Procurement synergies will be a driving force in a wide-ranging collaboration between Volvo Cars and Chinese automotive group Geely Auto.
The two firms said the deal would see them set up a joint company enabling them to jointly source next generation technologies after a proposed merger was scrapped.
Volvo said: “Following a detailed review of combination options, Volvo Cars and Geely Auto have concluded they can secure new growth opportunities in their respective markets and meet evolving industry challenges through deeper cooperation, while preserving their existing separate corporate structures.”
Last year the two firms announced plans to merge and list in Hong Kong and possibly Stockholm – a move that would have given Volvo access to Chinese markets.
But the firms decided a wide-ranging collaboration will maximise the strengths of both firms, especially by delivering joint procurement, synergies in powertrains, sharing of electric vehicle architecture, autonomous drive technologies and aftersales.
The two companies’ existing powertrain operations will be combined into a new standalone company that is expected to become operational this year.
The new company will provide internal combustion engines, transmissions, and next-generation dual-motor hybrid systems for the wider automotive industry as well as the two stakeholders.
Joint sourcing of next-generation technologies, ranging from connectivity and autonomous drive to car sharing and electrification, will form a major element of this new venture.
The firms will jointly source batteries, electric motors and connectivity solutions that they believe will generate valuable synergies.
Håkan Samuelsson, president and CEO of Volvo Cars, said: “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.”
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