With buyers becoming less and less concerned with what’s actually under the hood, Volvo last week agreed to spin off all of its internal-combustion engine operations.
Volvo and parent company Geely will form a joint venture under the name Aurobay to oversee all future combustion engine development. Under the deal, the two automakers will transfer their respective combustion engine operations, including plants, to the joint venture.
Volvo will also supply about 3,000 staff and Geely around 5,000 to Aurobay. The move isn’t expected to cost any jobs at either automaker. Rather, it will free up resources that can be ploughed back into electric-vehicle development. In the case of Volvo, the automaker is committed to going full electric by 2030. It has also established operations in Sweden and China for the development of electric motors.
The goal for Aurobay is to develop next-generation engines, including engines in hybrid configurations, to sell back to Volvo and Geely, and potentially other brands within the Geely fold. Aurobay will also be open to supplying rival automakers.
Volvo has a similar plan for infotainment systems, via a deal it announced in March with Ecarx, an in-car technology company backed by Geely.
Volvo and Geely have ruled out a full merger, but the two automakers plan to deepen their collaboration efforts in the future. The companies originally considered a merger as a means to boost their capital raising efforts, but Volvo is now more likely to launch an initial public offering to raise capital.