Volvo Cars will merge its engine development and manufacturing assets with those...
FRANKFURT - Volvo Cars will merge its engine development and manufacturing assets with those of parent Geely, creating a division to supply in-house brands Lotus, LEVC, Lynk and Proton, and also potential rivals with next-generation combustion and hybrid engines. It marks the latest example of consolidation in the engine manufacturing sector as tighter emissions rules hike development costs at a time when the expansion of electric cars calls into question the long-term demand for gas guzzlers.
Volvo currently builds 600,000 combustion engines, a number that rises to about 2 million when combined with Geely’s assets, allowing for savings on components and development costs, Volvo Chief Executive Hakan Samuelsson told Reuters. In the medium term, Volvo will drop diesel engines altogether in favor of focusing on hybrid and electric powertrains, requiring further investments in fuel injection, turbo charging and brake recovery technologies.
Geely in August reported a 40% drop in net profit, citing a sharp slowdown in demand for cars, while Volvo has rejigged its global production plans in an effort to reduce the impact of tariffs. Global tariffs, accelerated by a trade war between China and the United States, as well as higher investment requirements for electric and autonomous vehicles, are forcing carmakers to seek new ways to cut and share costs.
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