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Volvo and Geely discuss outright merger of businesses

Any merger would preserve each of the combined automaker's brands, such as Polestar and Lynk & Co.

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Volvo and Geely sitting in a tree, m-e-r-g-i-n-g?

Andrew Krok/Roadshow

This decade could be the decade of major mergers across the auto industry. As autonomous driving and electrification quite literally suck profits from even the world's largest auto companies, it's clear some will need a helping hand -- and it's an option we've already started to see some exercise in the Fiat Chrysler/PSA Group merger deal.

Next up could be Sweden's Volvo Cars and China's Geely. Both automakers announced on Tuesday that the companies have begun formal discussions about an outright merger of businesses. The two companies will create a "joint working group" to hash out a merger proposal to each automaker's board of directors.

This merger is a far different animal than what we saw from the FCA/PSA tie-up. Geely currently owns Volvo after Ford sold the latter in the late oughties. However, Volvo Cars has largely been free to exercise resources as it sees fit. Merging with Geely would create a single automaker that operates the Volvo, Polestar and Lynk & Co brands. Geely also owns Lotus these days, and a merger could open the door further for Volvo engines to power the British sports cars of the future. What a brave new world.

Both automakers believe a combined unit would be better equipped to tackle major changes coming to the auto industry in the years to come. As I mentioned, electrification and self-driving technology are the big ones.

A deal is far from certain as the companies start drawing up proposals, but depending on how each company likes the idea, this process could go rather quickly. Stay tuned.

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