By Yilei Sun and Helena Soderpalm
BEIJING/STOCKHOLM (Reuters) - China's Geely Automobile and its Swedish sister company Volvo Cars will abandon merger plans but launch a new entity to combine their powertrain operations and expand cooperation on electric vehicles, the companies said.
A year ago the two said they were planning to merge, giving Volvo access to public markets, as global automakers pursue alliances to respond better to the cost of the transition to electric cars, tougher emission rules and autonomous driving.
Geely and Volvo on Wednesday said they would preserve with their existing separate corporate structures after "a detailed review of combination options".
They added, however, that they would launch a new company to combine their existing powertrain operations.
The new entity, expected to become operational this year, will provide engines, transmissions systems and petrol-electric hybrid systems for use by both companies as well as other automakers.
"I firmly believe that this is the best combination, the best way forward for our companies," Volvo Cars CEO Hakan Samuelsson told a joint news conference.
Asked if Volvo Cars would consider a stock market listing, he said there were currently no such plans.
The two companies will also focus on the development and sourcing of next-generation technologies, from connectivity and self-driving vehicles to car sharing and electrification, their statement added.
The companies did not disclose what savings they expect to make from the various collaborations.
Geely and Volvo's joint research team rolled out a car product platform, dubbed Compact Modular Architecture (CMA), to develop, design and build different types of compact cars with similar mechanical layout faster than before and at lower cost.
Geely Auto will also forge a partnership with Volvo's sales network to help to boost growth for their jointly owned Lynk & Co car brand.
Last year Geely Auto sold 1.32 million cars while Volvo Cars sold 661,713 vehicles.
Geely Auto plans to raise 20 billion yuan ($2.93 billion) from a public share sale on Shanghai's Nasdaq-style STAR Market, which CEO Gui Shengyue said would be unaffected by the new collaboration with Volvo.
Hangzhou-based Zhejiang Geely Holding Group, Geely Automobile's parent, bought Volvo Cars from Ford Motor (NYSE:F) Co in 2010. It also has stakes in Daimler AG (DE:DAIGn) and Malaysian carmaker Proton.