Not long after Volvo announced that products introduced from 2019 onwards would feature electrified powertrains, a new joint-venture was established to enhance intellectual property sharing with its Chinese parent company, Geely Holdings, and ultimately Geely Auto and LYNK & CO (all of which Geely Holdings is a significant stakeholder).
Volvo has enjoyed a fair amount of business autonomy since acquired by Geely Holdings Group in 2010 but in a world where the automotive landscape is undergoing some of the most rapid and significant changes in the past 100 years, collaboration among brands is becoming more crucial to reduce development time and expenses.
In addition to sharing vehicle platforms, engine technologies, and other IP, the joint-venture will be responsible for developing the next generation of electric vehicle systems including battery cells, motors, and charging systems.
Is this the right play for Volvo?
Short answer: Yes. Here’s Why:
Although Volvo is a a fully established automaker, selling slightly over 500,000 units annually in over 100 countries, it’s still a relatively small brand and in order to compete with technical investments for electrification being made by other manufacturers, it needs a teammate and fortunately for Volvo, their teammate (and owner) is based in China.
Already established as the largest car market in the world, 2016 marked the first year where China has more EVs on the road than the U.S. In fact, according to a recent report, China saw a 70% increase in year on year sales and now accounts for 43% of the world’s annual EV sales. Although existing (and substantial) government financial incentives for the region are set to fade by 2020, non-financial incentives, such as an exemption from license-plate lotteries, are expected to remain and are considered to be significant purchase drivers for the growing urban population. Forbes notes that within the next 10 years, Chinese cities will account for 6 of the 10 fastest growing cities in the world and by 2025, over one-third of the world’s 600 largest cities will reside in China. Herein lies the key demographic that separates the China market from the less-dense markets, such as the U.S., where the technological hurdles of range and charging speed are much more critically viewed for purchasing consideration.
The technological advancements realized through the joint venture can also be applied to plug-in hybrid and mild hybrid vehicles which will likely be more familiar in the U.S. market as it better suits the combined city and highway driving cycles.
So while we see many companies collaborating to quickly develop these advanced powertrains, Volvo has just landed a unique scenario where its partner and owner is from the region where more EVs are sold than anywhere else in the world. Enhancing the collaboration with Geely Holdings and its controlled brands puts Volvo in a very advanced and robust position as the world transitions to adopting electrified vehicles.
Check out the recent drive impression of the new 2018 Volvo XC60