Volvo and parent company, Geely, are going to merge their internal combustion engine operations into a stand-alone business, freeing up the Swedish carmaker to concentrate on electric powertrains. Happily, the new entity won't just be developing and producing petrol and diesel engines; it will also have a significant focus on hybrid powertrains.

Volvo is busy developing its range of cars with the aim of making all of its models electrified in the near future. By 2025, Volvo reckons that half of its sales will be fully electric cars – the first of which will be the new electric XC40 – and the other half hybrids, such as the XC60 T8 Twin Engine that we tested recently. Shifting its combustion engine efforts frees up capacity to fulfil this ambition whilst still enabling it to receive hybrid powertrains.

On the other hand, Geely has a host of brands demanding internal combustion engines and hybrid powertrains, so it makes sense for them to bring its R&D and production under one umbrella company. Doing so will enable it to supply not only Volvo, but also Geely Auto, Proton, Lotus, LEVC and LYNK & CO. Third-party manufacturers could also benefit from buying white labelled engines from the new business.

Quite what the exact situation is with regards existing workforces from each company isn't totally clear, but no reductions in workforce are anticipated. Around 3000 workers from Volvo and 5000 from Geely's existing combustion engine operations will potentially find employment at the new company. This includes those from all business areas, including R&D, procurement, manufacturing, IT and finance.

“Hybrid cars need the best internal combustion engines. This new unit will have the resources, scale and expertise to develop these powertrains cost efficiently,” said Håkan Samuelsson, Volvo Cars’ President and Chief Executive.

At present, the exact business plans are under development, including negotiations with relevant unions and authorities, so there's still a way to go before it becomes a reality. On the face of it, however, combining the two brand's functions in this way does make sense as it's mutually beneficial – especially where Volvo's electric ambitions are concerned.