Volvo deepens tech ties with Geely, Lynk & Co

RESURGENT Swedish premium brand Volvo is deepening its technological and financial ties with Chinese parent company Geely and start-up sister brand Lynk & Co.

A key goal of the increased collaboration is to accelerate the advancement of drivetrain electrification while reducing costs by achieving greater economies of scale.

The three companies signed a memorandum of understanding to create a new joint venture, of which Geely Holding and Volvo Cars will each hold a 50 per cent share.

Under the three-way joint venture, vehicle platforms and drivetrain technologies will be shared via licensing agreements, with the intellectual property rights maintained by the company that developed them.

Headquartered in China, the new joint venture will also have an office in Volvo’s Gothenburg home town. Automotive News reports the arrangement will also include use of Volvo’s dealerships for aftersales service of Lynk & Co vehicles that will be sold directly to customers online.

In addition, Volvo will take what it describes as “a significant minority shareholding” in Lynk & Co, subject to regulatory approval.

This will result in Geely Auto owning half of Lynk & Co, with the remainder divided between Geely Holding and Volvo, although the ratio has not been disclosed.

Volvo, Geely and Lynk & Co already share technology including the Compact Modular Architecture (CMA) platform that will underpin compact Volvo models starting with the XC40 SUV that will be revealed later this year and followed by the S40/V40 sedan and wagon.

The first model revealed by Lynk & Co, the 01 compact crossover announced last October, also rides on CMA underpinnings, as did the 03 sedan concept revealed in Shanghai in April this year.

In a statement, Volvo said it expected the sharing arrangement will “extend in future to also cover electrified vehicle components such as battery cells, e-motors and charging systems”.

Volvo president and CEO Hakan Samuelsson said the tie-up will “strengthen Volvo’s ability to develop next-generation electrified cars”.

“Partnerships to share know-how and technologies are common practice in the automotive industry. This is the model we are adopting,” he said.

Global sales of Volvo cars increased 8.2 per cent in the first half of this year to a record 277,641 units, with a big 21.2 per cent jump in profits to SEK6.8 billion ($A1.05bn) off the back of revenues up 21.4 per cent to SEK99.1bn. The brand’s margins were also up, from 6.6 per cent to 6.8 per cent.

Li Shufu, chairman of Geely Holding, said the group would benefit from the upside of increased collaboration and sharing while “preserving the separate identities and strategic autonomy of our different automotive brands”.

Geely Holding is China’s largest privately owned automotive company and the largest shareholder of Geely Auto. It acquired Volvo from Ford in 2010 as the last brand to be sold off in the break-up of the Blue Oval’s unsuccessful Premier Automotive Group.

Lynk & Co senior vice president Alain Visser described the deal as providing his fledgling company “a solid global foundation for increased economies of scale, harnessing the advanced technologies of Volvo Cars, combined with our unique and differentiated Lynk & Co business model”.

Lynk & Co was launched last year as a car brand offering vehicles designed around use of an online sharing platform inspired by Airbnb and Uber that enables drivers to choose between buying, leasing or borrowing car.

Owners or leasers will be able to use the app to earn money from sharing their vehicle when it is not in use. The company also proposes its vehicles can be used to accept and store deliveries such as dry cleaning or online shopping when it would be inconvenient for the owner to be at home or the collection point.

Lynk & Co vehicles will be produced in the same Chinese factory as the Volvo XC40, with the 01 expected to go on sale in China before the end of this year ahead of an international rollout starting in 2018.