Volvo to take control of China operations from parent Geely

Volvo Cars has agreed to take control of its China ventures from parent Geely Automobile Holdings Ltd., potentially boosting its valuation ahead of a planned share sale.

The deal will make Volvo the first major foreign automaker to gain full control over its Chinese operations, the Swedish company’s Chief Executive Officer Hakan Samuelsson said in a statement Wednesday.

Next year, China is set to remove the 50% cap on foreign automakers’ investments in joint ventures that make gasoline-powered cars, after lifting the limit for electric-vehicle manufacturers in 2018. Tesla Inc. was the first non-Chinese carmaker to set up a wholly-owned venture in what is the world’s biggest car market.

Under the agreement, Volvo will buy an additional 50% of shares in Daqing Volvo Car Manufacturing Co. and Shanghai Volvo Car Research and Development Co., it said in the statement. The transaction will be completed in two steps, starting in 2022 when the joint-venture cap is lifted, and is expected to be formally completed in 2023, Volvo said.

In an interview with Bloomberg News last month, Geely Chief Executive Officer Daniel Li said he expects Volvo’s planned listing on the Nasdaq Stockholm stock exchange to “move quite fast.” It should lure a “very good valuation,” given it’s the only automotive joint venture in China that allows the foreign partner to control decision-making on the ground, Li said.

Read more: Geely Says Star Board Retreat Won’t Stop Plans to Raise Cash

The iconic Swedish carmaker, which Hangzhou-based Geely took control of in 2010, could raise around $20 billion, Bloomberg News reported in March.