After a failed attempt to source a compact car platform from a rival automaker, Volvo has confirmed it will develop its own platform together with its Chinese parent Geely, which plans to use the platform for its own range of compact cars.

The two firms announced today they will form a new R&D center in Volvo’s hometown of Gothenburg, Sweden, which will be responsible for developing the new compact car platform.

The R&D center will employ approximately 200 engineers from Sweden and China and will be fully operational by the end of the year.

Few details are known about Volvo’s new compact car platform, though we can confirm it will be a modular design similar to the Scalable Platform Architecture (SPA) that will underpin every new Volvo sized from about the S60 up. The first model to be based on the SPA platform will be the 2016 Volvo XC90 due at the end of next year.

Though costly in the initial phase, the benefits of developing one’s own platform are many. Importantly, Volvo will not have to compromise in a way that is inevitable when partnering with an outside firm.

In addition, by utilizing modular designs for its two new platforms (SPA and new compact car), Volvo will be able to eventually realize huge cost savings in terms of development, testing and sourcing when coming up with multiple models spawned from the common architectures.

You may be wondering why Volvo needs to develop a new compact car platform when it has just launched two new compact cars, the stylish V40 and its V40 Cross Country variant. These models are based on an aging albeit updated platform shared with the C30 and originally sourced from former parent Ford Motor Company [NYSE:F]. Cars built on this platform, such as the V40, have proven too expensive to sell in the U.S.


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