Geely Auto and Volvo Cars are planning to merge their engine operations into a stand-alone business unit, which will pool resources to create greater synergy between them and facilitate their electrification campaigns, according to parent company Zhejiang Geely Holding Group. The proposed new unit, which is still subject to diligence and approval, will develop and produce more efficient engines and hybrid powertrains for vehicles under all brands across the group as well as other automakers, the company said. The move will increase synergies for both Geely and Volvo in research and development (R&D), manufacturing, procurement, and operations and thus improve efficiency and cut costs.

Currently Volvo makes over 600,000 vehicles a year, while Geely produces about 1.5 million. Combined they have 8,000 people working on combustion engine operations, including research and development (R&D), procurement, manufacturing, IT and finance functions. The group said there would be no reduction in the workforce due to the merger. An Conghui, President of the group, said the company is committed to full electrification, but it will continue to increase investments in the development of highly efficient combustion engines and hybrid systems. Geely is one of the first Chinese carmakers to develop the 48-volt mild hybrid system, believing that China will be a major market for such technology.

Geely said models featuring the latest-generation hybrid system are expected to hit the market in 2022. The Chinese company has been ramping up investment in R&D over the years. In the past decade, it has spent over CNY100 billion in R&D. So far it has established five major R&D facilities, employing up to 20,000 engineers. Last year, its R&D expenditure totaled CNY21 billion, accounting for 6.4% of its total revenue in the year, which is roughly the same proportion as international automotive groups. Volvo said the stand-alone engine unit will enable it to focus on developing fully electric premium vehicles. Volvo, which Geely acquired from Ford in 2010, expects half of its global sales to be electric vehicles by 2025, and the other half will be hybrids, the China Daily reports.