Volvo Cars and Geely say they intend to merge their existing combustion engine operations into a stand-alone business in order to establish a new global supplier that will “seek to develop next-generation combustion engines and hybrid powertrains”.

The proposed new business would clear the way for Volvo Cars to focus on the development of its all-electric range of premium cars.

Volvo Cars (www.volvogroup.com) is building an entirely electrified product range, as part of its ambition to “put sustainability at the core” of its operations.

By the middle of the next decade, it expects half of its global sales to be fully electric and the other half hybrid, supplied by the new unit.

For Geely (www.global.geely.com), the planned new business means that technologically advanced and efficient combustion engines and hybrid powertrains would be available to Geely Auto, Proton, Lotus, LEVC and Lynk & Co.

The planned new stand-alone business could also supply third-party manufacturers, providing possible growth opportunities.

It would represent a significant industrial collaboration between Volvo Cars and Geely, with substantial operational, industrial and financial synergies.

The proposed new business would employ about 3,000 staff from Volvo Cars and around 5,000 staff from Geely’s combustion engine operations, including research and development, procurement, manufacturing, IT and finance functions. No reductions in the workforce are anticipated.

Volvo Cars says it believes that the electrification of the automotive industry will be a gradual process, and that there will be significant on-going demand for efficient hybrid powertrains alongside fully electric offerings.

Håkan Samuelsson, Volvo Cars’ president and chief executive, said: “Hybrid cars need the best internal-combustion engines.

“This new unit will have the resources, scale and expertise to develop these powertrains cost efficiently.”

The detailed plans of the new business are under development and subject to union negotiations, as well as board and relevant authority approvals.