Volvo owner Geely and Volvo Cars have announced that they will forego their proposed merger and instead significantly deepen their existing cooperation as two separate companies. This includes, among other things, expanded joint use of modular architectures for electric cars.
In addition, joint procurement is expected to reduce purchasing costs, which makes sense with a higher proportion of common parts in shared platform use. Thus, at the press conference held online, the companies also announced to share the new SEA and SPA2 electric car architectures among their brands.
Volvo Cars and Geely confirmed their plan to merge the development and production of internal combustion engines and hybrid powertrains into a standalone company. This plan was announced back in 2019. In December 2020, Volvo also announced plans to manufacture electric motors at its Swedish engine plant in the future. The production of internal combustion engines at the Skövde plant will be transferred to a separate subsidiary of Volvo Cars called Powertrain Engineering Sweden (PES), which will be merged with Geely’s internal combustion engine business, Volvo said in December.
Companies are often pushed into mergers by investors, but here it was the other way around: a merger of Geely and Volvo Cars was seen rather sceptically by the capital market, as a merger of companies with many parallel structures takes time and ties up capacity. The friction caused by this process would probably be greater than the positive effect.
“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,” the statement reads.
Volvo Car chief executive Hakan Samuelsson also indicated that the deepened collaboration was “the best way forward”. “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,” Samuelsson said at the press conference. On a possible IPO of Volvo Cars, he said that no such decision had been made, but it was an option, Samuelsson hinted.
“Geely Auto looks forward to partnering more closely with Volvo Cars, achieving significant synergies for our respective businesses,” said An Conghui, president and CEO of Geely Auto. “This will enable Geely Auto to accelerate its global expansion, to capitalise on our strengths in China and develop a new generation of world-class new energy vehicles and associated mobility services.”
The companies intend not only to share the SEA and SPA2 platforms, but also to develop them together. But there is also to be better cooperation in sales, even if only brand-specific: in order to expand the joint brand Lynk & Co globally, the existing sales and service network of Volvo is now to be used.
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