Volvo Cars and Geely to establish JV to boost synergies, accelerate next-gen electrified vehicle technology
Volvo Cars plans to set up a new joint venture technology company with Geely Holding, the Chinese car group, to share existing and future technology, to deepen industrial synergies and to provide the economies of scale that will allow them to develop next generation electrified vehicle technology more rapidly.
According to a Memorandum of Understanding signed today, Volvo Cars, Geely Auto and LYNK & CO will share vehicle architecture and engine technologies via cross licensing arrangements of technologies managed by the new joint venture. They will also cooperate more deeply by commonly sourcing components and cutting procurement costs.
Volvo Cars, Geely Auto and LYNK & CO are controlled by Geely Holding, the Chinese car group. The new joint venture will be 50/50 owned by Volvo Cars and Geely Holding and be headquartered in China with a subsidiary in Gothenburg, Sweden.
Partnerships to share know-how and technologies are common practice in the automotive industry. This is the model we are adopting. This planned collaboration will strengthen Volvo’s ability to develop next generation electrified cars.—Håkan Samuelsson, president and chief executive
Volvo Cars and Geely already share technology, most notably the Compact Modular Architecture (CMA) which is being used by Volvo Cars for its soon-to-be-announced smaller range of 40 series cars and by LYNK & CO.
The intellectual property rights for the technology to be shared will remain with the company that developed it, but the technology itself will be available for use by Volvo, Geely Auto and LYNK & CO, via license agreements.
Future modular vehicle architectures and other technology will be shared and developed based on cost sharing agreements. The company leading the development will own the technology and the other group companies will have full access to it through a license, reducing overall development costs.
The partners expect that the collaboration will extend in future to also cover electrified vehicle components such as battery cells, e-motors and charging systems in order to maximize synergies across the group.
Separately, Volvo is taking a significant minority shareholding in LYNK & CO. This stake reflects the fact that LYNK & CO will benefit from the use of Volvo technology both now and in the future. LYNK & CO will be jointly owned by Geely Holding, Geely Auto and Volvo Cars.
We will unlock significant benefits across our portfolio by sharing both technologies and next-generation vehicle architectures. I am confident these synergies can be achieved while preserving the separate identities and strategic autonomy of our different automotive brands.—Li Shufu, chairman of Geely Holding
The above transactions are subject to definitive agreements and relevant authority approvals.
Volvo Cars profit up 21.2% in 1H 2017. Separately, Volvo Cars reported strong growth in operating profit of SEK 6.8 billion (US$820 million) in the first half of 2017, compared to SEK 5.6 billion (US$670 million) for the same period last year, after taking market share across Europe and experiencing a robust sales increase in China.
Revenues rose to SEK 99.1 billion (US$11.9 billion) from SEK 84.2 billion (US$10.1 billion) in the first six months of 2016, while the operating profit margin improved to 6.8% from 6.6% a year earlier, even as the company continues to invest heavily in new cars and technologies.
Sales for the first six months of the year increased 8.2% compared to the same period last year to 277,641 cars. The first half increase in sales means Volvo Cars remains firmly on course for a fourth consecutive record year.
During the first half of 2017, the company took market share in the EMEA region, following healthy growth in several key markets. Sales were up by 6.6% during the period. In the Asia Pacific region and China in particular, Volvo outperformed the market. Sales in the region increased by 22.6%, while China sales were up 27.6%.
In the US, Volvo Cars expects to report solid full-year growth after a strong second half of the year. Delivery constraints affected first quarter sales, but a return to growth during the second quarter and the impending start of delivery of the new XC60 mid-size SUV point to a stronger finish.
Later this year, Volvo Cars will launch its all-new XC40, its first entry into the fast-growing small premium SUV segment, completing the company’s SUV line-up.