BEIJING -- Volvo has agreed to make some engines available for Geely-branded vehicles, sources said, deepening ties between the carmakers which already share technology through Lynk & CO.
All three brands are owned by China's Zhejiang Geely Holding Group.
The first Volvo-powered Geely model is expected to go on sale as early as the end of next year equipped with a new 1.5-liter turbocharged gasoline engine that Volvo has been developing for smaller cars, the sources said.
Volvo is expected to share a 2.0-liter turbocharged engine at a later date and will also allow Geely-branded cars to use a common vehicle platform developed jointly for Volvo and Lynk.
"The terms of the recently announced joint venture between Volvo Cars and Geely Group mean that existing and future technologies can be shared by Volvo, Geely Auto and Lynk & CO, under license agreements," a Volvo spokesman said.
As part of this deepened technology-sharing arrangement, Geely on Friday said it has completed the formation of a joint-venture with Volvo, called GV Automobile Technology to cooperate on automotive technologies, purchasing and the future development of Lynk & Co, Geely said in a press release.
The new joint venture creates a platform where all three brands - Geely, Volvo and Lynk - can formally share the technologies and know-how they jointly develop and collaborate in purchasing, a Geely spokesman said.
Analysts questioned Geely's ability to absorb the best of Volvo when it acquired the automaker from Ford Motor Co. almost seven years ago. Yet Geely has been working progressively to improve its technology with Volvo expertise.
Better designed cars following its 2010 purchase of Volvo – such as its GC9 sedan and Boyue SUV – have helped lift Geely's fortunes. Its China sales grew 50 percent last year to 766,000 vehicles and it expects sales to climb well above the 1 million mark this year.
Ultimately, Geely aspires to sell more vehicles outside of China.
Earlier this year, Geely bought 49.9 percent share of struggling Malaysian carmaker Proton from conglomerate DRB-HICOM. Geely officials have told Reuters the Hangzhou automaker is planning to improve Proton cars by sharing Geely and Volvo technologies.
Volvo image risk
Analysts have said one big risk for Volvo, as it combines more with its parent, is the dilution of Volvo's brand image by sharing its technology and know-how with a Chinese automaker.
Volvo CEO Hakan Samuelsson said the key was to differentiate the brand sufficiently - even if the two groups share more technology. For Volvo, that is about more and better safety equipment, among other aspects.
"The progress Geely has been able to make in improving products and brand image over the past several years makes me feel more confident they can execute this process successfully," Yale Zhang, head of Shanghai-based consultancy Automotive Foresight, said.
Last month Geely and Volvo said they plan to go beyond Lynk and create a joint venture to share technology, such as vehicle architecture and engines via cross licensing arrangements managed by that joint venture.
Samuelsson told Reuters last month the deal would provide Volvo with greater development resources and efficiency in purchasing parts. It also should help Volvo speed up introduction of new technology in areas such as components for electric vehicles, he said.