Volvo Cars and Geely have announced plans to merge their existing combustion engine operations into a stand-alone business in order to establish a new global supplier that will seek to develop next-generation combustion engines and hybrid powertrains.
The proposed new business would clear the way for Volvo Cars to focus on the development of its all-electric range of premium cars. Volvo Cars is building an entirely electrified product range, as part of the company’s ambition to put sustainability at the core of its operations. By the middle of the next decade the automaker expects half its global sales to be fully electric and the other half hybrid, supplied by the new unit.
For Geely, the new entity means technologically advanced and efficient combustion engines and hybrid powertrains would be available to Geely Auto, Proton, Lotus, LEVC and LYNK & CO. The planned new stand-alone business also will be able to supply third-party manufacturers, providing possible growth opportunities.
Volvo and Geely say the new business would represent a significant industrial collaboration between the two companies, with substantial operational, industrial and financial synergies.
The proposed new business is intended employ 3,000 workers from Volvo Cars and around 5,000 employees from Geely’s combustion engine operations, including research and development, procurement, manufacturing, IT and finance functions. No reductions in the workforce at either business are anticipated.
Both Volvo Cars and Geely are in the process of carving out their internal combustion engine operations into new units within their respective organizations, as a first step toward a merger of the two into a combined new stand-alone business.
Volvo says it believes the electrification of the automotive industry will be a gradual process, meaning there will be significant ongoing demand for efficient hybrid powertrains alongside fully-electric offerings.
“Hybrid cars need the best internal combustion engines. This new unit will have the resources, scale and expertise to develop these powertrains cost efficiently,” said Håkan Samuelsson, Volvo Cars’ president and chief executive.
The detailed plans of the new business are under development and subject to union negotiations as well as board and relevant authority approvals.