STOCKHOLM – Volvo Cars signed separate MOUs on July 20 with parent company Geely Holding Group to set up a new joint venture technology company and for the Swedish carmaker to a significant minority stake in LYNK & CO, the international premium brand launched by Geely last year.
The new technology JV aims to share existing and future technology, deepen industrial synergies and provide the economies of scale that will allow the two partners to more rapidly develop next generation electrified vehicle technology.
Volvo Cars, Geely and LYNK & CO will share vehicle architecture and engine technologies via cross licensing arrangements of technologies managed by the new JV. They will also cooperate more deeply by commonly sourcing components and cutting procurement costs.
The new joint venture will be 50:50 owned by Volvo Cars and Geely and be headquartered in China with a subsidiary in Gothenburg, Sweden.
In parallel, Geely, Volvo Cars and Hong Kong-listed Geely Auto Holdings also signed an MOU that will pave the way for Geely and Volvo Cars to take a 50 percent stake in LYNK & CO. Geely Auto will retain the remaining 50 percent of LYNK & CO.
The two initiatives represent a move towards closer collaboration between Geely Auto, Volvo Cars and Geely, which owns 100 percent of Volvo Cars and is also the largest shareholder in Geely Auto.
All brands under Geely will also benefit from shared IP, joint purchasing arrangements and wider economies of scale as part of the joint venture.
“Partnerships to share know-how and technologies are common practice in the automotive industry. This is the model we are adopting,” said Håkan Samuelsson, president and CEO of Volvo Cars. “This planned collaboration will strengthen Volvo’s ability to develop next generation electrified 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,” said Li Shufu, chairman of both Geely and Volvo Cars.
Alain Visser, senior vice president of LYNK & CO, added: “This gives our brand a solid global foundation for increased economies of scale, harnessing the advanced technologies of Volvo Cars, combined with our unique and differentiated LYNK & CO business model.”
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 for its upcoming 01 small SUV.
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.
It is expected 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.
The two transactions are subject to definitive agreements and relevant authority approvals, and coincided with the announcement on the same day that Volvo Cars achieved revenues of SEK99.1 billion with operating profit margin of 6.8 percent in the first half of 2017.