Geely and Volvo to launch power-train venture after merger scrapped

China's Geely group and its Swedish sister company Volvo Cars will abandon merger plans, but launch a new entity to combine their power-train operations and expand co-operation on electric vehicles, the companies said.

A year ago the two said they were planning to merge, giving Volvo access to public markets, as global automakers pursue alliances to respond better to the cost of the transition to electric cars, tougher emission rules and autonomous driving.

Geely and Volvo on Wednesday said they would preserve their existing separate corporate structures after “a detailed review of combination options”.

They added, however, that they would launch a new company to combine their existing power-train operations.

The new entity, expected to become operational this year, will provide engines, transmissions systems and petrol-electric hybrid systems for use by both companies, as well as other automakers.

“I firmly believe that this is the best combination, the best way forward for our companies,” Volvo Cars CEO Håkan Samuelsson said.

Asked if Volvo Cars would consider a stock market listing, he said there were no such plans.

The companies will also focus on the development and sourcing of next-generation technologies, from connectivity and self-driving vehicles to car sharing and electrification, they added.

The two did not disclose what savings they expect to make from the various collaborations.

Geely and Volvo's joint research team rolled out a car product platform, dubbed Compact Modular Architecture (CMA), to develop, design and build different types of compact cars, with similar mechanical layout, faster than before and at lower cost.

Geely will also forge a partnership with Volvo's sales network to help boost growth for their jointly owned Lynk & Co car brand.

Last year Geely sold 1.32 million cars, while Volvo Cars sold 661,713 vehicles.

Geely plans to raise 20 billion yuan (about R42bn) from a public share sale on Shanghai's Nasdaq-style STAR Market, which CEO Gui Sheng Yue said would be unaffected by the new collaboration with Volvo.

Hangzhou-based Zhejiang Geely Holding Group, Geely’s parent, bought Volvo Cars from Ford Motor Co in 2010. It also has stakes in Daimler AG and Malaysian carmaker Proton.