BEIJING -- Geely Automobile and 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 on Wednesday.
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 EVs, tougher emissions rules and autonomous driving.
In a joint statement on Wednesday Geely and Volvo said that they would preserve their existing separate corporate structures after "a detailed review of combination options."
They said, however, 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 hybrid systems for use by both companies as well as other automakers.
"I firmly believe that this is the best combination, the best way forward for our companies," Volvo Cars CEO Hakan Samuelsson told a joint news conference.
Asked if Volvo Cars would consider a stock market listing, he said there were currently no such plans.
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 sold 661,713 vehicles.
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, their statement added.
The companies did not disclose what savings they expect to realize from the various collaborations.
Geely and Volvo's joint research team rolled out a car product platform, dubbed Compact Modular Architecture, to develop, design and build different types of compact cars with similar mechanical layouts faster than before and at lower cost.
Geely Auto will also forge a partnership with Volvo's sales network in an effort to boost growth for their jointly owned Lynk & Co. car brand.
Geely Auto plans to raise 20 billion yuan ($3.1 billion) from a public share sale on Shanghai's Nasdaq-style STAR Market, which CEO Gui Shengyue said would be unaffected by the new collaboration with Volvo.
Hangzhou-based Zhejiang Geely Holding also has stakes in Daimler AG and Malaysian carmaker Proton.