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Automakers Geely & Volvo Cars to Launch a New Powertrain Joint Venture After Merger Talks End

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【Summary】Sweden-based Volvo Cars and Chinese automaker Geely Auto are combining their vehicle powertrain operations in a new joint venture company while still retaining their existing independent corporate structures. In addition to developing new EV powertrains under the new venture, the two automakers will share electric vehicle architectures and autonomous driving technologies.

Eric Walz    Feb 24, 2021 5:30 PM PT
Automakers Geely & Volvo Cars to Launch a New Powertrain Joint Venture After Merger Talks End

In February 2020, Swedish automaker Volvo Cars and Chinese automaker Geely Automobile Holdings Limited (Geely) were in talks about merging their operations into a single auto group, which would have resulted in the formation of one of the world's largest car companies.

However Volvo Cars and Geely Auto have now decided as their talks progressed they can better secure new growth opportunities in their respective markets and better adapt to a changing auto industry by leaving their existing separate corporate structures intact. So the two automakers announced they are combining powertrain operations in a new joint venture company.

The joint venture will develop electric, hybrid, as well as internal combustion engine powertrains.

"Having evaluated different options to realize value, we concluded jointly that a collaboration model between two standalone companies is the best way to secure continued growth and at the same time achieve technological synergies in many areas. We welcome the opportunity of further and deeper collaboration with Geely Auto," said Håkan Samuelsson, President and CEO of Volvo Cars.

In addition to developing new EV powertrains under the new venture, the two automakers will share electric vehicle architectures, autonomous driving technologies and jointly procure components to save costs. Volvo and Geely will also jointly source EV batteries and electric motors from suppliers. 

The joint venture will utilize Volvo's existing distribution and service network to expand globally.

The collaboration will be overseen by a new governance model, supported by Geely Holding, which is the lead shareholder of both companies.

Geely has owned Volvo for over a decade having purchased Volvo from U.S. automaker Ford Motor Company in 2010. At the time, acquiring Volvo was intended to help extend the automaker's reach outside of its home country of China.

The new joint venture company is expected to become operational sometime this year. It will provide internal combustion engines, transmissions, and next-generation dual-motor hybrid systems that both automakers will share among their model lineups. In addition, the company plans to develop systems for other automobile manufacturers.

The collaboration will also include the joint development of an autonomous driving (AD) solution under the lead of Zenseact, Volvo Cars software development company which has developed a scalable advanced driver assist system (ADAS) and autonomous driving software platform.

The two companies are also planning to share Volvo's new SEA and SPA2 electric vehicle architectures among their brands and have launched efforts to speed up the development of hardware and software for the next-generation modular EV architectures. 

The sharing of vehicle platforms allows for an expansion of product portfolios across the Volvo Cars, Geely, Lynk & Co and the Polestar brand. Polestar is Volvo Cars' new dedicated electric brand. The new Polestar 2 EV is built in China by Geely.

In addition, the two companies will collaborate on the global expansion of the jointly owned Lynk & Co brand, which launched in 2016. The Lynx & Co is focused on internet connectivity and innovative purchasing models, such as a direct to consumer sales model.

"Geely Auto looks forward to partnering more closely with Volvo Cars, achieving significant synergies for our respective businesses. This will enable Geely Auto to accelerate its global expansion, to capitalise on our strengths in China and develop a new generation of world-class new energy vehicles and associated mobility services," said An Conghui, President and CEO of Geely Auto.

The collaboration agreement has the support of Li Shufu, Chairman of Geely Holding, which is the largest shareholder in Geely Auto.

"We are encouraged by the potential synergies and growth opportunities created by this collaboration, which will create two even stronger globally competitive companies in the rapidly changing world of automotive technology and new mobility services," said Shufu.

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