybrid powertrains that will be made in conjunction with Geely. 

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