Volvo Cars and its Chinese parent Geely will set up a joint research and development center in Sweden to produce technology for new cars. Volvo said the center would be operational towards the end of the year.

The new R&D center will employ about 200 full-time engineers from Sweden and China to develop a new modular architecture and components for new cars in the compact car class, Volvo said.

The companies said the new center would bring cost savings in terms of development and economies of scale.

The head of the center, Mats Fagerhag, did not go into detail, other than to say most of the savings would likely come “on the material side,” meaning Geely and Volvo can share components and use Geely’s supply chain in China, where costs are cheaper.

Fagerhag said it was too early to say which components are going to be shared.

In a statement, the executive said the development of a modular design would allow several different vehicle platforms to be developed from one single architecture, thereby ensuring tailor-made solutions for both brands.

Peter Mertens, senior vice president of R&D at Volvo Cars, said on the conference call that the technology resulting from the joint effort would not compromise Volvo’s higher safety requirements.

Geely Chairman Li Shufu said the center, based in Volvo’s western Swedish hometown of Gothenburg, would help Geely improve the quality of its cars.

“However, the sharing of knowledge and technology has to be done without jeopardizing brand integrity and individual product development,” Li said.

Geely, whose investment in Volvo is the biggest Chinese overseas auto investment, is stronger in the mass-market segment in China, while the Volvo brand is aimed at the premium market.

Volvo has had a patchy record since Geely bought it from Ford Motor Co. in 2010. Sales rose in 2011, but a recession in Europe and slowing sales in China pushed it into a loss for the first half of last year. Internal disagreements also led to the ousting last year of CEO Stefan Jacoby and his replacement by Hakan Samuelsson.