Volvo Cars and Geely Auto are to work more closely on electric vehicle developments but will not push ahead with previous plans for a merger.

Volvo Cars’ and Geely Auto’s powertrain operations will be combined in a new company focused on next-generation hybrid systems and internal combustion engines

The two firms, both part of Geely Holding Group, said a year ago that they were considering a global merger as they looked to combine their strengths “to lead the automotive industry transformation”.

But in a press conference yesterday (24 February 2021), the carmakers said can secure new growth opportunities in their respective markets and meet evolving industry challenges through deeper cooperation on EVs and autonomous driving, while remaining separate corporate businesses to ensure they remain agile. It would also enable them to explore new listings.

The two carmakers will now combine their existing powertrain operations into a new standalone company. This is expected to become operational this year and will provide internal combustion engines and drivetrains for use by both companies as well as other automakers.

But the collaboration will particularly focus on the development and sourcing of next-generation technologies, from connectivity and autonomous drive to car sharing and electrification. This will see them share and jointly source batteries, electric motors and connectivity solutions, generating synergies.

They will also work together on an autonomous driving solution under the lead of Zenseact, Volvo Cars’ AD software development company.

Håkan Samuelsson, president and CEO of Volvo Cars, outlined: “Having evaluated different options to realise 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.”