By HOU Zhuokai

Geely and Volvo have called off merger plans and instead will create a new entity to combine their powertrain businesses and to collaborate more closely on EVs, the two companies announced on Wednesday night.

Both owned by entrepreneur LI Shufu’s Zhejiang Geely Holding Group, the two will remain financially independent but make joint procurements to cut costs and collaborate on autonomous and electric drive technology as well as modular architecture for EVs. The new entity will provide products and services to third-party companies. Chinese-Swedish car maker Lynk & Co., also owned by Geely, will use Volvo’s distribution network from April.

“Powertrain operations will be merged before the end of the year,” said AN Conghui, CEO of Geely Automobile. “Products developed by the new entity will serve all brands owned by Zhejiang Geely Holding Group.”

Geely and Volvo have modular vehicle architecture and a sustainable experience architecture platform. The new company will work on top of the modules to develop new over the next five to ten years.

Håkan Samuelsson, CEO of Volvo, said the plan was better than a full-blown merger, as stakeholders were wary of stock dilution.