Swedish automaker Volvo Cars and its Chinese parent company Geely will merge internal combustion engine (ICE) operations into a stand-alone business. The merged ICE business will combine 3,000 employees from Volvo and 5,000 employees from Geely including R&D, procurement, manufacturing, IT, and finance positions.Business Insider Intelligence
The new unit will work on designing new and upgraded ICEs to supply in-house brands such as Lotus, LEVC, Lynk, and Proton. The spinoff will enable Volvo to focus on in-house EV powertrain and platform development without neglecting ICE development, according to Volvo Cars CEO Håkan Samuelsson cited by Transport Topics.
Volvo and Geely are following a growing trend of traditionally insular automakers cooperating to split development costs.BMW and Toyota agreed to an ICE-sharing deal. This deal enabled Toyota to forgodeveloping a new ICE for its Supra sports car, and BMW to split the cost to develop the engine, which it used in its Z4 sports car. Consolidating ICE efforts provides greater efficiency and cost savings for a tech that automakers likely don't see much of a future in. Sales of ICE vehicles are expected to decline after 2030, perBloombergNEF.Subaru and Toyota teamed up to jointly develop an electric vehicle (EV) platform.Under their agreement, Subaru and Toyota are jointly developing an EV platform to build SUVs that will be sold under both brands. Joint development allows the companies involved to split manpower and costs while combining their best assets. EV development can be expensive, with automakers already planning to commit around $300 billion to EV development in coming years.
Geely and Volvo have decided to combine combustion engine development, but not EV drivetrain efforts, likely in an effort to build a wider array of EV platforms. The decision to independently pursue EV development enables the two automakers to develop a wide lineup of EV solutions that appeal to their individual core audiences — currently, Volvo is working on an EV SUV, while Geely has announced an EV sedan.
Moreover, separate EV initiatives won't tie the companies' development timelines together, so a delay at one company won't affect the other. Volvo expects that half of its sales will be of fully electric cars by 2025, with the remaining sales being of cars that use hybrid engines. Geely will launch at least 10 fully electric models in multiple segments by 2025 under its Geometry brand. The two companies are doubling down on EV development to capitalize on a growing market for EVs — over 2 million EVs were sold in 2018, and 10 million are expected to be sold in 2025, per BloombergNEF.
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