(Yicai Global) July 21 -- Zhejiang Geely Holding Group Co. and Volvo Car Corp. signed a memorandum of understanding to team up in a new joint venture, and shares in the new company will be equally distributed, the Chinese automaker said in an official statement yesterday.
The pair will share cutting-edge vehicle architecture and clean powertrain technologies through mutual licensing and jointly source parts and components. The deal will create synergies and economies of scale that will take the development of the Chinese carmaker's three brands -- Geely, Volvo and Lynk & Co. -- to new levels.
After the deal, the pair will deepen and broaden their collaborations and work together to make next-generation electric vehicle platform technology. The joint venture will be responsible for applying technologies cooperatively developed by the companies.
Volvo will become a shareholder of Lynk & Co, splitting a 50-percent stake in the high-end car brand with Geely Holding Group. The remaining 50 percent will be held by Geely Automobile Holdings Ltd. [HKG:0175].
"Partnerships to share know-how and technologies are common practice in the automotive industry," said Haakan Samuelsson, president and chief executive of Volvo. "This is the model we are adopting. This planned collaboration will strengthen Volvo's ability to develop next generation electrified cars."
The Swedish group has advanced rapidly since it was acquired by Geely Holding in 2010. Its sales grew 8.2 percent to 278,000 in the first half, with net profit increasing 21.2 percent to USD828.5 million (SEK6.8 billion). Sales at Geely Automobile rose 89 percent to 531,000 units in the same period, and the net profit growth is projected to exceed 100 percent. The firm increased its full-year sales target to 1.1 million on July 6.
By bundling Geely Automobile with Volvo and Lynk, Geely Group will be able to improve the overall competitiveness of each brand, allowing them to benefit from their complementary strengths.