France’s Renault has formally signed a joint-venture agreement with China’s Zhejiang Geely Holding Group to set up a new combustion engine and hybrid power-train company, while Saudi Aramco is still mulling an investment.
The move follows a letter of intent signed between the three parties in March as the joint venture seeks to pool resources to work on hybrid technology and synthetic fuels to power 80 per cent of the global internal combustion engine and hybrid market, the companies said in a statement on Tuesday.
Renault has been revamping its corporate structure to tackle the shift to electric vehicles (EVs) and bolster profits. As part of that plan, the company last year merged its combustion assets with Geely’s to amass scale and cut costs. The new entity, dubbed Horse by Renault, started operating this month.
The maker of Clio cars and Geely will each hold 50 per cent equity stakes in the new project, which will establish its headquarters in the United Kingdom. Regional hubs in Madrid and Hangzhou in China will operate in the meantime. The venture, which does not have an official name yet, will have 17 plants and 19,000 employees, and the capacity to supply more than 5 million internal combustion, hybrid and plug-in hybrid engines annually.
The transaction is expected to be completed in the second half of this year, subject to approval from antitrust and foreign-direct-investment authorities.
Joining the venture would help state-controlled Saudi Aramco grow in an industry that is undergoing a seismic shift toward a battery-powered future. While sales of full EVs are taking off, combustion-engine and plug-in hybrid autos will still be in demand for years to come, especially in developing countries. The world’s biggest oil company will also help support research and development across synthetic fuels and next-generation hydrogen technologies.
Earlier this year, European Union rules to effectively ban sales of new combustion-engine cars from 2035 were delayed for weeks after a last-minute push by Germany to secure allowances for so-called e-fuels. Among the concerns regarding the bloc’s all-out EV push are significant job losses in the sector and a lack of infrastructure to support mass adoption of EVs.
Saudi Aramco is already working to develop technology that can reduce motor emissions and improve fuel efficiency.