Geely and Volvo abandon merger to focus on engine alliance

The Chinese and Swedish carmakers said they would also cooperate more closely in the areas of autonomous driving and electrification, leading to greater production efficiency

Geely and Volvo abandon merger to focus on engine alliance
A Geely Xingyue sports utility vehicle is displayed at the Shanghai auto show in 2019. File photo by Reuters.  

(ATF) Geely Automobile and Volvo Cars will scale down their merger plans to a cooperation agreement about making engines, dampening down hopes that the Chinese and Swedish car makers could mount a global challenge to rivals.

A year ago the two companies said they were planning to merge, giving Volvo access to public markets through the listed Geely, and signalling further consolidation among global car companies.

But on February 24, they said they would stay separate after “a detailed review of combination options”, adding that a new company would combine their existing powertrain operations.

"I firmly believe that this is the best combination, the best way forward for our companies," Volvo Cars chief executive Hakan Samuelsson told a joint news conference.

But analysts were lukewarm. “We had expected the acquisition of the entire Volvo Car business leading to more future synergies in terms of operational efficiency,” said Kelvin Lau at Daiwa Capital Markets in Hong Kong. “This is below our expectations.”

NO LISTING PLANS

Samuelsson said there were no plans for Volvo to list. Hong Kong-listed Geely shares rose more than 4% to HK$27 in trading on February 25.

Volvo and Geely said they would also cooperate more closely in the areas of autonomous driving and electrification.

Geely already has a joint venture with Chinese internet giant Baidu to produce flagship intelligent electric vehicles . “Baidu contributes intelligent driving technology to match Geely's design and manufacturing,” noted Binnie Wong, head of Asia Pacific internet research at  HSBC.

The new entity would provide engines, transmissions systems and petrol-electric hybrid systems for use by both companies as well as other carmakers. “This will lead to synergies in terms of production efficiency,” Lau acknowledged.

They will also share technologies for battery packs, electric drive systems and 'intelligent' connectivity, and jointly purchase parts for cost savings. Lau said the Geely-owned Lynk & Co would be able to leverage Volvo’s extensive sales network.

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Geely Volvo Merger plan dropped China autonomous driving EVs electric vehicles car engines