Geely, Volvo signed a technology transfer deal

Article by Christian A., on March 12, 2012

A technology transfer agreement has been entered between Zhejiang Geely Holding Group (Geely Automobile’s parent) and Volvo. This deal enables Geely to improve its product lineup and intensify its competitiveness. Volvo CEO Stefan Jacoby said that this is a move that creates added value for the two companies.

He added that this will help with plans for China to soon be Volvo’s “second home market." In a statement, Geely said that this deal covers the joint development of electric vehicle and small-car technology, which include plug-in vehicles. Li Shufu, chairman of Geely Holding Group, said that it’s a “strategic imperative” for the company to improve its various brands to and to do what it can to unlock the synergies within the group.

In 2010, Volvo was bought by Zhejiang Geely from Ford Motor Co. This is China's biggest overseas auto acquisition and reflects the country's quick rise in the auto industry. However, this deal resulted to worries that a Chinese takeover will hurt Volvo's image as a long-established upscale brand. To alleviate those fears, Li has given a public statement to emphasize that Volvo's independence would be maintained.

Li has been reiterating, “Geely is Geely, Volvo is Volvo." Even if technology sharing between a parent and its subsidiary isn’t unusual, industry observers predict that there will be operational difficulties in implementing the plan.

Yale Zhang, president of consultancy Automotive Foresight (Shanghai) Co Ltd., said that Geely is the “obvious beneficiary” of this agreement but the sharing has to be done carefully since it’s possible that Volvo's image as a premier brand may be damaged. The Chinese government has yet to approve a plan by Volvo to construct a greenfield manufacturing plant in Chengdu in southwest China. This plant would house the operations of a new brand jointly developed by Volvo and Geely.

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