Volvo Cars, the global premium car maker, and Autoliv Inc, the worldwide leader in automotive safety systems, have signed a letter of intent to set up a new jointly-owned company to develop next generation autonomous driving software.

The planned new company will have its headquarters in Gothenburg, Sweden, and an initial workforce taken from both companies of around 200, increasing to over 600 in the medium term. The company is expected to start operations in the beginning of 2017.

The joint venture will create a new entrant in the growing global market for autonomous driving software systems. It marks the first time a leading premium car maker has joined forces with a tier one supplier to develop new ADAS and AD technologies.

The new company, which has yet to be named, will develop advanced driver assistance systems (ADAS) and autonomous drive (AD) systems for use in Volvo cars and for sale exclusively by Autoliv to all car makers globally, with revenues shared by both companies.

The joint venture will bring together two global leaders in automotive safety, underlining the contribution ADAS and AD can make to road safety and speeding the development and introduction of fully autonomous cars.

Volvo Cars has an established reputation for making some of the world’s safest cars, having invented the three point safety belt and consistently developed and introduced world leading active and passive safety systems. It has a medium term vision that no one will be killed or seriously injured in a new Volvo by 2020.

Autoliv is the world’s leading supplier of safety systems to car makers worldwide and has led the way in the development and introduction of active and passive safety technologies to the world’s car makers for more than 60 years.

Håkan Samuelsson, president and chief executive of Volvo Cars, said: “By combining our know how and resources we will create a world leader in AD software development. This means we can introduce this exciting technology to our customers faster.”

Jan Carlson, chairman, chief executive and president of Autoliv, said: “There are no two companies that can claim to have done more for automotive safety worldwide than Autoliv and Volvo. This new company is a recognition of the fact that autonomous driving is the next step to transform road safety.”

Both Autoliv and Volvo Cars will licence and transfer the intellectual property for their ADAS systems to the joint venture. From this base the company will develop new ADAS technologies and AD systems. It expects to have its first ADAS products available for sale by 2019 with AD technologies available by 2021.

Autoliv will be the exclusive supplier and distribution channel for all the new company’s products towards third parties, except Volvo Cars which will source directly from the new company. Its management will comprise of representatives from Autoliv and Volvo Cars.

• Dennis Nobelius, managing director of Volvo Switzerland and formerly vice president vehicle line 90 at Volvo Cars, will be the chief executive of the new joint venture.