Volvo Cars and its parent company Geely Holding have agreed to create a joint venture under the name Aurobay for powertrain operations as the companies proceed with earlier announced plans to merge these into a new, stand-alone business.

The new company will be a global supplier of complete powertrains including combustion engines, transmissions and hybrid components.

Aurobay will initially be jointly owned by Volvo Cars and Geely Holding and Volvo Cars will transfer all assets in its wholly owned subsidiary Powertrain Engineering Sweden, including its Skovde, Sweden-based engine plant and R&D employees, along with its engine plant in China and other relevant assets to the joint venture in coming months.

“The creation of the stand-alone joint venture and the transfer of assets allows Volvo Cars to focus fully on the development of its new range of all-electric premium cars in coming years,” a statement said.

“The company aims for 50% of its global sales volume to consist of fully electric cars by 2025 while 50% will be hybrids, with powertrains supplied by Aurobay.”

Geely Holding will benefit from the addition of a strong R&D organisation and advanced and efficient combustion engines and hybrid powertrains for its own brands, “creating a strong base for substantial operational, industrial and financial synergies”.

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The new stand-alone business hopes to supply customers outside the Geely Holding Group and also wants to be a leading player in the supply of high-quality, low emission, cost-efficient powertrains.