Geely Auto and Volvo Cars to launch powertrain venture after merger scrapped

BEIJING (Reuters) - China's Geely Automobile and its Swedish sister company Volvo Cars will abandon merger plans but launch a new entity to combine their powertrain operations and expand cooperation on electric vehicles, the companies said.

A year ago the two said they were planning to merge and list in Hong Kong and possibly Stockholm, giving Volvo access to public markets, as global automakers pursue alliances to respond better to the cost of the transition to electric cars, tougher emission rules and autonomous driving.

In a joint statement on Wednesday Geely Automobiles and Volvo Cars that they would perserve with their existing separate corporate structures after "a detailed review of combination options".

They said, however, that they would launch a new company to combine their existing powertrain operations.

The new entity, expected to become operational this year, will provide engines, transmissions systems and petrol-electric hybrid systems for use by both companies as well as other automakers.

The two companies will also focus on the development and sourcing of next-generation technologies, from connectivity and self-driving vehicles to car sharing and electrification. They plan to share and jointly source batteries, electric motors and connectivity solutions, the statement added.

Geely Auto will also forge a partnership with Volvo's sales network to help to boost growth for their jointly owned Lynk & Co car brand.

Hangzhou-based Zhejiang Geely Holding Group, Geely Automobile's parent, bought Volvo Cars from Ford Motor Co in 2010. Last year Geely Automobile sold 1.32 million cars while Volvo Cars sold 661,713 vehicles.

(Reporting by Yilei Sun and Brenda Goh Editing by David Goodman)

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