Volvo and Geely announced Monday they are considering a full merger to further boost synergies in the areas of technology sharing and capital raising.
Specifically, the companies see a better chance of success when merged should they choose to go public. In Monday's announcement, Volvo and Geely said a merged company would have access to the global capital market by listing in Hong Kong. A listing in the Swedish capital Stockholm would also happen should the merged company go public.
Volvo planned to go public on its own in 2018 but called it off because of concerns of the escalating trade war at the time between the United States and China and also between the U.S. and Europe.
Volvo is already a subsidiary of Geely, with the Chinese auto giant snapping up the Swedish automaker from Ford back in 2010. With Geely's help, Volvo has transformed into a legitimate rival to the German luxury brands and is returning record sales and profits.
The merged company would include the Volvo and Polestar car brands from the Volvo side, while from Geely there would be the Geely and Lynk & Co. brands along with some China-only brands. Geely also has a 51-percent controlling stake in Lotus and major stakes in Proton and Daimler.
A decision on the merger is expected to be made before the end of 2020.
“A combination of the two companies would result in a strong global group,” said Li Shufu, Geely's chairman. “We look forward to working with Hakan Samuelsson, president and CEO of Volvo Cars, to further investigate this opportunity with the goal to strengthen the synergies within the Group while maintaining the competitive advantage and the integrity of each individual brand.”
The last major merger in the automotive industry was only in December, with Fiat Chrysler Automobiles and PSA Group implementing a 50:50 merger.