Volvo S90 production line (Photo/VCG)

Feb. 11 (NBD) – The management of Geely Automobile Holdings Limited (Geely, 00175.HK) and Swedish automaker Volvo Cars, both owned by Zhejiang Geely Holding, are in preliminary talks regarding a possible combination of their businesses, the listed Chinese automaker said in a regulatory filing Monday. 

Shares of Geely rose 5.84 percent to close at 14.5 HK dollars in the morning session on Tuesday. 

The proposed merger is aimed at creating a powerful global auto group and will be conducive to cost structure and technological synergies between the two companies, Geely noted. Previously, Geely's Chairman Li Shufu said only two or three auto manufacturers could survive in the future, which suggests companies should work together to tackle challenges brought by disruptive technologies like 5G. 

Securities analysts held that the proposed entity, if materialized, is expected to be China's largest auto group in terms of market value. Currently, SAIC Motor Corporation (600104.SH) ranks top with a market cap of approximately 248.4 billion yuan. 

But Geely and Volvo haven't yet had any concrete timetable or detailed plan for the proposed transaction. 

According to the filing, the combined business will preserve the distinct identity of Geely, Volvo, Lynk & Co and Polestar brands, and will seek to float shares in both Hong Kong and Stockholm. This will give Volvo Cars an access to the capital market. 

Reports emerged in May 2018 said the Swedish carmaker was planning for a Stockholm listing, but then dropped the plan due to lower-than-expected valuation amid a broad-based decline in automotive shares.   

In 2019, Volvo Cars reported record sales of 705,452 cars around the globe. The company's revenue for the year stood at around 274.1 billion Swedish krona (28.9 billion U.S. dollars), and net income was approximately 9.6 billion Swedish krona (1.0 billion U.S. dollars). 

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