Volvo, Parent Geely to Form Stand-Alone Powertrain Unit

Swedish automaker Volvo will merge its internal-combustion-engine operations with Chinese parent company Geely into a stand-alone business.

The move is seen as an extension of the automaker’s globalization strategy establishing a new supplier developing next-generation ICE and hybrid powertrains. Volvo expects the merger will allow it to focus exclusively on development of its all-electric range of vehicles.

The company expects half its global sales to be fully electric by 2025 and the other half hybrid, supplied by the new joint powertrain supplier. The entity also will provide powertrains to Geely Auto, Proton, Lotus, London Electric Vehicle and Lynk and hopes to also supply third-party manufacturers.

There will be no workforce reductions at the two automakers’ current engine production facilities. There are about 3,000 employees at Volvo and another 5,000 at Geely’s combustion-engine operations, including R&D, procurement, manufacturing, IT and finance.

In a statement, 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.”

Håkan Samuelsson, Volvo president and CEO, adds: “Hybrid cars need the best internal-combustion engines. This new unit will have the resources, scale and expertise to develop these powertrains cost-efficiently.”

Detailed plans of the new business are under development and subject to union negotiations as well as board and relevant regulatory approvals.