Volvo, Geely Form Aurobay Joint Venture

Volvo's engine plant in Skövde, Sweden, will continue to produce low-emission powertrains, transmissions, and hybrid solutions for the automaker for the next half decade or so as the company moves toward full electrification. (Volvo)

Slowly but surely, Volvo Cars (Volvo) is getting out of the combustion engine business. Marking a significant step in that transition, Volvo and its parent company, Zhejiang Geely Holding (Geely), announced a corporate shift this week to create Aurobay. This stand-alone joint venture will focus on low-emission powertrains, transmissions, and hybrid solutions.

Volvo has a long history of designing and building its own powertrains. Moving forward, the company will direct more energy into developing all-electric vehicles as part of its strategy to sell nothing but EVs by 2030. Before we get to that zero-emission world, Volvo wants at least 50 percent of its global vehicle sales to consist of all-electric cars by 2025 and the rest to be hybrids. Following the company’s announcement, we know that Aurobay will supply those powertrains.

The new joint venture (JV) will inherit several assets from Volvo, including the Powertrain Engineering Sweden. That wholly-owned subsidiary will come with its engine plant in Skövde, Sweden, and a related research-and-development team. Volvo will also transfer its engine plant in China and “other relevant assets” to the joint venture soon.

Volvo offers two types of non-plug-in hybrid powertrains in its vehicles, mild and micro hybrids. The mild hybrids use a 48-volt battery and an integrated starter generator to lower emissions. This system can regenerate small amounts of power from the vehicle’s brakes when it slows down and then uses this energy to move the vehicle forward. The micro-hybrid system also captures regenerative braking energy but feeds it into the 12-volt battery. Volvo’s micro hybrids also feature start/stop technology.

Aurobay will supply Volvo with the combustion powertrains it needs for the next half-decade or so, but Geely gets something out of the deal as well. Geely said in a joint statement with Volvo that Aurobay will benefit from access to the “technologically advanced and efficient combustion engines,” as well as hybrid powertrains that Volvo currently offers. Geely will use these and future engines in its portfolio of brands, the company said, which will create “a strong base for substantial operational, industrial, and financial synergies.” Aurobay will then use this base to offer its products to non-Geely brands and hopes to be “a leading player in the supply of high-quality, low emission, cost-efficient powertrains solutions.”

Zhejiang Geely Holding purchased Volvo Cars back in 2010, and the two companies will together own Aurobay. Volvo and Geely had previously announced that they would merge their powertrain businesses into a new, separate business.

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