(Yicai Global) Oct. 8 -- Geely Auto and Volvo Car Group, two units of Zhejiang Geely Holding Group, plan to consolidate their combustion engine businesses into an independent supplier that could also provide power systems to other automakers.

The new division will research and develop power assembly and hybrid power systems and equip them in Geely's Volvo, Lynk & Co., Proton Holdings, Lotus Cars and London EV units, Hangzhou-based Geely said in a statement yesterday.

The merger is the latest in a series of business integrations after Geely spent USD1.8 billion to acquire Volvo in 2010 and forms part of Volvo's shift to all-electric vehicles.

The combined engine business will produce 2 million gas and diesel motors, up from the current 600,000. Geely said the merger will not affect the 3,000 staff at Gothenburg, Sweden-based Volvo and the 5,000 at Geely Auto who are involved in the R&D and manufacture of such engines.

The merger is still being planned as the two parties have yet to come to a full consensus and complete due diligence. It will also need the green light from Volvo's union, the two firms' boards, and regulators in both countries. 

Editor: Ben Armour