Volvo and Geely scrap merger plans but strengthen technical links

Volvo and Geely Auto have expanded their partnership to agree increased joint development of future technology – but ruled out plans for a full merger.

The two firms are both owned by Geely Holding Group and already work together in a range of areas. Last year, they announced plans to pursue a full merger, but the firms now say that they can benefit more from increasing co-operation while remaining separate businesses.

Volvo, which was bought by Geely Holding in 2010, and Geely Auto already use a number of joint platforms – CMA, SPA2 and the forthcoming electric SEA architecture – and are in the process of merging their combustion engines divisions into a stand-alone business. They have also worked together on the creation of the Lynk&Co and Polestar brands.

The new agreement will include expanded development and use of shared electric architectures, which will allow for the expansion of the product portfolio of all four brands. That will also include the development of a next-generation platform designed for advanced autonomous vehicles that feature technology set to be introduced in the coming decade.

Volvo and Geely will also work together on the joint development of connectivity technology and software and adopt increased joint purchasing to lower costs. The agreement also allows for Lynk&Co’s continued global expansion through use of the Volvo service network.

Volvo boss Håkan Samuelsson said the decision to increase co-operation rather than pursue a full merger was “the best way to achieve a strong combination and make both companies stronger”. He added: “Volvo and Geely are two of the fastest-growing car companies in the world, so it’s important we maintain the ability to keep growing without any loss of momentum.

“This is really the best combination and the best way forward for both our companies, employees, customers and investors. It brings all the benefits of a merger without any of the disadvantages that could come.”

Samuelsson added that he anticipated the joint purchasing benefits will result costs, allowing Volvo to improve its pricing, and said that one key benefit was the shared development of future technology.

He added: “In the future, some new development areas will be particularly important. In the past, we worked together on a lot of hardware modules, but in the future, it will be really important to have a common software stack. Software and technology, such as autonomous technology, will be very important to work together on.”

Geely Auto president An Conghui said: “The global automotive industry is undergoing profound changes. This deepening of co-operation is the result of joint development of long-term thinking with important strategic considerations. Establishing a closer relationship with Volvo will accelerate Geely’s global expansion.”