Volvo Cars and Geely intend to merge their existing combustion engine operations into a stand-alone business in order to establish a new global supplier that will seek to develop next-generation combustion engines and hybrid powertrains.

The proposed new business would clear the way for Volvo to focus on the development of its all-electric range of premium cars. Volvo Cars is building an entirely electrified product range, as part of the company’s ambition to put sustainability at the core of its operations. By the middle of the next decade it expects half its global sales to be fully electric and the other half hybrid, supplied by the new unit.

For Geely, the planned new entity means technologically advanced and efficient combustion engines and hybrid powertrains would be available to Geely Auto, Proton, Lotus, LEVC and Lynk & Co. The planned new stand-alone business can also supply third-party manufacturers, providing possible growth opportunities.

The proposed new business is intended to be an attractive employer for approximately 3,000 employees from Volvo Cars and around 5,000 employees from Geely’s combustion engine operations, including research and development, procurement, manufacturing, IT, and finance functions. No reductions in the workforce are anticipated.

Both Volvo Cars and Geely are in the process of carving out their ICE (internal combustion engine) operations into new units within their respective organizations, as a first step towards a merger of the two into a combined new stand-alone business.

Volvo Cars 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.