Volvo Will Merge Its Combustion Engine Production With Chinese Owner Geely

The combined business will build engines for Lotus, Lynk & Co. among others

The move will supposedly save development costs.

Swedish automaker Volvo announced Monday it will merge its engine manufacturing operations with parent company Geely. The move will create a new division to supply its in-house brands with combustion and hybrid powertrains, including Lotus, LEVC (London EV Company) and Lynk & Co. The two companies’ combined development assets will allow for more efficient use of resources and reduced costs, Volvo CEO Håkan Samuelsson told Reuters.

“Volvo Cars is building an entirely electrified product range, as part of the company’s ambition to put sustainability at the core of its operations,” the company said in its release. Volvo currently builds 600,000 combustion engines, and that capacity could rise to 2 millions with access to Geely’s own manufacturing assets. The move to consolidate its combustion engine production will allow the Gothenburg-based car company to focus on its electrified electric range of models.

The new business will shift 3,000 Volvo employees and 5,000 Geely employees from engine operations, research, development, procurement, manufacturing, IT and finance positions. However, Volvo said the move would not cut any existing jobs. The next-generation combustion and hybrid engines could make their way to other firms, including potential rivals as well. This is a business functioning solely on powertrains, and does not mention Volvo and Geely combining production to assemble whole cars.

Geely has owned Volvo for nearly a decade. The Chinese company bought the Swedish marque from Ford in 2010, and has mostly maintained an arms-length relationship since then. Now, this move could be seen as Geely taking lengths to further bring Volvo into the fold. As the two companies work on more efficient powertrains, it may provide some of its rivals with engines, if they’re struggling to keep up with tightening emissions regulations, especially in Europe.